[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2013 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          Title 42

Public Health


________________________

Parts 430 to 481

                         Revised as of October 1, 2013

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2013
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 42:
          Chapter IV--Centers for Medicare & Medicaid 
          Services, Department of Health and Human Services 
          (Continued)                                                3
  Finding Aids:
      Table of CFR Titles and Chapters........................     617
      Alphabetical List of Agencies Appearing in the CFR......     637
      List of CFR Sections Affected...........................     647

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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 42 CFR 430.0 refers 
                       to title 42, part 430, 
                       section 0.

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

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
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name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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Many agencies have begun publishing numerous OMB control numbers as 
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    Office of the Federal Register.
    July 1, 2013.







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                               THIS TITLE

    Title 42--Public Health is composed of five volumes. The parts in 
these volumes are arranged in the following order: Parts 1-399, parts 
400-413, parts 414-429, parts 430 to 481, and part 482 to end. The first 
volume (parts 1-399) contains current regulations issued under chapter 
I--Public Health Service (HHS). The second, third, and fourth volumes 
(parts 400-413, parts 414-429, and parts 430 to 481) include regulations 
issued under chapter IV--Centers for Medicare & Medicaid Services (HHS) 
and the fifth volume (part 482 to end) contains the remaining 
regulations in chapter IV and the regulations issued under chapter V by 
the Office of Inspector General-Health Care (HHS). The contents of these 
volumes represent all current regulations codified under this title of 
the CFR as of October 1, 2013.

    For this volume, Jonn V. Lilyea was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.

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                         TITLE 42--PUBLIC HEALTH




                           (Parts 430 to 481)

  --------------------------------------------------------------------
                                                                    Part

chapter iv--Centers for Medicare & Medicaid Services, 
  Department of Health and Human Services (Continued).......         430

[[Page 3]]



  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                  HEALTH AND HUMAN SERVICES (CONTINUED)




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


  Editorial Note: Nomenclature changes to chapter IV appear at 66 FR 
39452, July 31, 2001; 67 FR 36540, May 24, 2002; 69 FR 18803, Apr. 9, 
2004; and 77 FR 29028, July 16, 2012.

                SUBCHAPTER C--MEDICAL ASSISTANCE PROGRAMS
Part                                                                Page
430             Grants to States for Medical Assistance 
                    Programs................................           5
431             State organization and general 
                    administration..........................          22
432             State personnel administration..............          84
433             State fiscal administration.................          89
434             Contracts...................................         133
435             Eligibility in the States, District of 
                    Columbia, the Northern Mariana Islands, 
                    and American Samoa......................         136
436             Eligibility in Guam, Puerto Rico, and the 
                    Virgin Islands..........................         216
438             Managed care................................         249
440             Services: General provisions................         290
441             Services: Requirements and limits applicable 
                    to specific services....................         317
442             Standards for payment to nursing facilities 
                    and intermediate care facilities for 
                    Individuals with Intellectual 
                    Disabilities............................         371
447             Payments for services.......................         377
455             Program integrity: Medicaid.................         427

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456             Utilization control.........................         447
    SUBCHAPTER D--STATE CHILDREN'S HEALTH INSURANCE PROGRAMS (SCHIPS)
457             Allotments and grants to States.............         484
   SUBCHAPTER E--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
460             Programs of all-inclusive care for the 
                    elderly (PACE)..........................         542
             SUBCHAPTER F--QUALITY IMPROVEMENT ORGANIZATIONS
475             Quality improvement organizations...........         576
476             Utilization and quality control review......         579
478             Reconsiderations and appeals................         596
480             Acquisition, protection, and disclosure of 
                    quality improvement organization 
                    information.............................         602
481             [Reserved]

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                SUBCHAPTER C_MEDICAL ASSISTANCE PROGRAMS





PART 430_GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS--
Table of Contents



               Subpart A_Introduction; General Provisions

Sec.
430.0 Program description.
430.1 Scope of subchapter C.
430.2 Other applicable Federal regulations.
430.3 Appeals under Medicaid.
430.5 Definitions.

                          Subpart B_State Plans

430.10 The State plan.
430.12 Submittal of State plans and plan amendments.
430.14 Review of State plan material.
430.15 Basis and authority for action on State plan material.
430.16 Timing and notice of action on State plan material.
430.18 Administrative review of action on State plan material.
430.20 Effective dates of State plans and plan amendments.
430.25 Waivers of State plan requirements.

Subpart C_Grants; Reviews and Audits; Withholding for Failure To Comply; 
   Deferral and Disallowance of Claims; Reduction of Federal Medicaid 
                                Payments

430.30 Grants procedures.
430.32 Program reviews.
430.33 Audits.
430.35 Withholding of payment for failure to comply with Federal 
          requirements.
430.38 Judicial review.
430.40 Deferral of claims for FFP.
430.42 Disallowance of claims for FFP.
430.45 Reduction of Federal Medicaid payments.
430.48 Repayment of Federal funds by installments.

Subpart D_Hearings on Conformity of State Medicaid Plans and Practice to 
                          Federal Requirements

430.60 Scope.
430.62 Records to be public.
430.63 Filing and service of papers.
430.64 Suspension of rules.
430.66 Designation of presiding officer for hearing.
430.70 Notice of hearing or opportunity for hearing.
430.72 Time and place of hearing.
430.74 Issues at hearing.
430.76 Parties to the hearing.
430.80 Authority of the presiding officer.
430.83 Rights of parties.
430.86 Discovery.
430.88 Evidence.
430.90 Exclusion from hearing for misconduct.
430.92 Unsponsored written material.
430.94 Official transcript.
430.96 Record for decision.
430.100 Posthearing briefs.
430.102 Decisions following hearing.
430.104 Decisions that affect FFP.

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

    Source: 53 FR 36571, Sept. 21, 1988, unless otherwise noted.



               Subpart A_Introduction; General Provisions



Sec.  430.0  Program description.

    Title XIX of the Social Security Act, enacted in 1965, authorizes 
Federal grants to States for medical assistance to low-income persons 
who are age 65 or over, blind, disabled, or members of families with 
dependent children or qualified pregnant women or children. The program 
is jointly financed by the Federal and State governments and 
administered by States. Within broad Federal rules, each State decides 
eligible groups, types and range of services, payment levels for 
services, and administrative and operating procedures. Payments for 
services are made directly by the State to the individuals or entities 
that furnish the services.



Sec.  430.1  Scope of subchapter C.

    The regulations in subchapter C set forth State plan requirements, 
standards, procedures, and conditions for obtaining Federal financial 
participation (FFP). Each part (or subpart of section) in the subchapter 
describes the specific statutory basis for the regulation. However, 
where the basis is the Secretary's general authority to issue 
regulations for any program under the Act (section 1102 of the Act), or 
his general authority to prescribe State plan requirements needed for 
proper and efficient administration of the

[[Page 6]]

plan (section 1902(a)(4)), those statutory provisions are simply cited 
without further description.



Sec.  430.2  Other applicable Federal regulations.

    Other regulations applicable to State Medicaid programs include the 
following:
    (a) 5 CFR part 900, subpart F, Administration of the Standards for a 
Merit System of Personnel Administration.
    (b) The following HHS Regulations in 45 CFR subtitle A:

Part 16--Procedures of the Departmental Appeals Board.
Part 74--Administration of Grants.
Part 80--Nondiscrimination Under Programs Receiving Federal Assistance 
Through the Department of Health and Human Services: Effectuation of 
Title VI of the Civil Rights Act of 1964.
Part 81--Practice and Procedure for Hearings Under 45 CFR part 80.
Part 84--Nondiscrimination on the Basis of Handicap in Programs and 
Activities Receiving or Benefiting From Federal Financial Assistance.
Part 95--General Administration--grant programs (public assistance and 
medical assistance).

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec.  430.3  Appeals under Medicaid.

    Three distinct types of disputes may arise under Medicaid.
    (a) Compliance with Federal requirements. Disputes that pertain to 
whether a State's plan or proposed plan amendments, or its practice 
under the plan meet or continue to meet Federal requirements are subject 
to the hearing provisions of subpart D of this part.
    (b) FFP in Medicaid expenditures. Disputes that pertain to 
disallowances of FFP in Medicaid expenditures (mandatory grants) are 
heard by the Departmental Appeals Board (the Board) in accordance with 
procedures set forth in 45 CFR part 16.
    (c) Discretionary grants disputes. Disputes pertaining to 
discretionary grants, such as grants for special demonstration projects 
under sections 1110 and 1115 of the Act, which may be awarded to a 
Medicaid agency, are also heard by the Board. 45 CFR part 16, appendix 
A, lists all the types of disputes that the Board hears.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec.  430.5  Definitions.

    As used in this subchapter, unless the context indicates otherwise--
    Contractor means any entity that contracts with the State agency, 
under the State plan, in return for a payment, to process claims, to 
provide or pay for medical services, or to enhance the State agency's 
capability for effective administration of the program.
    Representative has the meaning given the term by each State 
consistent with its laws, regulations, and policies.

[67 FR 41094, June 14, 2002]



                          Subpart B_State Plans



Sec.  430.10  The State plan.

    The State plan is a comprehensive written statement submitted by the 
agency describing the nature and scope of its Medicaid program and 
giving assurance that it will be administered in conformity with the 
specific requirements of title XIX, the regulations in this Chapter IV, 
and other applicable official issuances of the Department. The State 
plan contains all information necessary for CMS to determine whether the 
plan can be approved to serve as a basis for Federal financial 
participation (FFP) in the State program.



Sec.  430.12  Submittal of State plans and plan amendments.

    (a) Format. A State plan for Medicaid consists of preprinted 
material that covers the basic requirements, and individualized content 
that reflects the characteristics of the particular State's program.
    (b) Governor's review--(1) Basic rules. Except as provided in 
paragraph (b)(2) of this section--
    (i) The Medicaid agency must submit the State plan and State plan 
amendments to the State Governor or his designee for review and comment 
before submitting them to the CMS regional office.
    (ii) The plan must provide that the Governor will be given a 
specific period

[[Page 7]]

of time to review State plan amendments, long-range program planning 
projections, and other periodic reports on the Medicaid program, 
excluding periodic statistical, budget and fiscal reports.
    (iii) Any comments from the Governor must be submitted to CMS with 
the plan or plan amendment.
    (2) Exceptions. (i) Submission is not required if the Governor's 
designee is the head of the Medicaid agency.
    (ii) Governor's review is not required for preprinted plan 
amendments that are developed by CMS if they provide absolutely no 
options for the State.
    (c) Plan amendments. (1) The plan must provide that it will be 
amended whenever necessary to reflect--
    (i) Changes in Federal law, regulations, policy interpretations, or 
court decisions; or
    (ii) Material changes in State law, organization, or policy, or in 
the State's operation of the Medicaid program. For changes related to 
advance directive requirements, amendments must be submitted as soon as 
possible, but no later than 60 days from the effective date of the 
change to State law concerning advance directives.
    (2) Prompt submittal of amendments is necessary--
    (i) So that CMS can determine whether the plan continues to meet the 
requirements for approval; and
    (ii) To ensure the availability of FFP in accordance withSec. 
430.20.

[53 FR 36571, Sept. 21, 1988, as amended at 60 FR 33293, June 27, 1995]



Sec.  430.14  Review of State plan material.

    CMS regional staff reviews State plans and plan amendments, 
discusses any issues with the Medicaid agency, and consults with central 
office staff on questions regarding application of Federal policy.



Sec.  430.15  Basis and authority for action on State plan material.

    (a) Basis for action. (1) Determinations as to whether State plans 
(including plan amendments and administrative practice under the plans) 
originally meet or continue to meet the requirements for approval are 
based on relevant Federal statutes and regulations.
    (2) Guidelines are furnished to assist in the interpretation of the 
regulations.
    (b) Approval authority. The Regional Administrator exercises 
delegated authority to approve the State plan and plan amendments on the 
basis of policy statements and precedents previously approved by the 
Administrator.
    (c) Disapproval authority. (1) The Administrator retains authority 
for determining that proposed plan material is not approvable or that 
previously approved material no longer meets the requirements for 
approval.
    (2) The Administrator does not make a final determination of 
disapproval without first consulting the Secretary.



Sec.  430.16  Timing and notice of action on State plan material.

    (a) Timing. (1) A State plan or plan amendment will be considered 
approved unless CMS, within 90 days after receipt of the plan or plan 
amendment in the regional office, sends the State--
    (i) Written notice of disapproval; or
    (ii) Written notice of any additional information it needs in order 
to make a final determination.
    (2) If CMS requests additional information, the 90-day period for 
CMS action on the plan or plan amendment begins on the day it receives 
that information.
    (b) Notice of final determination. (1) The Regional Administrator or 
the Administrator notifies the Medicaid agency of the approval of a 
State plan or plan amendment.
    (2) Only the Administrator gives notice of disapproval of a State 
plan or plan amendment.



Sec.  430.18  Administrative review of action on State plan material.

    (a) Request for reconsideration. Any State dissatisfied with the 
Administrator's action on plan material underSec. 430.15 may, within 
60 days after receipt of the notice provided underSec. 430.16(b), 
request that the Administrator reconsider the issue of whether the plan 
or plan amendment conforms to the requirements for approval.
    (b) Notice and timing of hearing. (1) Within 30 days after receipt 
of the request, the Administrator notifies the

[[Page 8]]

State of the time and place of the hearing.
    (2) The hearing takes place not less than 30 days nor more than 60 
days after the date of the notice, unless the State and the 
Administrator agree in writing on an earlier or later date.
    (c) Hearing procedures. The hearing procedures are set forth in 
subpart D of this part.
    (d) Decision. A decision affirming, modifying, or reversing the 
Administrator's original determination is made in accordance withSec. 
430.102.
    (e) Effect of hearing decision. (1) Denial of Federal funds, if 
required by the Administrator's original determination, will not be 
delayed pending a hearing decision.
    (2) However, if the Administrator determines that his or her 
original decision was incorrect, CMS pays the State a lump sum equal to 
any funds incorrectly denied.



Sec.  430.20  Effective dates of State plans and plan amendments.

    For purposes of FFP, the following rules apply:
    (a) New plans. The effective date of a new plan--
    (1) May not be earlier than the first day of the quarter in which an 
approvable plan is submitted to the regional office; and
    (2) With respect to expenditures for medical assistance, may not be 
earlier than the first day on which the plan is in operation on a 
statewide basis.
    (b) Plan amendment. (1) For a plan amendment that provides 
additional services to individuals eligible under the approved plan, 
increases the payment amounts for services already included in the plan, 
or makes additional groups eligible for services provided under the 
approved plan, the effective date is determined in accordance with 
paragraph (a) of this section.
    (2) For a plan amendment that changes the State's payment method and 
standards, the rules ofSec. 447.256 of this chapter apply.
    (3) For other plan amendments, the effective date may be a date 
requested by the State if CMS approves it.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]



Sec.  430.25  Waivers of State plan requirements.

    (a) Scope of section. This section describes the purpose and effect 
of waivers, identifies the requirements that may be waived and the other 
regulations that apply to waivers, and sets forth the procedures that 
CMS follows in reviewing and taking action on waiver requests.
    (b) Purpose of waivers. Waivers are intended to provide the 
flexibility needed to enable States to try new or different approaches 
to the efficient and cost-effective delivery of health care services, or 
to adapt their programs to the special needs of particular areas or 
groups of beneficiaries. Waivers allow exceptions to State plan 
requirements and permit a State to implement innovative programs or 
activities on a time-limited basis, and subject to specific safeguards 
for the protection of beneficiaries and the program. Detailed rules for 
waivers are set forth in subpart B of part 431, subpart A of part 440, 
and subpart G of part 441 of this chapter.
    (c) Effect of waivers. (1) Waivers under section 1915(b) allow a 
State to take the following actions:
    (i) Implement a primary care case-management system or a specialty 
physician system.
    (ii) Designate a locality to act as central broker in assisting 
Medicaid beneficiaries to choose among competing health care plans.
    (iii) Share with beneficiaries (through provision of additional 
services) cost-savings made possible through the beneficiaries' use of 
more cost-effective medical care.
    (iv) Limit beneficiaries' choice of providers (except in emergency 
situations and with respect to family planning services) to providers 
that fully meet reimbursement, quality, and utilization standards, which 
are established under the State plan and are consistent with access, 
quality, and efficient and economical furnishing of care.
    (2) A waiver under section 1915(c) of the Act allows a State to 
include as ``medical assistance'' under its plan home and community 
based services furnished to beneficiaries who would otherwise need 
inpatient care that is

[[Page 9]]

furnished in a hospital, SNF, ICF, or ICF/IIDIID, and is reimbursable 
under the State plan.
    (3) A waiver under section 1916 (a)(3) or (b)(3) of the Act allows a 
State to impose a deduction, cost-sharing or similar charge of up to 
twice the ``nominal charge'' established under the plan for outpatient 
services, if--
    (i) The outpatient services are received in a hospital emergency 
room but are not emergency services; and
    (ii) The State has shown that Medicaid beneficiaries have actually 
available and accessible to them alternative services of nonemergency 
outpatient services.
    (d) Requirements that are waived. In order to permit the activities 
described in paragraph (c) of this section, one or more of the title XIX 
requirements must be waived, in whole or in part.
    (1) Under section 1915(b) of the Act, and subject to certain 
limitations, any of the State plan requirements of section 1902 of the 
Act may be waived to achieve one of the purposes specified in that 
section.
    (2) Under section 1915(c) of the Act, the following requirements may 
be waived:
    (i) Statewideness--section 1902(a)(1).
    (ii) Comparability of services--section 1902(a)(10)(B).
    (iii) Income and resource rules--section 1902(a)(10)(C)(i)(III).
    (3) Under section 1916 of the Act, paragraphs (a)(3) and (b)(3) 
require that any cost-sharing imposed on beneficiaries be nominal in 
amount, and provide an exception for nonemergency services furnished in 
a hospital emergency room if the conditions of paragraph (c)(3) of this 
section are met.
    (e) Submittal of waiver request. The State Governor, the head of the 
Medicaid agency, or an authorized designee may submit the waiver 
request.
    (f) Review of waiver requests. (1) This paragraph applies to initial 
waiver requests and to requests for renewal or amendment of a previously 
approved waiver.
    (2) CMS regional and central office staff review waiver requests and 
submit a recommendation to the Administrator, who--
    (i) Has the authority to approve or deny waiver requests; and
    (ii) Does not deny a request without first consulting the Secretary.
    (3) A waiver request is considered approved unless, within 90 days 
after the request is received by CMS, the Administrator denies the 
request, or the Administrator or the Regional Administrator sends the 
State a written request for additional information necessary to reach a 
final decision. If additional information is requested, a new 90-day 
period begins on the day the response to the additional information 
request is received by the addressee.
    (g) Basis for approval--(1) Waivers under section 1915 (b) and (c). 
The Administrator approves waiver requests if the State's proposed 
program or activity meets the requirements of the Act and the 
regulations atSec. 431.55 or subpart G of part 441 of this chapter.
    (2) Waivers under section 1916. The Administrator approves a waiver 
under section 1916 of the Act if the State shows, to CMS's satisfaction, 
that the Medicaid beneficiaries have available and accessible to them 
sources, other than a hospital emergency room, where they can obtain 
necessary nonemergency outpatient services.
    (h) Effective date and duration of waivers--(1) Effective date. 
Waivers receive a prospective effective date determined, with State 
input, by the Administrator. The effective date is specified in the 
letter of approval to the State.
    (2) Duration of waivers--(i) Home and community-based services under 
section 1915(c). The initial waiver is for a period of three years and 
may be renewed thereafter for periods of five years.
    (ii) Waivers under sections 1915(b) and 1916. The initial waiver is 
for a period of two years and may be renewed for additional periods of 
up to two years as determined by the Administrator.
    (3) Renewal of waivers. (i) A renewal request must be submitted at 
least 90 days (but not more than 120 days) before a currently approved 
waiver expires, to provide adequate time for CMS review.
    (ii) If a renewal request for a section 1915(c) waiver proposes a 
change in services provided, eligible population, service area, or 
statutory sections

[[Page 10]]

waived, the Administrator may consider it a new waiver, and approve it 
for a period of three years.

[56 FR 8846, Mar. 1, 1991]



Subpart C_Grants; Reviews and Audits; Withholding for Failure To Comply; 
   Deferral and Disallowance of Claims; Reduction of Federal Medicaid 
                                Payments



Sec.  430.30  Grants procedures.

    (a) General provisions. (1) Once CMS has approved a State plan, it 
makes quarterly grant awards to the State to cover the Federal share of 
expenditures for services, training, and administration.
    (2) The amount of the quarterly grant is determined on the basis of 
information submitted by the State agency (in quarterly estimate and 
quarterly expenditure reports) and other pertinent documents.
    (b) Quarterly estimates. The Medicaid agency must submit Form CMS-37 
(Medicaid Program Budget Report; Quarterly Distribution of Funding 
Requirements) to the central office (with a copy to the regional office) 
45 days before the beginning of each quarter.
    (c) Expenditure reports. (1) The State must submit Form CMS-64 
(Quarterly Medicaid Statement of Expenditures for the Medical Assistance 
Program) to the central office (with a copy to the regional office) not 
later than 30 days after the end of each quarter.
    (2) This report is the State's accounting of actual recorded 
expenditures. The disposition of Federal funds may not be reported on 
the basis of estimates.
    (d) Grant award--(1) Computation by CMS. Regional office staff 
analyzes the State's estimates and sends a recommendation to the central 
office. Central office staff considers the State's estimates, the 
regional office recommendations and any other relevant information, 
including any adjustments to be made under paragraph (d)(2) of this 
section, and computes the grant.
    (2) Content of award. The grant award computation form shows the 
estimate of expenditures for the ensuring quarter, and the amounts by 
which that estimate is increased or decreased because of an 
underestimate or overestimate for prior quarters, or for any of the 
following reasons:
    (i) Penalty reductions imposed by law.
    (ii) Accounting adjustments.
    (iii) Deferrals or disallowances.
    (iv) Interest assessments.
    (v) Mandated adjustments such as those required by section 1914 of 
the Act.
    (3) Effect of award. The grant award authorizes the State to draw 
Federal funds as needed to pay the Federal share of disbursements.
    (4) Drawing procedure. The draw is through a commercial bank and the 
Federal Reserve system against a continuing letter of credit certified 
to the Secretary of the Treasury in favor of the State payee. (The 
letter of credit payment system was established in accordance with 
Treasury Department regulations--Circular No. 1075.)
    (e) General administrative requirements. With the following 
exceptions, the provisions of 45 CFR part 74, which establish uniform 
administrative requirements and cost principles, apply to all grants 
made to States under this subpart:

45 CFR part 74
Subpart G--Matching and Cost Sharing
Subpart I--Financial Report Requirements

[53 FR 36571, Sept. 21, 1988, as amended at 77 FR 31507, May 29, 2012]



Sec.  430.32  Program reviews.

    (a) Review of State and local administration. In order to determine 
whether the State is complying with the Federal requirements and the 
provisions of its plan, CMS reviews State and local administration 
through analysis of the State's policies and procedures, on-site review 
of selected aspects of agency operation, and examination of samples of 
individual case records.
    (b) Quality control program. The State itself is required to carry 
out a continuing quality control program as set forth in part 431, 
subpart P, of this chapter.
    (c) Action on review findings. If Federal or State reviews reveal 
serious problems with respect to compliance with any Federal 
requirement, the

[[Page 11]]

State must correct its practice accordingly.



Sec.  430.33  Audits.

    (a) Purpose. The Department's Office of Inspector General (OIG) 
periodically audits State operations in order to determine whether--
    (1) The program is being operated in a cost-efficient manner; and
    (2) Funds are being properly expended for the purposes for which 
they were appropriated under Federal and State law and regulations.
    (b) Reports. (1) The OIG releases audit reports simultaneously to 
State officials and the Department's program officials.
    (2) The reports set forth OIG opinion and recommendations regarding 
the practices it reviewed, and the allowability of the costs it audited.
    (3) Cognizant officials of the Department make final determinations 
on all audit findings.
    (c) Action on audit exceptions--(1) Concurrence or clearance. The 
State agency has the opportunity of concurring in the exceptions or 
submitting additional facts that support clearance of the exceptions.
    (2) Appeal. Any exceptions that are not disposed of under paragraph 
(c)(1) of this section are included in a disallowance letter that 
constitutes the Department's final decision unless the State requests 
reconsideration by the Administrator or the Departmental Appeals Board. 
(Specific rules are set forth inSec. 430.42.)
    (3) Adjustment. If the decision by the Board requires an adjustment 
of FFP, either upward or downward, a subsequent grant award promptly 
reflects the amount of increase or decrease.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991; 77 
FR 31507, May 29, 2012]



Sec.  430.35  Withholding of payment for failure to comply with Federal
requirements.

    (a) Basis for withholding. CMS withholds payments to the State, in 
whole or in part, only if, after giving the agency reasonable notice and 
opportunity for a hearing in accordance with subpart D of this part, the 
Administrator finds--
    (1) That the plan no longer complies with the provisions of section 
1902 of the Act; or
    (2) That in the administration of the plan there is failure to 
comply substantially with any of those provisions.

(Hearings under subpart D are generally not called until a reasonable 
effort has been made to resolve the issues through conferences and 
discussions. These may be continued even if a date and place have been 
set for the hearing.)
    (b) Noncompliance of the plan. A question of noncompliance of a 
State plan may arise from an unapprovable change in the approved State 
plan or the failure of the State to change its approved plan to conform 
to a new Federal requirement for approval of State plans.
    (c) Noncompliance in practice. A question of noncompliance in 
practice may arise from the State's failure to actually comply with a 
Federal requirement, regardless of whether the plan itself complies with 
that requirement.
    (d) Notice and implementation of withholding. If the Administrator 
makes a finding of noncompliance under paragraph (a) of this section, 
the following rules apply:
    (1) The Administrator notifies the State:
    (i) That no further payments will be made to the State (or that 
payments will be made only for those portions or aspects of the program 
that are not affected by the noncompliance); and
    (ii) That the total or partial withholding will continue until the 
Administrator is satisfied that the State's plan and practice are, and 
will continue to be, in compliance with Federal requirements.
    (2) CMS withholds payments, in whole or in part, until the 
Administrator is satisfied regarding the State's compliance.



Sec.  430.38  Judicial review.

    (a) Right to judicial review. Any State dissatisfied with the 
Administrator's final determination on approvability of plan material 
(Sec.  430.18) or compliance with Federal requirements (Sec.  430.35) 
has a right to judicial review.
    (b) Petition for review. (1) The State must file a petition for 
review with the

[[Page 12]]

U.S. Court of Appeals for the circuit in which the State is located, 
within 60 days after it is notified of the determination.
    (2) The clerk of the court will file a copy of the petition with the 
Administrator and the Administrator will file in the court the record of 
the proceedings on which the determination was based.
    (c) Court action. (1) The court is bound by the Administrator's 
findings of fact if they are supported by substantial evidence.
    (2) The court has jurisdiction to affirm the Administrator's 
decision, to set it aside in whole or in part, or, for good cause, to 
remand the case for additional evidence.
    (d) Response to remand. (1) If the court remands the case, the 
Administrator may make new or modified findings of fact and may modify 
his or her previous determination.
    (2) The Administrator will certify to the court the transcript and 
record of the further proceedings.
    (e) Review by the Supreme Court. The judgment of the appeals court 
is subject to review by the U.S. Supreme Court upon certiorari or 
certification, as provided in 28 U.S.C. 1254.



Sec.  430.40  Deferral of claims for FFP.

    (a) Requirements for deferral. Payment of a claim or any portion of 
a claim for FFP is deferred only if--
    (1) The Administrator or current Designee questions its allowability 
and needs additional information to resolve the question; and
    (2) CMS takes action to defer the claim (by excluding the claimed 
amount from the grant award) within 60 days after the receipt of a 
Quarterly Statement of Expenditures (prepared in accordance with CMS 
instructions) that includes that claim.
    (b) Notice of deferral and State's responsibility.(1) Within 15 days 
of the action described in paragraph (a)(2) of this section, the current 
Designee sends the State a written notice of deferral that--
    (i) Identifies the type and amount of the deferred claim and 
specifies the reason for deferral; and
    (ii) Requests the State to make available all the documents and 
materials the regional office then believes are necessary to determine 
the allowability of the claim.
    (2) It is the responsibility of the State to establish the 
allowability of a deferred claim.
    (c) Handling of documents and materials. (1) Within 60 days (or 
within 120 days if the State requests an extension) after receipt of the 
notice of deferral, the State must make available to the regional 
office, in readily reviewable form, all requested documents and 
materials except any that it identifies as not being available.
    (2) Regional office staff usually initiates review within 30 days 
after receipt of the documents and materials.
    (3) If the current Designee finds that the materials are not in 
readily reviewable form or that additional information is needed, he or 
she promptly notifies the State that it has 15 days to submit the 
readily reviewable or additional materials.
    (4) If the State does not provide the necessary materials within 15 
days, the current Designee disallows the claim.
    (5) The current Designee has 90 days, after all documentation is 
available in readily reviewable form, to determine the allowability of 
the claim.
    (6) If the current Designee cannot complete review of the material 
within 90 days, CMS pays the claim, subject to a later determination of 
allowability.
    (d) Effect of decision to pay a deferred claim. Payment of a 
deferred claim under paragraph (c)(6) of this section does not preclude 
a subsequent disallowance based on the results of an audit or financial 
review. (If there is a subsequent disallowance, the State may request 
reconsideration as provided in paragraph (e)(2) of this section.)
    (e) Notice and effect of decision on allowability. (1) The 
Administrator or current Designee gives the State written notice of his 
or her decision to pay or disallow a deferred claim.
    (2) If the decision is to disallow, the notice informs the State of 
its right to reconsideration in accordance with 45 CFR part 16.

[53 FR 36571, Sept. 21, 1988, as amended at 77 FR 31507, May 29, 2012]

[[Page 13]]



Sec.  430.42  Disallowance of claims for FFP.

    (a) Notice of disallowance and of right to reconsideration. When the 
Administrator or current Designee determines that a claim or portion of 
claim is not allowable, he or she promptly sends the State a 
disallowance letter that includes the following, as appropriate:
    (1) The date or dates on which the State's claim for FFP was made.
    (2) The time period during which the expenditures in question were 
made or claimed to have been made.
    (3) The date and amount of any payment or notice of deferral.
    (4) A statement of the amount of FFP claimed, allowed, and 
disallowed and the manner in which these amounts were computed.
    (5) Findings of fact on which the disallowance determination is 
based or a reference to other documents previously furnished to the 
State or included with the notice (such as a report of a financial 
review or audit) which contain the findings of fact on which the 
disallowance determination is based.
    (6) Pertinent citations to the law, regulations, guides and 
instructions supporting the action taken.
    (7) A request that the State make appropriate adjustment in a 
subsequent expenditure report.
    (8) Notice of the State's right to request reconsideration of the 
disallowance and the time allowed to make the request.
    (9) A statement indicating that the disallowance letter is the 
Department's final decision unless the State requests reconsideration 
under paragraph (b)(2) or (f)(2) of this section.
    (b) Reconsideration of a disallowance. (1) The Administrator will 
reconsider Medicaid disallowance determinations.
    (2) To request reconsideration of a disallowance, a State must 
complete the following:
    (i) Submit the following within 60 days after receipt of the 
disallowance letter:
    (A) A written request to the Administrator that includes the 
following:
    (1) A copy of the disallowance letter.
    (2) A statement of the amount in dispute.
    (3) A brief statement of why the disallowance should be reversed or 
revised, including any information to support the State's position with 
respect to each issue.
    (4) Additional information regarding factual matters or policy 
considerations.
    (B) A copy of the written request to the Regional Office.
    (C) Send all requests for reconsideration via registered or 
certified mail to establish the date the reconsideration was received by 
CMS.
    (ii) In all cases, the State has the burden of documenting the 
allowability of its claims for FFP.
    (iii) Additional information regarding the legal authority for the 
disallowance will not be reviewed in the reconsideration but may be 
presented in any appeal to the Departmental Appeals Board under 
paragraph (f)(2) of this section.
    (3) A State may request to retain the FFP during the reconsideration 
of the disallowance under section 1116(e) of the Act, in accordance with 
Sec.  433.38 of this subchapter.
    (4) The State is not required to request reconsideration before 
seeking review from the Departmental Appeals Board.
    (5) The State may also seek reconsideration, and following the 
reconsideration decision, request a review from the Board.
    (6) If the State elects reconsideration, the reconsideration process 
must be completed or withdrawn before requesting review by the Board.
    (c) Procedures for reconsideration of a disallowance. (1) Within 60 
days after receipt of the disallowance letter, the State shall, in 
accordance with (b)(2) of this section, submit in writing to the 
Administrator any relevant evidence, documentation, or explanation and 
shall simultaneously submit a copy thereof to the Regional Office.
    (2) After consideration of the policies and factual matters 
pertinent to the issues in question, the Administrator shall, within 60 
days from the date of receipt of the request for reconsideration, issue 
a written decision or a request for additional information as described 
in paragraph (c)(3) of this section.

[[Page 14]]

    (3) At the Administrator's option, CMS may request from the State 
any additional information or documents necessary to make a decision. 
The request for additional information must be sent via registered or 
certified mail to establish the date the request was sent by CMS and 
received by the State.
    (4) Within 30 days after receipt of the request for additional 
information, the State must submit to the Administrator, with a copy to 
the Regional Office in readily reviewable form, all requested documents 
and materials.
    (i) If the Administrator finds that the materials are not in readily 
reviewable form or that additional information is needed, he or she 
shall notify the State via registered or certified mail that it has 15 
business days from the date of receipt of the notice to submit the 
readily reviewable or additional materials.
    (ii) If the State does not provide the necessary materials within 15 
business days from the date of receipt of such notice, the Administrator 
shall affirm the disallowance in a final reconsideration decision issued 
within 15 days from the due date of additional information from the 
State.
    (5) If additional documentation is provided in readily reviewable 
form under the paragraph (c)(4) of this section, the Administrator shall 
issue a written decision, within 60 days from the due date of such 
information.
    (6) The final written decision shall constitute final CMS 
administrative action on the reconsideration and shall be (within 15 
business days of the decision) mailed to the State agency via registered 
or certified mail to establish the date the reconsideration decision was 
received by the State.
    (7) If the Administrator does not issue a decision within 60 days 
from the date of receipt of the request for reconsideration or the date 
of receipt of the requested additional information, the disallowance 
shall be deemed to be affirmed upon reconsideration.
    (8) No section of this regulation shall be interpreted as waiving 
the Department's right to assert any provision or exemption under the 
Freedom of Information Act.
    (d) Withdrawal of a request for reconsideration of a disallowance. 
(1) A State may withdraw the request for reconsideration at any time 
before the notice of the reconsideration decision is received by the 
State without affecting its right to submit a notice of appeal to the 
Board. The request for withdrawal must be in writing and sent to the 
Administrator, with a copy to the Regional Office, via registered or 
certified mail.
    (2) Within 60 days after CMS' receipt of a State's withdrawal 
request, a State may, in accordance with (f)(2) of this section, submit 
a notice of appeal to the Board.
    (e) Implementation of decisions for reconsideration of a 
disallowance. (1) After undertaking a reconsideration, the Administrator 
may affirm, reverse, or revise the disallowance and shall issue a final 
written reconsideration decision to the State in accordance with 
paragraph (c)(4) of this section.
    (2) If the reconsideration decision requires an adjustment of FFP, 
either upward or downward, a subsequent grant award will be issued in 
the amount of such increase or decrease.
    (3) Within 60 days after the receipt of a reconsideration decision 
from CMS a State may, in accordance with paragraph (f)(2) of this 
section, submit a notice of appeal to the Board.
    (f) Appeal of Disallowance. (1) The Departmental Appeals Board 
reviews disallowances of FFP under title XIX.
    (2) A State that wishes to appeal a disallowance to the Board must:
    (i) Submit a notice of appeal to the Board at the address given on 
the Departmental Appeals Board's web site within 60 days after receipt 
of the disallowance letter.
    (A) If a reconsideration of a disallowance was requested, within 60 
days after receipt of the reconsideration decision; or
    (B) If reconsideration of a disallowance was requested and no 
written decision was issued, within 60 days from the date the decision 
on reconsideration of the disallowance was due to be issued by CMS.
    (ii) Include all of the following:
    (A) A copy of the disallowance letter.
    (B) A statement of the amount in dispute.
    (C) A brief statement of why the disallowance is wrong.

[[Page 15]]

    (3) The Board's decision of an appeal under paragraph (f)(2) of this 
section shall be the final decision of the Secretary and shall be 
subject to reconsideration by the Board only upon a motion by either 
party that alleges a clear error of fact or law and is filed during the 
60-day period that begins on the date of the Board's decision or to 
judicial review in accordance with paragraph (f)(2)(i) of this section.
    (g) Appeals procedures. The appeals procedures are those set forth 
in 45 CFR part 16 for Medicaid and for many other programs administered 
by the Department.
    (1) In all cases, the State has the burden of documenting the 
allowability of its claims for FFP.
    (2) The Board shall conduct a thorough review of the issues, taking 
into account all relevant evidence, including such documentation as the 
State may submit and the Board may require.
    (h) Implementation of decisions. (1) The Board may affirm the 
disallowance, reverse the disallowance, modify the disallowance, or 
remand the disallowance to CMS for further consideration.
    (2) The Board will issue a final written decision to the State 
consistent with 45 CFR Part 16.
    (3) If the appeal decision requires an adjustment of FFP, either 
upward or downward, a subsequent grant award will be issued in the 
amount of increase or decrease.

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991; 77 
FR 31507, May 29, 2012]



Sec.  430.45  Reduction of Federal Medicaid payments.

    (a) Methods of reduction. CMS may reduce Medicaid payments to a 
State as required under the Act by reducing--
    (1) The Federal Medical Assistance Percentage;
    (2) The amount of State expenditures subject to FFP;
    (3) The rates of FFP; or
    (4) The amount otherwise payable to the State.
    (b) Right to reconsideration. A state that receives written final 
notice of a reduction under paragraph (a) of this section has a right to 
reconsideration. The provisions ofSec. 430.42 (b) and (c) apply.
    (c) Other applicable rules. Other rules regarding reduction of 
Medicaid payments are set forth in parts 433 and 447 of this chapter.



Sec.  430.48  Repayment of Federal funds by installments.

    (a) Basic conditions. When Federal payments have been made for 
claims that are later found to be unallowable, the State may repay the 
Federal funds by installments if all of the following conditions are 
met:
    (1) The amount to be repaid exceeds 0.25 percent of the estimated or 
actual annual State share for the Medicaid program.
    (2) The State has given the Regional Office written notice, before 
total repayment was due, of its intent to repay by installments.
    (b) Annual State share determination. CMS determines whether the 
amount to be repaid exceeds 0.25 percent of the annual State share as 
follows:
    (1) If the Medicaid program is ongoing, CMS uses the annual 
estimated State share of Medicaid expenditures for the current year, as 
shown on the State's latest Medicaid Program Budget Report (CMS-37). The 
current year is the year in which the State requests the repayment by 
installments.
    (2) If the Medicaid program has been terminated by Federal law or by 
the State, CMS uses the actual State share that is shown on the State's 
CMS-64 Quarterly Expense Report for the last four quarters filed.
    (c) Standard Repayment amounts, schedules, and procedures--(1) 
Repayment amount. The repayment amount may not include any amount 
previously approved for installment repayment.
    (2) Repayment schedule. The maximum number of quarters allowed for 
the standard repayment schedule is 12 quarters (3 years), except as 
provided in paragraphs (c)(4) and (e) of this section.
    (3) Quarterly repayment amounts. (i) The quarterly repayment amounts 
for each of the quarters in the repayment schedule will be the larger of 
the repayment amount divided by 12 quarters or the minimum repayment 
amount;

[[Page 16]]

    (ii) The minimum quarterly repayment amounts for each of the 
quarters in the repayment schedule is 0.25 percent of the estimated 
State share of the current annual expenditures for Medicaid;
    (iii) The repayment period may be less than 12 quarters when the 
minimum repayment amount is required.
    (4) Extended schedule. (i) The repayment schedule may be extended 
beyond 12 quarterly installments if the total repayment amount exceeds 
100 percent of the estimated State share of the current annual 
expenditures;
    (ii) The quarterly repayment amount will be 8\1/3\ percent of the 
estimated State share of the current annual expenditures until fully 
repaid.
    (5) Repayment process. (i) Repayment is accomplished through 
deposits into the State's Payment Management System (PMS) account;
    (ii) A State may choose to make payment by Automated Clearing House 
(ACH) direct deposit, by check, or by Fedwire transfer.
    (6) Reductions. If the State chooses to repay amounts representing 
higher percentages during the early quarters, any corresponding 
reduction in required minimum percentages is applied first to the last 
scheduled payment, then to the next to the last payment, and so forth as 
necessary.
    (d) Alternate repayment amounts, schedules, and procedures for 
States experiencing economic distress immediately prior to the repayment 
period--(1) Repayment amount. The repayment amount may not include 
amounts previously approved for installment repayment if a State 
initially qualifies for the alternate repayment schedule at the onset of 
an installment repayment period.
    (2) Qualifying period of economic distress. (i) A State will qualify 
to avail itself of the alternate repayment schedule if it demonstrates 
the State is experiencing a period of economic distress;
    (ii) A period of economic distress is one in which the State 
demonstrates distress for at least each of the previous 6 months, ending 
the month prior to the date of the State's written request for an 
alternate repayment schedule, as determined by a negative percent change 
in the monthly Philadelphia Federal Reserve Bank State coincident index.
    (3) Repayment schedule. The maximum number of quarters allowed for 
the alternate repayment schedule is 12 quarters (3 years), except as 
provided in paragraph (d)(5) of this section.
    (4) Quarterly repayment amounts. (i) The quarterly repayment amounts 
for each of the first 8 quarters in the repayment schedule will be the 
smaller of the repayment amount divided by 12 quarters or the maximum 
quarterly repayment amount;
    (ii) The maximum quarterly repayment amounts for each of the first 8 
quarters in the repayment schedule is 0.25 percent of the annual State 
share determination as defined in paragraph (b) of this section;
    (iii) For the remaining 4 quarters, the quarterly repayment amount 
equals the remaining balance of the overpayment amount divided by the 
remaining 4 quarters.
    (5) Extended schedule. (i) For a State that initiated its repayment 
under an alternate payment schedule for economic distress, the repayment 
schedule may be extended beyond 12 quarterly installments if the total 
repayment amount exceeds 100 percent of the estimated State share of 
current annual expenditures;
    (A) In these circumstances, paragraph (d)(3) of this section is 
followed for repayment of the amount equal to 100 percent of the 
estimated State share of current annual expenditures.
    (B) The remaining amount of the repayment is in quarterly amounts 
equal to 8\1/3\ percent of the estimated State share of current annual 
expenditures until fully repaid.
    (ii) Upon request by the State, the repayment schedule may be 
extended beyond 12 quarterly installments if the State has qualifying 
periods of economic distress in accordance with paragraph (d)(2) of this 
section during the first 8 quarters of the alternate repayment schedule.
    (A) To qualify for additional quarters, the States must demonstrate 
a period of economic distress in accordance with paragraph (d)(2) of 
this section for at least 1 month of a quarter during the first 8 
quarters of the alternate repayment schedule.

[[Page 17]]

    (B) For each quarter (of the first 8 quarters of the alternate 
payment schedule) identified as qualified period of economic distress, 
one quarter will be added to the remaining 4 quarters of the original 12 
quarter repayment period.
    (C) The total number of quarters in the alternate repayment schedule 
shall not exceed 20 quarters.
    (6) Repayment process. (i) Repayment is accomplished through 
deposits into the State's Payment Management System (PMS) account;
    (ii) A State may choose to make payment by Automated Clearing House 
(ACH) direct deposit, by check, or by Fedwire transfer.
    (7) If the State chooses to repay amounts representing higher 
percentages during the early quarters, any corresponding reduction in 
required minimum percentages is applied first to the last scheduled 
payment, then to the next to the last payment, and so forth as 
necessary.
    (e) Alternate repayment amounts, schedules, and procedures for 
States entering into distress during a standard repayment schedule--(1) 
Repayment amount. The repayment amount may include amounts previously 
approved for installment repayment if a State enters into a qualifying 
period of economic distress during an installment repayment period.
    (2) Qualifying period of economic distress. (i) A State will qualify 
to avail itself of the alternate repayment schedule if it demonstrates 
the State is experiencing economic distress;
    (ii) A period of economic distress is one in which the State 
demonstrates distress for each of the previous 6 months, that begins on 
the date of the State's request for an alternate repayment schedule, as 
determined by a negative percent change in the monthly Philadelphia 
Federal Reserve Bank State coincident index.
    (3) Repayment schedule. The maximum number of quarters allowed for 
the alternate repayment schedule is 12 quarters (3 years), except as 
provided in paragraph (e)(5) of this section.
    (4) Quarterly repayment amounts. (i) The quarterly repayment amounts 
for each of the first 8 quarters in the repayment schedule will be the 
smaller of the repayment amount divided by 12 quarters or the maximum 
repayment amount;
    (ii) The maximum quarterly repayment amounts for each of the first 8 
quarters in the repayment schedule is 0.25 percent of the annual State 
share determination as defined in paragraph (b) of this section;
    (iii) For the remaining 4 quarters, the quarterly repayment amount 
equals the remaining balance of the overpayment amount divided by the 
remaining 4 quarters.
    (5) Extended schedule. (i) For a State that initiated its repayment 
under the standard payment schedule and later experienced periods of 
economic distress and elected an alternate repayment schedule, the 
repayment schedule may be extended beyond 12 quarterly installments if 
the total repayment amount of the remaining balance of the standard 
schedule, exceeds 100 percent of the estimated State share of the 
current annual expenditures;
    (ii) In these circumstances, paragraph (d)(3) of this section is 
followed for repayment of the amount equal to 100 percent of the 
estimated State share of current annual expenditures;
    (iii) The remaining amount of the repayment is in quarterly amounts 
equal to 8\1/3\ percent of the estimated State share of the current 
annual expenditures until fully repaid.
    (6) Repayment process. (i) Repayment is accomplished through 
deposits into the State's Payment Management System (PMS) account;
    (ii) A State may choose to make payment by Automated Clearing House 
(ACH) direct deposit, by check, or by Fedwire transfer.
    (7) If the State chooses to repay amounts representing higher 
percentages during the early quarters, any corresponding reduction in 
required minimum percentages is applied first to the last scheduled 
payment, then to the next to the last payment, and so forth as 
necessary.

[77 FR 31509, May 29, 2012]

[[Page 18]]



Subpart D_Hearings on Conformity of State Medicaid Plans and Practice to 
                          Federal Requirements



Sec.  430.60  Scope.

    (a) This subpart sets forth the rules for hearings to States that 
appeal a decision to disapprove State plan material (underSec. 430.18) 
or to withhold Federal funds (underSec. 430.35), because the State 
plan or State practice in the Medicaid program is not in compliance with 
Federal requirements.
    (b) Nothing in this subpart is intended to preclude or limit 
negotiations between CMS and the State, whether before, during, or after 
the hearing to resolve the issues that are, or otherwise would be, 
considered at the hearing. Such negotiations and resolution of issues 
are not part of the hearing, and are not governed by the rules in this 
subpart except as expressly provided.



Sec.  430.62  Records to be public.

    All pleadings, correspondence, exhibits, transcripts of testimony, 
exceptions, briefs, decisions, and other documents filed in the docket 
in any proceeding may be inspected and copied in the office of the CMS 
Docket Clerk. Inquiries may be made to the Docket Clerk, Hearing Staff, 
Bureau of Eligibility, Reimbursment and Coverage, 300 East High Rise, 
6325 Security Boulevard, Baltimore, Maryland, 21207. Telephone: (301) 
594-8261.



Sec.  430.63  Filing and service of papers.

    (a) Filing. All papers in the proceedings are filed with the CMS 
Docket Clerk, in an original and two copies. Originals only of exhibits 
and transcripts of testimony need be filed.
    (b) Service. All papers in the proceedings are served on all parties 
by personal delivery or by mail. Service on the party's designated 
attorney is considered service upon the party.



Sec.  430.64  Suspension of rules.

    Upon notice to all parties, the Administrator or the presiding 
officer may modify or waive any rule in this subpart upon determination 
that no party will be unduly prejudiced and the ends of justice will 
thereby be served.



Sec.  430.66  Designation of presiding officer for hearing.

    (a) The presiding officer at a hearing is the Administrator or his 
designee.
    (b) The designation of the presiding officer is in writing. A copy 
of the designation is served on all parties.



Sec.  430.70  Notice of hearing or opportunity for hearing.

    The Administrator mails the State a notice of hearing or opportunity 
for hearing that--
    (a) Specifies the time and place for the hearing;
    (b) Specifies the issues that will be considered;
    (c) Identifies the presiding officer; and
    (d) Is published in the Federal Register.



Sec.  430.72  Time and place of hearing.

    (a) Time. The hearing is scheduled not less than 30 nor more than 60 
days after the date of notice to the State. The scheduled date may be 
changed by written agreement between CMS and the State.
    (b) Place. The hearing is conducted in the city in which the CMS 
regional office is located or in another place fixed by the presiding 
officer in light of the circumstances of the case, with due regard for 
the convenience and necessity of the parties or their representatives.



Sec.  430.74  Issues at hearing.

    The list of issues specified in the notice of hearing may be 
augmented or reduced as provided in this section.
    (a) Additional issues. (1) Before a hearing underSec. 430.35, the 
Administrator may send written notice to the State listing additional 
issues to be considered at the hearing. That notice is published in the 
Federal Register.
    (2) If the notice of additional issues is furnished to the State 
less than 20 days before the scheduled hearing date, postponement is 
granted if requested by the State or any other party. The new date may 
be 20 days after the date of the notice, or a later date agreed to by 
the presiding officer.

[[Page 19]]

    (b) New or modified issues. If, as a result of negotiations between 
CMS and the State, the submittal of plan amendment, a change in the 
State program, or other actions by the State, any issue is resolved in 
whole or in part, but new or modified issues are presented, as specified 
by the presiding officer, the hearing proceeds on the new or modified 
issues.
    (c) Issues removed from consideration--(1) Basis for removal. If at 
any time before, during, or after the hearing, the presiding officer 
finds that the State has come into compliance with Federal requirements 
on any issue or part of an issue, he or she removes the appropriate 
issue or part of an issue from consideration. If all issues are removed, 
the hearing is terminated.
    (2) Notice to parties. Before removing any issue or part of an issue 
from consideration, the presiding officer provides all parties other 
than CMS and the State with--
    (i) A statement of the intent to remove and the reasons for removal; 
and
    (ii) A copy of the proposed State plan provision on which CMS and 
the State have agreed.
    (3) Opportunity for written comment. The notified parties have 15 
days to submit, for consideration by the presiding officer, and for the 
record, their views as to, or any information bearing upon, the merits 
of the proposed plan provision and the merits of the reasons for 
removing the issue from consideration.
    (d) Remaining issues. The issues considered at the hearing are 
limited to those issues of which the State is notified as provided in 
Sec.  430.70 and paragraph (a) of this section, and new or modified 
issues described in paragraph (b) of this section. They do not include 
issues or parts of issues removed in accordance with paragraph (c) of 
this section.



Sec.  430.76  Parties to the hearing.

    (a) CMS and the State. CMS and the State are parties to the hearing.
    (b) Other individuals--(1) Basis for participation. Other 
individuals or groups may be recognized as parties if the issues to be 
considered at the hearing have caused them injury and their interest is 
within the zone of interests to be protected by the governing Federal 
statute.
    (2) Petition for participation. Any individual or group wishing to 
participate as a party must, within 15 days after notice of hearing is 
published in the Federal Register, file with the CMS Docket Clerk, a 
petition that concisely states--
    (i) Petitioner's interest in the proceeding;
    (ii) Who will appear for petitioner;
    (iii) The issues on which petitioner wishes to participate; and
    (iv) Whether petitioner intends to present witnesses.

The petitioner must also serve a copy of the petition on each party of 
record at that time.
    (3) Comments on petition. Any party may, within 5 days of receipt of 
the copy of the petition, file comments on it.
    (4) Action on petition. (i) The presiding officer promptly 
determines whether each petitioner has the requisite interest in the 
proceedings and approves or denies participation accordingly.
    (ii) If petitions are made by more than one individual or group with 
common interests, the presiding officer may--
    (A) Request all those petitioners to designate a single 
representative; or
    (B) Recognize one or more of those petitioners to represent all of 
them.
    (iii) The presiding officer gives each petitioner written notice of 
the decision and, if the decision is to deny, briefly states the grounds 
for denial.
    (c) Amicus curiae (friend of the court)--(1) Petition for 
participation. Any person or organization that wishes to participate as 
amicus curiae must, before the hearing begins, file with the CMS Docket 
Clerk, a petition that concisely states--
    (i) The petitioners' interest in the hearing;
    (ii) Who will represent the petitioner; and
    (iii) The issues on which the petitioner intends to present 
argument.
    (2) Action on amicus curiae petition. The presiding officer may 
grant the petition if he or she finds that the petitioner has a 
legitimate interest in the proceedings, that such participation will not 
unduly delay the outcome and

[[Page 20]]

may contribute materially to the proper disposition of the issues.
    (3) Nature of amicus participation. An amicus curiae is not a party 
to the hearing but may participate by--
    (i) Submitting a written statement of position to the presiding 
officer before the beginning of the hearing;
    (ii) Presenting a brief oral statement at the hearing, at the point 
in the proceedings specified by the presiding officer; and
    (iii) Submitting a brief or written statement when the parties 
submit briefs.

The amicus curiae must serve copies of any briefs or written statements 
on all parties.



Sec.  430.80  Authority of the presiding officer.

    (a) The presiding officer has the duty to conduct a fair hearing, to 
avoid delay, maintain order, and make a record of the proceedings. He or 
she has the authority necessary to accomplish those ends, including but 
not limited to authority to take the following actions:
    (1) Change the date, time, and place of the hearing after due notice 
to the parties. This includes authority to postpone or adjourn the 
hearing in whole or in part. In a hearing on disapproval of a State 
plan, or State plan amendments, changes in the date of the hearing are 
subject to the time limits imposed by section 1116(a)(2) of the Act.
    (2) Hold conferences to settle or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the issues.
    (3) Regulate participation of parties and amici curiae and require 
parties and amici curiae to state their position with respect to the 
various issues in the proceeding.
    (4) Administer oaths and affirmations.
    (5) Rule on motions and other procedural items, including issuance 
of protective orders or other relief to a party against whom discovery 
is sought.
    (6) Regulate the course of the hearing and conduct of counsel.
    (7) Examine witnesses.
    (8) Receive, rule on, exclude or limit evidence or discovery.
    (9) Fix the time for filing motions, petitions, briefs, or other 
items.
    (10) If the presiding officer is the Administrator, make a final 
decision.
    (11) If the presiding officer is a designee of the Administrator, 
certify the entire record including recommended findings and proposed 
decision to the Administrator.
    (12) Take any action authorized by the rules in this subpart or in 
conformance with the provisions of 5 U.S.C. 551 through 559.
    (b) The presiding officer does not have authority to compel by 
subpoena the production of witnesses, papers, or other evidence.
    (c) If the presiding officer is a designee of the Administrator, his 
or her authority pertains to the issues of compliance by a State with 
Federal requirements, and does not extend to the question of whether, in 
case of any noncompliance, Federal payments will be denied in respect to 
the entire State plan or only for certain categories under, or parts of, 
the State plan affected by the noncompliance.



Sec.  430.83  Rights of parties.

    All parties may:
    (a) Appear by counsel or other authorized representative, in all 
hearing proceedings.
    (b) Participate in any prehearing conference held by the presiding 
officer.
    (c) Agree to stipulations as to facts which will be made a part of 
the record.
    (d) Make opening statements at the hearing.
    (e) Present relevant evidence on the issues at the hearing.
    (f) Present witnesses who then must be available for cross-
examination by all other parties.
    (g) Present oral arguments at the hearing.
    (h) Submit written briefs, proposed findings of fact, and proposed 
conclusions of law, after the hearing.



Sec.  430.86  Discovery.

    CMS and any party named in the notice issued underSec. 430.70 has 
the right to conduct discovery (including depositions) against opposing 
parties. Rules

[[Page 21]]

26-37 of the Federal Rules of Civil Procedures apply to such 
proceedings; there will be no fixed rule on priority of discovery. Upon 
written motion, the presiding officer promptly rules upon any objection 
to discovery action initiated under this section. The presiding officer 
also has the power to grant a protective order or relief to any party 
against whom discovery is sought and to restrict or control discovery so 
as to prevent undue delay in the conduct of the hearing. Upon the 
failure of any party to make discovery, the presiding officer may issue 
any order and impose any sanction (other than contempt orders) 
authorized by Rule 37 of the Federal Rules of Civil Procedure.



Sec.  430.88  Evidence.

    (a) Evidentiary purpose. The hearing is directed to receiving 
factual evidence and expert opinion testimony related to the issues 
involved in the proceeding. Argument is not received in evidence. It 
must be presented in statements, memoranda, or briefs, as determined by 
the presiding officer. Brief opening statements, concerning the party's 
position and what he or she intends to prove, may be made at hearings.
    (b) Testimony. Testimony is given orally under oath or affirmation 
by witnesses at the hearing. Witnesses are available at the hearing for 
cross-examination by all parties.
    (c) Stipulations and exhibits. Two or more parties may agree to 
stipulations of fact. Those stipulations, and any exhibit proposed by 
any party, are exchanged before the hearing if the presiding officer so 
requires.
    (d) Rules of evidence. (1) Technical rules of evidence do not apply 
to hearings conducted under this subpart. However, rules or principles 
designed to ensure production of the most credible evidence available 
and to subject testimony to test by cross-examination are applied by the 
presiding officer when reasonably necessary.
    (2) A witness may be cross-examined on any matter material to the 
proceeding without regard to the scope of his or her direct examination.
    (3) The presiding officer may exclude irrelevant, immaterial, or 
unduly repetitious evidence.
    (4) All documents and other evidence offered or taken for the record 
are open to examination by the parties and an opportunity is given to 
refute facts and arguments advanced on either side of the issues.



Sec.  430.90  Exclusion from hearing for misconduct.

    The presiding officer may immediately exclude from the hearing any 
person who--
    (a) Uses disrespectful, disorderly, or contumacious language or 
engages in contemptuous behavior;
    (b) Refuses to comply with directions; or
    (c) Uses dilatory tactics.



Sec.  430.92  Unsponsored written material.

    Letters expressing views or urging action and other unsponsored 
written material regarding matters in issue in a hearing are placed in 
the correspondence section of the docket of the proceeding. These data 
are not considered part of the evidence or record in the hearing.



Sec.  430.94  Official transcript.

    (a) Filing. The official transcripts of testimony, together with any 
stipulations, briefs, or memoranda of law, are filed with CMS.
    (b) Availability of transcripts. CMS designates an official reporter 
for each hearing. Transcripts of testimony in hearings may be obtained 
from the official reporter by the parties and the public at rates not in 
excess of the maximum rates fixed by the contract between CMS and the 
reporter.
    (c) Correction of transcript. Upon notice to all parties, the 
presiding officer may authorize corrections that affect substantive 
matters in the transcript.



Sec.  430.96  Record for decision.

    The transcript of testimony, exhibits, and all papers and requests 
filed in the proceedings, except the correspondence section of the 
docket, including rulings and any recommended or initial decision 
constitute the exclusive record for decision.



Sec.  430.100  Posthearing briefs.

    The presiding officer fixes the time for filing posthearing briefs, 
which may

[[Page 22]]

contain proposed findings of fact and conclusions of law. The presiding 
officer may also permit reply briefs.



Sec.  430.102  Decisions following hearing.

    (a) Administrator presides. If the presiding officer is the 
Administrator, he or she issues the hearing decision within 60 days 
after expiration of the period for submission of posthearing briefs.
    (b) Administrator's designee presides. If the presiding officer is 
other than the Administrator, the procedure is as follows:
    (1) Upon expiration of the period allowed for submission of 
posthearing briefs, the presiding officer certifies the entire record, 
including his or her recommended findings and proposed decision, to the 
Administrator. The Administrator serves a copy of the recommended 
findings and proposed decision upon all parties and amici, if any.
    (2) Any party may, within 20 days, file with the Administrator 
exceptions to the recommended findings and proposed decision and a 
supporting brief or statement.
    (3) The Administrator reviews the recommended decision and, within 
60 days of its issuance, issues his or her own decision.
    (c) Effect of Administrator's decision. The decision of the 
Administrator under this section is the final decision of the Secretary 
and constitutes ``final agency action'' within the meaning of 5 U.S.C. 
704 and a ``final determination'' within the meaning of section 
1116(a)(3) of the Act andSec. 430.38. The Administrator's decision is 
promptly served on all parties and amici.



Sec.  430.104  Decisions that affect FFP.

    (a) Scope of decisions. If the Administrator concludes that 
withholding of FFP is necessary because a State is out of compliance 
with Federal requirements, in accordance withSec. 430.35, the decision 
also specifies--
    (1) Whether no further payments will be made to the State or whether 
payments will be limited to parts of the program not affected by the 
noncompliance; and
    (2) The effective date of the decision to withhold.
    (b) Consultation. The Administrator may ask the parties for 
recommendations or briefs or may hold conferences of the parties on the 
question of further payments to the State.
    (c) Effective date of decision. The effective date of a decision to 
withhold Federal funds will not be earlier than the date of the 
Administrator's decision and will not be later than the first day of the 
next calendar quarter. The provisions of this section may not be waived 
underSec. 430.64.



PART 431_STATE ORGANIZATION AND GENERAL ADMINISTRATION--
Table of Contents



Sec.
431.1 Purpose.

                      Subpart A_Single State Agency

431.10 Single State agency.
431.11 Organization for administration.
431.12 Medical care advisory committee.
431.15 Methods of administration.
431.16 Reports.
431.17 Maintenance of records.
431.18 Availability of agency program manuals.
431.20 Advance directives.

              Subpart B_General Administrative Requirements

431.40 Basis and scope.
431.50 Statewide operation.
431.51 Free choice of providers.
431.52 Payments for services furnished out of State.
431.53 Assurance of transportation.
431.54 Exceptions to certain State plan requirements.
431.55 Waiver of other Medicaid requirements.
431.56 Special waiver provisions applicable to American Samoa and the 
          Northern Mariana Islands.

        Subpart C_Administrative Requirements: Provider Relations

431.105 Consultation to medical facilities.
431.107 Required provider agreement.
431.108 Effective date of provider agreements.
431.110 Participation by Indian Health Service facilities.
431.115 Disclosure of survey information and provider or contractor 
          evaluation.
431.120 State requirements with respect to nursing facilities.

             Subpart D_Appeals Process for NFs and ICFs/IID

431.151 Scope and applicability.

[[Page 23]]

431.152 State plan requirements.
431.153 Evidentiary hearing.
431.154 Informal reconsideration for ICFs/IID.

        Subpart E_Fair Hearings for Applicants and Beneficiaries

                           General Provisions

431.200 Basis and purpose.
431.201 Definitions.
431.202 State plan requirements.
431.205 Provision of hearing system.
431.206 Informing applicants and beneficiaries.

                                 Notice

431.210 Content of notice.
431.211 Advance notice.
431.213 Exceptions from advance notice.
431.214 Notice in cases of probable fraud.

                            Right to Hearing

431.220 When a hearing is required.
431.221 Request for hearing.
431.222 Group hearings.
431.223 Denial or dismissal of request for a hearing.

                               Procedures

431.230 Maintaining services.
431.231 Reinstating services.
431.232 Adverse decision of local evidentiary hearing.
431.233 State agency hearing after adverse decision of local evidentiary 
          hearing.
431.240 Conducting the hearing.
431.241 Matters to be considered at the hearing.
431.242 Procedural rights of the applicant or beneficiary.
431.243 Parties in cases involving an eligibility determination.
431.244 Hearing decisions.
431.245 Notifying the applicant or beneficiary of a State agency 
          decision.
431.246 Corrective action.

                     Federal Financial Participation

431.250 Federal financial participation.

   Subpart F_Safeguarding Information on Applicants and beneficiaries

431.300 Basis and purpose.
431.301 State plan requirements.
431.302 Purposes directly related to State plan administration.
431.303 State authority for safeguarding information.
431.304 Publicizing safeguarding requirements.
431.305 Types of information to be safeguarded.
431.306 Release of information.
431.307 Distribution of information materials.

                  Subpart G_Section 1115 Demonstrations

431.400 Basis and purpose.
431.404 Definitions.
431.408 State public notice process.
431.412 Application procedures.
431.416 Federal public notice and approval process.
431.420 Monitoring and compliance.
431.424 Evaluation requirements.
431.428 Reporting requirements.

Subparts H-L [Reserved]

                 Subpart M_Relations With Other Agencies

431.610 Relations with standard-setting and survey agencies.
431.615 Relations with State health and vocational rehabilitation 
          agencies and title V grantees.
431.620 Agreement with State mental health authority or mental 
          institutions.
431.621 State requirements with respect to nursing facilities.
431.625 Coordination of Medicaid with Medicare part B.
431.630 Coordination of Medicaid with QIOs.
431.635 Coordination of Medicaid with Special Supplemental Food Program 
          for Women, Infants, and Children (WIC).

   Subpart N_State Programs for Licensing Nursing Home Administrators

431.700 Basis and purpose.
431.701 Definitions.
431.702 State plan requirement.
431.703 Licensing requirement.
431.704 Nursing homes designated by other terms.
431.705 Licensing authority.
431.706 Composition of licensing board.
431.707 Standards.
431.708 Procedures for applying standards.
431.709 Issuance and revocation of license.
431.710 Provisional licenses.
431.711 Compliance with standards.
431.712 Failure to comply with standards.
431.713 Continuing study and investigation.
431.714 Waivers.
431.715 Federal financial participation.

Subpart O [Reserved]

                        Subpart P_Quality Control

                           General Provisions

431.800 Scope of subpart.
431.802 Basis.
431.804 Definitions.
431.806 State plan requirements.
431.808 Protection of beneficiary rights.

[[Page 24]]

           Medicaid Eligibility Quality Control (MEQC) Program

431.810 Basic elements of the Medicaid eligibility quality control 
          (MEQC) program.
431.812 Review procedures.
431.814 Sampling plan and procedures.
431.816 Case review completion deadlines and submittal of reports.
431.818 Access to records: MEQC program.
431.820 Corrective action under the MEQC program.
431.822 Resolution of differences in State and Federal case eligibility 
          or payment findings.

   Medicaid Quality Control (MQC) Claims Processing Assessment System

431.830 Basic elements of the Medicaid quality control (MQC) claims 
          processing assessment system.
431.832 Reporting requirements for claims processing assessment systems.
431.834 Access to records: Claims processing assessment systems.
431.836 Corrective action under the MQC claims processing assessment 
          systems.

                     Federal Financial Participation

431.861-431.864 [Reserved]
431.865 Disallowance of Federal financial participation for erroneous 
          State payments (for annual assessment periods ending after 
          July 1, 1990).

Subpart Q_Requirements for Estimating Improper Payments in Medicaid and 
                                  CHIP

431.950 Purpose.
431.954 Basis and scope.
431.958 Definitions and use of terms.
431.960 Types of payment errors.
431.970 Information submission requirements.
431.972 Claims sampling procedures.
431.974 Basic elements of Medicaid and CHIP eligibility reviews.
431.978 Eligibility sampling plan and procedures.
431.980 Eligibility review procedures.
431.988 Eligibility case review completion deadlines and submittal of 
          reports.
431.992 Corrective action plan.
431.998 Difference resolution and appeal process.
431.1002 Recoveries.

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

    Source: 43 FR 45188, Sept. 29, 1978, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 431 appear at 75 FR 
48852, Aug. 11, 2010.



Sec.  431.1  Purpose.

    This part establishes State plan requirements for the designation, 
organization, and general administrative activities of a State agency 
responsible for operating the State Medicaid program, directly or 
through supervision of local administering agencies.



                      Subpart A_Single State Agency



Sec.  431.10  Single State agency.

    (a) Basis, purpose, and definitions. (1) This section implements 
section 1902(a)(4) and (5) of the Act.
    (2) For purposes of this part--
    Appeals decision means a decision made by a hearing officer 
adjudicating a fair hearing under subpart E of this part.
    Exchange has the meaning given to the term in 45 CFR 155.20.
    Exchange appeals entity has the meaning given to the term ``appeals 
entity,'' as defined in 45 CFR 155.500.
    Medicaid agency is the single State agency for the Medicaid program.
    (b) Designation and certification. A State plan must--
    (1) Specify a single State agency established or designated to 
administer or supervise the administration of the plan; and
    (2) Include a certification by the State Attorney General, citing 
the legal authority for the single State agency to--
    (i) Administer or supervise the administration of the plan; and
    (ii) Make rules and regulations that it follows in administering the 
plan or that are binding upon local agencies that administer the plan.
    (3) The single State agency is responsible for determining 
eligibility for all individuals applying for or receiving benefits in 
accordance with regulations in part 435 of this chapter and for fair 
hearings filed in accordance with subpart E of this part.
    (c) Delegations. (1) Subject to the requirement in paragraph (c)(2) 
of this section, the Medicaid agency--
    (i)(A) May, in the approved state plan, delegate authority to 
determine eligibility for all or a defined subset of individuals to--
    (1) The single State agency for the financial assistance program 
under title

[[Page 25]]

IV-A (in the 50 States or the District of Columbia), or under title I or 
XVI (AABD), in Guam, Puerto Rico, or the Virgin Islands;
    (2) The Federal agency administering the supplemental security 
income program under title XVI of the Act; or
    (3) The Exchange.
    (B) Must in the approved state plan specify to which agency, and the 
individuals for which, authority to determine eligibility is delegated.
    (ii) Delegate authority to conduct fair hearings under subpart E of 
this part for denials of eligibility for individuals whose income 
eligibility is determined based on the applicable modified adjusted 
gross income standard described inSec. 435.911(c) of this chapter, to 
an Exchange or Exchange appeals entity, provided that individuals who 
have requested a fair hearing of such a denial are given a choice to 
have their fair hearing instead conducted by the Medicaid agency.
    (2) The Medicaid agency may delegate authority to make eligibility 
determinations or to conduct fair hearings under this section only to a 
government agency which maintains personnel standards on a merit basis.
    (3) The Medicaid agency--
    (i) Must ensure that any agency to which eligibility determinations 
or appeals decisions are delegated--
    (A) Complies with all relevant Federal and State law, regulations 
and policies, including, but not limited to, those related to the 
eligibility criteria applied by the agency under part 435 of this 
chapter; prohibitions against conflicts of interest and improper 
incentives; and safeguarding confidentiality, including regulations set 
forth at subpart F of this part.
    (B) Informs applicants and beneficiaries how they can directly 
contact and obtain information from the agency; and
    (ii) Must exercise appropriate oversight over the eligibility 
determinations and appeals decisions made by such agencies to ensure 
compliance with paragraphs (c)(2) and (c)(3)(i) of this section and 
institute corrective action as needed, including, but not limited to, 
rescission of the authority delegated under this section.
    (iii) If authority to conduct fair hearings is delegated to the 
Exchange or Exchange appeals entity under paragraph (c)(1)(ii) of this 
section, the agency may establish a review process whereby the agency 
may review fair hearing decisions made under that delegation, but that 
review will be limited to the proper application of federal and state 
Medicaid law and regulations, including sub-regulatory guidance and 
written interpretive policies, and must be conducted by an impartial 
official not directly involved in the initial determination.
    (d) Agreement with Federal, State or local entities making 
eligibility determinations or appeals decisions. The plan must provide 
for written agreements between the Medicaid agency and the Exchange or 
any other State or local agency that has been delegated authority under 
paragraph (c)(1)(i) of this section to determine Medicaid eligibility 
and for written agreements between the agency and the Exchange or 
Exchange appeals entity that has been delegated authority to conduct 
Medicaid fair hearings under paragraph (c)(1)(ii) of this section. Such 
agreements must be available to the Secretary upon request and must 
include provisions for:
    (1) The relationships and respective responsibilities of the 
parties, including but not limited to the respective responsibilities to 
effectuate the fair hearing rules in subpart E of this part;
    (2) Quality control and oversight by the Medicaid agency, including 
any reporting requirements needed to facilitate such control and 
oversight;
    (3) Assurances that the entity to which authority to determine 
eligibility or conduct fair hearings will comply with the provisions set 
forth in paragraph (c)(3) of this section.
    (4) For appeals, procedures to ensure that individuals have notice 
and a full opportunity to have their fair hearing conducted by either 
the Exchange or Exchange appeals entity or the Medicaid agency.
    (e) Authority of the single State agency. The Medicaid agency may 
not delegate,

[[Page 26]]

to other than its own officials, the authority to supervise the plan or 
to develop or issue policies, rules, and regulations on program matters.

[44 FR 17930, Mar. 23, 1979, as amended at 77 FR 17202, Mar. 23, 2012; 
77 FR 42300, July 15, 2012]



Sec.  431.11  Organization for administration.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes the general organization and staffing requirements 
for the Medicaid agency and the State plan.
    (b) Description of organization. (1) The plan must include a 
description of the organization and functions of the Medicaid agency.
    (2) When submitting a state plan amendment related to the 
designation, authority, organization or functions of the Medicaid 
agency, the Medicaid agency must provide an organizational chart 
reflecting the key components of the Medicaid agency and the functions 
each performs.
    (c) Eligibility determined or fair hearings decided by other 
entities. If eligibility is determined or fair hearings decided by 
Federal or State entities other than the Medicaid agency or by local 
agencies under the supervision of other State agencies, the plan must 
include a description of the staff designated by those other entities 
and the functions they perform in carrying out their responsibilities.

[44 FR 17931, Mar. 23, 1979, as amended at 77 FR 17203, Mar. 23, 2012; 
77 FR 42301, July 15, 2012]



Sec.  431.12  Medical care advisory committee.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes State plan requirements for establishment of a 
committee to advise the Medicaid agency about health and medical care 
services.
    (b) State plan requirement. A State plan must provide for a medical 
care advisory committee meeting the requirements of this section to 
advise the Medicaid agency director about health and medical care 
services.
    (c) Appointment of members. The agency director, or a higher State 
authority, must appoint members to the advisory committee on a rotating 
and continuous basis.
    (d) Committee membership. The committee must include--
    (1) Board-certified physicians and other representatives of the 
health professions who are familiar with the medical needs of low-income 
population groups and with the resources available and required for 
their care;
    (2) Members of consumers' groups, including Medicaid beneficiaries, 
and consumer organizations such as labor unions, cooperatives, consumer-
sponsored prepaid group practice plans, and others; and
    (3) The director of the public welfare department or the public 
health department, whichever does not head the Medicaid agency.
    (e) Committee participation. The committee must have opportunity for 
participation in policy development and program administration, 
including furthering the participation of beneficiary members in the 
agency program.
    (f) Committee staff assistance and financial help. The agency must 
provide the committee with--
    (1) Staff assistance from the agency and independent technical 
assistance as needed to enable it to make effective recommendations; and
    (2) Financial arrangements, if necessary, to make possible the 
participation of beneficiary members.
    (g) Federal financial participation. FFP is available at 50 percent 
in expenditures for the committee's activities.



Sec.  431.15  Methods of administration.

    A State plan must provide for methods of administration that are 
found by the Secretary to be necessary for the proper and efficient 
operation of the plan.

(Sec. 1902(a)(4) of the Act)

[44 FR 17931, Mar. 23, 1979]



Sec.  431.16  Reports.

    A State plan must provide that the Medicaid agency will--
    (a) Submit all reports required by the Secretary;
    (b) Follow the Secretary's instructions with regard to the form and 
content of those reports; and

[[Page 27]]

    (c) Comply with any provisions that the Secretary finds necessary to 
verify and assure the correctness of the reports.

[44 FR 17931, Mar. 23, 1979]



Sec.  431.17  Maintenance of records.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes the kinds of records a Medicaid agency must 
maintain, the retention period, and the conditions under which microfilm 
copies may be substituted for original records.
    (b) Content of records. A State plan must provide that the Medicaid 
agency will maintain or supervise the maintenance of the records 
necessary for the proper and efficient operation of the plan. The 
records must include--
    (1) Individual records on each applicant and beneficiary that 
contain information on--
    (i) Date of application;
    (ii) Date of and basis for disposition;
    (iii) Facts essential to determination of initial and continuing 
eligibility;
    (iv) Provision of medical assistance;
    (v) Basis for discontinuing assistance;
    (vi) The disposition of income and eligibility verification 
information received under Sec.Sec. 435.940 through 435.960 of this 
subchapter; and
    (2) Statistical, fiscal, and other records necessary for reporting 
and accountability as required by the Secretary.
    (c) Retention of records. The plan must provide that the records 
required under paragraph (b) of this section will be retained for the 
periods required by the Secretary.
    (d) Conditions for optional use of microfilm copies. The agency may 
substitute certified microfilm copies for the originals of 
substantiating documents required for Federal audit and review, if the 
conditions in paragraphs (d)(1) through (4) of this section are met.
    (1) The agency must make a study of its record storage and must show 
that the use of microfilm is efficient and economical.
    (2) The microfilm system must not hinder the agency's supervision 
and control of the Medicaid program.
    (3) The microfilm system must--
    (i) Enable the State to audit the propriety of expenditures for 
which FFP is claimed; and
    (ii) Enable the HHS Audit Agency and CMS to properly discharge their 
respective responsibilities for reviewing the manner in which the 
Medicaid program is being administered.
    (4) The agency must obtain approval from the CMS regional office 
indicating--
    (i) The system meets the conditions of paragraphs (d)(2) and (3) of 
this section; and
    (ii) The microfilming procedures are reliable and are supported by 
an adequate retrieval system.

[44 FR 17931, Mar. 23, 1979, as amended at 51 FR 7210, Feb. 28, 1986]



Sec.  431.18  Availability of agency program manuals.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes State plan requirements for facilitating access to 
Medicaid rules and policies by individuals outside the State Medicaid 
agency.
    (b) State plan requirements. A State plan must provide that the 
Medicaid agency meets the requirements of paragraphs (c) through (g) of 
this section.
    (c) Availability in agency offices. (1) The agency must maintain, in 
all its offices, copies of its current rules and policies that affect 
the public, including those that govern eligibility, provision of 
medical assistance, covered services, and beneficiary rights and 
responsibilities.
    (2) These documents must be available upon request for review, 
study, and reproduction by individuals during regular working hours of 
the agency.
    (d) Availability through other entities. The agency must provide 
copies of its current rules and policies to--
    (1) Public and university libraries;
    (2) The local or district offices of the Bureau of Indian Affairs;
    (3) Welfare and legal services offices; and
    (4) Other entities that--
    (i) Request the material in order to make it accessible to the 
public;
    (ii) Are centrally located and accessible to a substantial number of 
the beneficiary population they serve; and

[[Page 28]]

    (iii) Agree to accept responsibility for filing all amendments or 
changes forwarded by the agency.
    (e) Availability in relation to fair hearings. The agency must make 
available to an applicant or beneficiary, or his representative, a copy 
of the specific policy materials necessary--
    (1) To determine whether to request a fair hearing; or
    (2) To prepare for a fair hearing.
    (f) Availability for other purposes. The agency must establish rules 
for making program policy materials available to individuals who request 
them for other purposes.
    (g) Charges for reproduction. The agency must make copies of its 
program policy materials available without charge or at a charge related 
to the cost of reproduction.

[44 FR 17931, Mar. 23, 1979]



Sec.  431.20  Advance directives.

    (a) Basis and purpose. This section, based on section 1902(a) (57) 
and (58) of the Act, prescribes State plan requirements for the 
development and distribution of a written description of State law 
concerning advance directives.
    (b) A State Plan must provide that the State, acting through a State 
agency, association, or other private nonprofit entity, develop a 
written description of the State law (whether statutory or as recognized 
by the courts of the State) concerning advance directives, as defined in 
Sec.  489.100 of this chapter, to be distributed by Medicaid providers 
and health maintenance organizations (as specified in section 
1903(m)(1)(A) of the Act) in accordance with the requirements under part 
489, subpart I of this chapter. Revisions to the written descriptions as 
a result of changes in State law must be incorporated in such 
descriptions and distributed as soon as possible, but no later than 60 
days from the effective date of the change in State law, to Medicaid 
providers and health maintenance organizations.

[57 FR 8202, Mar. 6, 1992, as amended at 60 FR 33293, June 27, 1995]



              Subpart B_General Administrative Requirements

    Source: 56 FR 8847, Mar. 1, 1991, unless otherwise noted.



Sec.  431.40  Basis and scope.

    (a) This subpart sets forth State plan requirements and exceptions 
that pertain to the following administrative requirements and provisions 
of the Act:
    (1) Statewideness--section 1902(a)(1);
    (2) Proper and efficient administration--section 1902(a)(4);
    (3) Comparability of services--section 1902(a)(10) (B)-(E);
    (4) Payment for services furnished outside the State--section 
1902(a)(16);
    (5) Free choice of providers--section 1902(a)(23);
    (6) Special waiver provisions applicable to American Samoa and the 
Northern Mariana Islands--section 1902(j); and
    (7) Exceptions to, and waiver of, State plan requirements--sections 
1915 (a)-(c) and 1916 (a)(3) and (b)(3).
    (b) Other applicable regulations include the following:
    (1) Section 430.25 Waivers of State plan requirements.
    (2) Section 440.250 Limits on comparability of services.



Sec.  431.50  Statewide operation.

    (a) Statutory basis. Section 1902(a)(1) of the Act requires a State 
plan to be in effect throughout the State, and section 1915 permits 
certain exceptions.
    (b) State plan requirements. A State plan must provide that the 
following requirements are met:
    (1) The plan will be in operation statewide through a system of 
local offices, under equitable standards for assistance and 
administration that are mandatory throughout the State.
    (2) If administered by political subdivisions of the State, the plan 
will be mandatory on those subdivisions.
    (3) The agency will ensure that the plan is continuously in 
operation in all local offices or agencies through--
    (i) Methods for informing staff of State policies, standards, 
procedures, and instructions;
    (ii) Systematic planned examination and evaluation of operations in 
local

[[Page 29]]

offices by regularly assigned State staff who make regular visits; and
    (iii) Reports, controls, or other methods.
    (c) Exceptions. (1) ``Statewide operation'' does not mean, for 
example, that every source of service must furnish the service State-
wide. The requirement does not preclude the agency from contracting with 
a comprehensive health care organization (such as an HMO or a rural 
health clinic) that serves a specific area of the State, to furnish 
services to Medicaid beneficiaries who live in that area and chose to 
receive services from that HMO or rural health clinic. beneficiaries who 
live in other parts of the State may receive their services from other 
sources.
    (2) Other allowable exceptions and waivers are set forth in 
Sec.Sec. 431.54 and 431.55.

[56 FR 8847, Mar. 1, 1991; 56 FR 23022, May 20, 1991]



Sec.  431.51  Free choice of providers.

    (a) Statutory basis. This section is based on sections 1902(a)(23), 
1902(e)(2), and 1915(a) and (b) and 1932(a)(3) of the Act.
    (1) Section 1902(a)(23) of the Act provides that beneficiaries may 
obtain services from any qualified Medicaid provider that undertakes to 
provide the services to them.
    (2) Section 1915(a) of the Act provides that a State shall not be 
found out of compliance with section 1902(a)(23) solely because it 
imposes certain specified allowable restrictions on freedom of choice.
    (3) Section 1915(b) of the Act authorizes waiver of the section 
1902(a)(23) freedom of choice of providers requirement in certain 
specified circumstances, but not with respect to providers of family 
planning services.
    (4) Section 1902(a)(23) of the Act provides that a beneficiary 
enrolled in a primary care case management system or Medicaid managed 
care organization (MCO) may not be denied freedom of choice of qualified 
providers of family planning services.
    (5) Section 1902(e)(2) of the Act provides that an enrollee who, 
while completing a minimum enrollment period, is deemed eligible only 
for services furnished by or through the MCO or PCCM, may, as an 
exception to the deemed limitation, seek family planning services from 
any qualified provider.
    (6) Section 1932(a) of the Act permits a State to restrict the 
freedom of choice required by section 1902(a)(23), under specified 
circumstances, for all services except family planning services.
    (b) State plan requirements. A State plan, except the plan for 
Puerto Rico, the Virgin Islands, or Guam, must provide as follows:
    (1) Except as provided under paragraph (c) of this section and part 
438 of this chapter, a beneficiary may obtain Medicaid services from any 
institution, agency, pharmacy, person, or organization that is--
    (i) Qualified to furnish the services; and
    (ii) Willing to furnish them to that particular beneficiary.

This includes an organization that furnishes, or arranges for the 
furnishing of, Medicaid services on a prepayment basis.
    (2) A beneficiary enrolled in a primary care case-management system, 
a Medicaid MCO, or other similar entity will not be restricted in 
freedom of choice of providers of family planning services.
    (c) Exceptions. Paragraph (b) of this section does not prohibit the 
agency from--
    (1) Establishing the fees it will pay providers for Medicaid 
services;
    (2) Setting reasonable standards relating to the qualifications of 
providers; or
    (3) Subject to paragraph (b)(2) of this section, restricting 
beneficiaries' free choice of providers in accordance with one or more 
of the exceptions set forth inSec. 431.54, or under a waiver as 
provided inSec. 431.55; or
    (4) Limiting the providers who are available to furnish targeted 
case management services defined inSec. 440.169 of this chapter to 
target groups that consist solely of individuals with developmental 
disabilities or with chronic mental illness. This limitation may only be 
permitted so that the providers

[[Page 30]]

of case management services for eligible individuals with developmental 
disabilities or with chronic mental illness are capable of ensuring that 
those individuals receive needed services.
    (d) Certification requirement--(1) Content of certification. If a 
State implements a project under one of the exceptions allowed under 
Sec.  431.54 (d), (e) or (f), it must certify to CMS that the statutory 
safeguards and requirements for an exception under section 1915(a) of 
the Act are met.
    (2) Timing of certification. (i) For an exception underSec. 
431.54(d), the State may not institute the project until after it has 
submitted the certification and CMS has made the findings required under 
the Act, and so notified the State.
    (ii) For exceptions underSec. 431.54 (e) or (f), the State must 
submit the certificate by the end of the quarter in which it implements 
the project.

[56 FR 8847, Mar. 1, 1991, as amended at 67 FR 41094, June 14, 2002; 72 
FR 68091, Dec. 4, 2007]



Sec.  431.52  Payments for services furnished out of State.

    (a) Statutory basis. Section 1902(a)(16) of the Act authorizes the 
Secretary to prescribe State plan requirements for furnishing Medicaid 
to State residents who are absent from the State.
    (b) Payment for services. A State plan must provide that the State 
will pay for services furnished in another State to the same extent that 
it would pay for services furnished within its boundaries if the 
services are furnished to a beneficiary who is a resident of the State, 
and any of the following conditions is met:
    (1) Medical services are needed because of a medical emergency;
    (2) Medical services are needed and the beneficiary's health would 
be endangered if he were required to travel to his State of residence;
    (3) The State determines, on the basis of medical advice, that the 
needed medical services, or necessary supplementary resources, are more 
readily available in the other State;
    (4) It is general practice for beneficiaries in a particular 
locality to use medical resources in another State.
    (c) Cooperation among States. The plan must provide that the State 
will establish procedures to facilitate the furnishing of medical 
services to individuals who are present in the State and are eligible 
for Medicaid under another State's plan.



Sec.  431.53  Assurance of transportation.

    A State plan must--
    (a) Specify that the Medicaid agency will ensure necessary 
transportation for beneficiaries to and from providers; and
    (b) Describe the methods that the agency will use to meet this 
requirement.

[74 FR 31195, June 30, 2009]



Sec.  431.54  Exceptions to certain State plan requirements.

    (a) Statutory basis--(1) Section 1915(a) of the Act provides that a 
State shall not be deemed to be out of compliance with the requirements 
of sections 1902(a)(1), (10), or (23) of the Act solely because it has 
elected any of the exceptions set forth in paragraphs (b) and (d) 
through (f) of this section.
    (2) Section 1915(g) of the Act provides that a State may provide, as 
medical assistance, targeted case management services under the plan 
without regard to the requirements of sections 1902(a)(1) and 
1902(a)(10)(B) of the Act.
    (b) Additional services under a prepayment system. If the Medicaid 
agency contracts on a prepayment basis with an organization that 
provides services additional to those offered under the State plan, the 
agency may restrict the provision of the additional services to 
beneficiaries who live in the area served by the organization and wish 
to obtain services from it.
    (c) [Reserved]
    (d) Special procedures for purchase of medical devices and 
laboratory and X-ray tests. The Medicaid agency may establish special 
procedures for the purchase of medical devices or laboratory and X-ray 
tests (as defined inSec. 440.30 of this chapter) through a competitive 
bidding process or otherwise, if the State assures, in the certification 
required underSec. 431.51(d), and CMS finds, as follows:
    (1) Adequate services or devices are available to beneficiaries 
under the special procedures.

[[Page 31]]

    (2) Laboratory services are furnished through laboratories that meet 
the following requirements:
    (i) They are independent laboratories, or inpatient or outpatient 
hospital laboratories that provide services for individuals who are not 
hospital patients, or physician laboratories that process at least 100 
specimens for other physicians during any calendar year.
    (ii) They meet the requirements of subpart M of part 405 or part 482 
of this chapter.
    (iii) Laboratories that require an interstate license under 42 CFR 
part 74 are licensed by CMS or receive an exemption from the licensing 
requirement by the College of American Pathologists. (Hospital and 
physician laboratories may participate in competitive bidding only with 
regard to services to non-hospital patients and other physicians' 
patients, respectively.)
    (3) Any laboratory from which a State purchases services under this 
section has no more than 75 percent of its charges based on services to 
Medicare beneficiaries and Medicaid beneficiaries.
    (e) Lock-in of beneficiaries who over-utilize Medicaid services. If 
a Medicaid agency finds that a beneficiary has utilized Medicaid 
services at a frequency or amount that is not medically necessary, as 
determined in accordance with utilization guidelines established by the 
State, the agency may restrict that beneficiary for a reasonable period 
of time to obtain Medicaid services from designated providers only. The 
agency may impose these restrictions only if the following conditions 
are met:
    (1) The agency gives the beneficiary notice and opportunity for a 
hearing (in accordance with procedures established by the agency) before 
imposing the restrictions.
    (2) The agency ensures that the beneficiary has reasonable access 
(taking into account geographic location and reasonable travel time) to 
Medicaid services of adequate quality.
    (3) The restrictions do not apply to emergency services furnished to 
the beneficiary.
    (f) Lock-out of providers. If a Medicaid agency finds that a 
Medicaid provider has abused the Medicaid program, the agency may 
restrict the provider, through suspension or otherwise, from 
participating in the program for a reasonable period of time.
    Before imposing any restriction, the agency must meet the following 
conditions:
    (1) Give the provider notice and opportunity for a hearing, in 
accordance with procedures established by the agency.
    (2) Find that in a significant number or proportion of cases, the 
provider has:
    (i) Furnished Medicaid services at a frequency or amount not 
medically necessary, as determined in accordance with utilization 
guidelines established by the agency; or
    (ii) Furnished Medicaid services of a quality that does not meet 
professionally recognized standards of health care.
    (3) Notify CMS and the general public of the restriction and its 
duration.
    (4) Ensure that the restrictions do not result in denying 
beneficiaries reasonable access (taking into account geographic 
location: and reasonable travel time) to Medicaid services of adequate 
quality, including emergency services.
    (g) Targeted case management services. The requirements ofSec. 
431.50(b) relating to the statewide operation of a State plan andSec. 
440.240 of this chapter related to comparability of services do not 
apply with respect to targeted case management services defined inSec. 
440.169 of this chapter.

[56 FR 8847, Mar. 1, 1991, as amended at 72 FR 68091, Dec. 4, 2007]



Sec.  431.55  Waiver of other Medicaid requirements.

    (a) Statutory basis. Section 1915(b) of the Act authorizes the 
Secretary to waive most requirements of section 1902 of the Act to the 
extent he or she finds proposed improvements or specified practices in 
the provision of services under Medicaid to be cost effective, 
efficient, and consistent with the objectives of the Medicaid program. 
Sections 1915 (f) and (h) prescribe how such waivers are to be approved, 
continued, monitored, and terminated. Section 1902(p)(2) of the Act 
conditions FFP in payments to an entity under a

[[Page 32]]

section 1915(b)(1) waiver on the State's provision for exclusion of 
certain entities from participation.
    (b) General requirements. (1) General requirements for submittal of 
waiver requests, and the procedures that CMS follows for review and 
action on those requests are set forth inSec. 430.25 of this chapter.
    (2) In applying for a waiver to implement an approvable project 
under paragraph (c), (d), (e), or (f) of this section, a Medicaid agency 
must document in the waiver request and maintain data regarding:
    (i) The cost-effectiveness of the project;
    (ii) The effect of the project on the accessibility and quality of 
services;
    (iii) The anticipated impact of the project on the State's Medicaid 
program and;
    (iv) Assurances that the restrictions on free choice of providers do 
not apply to family planning services.
    (3) No waiver under this section may be granted for a period longer 
than 2 years, unless the agency requests a continuation of the waiver.
    (4) CMS monitors the implementation of waivers granted under this 
section to ensure that requirements for such waivers are being met.
    (i) If monitoring demonstrates that the agency is not in compliance 
with the requirements for a waiver under this section, CMS gives the 
agency notice and opportunity for a hearing.
    (ii) If, after a hearing, CMS finds an agency to be out of 
compliance with the requirements of a waiver, CMS terminates the waiver 
and gives the agency a specified date by which it must demonstrate that 
it meets the applicable requirements of section 1902 of the Act.
    (5) The requirements of section 1902(s) of the Act, with regard to 
adjustments in payments for inpatient hospital services furnished to 
infants who have not attained age 1 and to children who have not 
attained age 6 and who receive these services in disproportionate share 
hospitals, may not be waived under a section 1915(b) waiver.
    (c) Case-management system. (1) Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to implement a 
primary care case-management system or specialty physician services 
system.
    (i) Under a primary care case-management system the agency assures 
that a specific person or persons or agency will be responsible for 
locating, coordinating, and monitoring all primary care or primary care 
and other medical care and rehabilitative services on behalf of a 
beneficiary. The person or agency must comply with the requirements set 
forth in part 438 of this chapter for primary care case management 
contracts and systems.
    (ii) A specialty physician services system allows States to restrict 
beneficiaries of specialty services to designated providers of such 
services, even in the absence of a primary care case-management system.
    (2) A waiver under this paragraph (c) may not be approved unless the 
State's request assures that the restrictions--
    (i) Do not apply in emergency situations; and
    (ii) Do not substantially impair access to medically necessary 
services of adequate quality.
    (d) Locality as central broker. Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to allow a 
locality to act as a central broker to assist beneficiaries in selecting 
among competing health care plans. States must ensure that access to 
medically necessary services of adequate quality is not substantially 
impaired.
    (1) A locality is any defined jurisdiction, e.g., district, town, 
city, borough, county, parish, or State.
    (2) A locality may use any agency or agent, public or private, 
profit or nonprofit, to act on its behalf in carrying out its central 
broker function.
    (e) Sharing of cost savings. (1) Waivers of appropriate requirements 
of section 1902 of the Act may be authorized for a State to share with 
beneficiaries the cost savings resulting from the beneficiaries' use of 
more cost-effective medical care.
    (2) Sharing is through the provision of additional services, 
including--
    (i) Services furnished by a plan selected by the beneficiary; and

[[Page 33]]

    (ii) Services expressly offered by the State as an inducement for 
beneficiaries to participate in a primary care case-management system, a 
competing health care plan or other system that furnishes health care 
services in a more cost-effective manner.
    (f) Restriction of freedom of choice--(1) Waiver of appropriate 
requirements of section 1902 of the Act may be authorized for States to 
restrict beneficiaries to obtaining services from (or through) qualified 
providers or practitioners that meet, accept, and comply with the State 
reimbursement, quality and utilization standards specified in the 
State's waiver request.
    (2) An agency may qualify for a waiver under this paragraph (f) only 
if its applicable State standards are consistent with access, quality 
and efficient and economic provision of covered care and services and 
the restrictions it imposes--
    (i) Do not apply to beneficiaries residing at a long-term care 
facility when a restriction is imposed unless the State arranges for 
reasonable and adequate beneficiary transfer.
    (ii) Do not discriminate among classes of providers on grounds 
unrelated to their demonstrated effectiveness and efficiency in 
providing those services; and
    (iii) Do not apply in emergency circumstances.
    (3) Demonstrated effectiveness and efficiency refers to reducing 
costs or slowing the rate of cost increase and maximizing outputs or 
outcomes per unit of cost.
    (4) The agency must make payments to providers furnishing services 
under a freedom of choice waiver under this paragraph (f) in accordance 
with the timely claims payment standards specified inSec. 447.45 of 
this chapter for health care practitioners participating in the Medicaid 
program.
    (g) [Reserved]
    (h) Waivers approved under section 1915(b)(1) of the Act--(1) Basic 
rules. (i) An agency must submit, as part of it's waiver request, 
assurance that the entities described in paragraph (h)(2) of this 
section will be excluded from participation under an approved waiver.
    (ii) FFP is available in payments to an entity that furnishes 
services under a section 1915(b)(1) waiver only if the agency excludes 
from participation any entity described in paragraph (h)(2) of this 
section.
    (2) Entities that must be excluded. The agency must exclude an 
entity that meets any of the following conditions:
    (i) Could be excluded under section 1128(b)(8) of the Act as being 
controlled by a sanctioned individual.
    (ii) Has a substantial contractual relationship (direct or indirect) 
with an individual convicted of certain crimes, as described in section 
1128(b)(8)(B) of the Act.
    (iii) Employs or contracts directly or indirectly with one of the 
following:
    (A) Any individual or entity that, under section 1128 or section 
1128A of the Act, is precluded from furnishing health care, utilization 
review, medical social services, or administrative services.
    (B) Any entity described in paragraph (h)(2)(i) of this section.
    (3) Definitions. As used in this section, substantial contractual 
relationship means any contractual relationship that provides for one or 
more of the following services:
    (i) The administration, management, or provision of medical 
services.
    (ii) The establishment of policies, or the provision of operational 
support, for the administration, management, or provision of medical 
services.

[56 FR 8847, Mar. 1, 1991, as amended at 59 FR 4599, Feb. 1, 1994; 59 FR 
36084, July 15, 1994; 67 FR 41094, June 14, 2002]



Sec.  431.56  Special waiver provisions applicable to American Samoa
and the Northern Mariana Islands.

    (a) Statutory basis. Section 1902(j) of the Act provides for waiver 
of all but three of the title XIX requirements, in the case of American 
Samoa and the Northern Mariana Islands.
    (b) Waiver provisions. American Samoa or the Northern Mariana 
Islands may request, and CMS may approve, a waiver of any of the title 
XIX requirements except the following:
    (1) The Federal medical assistance percentage specified in section 
1903 of the Act andSec. 433.10(b) of this chapter.
    (2) The limit imposed by section 1108(c) of the Act on the amount of

[[Page 34]]

Federal funds payable to American Samoa or the Northern Mariana Islands 
for care and services that meet the section 1905(a) definition for 
Medicaid assistance.
    (3) The requirement that payment be made only with respect to 
expenditure made by American Samoa or the Northern Mariana Islands for 
care and services that meet the section 1905(a) definition of medical 
assistance.



        Subpart C_Administrative Requirements: Provider Relations



Sec.  431.105  Consultation to medical facilities.

    (a) Basis and purpose. This section implements section 1902(a)(24) 
of the Act, which requires that the State plan provide for consultative 
services by State agencies to certain institutions furnishing Medicaid 
services.
    (b) State plan requirements. A State plan must provide that health 
agencies and other appropriate State agencies furnish consultative 
services to hospitals, nursing homes, home health agencies, clinics, and 
laboratories in order to assist these facilities to--
    (1) Qualify for payments under the maternal and child health and 
crippled children's program (title V of the Act), Medicaid or Medicare;
    (2) Establish and maintain fiscal records necessary for the proper 
and efficient administration of the Act; and
    (3) Provide information needed to determine payments due under the 
Act for services furnished to beneficiaries.
    (c) State plan option: Consultation to other facilities. The plan 
may provide that health agencies and other appropriate State agencies 
furnish consultation to other types of facilities if those facilities 
are specified in the plan and provide medical care to individuals 
receiving services under the programs specified in paragraph (b) of this 
section.



Sec.  431.107  Required provider agreement.

    (a) Basis and purpose. This section sets forth State plan 
requirements, based on sections 1902(a)(4), 1902(a)(27), 1902(a)(57), 
and 1902(a)(58) of the Act, that relate to the keeping of records and 
the furnishing of information by all providers of services (including 
individual practitioners and groups of practitioners).
    (b) Agreements. A State plan must provide for an agreement between 
the Medicaid agency and each provider or organization furnishing 
services under the plan in which the provider or organization agrees to:
    (1) Keep any records necessary to disclose the extent of services 
the provider furnishes to beneficiaries;
    (2) On request, furnish to the Medicaid agency, the Secretary, or 
the State Medicaid fraud control unit (if such a unit has been approved 
by the Secretary underSec. 455.300 of this chapter), any information 
maintained under paragraph (b)(1) of this section and any information 
regarding payments claimed by the provider for furnishing services under 
the plan;
    (3) Comply with the disclosure requirements specified in part 455, 
subpart B of this chapter; and
    (4) Comply with the advance directives requirements for hospitals, 
nursing facilities, providers of home health care and personal care 
services, hospices, and HMOs specified in part 489, subpart I, andSec. 
417.436(d) of this chapter.
    (5)(i) Furnish to the State agency its National Provider Identifier 
(NPI) (if eligible for an NPI); and
    (ii) Include its NPI on all claims submitted under the Medicaid 
program.

[44 FR 41644, July 17, 1979, as amended at 57 FR 8202, Mar. 6, 1992; 75 
FR 24449, May 5, 2010]



Sec.  431.108  Effective date of provider agreements.

    (a) Applicability--(1) General rule. Except as provided in paragraph 
(a)(2) of this section, this section applies to Medicaid provider 
agreements with entities that, as a basis for participation in 
Medicaid--
    (i) Are subject to survey and certification by CMS or the State 
survey agency; or
    (ii) Are deemed to meet Federal requirements on the basis of 
accreditation by an accrediting organization whose program has CMS 
approval at the time of accreditation survey and accreditation decision.

[[Page 35]]

    (2) Exception. A Medicaid provider agreement with a laboratory is 
effective only while the laboratory has in effect a valid CLIA 
certificate issued under part 493 of this chapter, and only for the 
specialty and subspecialty tests it is authorized to perform.
    (b) All requirements are met on the date of survey. The agreement is 
effective on the date the onsite survey (including the Life Safety Code 
survey if applicable) is completed, if on that date the provider meets--
    (1) All applicable Federal requirements as set forth in this 
chapter; and
    (2) Any other requirements imposed by the State for participation in 
the Medicaid program. (If the provider has a time-limited agreement, the 
new agreement is effective on the day following expiration of the 
current agreement.)
    (c) All requirements are not met on the date of survey. If on the 
date the survey is completed the provider fails to meet any of the 
requirements specified in paragraph (b) of this section, the following 
rules apply:
    (1) An NF provider agreement is effective on the date on which--
    (i) The NF is found to be in substantial compliance as defined in 
Sec.  488.301 of this chapter; and
    (ii) CMS or the State survey agency receives from the NF, if 
applicable, an approvable waiver request.
    (2) For an agreement with any other provider, the effective date is 
the earlier of the following:
    (i) The date on which the provider meets all requirements.
    (ii) The date on which a provider is found to meet all conditions of 
participation but has lower level deficiencies, and CMS or the State 
survey agency receives from the provider an acceptable plan of 
correction for the lower level deficiencies, or an approvable waiver 
request, or both. (The date of receipt is the effective date of the 
agreement, regardless of when CMS approves the plan of correction or 
waiver request, or both.)
    (d) Accredited provider requests participation in the Medicaid 
program--(1) General rule. If a provider is currently accredited by a 
national accrediting organization whose program had CMS approval at the 
time of accreditation survey and accreditation decision, and on the 
basis of accreditation, CMS has deemed the provider to meet Federal 
requirements, the effective date depends on whether the provider is 
subject to requirements in addition to those included in the accrediting 
organization's approved program.
    (i) Provider subject to additional requirements. For a provider that 
is subject to additional requirements, Federal or State, or both, the 
effective date is the date on which the provider meets all requirements, 
including the additional requirements.
    (ii) Provider not subject to additional requirements. For a provider 
that is not subject to additional requirements, the effective date is 
the date of the provider's initial request for participation if on that 
date the provider met all Federal requirements.
    (2) Special rule: Retroactive effective date. If the provider meets 
the requirements of paragraphs (d)(1) and (d)(1)(i) or (d)(1)(ii) of 
this section, the effective date may be retroactive for up to one year, 
to encompass dates on which the provider furnished, to a Medicaid 
beneficiary, covered services for which it has not been paid.

[62 FR 43935, Aug. 18, 1997]



Sec.  431.110  Participation by Indian Health Service facilities.

    (a) Basis. This section is based on section 1902(a)(4) of the Act, 
proper and efficient administration; 1902(a)(23), free choice of 
provider; and 1911, reimbursement of Indian Health Service facilities.
    (b) State plan requirements. A State plan must provide that an 
Indian Health Service facility meeting State requirements for Medicaid 
participation must be accepted as a Medicaid provider on the same basis 
as any other qualified provider. However, when State licensure is 
normally required, the facility need not obtain a license but must meet 
all applicable standards for licensure. In determining whether a 
facility meets these standards, a Medicaid agency or State licensing 
authority may not take into account an absence of licensure of any staff 
member of the facility.

[[Page 36]]



Sec.  431.115  Disclosure of survey information and provider or 
contractor evaluation.

    (a) Basis and purpose. This section implements--
    (1) Section 1902(a)(36) of the Act, which requires a State plan to 
provide that the State survey agency will make publicly available the 
findings from surveys of health care facilities, laboratories, agencies, 
clinics, or organizations; and
    (2) Section 1106(d) of the Act, which places certain restrictions on 
the Medicaid agency's disclosure of contractor and provider evaluations.
    (b) Definition of State survey agency. The State survey agency 
referred to in this section means the agency specified under section 
1902(a)(9) of the Act as responsible for establishing and maintaining 
health standards for private or public institutions in which Medicaid 
beneficiaries may receive services.
    (c) State plan requirements. A State plan must provide that the 
requirements of this section andSec. 488.325 of this chapter are met.
    (d) Disclosure procedure. The Medicaid agency must have a procedure 
for disclosing pertinent findings obtained from surveys made by the 
State survey agency to determine if a health care facility, laboratory, 
agency, clinic or health care organization meets the requirements for 
participation in the Medicaid program.
    (e) Documents subject to disclosure. Documents subject to disclosure 
include--
    (1) Survey reports, except for Joint Commission on the Accreditation 
of Hospitals reports prohibited from disclosure underSec. 
422.426(b)(2) of this chapter;
    (2) Official notifications of findings based on survey reports:
    (3) Pertinent parts of written documents furnished by the health 
care provider to the survey agency that relate to the reports and 
findings; and
    (4) Ownership and contract information as specified inSec. 455.104 
of this subchapter.
    (f) Availability for inspection and copy of statements listing 
deficiencies. The disclosure procedure must provide that the State 
survey agency will--
    (1) Make statements of deficiencies based on the survey reports 
available for inspection and copying in both the public assistance 
office and the Social Security Administration district office serving 
the area where the provider is located; and
    (2) Submit to the Regional Medicaid Director, through the Medicaid 
agency, a plan for making those findings available in other public 
assistance offices in standard metropolitian statistical areas where 
this information would be helpful to persons likely to use the health 
care provider's services.
    (g) When documents must be made available. The disclosure procedure 
must provide that the State survey agency will--
    (1) Retain in the survey agency office and make available upon 
request survey reports and current and accurate ownership information; 
and
    (2) Make available survey reports, findings, and deficiency 
statements immediately upon determining that a health care provider is 
eligible to begin or continue participation in the Medicaid program, or 
within 90 days after completion of the survey, whichever occurs first.
    (h) Evaluation reports on providers and contractors. (1) If the 
Secretary sends the following reports to the Medicaid agency, the agency 
must meet the requirements of paragraphs (h) (2) and (3) of this section 
in releasing them:
    (i) Individual contractor performance reviews and other formal 
performance evaluations of carriers, intermediaries, and State agencies, 
including the reports of followup reviews;
    (ii) Comparative performance evaluations of those contractors, 
including comparisons of either overall performance or of any particular 
aspect of contractor operations; and
    (iii) Program validation survey reports and other formal performance 
evaluations of providers, including the reports of followup reviews.
    (2) The agency must not make the reports public until--
    (i) The contractor or provider has had a reasonable opportunity, not 
to exceed 30 days, to comment on them; and
    (ii) Those comments have been incorporated in the report.

[[Page 37]]

    (3) The agency must ensure that the reports contain no 
identification of individual patients, individual health care 
practitioners or other individuals.

[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 41644, July 17, 1979; 
59 FR 56232, Nov. 10, 1994]



Sec.  431.120  State requirements with respect to nursing facilities.

    (a) State plan requirements. A State plan must--
    (1) Provide that the requirements of subpart D of part 483 of this 
chapter are met; and
    (2) Specify the procedures and rules that the State follows in 
carrying out the specified requirements, including review and approval 
of State-operated programs.
    (3) To an NF or ICF/IIDIID that is dissatisfied with a determination 
as to the effective date of its provider agreement.
    (b) Basis and scope of requirements. The requirements set forth in 
part 483 of this chapter pertain to the following aspects of nursing 
facility services and are required by the indicated sections of the Act.
    (1) Nurse aide training and competency programs, and evaluation of 
nurse aide competency (1919(e)(1) of the Act).
    (2) Nurse aide registry (1919(e)(2) of the Act).

[56 FR 48918, Sept. 26, 1991, as amended at 62 FR 43935, Aug. 18, 1997]



             Subpart D_Appeals Process for NFs and ICFs/IID

    Source: 44 FR 9753, Feb. 15, 1979, unless otherwise noted.



Sec.  431.151  Scope and applicability.

    (a) General rules. This subpart sets forth the appeals procedures 
that a State must make available as follows:
    (1) To a nursing facility (NF) that is dissatisfied with a State's 
finding of noncompliance that has resulted in one of the following 
adverse actions:
    (i) Denial or termination of its provider agreement.
    (ii) Imposition of a civil money penalty or other alternative 
remedy.
    (2) To an intermediate care facility for Individuals with 
Intellectual Disabilities (ICF/IIDIID) that is dissatisfied with a 
State's finding of noncompliance that has resulted in the denial, 
termination, or nonrenewal of its provider agreement.
    (3) To an NF or ICF/IIDIID that is dissatisfied with a determination 
as to the effective date of its provider agreement.
    (b) Special rules. This subpart also sets forth the special rules 
that apply in particular circumstances, the limitations on the grounds 
for appeal, and the scope of review during a hearing.

[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997]



Sec.  431.152  State plan requirements.

    The State plan must provide for appeals procedures that, as a 
minimum, satisfy the requirements of Sec.Sec. 431.153 and 431.154.

[59 FR 56232, Nov. 10, 1994, as amended at 61 FR 32348, June 24, 1996]



Sec.  431.153  Evidentiary hearing.

    (a) Right to hearing. Except as provided in paragraph (b) of this 
section, and subject to the provisions of paragraphs (c) through (j) of 
this section, the State must give the facility a full evidentiary 
hearing for any of the actions specified inSec. 431.151.
    (b) Limit on grounds for appeal. The following are not subject to 
appeal:
    (1) The choice of sanction or remedy.
    (2) The State monitoring remedy.
    (3) [Reserved]
    (4) The level of noncompliance found by a State except when a 
favorable final administrative review decision would affect the range of 
civil money penalty amounts the State could collect.
    (5) A State survey agency's decision as to when to conduct an 
initial survey of a prospective provider.
    (c) Notice of deficiencies and impending remedies. The State must 
give the facility a written notice that includes:
    (1) The basis for the decision; and
    (2) A statement of the deficiencies on which the decision was based.

[[Page 38]]

    (d) Request for hearing. The facility or its legal representative or 
other authorized official must file written request for hearing within 
60 days of receipt of the notice of adverse action.
    (e) Special rules: Denial, termination or nonrenewal of provider 
agreement--(1) Appeal by an ICF/IIDIID. If an ICF/IIDICF/IID requests a 
hearing on denial, termination, or nonrenewal of its provider 
agreement--
    (i) The evidentiary hearing must be completed either before, or 
within 120 days after, the effective date of the adverse action; and
    (ii) If the hearing is made available only after the effective date 
of the action, the State must, before that date, offer the ICF/IIDICF/
IID an informal reconsideration that meets the requirements ofSec. 
431.154.
    (2) Appeal by an NF. If an NF requests a hearing on the denial or 
termination of its provider agreement, the request does not delay the 
adverse action and the hearing need not be completed before the 
effective date of the action.
    (f) Special rules: Imposition of remedies. If a State imposes a 
civil money penalty or other remedies on an NF, the following rules 
apply:
    (1) Basic rule. Except as provided in paragraph (f)(2) of this 
section (and notwithstanding any provision of State law), the State must 
impose all remedies timely on the NF, even if the NF requests a hearing.
    (2) Exception. The State may not collect a civil money penalty until 
after the 60-day period for request of hearing has elapsed or, if the NF 
requests a hearing, until issuance of a final administrative decision 
that supports imposition of the penalty.
    (g) Special rules: Dually participating facilities. If an NF is also 
participating or seeking to participate in Medicare as an SNF, and the 
basis for the State's denial or termination of participation in Medicaid 
is also a basis for denial or termination of participation in Medicare, 
the State must advise the facility that--
    (1) The appeals procedures specified for Medicare facilities in part 
498 of this chapter apply; and
    (2) A final decision entered under the Medicare appeals procedures 
is binding for both programs.
    (h) Special rules: Adverse action by CMS. If CMS finds that an NF is 
not in substantial compliance and either terminates the NF's Medicaid 
provider agreement or imposes alternative remedies on the NF (because 
CMS's findings and proposed remedies prevail over those of the State in 
accordance withSec. 488.452 of this chapter), the NF is entitled only 
to the appeals procedures set forth in part 498 of this chapter, instead 
of the procedures specified in this subpart.
    (i) Required elements of hearing. The hearing must include at least 
the following:
    (1) Opportunity for the facility--
    (i) To appear before an impartial decision-maker to refute the 
finding of noncompliance on which the adverse action was based;
    (ii) To be represented by counsel or other representative; and
    (iii) To be heard directly or through its representative, to call 
witnesses, and to present documentary evidence.
    (2) A written decision by the impartial decision-maker, setting 
forth the reasons for the decision and the evidence on which the 
decision is based.
    (j) Limits on scope of review: Civil money penalty cases. In civil 
money penalty cases--
    (1) The State's finding as to a NF's level of noncompliance must be 
upheld unless it is clearly erroneous; and
    (2) The scope of review is as set forth inSec. 488.438(e) of this 
chapter.

[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997; 
64 FR 39937, July 23, 1999]



Sec.  431.154  Informal reconsideration for ICFs/IID.

    The informal reconsideration must, at a minimum, include--
    (a) Written notice to the facility of the denial, termination or 
nonrenewal and the findings upon which it was based;
    (b) A reasonable opportunity for the facility to refute those 
findings in writing, and
    (c) A written affirmation or reversal of the denial, termination, or 
nonrenewal.

[44 FR 9753, Feb. 15, 1979, as amended at 59 FR 56233, Nov. 10, 1994; 61 
FR 32349, June 24, 1996]

[[Page 39]]



        Subpart E_Fair Hearings for Applicants and Beneficiaries

    Source: 44 FR 17932, Mar. 29, 1979, unless otherwise noted.

                           General Provisions



Sec.  431.200  Basis and scope.

    This subpart--
    (a) Implements section 1902(a)(3) of the Act, which requires that a 
State plan provide an opportunity for a fair hearing to any person whose 
claim for assistance is denied or not acted upon promptly;
    (b) Prescribes procedures for an opportunity for a hearing if the 
State agency or PAHP takes action, as stated in this subpart, to 
suspend, terminate, or reduce services, or an MCO or PIHP takes action 
under subpart F of part 438 of this chapter; and
    (c) Implements sections 1919(f)(3) and 1919(e)(7)(F) of the Act by 
providing an appeals process for any person who--
    (1) Is subject to a proposed transfer or discharge from a nursing 
facility; or
    (2) Is adversely affected by the pre-admission screening or the 
annual resident review that are required by section 1919(e)(7) of the 
Act.

[67 FR 41094, June 14, 2002]



Sec.  431.201  Definitions.

    For purposes of this subpart:
    Action means a termination, suspension, or reduction of Medicaid 
eligibility or covered services. It also means determinations by skilled 
nursing facilities and nursing facilities to transfer or discharge 
residents and adverse determinations made by a State with regard to the 
preadmission screening and annual resident review requirements of 
section 1919(e)(7) of the Act.
    Adverse determination means a determination made in accordance with 
sections 1919(b)(3)(F) or 1919(e)(7)(B) of the Act that the individual 
does not require the level of services provided by a nursing facility or 
that the individual does or does not require specialized services.
    Date of action means the intended date on which a termination, 
suspension, reduction, transfer or discharge becomes effective. It also 
means the date of the determination made by a State with regard to the 
preadmission screening and annual resident review requirements of 
section 1919(e)(7) of the Act.
    De novo hearing means a hearing that starts over from the beginning.
    Evidentiary hearing means a hearing conducted so that evidence may 
be presented.
    Notice means a written statement that meets the requirements of 
Sec.  431.210.
    Request for a hearing means a clear expression by the applicant or 
beneficiary, or his authorized representative, that he wants the 
opportunity to present his case to a reviewing authority.
    Send means deliver by mail or in electronic format consistent with 
Sec.  435.918 of this chapter.
    Service authorization request means a managed care enrollee's 
request for the provision of a service.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
67 FR 41095, June 14, 2002; 77 FR 42301, July 15, 2012]



Sec.  431.202  State plan requirements.

    A State plan must provide that the requirements of Sec.Sec. 
431.205 through 431.246 of this subpart are met.



Sec.  431.205  Provision of hearing system.

    (a) The Medicaid agency must be responsible for maintaining a 
hearing system that meets the requirements of this subpart.
    (b) The State's hearing system must provide for--
    (1) A hearing before--
    (i) The Medicaid agency; or
    (ii) For the denial of eligibility for individuals whose income 
eligibility is determined based on the applicable modified adjusted 
gross income standard described inSec.  435.911(c) of this chapter, the 
Exchange or Exchange appeals entity to which authority to conduct fair 
hearings has been delegated underSec. 431.10(c)(1)(ii), provided that 
individuals who have requested a fair hearing are given the choice to 
have their fair hearing conducted instead by the Medicaid agency; at 
state option the Exchange or Exchange appeals entity decision may be 
subject to review by the

[[Page 40]]

Medicaid agency in accordance withSec. 431.10(c)(3)(iii); or
    (2) An evidentiary hearing at the local level, with a right of 
appeal to the Medicaid agency.
    (c) The agency may offer local hearings in some political 
subdivisions and not in others.
    (d) The hearing system must meet the due process standards set forth 
in Goldberg v. Kelly, 397 U.S. 254 (1970), and any additional standards 
specified in this subpart.

[44 FR 17932, Mar. 29, 1979, as amended at 77 FR 42301, July 15, 2012]



Sec.  431.206  Informing applicants and beneficiaries.

    (a) The agency must issue and publicize its hearing procedures.
    (b) The agency must, at the time specified in paragraph (c) of this 
section, inform every applicant or beneficiary in writing--
    (1) Of his right to a hearing;
    (2) Of the method by which he may obtain a hearing; and
    (3) That he may represent himself or use legal counsel, a relative, 
a friend, or other spokesman.
    (c) The agency must provide the information required in paragraph 
(b) of this section--(1) At the time that the individual applies for 
Medicaid;
    (2) At the time of any action affecting his or her claim;
    (3) At the time a skilled nursing facility or a nursing facility 
notifies a resident in accordance withSec. 483.12 of this chapter that 
he or she is to be transferred or discharged; and
    (4) At the time an individual receives an adverse determination by 
the State with regard to the preadmission screening and annual resident 
review requirements of section 1919(e)(7) of the Act.
    (d) If, in accordance withSec. 431.10(c)(1)(ii), the agency has 
delegated authority to the Exchange or Exchange appeals entity to 
conduct the fair hearing, the agency must inform the individual in 
writing that--
    (1) He or she has the right to have his or her hearing before the 
agency, instead of the Exchange or the Exchange appeals entity; and
    (2) The method by which the individual may make such election;
    (e) The information required under this section may be provided in 
electronic format in accordance withSec. 435.918 of this chapter.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993, 77 FR 42301, July 15, 2012]

                                 Notice



Sec.  431.210  Content of notice.

    A notice required underSec. 431.206 (c)(2), (c)(3), or (c)(4) of 
this subpart must contain--
    (a) A statement of what action the State, skilled nursing facility, 
or nursing facility intends to take;
    (b) The reasons for the intended action;
    (c) The specific regulations that support, or the change in Federal 
or State law that requires, the action;
    (d) An explanation of--
    (1) The individual's right to request an evidentiary hearing if one 
is available, or a State agency hearing; or
    (2) In cases of an action based on a change in law, the 
circumstances under which a hearing will be granted; and
    (e) An explanation of the circumstances under which Medicaid is 
continued if a hearing is requested.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992]



Sec.  431.211  Advance notice.

    The State or local agency must send a notice at least 10 days before 
the date of action, except as permitted under Sec.Sec. 431.213 and 
431.214.

[77 FR 42301, July 15, 2012]



Sec.  431.213  Exceptions from advance notice.

    The agency may send a notice not later than the date of action if--
    (a) The agency has factual information confirming the death of a 
beneficiary;
    (b) The agency receives a clear written statement signed by a 
beneficiary that--
    (1) He no longer wishes services; or
    (2) Gives information that requires termination or reduction of 
services and indicates that he understands that this must be the result 
of supplying that information;

[[Page 41]]

    (c) The beneficiary has been admitted to an institution where he is 
ineligible under the plan for further services;
    (d) The beneficiary's whereabouts are unknown and the post office 
returns agency mail directed to him indicating no forwarding address 
(SeeSec. 431.231 (d) of this subpart for procedure if the 
beneficiary's whereabouts become known);
    (e) The agency establishes the fact that the beneficiary has been 
accepted for Medicaid services by another local jurisdiction, State, 
territory, or commonwealth;
    (f) A change in the level of medical care is prescribed by the 
beneficiary's physician;
    (g) The notice involves an adverse determination made with regard to 
the preadmission screening requirements of section 1919(e)(7) of the 
Act; or
    (h) The date of action will occur in less than 10 days, in 
accordance withSec. 483.12(a)(5)(ii), which provides exceptions to the 
30 days notice requirements ofSec. 483.12(a)(5)(i).

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993; 77 FR 42301, July 15, 2012]



Sec.  431.214  Notice in cases of probable fraud.

    The agency may shorten the period of advance notice to 5 days before 
the date of action if--
    (a) The agency has facts indicating that action should be taken 
because of probable fraud by the beneficiary; and
    (b) The facts have been verified, if possible, through secondary 
sources.

                            Right to Hearing



Sec.  431.220  When a hearing is required.

    (a) The State agency must grant an opportunity for a hearing to the 
following:
    (1) Any applicant who requests it because his claim for services is 
denied or is not acted upon with reasonable promptness.
    (2) Any beneficiary who requests it because he or she believes the 
agency has taken an action erroneously.
    (3) Any resident who requests it because he or she believes a 
skilled nursing facility or nursing facility has erroneously determined 
that he or she must be transferred or discharged.
    (4) Any individual who requests it because he or she believes the 
State has made an erroneous determination with regard to the 
preadmission and annual resident review requirements of section 
1919(e)(7) of the Act.
    (5) Any MCO or PIHP enrollee who is entitled to a hearing under 
subpart F of part 438 of this chapter.
    (6) Any PAHP enrollee who has an action as stated in this subpart.
    (7) Any enrollee who is entitled to a hearing under subpart B of 
part 438 of this chapter.
    (b) The agency need not grant a hearing if the sole issue is a 
Federal or State law requiring an automatic change adversely affecting 
some or all beneficiaries.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  431.221  Request for hearing.

    (a) The agency may require that a request for a hearing be in 
writing.
    (b) The agency may not limit or interfere with the applicant's or 
beneficiary's freedom to make a request for a hearing.
    (c) The agency may assist the applicant or beneficiary in submitting 
and processing his request.
    (d) The agency must allow the applicant or beneficiary a reasonable 
time, not to exceed 90 days from the date that notice of action is 
mailed, to request a hearings.



Sec.  431.222  Group hearings.

    The agency--
    (a) May respond to a series of individual requests for hearing by 
conducting a single group hearing;
    (b) May consolidate hearings only in cases in which the sole issue 
involved is one of Federal or State law or policy;
    (c) Must follow the policies of this subpart and its own policies 
governing hearings in all group hearings; and
    (d) Must permit each person to present his own case or be 
represented by his authorized representative.

[[Page 42]]



Sec.  431.223  Denial or dismissal of request for a hearing.

    The agency may deny or dismiss a request for a hearing if--
    (a) The applicant or beneficiary withdraws the request in writing; 
or
    (b) The applicant or beneficiary fails to appear at a scheduled 
hearing without good cause.

                               Procedures



Sec.  431.230  Maintaining services.

    (a) If the agency sends the 10-day or 5-day notice as required under 
Sec.  431.211 orSec. 431.214 of this subpart, and the beneficiary 
requests a hearing before the date of action, the agency may not 
terminate or reduce services until a decision is rendered after the 
hearing unless--
    (1) It is determined at the hearing that the sole issue is one of 
Federal or State law or policy; and
    (2) The agency promptly informs the beneficiary in writing that 
services are to be terminated or reduced pending the hearing decision.
    (b) If the agency's action is sustained by the hearing decision, the 
agency may institute recovery procedures against the applicant or 
beneficiary to recoup the cost of any services furnished the 
beneficiary, to the extent they were furnished solely by reason of this 
section.

[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980; 
77 FR 42302, July 15, 2012]



Sec.  431.231  Reinstating services.

    (a) The agency may reinstate services if a beneficiary requests a 
hearing not more than 10 days after the date of action.
    (b) The reinstated services must continue until a hearing decision 
unless, at the hearing, it is determined that the sole issue is one of 
Federal or State law or policy.
    (c) The agency must reinstate and continue services until a decision 
is rendered after a hearing if--
    (1) Action is taken without the advance notice required underSec. 
431.211 orSec. 431.214 of this subpart;
    (2) The beneficiary requests a hearing within 10 days from the date 
that the individual receives the notice of action. The date on which the 
notice is received is considered to be 5 days after the date on the 
notice, unless the beneficiary shows that he or she did not receive the 
notice within the 5-day period; and
    (3) The agency determines that the action resulted from other than 
the application of Federal or State law or policy.
    (d) If a beneficiary's whereabouts are unknown, as indicated by the 
return of unforwardable agency mail directed to him, any discontinued 
services must be reinstated if his whereabouts become known during the 
time he is eligible for services.

[44 FR 17932, Mar. 29, 1979, as amended at 77 FR 42302, July 15, 2012]



Sec.  431.232  Adverse decision of local evidentiary hearing.

    If the decision of a local evidentiary hearing is adverse to the 
applicant or beneficiary, the agency must--
    (a) Inform the applicant or beneficiary of the decision;
    (b) Inform the applicant or beneficiary that he has the right to 
appeal the decision to the State agency, in writing, within 15 days of 
the mailing of the notice of the adverse decision;
    (c) Inform the applicant or beneficiary of his right to request that 
his appeal be a de novo hearing; and
    (d) Discontinue services after the adverse decision.



Sec.  431.233  State agency hearing after adverse decision of local
evidentiary hearing.

    (a) Unless the applicant or beneficiary specifically requests a de 
novo hearing, the State agency hearing may consist of a review by the 
agency hearing officer of the record of the local evidentiary hearing to 
determine whether the decision of the local hearing officer was 
supported by substantial evidence in the record.
    (b) A person who participates in the local decision being appealed 
may not participate in the State agency hearing decision.



Sec.  431.240  Conducting the hearing.

    (a) All hearings must be conducted--
    (1) At a reasonable time, date, and place;

[[Page 43]]

    (2) Only after adequate written notice of the hearing; and
    (3) By one or more impartial officials or other individuals who have 
not been directly involved in the initial determination of the action in 
question.
    (b) If the hearing involves medical issues such as those concerning 
a diagnosis, an examining physician's report, or a medical review team's 
decision, and if the hearing officer considers it necessary to have a 
medical assessment other than that of the individual involved in making 
the original decision, such a medical assessment must be obtained at 
agency expense and made part of the record.
    (c) A hearing officer must have access to agency information 
necessary to issue a proper hearing decision, including information 
concerning State policies and regulations.

[44 FR 17932, Mar. 29, 1979, as amended at 77 FR 42302, July 15, 2012]



Sec.  431.241  Matters to be considered at the hearing.

    The hearing must cover--
    (a) Agency action or failure to act with reasonable promptness on a 
claim for services, including both initial and subsequent decisions 
regarding eligibility;
    (b) Agency decisions regarding changes in the type or amount of 
services;
    (c) A decision by a skilled nursing facility or nursing facility to 
transfer or discharge a resident; and
    (d) A State determination with regard to the preadmission screening 
and annual resident review requirements of section 1919(e)(7) of the 
Act.

[57 FR 56505, Nov. 30, 1992]



Sec.  431.242  Procedural rights of the applicant or beneficiary.

    The applicant or beneficiary, or his representative, must be given 
an opportunity to--
    (a) Examine at a reasonable time before the date of the hearing and 
during the hearing:
    (1) The content of the applicant's or beneficiary's case file; and
    (2) All documents and records to be used by the State or local 
agency or the skilled nursing facility or nursing facility at the 
hearing;
    (b) Bring witnesses;
    (c) Establish all pertinent facts and circumstances;
    (d) Present an argument without undue interference; and
    (e) Question or refute any testimony or evidence, including 
opportunity to confront and cross-examine adverse witnesses.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56506, Nov. 30, 1992]



Sec.  431.243  Parties in cases involving an eligibility determination.

    If the hearing involves an issue of eligibility and the Medicaid 
agency is not responsible for eligibility determinations, the agency 
that is responsible for determining eligibility must participate in the 
hearing.



Sec.  431.244  Hearing decisions.

    (a) Hearing recommendations or decisions must be based exclusively 
on evidence introduced at the hearing.
    (b) The record must consist only of--
    (1) The transcript or recording of testimony and exhibits, or an 
official report containing the substance of what happened at the 
hearing;
    (2) All papers and requests filed in the proceeding; and
    (3) The recommendation or decision of the hearing officer.
    (c) The applicant or beneficiary must have access to the record at a 
convenient place and time.
    (d) In any evidentiary hearing, the decision must be a written one 
that--
    (1) Summarizes the facts; and
    (2) Identifies the regulations supporting the decision.
    (e) In a de novo hearing, the decision must--
    (1) Specify the reasons for the decision; and
    (2) Identify the supporting evidence and regulations.
    (f) The agency must take final administrative action as follows:
    (1) Ordinarily, within 90 days from the earlier of the following:
    (i) The date the enrollee filed an MCO or PIHP appeal, not including 
the number of days the enrollee took to subsequently file for a State 
fair hearing; or
    (ii) If permitted by the State, the date the enrollee filed for 
direct access to a State fair hearing.

[[Page 44]]

    (2) As expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, from the MCO 
or PIHP, the case file and information for any appeal of a denial of a 
service that, as indicated by the MCO or PIHP--
    (i) Meets the criteria for expedited resolution as set forth in 
Sec.  438.410(a) of this chapter, but was not resolved within the 
timeframe for expedited resolution; or
    (ii) Was resolved within the timeframe for expedited resolution, but 
reached a decision wholly or partially adverse to the enrollee.
    (3) If the State agency permits direct access to a State fair 
hearing, as expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, directly 
from an MCO or PIHP enrollee, a fair hearing request on a decision to 
deny a service that it determines meets the criteria for expedited 
resolution, as set forth inSec. 438.410(a) of this chapter.
    (g) The public must have access to all agency hearing decisions, 
subject to the requirements of subpart F of this part for safeguarding 
of information.

[44 FR 17932, Mar. 29, 1979, as amended at 67 FR 41095, June 14, 2002]



Sec.  431.245  Notifying the applicant or beneficiary of a State
agency decision.

    The agency must notify the applicant or beneficiary in writing of--
    (a) The decision; and
    (b) His right to request a State agency hearing or seek judicial 
review, to the extent that either is available to him.



Sec.  431.246  Corrective action.

    The agency must promptly make corrective payments, retroactive to 
the date an incorrect action was taken, and, if appropriate, provide for 
admission or readmission of an individual to a facility if--
    (a) The hearing decision is favorable to the applicant or 
beneficiary; or
    (b) The agency decides in the applicant's or beneficiary's favor 
before the hearing.

[57 FR 56506, Nov. 30, 1992]

                     Federal Financial Participation



Sec.  431.250  Federal financial participation.

    FFP is available in expenditures for--
    (a) Payments for services continued pending a hearing decision;
    (b) Payments made--
    (1) To carry out hearing decisions; and
    (2) For services provided within the scope of the Federal Medicaid 
program and made under a court order.
    (c) Payments made to take corrective action prior to a hearing;
    (d) Payments made to extend the benefit of a hearing decision or 
court order to individuals in the same situation as those directly 
affected by the decision or order;
    (e) Retroactive payments under paragraphs (b), (c), and (d) of this 
section in accordance with applicable Federal policies on corrective 
payments; and
    (f) Administrative costs incurred by the agency for--
    (1) Transportation for the applicant or beneficiary, his 
representative, and witnesses to and from the hearing;
    (2) Meeting other expenses of the applicant or beneficiary in 
connection with the hearing;
    (3) Carrying out the hearing procedures, including expenses of 
obtaining the additional medical assessment specified inSec. 431.240 
of this subpart; and
    (4) Hearing procedures for Medicaid and non-Medicaid individuals 
appealing transfers, discharges and determinations of preadmission 
screening and annual resident reviews under part 483, subparts C and E 
of this chapter.

[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980; 
57 FR 56506, Nov. 30, 1992]



   Subpart F_Safeguarding Information on Applicants and Beneficiaries

    Source: 44 FR 17934, Mar. 29, 1979, unless otherwise noted.



Sec.  431.300  Basis and purpose.

    (a) Section 1902(a)(7) of the Act requires that a State plan must 
provide

[[Page 45]]

safeguards that restrict the use or disclosure of information concerning 
applicants and beneficiaries to purposes directly connected with the 
administration of the plan. This subpart specifies State plan 
requirements, the types of information to be safeguarded, the conditions 
for release of safeguarded information, and restrictions on the 
distribution of other information.
    (b) For purposes of this subpart, information concerning an 
applicant or beneficiary includes information on a non-applicant, as 
defined inSec. 435.4 of this subchapter.
    (c) Section 1137 of the Act, which requires agencies to exchange 
information to verify the income and eligibility of applicants and 
beneficiaries (seeSec. 435.940 throughSec. 435.965 of this 
subchapter), requires State agencies to have adequate safeguards to 
assure that--
    (1) Information exchanged by the State agencies is made available 
only to the extent necessary to assist in the valid administrative needs 
of the program receiving the information, and information received under 
section 6103(l)(7) of the Internal Revenue Code is exchanged only with 
agencies authorized to receive that information under that section of 
the Code; and
    (2) The information is adequately stored and processed so that it is 
protected against unauthorized disclosure for other purposes.
    (d) Section 1943 of the Act and section 1413 of the Affordable Care 
Act.

[51 FR 7210, Feb. 28, 1986, as amended at 77 FR 17203, Mar. 23, 2012]



Sec.  431.301  State plan requirements.

    A State plan must provide, under a State statute that imposes legal 
sanctions, safeguards meeting the requirements of this subpart that 
restrict the use or disclosure of information concerning applicants and 
beneficiaries to purposes directly connected with the administration of 
the plan.



Sec.  431.302  Purposes directly related to State plan administration.

    Purposes directly related to plan administration include--
    (a) Establishing eligibility;
    (b) Determining the amount of medical assistance;
    (c) Providing services for beneficiaries; and
    (d) Conducting or assisting an investigation, prosecution, or civil 
or criminal proceeding related to the administration of the plan.



Sec.  431.303  State authority for safeguarding information.

    The Medicaid agency must have authority to implement and enforce the 
provisions specified in this subpart for safeguarding information about 
applicants and beneficiaries.



Sec.  431.304  Publicizing safeguarding requirements.

    (a) The agency must publicize provisions governing the confidential 
nature of information about applicants and beneficiaries, including the 
legal sanctions imposed for improper disclosure and use.
    (b) The agency must provide copies of these provisions to applicants 
and beneficiaries and to other persons and agencies to whom information 
is disclosed.



Sec.  431.305  Types of information to be safeguarded.

    (a) The agency must have criteria that govern the types of 
information about applicants and beneficiaries that are safeguarded.
    (b) This information must include at least--
    (1) Names and addresses;
    (2) Medical services provided;
    (3) Social and economic conditions or circumstances;
    (4) Agency evaluation of personal information;
    (5) Medical data, including diagnosis and past history of disease or 
disability; and
    (6) Any information received for verifying income eligibility and 
amount of medical assistance payments (seeSec. 435.940 throughSec. 
435.965 of this subchapter). Income information received from SSA or the 
Internal Revenue Service must be safeguarded according to the 
requirements of the agency that furnished the data, including section 
6103 of the Internal Revenue Code, as applicable.

[[Page 46]]

    (7) Any information received in connection with the identification 
of legally liable third party resources underSec. 433.138 of this 
chapter.
    (8) Social Security Numbers.

[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 
FR 5975, Feb. 27, 1987; 77 FR 17203, Mar. 23, 2012]



Sec.  431.306  Release of information.

    (a) The agency must have criteria specifying the conditions for 
release and use of information about applicants and beneficiaries.
    (b) Access to information concerning applicants or beneficiaries 
must be restricted to persons or agency representatives who are subject 
to standards of confidentiality that are comparable to those of the 
agency.
    (c) The agency must not publish names of applicants or 
beneficiaries.
    (d) The agency must obtain permission from a family or individual, 
whenever possible, before responding to a request for information from 
an outside source, unless the information is to be used to verify 
income, eligibility and the amount of medical assistance payment under 
section 1137 of this Act and Sec.Sec. 435.940 through 435.965 of this 
chapter.

If, because of an emergency situation, time does not permit obtaining 
consent before release, the agency must notify the family or individual 
immediately after supplying the information.
    (e) The agency's policies must apply to all requests for information 
from outside sources, including governmental bodies, the courts, or law 
enforcement officials.
    (f) If a court issues a subpoena for a case record or for any agency 
representative to testify concerning an applicant or beneficiary, the 
agency must inform the court of the applicable statutory provisions, 
policies, and regulations restricting disclosure of information.
    (g) Before requesting information from, or releasing information to, 
other agencies to verify income, eligibility and the amount of 
assistance underSec. 435.940 throughSec. 435.965 of this subchapter, 
the agency must execute data exchange agreements with those agencies, as 
specified inSec. 435.945(i) of this subchapter.
    (h) Before requesting information from, or releasing information to, 
other agencies to identify legally liable third party resources under 
Sec.  433.138(d) of this chapter, the agency must execute data exchanges 
agreements, as specified inSec. 433.138(h)(2) of this chapter.

[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 
FR 5975, Feb. 27, 1987; 77 FR 17203, Mar. 23, 2012]



Sec.  431.307  Distribution of information materials.

    (a) All materials distributed to applicants, beneficiaries, or 
medical providers must--
    (1) Directly relate to the administration of the Medicaid program;
    (2) Have no political implications except to the extent required to 
implement the National Voter Registration Act of 1993 (NVRA) Pub. L. 
103-931; for States that are exempt from the requirements of NVRA, voter 
registration may be a voluntary activity so long as the provisions of 
section 7(a)(5) of NVRA are observed;
    (3) Contain the names only of individuals directly connected with 
the administration of the plan; and
    (4) Identify those individuals only in their official capacity with 
the State or local agency.
    (b) The agency must not distribute materials such as ``holiday'' 
greetings, general public announcements, partisan voting information and 
alien registration notices.
    (c) The agency may distribute materials directly related to the 
health and welfare of applicants and beneficiaries, such as 
announcements of free medical examinations, availability of surplus 
food, and consumer protection information.
    (d) Under NVRA, the agency must distribute voter information and 
registration materials as specified in NVRA.

[44 FR 17934, Mar. 29, 1979, as amended at 61 FR 58143, Nov. 13, 1996]



                  Subpart G_Section 1115 Demonstrations

    Source: 77 FR 11696, Feb. 27, 2012, unless otherwise noted.

[[Page 47]]



Sec.  431.400  Basis and purpose.

    (a) Basis. This subpart implements provisions in section 1115(d) of 
the Act, which requires all of the following:
    (1) The establishment of application requirements for Medicaid and 
CHIP demonstration projects that provide for:
    (i) A process for public notice and comment at the State level, 
including public hearings, sufficient to ensure a meaningful level of 
public input and that does not impose requirements that are in addition 
to, or duplicative of, requirements imposed under the Administrative 
Procedure Act, or requirements that are unreasonable or unnecessarily 
burdensome with respect to State compliance.
    (ii) Requirements relating to all of the following:
    (A) The goals of the program to be implemented or renewed under the 
demonstration project.
    (B) Expected State and Federal costs and coverage projections of the 
State demonstration project.
    (C) Specific plans of the State to ensure the demonstration project 
will be in compliance with titles XIX or XXI of the Act.
    (2) A process for public notice and comment after a demonstration 
application is received by the Secretary that is sufficient to ensure a 
meaningful level of public input.
    (3) A process for the submission of reports to the Secretary by a 
State relating to the implementation of a demonstration project.
    (4) Periodic evaluation of demonstration projects by the Secretary.
    (b) Purpose. This subpart sets forth a process for application and 
review of Medicaid and CHIP demonstration projects that provides for 
transparency and public participation.



Sec.  431.404  Definitions.

    For the purposes of this subpart:
    Demonstration means any experimental, pilot, or demonstration 
project which the Secretary approves under the authority of section 1115 
of the Act because, in the judgment of the Secretary, it is likely to 
assist in promoting the statutory objectives of the Medicaid or CHIP 
program.
    Indian Health Program means a program as defined at section 4(12) of 
the Indian Health Care Improvement Act, (Pub. L. 94-437).
    Public notice means a notice issued by a government agency or 
legislative body that contains sufficient detail to notify the public at 
large of a proposed action, consistent with the provisions ofSec. 
431.408 of this subpart.



Sec.  431.408  State public notice process.

    (a) General. A State must provide at least a 30-day public notice 
and comment period regarding applications for a demonstration project, 
or an extension of an existing demonstration project that the State 
intends to submit to CMS for review and consideration.
    (1) Public notice and comment period. Prior to submitting an 
application to CMS for a new demonstration project or an extension of a 
previously approved demonstration project, the State must provide at 
least a 30-day public notice and comment period, and the public notice 
shall include all of the following information:
    (i) A comprehensive description of the demonstration application or 
extension to be submitted to CMS that contains a sufficient level of 
detail to ensure meaningful input from the public, including:
    (A) The program description, goals, and objectives to be implemented 
or extended under the demonstration project, including a description of 
the current or new beneficiaries who will be impacted by the 
demonstration.
    (B) To the extent applicable, the proposed health care delivery 
system and the eligibility requirements, benefit coverage and cost 
sharing (premiums, co-payments, and deductibles) required of individuals 
that will be impacted by the demonstration, and how such provisions vary 
from the State's current program features.
    (C) An estimate of the expected increase or decrease in annual 
enrollment, and in annual aggregate expenditures, including historic 
enrollment or budgetary data, if applicable. This includes a financial 
analysis of any changes to the demonstration requested by the State in 
its extension request.

[[Page 48]]

    (D) The hypothesis and evaluation parameters of the demonstration.
    (E) The specific waiver and expenditure authorities that the State 
believes to be necessary to authorize the demonstration.
    (ii) The locations and Internet address where copies of the 
demonstration application are available for public review and comment.
    (iii) Postal and Internet email addresses where written comments may 
be sent and reviewed by the public, and the minimum 30-day time period 
in which comments will be accepted.
    (iv) The location, date, and time of at least two public hearings 
convened by the State to seek public input on the demonstration 
application.
    (2) Statement of public notice and public input procedures. (i) The 
State shall publish its public notice process, public input process, 
planned hearings, the demonstration application(s), and a link to the 
relevant Medicaid demonstration page(s) on the CMS Web site in a 
prominent location on either the main page of the public Web site of the 
State agency responsible for making applications for demonstrations or 
on a demonstration-specific Web page that is linked in a readily 
identifiable way to the main page of the State agency's Web site. The 
State must maintain and keep current the public Web site throughout the 
entire public comment and review process.
    (ii) The State shall also publish an abbreviated public notice which 
must include a summary description of the demonstration, the location 
and times of the two or more public hearings, and an active link to the 
full public notice document on the State's Web site in the State's 
administrative record in accordance with the State's Administrative 
Procedure Act, provided that such notice is provided at least 30 days 
prior to the submission of the demonstration application to CMS or in 
the newspapers of widest circulation in each city with a population of 
100,000, or more, provided that such notice is provided at least 30 days 
prior to the submission of the demonstration application to CMS, or 
both.
    (iii) The State must also utilize additional mechanisms, such as an 
electronic mailing list, to notify interested parties of the 
demonstration application(s).
    (3) Public hearings. At least 20 days prior to submitting an 
application for a new demonstration project or extension of an existing 
demonstration project to CMS for review, the State must have conducted 
at least two public hearings, on separate dates and at separate 
locations, regarding the State's demonstration application at which 
members of the public throughout the State have an opportunity to 
provide comments. The State must use telephonic and/or Web conference 
capabilities for at least one of the two required public hearings to 
ensure statewide accessibility to the public hearing unless it can 
document it has afforded the public throughout the State the opportunity 
to provide comment, such as holding the two public hearings in 
geographically distinct areas of the State. The State must use at least 
two of the following public forums:
    (i) The Medical Care Advisory Committee that operates in accordance 
withSec. 431.12 of this subpart; or
    (ii) A commission or other similar process, where meetings are open 
to members of the public; or
    (iii) A State legislative process, which would afford an interested 
party the opportunity to learn about the contents of the demonstration 
application, and to comment on its contents; or
    (iv) Any other similar process for public input that would afford an 
interested party the opportunity to learn about the contents of the 
demonstration application, and to comment on its contents.
    (b) Tribal consultation and seeking advice from Indian health 
providers and urban Indian organizations. A State with Federally-
recognized Indian tribes, Indian health programs, and/or urban Indian 
health organizations shall include a process to consult with the Indian 
tribes, and seek advice from Indian Health programs and urban Indian 
health organizations in the State, prior to submission of an application 
to CMS for a new demonstration project, or an extension of a previously 
approved demonstration project, that has or would have a direct effect 
on Indians, tribes, on Indian health programs, or on urban Indian health 
organizations.

[[Page 49]]

    (1) For initial applications and applications extending existing 
demonstration projects that have a direct effect on Indians, tribes, 
Indian health programs, and urban Indian health organizations in the 
State, the State must demonstrate that it has conducted consultation 
activities with tribes and sought advice from Indian health programs and 
urban Indian health organizations prior to submission of such 
application.
    (2) Consultation with Federally-recognized Indian tribes and 
solicitation of advice from affected Indian health providers and urban 
Indian organizations must be conducted in accordance with the 
consultation process outlined in the July 17, 2001 letter or the State's 
formal tribal consultation agreement or process and the process for 
seeking advice from Indian Health providers must be conducted as 
outlined in the State's approved Medicaid State Plan.
    (3) Documentation of the State's consultation activities must be 
included in the demonstration application, which must describe the 
notification process, the entities involved in the consultation(s), the 
date(s) and location(s) of the consultation(s), issues raised, and the 
potential resolution for such issues.



Sec.  431.412  Application procedures.

    (a) Initial demonstration application content. (1) Applications for 
initial approval of a demonstration will not be considered complete 
unless they comply with the public notice process set forth inSec. 
431.408(a) of this subpart, and include the following:
    (i) A comprehensive program description of the demonstration, 
including the goals and objectives to be implemented under the 
demonstration project.
    (ii) A description of the proposed health care delivery system, 
eligibility requirements, benefit coverage and cost sharing (premiums, 
copayments, and deductibles) required of individuals who will be 
impacted by the demonstration to the extent such provisions would vary 
from the State's current program features and the requirements of the 
Act.
    (iii) An estimate of the expected increase or decrease in annual 
enrollment, and in annual aggregate expenditures, including historic 
enrollment or budgetary data, if applicable.
    (iv) Current enrollment data, if applicable, and enrollment 
projections expected over the term of the demonstration for each 
category of beneficiary whose health care coverage is impacted by the 
demonstration.
    (v) Other program features that the demonstration would modify in 
the State's Medicaid and CHIP programs.
    (vi) The specific waiver and expenditure authorities that the State 
believes to be necessary to authorize the demonstration.
    (vii) The research hypotheses that are related to the 
demonstration's proposed changes, goals, and objectives, a plan for 
testing the hypotheses in the context of an evaluation, and, if a 
quantitative evaluation design is feasible, the identification of 
appropriate evaluation indicators.
    (viii) Written documentation of the State's compliance with the 
public notice requirements set forth inSec. 431.408 of this subpart, 
with a report of the issues raised by the public during the comment 
period, which shall be no less than 30 days, and how the State 
considered those comments when developing the demonstration application.
    (2) CMS may request, or the State may propose application 
modifications, as well as additional information to aid in the review of 
the application. If an application modification substantially changes 
the original demonstration design, CMS may, at its discretion, direct an 
additional 30-day public comment period.
    (3) This section does not preclude a State from submitting to CMS a 
pre-application concept paper or from conferring with CMS about its 
intent to seek a demonstration prior to submitting a completed 
application.
    (b) Demonstration application procedures. A State application for 
approval of a new demonstration project or an extension of an existing 
demonstration project must be submitted to CMS as both printed and 
electronic documents. Electronic documents must be submitted in a format 
that will be accessible to individuals with disabilities.
    (1) Consistent withSec. 431.416(a) of this subpart, within 15 days 
of receipt of a

[[Page 50]]

complete application, CMS will send the State a written notice informing 
the State of receipt of the submitted application, the date in which the 
Secretary received the State's demonstration application and the start 
date of the 30-day Federal public notice process set forth inSec. 
431.416 of this subpart. The written notice--
    (i) Is provided for purposes of initiating the Federal-level public 
comment period and does not preclude a determination that, based on 
further review, further information is required to supplement or support 
the application, or that the application cannot be approved because a 
required element is missing or insufficient.
    (ii) Does not prevent a State from modifying its application or 
submitting any supplementary information it determines necessary to 
support CMS' review of its application.
    (2) Within 15 days of receipt of a demonstration application that 
CMS determines is incomplete, CMS will send the State a written notice 
of the elements missing from the application.
    (3) CMS will publish on its Web site at regular intervals the status 
of all State submissions, including information received from the State 
while the State works with CMS to meet the demonstration application 
process set forth in this section.
    (c) Demonstration extension request. A request to extend an existing 
demonstration under sections 1115(a), (e), and (f) of the Act will be 
considered only if it is submitted at least 12 months prior to the 
expiration date of the demonstration when requesting an extension under 
section 1115(e) of the Act or 6 months prior to the expiration date of 
the demonstration when requesting an extension under section 1115(a) or 
(f) of the Act, unless a longer time frame is specified in the Special 
Terms and Conditions for the original demonstration. An extension 
application, including an extension for the purpose of phasing out a 
demonstration, must be sent from the Governor of the State to the 
Secretary.
    (1) Changes to existing demonstration. If an extension application 
includes substantial changes to the existing demonstration, CMS may, at 
its discretion, treat the application as an application for a new 
demonstration.
    (2) Demonstration extension application. An application to extend an 
existing demonstration will be considered complete, for purposes of 
initiating the Federal-level public notice period, when the State 
provides the following:
    (i) A historical narrative summary of the demonstration project, 
which includes the objectives set forth at the time the demonstration 
was approved, evidence of how these objectives have or have not been 
met, and the future goals of the program.
    (ii) If changes are requested, a narrative of the changes being 
requested along with the objective of the change and the desired 
outcomes.
    (iii) A list and programmatic description of the waivers and 
expenditure authorities that are being requested for the extension 
period, or a statement that the State is requesting the same waiver and 
expenditure authorities as those approved in the current demonstration.
    (iv) Summaries of External Quality Review Organization (EQRO) 
reports, managed care organization (MCO) and State quality assurance 
monitoring, and any other documentation of the quality of and access to 
care provided under the demonstration, such as the CMS Form 416 EPSDT/
CHIP report.
    (v) Financial data demonstrating the State's historical and 
projected expenditures for the requested period of the extension, as 
well as cumulatively over the lifetime of the demonstration. This 
includes a financial analysis of changes to the demonstration requested 
by the State.
    (vi) An evaluation report of the demonstration, inclusive of 
evaluation activities and findings to date, plans for evaluation 
activities during the extension period, and if changes are requested, 
identification of research hypotheses related to the changes and an 
evaluation design for addressing the proposed revisions.
    (vii) Documentation of the State's compliance with the public notice 
process set forth inSec. 431.408 of this subpart, including the post-
award public input process described inSec. 431.420(c) of this 
subpart, with a report of the issues

[[Page 51]]

raised by the public during the comment period and how the State 
considered the comments when developing the demonstration extension 
application.
    (3) CMS may request, or the State may propose application 
modifications, as well as additional information to aid in the review of 
an application to extend a demonstration. If an application modification 
substantially changes the original demonstration design, CMS may, at its 
discretion, direct an additional 30-day public comment period.
    (4) Upon application from the State, the Secretary may extend 
existing demonstration projects on a temporary basis for the period 
during which a successor demonstration is under review, without regard 
to the date when the application was submitted.
    (d) Approvals. Approval of a new demonstration or a demonstration 
extension will generally be prospective only and Federal Financial 
Participation (FFP) will not be available for changes to the 
demonstration that have not been approved by CMS.



Sec.  431.416  Federal public notice and approval process.

    (a) General. Within 15 days of receipt of a complete application 
from the State for a new demonstration project or an extension of a 
previously approved demonstration project, CMS will:
    (1) Send the State a written notice informing the State of receipt 
of the demonstration application, the date in which the Secretary 
received the State's demonstration application, the start dates of the 
30-day Federal public notice process, and the end date of the 45-day 
minimum Federal decision-making period.
    (2) Publish the written notice acknowledging receipt of the State's 
completed application on its Web site within the same 15-day timeframe.
    (b) Public comment period. Upon notifying a State of a completed 
application, CMS will solicit public comment regarding such 
demonstration application for 30 days by doing the following:
    (1) Publishing the following on the CMS Web site:
    (i) The written notice of CMS receipt of the State's complete 
demonstration application.
    (ii) Demonstration applications, including supporting information 
submitted by the State as part of the complete application, and 
associated concept papers, as applicable.
    (iii) The proposed effective date of the demonstration.
    (iv) Addresses to which inquiries and comments from the public may 
be directed to CMS by mail or email.
    (2) Notifying interested parties through a mechanism, such an 
electronic mailing list, that CMS will create for this purpose.
    (c) Public disclosure. CMS will publish on its Web site, at regular 
intervals, appropriate information, which may include, but is not 
limited to the following:
    (1) Relevant status update(s);
    (2) A listing of the issues raised through the public notice 
process.
    (d) Publishing of comments. (1) CMS will publish written comments 
electronically through its Web site or an alternative Web site.
    (2) CMS will review and consider all comments received by the 
deadline, but will not provide written responses to public comments. 
While comments may be submitted after the deadline, CMS cannot assure 
that these comments will be considered.
    (e) Approval of a demonstration application. (1) CMS will not render 
a final decision on a demonstration application until at least 45 days 
after notice of receipt of a completed application, to receive and 
consider public comments.
    (2) CMS may expedite this process under the exception to the normal 
public notice process provisions inSec. 431.416(g) of this subpart.
    (f) Administrative record. (1) CMS will maintain, and publish on its 
public Web site, an administrative record that may include, but is not 
limited to the following:
    (i) The demonstration application from the State.
    (ii) The State's disaster exemption request and CMS' response, if 
applicable.
    (iii) Written public comments sent to the CMS and any CMS responses.

[[Page 52]]

    (iv) If an application is approved, the final special terms and 
conditions, waivers, expenditure authorities, and award letter sent to 
the State.
    (v) If an application is denied, the disapproval letter sent to the 
State.
    (vi) The State acceptance letter, as applicable.
    (vii) Specific requirements related to the approved and agreed upon 
terms and conditions, such as implementation reviews, evaluation design, 
quarterly progress reports, annual reports, and interim and/or final 
evaluation reports.
    (viii) Notice of the demonstration's suspension or termination, if 
applicable.
    (2) To ensure that the public has access to all documentation 
related to the demonstration project, including the aforementioned 
items, we will also provide a link to the State's public Web site.
    (g) Exemption from the normal public notice process. (1) CMS may 
waive, in whole or in part, the Federal and State public notice 
procedures to expedite a decision on a proposed demonstration or 
demonstration extension request that addresses a natural disaster, 
public health emergency, or other sudden emergency threats to human 
lives.
    (2) The Secretary may exempt a State from the normal public notice 
process or the required time constraints imposed in this section or 
Sec.  431.408(a) of this subpart when the State demonstrates to CMS the 
existence of unforeseen circumstances resulting from a natural disaster, 
public health emergency, or other sudden emergency that directly 
threatens human lives that warrant an exception to the normal public 
notice process.
    (i) The State is expected to discharge its basic responsibilities in 
submitting demonstration applications to the Secretary as required in 
Sec.  431.412 of this subpart.
    (ii) Such applications will be posted on the CMS Web site.
    (3) A State must establish (or meet) all of the following criteria 
to obtain such an exemption from the normal public notice process 
requirements:
    (i) The State acted in good faith, and in a diligent, timely, and 
prudent manner.
    (ii) The circumstances constitute an emergency and could not have 
been reasonably foreseen.
    (iii) Delay would undermine or compromise the purpose of the 
demonstration and be contrary to the interests of beneficiaries.
    (4) CMS will publish on its Web site any disaster exemption 
determinations within 15 days of approval, as well as the revised 
timeline for public comment or post-award processes, if applicable.



Sec.  431.420  Monitoring and compliance.

    (a) General. (1) Any provision of the Social Security Act that is 
not expressly waived by CMS in its approval of the demonstration project 
are not waived, and States may not stop compliance with any of these 
provisions not expressly waived. Waivers may be limited in scope to the 
extent necessary to achieve a particular purpose or to the extent of a 
particular regulatory requirement implementing the statutory provision.
    (2) States must comply with the terms and conditions of the 
agreement between the Secretary and the State to implement a State 
demonstration project.
    (b) Implementation reviews. (1) The terms and conditions will 
provide that the State will perform periodic reviews of the 
implementation of the demonstration.
    (2) CMS will review documented complaints that a State is failing to 
comply with requirements specified in the special terms and conditions 
and implementing waivers of any approved demonstration.
    (3) CMS will promptly share with the State complaints that CMS has 
received and will also provide notification of any applicable monitoring 
and compliance issues.
    (c) Post award. Within 6 months after the implementation date of the 
demonstration and annually thereafter, the State must hold a public 
forum--
    (1) To solicit comments on the progress of a demonstration project.
    (2) At which members of the public have an opportunity to provide 
comments and in such time as to include a summary of the forum in the 
quarterly report associated with the quarter in

[[Page 53]]

which the forum was held, as well as in its annual report to CMS.
    (3) The public forum to solicit feedback on the progress of a 
demonstration project must occur using one of the following:
    (i) A Medical Care Advisory Committee that operates in accordance 
withSec. 431.412 of this subpart.
    (ii) A commission or other similar process, where meetings are open 
to members of the public, and would afford an interested party the 
opportunity to learn about the demonstration's progress.
    (iii) The State must publish the date, time, and location of the 
public forum in a prominent location on the State's public Web site, at 
least 30 days prior to the date of the planned public forum.
    (4) [Reserved]
    (d) Terminations and suspensions. (1) The Secretary may suspend or 
terminate a demonstration in whole or in part, any time before the date 
of expiration, whenever it determines that the State has materially 
failed to comply with the terms of the demonstration project.
    (2) The Secretary may also withdraw waivers or expenditure 
authorities based on a finding that the demonstration project is not 
likely to achieve the statutory purposes.
    (3) The terms and conditions for the demonstration will detail any 
notice and appeal rights for the State for a termination, suspension or 
withdrawal of waivers or expenditure authorities.
    (e) Closeout costs. When a demonstration is terminated, suspended, 
or if waivers or expenditure authority are withdrawn, Federal funding is 
limited to normal closeout costs associated with an orderly termination 
of the demonstration or expenditure authority, including service costs 
during any approved transition period, and administrative costs of 
disenrolling participants.
    (f) Federal evaluators. (1) The State must fully cooperate with CMS 
or an independent evaluator selected by CMS to undertake an independent 
evaluation of any component of the demonstration.
    (2) The State must submit all requested data and information to CMS 
or the independent evaluator.



Sec.  431.424  Evaluation requirements.

    (a) General. States are permitted and encouraged to use a range of 
appropriate evaluation strategies (including experimental and other 
quantitative and qualitative designs) in the application of evaluation 
techniques with the approval of CMS.
    (b) Demonstration evaluations. Demonstration evaluations will 
include the following:
    (1) Quantitative research methods. (i) These methods involve the 
empirical investigation of the impact of key programmatic features of 
the demonstration.
    (ii) CMS will consider alternative evaluation designs when 
quantitative designs are technically infeasible or not well suited to 
the change made by the demonstration.
    (2) Approaches that minimize beneficiary impact. The evaluation 
process must minimize burden on beneficiaries and protect their privacy 
in terms of implementing and operating the policy approach to be 
demonstrated while ensuring the impact of the demonstration is measured.
    (c) Evaluation design plan. (1) The State will submit and receive 
CMS approval of a design for an evaluation of the demonstration project 
and publish this document to the State's public Web site within 30 days 
of CMS approval.
    (2) The draft demonstration evaluation design must include all of 
the following:
    (i) A discussion of the demonstration hypotheses that are being 
tested including monitoring and reporting on the progress towards the 
expected outcomes.
    (ii) The data that will be utilized and the baseline value for each 
measure.
    (iii) The methods of data collection.
    (iv) A description of how the effects of the demonstration will be 
isolated from those other changes occurring in the State at the same 
time through the use of comparison or control groups to identify the 
impact of significant aspects of the demonstration.

[[Page 54]]

    (v) A proposed date by which a final report on findings from 
evaluation activities conducted under the evaluation plan must be 
submitted to CMS.
    (vi) Any other information pertinent to the State's research on the 
policy operations of the demonstration operations.
    (d) Evaluations for demonstration extensions. (1) In the event that 
the State requests to extend the demonstration beyond the current 
approval period under the authority of section 1115(a), (e), or (f) of 
the Act, the State must submit an interim evaluation report as part of 
the State's request for a subsequent renewal of the demonstration.
    (2) State evaluations must be published on the State's public Web 
site within 30 days of submission to CMS.
    (e) Approved evaluation designs. The State must publish the CMS-
approved demonstration evaluation design on the State's public Web site 
within 30 days of CMS approval.
    (f) Federal evaluations. The State must comply with all requirements 
set forth in this subpart.
    (g) Federal public notice. CMS will post, or provide a link to the 
State's public Web site, all evaluation materials, including research 
and data collection, on its Web site for purposes of sharing findings 
with the public within 30 days of receipt of materials.



Sec.  431.428  Reporting requirements.

    (a) Annual reports. The State must submit an annual report to CMS 
documenting all of the following:
    (1) Any policy or administrative difficulties in the operation of 
the demonstration.
    (2) The status of the health care delivery system under the 
demonstration with respect to issues and/or complaints identified by 
beneficiaries.
    (3) The impact of the demonstration in providing insurance coverage 
to beneficiaries and uninsured populations.
    (4) Outcomes of care, quality of care, cost of care and access to 
care for demonstration populations.
    (5) The results of beneficiary satisfaction surveys, if conducted 
during the reporting year, grievances and appeals.
    (6) The existence or results of any audits, investigations or 
lawsuits that impact the demonstration.
    (7) The financial performance of the demonstration.
    (8) The status of the evaluation and information regarding progress 
in achieving demonstration evaluation criteria.
    (9) Any State legislative developments that may impact the 
demonstration.
    (10) The results/impact of any demonstration programmatic area 
defined by CMS that is unique to the demonstration design or evaluation 
hypothesis.
    (11) A summary of the annual post-award public forum, including all 
public comments received regarding the progress of the demonstration 
project.
    (b) Submitting and publishing annual reports. States must submit a 
draft annual report to CMS no later than 90 days after the end of each 
demonstration year, or as specified in the demonstration's STCs. The 
State must publish its draft annual report on its public Web site within 
30 days of submission to CMS.
    (1) Within 60 days of receipt of comments from CMS, the State must 
submit to CMS the final annual report for the demonstration year.
    (2) The final annual report is to be published on the State's public 
Web site within 30 days of approval by CMS.

Subparts H-L [Reserved]



                 Subpart M_Relations With Other Agencies



Sec.  431.610  Relations with standard-setting and survey agencies.

    (a) Basis and purpose. This section implements--
    (1) Section 1902(a)(9) of the Act, concerning the designation of 
State authorities to be responsible for establishing and maintaining 
health and other standards for institutions participating in Medicaid; 
and
    (2) Section 1902(a)(33) of the Act, concerning the designation of 
the State licensing agency to be responsible for determining whether 
institutions and

[[Page 55]]

agencies meet requirements for participation in the State's Medicaid 
program.
    (3) Section 1919(g)(1)(A) of the Act, concerning responsibilities of 
the State for certifying the compliance of non-State operated NFs with 
requirements of participation in the State's Medicaid program.
    (b) Designated agency responsible for health standards. A State plan 
must designate, as the State authority responsible for establishing and 
maintaining health standards for private or public institutions that 
provide services to Medicaid beneficiaries, the same State agency that 
is used by the Secretary to determine qualifications of institutions and 
suppliers of services to participate in Medicare (see 42 CFR 405.1902). 
The requirement for establishing and maintaining standards does not 
apply with respect to religious nonmedical institutions as defined in 
Sec.  440.170(b) of this chapter.
    (c) Designated agency responsible for standards other than health 
standards. The plan must designate the Medicaid agency or other 
appropriate State authority or authorities to be responsible for 
establishing and maintaining standards, other than those relating to 
health, for private or public institutions that provide services to 
Medicaid beneficiaries.
    (d) Description and retention of standards. (1) The plan must 
describe the standards established under paragraphs (b) and (c) of this 
section.
    (2) The plan must provide that the Medicaid agency keeps these 
standards on file and makes them available to the Administrator upon 
request.
    (e) Designation of survey agency. The plan must provide that--
    (1) The agency designated in paragraph (b) of this section, or 
another State agency responsible for licensing health institutions in 
the State, determines for the Medicaid agency whether institutions and 
agencies meet the requirements for participation in the Medicaid 
program; and
    (2) The agency staff making the determination under paragraph (e)(1) 
of this section is the same staff responsible for making similar 
determinations for institutions or agencies participating under 
Medicare; and
    (3) The agency designated in paragraph (e)(1) of this section makes 
recommendations regarding the effective dates of provider agreements, as 
determined underSec. 431.108.
    (f) Written agreement required. The plan must provide for a written 
agreement (or formal written intra-agency arrangement) between the 
Medicaid agency and the survey agency designated under paragraph (e) of 
this section, covering the activities of the survey agency in carrying 
out its responsibilities. The agreement must specify that--
    (1) Federal requirements and the forms, methods and procedures that 
the Administrator designates will be used to determine provider 
eligibility and certification under Medicaid;
    (2) Inspectors surveying the premises of a provider will--
    (i) Complete inspection reports;
    (ii) Note on completed reports whether or not each requirement for 
which an inspection is made is satisfied; and
    (iii) Document deficiencies in reports;
    (3) The survey agency will keep on file all information and reports 
used in determining whether participating facilities meet Federal 
requirements; and
    (4) The survey agency will make the information and reports required 
under paragraph (f)(3) of this section readily accessible to HHS and the 
Medicaid agency as necessary--
    (i) For meeting other requirements under the plan; and
    (ii) For purposes consistent with the Medicaid agency's effective 
administration of the program.
    (g) Responsibilities of survey agency. The plan must provide that, 
in certifying NFs and ICFs/IID, the survey agency designated under 
paragraph (e) of this section will--
    (1) Review and evaluate medical and independent professional review 
team reports obtained under part 456 of this subchapter as they relate 
to health and safety requirements;
    (2) Have qualified personnel perform on-site inspections 
periodically as appropriate based on the timeframes in the correction 
plan and--
    (i) At least once during each certification period or more 
frequently if there is a compliance question; and

[[Page 56]]

    (ii) For non-State operated NFs, within the timeframes specified in 
Sec.  488.308 of this chapter.
    (3) Have qualified personnel perform on-site inspections--
    (i) At least once during each certification period or more 
frequently if there is a compliance question; and
    (ii) For intermediate care facilities with deficiencies as described 
in Sec.Sec. 442.112 and 442.113 of this subchapter, within 6 months 
after initial correction plan approval and every 6 months thereafter as 
required under those sections.
    (h) FFP for survey responsibilities. (1) FFP is available in 
expenditures that the survey agency makes to carry out its survey and 
certification responsibilities under the agreement specified in 
paragraph (f) of this section.
    (2) FFP is not available in any expenditures that the survey agency 
makes that are attributable to the State's overall responsibilities 
under State law and regulations for establishing and maintaining 
standards.

[43 FR 45188, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 
53 FR 20494, June 3, 1988; 57 FR 43923, Sept. 23, 1992; 59 FR 56233, 
Nov. 10, 1994; 62 FR 43936, Aug. 18, 1997; 64 FR 67052, Nov. 30, 1999]



Sec.  431.615  Relations with State health and vocational
rehabilitation agencies and title V grantees.

    (a) Basis and purpose. This section implements section 1902(a)(11) 
and (22)(C) of the Act, by setting forth State plan requirements for 
arrangements and agreements between the Medicaid agency and--
    (1) State health agencies;
    (2) State vocational rehabilitation agencies; and
    (3) Grantees under title V of the Act, Maternal and Child Health and 
Crippled Children's Services.
    (b) Definitions. For purposes of this section--
    ``Title V grantee'' means the agency, institution, or organization 
receiving Federal payments for part or all of the cost of any service 
program or project authorized by title V of the Act, including--
    (1) Maternal and child health services;
    (2) Crippled children's services;
    (3) Maternal and infant care projects;
    (4) Children and youth projects; and
    (5) Projects for the dental health of children.
    (c) State plan requirements. A state plan must--
    (1) Describe cooperative arrangements with the State agencies that 
administer, or supervise the administration of, health services and 
vocational rehabilitation services designed to make maximum use of these 
services;
    (2) Provide for arrangements with title V grantees, under which the 
Medicaid agency will utilize the grantee to furnish services that are 
included in the State plan;
    (3) Provide that all arrangements under this section meet the 
requirements of paragraph (d) of this section; and
    (4) Provide, if requested by the title V grantee in accordance with 
the arrangements made under this section, that the Medicaid agency 
reimburse the grantee or the provider for the cost of services furnished 
beneficiaries by or through the grantee.
    (d) Content of arrangements. The arrangements referred to in 
paragraph (c) must specify, as appropriate--
    (1) The mutual objectives and responsibilities or each party to the 
arrangement;
    (2) The services each party offers and in what circumstances;
    (3) The cooperative and collaborative relationships at the State 
level;
    (4) The kinds of services to be provided by local agencies; and
    (5) Methods for--
    (i) Early identification of individuals under 21 in need of medical 
or remedial services;
    (ii) Reciprocal referrals;
    (iii) Coordinating plans for health services provided or arranged 
for beneficiaries;
    (iv) Payment or reimbursement;
    (v) Exchange of reports of services furnished to beneficiaries;
    (vi) Periodic review and joint planning for changes in the 
agreements;
    (vii) Continuous liaison between the parties, including designation 
of State and local liaison staff; and
    (viii) Joint evaluation of policies that affect the cooperative work 
of the parties.

[[Page 57]]

    (e) Federal financial participation. FFP is available in 
expenditures for Medicaid services provided to beneficiaries through an 
arrangement under this section.



Sec.  431.620  Agreement with State mental health authority or mental
institutions.

    (a) Basis and purpose. This section implements section 
1902(a)(20)(A) of the Act, for States offering Medicaid services in 
institutions for mental diseases for beneficiaries aged 65 or older, by 
specifying the terms of the agreement those States must have with other 
State authorities and institutions. (See part 441, subpart C of this 
chapter for regulations implementing section 1902(a)(20) (B) and (C).)
    (b) Definition. For purposes of this section, an ``institution for 
mental diseases'' means an institution primarily engaged in providing 
diagnosis, treatment, or care of persons with mental diseases. This 
includes medical attention, nursing care, and related services.
    (c) State plan requirement. A State plan that includes Medicaid for 
persons aged 65 or older in institutions for mental diseases must 
provide that the Medicaid agency has in effect a written agreement 
with--
    (1) The State authority or authorities concerned with mental 
diseases; and
    (2) Any institution for mental diseases that is not under the 
jurisdiction of those State authorities, and that provides services 
under Medicaid to beneficiaries aged 65 or older.
    (d) Provisions required in an agreement. The agreement must specify 
the respective responsibilities of the agency and the authority or 
institution, including arrangements for--
    (1) Joint planning between the parties to the agreement;
    (2) Development of alternative methods of care;
    (3) Immediate readmission to an institution when needed by a 
beneficiary who is in alternative care;
    (4) Access by the agency to the institution, the beneficiary, and 
the beneficiary's records when necessary to carry out the agency's 
responsibilities;
    (5) Recording, reporting, and exchanging medical and social 
information about beneficiaries; and
    (6) Other procedures needed to carry out the agreement.

[44 FR 17935, Mar. 23, 1979]



Sec.  431.621  State requirements with respect to nursing facilities.

    (a) Basis and purpose. This section implements sections 
1919(b)(3)(F) and 1919(e)(7) of the Act by specifying the terms of the 
agreement the State must have with the State mental health and 
Intellectual Disability authorities concerning the operation of the 
State's preadmission screening and annual resident review (PASARR) 
program.
    (b) State plan requirement. The State plan must provide that the 
Medicaid agency has in effect a written agreement with the State mental 
health and Intellectual Disability authorities that meets the 
requirements specified in paragraph (c) of this section.
    (c) Provisions required in an agreement. The agreement must specify 
the respective responsibilities of the agency and the State mental 
health and Intellectual Disability authorities, including arrangements 
for--(1) Joint planning between the parties to the agreement;
    (2) Access by the agency to the State mental health and Intellectual 
Disability authorities' records when necessary to carry out the agency's 
responsibilities;
    (3) Recording, reporting, and exchanging medical and social 
information about individuals subject to PASARR;
    (4) Ensuring that preadmission screenings and annual resident 
reviews are performed timely in accordance with Sec.Sec. 483.112(c) 
and 483.114(c) of this part;
    (5) Ensuring that, if the State mental health and Intellectual 
Disability authorities delegate their respective responsibilities, these 
delegations comply withSec. 483.106(e) of this part;
    (6) Ensuring that PASARR determinations made by the State mental 
health and Intellectual Disability authorities are not countermanded by 
the State Medicaid agency, except through the appeals process, but that 
the State

[[Page 58]]

mental health and Intellectual Disability authorities do not use 
criteria which are inconsistent with those adopted by the State Medicaid 
agency under its approved State plan;
    (7) Designating the independent person or entity who performs the 
PASARR evaluations for individuals with MI; and
    (8) Ensuring that all requirements of Sec.Sec. 483.100 through 
483.136 are met.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec.  431.625  Coordination of Medicaid with Medicare part B.

    (a) Basis and purpose. (1) Section 1843(a) of the Act requires the 
Secretary to have entered into an agreement with any State that 
requested that agreement before January 1, 1970, or during calendar year 
1981, under which the State could enroll certain Medicare-eligible 
beneficiaries under Medicare Part B and agree to pay their premiums.
    (2) Section 1902(a)(10) of the Act (in clause (II) following 
subparagraph (D)), allows the State to pay the premium, deductibles, 
cost sharing, and other charges for beneficiaries enrolled under 
Medicare Part B without obligating itself to provide the range of Part B 
benefits to other beneficiaries; and
    (3) Section 1903 (a)(1) and (b) of the Act authorizes FFP for State 
payment of Medicare Part B premiums for certain beneficiaries.
    (4) This section--
    (i) Specifies the exception, relating to Part B coverage, from the 
requirement to provide comparable services to all beneficiaries; and
    (ii) Prescribes FFP rules concerning State payment for Medicare 
premiums and for services that could have been covered under Medicare.
    (5) Section 1902(a)(15) of the Act requires that if a State chooses 
to pay only a portion of deductibles, cost sharing or other charges for 
beneficiaries enrolled under Medicare Part B, the portion that is to be 
paid by a Medicaid beneficiary must be reasonably related to the 
beneficiary's income and resources.
    (b) Exception from obligation to provide comparable services; State 
plan requirement. (1) The State's payment of premiums, deductibles, cost 
sharing, or similar charges under Part B does not obligate it to provide 
the full range of Part B services to beneficiaries not covered by 
Medicare.
    (2) The State plan must specify this exception if it applies.
    (c) Effect of payment of premiums on State liability for cost 
sharing. (1) State payment of Part B premiums on behalf of a Medicaid 
beneficiary does not obligate it to pay on the beneficiary's behalf the 
Part B deductible and coinsurance amounts for those Medicare Part B 
services not covered in the Medicaid State plan.
    (2) If a State pays on a beneficiary's behalf any portion of the 
deductible or cost sharing amounts under Medicare Part B, the portion 
paid by a State must be reasonably related to the beneficiary's income 
and resources.
    (d) Federal financial participation: Medicare Part B premiums--(1) 
Basic rule. Except as provided in paragraph (d)(2) of this section, FFP 
is not available in State expenditures for Medicare Part B premiums for 
Medicaid beneficiaries unless the beneficiaries receive money payments 
under title I, IV-A, X, XIV, XVI (AABD or SSI) of the Act, or State 
supplements as permitted under section 1616(a) of the Act, or as 
required by section 212 of Pub. L. 93-66.
    (2) Exception. FFP is available in expenditures for Medicare Part B 
premiums for the following groups:
    (i) AFDC families required to be covered under Sec.Sec. 435.112 
and 436.116 of this subchapter, those eligible for continued Medicaid 
coverage despite increased income from employment;
    (ii) Beneficiaries required to be covered under Sec.Sec. 435.114, 
435.134, and 436.112 of this subchapter, those eligible for continued 
Medicaid coverage despite increased income from monthly insurance 
benefits under title II of the Act;
    (iii) Beneficiaries required to be covered underSec. 435.135 of 
this subchapter, those eligible for continued Medicaid coverage despite 
increased income from cost-of-living increases under title II of the 
Act;
    (iv) Beneficiaries of foster care maintenance payments or adoption 
assistance payments who, under Part E of

[[Page 59]]

title IV of the Act are considered as receiving AFDC;
    (v) Individuals required to be covered underSec. 435.120 of this 
chapter, that is, blind or disabled individuals who, under section 
1619(b) of the Act, are considered to be receiving SSI;
    (vi) Individuals who, in accordance with Sec.Sec. 435.115 and 
436.114 of this chapter are, for purposes of Medicaid eligibility, 
considered to be receiving AFDC. These are participants in a work 
supplementation program, or individuals denied AFDC because the payment 
would be less than $10;
    (vii) Certain beneficiaries of Veterans Administration pensions 
during the limited time they are, under section 310(b) of Pub. L. 96-
272, considered as receiving SSI, mandatory State supplements, or AFDC;
    (viii) Disabled children living at home to whom the State provides 
Medicaid under section 1902(e)(3) of the Act;
    (ix) Individuals who become ineligible for AFDC because of the 
collection or increased collection of child or spousal support, but, in 
accordance with section 406(h) of the Act, remain eligible for Medicaid 
for four more months; and
    (x) Individuals who become ineligible for AFDC because they are no 
longer eligible for the disregard of earnings of $30 or of $30 plus one-
third of the remainder, but, in accordance with section 402(a)(37) of 
the Act, are considered as receiving AFDC for a period of 9 to 15 
months.
    (3) No FFP is available in State Medicaid expenditures that could 
have been paid for under Medicare Part B but were not because the person 
was not enrolled in Part B. This limit applies to all beneficiaries 
eligible for enrollment under Part B, whether individually or through an 
agreement under section 1843(a) of the Act. However, FFP is available in 
expenditures required by Sec.Sec. 435.914 and 436.901 of this 
subchapter for retroactive coverage of beneficiaries.

[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979; 
52 FR 47933, Dec. 17, 1987; 53 FR 657, Jan. 11, 1988]



Sec.  431.630  Coordination of Medicaid with QIOs.

    (a) The State plan may provide for the review of Medicaid services 
through a contract with a QIO designated under Part 462 of this chapter. 
Medicaid requirements for medical and utilization review are deemed to 
be met for those services or providers subject to review under the 
contract.
    (b) The State plan must provide that the contract with the QIO--
    (1) Meets the requirements ofSec. 434.6(a) of this part;
    (2) Includes a monitoring and evaluation plan by which the State 
ensures satisfactory performance by the QIO;
    (3) Identifies the services and providers subject to QIO review;
    (4) Ensures that the review activities performed by the QIO are not 
inconsistent with QIO review activities of Medicare services and 
includes a description of whether and to what extent QIO determinations 
will be considered conclusive for Medicaid payment purposes.

[50 FR 15327, Apr. 17, 1985]



Sec.  431.635  Coordination of Medicaid with Special Supplemental Food
Program for Women, Infants, and Children (WIC).

    (a) Basis. This section implements sections 1902(a)(11)(C) and 
1902(a) (53) of the Act, which provide for coordination of Medicaid with 
the Special Supplemental Food Program for Women, Infants, and Children 
(WIC) under section 17 of the Child Nutrition Act of 1966.
    (b) Definitions. As used in this section, the terms breastfeeding 
women, postpartum women, and pregnant women mean women as defined in 
section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786(b)).
    (c) State plan requirements. A State Plan must provide for--
    (1) Coordinating operation of the Medicaid program with the State's 
operation of the Special Supplemental Food Program for Women, Infants, 
and Children;
    (2) Providing timely written notice of the availability of WIC 
benefits to all individuals in the State who are determined to be 
eligible (including presumptively eligible) for Medicaid and who are:

[[Page 60]]

    (i) Pregnant women;
    (ii) Postpartum women;
    (iii) Breastfeeding women; and
    (iv) Children under the age of 5.
    (3) Referring individuals described under paragraphs (c)(2) (i) 
through (iv) of this section to the local agency responsible for 
administering the WIC program.
    (d) Notification requirements. (1) The agency must give the written 
notice required under paragraph (c) of this section as soon as the 
agency identifies the individual (e.g., at the time of an eligibility 
determination for Medicaid) or immediately thereafter (e.g., at the time 
of notice of eligibility).
    (2) The agency, no less frequently than annually, must also provide 
written notice of the availability of WIC benefits, including the 
location and telephone number of the local WIC agency or instructions 
for obtaining further information about the WIC program, to all Medicaid 
beneficiaries (including those found to be presumptively eligible) who 
are under age 5 or who are women who might be pregnant, postpartum, or 
breastfeeding as described in paragraphs (c)(2) (i) through (iv) of this 
section.
    (3) The agency must effectively inform those individuals who are 
blind or deaf or who cannot read or understand the English language.

[57 FR 28103, June 24, 1992]



   Subpart N_State Programs for Licensing Nursing Home Administrators



Sec.  431.700  Basis and purpose.

    This subpart implements sections 1903(a)(29) and 1908 of the Act 
which require that the State plan include a State program for licensing 
nursing home administrators.



Sec.  431.701  Definitions.

    Unless otherwise indicated, the following definitions apply for 
purposes of this subpart:
    Agency means the State agency responsible for licensing individual 
practitioners under the State's healing arts licensing act.
    Board means an appointed State board established to carry out a 
State program for licensing administrators of nursing homes, in a State 
that does not have a healing arts licensing act or an agency as defined 
in this section.
    Licensed means certified by a State agency or board as meeting all 
of the requirements for a licensed nursing home administrator specified 
in this subpart.
    Nursing home means any institution, facility, or distinct part of a 
hospital that is licensed or formally recognized as meeting nursing home 
standards established under State law, or that is determined underSec. 
431.704 to be included under the requirements of this subpart. The term 
does not include--
    (a) A religious nonmedical institution as defined inSec. 
440.170(b) of this chapter; or
    (b) A distinct part of a hospital, if the hospital meets the 
definition inSec. 440.10 orSec. 440.140 of this subchapter, and the 
distinct part is not licensed separately or formally approved as a 
nursing home by the State even though it is designated or certified as a 
skilled nursing facility.
    Nursing home administrator means any person who is in charge of the 
general administration of a nursing home whether or not the person--
    (a) Has an ownership interest in the home; or
    (b) Shares his functions and duties with one or more other persons.

[43 FR 45188, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]



Sec.  431.702  State plan requirement.

    A State plan must provide that the State has a program for licensing 
administrators of nursing homes that meets the requirements of 
Sec.Sec. 431.703 through 431.713 of this subpart.



Sec.  431.703  Licensing requirement.

    The State licensing program must provide that only nursing homes 
supervised by an administrator licensed in accordance with the 
requirements of this subpart may operate in the State.



Sec.  431.704  Nursing homes designated by other terms.

    If a State licensing law does not use the term ``nursing home,'' the 
CMS Administrator will determine the term or terms equivalent to 
``nursing home''

[[Page 61]]

for purposes of applying the requirements of this subpart. To obtain 
this determination, the Medicaid agency must submit to the Regional 
Medicaid Director copies of current State laws that define institutional 
health care facilities for licensing purposes.



Sec.  431.705  Licensing authority.

    (a) The State licensing program must provide for licensing of 
nursing home administrators by--
    (1) The agency designated under the healing arts act of the State; 
or
    (2) A State licensing board.
    (b) The State agency or board must perform the functions and duties 
specified in Sec.Sec. 431.707 through 431.713 and the board must meet 
the membership requirements specified inSec. 431.706 of this subpart.



Sec.  431.706  Composition of licensing board.

    (a) The board must be composed of persons representing professions 
and institutions concerned with the care and treatment of chronically 
ill or infirm elderly patients. However--
    (1) A majority of the board members may not be representative of a 
single profession or category of institution; and
    (2) Members not representative of institutions may not have a direct 
financial interest in any nursing home.
    (b) For purposes of this section, nursing home administrators are 
considered representatives of institutions.



Sec.  431.707  Standards.

    (a) The agency or board must develop, impose, and enforce standards 
that must be met by individuals in order to be licensed as a nursing 
home administrator.
    (b) The standards must be designed to insure that nursing home 
administrators are--
    (1) Of good character;
    (2) Otherwise suitable; and
    (3) Qualified to serve because of training or experience in 
institutional administration.



Sec.  431.708  Procedures for applying standards.

    The agency or board must develop and apply appropriate procedures 
and techniques, including examinations and investigations, for 
determining if a person meets the licensing standards.



Sec.  431.709  Issuance and revocation of license.

    Except as provided inSec. 431.714 of this subpart, the agency or 
board must--
    (a) Issue licenses to persons who meet the agency's or board's 
standards; and
    (b) Revoke or suspend a license if the agency or board determines 
that the person holding the license substantially fails to meet the 
standards.



Sec.  431.710  Provisional licenses.

    To fill a position of nursing home administrator that unexpectedly 
becomes vacant, the agency or board may issue one provisional license, 
for a single period not to exceed 6 months. The license may be issued to 
a person who does not meet all of the licensing requirements established 
underSec. 431.707 but who--
    (a) Is of good character and otherwise suitable; and
    (b) Meets any other standards established for provisional licensure 
by the agency or board.



Sec.  431.711  Compliance with standards.

    The agency or board must establish and carry out procedures to 
insure that licensed administrators comply with the standards in this 
subpart when they serve as nursing home administrators.



Sec.  431.712  Failure to comply with standards.

    The agency or board must investigate and act on all complaints it 
receives of violations of standards.



Sec.  431.713  Continuing study and investigation.

    The agency or board must conduct a continuing study of nursing homes 
and administrators within the State to improve--
    (a) Licensing standards; and
    (b) The procedures and methods for enforcing the standards.



Sec.  431.714  Waivers.

    The agency or board may waive any standards developed underSec. 
431.707 of

[[Page 62]]

this subpart for any person who has served in the capacity of a nursing 
home administrator during all of the 3 calendar years immediately 
preceding the calendar year in which the State first meets the 
requirements in this subpart.



Sec.  431.715  Federal financial participation.

    No FFP is available in expenditures by the licensing board for 
establishing and maintaining standards for the licensing of nursing home 
administrators.

Subpart O [Reserved]



                        Subpart P_Quality Control

                           General Provisions

    Source: Sections 431.800 through 431.808 appear at 55 FR 22166, May 
31, 1990, unless otherwise noted.



Sec.  431.800  Scope of subpart.

    This subpart--
    (a) Establishes State plan requirements for a Medicaid eligibility 
quality control (MEQC) program designed to reduce erroneous expenditures 
by monitoring eligibility determinations and a claims processing 
assessment system that monitors claims processing operations.
    (b) Establishes rules and procedures for disallowing Federal 
financial participation (FFP) in erroneous Medicaid payments due to 
eligibility and beneficiary liability errors as detected through the 
MEQC program.



Sec.  431.802  Basis.

    This subpart implements the following sections of the Act, which 
establish requirements for State plans and for payment of Federal 
financial participation (FFP) to States:

    1902(a)(4) Administrative methods for proper and efficient operation 
of the State plan.
    1903(u) Limitation of FFP for erroneous medical assistance 
expenditures.



Sec.  431.804  Definitions.

    As used in this subpart--
    Active case means an individual or family determined to be currently 
authorized as eligible for Medicaid by the agency.
    Administrative period means the period of time recognized by the 
MEQC program for State agencies to reflect changes in case 
circumstances, i.e., a change in a common program area, during which no 
case error based on the circumstance change would be cited. This period 
consists of the review month and the month prior to the review month.
    Claims processing error means FFP has been claimed for a Medicaid 
payment that was made--
    (1) For a service not authorized under the State plan;
    (2) To a provider not certified for participation in the Medicaid 
program;
    (3) For a service already paid for by Medicaid; or
    (4) In an amount above the allowable reimbursement level for that 
service.
    Eligibility error means that Medicaid coverage has been authorized 
or payment has been made for a beneficiary or family under review who--
    (1) Was ineligible when authorized or when he received services; or
    (2) Was eligible for Medicaid but was ineligible for certain 
services he received; or
    (3) Had not met beneficiary liability requirements when authorized 
eligible for Medicaid; that is, he had not incurred medical expenses 
equal to the amount of his excess income over the State's financial 
eligibility level or he had incurred medical expenses that exceeded the 
amount of excess income over the State's financial eligibility level, or 
was making an incorrect amount of payment toward the cost of services.
    Negative case action means an action that was taken to deny or 
otherwise dispose of a Medicaid application without a determination of 
eligibility (for instance, because the application was withdrawn or 
abandoned) or an action to deny, suspend, or terminate an individual or 
family.
    State agency means either the State Medicaid agency or a State 
agency that is responsible for determining eligibility for Medicaid.

[[Page 63]]



Sec.  431.806  State plan requirements.

    (a) MEQC program. A State plan must provide for operating a Medicaid 
eligibility quality control program that meets the requirements of 
Sec.Sec. 431.810 through 431.822 of this subpart.
    (b) Use of PERM data. A State plan must provide for operating a 
Medicaid eligibility quality control program that is in accordance with 
Sec.  431.978 throughSec. 431.988 of this part to meet the 
requirements ofSec. 431.810 throughSec. 431.822 of this subpart when 
a State is in their PERM year.
    (c) Claims processing assessment system. Except in a State that has 
an approved Medicaid Management Information System (MMIS) under subpart 
C of part 433 of this subchapter, a State plan must provide for 
operating a Medicaid quality control claims processing assessment system 
that meets the requirements of Sec.Sec. 431.830 through 431.836 of 
this subpart.

[55 FR 22166, May 31, 1990, as amended at 75 FR 48847, Aug. 11, 2010]



Sec.  431.808  Protection of beneficiary rights.

    Any individual performing activities under the MEQC program or the 
claims processing assessment system specified in this subpart must do so 
in a manner that is consistent with the provisions of Sec.Sec. 435.902 
and 436.901 of this subchapter concerning the rights of beneficiaries.

           Medicaid Eligibility Quality Control (MEQC) Program

    Source: Sections 431.810 through 431.822 appear at 55 FR 22167, May 
31, 1990, unless otherwise noted.



Sec.  431.810  Basic elements of the Medicaid eligibility quality 
control (MEQC) program.

    (a) General requirements. The agency must operate the MEQC program 
in accordance with this section and Sec.Sec. 431.812 through 431.822 
and other instructions established by CMS.
    (b) Review requirements. The agency must conduct MEQC reviews in 
accordance with the requirements specified inSec. 431.812 and other 
instructions established by CMS.
    (c) Sampling requirements. The agency must conduct MEQC sampling in 
accordance with the requirements specified inSec. 431.814 and other 
instructions established by CMS.



Sec.  431.812  Review procedures.

    (a) Active case reviews. (1) Except as provided in paragraph (a)(2) 
of this section, the agency must review all active cases selected from 
the State agency's lists of cases authorized eligible for the review 
month, to determine if the cases were eligible for services during all 
or part of the month under review, and, if appropriate, whether the 
proper amount of beneficiary liability was computed.
    (2) The agency is not required to conduct reviews of the following 
cases:
    (i) Supplemental Security Income (SSI) beneficiary cases in States 
with contracts under section 1634 of the Act for determining Medicaid 
eligibility.
    (ii) Foster care and adoption assistance cases under title IV-E of 
the Act found eligible for Medicaid.
    (iii) Cases under programs that are 100 percent federally funded.
    (b) Negative case reviews. Except as provided in paragraph (c) of 
this section, or unless a State is utilizing an approved sampling plan 
to conduct negative case action reviews underSec. 431.978(a) andSec. 
431.980(b), the agency must review those negative cases selected from 
the State agency's list of cases that are denied, suspended, or 
terminated in the review month to determine if the reason for the 
denial, suspension, or termination was correct and if requirements for 
timely notice of negative action were met. A State's negative case 
sample size is determined on the basis of the number of negative case 
actions in the universe.
    (iv) Individuals whose eligibility was determined under a State's 
option under section 1902(e)(13) of the Act.
    (c) Alternate systems of negative case reviews--(1) Basic provision. 
A State may be exempt from the negative case review requirements 
specified in paragraphs (b) and (e)(2) of this section and inSec. 
431.814(d) upon CMS's approval of a plan for the use of a superior 
system.
    (2) Submittal of plan for alternate system. An agency must submit 
its plan for the use of a superior system to CMS

[[Page 64]]

for approval at least 60 days before the beginning of the review period 
in which it is to be implemented. If a plan is unchanged from a previous 
period, the agency is not required to resubmit it.

The agency must receive approval for a plan before it can be 
implemented.
    (3) Requirement for alternate system. To be approved, the State's 
plan must--
    (i) Clearly define the purpose of the system and demonstrate how the 
system is superior to the current negative case review requirements.
    (ii) Contain a methodology for identifying significant problem areas 
that could result in erroneous denials, suspensions, and terminations of 
applicants and beneficiaries. Problem areas selected for review must 
contain at least as many applicants and beneficiaries as were included 
in the negative case sample size previously required for the State.
    (iii) Provide a detailed methodology describing how the extent of 
the problem area will be measured through sampling and review 
procedures, the findings expected from the review, and planned 
corrective actions to resolve the problem.
    (iv) Include documentation supporting the use of the system 
methodology. Documentation must include the timeframes under which the 
system will be operated.
    (v) Provide a superior means of monitoring denials, terminations, 
and suspensions than that required under paragraph (b) of this section.
    (vi) Provide a statistically valid error rate that can be projected 
to the universe that is being studied.
    (d) Reviews for erroneous payments. The agency must review all 
claims for services furnished during the review month and paid within 4 
months of the review month to all members of each active case related in 
the sample to identify erroneous payments resulting from--
    (1) Ineligibility for Medicaid;
    (2) Ineligibility for certain Medicaid services; and
    (3) beneficiary understated or overstated liability.
    (e) Reviews for verification of eligibility status. The agency must 
collect and verify all information necessary to determine the 
eligibility status of each individual included in an active case 
selected in the sample as of the review month and whether Medicaid 
payments were for services which the individual was eligible to receive.

The agency must apply the administrative period described inSec. 
431.804 when considering the case circumstances and the case 
correctness. In order to verify eligibility information, the agency 
must--
    (1) Examine and analyze each case record for all cases under review 
to establish what information is available for use in determining 
eligibility in the review month;
    (2) Conduct field investigations including in-person beneficiary 
interviews for each case in the active case sample, and conduct in-
person interviews only when the correctness of the agency action cannot 
be determined by review of the case record with beneficiaries for cases 
in the negative case action sample (unless this is otherwise addressed 
in a superior system provided for in paragraph (c)(1) of this section);
    (3) Verify all appropriate elements of eligibility for active cases 
through at least one primary source of evidence or two secondary sources 
of evidence as defined by CMS by documentation or by collateral contacts 
as required, or both, and fully record the information on the 
appropriate forms;
    (4) Determine the basis on which eligibility was established and the 
eligibility status of the active case and each case member;
    (5) Collect copies of State paid claims or beneficiary profiles for 
services delivered during the review month and, if indicated, any months 
prior to the review month in the agency's selected spenddown period, for 
all members of the active case under review;
    (6) Associate dollar values with eligibility status for each active 
case under review; and
    (7) Complete the payment, case, and review information for all 
individuals in the active case under review on the appropriate forms.
    (f) Substitution of PERM data.
    (1) A State in its Payment Error Rate Measurement (PERM) year may 
elect to substitute the random sample of selected cases, eligibility 
review

[[Page 65]]

findings, and payment review findings obtained through PERM reviews 
conducted in accordance withSec. 431.978 throughSec. 431.988 of this 
part for data required in this section, if the only exclusions are those 
set forth inSec. 431.978(d)(1) of this part.
    (2) PERM cases cited as undetermined may be dropped when calculating 
MEQC error rates if reasons for drops are acceptable reasons listed in 
the State Medicaid Manual.

[55 FR 22167, May 31, 1990, as amended at 72 FR 50513, Aug. 31, 2007; 75 
FR 48847, Aug. 11, 2010]



Sec.  431.814  Sampling plan and procedures.

    (a) Plan approval. The agency must submit a basic MEQC sampling plan 
(or revisions to a current plan) that meets the requirements of this 
section to the appropriate CMS regional office for approval at least 60 
days before the beginning of the review period in which it is to be 
implemented. If a plan is unchanged from a previous period, the agency 
is not required to resubmit the entire plan. Universe estimates and 
sampling intervals are required 2 weeks before the first monthly sample 
selection for each review period. The agency must receive approval for a 
plan before it can be implemented.
    (b) Plan requirements. The agency must have an approved sampling 
plan in effect for the full 6-month sampling period that includes the 
following:
    (1) The population to be sampled;
    (2) The list(s) from which the sample is selected and the following 
characteristics of the list(s):
    (i) Sources;
    (ii) All types of cases in the selection lists;
    (iii) Accuracy and completeness of sample lists in reference to the 
population(s) of interest;
    (iv) Whether or not the selection list was constructed by combining 
more than one list;
    (v) The form of the selection list (whether the list or part of the 
list is automated);
    (vi) Frequency and length of delays in updating the selection lists 
or their sources;
    (vii) Number of items on the lists and proportion of listed-in-error 
items:
    (viii) Methods of deleting unwanted items from the selection lists; 
and
    (ix) Structure of the selection lists.
    (3) The sample size, including the minimum number of reviews to be 
completed and the expected number of cases to be selected. Minimum 
sample sizes are based on the State's relative level of Medicaid annual 
expenditures for services for active cases, and on the total number of 
negative case actions in the universe for negative cases. When the 
sample is substratified, there can be no fewer than 75 cases in each 
substratum, except as provided in paragraph (c) of this section or as 
provided in an exception documented in an approved sampling plan which 
contains a statement accepting the precision and reliability of the 
reduced sample.
    (4) The sample selection procedure. Systematic random sampling is 
recommended. Alternative procedures must provide a representative 
sample, conform to principles of probability sampling, and yield 
estimates with the same or better precision than achieved in systematic 
random sampling.
    (5) Procedures used to identify amounts paid for services received 
in the review month.
    (6) Specification as to whether the agency chooses to--
    (i) Use billed amounts to offset beneficiary liability toward cost 
of care (No indication will be interpreted to mean that the agency will 
use paid claims); and
    (ii) Use denied claims to offset beneficiary liability toward cost 
of care in the payment review. (No indication will be interpreted to 
mean denied claims will not be used.)
    (7) Indication of whether the agency opts to drop or complete cases 
selected more than once in a sample period. (No indication will be 
interpreted to mean that the agency will complete cases selected more 
than once.)
    (c) Eligibility universe--active cases. The MEQC universe for active 
cases must be divided into two strata, the Aid to Families with 
Dependent Children (AFDC) stratum and the Medical Assistance Only (MAO) 
stratum.
    (1) All States must use the AFDC quality control sample for the AFDC 
stratum.

[[Page 66]]

    (2) States must include in the MAO stratum all cases certified as 
eligible for Medicaid that are not in the AFDC stratum, excluding 
individuals specified in paragraph (c)(4) of this section.
    (3) States that do not have an agreement with the Social Security 
Administration under section 1634 of the Act and do not have more 
restrictive eligibility criteria under section 1902(f) of the Act but 
require a separate Medicaid application for beneficiaries of SSI and 
determine Medicaid eligibility using SSI criteria must divide the MAO 
stratum into two substrata: MAO cases and SSI cash cases for the first 
review period beginning after July 1, 1990 and for review periods 
thereafter. The SSI substratum sample size must be 75 cases or one-half 
of the total MAO sample, whichever is smaller. The non-SSI MAO 
substratum sample will be the remainder of the MAO stratum cases.

States may be exempt from this requirement when implementing an approved 
sampling option that does not accommodate this stratification method.
    (4) States must exclude from the MEQC universe all of the following:
    (i) SSI beneficiaries whose eligibility determinations were made 
exclusively by the Social Security Administration under an agreement 
under section 1634 of the Act.
    (ii) Individuals in foster care or receiving adoption assistance 
whose eligibility is determined under Title IV-E of the Act.
    (iii) Individuals receiving Medicaid under programs that are 100 
percent Federally-funded.
    (iv) Individuals whose eligibility was determined under a State's 
option for Express Lane Eligibility under section 1902(e)(13) of the 
Act.
    (d) Eligibility universe--negative cases. Unless the agency has an 
approved superior system underSec. 431.812(c) that provides otherwise, 
the universe for negative Medicaid eligibility cases must consist of all 
denied applications, suspensions, and terminations occurring during the 
review month except transfers between counties without any break in 
eligibility, cases in which eligibility is exclusively determined by SSA 
under a section 1634 contract, cases determined eligible for foster care 
and adoption assistance under title IV-E of the Act, and cases under 
programs that are 100 percent federally funded.
    (e) Sampling procedures. The agency must document all sampling 
procedures used by the State agency, including 98 percent accuracy of 
program identifier codes used in the sampling frame to separate listed-
in-error cases from those in the population of interest, must make them 
available for review by CMS, and must be able to demonstrate the 
integrity of its sampling procedures in accordance with this section.
    (f) Sampling periods. The agency must use 6-month sampling periods, 
from April through September and from October through March.
    (g) Statistical samples. The agency must select statistically valid 
samples of both active and negative case actions.
    (h) Sample selection lists. The agency must submit to CMS monthly a 
list of cases selected in the sample to be reviewed, after the State's 
sample selection and before commencing MEQC reviews on the cases in the 
sample.
    (i) Universe estimates and sampling intervals. The agency must 
submit detailed universe estimates and sampling intervals to CMS for 
approval at least 2 weeks before the first sample selection of the 
review period if the estimates differ from the previous period. The 
sampling intervals must be used continuously throughout the sampling 
period unless otherwise specified in an approved sampling plan. Final 
universe counts based on the actual sampling universe must be determined 
and reported to CMS for each stratum/substratum designated in the 
sampling plan.

The agency also must submit universe counts for cases eligible for 
foster care and adoption assistance under title IV-E of the Act, and, 
for States with an agreement under section 1634 of the Act, for cases 
found eligible by the Social Security Administration.
    (j) Sample size and methodology options. The agency may select a 
sample size in accordance with the minimum established under paragraph 
(b)(3) of

[[Page 67]]

this section or use one of the methodologies specified in paragraph 
(j)(1) or (2) of this section.
    (1) Increase in size. The agency may, at its option, increase its 
sample size for a sampling period above the federally prescribed minimum 
sample size provided for under paragraph (b)(3) of this section, and 
receive FFP for any increased administrative costs the agency incurs by 
exercising this option.
    (2) Retrospective sampling. The agency may, at its option, implement 
retrospective sampling in which cases are stratified by dollar value of 
claims paid. If the agency selects retrospective sampling, it must--
    (i) Draw an initial case sample size each month that is no less than 
5 times the required sample size. The sample will be selected from the 
universe of cases that were certified eligible in the fourth month prior 
to the month of case selection;
    (ii) Identify claims paid for services furnished to all individuals 
during the review month (and, if indicated, any months prior to the 
review month in the agency's selected spenddown period) for these cases;
    (iii) Stratify the cases by dollar value of the claims into three 
strata; and
    (iv) Select a second statistically valid sample within each group 
subject to the sample size requirements specified in paragraph (b)(3) or 
(j)(1) of this section.

[55 FR 22166, May 31, 1990, as amended at 75 FR 48847, Aug. 11, 2010]



Sec.  431.816  Case review completion deadlines and submittal of reports.

    (a) The agency must complete case reviews and submit reports of 
findings to CMS as specified in paragraph (b) of this section in the 
form and at the time specified by CMS.
    (b) In addition to the reporting requirements specified inSec. 
431.814 relating to sampling, the agency must complete case reviews and 
submit reports of findings to CMS in accordance with paragraphs (b)(1) 
through (6) of this section for review periods beginning after July 1, 
1990. The agency must not combine or otherwise integrate case findings 
from the MAO and AFDC strata to meet the case percentage deadlines as 
specified in paragraphs (b)(1) through (6) of this section.
    (1) Active case eligibility reviews--MAO stratum. (i) The agency 
must complete case eligibility reviews and report the findings 
electronically through the system prescribed by CMS for 90 percent of 
all active MAO cases within 105 days of the end of the review month for 
which those cases were reviewed, within 125 days for 95 percent of all 
active MAO cases, and within 150 days for 100 percent of all MAO active 
cases.
    (ii) The agency must submit a report on cases selected for the 
review month.
    (2) Active case eligibility reviews--AFDC stratum. (i) The agency 
must complete case eligibility reviews for AFDC ineligible and overpaid 
error cases caused by ineligible individuals and report the findings 
electronically through the system prescribed by CMS within 105 days of 
the end of the review month for which those cases were reviewed for 90 
percent of the total reviews; within 125 days of the end of the review 
month for which those cases were reviewed for 95 percent of the total 
reviews; and within 150 days of the end of the review month for which 
those cases were reviewed for 100 percent of the total reviews.
    (ii) The agency must report findings electronically through the 
system prescribed by CMS for 100 percent of the State agency-reported 
eligible individuals within 30 days after the final timeframe required 
by the AFDC program as specified in program regulations at 45 CFR 
205.40(b)(2)(ii).
    (3) Negative case eligibility reviews. The agency must submit a 
monthly progress report on negative case reviews completed during the 
month unless the agency has an approved superior system in effect. The 
agency must submit a report on its findings by June 30 of each year for 
the previous April-September sampling period and by December 31, for the 
October-March sampling period.
    (4) Payment reviews. (i) The agency must submit payment review 
findings electronically through the system prescribed by CMS.
    (ii) The agency must complete payment review findings for 100 
percent of the active case reviews in its sample

[[Page 68]]

and report the findings within 60 days after the first day of the month 
in which the claims collection process begins. The agency must wait 5 
months after the end of each review month before associating the amount 
of claims paid for each case for services furnished during the review 
month unless retrospective sampling is elected.
    (iii) The agency must make any necessary corrections to claims 
payments during the month the claim is paid and the following month. CMS 
will take necessary action to reject any State adjustment adversely 
affecting the error rate, for example, by not paying claims on error 
cases.
    (5) Summary of reviews and findings. The agency must submit summary 
reports of the findings for all active cases in the 6-month sample by 
July 31 of each year for the previous April-September sampling period 
and by January 31 for the October-March sampling period. These summary 
reports must include findings changed in the Federal re-review process.
    (6) Other data and reports. The agency must report other requested 
data and reports in a manner prescribed by CMS.



Sec.  431.818  Access to records: MEQC program.

    (a) The agency, upon written request, must mail to the HHS staff all 
records, including complete local agency eligibility case files or 
legible copies and all other documents pertaining to its MEQC reviews to 
which the State has access, including information available under part 
435, subpart I, of this chapter.
    (b) The agency must mail requested records within 10 working days of 
receipt of a request, unless the State has an alternate method of 
submitting these records that is approved by CMS or has received, on an 
as-needed basis, approval from CMS to extend this timeframe by 3 
additional working days to allow for exceptional circumstances.



Sec.  431.820  Corrective action under the MEQC program.

    The agency must--
    (a) Take action to correct any active or negative case action errors 
found in the sample cases;
    (b) Take administrative action to prevent or reduce the incidence of 
those errors; and
    (c) By September 15 each year, submit to CMS a report on its error 
rate analysis and a corrective action plan based on that analysis. The 
agency must submit revisions to the plan within 60 days of 
identification of additional error-prone areas, other significant 
changes in the error rate (that is, changes that the State experiences 
that increase or decrease its error rate and necessitate immediate 
corrective action or discontinuance of corrective actions that 
effectively control the cause of the error rate change), or changes in 
planned corrective action.



Sec.  431.822  Resolution of differences in State and Federal case 
eligibility or payment findings.

    (a) When a difference exists between State and Federal case 
eligibility or payment findings, the Regional Office will notify the 
agency by a difference letter.
    (b) The agency must return the difference letter to the Regional 
Office within 28 calendar days of the date of the letter indicating 
either agreement with the Federal finding or reasons for disagreement 
and if the agency desires a conference to resolve the difference. This 
period may be shortened if the Regional Office finds that it is 
necessary to do so in order to meet a case completion deadline, and the 
State still has a reasonable period of time in which to respond to the 
letter. If the agency fails to submit the difference letter indicating 
its agreement or disagreement with the Federal findings within the 28 
calendar days (or the shorter period designated as described above), the 
Federal findings will be sustained.
    (c) If the Regional Office disagrees with the agency's response, a 
difference conference will be scheduled within 20 days of the request of 
the agency. If a difference cannot be resolved, the State may request a 
direct presentation of its position to the Regional Administrator. The 
Regional Administrator has final authority for resolving the difference.

[[Page 69]]

   Medicaid Quality Control (MQC) Claims Processing Assessment System

    Source: Sections 431.830 through 431.836 appear at 55 FR 22170, May 
31, 1990, unless otherwise noted.



Sec.  431.830  Basic elements of the Medicaid quality control (MQC)
claims processing assessment system.

    An agency must--
    (a) Operate the MQC claims processing assessment system in 
accordance with the policies, sampling methodology, review procedures, 
reporting forms, requirements, and other instructions established by 
CMS.
    (b) Identify deficiencies in the claims processing operations.
    (c) Measure cost of deficiencies;
    (d) Provide data to determine appropriate corrective action;
    (e) Provide an assessment of the State's claims processing or that 
of its fiscal agent;
    (f) Provide for a claim-by-claim review where justifiable by data; 
and
    (g) Produce an audit trail that can be reviewed by CMS or an outside 
auditor.



Sec.  431.832  Reporting requirements for claims processing assessment
systems.

    (a) The agency must submit reports and data specified in paragraph 
(b) of this section to CMS, in the form and at the time specified by 
CMS.
    (b) Except when CMS authorizes less stringent reporting, States must 
submit:
    (1) A monthly report on claims processing reviews sampled and or 
claims processing reviews completed during the month;
    (2) A summary report on findings for all reviews in the 6-month 
sample to be submitted by the end of the 3rd month following the 
scheduled completion of reviews for that 6 month period; and
    (3) Other data and reports as required by CMS.



Sec.  431.834  Access to records: Claims processing assessment
systems.

    The agency, upon written request, must provide HHS staff with access 
to all records pertaining to its MQC claims processing assessment system 
reviews to which the State has access, including information available 
under part 435, subpart J, of this chapter.



Sec.  431.836  Corrective action under the MQC claims processing 
assessment system.

    The agency must--
    (a) Take action to correct those errors identified through the 
claims processing assessment system review and, if cost effective, to 
recover those funds erroneously spent;
    (b) Take administrative action to prevent and reduce the incidence 
of those errors; and
    (c) By August 31 of each year, submit to CMS a report of its error 
analysis and a corrective action plan on the reviews conducted since the 
cut-off-date of the previous corrective action plan.

                     Federal Financial Participation



Sec.Sec. 431.861-431.864  [Reserved]



Sec.  431.865  Disallowance of Federal financial participation for 
erroneous State payments (for annual assessment periods ending after 
July 1, 1990).

    (a) Purpose and applicability--
    (1) Purpose. This section establishes rules and procedures for 
disallowing Federal financial participation (FFP) in erroneous medical 
assistance payments due to eligibility and beneficiary liability errors, 
as detected through the Medicaid eligibility quality control (MEQC) 
program required underSec. 431.806 in effect on and after July 1, 
1990.
    (2) Applicability. This section applies to all States except Puerto 
Rico, Guam, the Virgin Islands, the Northern Mariana Islands, and 
American Samoa beginning July 1, 1990.
    (b) Definitions. For purposes of this section--
    Administrator means the Administrator, Centers for Medicare & 
Medicaid Services or his or her designee.
    Annual assessment period means the 12-month period October 1 through 
September 30 and includes two 6-month sample periods (October-March and 
April-September).
    Beneficiary liability means--
    (1) The amount of excess income that must be offset with incurred 
medical expenses to gain eligibility; or

[[Page 70]]

    (2) The amount of payment a beneficiary must make toward the cost of 
services.
    Erroneous payments means the Medicaid payment that was made for an 
individual or family under review who--
    (1) Was ineligible for the review month or, if full month coverage 
is not provided, at the time services were received;
    (2) Was ineligible to receive a service provided during the review 
month; or
    (3) Had not properly met enrollee liability requirements prior to 
receiving Medicaid services.
    (4) The term does not include payments made for care and services 
covered under the State plan and furnished to children during a 
presumptive eligibility period as described inSec. 435.1102 of this 
chapter.
    National mean error rate means the payment weighted average of the 
eligibility payment error rates for all States.
    National standard means a 3-percent eligibility payment error rate.
    State payment error rate means the ratio of erroneous payments for 
medical assistance to total expenditures for medical assistance (less 
payments to Supplemental Security Income beneficiaries in section 1634 
contract States and payments for children eligible for foster care and 
adoption assistance under title IV-E of the Act) for cases under review 
under the MEQC system for each assessment period.
    Technical error means an error in an eligibility condition that, if 
corrected, would not result in a difference in the amount of medical 
assistance paid. These errors include work incentive program 
requirements, assignment of social security numbers, the requirement for 
a separate Medicaid application, monthly reporting requirements, 
assignment of rights to third party benefits, and failure to apply for 
benefits for which the family or individual is not eligible. Errors 
other than those listed in this definition, identified by CMS in 
subsequent instructions, or approved by CMS are not technical errors.
    (c) Setting of State's payment error rate. (1) Each State must, for 
each annual assessment period, have a payment error rate no greater than 
3 percent or be subject to a disallowance of FFP.
    (2) A payment error rate for each State is determined by CMS for 
each annual assessment period by computing the statistical estimate of 
the ratio of erroneous payments for medical assistance made on behalf of 
individuals or cases in the sample for services received during the 
review month to total expenditures for medical assistance for that State 
made on behalf of individuals or cases in the sample for services 
received during the review month. This ratio incorporates the findings 
of a federally re-reviewed subsample of the State's review findings and 
is projected to the universe of total medical assistance payments for 
calculating the amount of disallowance under paragraph (d)6) of this 
section.
    (3) The State's payment error rate does not include payments made on 
behalf of individuals whose eligibility determinations were made 
exclusively by the Social Security Administration under an agreement 
under section 1634 of the Act or children found eligible for foster care 
and adoption assistance under title IV-E of the Act.
    (4) The amount of erroneous payments is determined as follows:
    (i) For ineligible cases resulting from excess resources, the amount 
of error is the lesser of--
    (A) The amount of the payment made on behalf of the family or 
individual for the review month; or
    (B) The difference between the actual amount of countable resources 
of the family or individual for the review month and the State's 
applicable resources standard.
    (ii) For ineligible cases resulting from other than excess 
resources, the amount of error is the total amount of medical assistance 
payments made for the individual or family under review for the review 
month.
    (iii) For erroneous payments resulting from failure to properly meet 
beneficiary liability, the amount of error is the lesser of--
    (A) The amount of payments made on behalf of the family or 
individual for the review month; or
    (B) The difference between the correct amount of beneficiary 
liability and the amount of beneficiary liability

[[Page 71]]

met by the individual or family for the review month.
    (iv) The amount of payments made for services provided during the 
review month for which the individual or family was not eligible.
    (5) In determining the amount of erroneous payments, errors caused 
by technical errors are not included.
    (6) If a State fails to cooperate in completing a valid MEQC sample 
or individual reviews in a timely and appropriate fashion as required, 
CMS will establish the State's payment error rate based on either--
    (i) A special sample or audit;
    (ii) The Federal subsample; or
    (iii) Other arrangements as the Administrator may prescribe.
    (7) When it is necessary for CMS to exercise the authority in 
paragraph (c)(6) of this section, the amount that would otherwise be 
payable to the State under title XIX of the Act is reduced by the full 
costs incurred by CMS in making these determinations. CMS may make these 
determinations either directly or under contractual or other 
arrangements.
    (d) Computation of anticipated error rate. (1) Before the beginning 
of each quarter, CMS will project the anticipated medical assistance 
payment error rate for each State for that quarter. The anticipated 
error rate is the lower of the weighted average error rate of the two 
most recent 6-month review periods or the error rate of the most recent 
6-month review period. In either case, cases in the review periods must 
have been completed by the State and CMS. If a State fails to provide 
CMS with information needed to project anticipated excess erroneous 
expenditures, CMS will assign the State an error rate as prescribed in 
paragraph (c)(6) of this section.
    (2) If the State believes that the anticipated error rate 
established in accordance with paragraph (d)(1) of this section is based 
on erroneous data, the State may submit evidence that demonstrates the 
data were erroneous. If the State satisfactorily demonstrates that CMS's 
data were erroneous, the State's anticipated error rate will be adjusted 
accordingly. Submittal of evidence is subject to the following 
conditions:
    (i) The State must inform CMS of its intent to submit evidence at 
least 70 days prior to the beginning of the quarter.
    (ii) The State may request copies of data that CMS used to compute 
its anticipated error rate within 7 days of receiving notification of 
its projected error rate.
    (iii) The State has up to 40 days before the quarter begins to 
present the evidence.
    (iv) The evidence is restricted to documentation of suspected CMS 
data entry errors, processing errors, and resolutions of Federal 
subsample difference cases subsequent to calculation of the error rate 
projection as contained in the original notice to the State.
    (v) The State may not submit other evidence, such as that consisting 
of revisions to State errors as a result of changes to the original 
State review findings submitted to CMS.
    (vi) The State may not submit evidence challenging the error rate 
computational methodology.
    (3) Based on the anticipated error rate established in paragraph 
(d)(1) or (d)(2) of this section, CMS reduces its estimate of the 
State's requirements for FFP for medical assistance for the quarter by 
the percentage by which the anticipated payment error rate exceeds the 
3-percent national standard. This reduction is applied against CMS's 
total estimate of FFP for medical assistance expenditures (less payments 
to Supplemental Security Income beneficiaries in 1634 contract States 
and payments to children found eligible for foster care and adoption 
assistance under title IV-E of the Act) prior to any other required 
reductions. The reduction is noted on the State's grant award for the 
quarter and does not constitute a disallowance, and, therefore, is not 
appealable.
    (4) After the end of each quarter, an adjustment to the reduction 
will be made based on the State's actual expenditures.
    (5) After the actual payment error rate has been established for 
each annual assessment period, CMS will compute the actual amount of the 
disallowance and adjust the FFP payable to

[[Page 72]]

each State based on the difference between the amounts previously 
withheld for each of the quarters during the appropriate assessment 
period and the amount that should have been withheld based on the 
State's actual final error rate. If CMS determines that the amount 
withheld for the period exceeds the amount of the actual disallowance, 
the excess amount withheld will be returned to the States through the 
normal grant awards process within 30 days of the date the actual 
disallowance is calculated.
    (6) CMS will compute the amount to be withheld or disallowed as 
follows:
    (i) Subtract the 3-percent national standard from the State's 
anticipated or actual payment error rate percentage.
    (ii) If the difference is greater than zero, the Federal medical 
assistance funds for the period, excluding payments for those 
individuals whose eligibility for Medicaid was determined exclusively by 
the Social Security Administration under a section 1634 agreement and 
children found eligible for foster care and adoption assistance under 
title IV-E of the Act, are multiplied by that percentage. This product 
is the amount of the disallowance or withholding.
    (7) A State's payment error rate for an annual assessment period is 
the weighted average of the payment error rates in the two 6-month 
review periods comprising the annual assessment period.
    (8) The weights are established as the percent of the total annual 
payments, excluding payments for those individuals whose eligibility for 
Medicaid was determined exclusively by the Social Security 
Administration under a section 1634 agreement and children found 
eligible for foster care and adoption assistance under title IV-E of the 
Act, that occur in each of the 6-month periods.
    (e) Notice to States and showing of good faith. (1) When the actual 
payment error rate data are finalized for each annual assessment period 
ending after July 1, 1990, CMS will establish each State's error rate 
and the amount of any disallowance. States that have error rates above 
the national standard will be notified by letter of their error rates 
and the amount of the disallowance.
    (i) The State has 65 days from the date of receipt of this 
notification to show that this disallowance should not be made because 
it failed to meet the national standard despite a good faith effort to 
do so.
    (ii) If CMS is satisfied that the State did not meet the national 
standard despite a good faith effort, CMS may reduce the funds being 
disallowed in whole or in part as it finds appropriate under the 
circumstances shown by the State.
    (iii) A finding that a State did not meet the national standard 
despite a good faith effort will be limited to extraordinary 
circumstances.
    (iv) The burden of establishing that a good faith effort was made 
rests entirely with the State.
    (2) Some examples of circumstances under which CMS may find that a 
State did not meet the national standard despite a good faith effort 
are--
    (i) Disasters such as fire, flood, or civil disorders that--
    (A) Require the diversion of significant personnel normally assigned 
to Medicaid eligibility administration; or
    (B) Destroyed or delayed access to significant records needed to 
make or maintain accurate eligibility determinations;
    (ii) Strikes of State staff or other government or private personnel 
necessary to the determination of eligibility or processing of case 
changes;
    (iii) Sudden and unanticipated workload changes that result from 
changes in Federal law and regulation, or rapid, unpredictable caseload 
growth in excess of, for example, 15 percent for a 6-month period;
    (iv) State actions resulting from incorrect written policy 
interpretations to the State by a Federal official reasonably assumed to 
be in a position to provide that interpretation; and
    (v) The State has taken the action it believed was needed to meet 
the national standard, but the national standard was not met. CMS will 
consider request for a waiver under this criterion only if a State has 
achieved an error rate for the sample period that (after reducing the 
error rate by taking into account the cases determined by

[[Page 73]]

CMS to be in error as a result of conditions listed in paragraphs (e)(2) 
(i) through (iv) of this section) is less than its error rate for the 
preceding sample year and does not exceed the national mean error rate 
for the sample period under review (unless that national mean error rate 
is at or below the 3-percent national standard). If the agency has met 
this error reduction requirement or had error rates of 3 percent or 
below for the prior two review periods, and its error rate for the 
review period under consideration is less than one-third above the 
national standard, CMS will evaluate a request for a good faith waiver 
based on the following factors:
    (A) The State has fully met the performance standards in the 
operation of a quality control system in accordance with Federal 
regulations and CMS guidelines (e.g., adherence to Federal case 
completion timeliness requirements and verification standards).
    (B) The State has achieved substantial performance in the 
formulation of error reduction initiatives based on the following 
processes:
    (1) Performance of an accurate and thorough statistical and program 
analysis for error reduction which utilized quality control and other 
data:
    (2) The translation of such analysis into specific and appropriate 
error reduction practices for major error elements; and
    (3) The use of monitoring systems to verify that the error reduction 
initiatives were implemented at the local office level.
    (C) The State has achieved substantial performance in the operation 
of the following systems supported by evidence of the timely utilization 
of their outputs in the determination of case eligibility:
    (1) The operation of the Income and Eligibility Verification System 
in accordance with the requirements of parts 431 and 435 of this 
chapter, and
    (2) The operation of systems that interface with Social Security 
data and, where State laws do not restrict agency access, records from 
agencies responsible for motor vehicles, vital statistics, and State or 
local income and property taxes (where these taxes exist).
    (D) The State has achieved substantial performance in the use of the 
following accountability mechanisms to ensure that agency staff adhere 
to error reduction initiatives. The following are minimum requirements:
    (1) Accuracy of eligibility and liability determinations and timely 
processing of case actions are used as quantitative measures of employee 
performance and reflected in performance standards and appraisal forms:
    (2) Selective second-party case reviews are conducted. The second-
party review results are periodically reported to higher level 
management, as well as supervisors and workers and are used in 
performance standards and appraisal forms; and
    (3) Regular operational reviews of local offices are performed by 
the State to evaluate the offices' effectiveness in meeting error 
reduction goals with periodic monitoring to ensure that review 
recommendations have been implemented.
    (vi) A State that meets the performance standards specified in 
paragraphs (e)(2)(v) (A) through (D) of this section will be considered 
for a full or partial waiver of its disallowance amount. The State must 
submit only specific documentation that verifies that the necessary 
actions were accomplished. For example, a State could submit worker 
performance standards reflecting timeliness and case accuracy as 
quantitative measures of performance.
    (3) The failure of a State to act upon necessary legislative changes 
or to obtain budget authorization for needed resources is not a basis 
for finding that a State failed to meet the national standard despite a 
good faith effort.
    (f) Disallowance subject to appeal. (1) If a State does not agree 
with a disallowance imposed under paragraph (e) of this section, it may 
appeal to the Departmental Appeals Board within 30 days from the date of 
the final disallowance notice from CMS. The regular procedures for an 
appeal of a disallowance will apply, including review by the Appeals 
Board under 45 CFR part 16.
    (2) This appeal provision, as it applies to MEQC disallowances, is 
not applicable to the Administrator's decision on

[[Page 74]]

a State's waiver request provided for under paragraph (e) of this 
section.

[55 FR 22171, May 31, 1990, as amended at 61 FR 38398, July 24, 1996; 66 
FR 2666, Jan. 11, 2001]



Subpart Q_Requirements for Estimating Improper Payments in Medicaid and 
                                  CHIP

    Source: 71 FR 51081, Aug. 28, 2006, unless otherwise noted.



Sec.  431.950  Purpose.

    This subpart requires States and providers to submit information 
necessary to enable the Secretary to produce national improper payment 
estimates for Medicaid and the Children's Health Insurance Program 
(CHIP).

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]



Sec.  431.954  Basis and scope.

    (a) Basis. The statutory bases for this subpart are as follows:
    (1) Sections 1102, 1902(a)(6), and 2107(b)(1) of the Act, which 
contain the Secretary's general rulemaking authority and obligate States 
to provide information, as the Secretary may require, to monitor program 
performance.
    (2) The Improper Payments Information Act of 2002 (Pub. L. 107-300), 
which requires Federal agencies to review and identify annually those 
programs and activities that may be susceptible to significant erroneous 
payments, estimate the amount of improper payments, report such 
estimates to the Congress, and submit a report on actions the agency is 
taking to reduce erroneous payments.
    (3) Section 1902(a)(27)(B) of the Act requires States to require 
providers to agree to furnish the State Medicaid agencies and the 
Secretary with information regarding payments claimed by Medicaid 
providers for furnishing Medicaid services.
    (4) Section 601 of the Children's Health Insurance Program 
Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3) which requires that 
the new PERM regulations include the following: Clearly defined criteria 
for errors for both States and providers; Clearly defined processes for 
appealing error determinations; clearly defined responsibilities and 
deadlines for States in implementing any corrective action plans; 
requirements for State verification of an applicant's self-declaration 
or self-certification of eligibility for, and correct amount of, medical 
assistance under Medicaid or child health assistance under CHIP; and 
State-specific sample sizes for application of the PERM requirements.
    (b) Scope. (1) This subpart requires States under the statutory 
provisions cited in paragraph (a) of this section to submit information 
as set forth inSec. 431.970 for, among other purposes, estimating 
improper payments in the fee-for-service (FFS) and managed care 
components of the Medicaid and CHIP programs and to determine whether 
eligibility was correctly determined. This subpart also requires 
providers to submit to the Secretary any medical records and other 
information necessary to disclose the extent of services provided to 
individuals receiving assistance, and to furnish information regarding 
any payments claimed by the provider for furnishing such services, as 
requested by the Secretary.
    (2) All information must be furnished in accordance with section 
1902(a)(7)(A) of the Act, regarding confidentiality.
    (3) This subpart does not apply with respect to Puerto Rico, Guam, 
the Virgin Islands, the Northern Mariana Islands or American Samoa.

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]



Sec.  431.958  Definitions and use of terms.

    Active case means a case containing information on a beneficiary who 
is enrolled in the Medicaid or CHIP program in the month that 
eligibility is reviewed.
    Active fraud investigation means a beneficiary or a provider has 
been referred to the State Medicaid Fraud Control Unit or similar 
Federal or State investigative entity including a Federal oversight 
agency and the unit is currently actively pursuing an investigation to 
determine whether the beneficiary or the provider committed health care 
fraud. This definition applies to both the claims and eligibility review 
for PERM.

[[Page 75]]

    Adjudication date means either the date on which money was obligated 
to pay a claim or the date the decision was made to deny a claim.
    Agency means, for purposes of the PERM eligibility reviews under 
this part, the entity that performs the Medicaid and CHIP eligibility 
reviews under PERM and excludes the State Medicaid or CHIP agency as 
defined in the regulation.
    Annual sample size means the number of fee-for-service claims, 
managed care payments, or eligibility cases necessary to meet precision 
requirements in a given PERM cycle.
    Application means an application form for Medicaid or CHIP benefits 
deemed complete by the State, with respect to which such State approved 
or denied eligibility.
    Beneficiary means an applicant for, or beneficiary of, Medicaid or 
CHIP program benefits.
    Case means an individual beneficiary or family enrolled in Medicaid 
or CHIP or who has been denied enrollment or has been terminated from 
Medicaid or CHIP. The case as a sampling unit only applies to the 
eligibility component.
    Case error rate means an error rate that reflects the number of 
cases in error in the eligibility sample for the active cases plus the 
number of cases in error in the eligibility sample for the negative 
cases expressed as a percentage of the total number of cases examined in 
the sample.
    Case record means either a hardcopy or electronic file that contains 
information on a beneficiary regarding program eligibility.
    Children's Health Insurance Program (CHIP) means the program 
authorized and funded under Title XXI of the Act.
    Eligibility means meeting the State's categorical and financial 
criteria for receipt of benefits under the Medicaid or CHIP programs.
    Improper payment means any payment that should not have been made or 
that was made in an incorrect amount (including overpayments and 
underpayments) under statutory, contractual, administrative, or other 
legally applicable requirements; and includes any payment to an 
ineligible beneficiary, any duplicate payment, any payment for services 
not received, any payment incorrectly denied, and any payment that does 
not account for credits or applicable discounts.
    Last action means the most recent date on which the State agency 
took action to grant, deny, or terminate program benefits based on the 
State agency's eligibility determination; and is the point in time for 
the PERM eligibility reviews unless the last action occurred outside of 
12 months prior to the sample month.
    Medicaid means the joint Federal and State program, authorized and 
funded under Title XIX of the Act, that provides medical care to people 
with low incomes and limited resources.
    Negative case means a case containing information on a beneficiary 
who applied for benefits and was denied or whose program benefits were 
terminated, based on the State agency's eligibility determination or on 
a completed redetermination.
    Payment means any payment to a provider, insurer, or managed care 
organization for a Medicaid or CHIP beneficiary for which there is 
Medicaid or CHIP Federal financial participation. It may also mean a 
direct payment to a Medicaid or CHIP beneficiary in limited 
circumstances permitted by CMS regulation or policy.
    Payment error rate means an annual estimate of improper payments 
made under Medicaid and CHIP equal to the sum of the overpayments and 
underpayments in the sample, that is, the absolute value of such 
payments, expressed as a percentage of total payments made in the 
sample.
    Payment review means the process by which payments for services are 
associated with cases reviewed for eligibility. Payments are collected 
for services received in the review month or in the sample month, 
depending on the case reviewed.
    PERM means the Payment Error Rate Measurement process to measure 
improper payment in Medicaid and CHIP.
    Provider means any qualified provider recognized under Medicaid and 
CHIP statute and regulations.
    Provider error includes, but is not limited to, medical review 
errors as described inSec. 431.960(c) of this subpart, as

[[Page 76]]

determined in accordance with documented State or Federal policies or 
both.
    Review cycle means the complete timeframe to complete the improper 
payments measurement including the fiscal year being measured; generally 
this timeframe begins in October of the fiscal year reviewed and ends in 
August of the following fiscal year.
    Review month means the month in which eligibility is reviewed and is 
usually when the State took its last action to grant or redetermine 
eligibility. If the State's last action was taken beyond 12 months prior 
to the sample month, the review month shall be the sample month.
    Review year means the Federal fiscal year being analyzed for errors 
by Federal contractors or the State.
    Sample month means the month the State selects a case from the 
sample for an eligibility review.
    State agency means the State agency that is responsible for 
determining program eligibility for Medicaid and CHIP, as applicable, 
based on applications and redeterminations.
    State error includes, but is not limited to, data processing errors 
and eligibility errors as described inSec. 431.960(b) and (d) of this 
subpart, as determined in accordance with documented State or Federal 
policies or both.
    States means the 50 States and the District of Columbia.
    Undetermined means a beneficiary case subject to a Medicaid or CHIP 
eligibility determination under this regulation about which a definitive 
determination of eligibility could not be made.

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]



Sec.  431.960  Types of payment errors.

    (a) General rule. State or provider errors identified for the 
Medicaid and CHIP improper payments measurement under the Improper 
Payments Information Act of 2002 must affect payment under applicable 
Federal policy or State policy or both.
    (b) Data processing errors.
    (1) A data processing error is an error resulting in an overpayment 
or underpayment that is determined from a review of the claim and other 
information available in the State's Medicaid Management Information 
System, related systems, or outside sources of provider verification.
    (2) The difference in payment between what the State paid (as 
adjusted within improper payment measurement guidelines) and what the 
State should have paid, in accordance with the State's documented 
policies, is the dollar measure of the payment error.
    (3) Data processing errors include, but are not limited to the 
following:
    (i) Payment for duplicate items.
    (ii) Payment for non-covered services.
    (iii) Payment for fee-for-service claims for managed care services.
    (iv) Payment for services that should have been paid by a third 
party but were inappropriately paid by Medicaid or CHIP.
    (v) Pricing errors.
    (vi) Logic edit errors.
    (vii) Data entry errors.
    (viii) Managed care rate cell errors.
    (ix) Managed care payment errors.
    (c) Medical review errors. (1) A medical review error is an error 
resulting in an overpayment or underpayment that is determined from a 
review of the provider's medical record or other documentation 
supporting the service(s) claimed, Code of Federal Regulations that are 
applicable to conditions of payment, the State's written policies, and a 
comparison between the documentation and written policies and the 
information presented on the claim.
    (2) The difference in payment between what the State paid (as 
adjusted within improper payment measurement guidelines) and what the 
State should have paid, in accordance with 42 CFR 440 to 484.55 of the 
Code of Federal Regulations that are applicable to conditions of payment 
and the State's documented policies, is the dollar measure of the 
payment error.
    (3) Medical review errors include, but are not limited to the 
following:
    (i) Lack of documentation.
    (ii) Insufficient documentation.
    (iii) Procedure coding errors.
    (iv) Diagnosis coding errors.
    (v) Unbundling.
    (vi) Number of unit errors.
    (vii) Medically unnecessary services.
    (viii) Policy violations.

[[Page 77]]

    (ix) Administrative errors.
    (d) Eligibility errors. (1) An eligibility error includes, but is 
not limited to, errors determined by applying Federal rules and the 
State's documented policies and procedures, resulting from services 
being provided to an individual who meets at least one of the following 
provisions:
    (i) Was ineligible when authorized as eligible or when he or she 
received services.
    (ii) Was eligible for the program but was ineligible for certain 
services he or she received.
    (iii) Lacked or had insufficient documentation in his or her case 
record, in accordance with the State's documented policies and 
procedures, to make a definitive review decision of eligibility or 
ineligibility.
    (iv) Overpaid the assigned liability due to the individual's 
liability being understated.
    (v) Underpaid toward assigned liability due to the individual's 
liability being overstated.
    (vi) Was ineligible for managed care but enrolled in managed care.
    (vii) Was eligible for managed care but improperly enrolled in the 
incorrect managed care plan.
    (2) The dollars paid in error due to the eligibility error is the 
measure of the payment error.
    (3) A State eligibility error does not result from the State's 
verification of an applicant's self-declaration or self-certification of 
eligibility for, and the correct amount of, medical assistance or child 
health assistance, if the State process for verifying an applicant's 
self-declaration or self-certification satisfies the requirements in 
Federal law, guidance, or if applicable, Secretary approval.
    (4) Negative case errors are errors, based on the State's documented 
policies and procedures, resulting from either of the following:
    (i) Applications for Medicaid or CHIP that are improperly denied by 
the State.
    (ii) Existing cases that are improperly terminated from Medicaid or 
CHIP by the State.
    (5) No payment errors are associated with negative cases.
    (e) Errors for purposes of determining the national error rates. The 
Medicaid and CHIP national error rates include but are not limited to 
the errors described in paragraphs (b) through (d) of this section, with 
the exception of negative case errors described in paragraph (d)(4) of 
this section.
    (f) Errors for purposes of determining the State error rates. The 
Medicaid and CHIP State error rates include but are not limited to, the 
errors described in paragraphs (b) through (d)(1)(vii) of this section, 
with the exception of negative case errors as described in paragraph 
(d)(4) of this section.
    (g) Error codes. CMS may define different types of errors within the 
above categories for analysis and reporting purposes. Only dollars in 
error will factor into a State's PERM error rate.

[75 FR 48848, Aug. 11, 2010]



Sec.  431.970  Information submission requirements.

    (a) States must submit information to the Secretary for, among other 
purposes, estimating improper payments in Medicaid and CHIP, that 
include but are not limited to--
    (1) Adjudicated fee-for-service (FFS) or managed care claims 
information or both, on a quarterly basis, from the review year;
    (2) Upon request from CMS, provider contact information that has 
been verified by the State as current;
    (3) All medical and other related policies in effect and any 
quarterly policy updates;
    (4) Current managed care contracts, rate information, and any 
quarterly updates applicable to the review year for CHIP and, as 
requested, for Medicaid;
    (5) Data processing systems manuals;
    (6) Repricing information for claims that are determined during the 
review to have been improperly paid;
    (7) Information on claims that were selected as part of the sample, 
but changed in substance after selection, for example, successful 
provider appeals;
    (8) Adjustments made within 60 days of the adjudication dates for 
the original claims or line items with sufficient information to 
indicate the nature of

[[Page 78]]

the adjustments and to match the adjustments to the original claims or 
line items;
    (9) For the eligibility improper payment measurement, information as 
set forth in Sec.Sec. 431.978 through 431.988;
    (10) A corrective action plan for purposes of reducing erroneous 
payments in FFS, managed care, and eligibility; and
    (11) Other information that the Secretary determines is necessary 
for, among other purposes, estimating improper payments and determining 
error rates in Medicaid and CHIP.
    (b) Providers must submit information to the Secretary for, among 
other purposes estimating improper payments in Medicaid and CHIP, which 
include but are not limited to, Medicaid and CHIP beneficiary medical 
records within 75 calendar days of the date the request is made by CMS. 
If CMS determines that the documentation is insufficient, providers must 
respond to the request for additional documentation within 14 calendar 
days of the date the request is made by CMS.

[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007; 
75 FR 48848, Aug. 11, 2010]



Sec.  431.972  Claims sampling procedures.

    (a) Claims universe.
    (1) The PERM claims universe includes payments that were originally 
paid (paid claims) and for which payment was requested but denied 
(denied claims) during the FFY, and for which there is FFP (or would 
have been if the claim had not been denied) through Title XIX (Medicaid) 
or Title XXI (CHIP).
    (2) The State must establish controls to ensure FFS and managed care 
universes are accurate and complete, including comparing the FFS and 
managed care universes to the Form CMS-64 and Form CMS-21 as 
appropriate.
    (b) Sample size. CMS estimates a State's annual sample size for 
claims review at the beginning of the PERM cycle.
    (1) Precision and confidence levels. The annual sample size should 
be estimated to achieve a State-level error rate within a 3 percent 
precision level at 95 percent confidence interval for the claims 
component of the PERM program, unless the precision requirement is 
waived by CMS on its own initiative.
    (2) Base year sample size. The annual sample size in a State's first 
PERM cycle (the ``base year'') is--
    (i) Five hundred fee-for-service claims and 250 managed care 
payments drawn from the claims universe; or
    (ii) If the claims universe of fee-for-service claims or managed 
care capitation payments from which the annual sample is drawn is less 
than 10,000, the State may request to reduce its sample size by the 
finite population correction factor for the relevant PERM cycle.
    (3) Subsequent year sample size. In PERM cycles following the base 
year:
    (i) CMS considers the error rate from the State's previous PERM 
cycle to determine the State's annual sample size for the current PERM 
cycle.
    (ii) The maximum sample size is 1,000 fee-for-service or managed 
care payments, respectively.
    (iii) If a State measured in the FY 2007 or FY 2008 cycle elects to 
reject its State-specific CHIP PERM rate determined during those cycles, 
information from those cycles will not be used to calculate its annual 
sample size in subsequent PERM cycles and the State's annual sample size 
in its base year is 500 fee-for-service and 250 managed care payments.

[75 FR 48849, Aug. 11, 2010]



Sec.  431.974  Basic elements of Medicaid and CHIP eligibility reviews.

    (a) General requirements. (1) States selected in any given year for 
Medicaid and CHIP improper payments measurement under the Improper 
Payments Information Act of 2002 must conduct reviews of a statistically 
valid random sample of beneficiary cases for such programs to determine 
if improper payments were made based on errors in the State agency's 
eligibility determinations.
    (2) The agency and personnel responsible for the development, 
direction, implementation, and evaluation of the eligibility reviews and 
associated activities, including calculation of the error rates under 
this section, must be functionally and physically separate from the 
State agencies and personnel that are responsible for Medicaid and

[[Page 79]]

CHIP policy and operations, including eligibility determinations.
    (3) Any individual performing activities under this section must do 
so in a manner that is consistent with the provisions ofSec. 435.901, 
concerning the rights of beneficiaries.
    (b) Sampling requirements. The State must have in effect a CMS-
approved sampling plan for the review year in accordance with the 
requirements specified inSec. 431.978.
    (c) Review requirements. The State must conduct eligibility reviews 
in accordance with the requirements specified inSec. 431.980.



Sec.  431.978  Eligibility sampling plan and procedures.

    (a) Plan approval. For each review year, the agency must--
    (1) Submit its Medicaid or CHIP sampling plan (or revisions to a 
current plan) for both active and negative cases to CMS for approval by 
the August 1 before the review year; and
    (2) Have its sampling plan approved by CMS before the plan is 
implemented.
    (b) Maintain current plan. The agency must do both of the following:
    (1) Keep its plan current, for example, by making adjustments to the 
plan when necessary due to fluctuations in the universe.
    (2) Review its plan each review year. If it is determined that the 
approved plan is--
    (i) Unchanged from the previous review year, the agency must notify 
CMS that it is using the plan from the previous review year; or
    (ii) Changed from the previous review year, the agency must submit a 
revised plan for CMS approval.
    (c) Sample size.
    (1) Precision and confidence levels. Annual sample size for 
eligibility reviews should be estimated to achieve within a 3 percent 
precision level at 95 percent confidence interval for the eligibility 
component of the program.
    (2) Base year sample size. Annual sample size for each State's base 
year of PERM is--
    (i) Five hundred four active cases and 204 negative cases drawn from 
the active and negative universes; or
    (ii) If the active case universe or negative case universe of 
Medicaid or CHIP beneficiaries from which the annual sample is drawn is 
less than 10,000, the State may request to reduce its sample size by the 
finite population correction factor for the relevant PERM cycle.
    (3) Subsequent year sample size. In PERM cycles following the base 
year the annual sample size may increase or decrease based on the 
State's prior results of the previous cycle PERM error rate information. 
The State may provide information to CMS in the eligibility sampling 
plan due to CMS by the August 1 prior to the start of the review year to 
support the calculation of a reduced annual sample size for the next 
PERM cycle.
    (i) CMS considers the error rate from the State's previous PERM 
cycle to determine the State's annual sample size for the current PERM 
cycle.
    (ii) The maximum sample size is 1,000 for the active cases and 
negative cases, respectively.
    (iii) If the active case universe or negative case universe of 
Medicaid or CHIP beneficiaries from which the annual sample is drawn is 
less than 10,000, the State may request to reduce its sample size by the 
finite population correction factor for the relevant PERM cycle.
    (iv) If a State measured in the FY 2007 or FY 2008 cycle elects to 
reject its PERM CHIP rate as determined during those cycles, information 
from those cycles is not used to calculate the State's sample size in 
subsequent PERM cycles and the State's sample size in its base year is 
504 active cases and 204 negative cases.
    (d) Sample selection. The sample must be stratified in accordance 
withSec. 431.978(d)(3). Cases must be selected each month throughout 
the fiscal year under review. Each month throughout the year and before 
commencing the eligibility reviews, States must submit to CMS a monthly 
sample selection list that identifies the cases selected in that month.
    (1) Eligibility universe-active cases--(i) Medicaid. (A) The 
Medicaid active universe consists of all active Medicaid cases funded 
through Title XIX for the sample month.

[[Page 80]]

    (B) The following types of cases are excluded from the Medicaid 
active universe:
    (1) Cases for which the Social Security Administration, under 
section 1634 of the Act agreement with a State, determines Medicaid 
eligibility for Supplemental Security Income beneficiaries.
    (2) All foster care and adoption assistance cases under Title IV-E 
of the Act are excluded from the universe in all States.
    (3) Cases under active fraud investigation.
    (4) Cases in which eligibility was determined under section 
1902(e)(13) of the Act for States' Express Lane Eligibility option.
    (C) If the State cannot identify cases that meet the exclusion 
criteria specified in paragraph (d)(1)(i)(B) of this section before 
sample selection, the State must drop these cases from review if they 
are selected in the sample and are later determined to meet the 
exclusion criteria specified in paragraph (d)(1)(i)(B) of this section.
    (ii) CHIP. (A) The CHIP active universe consists of all active case 
CHIP and Title XXI Medicaid expansion cases that are funded through 
Title XXI for the sample month.
    (B) The following types of cases are excluded from the CHIP active 
universe:
    (1) Cases under active fraud investigation.
    (2) Cases in which eligibility was determined under section 
2107(e)(1) of the Act for States' Express Lane Eligibility option.
    (C) If the State cannot identify cases that meet the exclusion 
criteria specified in paragraph (d)(1)(ii)(B) of this section before 
sample selection, the State must drop these cases from review if it is 
later determined that the cases meet the exclusion criteria specified in 
paragraph (d)(1)(ii)(B) of this section.
    (2) Eligibility universe--negative cases. The Medicaid and CHIP 
negative universe consists of all negative cases for the sample month. 
The negative case universe is not stratified.
    (3) Stratifying the universe. States have the option to stratify the 
active case universe.
    (i) Each month, the State may stratify the Medicaid and CHIP active 
case universe into three strata:
    (A) Program applications completed by the beneficiaries in which the 
State took action in the sample month to approve such beneficiaries for 
Medicaid or CHIP based on the eligibility determination.
    (B) Redeterminations of eligibility in which the State took action 
in the sample month to approve the beneficiaries for Medicaid or CHIP 
based on information obtained through a completed redetermination.
    (C) All other cases.
    (ii) States that do not stratify the universe will sample from the 
entire active case universe each month.
    (4) Sample selection. Each month, an equal number of cases are 
selected for review from one of the following:
    (i) Each stratum as described in paragraph (d)(3)(i) of this 
section.
    (ii) The entire active case universe if opting not to stratify cases 
under paragraph (d)(2)(ii) of this section.
    (iii) Otherwise provided for in the State's sampling plan approved 
by CMS.

[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007; 
75 FR 48849, Aug. 11, 2010]



Sec.  431.980  Eligibility review procedures.

    (a) Active case reviews. The agency must verify eligibility for all 
selected active cases for Medicaid and CHIP for the review month for 
compliance with the State's eligibility criteria.
    (b) Negative case reviews. The agency must review all selected 
negative cases for Medicaid and CHIP for the review month to determine 
whether the cases were properly denied or terminated.
    (c) Payment review. The agency must identify all Medicaid and CHIP 
payments made for services furnished, either in the first 30 days of 
eligibility or in the review month for applications underSec. 
431.978(d)(3)(i) and redeterminations underSec. 431.978(d)(3)(ii) in 
accordance to State policy or from the sample month for all other cases 
underSec. 431.978(d)(3)(iii), to identify erroneous payments resulting 
from ineligibility for services or for the program.
    (d) Eligibility review decision--(1) Active cases--Medicaid. Unless 
the State

[[Page 81]]

has selected to substitute MEQC data for PERM data under paragraph (f) 
of this section, the agency must complete all of the following:
    (i) Review the cases specified at Sec.Sec. 431.978(d)(3)(i)(A) and 
431.978(d)(3)(i)(B) of this subpart in accordance with the State's 
categorical and financial eligibility criteria and documented policies 
and procedures as of the review month and identify payments made on 
behalf of such beneficiary or family for services received in the first 
30 days of eligibility.
    (ii) For cases specified inSec. 431.978(d)(3)(i)(C) of this 
subpart, review the last action as follows:
    (A) If the last action was not more than 12 months prior to the 
sample month, review in accordance with the State's categorical and 
financial eligibility criteria and documented policies and procedures as 
of the last action and identify payments made on behalf of such 
beneficiary or family in the first 30 days of eligibility.
    (B) If the last action occurred more than 12 months prior to the 
sample month, review in accordance with the State's categorical and 
financial eligibility criteria and documented policies and procedures as 
of the sample month and identify payments made on behalf of the 
beneficiary or family for services received in the sample month.
    (iii) For cases in States that do not stratify the universe, as 
specified inSec. 431.978(d)(3)(ii) of this subpart, review the last 
action as follows:
    (A) If the last action was no more than 12 months prior to the 
sample month, review in accordance with the State's categorical and 
financial eligibility criteria and documented policies and procedures as 
of the last action and identify payments made on behalf of such 
beneficiary or family for services received in the sample month.
    (B) If the last action occurred more than 12 months prior to the 
sample month, review in accordance with the State's categorical and 
financial eligibility criteria, and documented policies and procedures, 
as of the sample month and identify payments made on behalf of the 
beneficiary or family for services received in the sample month.
    (C) Cases that are not stratified must have the last action 
identified as either falling under the criteria ofSec. 
431.978(d)(3)(i)(A) orSec. 431.978(d)(3)(i)(B) of this subpart after 
the sample is selected.
    (iv) Examine the evidence in the case file that supports categorical 
and financial eligibility for the category of coverage in which the case 
is assigned, and independently verify information that is missing, 
outdated (older than 12 months) and likely to change, or otherwise as 
needed, to verify eligibility.
    (v) For managed care cases, also verify residency and eligibility 
for and actual enrollment in the managed care plan during the month 
under review.
    (vi) Elements of eligibility in which State policy allows for self-
declaration or self-certification are considered to be verified with a 
self-declaration or self-certification statement. The self-declaration 
or self-certification must be--
    (A) Present in the record;
    (B) Not outdated (more than 12 months old);
    (C) Originating from the last case action that was not more than 12 
months prior to the sample month;
    (D) In a valid, State-approved format; and
    (E) Consistent with other facts in the case record.
    (vii) If a self-declaration or self-certification statement does not 
meet the provisions of paragraphs (e)(1)(vi)(A) through (D) of this 
section, eligibility may be verified through a new self-declaration or 
self-certification statement or other third party sources.
    (A) If eligibility or ineligibility cannot be verified, cite a case 
as undetermined.
    (ix) As a result of paragraphs (e)(1)(i) through (e)(1)(vii) of this 
section--
    (A) Cite the case as eligible or ineligible based on the review 
findings and identify with the particular beneficiary the payments made 
on behalf of the particular beneficiary for services received in the 
first 30 days of eligibility, the review month, or sample month, as 
appropriate; or
    (B) Cite the case as undetermined if after due diligence an 
eligibility determination could not be made and identify with the 
particular beneficiary the payments made on behalf of the particular 
beneficiary for services received

[[Page 82]]

in the first 30 days of eligibility, the review month or sample month, 
as appropriate.
    (2) Active cases--CHIP. In addition to the procedures for active 
cases as set forth in paragraphs (e)(1)(i) through (e)(1)(vii) of this 
section, the agency must verify that the case is not eligible for 
Medicaid by determining that the child has income above the Medicaid 
levels in accordance with the requirements inSec. 457.350 of this 
chapter. Upon verification, the agency must--
    (e) Negative cases--Medicaid and CHIP. The agency must--
    (1) Identify the reason the State agency determined ineligibility;
    (2) Examine the evidence in the case file to determine whether the 
State agency's denial or termination was correct or whether there is any 
reason the case should have been denied or terminated; and
    (i) Record the State agency's finding as correct if the case record 
review substantiates that the individual was not eligible; or
    (ii) Record the case as an error if there is no valid reason for the 
denial or termination.
    (f) Substitution of MEQC data. (1) A State in their PERM year may 
elect to substitute the random sample of selected cases, eligibility 
review findings, and payment review findings, as qualified by paragraphs 
(d)(2) and (d)(3) of this section, which are obtained through MEQC 
reviews conducted in accordance with section 1903(u) of the Act for data 
required in this section, as long as the State MEQC reviews meet the 
requirements of the MEQC Sampling Plan and Procedures atSec. 431.814 
of this part, and if the only exclusions are those set forth in section 
1902(e)(13) of the Act,Sec. 431.814(c)(4), andSec. 431.978(d)(1) of 
this part.
    (2) MEQC samples must also meet PERM confidence and precision 
requirements.
    (3) MEQC cases that are dropped due to the acceptable reasons listed 
in the State Medicaid Manual are included in the PERM error rate 
calculation.

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48850, Aug. 11, 2010]



Sec.  431.988  Eligibility case review completion deadlines and
submittal of reports.

    (a)(1) States must complete and report to CMS the findings, 
including total number of cases in the eligibility universe, the error 
causes for all case reviews listed on the monthly sample selection 
lists, including cases dropped from review due to active fraud 
investigations, and cases for which eligibility could not be determined.
    (2) States must submit a summary report of the active case 
eligibility and payment review findings to CMS by July 1 following the 
review year.
    (b) The agency must report by July 1 following the review year, 
information as follows:
    (1) Case and payment error data for active cases.
    (2) Case error data for negative cases.
    (3) Identify the last action on a case, either application or 
redetermination for States that do not stratify the eligibility sample 
in accordance withSec. 431.978(d)(3)(i) of this subpart.
    (4) The number and amounts of undetermined cases in the sample and 
the total amount of payments from all undetermined cases.
    (5) The number of cases dropped from review due to active fraud 
investigations.

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48851, Aug. 11, 2010]



Sec.  431.992  Corrective action plan.

    (a) The State agency must develop a separate corrective action plan 
for Medicaid and CHIP, which is not required to be approved by CMS, 
designed to reduce improper payments in each program based on its 
analysis of the error causes in the FFS, managed care, and eligibility 
components.
    (b) In developing a corrective action plan, the State must take the 
following actions:
    (1) Data analysis. States must conduct data analysis such as 
reviewing clusters of errors, general error causes, characteristics, and 
frequency of errors that are associated with improper payments.
    (2) Program analysis. States must review the findings of the data 
analysis to determine the specific programmatic causes to which errors 
are

[[Page 83]]

attributed (for example, provider lack of understanding of the 
requirement to provide documentation) and to identify root error causes.
    (3) Corrective action planning. States must determine the corrective 
actions to be implemented that address the root error causes.
    (4) Implementation and monitoring.
    (i) States must develop an implementation schedule for each 
corrective action initiative and implement those actions in accordance 
with the schedule.
    (ii) The implementation schedule must identify all of the following:
    (A) Major tasks.
    (B) Key personnel responsible for each activity.
    (C) A timeline for each action including target implementation 
dates, milestones, and monitoring.
    (5) Evaluation. States must evaluate the effectiveness of the 
corrective action by assessing all of the following:
    (i) Improvements in operations.
    (ii) Efficiencies.
    (iii) Number of errors.
    (iv) Improper payments.
    (c) The State agency must submit to CMS and implement the corrective 
action plan for the fiscal year it was reviewed no later than 90 
calendar days after the date on which the State's Medicaid or CHIP error 
rates are posted on the CMS contractor's Web site.
    (d) The State must submit to CMS a new corrective action plan for 
each subsequent error rate measurement that contains an update on the 
status of a previous corrective action plan. Items to address in the new 
corrective action plan include, but are not limited to the following:
    (1) Effectiveness of implemented corrective actions, as assessed 
using objective data sources.
    (2) Discontinued or ineffective actions, actions not implemented, 
and those actions, if any, that were substituted for such discontinued, 
ineffective, or abandoned actions.
    (3) Findings on short-term corrective actions.
    (4) The status of the long-term corrective actions.

[75 FR 48851, Aug. 11, 2010]



Sec.  431.998  Difference resolution and appeal process.

    (a) The State may file, in writing, a request with the Federal 
contractor to resolve differences in the Federal contractor's findings 
based on medical or data processing reviews on FFS and managed care 
claims in Medicaid or CHIP within 20 business days after the disposition 
report of claims review findings is posted on the contractor's Web site. 
The State must complete all of the following:
    (1) Have a factual basis for filing the difference.
    (2) Provide the Federal contractor with valid evidence directly 
related to the error finding to support the State's position that the 
claim was properly paid.
    (b) For a claim in which the State and the Federal contractor cannot 
resolve the difference in findings, the State may appeal to CMS for 
final resolution, filing the appeal within 10 business days from the 
date the contractor's finding as a result of the difference resolution 
is posted on the contractor's Web site. There is no minimum dollar 
threshold required to appeal a difference in findings.
    (c) For eligibility error determinations made by the agency with 
personnel functionally and physically separate from the State Medicaid 
and CHIP agencies with personnel that are responsible for Medicaid and 
CHIP policy and operations, the State may appeal error determinations by 
filing an appeal request.
    (1) Filing an appeal request. The State may--
    (i) File its appeal request with the appropriate State agency or 
entity; or
    (ii) If no appeals process is in place at the State level, 
differences in findings--
    (A) Must be documented in writing and submitted directly to the 
agency responsible for the PERM eligibility review for its 
consideration;
    (B) May be resolved through document exchange facilitated by CMS, 
whereby CMS will act as intermediary by receiving the written 
documentation supporting the State's appeal from the State agency and 
submitting that

[[Page 84]]

documentation to the agency responsible for the PERM eligibility review; 
or
    (C) Any unresolved differences may be addressed by CMS between the 
final month of payment data submission and error rate calculation.
    (2) After the filing of an appeals request. (i) Any changes in error 
findings must be reported to CMS by the deadline for submitting final 
eligibility review findings.
    (ii) Any appeals of determinations based on interpretations of 
Federal policy may be referred to CMS.
    (iii) CMS's eligibility error resolution decision is final.
    (iv) If CMS's or the State-level appeal board's decision causes an 
erroneous payment finding to be made, if the final adjudicated claim is 
actually a payment error in accordance with documented State policies 
and procedures, any resulting recoveries are governed bySec. 431.1002 
of this subchapter.
    (d) All differences, including those pending in CMS for final 
decision that are not resolved in time to be included in the error rate 
calculation, will be considered as errors for meeting the reporting 
requirements of the IPIA. Upon State request, CMS will calculate a 
subsequent State-specific error rate that reflects any reversed 
disposition of the unresolved claims.

[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48851, Aug. 11, 2010]



Sec.  431.1002  Recoveries.

    (a) Medicaid. States must return to CMS the Federal share of 
overpayments based on medical and processing errors in accordance with 
section 1903(d)(2) of the Act and related regulations at part 433, 
subpart F of this chapter. Payments based on erroneous Medicaid 
eligibility determinations are addressed under section 1903(u) of the 
Act and related regulations at part 431, subpart P of this chapter.
    (b) CHIP. Quarterly Federal payments to the States under Title XXI 
of the Act must be reduced in accordance with section 2105(e) of the Act 
and related regulations at part 457, subpart B of this chapter.



PART 432_STATE PERSONNEL ADMINISTRATION--Table of Contents



                      Subpart A_General Provisions

Sec.
432.1 Basis and purpose.
432.2 Definitions.
432.10 Standards of personnel administration.

   Subpart B_Training Programs; Subprofessional and Volunteer Programs

432.30 Training programs: General requirements.
432.31 Training and use of subprofessional staff.
432.32 Training and use of volunteers.

              Subpart C_Staffing and Training Expenditures

432.45 Applicability of provisions in subpart.
432.50 FFP: Staffing and training costs.
432.55 Reporting training and administrative costs.

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

    Source: 43 FR 45199, Sept. 29, 1978, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  432.1  Basis and purpose.

    This part prescribes regulations to implement section 1902(a)(4) of 
the Act, which relates to a merit system of State personnel 
administration and training and use of subprofessional staff and 
volunteers in State Medicaid programs, and section 1903(a), rates of FFP 
for Medicaid staffing and training costs. It also prescribes 
regulations, based on the general administrative authority in section 
1902(a)(4), for State training programs for all staff.



Sec.  432.2  Definitions.

    As used in this part--
    Community service aides means subprofessional staff, employed in a 
variety of positions, whose duties are an integral part of the agency's 
responsibility for planning, administration, and for delivery of health 
services.
    Directly supporting staff means secretarial, stenographic, and 
copying personnel and file and records clerks who provide clerical 
services that directly support the responsibilities of skilled

[[Page 85]]

professional medical personnel, who are directly supervised by the 
skilled professional medical personnel, and who are in an employer-
employee relationship with the Medicaid agency.
    Fringe benefits means the employer's share of premiums for workmen's 
compensation, employees' retirement, unemployment compensation, health 
insurance, and similar expenses.
    Full-time training means training that requires employees to be 
relieved of all responsibility for performance of current agency work to 
participate in a training program.
    Part-time training means training that allows employees to continue 
full-time in their agency jobs or requires only partial reduction of 
work activities to participate in the training activity.
    Skilled professional medical personnel means physicians, dentists, 
nurses, and other specialized personnel who have professional education 
and training in the field of medical care or appropriate medical 
practice and who are in an employer-employee relationship with the 
Medicaid agency. It does not include other nonmedical health 
professionals such as public administrators, medical analysts, 
lobbyists, senior managers or administrators of public assistance 
programs or the Medicaid program.
    Staff of other public agencies means skilled professional medical 
personnel and directly supporting staff who are employed in State or 
local agencies other than the Medicaid agency who perform duties that 
directly relate to the administration of the Medicaid program.
    Subprofessional staff means persons performing tasks that demand 
little or no formal education; a high school diploma; or less than 4 
years of college.
    Supporting staff means secretarial, stenographic, clerical, and 
other subprofessional staff whose activities are directly necessary to 
the carrying out of the functions which are the responsibility of 
skilled professional medical personnel, as defined in this section.
    Training program means a program of educational activities based on 
the agency's training needs and aimed at insuring that agency staff 
acquire the knowledge and skills necessary to perform their jobs.
    Volunteer means a person who contributes personal service to the 
community through the agency's program but is not a replacement or 
substitute for paid staff.

[43 FR 45199, Sept. 29, 1978, as amended at 50 FR 46663, Nov. 12, 1985; 
50 FR 49389, Dec. 2, 1985]



Sec.  432.10  Standards of personnel administration.

    (a) State plan requirement. A State plan must provide that the 
requirements of paragraphs (c) through (h) of this section are met.
    (b) Terms. In this section, ``standards'' refer to those specified 
in paragraph (c) of this section.
    (c) Methods of personnel administration. Methods of personnel 
administration must be established and maintained, in the Medicaid 
agency and in local agencies administering the propgram, in conformity 
with:
    (1) [Reserved]
    (2) 5 CFR part 900, subpart F, Administration of the Standards for 
Merit System of Personnel Administration.
    (d) Compliance of local jurisdictions. The Medicaid agency must have 
in effect methods to assure compliance with the standards by local 
jurisdictions included in the plan.
    (e) Review and adequacy of State laws, regulations, and policies. 
The agency must--
    (1) Assure that the U.S. Civil Service Commission has determined the 
adequacy of current State laws, regulations, and policy statements that 
effect methods of personnel administration in conformity with the 
standards, and
    (2) Submit any changes in them to the Commission for review.
    (f) Statements of acceptance by local agencies. If the Medicaid 
agency changes from a State-administered to a State-supervised, locally 
administered program, it must obtain statements of acceptance of the 
standards from the local agencies.

[[Page 86]]

    (g) Affirmative action plan. The Medicaid agency must have in effect 
an affirmative action plan for equal employment opportunity, that 
includes specific action steps and timetables to assure that 
opportunity, and meets all other requirements of 45 CFR 70.4. \1\
---------------------------------------------------------------------------

    \1\ Editorial Note: The regulations formerly contained in 45 CFR 
70.4 were revised and reissued by the Office of Personnel Management at 
5 CFR Part 900, (Subpart F).
---------------------------------------------------------------------------

    (h) Submittal of requested materials. The Medicaid agency must 
submit to HHS, upon request, copies of the affirmative action plan and 
of the State and local materials that assure compliance with the 
standards.

[43 FR 45199, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



   Subpart B_Training Programs; Subprofessional and Volunteer Programs



Sec.  432.30  Training programs: General requirements.

    (a) A State plan must provide for a program of training for Medicaid 
agency personnel. (See also Sec.Sec. 432.31 and 432.32 for training 
programs for subprofessional staff and for volunteers.)
    (b) The program must--
    (1) Include initial inservice training for newly appointed staff, 
and continuing training opportunities to improve the operation of the 
program;
    (2) Be related to job duties performed or to be performed by the 
persons trained; and
    (3) Be consistent with the program objectives of the agency.



Sec.  432.31  Training and use of subprofessional staff.

    (a) State plan requirement. A State plan must provide for the 
training and effective use of subprofessional staff as community service 
aides, in accordance with the requirements of this section.
    (b) Recruitment and selection. The Medicaid agency must have methods 
of recruitment and selection that afford opportunity for full-time or 
part-time employment of persons of low income, including:
    (1) Young, middle-aged, and older persons;
    (2) Physically and mentally disabled; and
    (3) Beneficiaries.
    (c) Merit system. Subprofessional positions must be subject to merit 
system requirements except where special exemption is approved on the 
basis of a State alternative plan for employment of disadvantaged 
persons.
    (d) Staffing plan. The agency staffing plan must include the kinds 
of jobs that subprofessional staff can perform.
    (e) Career service. The agency must have a career service program 
that allows persons:
    (1) To enter employment at the subprofessional level; and
    (2) To progress to positions of increasing responsibility and 
reward:
    (i) In accordance with their abilities; and
    (ii) Through work experience and pre-service and in-service 
training.
    (f) Training, supervision and supportive services. The agency must 
have an organized training program, supervision, and supportive services 
for subprofessional staff.
    (g) Progressive expansion. The agency must provide for annual 
increase in the number of subprofessional staff until:
    (1) An appropriate ratio of subprofessional and professional staff 
has been achieved; and
    (2) There is maximum use of subprofessional staff as community aides 
in the operation of the program.



Sec.  432.32  Training and use of volunteers.

    (a) State plan requirement. A State plan must provide for the 
training and use of non-paid or partially paid volunteers in accordance 
with the requirements of this section.
    (b) Functions of volunteers. The Medicaid agency must make use of 
volunteers in:
    (1) Providing services to applicants and beneficiaries; and
    (2) Assisting any advisory committees established by the agency.

As used in this paragraph, ``partially paid volunteers'' means 
volunteers who are reimbursed only for actual expenses incurred in 
giving service, without regard to the value of the service or the time 
required to provide it.

[[Page 87]]

    (c) Staffing. The agency must designate a position whose incumbent 
is responsible for:
    (1) The development, organization, and administration of the 
volunteer program; and
    (2) Coordination of the program with related functions.
    (d) Recruitment, selection, training, and supervision. The agency 
must have:
    (1) Methods of recruitment and selection that assure participation 
of volunteers of all income levels, in planning capacities and service 
provision; and
    (2) A program of organized training and supervision of volunteers.
    (e) Reimbursement of expenses. The agency must--
    (1) Reimburse volunteers for actual expenses incurred in providing 
services; and
    (2) Assure that no volunteer is deprived of the opportunity to serve 
because of the expenses involved.
    (f) Progressive expansion. The agency must provide for annual 
increase in the number of volunteers used until the volunteer program is 
adequate for the achievement of the agency's service goals.



              Subpart C_Staffing and Training Expenditures



Sec.  432.45  Applicability of provisions in subpart.

    The rates of FFP specified in this subpart C do not apply to State 
personnel who conduct survey activities and certify facilities for 
participation in Medicaid, as provided for under section 1902(a)(33)(B) 
of the Act.

[50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]



Sec.  432.50  FFP: Staffing and training costs.

    (a) Availability of FFP. FFP is available in expenditures for salary 
or other compensation, fringe benefits, travel, per diem, and training, 
at rates determined on the basis of the individual's position, as 
specified in paragraph (b) of this section.
    (b) Rates of FFP. (1) For skilled professional medical personnel and 
directly supporting staff of the Medicaid agency or of other public 
agencies (as defined inSec. 432.2), the rate is 75 percent.
    (2) For personnel engaged directly in the operation of mechanized 
claims processing and information retrieval systems, the rate is 75 
percent.
    (3) For personnel engaged in the design, development, or 
installation of mechanized claims processing and information retrieval 
systems, the rate is 50 percent for training and 90 percent for all 
other costs specified in paragraph (a) of this section.
    (4) [Reserved]
    (5) For personnel administering family planning services and 
supplies, the rate is 90 percent.
    (6) For all other staff of the Medicaid agency or other public 
agencies providing services to the Medicaid agency, and for training and 
other expenses of volunteers, the rate is 50 percent.
    (c) Application of rates. (1) FFP is prorated for staff time that is 
split among functions reimbursed at different rates.
    (2) Rates of FFP in excess of 50 percent apply only to those 
portions of the individual's working time that are spent carrying out 
duties in the specified areas for which the higher rate is authorized.
    (3) The allocation of personnel and staff costs must be based on 
either the actual percentages of time spent carrying out duties in the 
specified areas, or another methodology approved by CMS.
    (d) Other limitations for FFP rate for skilled professional medical 
personnel and directly supporting staff--(1) Medicaid agency personnel 
and staff. The rate of 75 percent FFP is available for skilled 
professional medical personnel and directly supporting staff of the 
Medicaid agency if the following criteria, as applicable, are met:
    (i) The expenditures are for activities that are directly related to 
the administration of the Medicaid program, and as such do not include 
expenditures for medical assistance;
    (ii) The skilled professional medical personnel have professional 
education and training in the field of medical care or appropriate 
medical practice. ``Professional education and training'' means the 
completion of a 2-year or longer program leading to an academic degree 
or certificate in a medically related profession. This is demonstrated

[[Page 88]]

by possession of a medical license, certificate, or other document 
issued by a recognized National or State medical licensure or certifying 
organization or a degree in a medical field issued by a college or 
university certified by a professional medical organization. Experience 
in the administration, direction, or implementation of the Medicaid 
program is not considered the equivalent of professional training in a 
field of medical care.
    (iii) The skilled professional medical personnel are in positions 
that have duties and responsibilities that require those professional 
medical knowledge and skills.
    (iv) A State-documented employer-employee relationship exists 
between the Medicaid agency and the skilled professional medical 
personnel and directly supporting staff; and
    (v) The directly supporting staff are secretarial, stenographic, and 
copying personnel and file and records clerks who provide clerical 
services that are directly necessary for the completion of the 
professional medical responsibilities and functions of the skilled 
professional medical staff. The skilled professional medical staff must 
directly supervise the supporting staff and the performance of the 
supporting staff's work.
    (2) Staff of other public agencies. The rate of 75 percent FFP is 
available for staff of other public agencies if the requirements 
specified in paragraph (d)(1) of this section are met and the public 
agency has a written agreement with the Medicaid agency to verify that 
these requirements are met.
    (e) Limitations on FFP rates for staff in mechanized claims 
processing and information retrieval systems. The special matching rates 
for persons working on mechanized claims processing and information 
retrieval systems (paragraphs (b)(2) and (3) of this section) are 
applicable only if the design, development and installation, or the 
operation, have been approved by the Administrator in accordance with 
part 433, subchapter C, of this chapter.

[43 FR 45199, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 
50 FR 46663, Nov. 12, 1985]



Sec.  432.55  Reporting training and administrative costs.

    (a) Scope. This section identifies activities and costs to be 
reported as training or administrative costs on quarterly estimate and 
expenditure reports to CMS.
    (b) Activities and costs to be reported on training expenditures. 
(1) For fulltime training (with no assigned agency duties): Salaries, 
fringe benefits, dependency allowances, travel, tuition, books, and 
educational supplies.
    (2) For part-time training: Travel, per diem, tuition, books and 
educational supplies.
    (3) For State and local Medicaid agency staff development personnel 
(including supporting staff) assigned fulltime training functions: 
Salaries, fringe benefits, travel, and per diem. Costs for staff 
spending less than full time on training for the Medicaid program must 
be allocated between training and administration in accordance with 
Sec.  433.34 of this subchapter.
    (4) For experts engaged to develop or conduct special programs: 
Salary, fringe benefits, travel, and per diem.
    (5) For agency training activities directly related to the program: 
Use of space, postage, teaching supplies, and purchase or development of 
teaching materials and equipment, for example, books and audiovisual 
aids.
    (6) For field instruction in Medicaid: Instructors' salaries and 
fringe benefits, rental of space, travel, clerical assistance, teaching 
materials and equipment such as books and audiovisual aids.
    (c) Activities and costs not to be reported as training 
expenditures. The following activities are to be reported as 
administrative costs:
    (1) Salaries of supervisors (day-to-day supervision of staff is not 
a training activity); and
    (2) Cost of employing students on a temporary basis, for instance, 
during summer vacation.

[43 FR 45199, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979]

[[Page 89]]



PART 433_STATE FISCAL ADMINISTRATION--Table of Contents



Sec.
433.1 Purpose.

    Subpart A_Federal Matching and General Administration Provisions

433.8 [Reserved]
433.10 Rates of FFP for program services.
433.11 Enhanced FMAP rate for children.
433.15 Rates of FFP for administration.
433.32 Fiscal policies and accountability.
433.34 Cost allocation.
433.35 Equipment--Federal financial participation.
433.36 Liens and recoveries.
433.37 Reporting provider payments to Internal Revenue Service.
433.38 Interest charge on disallowed claims for FFP.
433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.

     Subpart B_General Administrative Requirements State Financial 
                              Participation

433.50 Basis, scope, and applicability.
433.51 Funds from units of government as the State share of financial 
          participation.
433.52 General definitions.
433.53 State plan requirements.
433.54 Bona fide donations.
433.55 Health care-related taxes defined.
433.56 Classes of health care services and providers defined.
433.57 General rules regarding revenues from provider-related donations 
          and health care-related taxes.
433.58-433.60 [Reserved]
433.66 Permissible provider-related donations.
433.67 Limitations on level of FFP for permissible provider-related 
          donations.
433.68 Permissible health care-related taxes.
433.70 Limitation on level of FFP for revenues from health care-related 
          taxes.
433.72 Waiver provisions applicable to health care-related taxes.
433.74 Reporting requirements.

Subpart C_Mechanized Claims Processing and Information Retrieval Systems

433.110 Basis, purpose, and applicability.
433.111 Definitions.
433.112 FFP for design, development, installation or enhancement of 
          mechanized claims processing and information retrieval 
          systems.
433.114 Procedures for obtaining initial approval; notice of decision.
433.116 FFP for operation of mechanized claims processing and 
          information retrieval systems.
433.117 Initial approval of replacement systems.
433.119 Conditions for reapproval; notice of decision.
433.120 Procedures for reduction of FFP after reapproval review.
433.121 Reconsideration of the decision to reduce FFP after reapproval 
          review.
433.122 Reapproval of a disapproved system.
433.123 Notification of changes in system requirements, performance 
          standards or other conditions for approval or reapproval.
433.127 Termination of FFP for failure to provide access to claims 
          processing and information retrieval systems.
433.131 Waiver for noncompliance with conditions of approval and 
          reapproval.

                     Subpart D_Third Party Liability

433.135 Basis and purpose.
433.136 Definitions.
433.137 State plan requirements.
433.138 Identifying liable third parties.
433.139 Payment of claims.
433.140 FFP and repayment of Federal share.

                    Assignment of Rights to Benefits

433.145 Assignment of rights to benefits--State plan requirements.
433.146 Rights assigned; assignment method.
433.147 Cooperation in establishing paternity and in obtaining medical 
          support and payments and in identifying and providing 
          information to assist in pursuing third parties who may be 
          liable to pay.
433.148 Denial or termination of eligibility.

              Cooperative Agreements and Incentive Payments

433.151 Cooperative agreements and incentive payments--State plan 
          requirements.
433.152 Requirements for cooperative agreements for third party 
          collections.
433.153 Incentive payments to States and political subdivisions.
433.154 Distribution of collections.

   Subpart E_Methodologies for Determining Federal Share of Medicaid 
                Expenditures for Adult Eligibility Group

433.202 Scope.
433.204 Definitions.
433.206 Threshold methodology.

    Subpart F_Refunding of Federal Share of Medicaid Overpayment to 
                                Providers

433.300 Basis.
433.302 Scope of subpart.
433.304 Definitions.
433.310 Applicability of requirements.
433.312 Basic requirements for refunds.

[[Page 90]]

433.316 When discovery of overpayment occurs and its significance.
433.318 Overpayments involving providers who are bankrupt or out of 
          business.
433.320 Procedures for refunds to CMS.
433.322 Maintenance of records.

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

    Source: 43 FR 45201, Sept. 29, 1978, unless otherwise noted.



Sec.  433.1  Purpose.

    This part specifies the rates of FFP for services and 
administration, and prescribes requirements, prohibitions, and FFP 
conditions relating to State fiscal activities.



    Subpart A_Federal Matching and General Administration Provisions



Sec.  433.8  [Reserved]



Sec.  433.10  Rates of FFP for program services.

    (a) Basis. Sections 1903(a)(1), 1903(g), 1905(b), 1905(y), and 
1905(z) provide for payments to States, on the basis of a Federal 
medical assistance percentage, for part of their expenditures for 
services under an approved State plan.
    (b) Federal medical assistance percentage (FMAP)--Computations. The 
FMAP is determined by the formula described in section 1905(b) of the 
Act. Under the formula, if a State's per capita income is equal to the 
national average per capita income, the Federal share is 55 percent. If 
a State's per capita income exceeds the national average, the Federal 
share is lower, with a statutory minimum of 50 percent. If a State's per 
capita income is lower than the national average, the Federal share is 
increased, with a statutory maximum of 83 percent. The formula used in 
determining the State and Federal share is as follows:

State Share = [(State per capita income) \2\/(National per capita 
          income) \2\] x 45 percent
Federal share=100 percent minus the State share (with a minimum of 50 
          percent and a maximum of 83 percent)


The formula provides for squaring both the State and national average 
per capita incomes; this procedure magnifies any difference between the 
State's income and the national average. Consequently, Federal matching 
to lower income States is increased, and Federal matching to higher 
income States is decreased, within the statutory 50-83 percent limits. 
The FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa is set by statute at 50 percent and is 
subject to dollar limitations specified in section 1108 of the Act.
    (c) Special provisions. (1) Under section 1903(a)(5) of the Act, the 
Federal share of State expenditures for family planning services is 90 
percent.
    (2) Under section 1905(b), the Federal share of State expenditures 
for services provided through Indian Health Service facilities is 100 
percent.
    (3) Under section 1903(g), the FMAP is reduced if the State does not 
have an effective program to control use of institutional services.
    (4) Under section 1905(b) of the Social Security Act, the Federal 
share of State expenditures described inSec. 433.11(a) for services 
provided to children, is the enhanced FMAP rate determined in accordance 
withSec. 457.622(b) of this chapter, subject to the conditions 
explained inSec. 433.11(b).
    (5)(i) Under section 1933(d) of the Act, the Federal share of State 
expenditures for Medicare Part B premiums described in section 
1905(p)(3)(A)(ii) of the Act on behalf of Qualifying Individuals 
described in section 1902(a)(10)(E)(iv) of the Act, is 100 percent, to 
the extent that the assistance does not exceed the State's allocation 
under paragraph (c)(5)(ii) of this section. To the extent that the 
assistance exceeds that allocation, the Federal share is 0 percent.
    (ii) Under section 1933(c)(2) of the Act and subject to paragraph 
(c)(5)(iii) of this section, the allocation to each State is equal to 
the total allocation specified in section 1933(g) of the Act multiplied 
by the Secretary's estimate of the ratio of the total number of 
individuals described in section 1902(a)(10)(E)(iv) of the Act in the 
State to the total number of individuals described in section 
1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating 
that ratio, the Secretary will use data from the U.S. Census Bureau.
    (iii) If, based on projected expenditures for a fiscal year, or for 
a shorter

[[Page 91]]

period for which funding is available under section 1933 of the Act, the 
Secretary determines that the expenditures described in paragraph 
(c)(5)(i) of this section for one or more States are projected to exceed 
the allocation made to the State, the Secretary may adjust each State's 
fiscal year allocation, as follows:
    (A) The Secretary will compare each State's projected total 
expenditures for the expenses described in paragraph (c)(5)(i) of this 
section to the State's initial allocation determined under paragraph 
(c)(5)(ii) of this section, to determine the extent of each State's 
projected surplus or deficit.
    (B) The surplus of each State with a projected surplus, as 
determined in accordance with paragraph (c)(5)(iii)(A) of this section 
will be added together to arrive at the Total Projected Surplus.
    (C) The deficit of each State with a projected deficit, as 
determined in accordance with paragraph (c)(5)(iii)(A) of this section 
will be added together to arrive at the Total Projected Deficit.
    (D) Each State with a projected deficit will receive an additional 
allocation equal to the amount of its projected deficit, or a prorated 
amount of such deficit, if the Total Projected Deficit is greater than 
the Total Projected Surplus. Except as described in paragraph 
(c)(5)(iii)(E) of this section, the amount to be reallocated from each 
State with a projected surplus will be equal to A x B, where A equals 
the Total Projected Deficit and B equals the amount of the State's 
projected surplus as a percentage of the Total Projected Surplus.
    (E) If the Total Projected Deficit determined under paragraph 
(c)(5)(iii)(C) of this section is greater than the Total Projected 
Surplus determined under paragraph (c)(5)(iii)(B) of this section, each 
State with a projected deficit will receive an additional allocation 
amount equal to the amount of the Total Projected Surplus multiplied by 
the amount of the projected deficit for such State as a percentage of 
the Total Projected Deficit. The amount to be reallocated from each 
State with a projected surplus will be equal to the amount of the 
projected surplus.
    (iv) CMS will notify States of any changes in allotments resulting 
from any reallocations.
    (v) The provisions in paragraph (c)(5) of this section will be in 
effect through the end of the period for which funding authority is 
available under section 1933 of the Act.
    (6)(i) Newly eligible FMAP. Beginning January 1, 2014, under section 
1905(y) of the Act, the FMAP for a State that is one of the 50 States or 
the District of Columbia, including a State that meets the definition of 
expansion State inSec. 433.204(b), for amounts expended by such State 
for medical assistance for newly eligible individuals, as defined in 
Sec.  433.204(a)(1), will be an increased FMAP equal to:
    (A) 100 percent, for calendar quarters in calendar years (CYs) 2014 
through 2016;
    (B) 95 percent, for calendar quarters in CY 2017;
    (C) 94 percent, for calendar quarters in CY 2018;
    (D) 93 percent, for calendar quarters in CY 2019;
    (E) 90 percent, for calendar quarters in CY 2020 and all subsequent 
calendar years.
    (ii) The FMAP specified in paragraph (c)(6)(i) of this section will 
apply to amounts expended by a State for medical assistance for newly 
eligible individuals in accordance with the requirements of the 
methodology applied by the State underSec. 433.206.
    (7)(i) Temporary FMAP increase. During the period January 1, 2014, 
through December 31, 2015, under section 1905(z)(1) of the Act for a 
State described in paragraph (c)(7)(ii) of this section, the FMAP 
determined under paragraph (b) of this section will be increased by 2.2 
percentage points.
    (ii) A State qualifies for the targeted increase in the FMAP under 
paragraph (c)(7)(i) of this section, if the State:
    (A) Is an expansion State, as described inSec. 433.204(b) of this 
section;
    (B) Does not qualify for any payments on the basis of the increased 
FMAP under paragraph (c)(6) of this section, as determined by the 
Secretary; and
    (C) Has not been approved by the Secretary to divert a portion of 
the disproportionate share hospital allotment

[[Page 92]]

for the State under section 1923(f) of the Act to the costs of providing 
medical assistance or other health benefits coverage under a 
demonstration that is in effect on July 1, 2009.
    (iii) The increased FMAP under paragraph (c)(7)(i) of this section 
is available for amounts expended by the State for medical assistance 
for individuals that are not newly eligible as defined inSec. 
433.204(a)(1).
    (8) Expansion State FMAP. Beginning January 1, 2014, under section 
1905(z)(2) of the Act, the FMAP for an expansion State defined inSec. 
433.204(b), for amounts expended by such State for medical assistance 
for individuals described inSec. 435.119 of this chapter who are not 
newly eligible as defined inSec. 433.204(a)(1), and who are 
nonpregnant childless adults with respect to whom the State may require 
enrollment in benchmark coverage under section 1937 of the Act, will be 
determined in accordance with the expansion State FMAP formula in 
paragraph (c)(8)(i).
[GRAPHIC] [TIFF OMITTED] TR02AP13.029

    (i) Expansion State FMAP.
    (ii) Transition percentage. For purposes of paragraph (c)(8)(i) of 
this section, the transition percentage is equal to:
    (A) 50 percent, for calendar quarters in CY 2014;
    (B) 60 percent, for calendar quarters in CY 2015;
    (C) 70 percent, for calendar quarters in CY 2016;
    (D) 80 percent, for calendar quarters in CY 2017;
    (E) 90 percent, for calendar quarters in CY 2018; and
    (F) 100 percent, for calendar quarters in CY 2019 and all subsequent 
calendar years.

(Sections 1902(a)(10), 1933 of the Social Security Act (42 U.S.C. 
1396a), and Pub. L. 105-33)

[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48559, Oct. 1, 1981; 
51 FR 41350, Nov. 14, 1986; 54 FR 21066, May 16, 1989; 66 FR 2666, Jan. 
11, 2001; 70 FR 50220, Aug. 26, 2005; 71 FR 25092, Apr. 28, 2006; 73 FR 
70893, Nov. 24, 2008; 78 FR 19942, April 2, 2013]



Sec.  433.11  Enhanced FMAP rate for children.

    (a) Subject to the conditions in paragraph (b) of this section, the 
enhanced FMAP determined in accordance withSec. 457.622 of this 
chapter will be used to determine the Federal share of State 
expenditures, except any expenditures pursuant to section 1923 of the 
Act for payments to disproportionate share hospitals for--
    (1) Services provided to optional targeted low-income children 
described inSec. 435.4 orSec. 436.3 of this chapter; and
    (2) Services provided to children born before October 1, 1983, with 
or without group health coverage or other health insurance coverage, who 
would be described in section 1902(l)(1)(D) of the Act (poverty-level-
related children's groups) if--
    (i) They had been born on or after that date; and
    (ii) They would not qualify for medical assistance under the State 
plan in effect on March 31, 1997.
    (b) Enhanced FMAP is not available if--
    (1) A State adopts income and resource standards and methodologies 
for purposes of determining a child's eligibility under the Medicaid 
State plan that are more restrictive than those applied under policies 
of the State plan (as described in the definition of optional targeted 
low-income children atSec. 435.4 of this chapter) in effect on June 1, 
1997; or
    (2) No funds are available in the State's title XXI allotment, as 
determined under part 457, subpart F of this chapter for the quarter 
enhanced FMAP is claimed; or
    (3) The State fails to maintain a valid method of identifying 
services provided on behalf of children listed in paragraph (a) of this 
section.

[66 FR 2666, Jan. 11, 2001]



Sec.  433.15  Rates of FFP for administration.

    (a) Basis. Section 1903(a) (2) through (5) and (7) of the Act 
provide for payments to States, on the basis of specified percentages, 
for part of their expenditures for administration of an approved State 
plan.
    (b) Activities and rates. (1) [Reserved]

[[Page 93]]

    (2) Administration of family planning services: 90 percent. (Section 
1903 (a)(5); 42 CFR 432.50(b)(5).)
    (3) Design, development, or installation of mechanized claims 
processing and information retrieval systems: 90 percent. (Section 
1903(a)(3)(A)(i); 42 CFR part 433, subpart C, andSec. 432.50 (b)(3).)
    (4) Operation of mechanized claims processing and information 
retrieval systems: 75 percent. (Section 1903(a) (3)(B); 42 CFR part 433, 
subpart C andSec. 432.50(b)(2).)
    (5) Compensation and training of skilled professional medical 
personnel and staff directly supporting those personnel if the criteria 
specified inSec. 432.50 (c) and (d) are met: 75 percent. (Section 
1903(a)(2); 42 CFR 432.50(b)(1).)
    (6)(i) Funds expended for the performance of medical and utilization 
review by a QIO under a contract entered into under section 1902(d) of 
the Act: 75 percent (section 1903(a)(3)(C) of the Act).
    (ii) If a State contracts for medical and utilization review with 
any individual or organization not designated under Part B of Title XI 
of the Act, funds expended for such review will be reimbursed as 
provided in paragraph (b)(7) of this section.
    (7) All other activities the Secretary finds necessary for proper 
and efficient administration of the State plan: 50 percent. (Section 
1903(a)(7).) (See alsoSec. 455.300 of this subchapter for FFP at 90 
percent for State Medicaid fraud control units under section 
1903(a)(6).)
    (8) Nurse aide training and competency evaluation programs and 
competency evaluation programs described in 1919(e)(1) of the Act: for 
calendar quarters beginning on or after July 1, 1988 and before July 1, 
1990: The lesser of 90% or the Federal medical assistance percentage 
plus 25 percentage points; for calendar quarters beginning on or after 
October 1, 1990: 50%. (Section 1903(a)(2)(B) of the Act.)
    (9) Preadmission screening and annual resident review (PASARR) 
activities conducted by the State: 75 percent. (Sections 1903(a)(2)(C) 
and 1919(e)(7); 42 CFR part 483, subparts C and E.)
    (10) Funds expended for the performance of external quality review 
or the related activities described inSec. 438.358 of this chapter 
when they are performed by an external quality review organization as 
defined inSec. 438.320 of this chapter: 75 percent.

[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 
46 FR 54744, Nov. 4, 1981; 50 FR 15327, Apr. 17, 1985; 50 FR 46664, Nov. 
12, 1985; 56 FR 48918, Sept. 26, 1991; 57 FR 56506, Nov. 30, 1992; 68 FR 
3635, Jan. 24, 2003]



Sec.  433.32  Fiscal policies and accountability.

    A State plan must provide that the Medicaid agency and, where 
applicable, local agencies administering the plan will--
    (a) Maintain an accounting system and supporting fiscal records to 
assure that claims for Federal funds are in accord with applicable 
Federal requirements;
    (b) Retain records for 3 years from date of submission of a final 
expenditure report;
    (c) Retain records beyond the 3-year period if audit findings have 
not been resolved; and
    (d) Retain records for nonexpendable property acquired under a 
Federal grant for 3 years from the date of final disposition of that 
property.

[44 FR 17935, Mar. 23, 1979]



Sec.  433.34  Cost allocation.

    A State plan under Title XIX of the Social Security Act must provide 
that the single or appropriate Agency will have an approved cost 
allocation plan on file with the Department in accordance with the 
requirements contained in subpart E of 45 CFR part 95. Subpart E also 
sets forth the effect on FFP if the requirements contained in that 
subpart are not met.

[47 FR 17490, Apr. 23, 1982]



Sec.  433.35  Equipment--Federal financial participation.

    Claims for Federal financial participation in the cost of equipment 
under the Medicaid Program are determined in accordance with subpart G 
of 45 CFR part 95. Requirements concerning the management and 
disposition of equipment under the Medicaid Program are also prescribed 
in subpart G of 45 CFR part 95.

[47 FR 41564, Sept. 21, 1982]

[[Page 94]]



Sec.  433.36  Liens and recoveries.

    (a) Basis and purpose. This section implements sections 1902(a)(18) 
and 1917(a) and (b) of the Act, which describe the conditions under 
which an agency may impose a lien against a beneficiary's property, and 
when an agency may make an adjustment or recover funds in satisfaction 
of the claim against the individual's estate or real property.
    (b) Definition of property. For purposes of this section, 
``property'' includes the homestead and all other personal and real 
property in which the beneficiary has a legal interest.
    (c) State plan requirement. If a State chooses to impose a lien 
against an individual's real property (or as provided in paragraph 
(g)(1) of this section, personal property), the State plan must provide 
that the provisions of paragraphs (d) through (i) of this section are 
met.
    (d) Procedures. The State plan must specify the process by which the 
State will determine that an institutionalized individual cannot 
reasonably be expected to be discharged from the medical institution and 
return home as provided in paragraph (g)(2)(ii) of this section. The 
description of the process must include the type of notice to be given 
the individual, the process by which the individual will be given the 
opportunity for a hearing, the hearing procedures, and by whom and on 
what basis the determination that the individual cannot reasonably be 
expected to be discharged from the institution will be made. The notice 
to the individual must explain what is meant by the term lien, and that 
imposing a lien does not mean that the individual will lose ownership of 
the home.
    (e) Definitions. The State plan must define the following terms used 
in this section:
    (1) Individual's home.
    (2) Equity interest in home.
    (3) Residing in the home for at least 1 (or 2) year(s).
    (4) On a continuing basis.
    (5) Discharge from the medical institution and return home.
    (6) Lawfully residing.
    (f) Exception. The State plan must specify the criteria by which a 
son or daughter can establish to the agency's satisfaction that he or 
she has been providing care which permitted the individual to reside at 
home rather than in an institution, as provided in paragraph 
(h)(2)(iii)(B) of this section.
    (g) Lien provisions--(1) Incorrect payments. The agency may place a 
lien against an individual's property, both personal and real, before 
his or her death because of Medicaid claims paid or to be paid on behalf 
of that individual following a court judgement which determined that 
benefits were incorrectly paid for that individual.
    (2) Correct payments. Except as provided in paragraph (g)(3) of this 
section, the agency may place a lien against the real property of an 
individual at any age before his or her death because of Medicaid claims 
paid or to be paid for that individual when--
    (i) An individual is an inpatient of a medical institution and must, 
as a condition of receiving services in the institution under the State 
plan, apply his or her income to the cost of care as provided in 
Sec.Sec. 435.725, 435.832 and 436.832; and
    (ii) The agency determines that he or she cannot reasonably be 
expected to be discharged and return home. The agency must notify the 
individual of its intention to make that determination and provide an 
opportunity for a hearing in accordance with State established 
procedures before the determination is made. The notice to an individual 
must include an explanation of liens and the effect on an individual's 
ownership of property.
    (3) Restrictions on placing liens. The agency may not place a lien 
on an individual's home under paragraph (g)(2) of this section if any of 
the following individuals is lawfully residing in the home:
    (i) The spouse;
    (ii) The individual's child who is under age 21 or blind or disabled 
as defined in the State plan; or
    (iii) The individual's sibling (who has an equity interest in the 
home, and who was residing in the individual's home for at least one 
year immediately before the date the individual was admitted to the 
medical institution).
    (4) Termination of lien. Any lien imposed on an individual's real 
property under paragraph (g)(2) of this section

[[Page 95]]

will dissolve when that individual is discharged from the medical 
institution and returns home.
    (h) Adjustments and recoveries. (1) The agency may make an 
adjustment or recover funds for Medicaid claims correctly paid for an 
individual as follows:
    (i) From the estate of any individual who was 65 years of age or 
older when he or she received Medicaid; and
    (ii) From the estate or upon sale of the property subject to a lien 
when the individual is institutionalized as described in paragraph 
(g)(2) of this section.
    (2) The agency may make an adjustment or recovery under paragraph 
(h)(1) of this section only:
    (i) After the death of the individual's surviving spouse; and
    (ii) When the individual has no surviving child under age 21 or 
blind or disabled as defined in the State plan; and
    (iii) In the case of liens placed on an individual's home under 
paragraph (g)(2) of this section, when there is no--
    (A) Sibling of the individual residing in the home, who has resided 
there for at least one year immediately before the date of the 
individual's admission to the institution, and has resided there on a 
continuous basis since that time; or
    (B) Son or daughter of the individual residing in the home, who has 
resided there for at least two years immediately before the date of the 
individual's admission to the institution, has resided there on a 
continuous basis since that time, and can establish to the agency's 
satisfaction that he or she has been providing care which permitted the 
individual to reside at home rather than in an institution.
    (i) Prohibition of reduction of money payments. No money payment 
under another program may be reduced as a means of recovering Medicaid 
claims incorrectly paid.

[43 FR 45201, Sept. 29, 1978, as amended at 47 FR 43647, Oct. 1, 1982; 
47 FR 49847, Nov. 3, 1982]



Sec.  433.37  Reporting provider payments to Internal Revenue Service.

    (a) Basis and purpose. This section, based on section 1902(a)(4) of 
the Act, prescribes requirements concerning--
    (1) Identification of providers; and
    (2) Compliance with the information reporting requirements of the 
Internal Revenue Code.
    (b) Identification of providers. A State plan must provide for the 
identification of providers by--
    (1) Social security number if--
    (i) The provider is in solo practice; or
    (ii) The provider is not in solo practice but billing is by the 
individual practitioner; or
    (2) Employer identification number for all other providers.
    (c) Compliance with section 6041 of the Internal Revenue Code. The 
plan must provide that the Medicaid agency complies with the information 
reporting requirements of section 6041 of the Internal Revenue Code (26 
U.S.C. 6041). Section 6041 requires the filing of annual information 
returns showing amounts paid to providers, who are identified by name, 
address, and social security number or employer identification number.



Sec.  433.38  Interest charge on disallowed claims for FFP.

    (a) Basis and scope. This section is based on section 1903(d)(5) of 
the Act, which requires that the Secretary charge a State interest on 
the Federal share of claims that have been disallowed but have been 
retained by the State during the administrative appeals process under 
section 1116(e) of the Act and the Secretary later recovers after the 
administrative appeals process has been completed. This section does not 
apply to--
    (1) Claims that have been deferred by the Secretary and disallowed 
within the time limits ofSec. 430.40 of this chapter. Deferral of 
claims for FFP; or
    (2) Claims for expenditures that have never been paid on a grant 
award; or
    (3) Disallowances of any claims for services furnished before 
October 1, 1980, regardless of the date of the claim submitted to CMS.
    (b) General principles. (1) CMS will charge the State interest on 
FFP when--
    (i) CMS has notified the Medicaid agency underSec. 430.42 of this 
subpart that a State's claim for FFP is not allowable;

[[Page 96]]

    (ii) The agency has requested a reconsideration of the disallowance 
to the Administrator underSec. 430.42 of this chapter and has chosen 
to retain the FFP during the administrative reconsideration process in 
accordance with paragraph (c)(2) of this section;
    (iii)(A) CMS has made a final determination upholding part or all of 
the disallowance;
    (B) The agency has withdrawn its request for administrative 
reconsideration on all or part of the disallowance; or
    (C) The agency has reversed its decision to retain the funds without 
withdrawing its request for administrative reconsideration and CMS 
upholds all or part of the disallowance.
    (iv) The agency has appealed the disallowance to the Departmental 
Appeals Board under 45 CFR Part 16 and has chosen to retain the FFP 
during the administrative appeals process in accordance with paragraph 
(c)(2) of this section.
    (v)(A)The Board has made a final determination upholding part or all 
of the disallowance;
    (B) The agency has withdrawn its appeal on all or part of the 
disallowance; or
    (C) The agency has reversed its decision to retain the funds without 
withdrawing its appeal and the Board upholds all or part of the 
disallowance.
    (2) If the courts overturn, in whole or in part, a Board decision 
that has sustained a disallowance, CMS will return the principal and the 
interest collected on the funds that were disallowed, upon the 
completion of all judicial appeals.
    (3) Unless an agency decides to withdraw its request for 
administrative reconsideration or appeal on part of the disallowance and 
therefore returns only that part of the funds on which it has withdrawn 
its request for administrative reconsideration or appeal, any decision 
to retain or return disallowed funds must apply to the entire amount in 
dispute.
    (4) If the agency elects to have CMS recover the disputed amount, it 
may not reverse that election.
    (c) State procedures. (1) If the Medicaid agency has requested 
administrative reconsideration to CMS or appeal of a disallowance to the 
Board and wishes to retain the disallowed funds until CMS or the Board 
issues a final determination, the agency must notify the CMS Regional 
Office in writing of its decision to do so.
    (2) The agency must mail its notice to the CMS Regional Office 
within 60 days of the date of receipt of the notice of the disallowance, 
as established by the certified mail receipt accompanying the notice.
    (3) If the agency withdraws its decision to retain the FFP or its 
request for administrative reconsideration or appeal on all or part of 
the FFP, the agency must notify CMS in writing.
    (d) Amount of interest charged. (1) If the agency retains funds that 
later become subject to an interest charge under paragraph (b) of this 
section, CMS will offset from the next Medicaid grant award to the State 
the amount of the funds subject to the interest charge, plus interest on 
that amount.
    (2) The interest charge is at the rate CMS determines to be the 
average of the bond equivalent of the weekly 90-day Treasury bill 
auction rates during the period for which interest will be charged.
    (e) Duration of interest. (1) The interest charge on the amount of 
disallowed FFP retained by the agency will begin on the date of the 
disallowance notice and end--
    (i) On the date of the final determination by CMS of the 
administrative reconsideration if the State elects not to appeal to the 
Board, or final determination by the Board;
    (ii) On the date CMS receives written notice from the State that it 
is withdrawing its request for administrative reconsideration and elects 
not to appeal to the Board, or withdraws its appeal to the Board on all 
of the disallowed funds; or
    (iii) If the agency withdraws its request for administrative 
reconsideration on part of the funds on--
    (A) The date CMS receives written notice from the agency that it is 
withdrawing its request for administrative reconsideration on a 
specified part of the disallowed funds for the part on which the agency 
withdraws its request for administrative reconsideration; and

[[Page 97]]

    (B) The date of the final determination by CMS on the part for which 
the agency pursues its administrative reconsideration; or
    (iv) If the agency withdraws its appeal on part of the funds, on--
    (A) The date CMS receives written notice from the agency that it is 
withdrawing its appeal on a specified part of the disallowed funds for 
the part on which the agency withdraws its appeal; and
    (B) The date of the final determination by the Board on the part for 
which the agency pursues its appeal; or
    (v) If the agency has given CMS written notice of its intent to 
repay by installment, in the quarter in which the final installment is 
paid. Interest during the repayment of Federal funds by installments 
will be at the Current Value of Funds Rate (CVFR); or
    (vi) The date CMS receives written notice from the agency that it no 
longer chooses to retain the funds.
    (2) CMS will not charge interest on FFP retained by an agency for 
more than 12 months for disallowances of FFP made between October 1, 
1980 and August 13, 1981.

[48 FR 29485, June 27, 1983, as amended at 77 FR 31510, May 29, 2012]



Sec.  433.40  Treatment of uncashed or cancelled (voided) Medicaid checks.

    (a) Purpose. This section provides the rules to ensure that States 
refund the Federal portion of uncashed or cancelled (voided) checks 
under title XIX.
    (b) Definitions. As used in this section--
    Cancelled (voided) check means a Medicaid check issued by a State or 
fiscal agent which prior to its being cashed is cancelled (voided) by 
the State or fiscal agent, thus preventing disbursement of funds.
    Check means a check or warrant that a State or local agency uses to 
make a payment.
    Fiscal agent means an entity that processes or pays vendor claims 
for the Medicaid State agency.
    Uncashed check means a Medicaid check issued by a State or fiscal 
agent which has not been cashed by the payee.
    Warrant means an order by which the State agency or local agency 
without the authority to issue checks recognizes a claim. Presentation 
of a warrant by the payee to a State officer with authority to issue 
checks will result in release of funds due.
    (c) Refund of Federal financial participation (FFP) for uncashed 
checks--(1) General provisions. If a check remains uncashed beyond a 
period of 180 days from the date it was issued; i.e., the date of the 
check, it will no longer be regarded as an allowable program 
expenditure. If the State has claimed and received FFP for the amount of 
the uncashed check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the State 
must identify those checks which remain uncashed beyond a period of 180 
days after issuance. The State agency must refund all FFP that it 
received for uncashed checks by adjusting the Quarterly Statement of 
Expenditures for that quarter. If an uncashed check is cashed after the 
refund is made, the State may file a claim. The claim will be considered 
to be an adjustment to the costs for the quarter in which the check was 
originally claimed. This claim will be paid if otherwise allowed by the 
Act and the regulations issued pursuant to the Act.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (c)(2) of this section, the amount will be disallowed.
    (d) Refund of FFP for cancelled (voided) checks--(1) General 
provision. If the State has claimed and received FFP for the amount of a 
cancelled (voided) check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the State 
agency must identify those checks which were cancelled (voided). The 
State must refund all FFP that it received for cancelled (voided) checks 
by adjusting the Quarterly Statement of Expenditures for that quarter.
    (3) If the State does not refund the appropriate amount as specified 
in paragraph (d)(2) of this section, the amount will be disallowed.

[51 FR 36227, Oct. 9, 1986]

[[Page 98]]



     Subpart B_General Administrative Requirements State Financial 
                              Participation

    Source: 57 FR 55138, Nov. 24, 1992, unless otherwise noted.



Sec.  433.50  Basis, scope, and applicability.

    (a) Basis. This subpart interprets and implements--(1) Section 
1902(a)(2) of the Act which requires States to share in the cost of 
medical assistance expenditures and permit both State and local 
governments to participate in the financing of the non-Federal portion 
of medical assistance expenditures.
    (i) A unit of government is a State, a city, a county, a special 
purpose district, or other governmental unit in the State that: has 
taxing authority, has direct access to tax revenues, is a State 
university teaching hospital with direct appropriations from the State 
treasury, or is an Indian tribe as defined in Section 4 of the Indian 
Self-Determination and Education Assistance Act, as amended [25 U.S.C. 
450b].
    (ii) A health care provider may be considered a unit of government 
only when it is operated by a unit of government as demonstrated by a 
showing of the following:
    (A) The health care provider has generally applicable taxing 
authority; or
    (B) The health care provider has direct access to generally 
applicable tax revenues. This means the health care provider is able to 
directly access funding as an integral part of a unit of government with 
taxing authority which is legally obligated to fund the health care 
provider's expenses, liabilities, and deficits, so that a contractual 
arrangement with the State or local government is not the primary or 
sole basis for the health care provider to receive tax revenues;
    (C) The health care provider receives appropriated funding as a 
State university teaching hospital providing supervised teaching 
experiences to graduate medical school interns and residents enrolled in 
a State university in the State; or
    (D) The health care provider is an Indian Tribe or Tribal 
organization (as those terms are defined in Section 4 of the Indian 
Self-Determination and Education Assistance Act (ISDEAA); 25 U.S.C. 
450b) and meets the following criteria:
    (1) If the entity is a Tribal organization, it is--
    (a) Carrying out health programs of the IHS, including health 
services which are eligible for reimbursement by Medicaid, under a 
contract or compact entered into between the Tribal organization and the 
Indian Health Service pursuant to the Indian Self-Determination and 
Education Assistance Act, Public Law 93-638, as amended, and
    (b) Either the recognized governing body of an Indian tribe, or an 
entity which is formed solely by, wholly owned or comprised of, and 
exclusively controlled by Indian tribes.
    (2) Section 1903(a) of the Act, which requires the Secretary to pay 
each State an amount equal to the Federal medical assistance percentage 
of the total amount expended as medical assistance under the State's 
plan.
    (3) Section 1903(w) of the Act, which specifies the treatment of 
revenues from provider-related donations and health care-related taxes 
in determining a State's medical assistance expenditures for which 
Federal financial participation (FFP) is available under the Medicaid 
program.
    (b) Scope. This subpart--
    (1) Specifies State plan requirements for State financial 
participation in expenditures for medical assistance.
    (2) Defines provider-related donations and health care-related taxes 
that may be received without a reduction in FFP.
    (3) Specifies rules for revenues received from provider-related 
donations and health care-related taxes during a transition period.
    (4) Establishes limitations on FFP when States receive funds from 
provider-related donations and revenues generated by health care-related 
taxes.
    (c) Applicability. The provisions of this subpart apply to the 50 
States and the District of Columbia, but not to any State whose entire 
Medicaid program is operated under a waiver granted under section 1115 
of the Act.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993; 72 FR 29832, May 
29, 2007; 72 FR 29832, May 29, 2007; 75 FR 73975, Nov. 30, 2010]

[[Page 99]]



Sec.  433.51  Public Funds as the State share of financial participation.

    (a) Public Funds may be considered as the State's share in claiming 
FFP if they meet the conditions specified in paragraphs (b) and (c) of 
this section.
    (b) The public funds are appropriated directly to the State or local 
Medicaid agency, or are transferred from other public agencies 
(including Indian tribes) to the State or local agency and under its 
administrative control, or certified by the contributing public agency 
as representing expenditures eligible for FFP under this section.
    (c) The public funds are not Federal funds, or are Federal funds 
authorized by Federal law to be used to match other Federal funds.

[75 FR 73975, Nov. 30, 2010]



Sec.  433.52  General definitions.

    As used in this subpart--
    Entity related to a health care provider means--
    (1) An organization, association, corporation, or partnership formed 
by or on behalf of a health care provider;
    (2) An individual with an ownership or control interest in the 
provider, as defined in section 1124(a)(3) of the Act;
    (3) An employee, spouse, parent, child, or sibling of the provider, 
or of a person with an ownership or control interest in the provider, as 
defined in section 1124(a)(3) of the Act; or
    (4) A supplier of health care items or services or a supplier to 
providers of health care items or services.
    Health care provider means the individual or entity that receives 
any payment or payments for health care items or services provided.
    Provider-related donation means a donation or other voluntary 
payment (in cash or in kind) made directly or indirectly to a State or 
unit of local government by or on behalf of a health care provider, an 
entity related to such a health care provider, or an entity providing 
goods or services to the State for administration of the State's 
Medicaid plan.
    (1) Donations made by a health care provider to an organization, 
which in turn donates money to the State, may be considered to be a 
donation made indirectly to the State by a health care provider.
    (2) When an organization receives less than 25 percent of its 
revenues from providers and/or provider-related entities, its donations 
will not generally be presumed to be provider-related donations. Under 
these circumstances, a provider-related donation to an organization will 
not be considered a donation made indirectly to the State. However, if 
the donations from providers to an organization are subsequently 
determined to be indirect donations to the State or unit of local 
government for administration of the State's Medicaid program, then such 
donations will be considered to be health care related.
    (3) When the organization receives more than 25 percent of its 
revenue from donations from providers or provider-related entities, the 
organization always will be considered as acting on behalf of health 
care providers if it makes a donation to the State. The amount of the 
organization's donation to the State, in a State fiscal year, that will 
be considered health care related, will be based on the percentage of 
donations the organization received from the providers during that 
period.



Sec.  433.53  State plan requirements.

    A State plan must provide that--
    (a) State (as distinguished from local) funds will be used both for 
medical assistance and administration;
    (b) State funds will be used to pay at least 40 percent of the non-
Federal share of total expenditures under the plan; and
    (c) State and Federal funds will be apportioned among the political 
subdivisions of the State on a basis that assures that--
    (1) Individuals in similar circumstances will be treated similarly 
throughout the State; and
    (2) If there is local financial participation, lack of funds from 
local sources will not result in lowering the amount, duration, scope, 
or quality of services or level of administration under the plan in any 
part of the State.

[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]

[[Page 100]]



Sec.  433.54  Bona fide donations.

    (a) A bona fide donation means a provider-related donation, as 
defined inSec. 433.52, made to the State or unit of local government, 
that has no direct or indirect relationship, as described in paragraph 
(b) of this section, to Medicaid payments made to--
    (1) The health care provider;
    (2) Any related entity providing health care items and services; or
    (3) Other providers furnishing the same class of items or services 
as the provider or entity.
    (b) Provider-related donations will be determined to have no direct 
or indirect relationship to Medicaid payments if those donations are not 
returned to the individual provider, the provider class, or related 
entity under a hold harmless provision or practice, as described in 
paragraph (c) of this section.
    (c) A hold harmless practice exists if any of the following applies:
    (1) The State (or other unit of government) provides for a direct or 
indirect non-Medicaid payment to those providers or others making, or 
responsible for, the donation, and the payment amount is positively 
correlated to the donation. A positive correlation includes any positive 
relationship between these variables, even if not consistent over time.
    (2) All or any portion of the Medicaid payment to the donor, 
provider class, or related entity, varies based only on the amount of 
the donation, including where Medicaid payment is conditional on receipt 
of the donation.
    (3) The State (or other unit of government) receiving the donation 
provides for any direct or indirect payment, offset, or waiver such that 
the provision of that payment, offset, or waiver directly or indirectly 
guarantees to return any portion of the donation to the provider (or 
other parties responsible for the donation).
    (d) CMS will presume provider-related donations to be bona fide if 
the voluntary payments, including, but not limited to, gifts, 
contributions, presentations or awards, made by or on behalf of 
individual health care providers to the State, county, or any other unit 
of local government does not exceed--
    (1) $5,000 per year in the case of an individual provider donation; 
or
    (2) $50,000 per year in the case of a donation from any health care 
organizational entity.
    (e) To the extent that a donation presumed to be bona fide contains 
a hold harmless provision, as described in paragraph (c) of this 
section, it will not be considered a bona fide donation. When provider-
related donations are not bona fide, CMS will deduct this amount from 
the State's medical assistance expenditures before calculating FFP. This 
offset will apply to all years the State received such donations and any 
subsequent fiscal year in which a similar donation is received.

[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]



Sec.  433.55  Health care-related taxes defined.

    (a) A health care-related tax is a licensing fee, assessment, or 
other mandatory payment that is related to--
    (1) Health care items or services;
    (2) The provision of, or the authority to provide, the health care 
items or services; or
    (3) The payment for the health care items or services.
    (b) A tax will be considered to be related to health care items or 
services under paragraph (a)(1) of this section if at least 85 percent 
of the burden of the tax revenue falls on health care providers.
    (c) A tax is considered to be health care related if the tax is not 
limited to health care items or services, but the treatment of 
individuals or entities providing or paying for those health care items 
or services is different than the tax treatment provided to other 
individuals or entities.
    (d) A health care-related tax does not include payment of a criminal 
or civil fine or penalty, unless the fine or penalty was imposed instead 
of a tax.
    (e) Health care insurance premiums and health maintenance 
organization premiums paid by an individual or group to ensure coverage 
or enrollment are not considered to be payments for health care items 
and services for purposes of determining whether a health care-related 
tax exists.

[[Page 101]]



Sec.  433.56  Classes of health care services and providers defined.

    (a) For purposes of this subpart, each of the following will be 
considered as a separate class of health care items or services:
    (1) Inpatient hospital services;
    (2) Outpatient hospital services;
    (3) Nursing facility services (other than services of intermediate 
care facilities for individuals with intellectual disabilities);
    (4) Intermediate care facility services for individuals with 
intellectual disabilities, and similar services furnished by community-
based residences for individuals with intellectual disabilities, under a 
waiver under section 1915(c) of the Act, in a State in which, as of 
December 24, 1992, at least 85 percent of such facilities were 
classified as ICF/IIDICF/IIDs prior to the grant of the waiver;
    (5) Physician services;
    (6) Home health care services;
    (7) Outpatient prescription drugs;
    (8) Services of managed care organizations (including health 
maintenance organizations, preferred provider organizations);
    (9) Ambulatory surgical center services, as described for purposes 
of the Medicare program in section 1832(a)(2)(F)(i) of the Social 
Security Act. These services are defined to include facility services 
only and do not include surgical procedures;
    (10) Dental services;
    (11) Podiatric services;
    (12) Chiropractic services;
    (13) Optometric/optician services;
    (14) Psychological services;
    (15) Therapist services, defined to include physical therapy, speech 
therapy, occupational therapy, respiratory therapy, audiological 
services, and rehabilitative specialist services;
    (16) Nursing services, defined to include all nursing services, 
including services of nurse midwives, nurse practitioners, and private 
duty nurses;
    (17) Laboratory and x-ray services, defined as services provided in 
a licensed, free-standing laboratory or x-ray facility. This definition 
does not include laboratory or x-ray services provided in a physician's 
office, hospital inpatient department, or hospital outpatient 
department;
    (18) Emergency ambulance services; and
    (19) Other health care items or services not listed above on which 
the State has enacted a licensing or certification fee, subject to the 
following:
    (i) The fee must be broad based and uniform or the State must 
receive a waiver of these requirements;
    (ii) The payer of the fee cannot be held harmless; and
    (iii) The aggregate amount of the fee cannot exceed the State's 
estimated cost of operating the licensing or certification program.
    (b) Taxes that pertain to each class must apply to all items and 
services within the class, regardless of whether the items and services 
are furnished by or through a Medicaid-certified or licensed provider.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 
73 FR 9698, Feb. 22, 2008]



Sec.  433.57  General rules regarding revenues from provider-related 
donations and health care-related taxes.

    Effective January 1, 1992, CMS will deduct from a State's 
expenditures for medical assistance, before calculating FFP, funds from 
provider-related donations and revenues generated by health care-related 
taxes received by a State or unit of local government, in accordance 
with the requirements, conditions, and limitations of this subpart, if 
the donations and taxes are not--
    (a) Permissible provider-related donations, as specified inSec. 
433.66(b); or
    (b) Health care-related taxes, as specified inSec. 433.68(b).

[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]



Sec.Sec. 433.58-433.60  [Reserved]



Sec.  433.66  Permissible provider-related donations.

    (a) General rule. (1) Except as specified in paragraph (a)(2) of 
this section, a State may receive revenues from provider-related 
donations without a reduction in FFP, only in accordance with the 
requirements of this section.
    (2) The provisions of this section relating to provider-related 
donations for outstationed eligibility workers are effective on October 
1, 1992.

[[Page 102]]

    (b) Permissible donations. Subject to the limitations specified in 
Sec.  433.67, a State may receive, without a reduction in FFP, provider-
related donations that meet at least one of the following requirements:
    (1) The donations must be bona fide donations, as defined inSec. 
433.54; or
    (2) The donations are made by a hospital, clinic, or similar entity 
(such as a Federally-qualified health center) for the direct costs of 
State or local agency personnel who are stationed at the facility to 
determine the eligibility (including eligibility redeterminations) of 
individuals for Medicaid or to provide outreach services to eligible (or 
potentially eligible) Medicaid individuals. Direct costs of outstationed 
eligibility workers refers to the costs of training, salaries and fringe 
benefits associated with each outstationed worker and similar allocated 
costs of State or local agency support staff, and a prorated cost of 
outreach activities applicable to the outstationed workers at these 
sites. The prorated costs of outreach activities will be calculated 
taking the percent of State outstationed eligibility workers at a 
facility to total outstationed eligibility workers in the State, and 
multiplying the percent by the total cost of outreach activities in the 
State. Costs for such items as State agency overhead and provider office 
space are not allowable for this purpose.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 
73 FR 9698, Feb. 22, 2008]



Sec.  433.67  Limitations on level of FFP for permissible provider-
related donations.

    (a)(1) Limitations on bona fide donations. There are no limitations 
on the amount of bona fide provider-related donations that a State may 
receive without a reduction in FFP, as long as the bona fide donations 
meet the requirements ofSec. 433.66(b)(1).
    (2) Limitations on donations for outstationed eligibility workers. 
Effective October 1, 1992, the maximum amount of provider-related 
donations for outstationed eligibility workers, as described inSec. 
433.66(b)(2), that a State may receive without a reduction in FFP may 
not exceed 10 percent of a State's medical assistance administrative 
costs (both the Federal and State share), excluding the costs of family 
planning activities. The 10 percent limit for provider-related donations 
for outstationed eligibility workers is not included in the limit in 
effect through September 30, 1995, for health care-related taxes as 
described inSec. 433.70.
    (b) Calculation of FFP. CMS will deduct from a State's quarterly 
medical assistance expenditures, before calculating FFP, any provider-
related donations received in that quarter that do not meet the 
requirements ofSec. 433.66(b)(1) and provider donations for 
outstationed eligibility workers in excess of the limits specified under 
paragraph (a)(2) of this section.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 
73 FR 9698, Feb. 22, 2008]



Sec.  433.68  Permissible health care-related taxes.

    (a) General rule. A State may receive health care-related taxes, 
without a reduction in FFP, only in accordance with the requirements of 
this section.
    (b) Permissible health care-related taxes. Subject to the 
limitations specified inSec. 433.70, a State may receive, without a 
reduction in FFP, health care-related taxes if all of the following are 
met:
    (1) The taxes are broad based, as specified in paragraph (c) of this 
section;
    (2) The taxes are uniformly imposed throughout a jurisdiction, as 
specified in paragraph (d) of this section; and
    (3) The tax program does not violate the hold harmless provisions 
specified in paragraph (f) of this section.
    (c) Broad based health care-related taxes. (1) A health care-related 
tax will be considered to be broad based if the tax is imposed on at 
least all health care items or services in the class or providers of 
such items or services furnished by all non-Federal, non-public 
providers in the State, and is imposed uniformly, as specified in 
paragraph (d) of this section.
    (2) If a health care-related tax is imposed by a unit of local 
government, the tax must extend to all items or services or providers 
(or to all providers in a class) in the area over which

[[Page 103]]

the unit of government has jurisdiction.
    (3) A State may request a waiver from CMS of the requirement that a 
tax program be broad based, in accordance with the procedures specified 
inSec. 433.72. Waivers from the uniform and broad-based requirements 
will automatically be granted in cases of variations in licensing and 
certification fees for providers if the amount of such fees is not more 
than $1,000 annually per provider and the total amount raised by the 
State from the fees is used in the administration of the licensing or 
certification program.
    (d) Uniformly imposed health care-related taxes. A health care-
related tax will be considered to be imposed uniformly even if it 
excludes Medicaid or Medicare payments (in whole or in part), or both; 
or, in the case of a health care-related tax based on revenues or 
receipts with respect to a class of items or services (or providers of 
items or services), if it excludes either Medicaid or Medicare revenues 
with respect to a class of items or services, or both. The exclusion of 
Medicaid revenues must be applied uniformly to all providers being 
taxed.
    (1) A health care-related tax will be considered to be imposed 
uniformly if it meets any one of the following criteria:
    (i) If the tax is a licensing fee or similar tax imposed on a class 
of health care services (or providers of those health care items or 
services), the tax is the same amount for every provider furnishing 
those items or services within the class.
    (ii) If the tax is a licensing fee or similar tax imposed on a class 
of health care items or services (or providers of those items or 
services) on the basis of the number of beds (licensed or otherwise) of 
the provider, the amount of the tax is the same for each bed of each 
provider of those items or services in the class.
    (iii) If the tax is imposed on provider revenue or receipts with 
respect to a class of items or services (or providers of those health 
care items or services), the tax is imposed at a uniform rate for all 
services (or providers of those items or services) in the class on all 
the gross revenues or receipts, or on net operating revenues relating to 
the provision of all items or services in the State, unit, or 
jurisdiction. Net operating revenue means gross charges of facilities 
less any deducted amounts for bad debts, charity care, and payer 
discounts.
    (iv) The tax is imposed on items or services on a basis other than 
those specified in paragraphs (d)(1) (i) through (iii) of this section, 
e.g., an admission tax, and the State establishes to the satisfaction of 
the Secretary that the amount of the tax is the same for each provider 
of such items or services in the class.
    (2) A tax imposed with respect to a class of health care items or 
services will not be considered to be imposed uniformly if it meets 
either one of the following two criteria:
    (i) The tax provides for credits, exclusions, or deductions which 
have as its purpose, or results in, the return to providers of all, or a 
portion, of the tax paid, and it results, directly or indirectly, in a 
tax program in which--
    (A) The net impact of the tax and payments is not generally 
redistributive, as specified in paragraph (e) of this section; and
    (B) The amount of the tax is directly correlated to payments under 
the Medicaid program.
    (ii) The tax holds taxpayers harmless for the cost of the tax, as 
described in paragraph (f) of this section.
    (3) If a tax does not meet the criteria specified in paragraphs 
(d)(1)(i) through (iv) of this section, but the State establishes that 
the tax is imposed uniformly in accordance with the procedures for a 
waiver specified inSec. 433.72, the tax will be treated as a uniform 
tax.
    (e) Generally redistributive. A tax will be considered to be 
generally redistributive if it meets the requirements of this paragraph. 
If the State desires waiver of only the broad-based tax requirement, it 
must demonstrate compliance with paragraph (e)(1) of this section. If 
the State desires waiver of the uniform tax requirement, whether or not 
the tax is broad-based, it must demonstrate compliance with paragraph 
(e)(2) of this section.
    (1) Waiver of broad-based requirement only. This test is applied on 
a per class

[[Page 104]]

basis to a tax that is imposed on all revenues but excludes certain 
providers. For example, a tax that is imposed on all revenues (including 
Medicare and Medicaid) but excludes teaching hospitals would have to 
meet this test. This test cannot be used when a State excludes any or 
all Medicaid revenue from its tax in addition to the exclusion of 
providers, since the test compares the proportion of Medicaid revenue 
being taxed under the proposed tax with the proportion of Medicaid 
revenue being taxed under a broad-based tax.
    (i) A State seeking waiver of the broad-based tax requirement only 
must demonstrate that its proposed tax plan meets the requirement that 
its plan is generally redistributive by:
    (A) Calculating the proportion of the tax revenue applicable to 
Medicaid if the tax were broad based and applied to all providers or 
activities within the class (called P1);
    (B) Calculating the proportion of the tax revenue applicable to 
Medicaid under the tax program for which the State seeks a waiver 
(called P2); and
    (C) Calculating the value of P1/P2.
    (ii) If the State demonstrates to the Secretary's satisfaction that 
the value of P1/P2 is at least 1, CMS will automatically approve the 
waiver request.
    (iii) If a tax is enacted and in effect prior to August 13, 1993, 
and the State demonstrates to the Secretary's satisfaction that the 
value of P1/P2 is at least 0.90, CMS will review the waiver request. 
Such a waiver will be approved only if the following two criteria are 
met:
    (A) The value of P1/P2 is at least 0.90; and
    (B) The tax excludes or provides credits or deductions only to one 
or more of the following providers of items and services within the 
class to be taxed:
    (1) Providers that furnish no services within the class in the 
State;
    (2) Providers that do not charge for services within the class;
    (3) Rural hospitals (defined as any hospital located outside of an 
urban area as defined inSec. 412.62(f)(1)(ii) of this chapter);
    (4) Sole community hospitals as defined inSec. 412.92(a) of this 
chapter;
    (5) Physicians practicing primarily in medically underserved areas 
as defined in section 1302(7) of the Public Health Service Act;
    (6) Financially distressed hospitals if:
    (i) A financially distressed hospital is defined by the State law;
    (ii) The State law specifies reasonable standards for determining 
financially distressed hospitals, and these standards are applied 
uniformly to all hospitals in the State; and
    (iii) No more than 10 percent of nonpublic hospitals in the State 
are exempt from the tax;
    (7) Psychiatric hospitals; or
    (8) Hospitals owned and operated by HMOs.
    (iv) If a tax is enacted and in effect after August 13, 1993, and 
the State demonstrates to the Secretary's satisfaction that the value of 
P1/P2 is at least 0.95, CMS will review the waiver request. Such a 
waiver request will be approved only if the following two criteria are 
met:
    (A) The value of P1/P2 is at least 0.95; and
    (B) The tax complies with the provisions ofSec. 
433.68(e)(1)(iii)(B).
    (2) Waiver of uniform tax requirement. This test is applied on a per 
class basis to all taxes that are not uniform. This includes those taxes 
that are neither broad based (as specified inSec. 433.68(c)) nor 
uniform (as specified inSec. 433.68(d)).
    (i) A State seeking waiver of the uniform tax requirement (whether 
or not the tax is broad based) must demonstrate that its proposed tax 
plan meets the requirement that its plan is generally redistributive by:
    (A) Calculating, using ordinary least squares, the slope (designated 
as (B) (that is. the value of the x coefficient) of two linear 
regressions, in which the dependent variable is each provider's 
percentage share of the total tax paid by all taxpayers during a 12-
month period, and the independent variable is the taxpayer's ``Medicaid 
Statistic''. The term ``Medicaid Statistic'' means the number of the 
provider's taxable units applicable to the Medicaid program during a 12-
month period. If, for example, the State imposed a tax based on provider 
charges, the amount of a provider's Medicaid charges paid during a 12-
month period would be its

[[Page 105]]

``Medicaid Statistic''. If the tax were based on provider inpatient 
days, the number of the provider's Medicaid days during a 12-month 
period would be its ``Medicaid Statistic''. For the purpose of this 
test, it is not relevant that a tax program exempts Medicaid from the 
tax.
    (B) Calculating the slope (designated as B1) of the linear 
regression, as described in paragraph (e)(2)(i) of this section, for the 
State's tax program, if it were broad based and uniform.
    (C) Calculating the slope (designated as B2) of the linear 
regression, as described in paragraph (e)(2)(i) of this section, for the 
State's tax program, as proposed.
    (ii) If the State demonstrates to the Secretary's satisfaction that 
the value of B1/B2 is at least 1, CMS will automatically approve the 
waiver request.
    (iii) If the State demonstrates to the Secretary's satisfaction that 
the value of B1/B2 is at least 0.95, CMS will review the waiver request. 
Such a waiver will be approved only if the following two criteria are 
met:
    (A) The value of B1/B2 is at least 0.95; and
    (B) The tax excludes or provides credits or deductions only to one 
or more of the following providers of items and services within the 
class to be taxes:
    (1) Providers that furnish no services within the class in the 
State;
    (2) Providers that do not charge for services within the class;
    (3) Rural hospitals (defined as any hospital located outside of an 
urban area as defined inSec. 412.62(f)(1)(ii) of this chapter;
    (4) Sole community hospitals as defined inSec. 412.92(a) of this 
chapter;
    (5) Physicians practicing primarily in medically underserved areas 
as defined in section 1302(7) of the Public Health Service Act;
    (6) Financially distressed hospitals if:
    (i) A financially distressed hospital is defined by the State law;
    (ii) The State law specifies reasonable standards for determining 
financially distressed hospitals, and these standards are applied 
uniformly to all hospitals in the State; and
    (iii) No more than 10 percent of nonpublic hospitals in the State 
are exempt from the tax;
    (7) Psychiatric hospitals; or
    (8) Providers or payers with tax rates that vary based exclusively 
on regions, but only if the regional variations are coterminous with 
preexisting political (and not special purpose) boundaries. Taxes within 
each regional boundary must meet the broad-based and uniformity 
requirements as specified in paragraphs (c) and (d) of this section.
    (iv) A B1/B2 value of 0.70 will be applied to taxes that vary based 
exclusively on regional variations, and enacted and in effect prior to 
November 24, 1992, to permit such variations.
    (f) Hold harmless. A taxpayer will be considered to be held harmless 
under a tax program if any of the following conditions applies:
    (1) The State (or other unit of government) imposing the tax 
provides for a direct or indirect non-Medicaid payment to those 
providers or others paying the tax and the payment amount is positively 
correlated to either the tax amount or to the difference between the 
Medicaid payment and the tax amount. A positive correlation includes any 
positive relationship between these variables, even if not consistent 
over time.
    (2) All or any portion of the Medicaid payment to the taxpayer 
varies based only on the tax amount, including where Medicaid payment is 
conditional on receipt of the tax amount.
    (3) The State (or other unit of government) imposing the tax 
provides for any direct or indirect payment, offset, or waiver such that 
the provision of that payment, offset, or waiver directly or indirectly 
guarantees to hold taxpayers harmless for all or any portion of the tax 
amount.
    (i)(A) An indirect guarantee will be determined to exist under a two 
prong ``guarantee'' test. If the health care-related tax or taxes on 
each health care class are applied at a rate that produces revenues less 
than or equal to 6 percent of the revenues received by the taxpayer, the 
tax or taxes are permissible under this test. The phrase ``revenues 
received by the taxpayer'' refers to the net patient revenue 
attributable to the assessed permissible class of health care items or 
services. However, for the period of January 1, 2008

[[Page 106]]

through September 30, 2011, the applicable percentage of net patient 
service revenue is 5.5 percent. Compliance in State fiscal year 2008 
will be evaluated from January 1, 2008 through the last day of State 
fiscal year 2008. Beginning with State fiscal year 2009 the 5.5 percent 
tax collection will be measured on an annual State fiscal year basis.
    (B) When the tax or taxes produce revenues in excess of the 
applicable percentage of the revenue received by the taxpayer, CMS will 
consider an indirect hold harmless provision to exist if 75 percent or 
more of the taxpayers in the class receive 75 percent or more of their 
total tax costs back in enhanced Medicaid payments or other State 
payments. The second prong of the indirect hold harmless test is applied 
in the aggregate to all health care taxes applied to each class. If this 
standard is violated, the amount of tax revenue to be offset from 
medical assistance expenditures is the total amount of the taxpayers' 
revenues received by the State.
    (ii) [Reserved]

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43181, Aug. 13, 1993; 
62 FR 53572, Oct. 15, 1997; 73 FR 9698, Feb. 22, 2008]



Sec.  433.70  Limitation on level of FFP for revenues from health 
care-related taxes.

    (a) Limitations. Beginning October 1, 1995, there is no limitation 
on the amount of health care-related taxes that a State may receive 
without a reduction in FFP, as long as the health care-related taxes 
meet the requirements specified inSec. 433.68.
    (b) Calculation of FFP. CMS will deduct from a State's medical 
assistance expenditures, before calculating FFP, revenues from health 
care-related taxes that do not meet the requirements ofSec. 433.68 and 
any health care-related taxes in excess of the limits specified in 
paragraph (a)(1) of this section.

[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9699, Feb. 22, 2008]



Sec.  433.72  Waiver provisions applicable to health care-related taxes.

    (a) Bases for requesting waiver. (1) A State may submit to CMS a 
request for a waiver if a health care-related tax does not meet any or 
all of the following:
    (i) The tax does not meet the broad based criteria specified in 
Sec.  433.68c); and/or
    (ii) The tax is not imposed uniformly but meets the criteria 
specified inSec. 433.68(d)(2) or (d)(3).
    (2) When a tax that meets the criteria specified in paragraph (a)(1) 
of this section is imposed on more than one class of health care items 
or services, a separate waiver must be obtained for each class of health 
care items and services subject to the tax.
    (b) Waiver conditions. In order for CMS to approve a waiver request 
that would permit a State to receive tax revenue (within specified 
limitations) without a reduction in FFP, the State must demonstrate, to 
CMS's satisfaction, that its tax program meets all of the following 
requirements:
    (1) The net impact of the tax and any payments made to the provider 
by the State under the Medicaid program is generally redistributive, as 
described inSec. 433.68(e);
    (2) The amount of the tax is not directly correlated to Medicaid 
payments; and
    (3) The tax program does not fall within the hold harmless 
provisions specified inSec. 433.68(f).
    (c) Effective date. A waiver will be effective:
    (1) The date of enactment of the tax for programs in existence prior 
to August 13, 1993 or;
    (2) For tax programs commencing on or after August 13, 1993, on the 
first day in the quarter in which the waiver is received by CMS.

[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec.  433.74  Reporting requirements.

    (a) Beginning with the first quarter of Federal fiscal year 1993, 
each State must submit to CMS quarterly summary information on the 
source and use of all provider-related donations (including all bona 
fide and presumed-to-be bona fide donations) received by the State or 
unit of local government, and health care-related taxes collected. Each 
State must also provide any additional information requested by the

[[Page 107]]

Secretary related to any other donations made by, or any taxes imposed 
on, health care providers. States' reports must present a complete, 
accurate, and full disclosure of all of their donation and tax programs 
and expenditures.
    (b) Each State must provide the summary information specified in 
paragraph (a) of this section on a quarterly basis in accordance with 
procedures established by CMS.
    (c) Each State must maintain, in readily reviewable form, supporting 
documentation that provides a detailed description and legal basis for 
each donation and tax program being reported, as well as the source and 
use of all donations received and taxes collected. This information must 
be made available to Federal reviewers upon request.
    (d) If a State fails to comply with the reporting requirements 
contained in this section, future grant awards will be reduced by the 
amount of FFP CMS estimates is attributable to the sums raised by tax 
and donation programs as to which the State has not reported properly, 
until such time as the State complies with the reporting requirements. 
Deferrals and/or disallowances of equivalent amounts may also be imposed 
with respect to quarters for which the State has failed to report 
properly. Unless otherwise prohibited by law, FFP for those expenditures 
will be released when the State complies with all reporting 
requirements.



Subpart C_Mechanized Claims Processing and Information Retrieval Systems



Sec.  433.110  Basis, purpose, and applicability.

    (a) This subpart implements the following sections of the Act:
    (1) Section 1903(a)(3) of the Act, which provides for FFP in State 
expenditures for the design, development, or installation of mechanized 
claims processing and information retrieval systems and for the 
operation of certain systems. Additional HHS regulations and CMS 
procedures for implementing these regulations are in 45 CFR part 74, 45 
CFR part 95, subpart F, and part 11, State Medicaid Manual; and
    (2) Section 1903(r) of the Act, which imposes certain standards and 
conditions on mechanized claims processing and information retrieval 
systems (including eligibility determination systems) in order for these 
systems to be eligible for Federal funding under section 1903(a) of the 
Act.
    (ii) Requires a Federal performance review at least every three 
years of the mechanized claims processing and information retrieval 
systems; and
    (iii) Allows waivers of conditions of approval, conditions of 
reapproval, and FFP reductions under certain circumstances.
    (b) The requirements under section 1903(r) of the Act do not apply 
to Puerto Rico, Guam, the Virgin Islands, American Samoa and the 
Northern Mariana Islands.

[50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989; 
76 FR 21973, Apr. 19, 2011]



Sec.  433.111  Definitions.

    For purposes of this section:
    (a) The following terms are defined at 45 CFR part 95, subpart F 
Sec.  95.605:

``Advance Planning Document''; ``Design'' or ``System Design''; 
``Development''; ``Enhancement''; ``Hardware''; ``Installation''; 
``Operation''; and, ``Software''.

    (b) ``Mechanized claims processing and information retrieval 
system'' or ``system'' means the system of software and hardware used to 
process Medicaid claims from providers of medical care and services for 
the medical care and services furnished to beneficiaries under the 
medical assistance program and to retrieve and produce service 
utilization and management information required by the Medicaid single 
State agency and Federal Government for program administration and audit 
purposes. The system consists of
    (1) Required subsystems specified in the State Medicaid Manual;
    (2) Required changes to the required system or subsystem that are 
published in accordance withSec. 433.123 of this subpart and specified 
in the State Medicaid Manual; and
    (3) Approved enhancements to the system.

[[Page 108]]

    (c) ``Medicaid Information Technology Architecture (MITA)'' is 
defined atSec. 495.302 of this chapter.

[51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989; 
76 FR 21973, Apr. 19, 2011]



Sec.  433.112  FFP for design, development, installation or enhancement
of mechanized claims processing and information retrieval systems.

    (a) Subject to paragraph (c) of this section, FFP is available at 
the 90 percent rate in State expenditures for the design, development, 
installation, or enhancement of a mechanized claims processing and 
information retrieval system only if the APD is approved by CMS prior to 
the State's expenditure of funds for these purposes.
    (b) CMS will approve the system described in the APD if the 
following conditions are met:
    (1) CMS determines the system is likely to provide more efficient, 
economical, and effective administration of the State plan.
    (2) The system meets the system requirements, standards and 
conditions, and performance standards in Part 11 of the State Medicaid 
Manual, as periodically amended.
    (3) The system is compatible with the claims processing and 
information retrieval systems used in the administration of Medicare for 
prompt eligibility verification and for processing claims for persons 
eligible for both programs.
    (4) The system supports the data requirements of quality improvement 
organizations established under Part B of title XI of the Act.
    (5) The State owns any software that is designed, developed, 
installed or improved with 90 percent FFP.
    (6) The Department has a royalty free, non-exclusive, and 
irrevocable license to reproduce, publish, or otherwise use and 
authorize others to use, for Federal Government purposes, software, 
modifications to software, and documentation that is designed, 
developed, installed or enhanced with 90 percent FFP.
    (7) The costs of the system are determined in accordance with 45 CFR 
74.27(a).
    (8) The Medicaid agency agrees in writing to use the system for the 
period of time specified in the advance planning document approved by 
CMS or for any shorter period of time that CMS determines justifies the 
Federal funds invested.
    (9) The agency agrees in writing that the information in the system 
will be safeguarded in accordance with subpart F, part 431 of this 
subchapter.
    (10) Use a modular, flexible approach to systems development, 
including the use of open interfaces and exposed application programming 
interfaces; the separation of business rules from core programming, 
available in both human and machine readable formats.
    (11) Align to, and advance increasingly, in MITA maturity for 
business, architecture, and data.
    (12) Ensure alignment with, and incorporation of, industry 
standards: The HIPAA privacy, security and transaction standards; 
accessibility standards established under section 508 of the 
Rehabilitation Act, or standards that provide greater accessibility for 
individuals with disabilities, and compliance with Federal civil rights 
laws; standards adopted by the Secretary under section 1104 of the 
Affordable Care Act; and standards and protocols adopted by the 
Secretary under section 1561 of the Affordable Care Act.
    (13) Promote sharing, leverage, and reuse of Medicaid technologies 
and systems within and among States.
    (14) Support accurate and timely processing and adjudications/
eligibility determinations and effective communications with providers, 
beneficiaries, and the public.
    (15) Produce transaction data, reports, and performance information 
that would contribute to program evaluation, continuous improvement in 
business operations, and transparency and accountability.
    (16) Ensure seamless coordination and integration with the Exchange, 
and allow interoperability with health information exchanges, public 
health agencies, human services programs, and community organizations 
providing outreach and enrollment assistance services.
    (c) FFP is available at 90 percent of a State's expenditures for the 
design, development, installation, or enhancement of an eligibility 
determination

[[Page 109]]

system that meets the requirements of this subpart and only for costs 
incurred for goods and services provided on or after April 19, 2011 and 
on or before December 31, 2015.

[43 FR 45201, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 
45 FR 14213, Mar. 5, 1980; 50 FR 30846, July 30, 1985; 51 FR 45330, Dec. 
18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 55 FR 
4375, Feb. 7, 1990; 76 FR 21973, Apr. 19, 2011]



Sec.  433.114  Procedures for obtaining initial approval; notice of decision.

    (a) To obtain initial approval, the Medicaid agency must inform CMS 
in writing that the system meets the conditions specified inSec. 
433.116(c) through (i).
    (b) If CMS disapproves the system, the notice will include all of 
the following information:
    (1) The findings of fact upon which the determination was made.
    (2) The procedures for appeal of the determination in the context of 
a reconsideration of the resulting disallowance to the Departmental 
Appeals Board.

[50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989; 
76 FR 21974, Apr. 19, 2011]



Sec.  433.116  FFP for operation of mechanized claims processing and
information retrieval systems.

    (a) Subject to paragraph (j) of this section, FFP is available at 75 
percent of expenditures for operation of a mechanized claims processing 
and information retrieval system approved by CMS, from the first day of 
the calendar quarter after the date the system met the conditions of 
initial approval, as established by CMS (including a retroactive 
adjustment of FFP if necessary to provide the 75 percent rate beginning 
on the first day of that calendar quarter). Subject to 45 CFR 95.611(a), 
the State shall obtain prior written approval from CMS when it plans to 
acquire ADP equipment or services, when it anticipates the total 
acquisition costs will exceed thresholds, and meets other conditions of 
the subpart.
    (b) CMS will approve the system operation if the conditions 
specified in paragraphs (c) through (i) of this section are met.
    (c) The conditions ofSec. 433.112(b) (1) through (4) and (7) 
through (9), as periodically modified underSec. 433.112(b)(2), must be 
met.
    (d) The system must have been operating continuously during the 
period for which FFP is claimed.
    (e) The system must provide individual notices, within 45 days of 
the payment of claims, to all or a sample group of the persons who 
received services under the plan.
    (f) The notice required by paragraph (e) of this section--
    (1) Must specify--
    (i) The service furnished;
    (ii) The name of the provider furnishing the service;
    (iii) The date on which the service was furnished; and
    (iv) The amount of the payment made under the plan for the service; 
and
    (2) Must not specify confidential services (as defined by the State) 
and must not be sent if the only service furnished was confidential.
    (g) The system must provide both patient and provider profiles for 
program management and utilization review purposes.
    (h) If the State has a Medicaid fraud control unit certified under 
section 1903(q) of the Act andSec. 455.300 of this chapter, the 
Medicaid agency must have procedures to assure that information on 
probable fraud or abuse that is obtained from, or developed by, the 
system is made available to that unit. (SeeSec. 455.21 of this chapter 
for State plan requirements.)
    (i) The standards and conditions ofSec. 433.112(b)(10) through 
(b)(16) of this subpart must be met.
    (j) Beginning and no earlier than, April 19, 2011, FFP is available 
at 75 percent of a State's expenditures for the operation of an 
eligibility determination system that meets the requirements of this 
subpart. FFP at 75 percent is not available for eligibility 
determination systems that do not meet the standards and conditions by 
December 31, 2015.

[45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, 
July 30, 1985; 55 FR 4375, Feb. 7, 1990; 76 FR 21974, Apr. 19, 2011]

[[Page 110]]



Sec.  433.117  Initial approval of replacement systems.

    (a) A replacement system must meet all standards and conditions of 
initial approval of a mechanized claims processing and information 
retrieval system.
    (b) The agency must submit a APD that includes--
    (1) The date the replacement system will be in operation; and
    (2) A plan for orderly transition from the system being replaced to 
the replacement system.
    (c) FFP is available at--
    (1) 90 percent in expenditures for design, development, and 
installation in accordance with the provisions ofSec. 433.112; and
    (2) 75 percent in expenditures for operation of an approved 
replacement system in accordance with the provisions ofSec. 433.116(b) 
through (j), from the date that the system met the conditions of initial 
approval, as established by CMS.
    (d) FFP is available at 75 percent in expenditures for the operation 
of an approved system that is being replaced (or at a reduced rate 
determined underSec. 433.120 of this subpart for a system that has 
been disapproved) until the replacement system is in operation and 
approved.

[50 FR 30847, July 30, 1985, as amended at 76 FR 21974, Apr. 19, 2011]



Sec.  433.119  Conditions for reapproval; notice of decision.

    (a) CMS periodically reviews each system operation initially 
approved underSec. 433.114 of this subpart and reapproves it for FFP 
at 75 percent of expenditures if the following standards and conditions 
are met:
    (1) The system meets the requirements ofSec. 433.112(b)(1), (3), 
(4), (7) through (16) of this subpart.
    (2) The system meets the conditions ofSec. 433.116 (d) through 
(j).
    (3) The system meets the standards, conditions, and performance 
standards for reapproval and the system requirements in part 11 of the 
State Medicaid Manual as periodically amended.
    (4) A State system must meet all of the requirements of this subpart 
within the appropriate period CMS determines should apply as required by 
Sec.  433.123(b) of this subpart.
    (b) CMS may review an entire system operation or focus its review on 
parts of the operation. However, at a minimum, CMS will review 
standards, system requirements and other conditions of reapproval that 
have demonstrated weakness in a previous review or reviews.
    (c) After performing the review under paragraph (a) of this section, 
CMS will issue to the Medicaid agency a written notice informing the 
agency whether the system is reapproved or disapproved. If the system is 
disapproved, the notice will include the following information:
    (1) CMS's decision to reduce FFP for system operations from 75 
percent to 50 percent of expenditures, beginning with the first day of 
the first calendar quarter after CMS issues the written notice to the 
State.
    (2) The findings of fact upon which the determination was made.
    (3) A statement that State claims in excess of the reduced FFP rate 
will be disallowed and that any such disallowance will be appealable to 
the Departmental Appeals Board.

[54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 76 FR 21974, 
Apr. 19, 2011]



Sec.  433.120  Procedures for reduction of FFP after reapproval review.

    (a) If CMS determines after the reapproval review that the system no 
longer meets the conditions of reapproval inSec. 433.119, CMS will 
reduce FFP for system operations for at least four quarters. However, no 
system will be subject to reduction of FFP for at least the first four 
quarters after the quarter in which the system is initially approved as 
eligible for 75 percent FFP.
    (b) CMS will reduce FFP in expenditures for system operations from 
75 percent to 50 percent.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 
76 FR 21974, Apr. 19, 2011]



Sec.  433.121  Reconsideration of the decision to reduce FFP after 
reapproval review.

    (a) The State Medicaid agency may appeal (to the Departmental 
Appeals

[[Page 111]]

Board under 45 CFR Part 16) a disallowance concerning a reduction in FFP 
claimed for system operations caused by a disapproval of the State's 
system.
    (b) The decisions concerning whether to restore any FFP 
retroactively and the actual number of quarters for which FFP will be 
restored underSec. 433.122 of this subpart are not subject to 
administrative appeal to the Departmental Appeals Board under 45 CFR 
part 16.
    (c) An agency's request for a reconsideration before the Board under 
paragraph (a) of this section does not delay implementation of the 
reduction in FFP. However, any reduction is subject to retroactive 
adjustment if required by the Board's determination on reconsideration.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 
55 FR 1820, Jan. 19, 1990; 76 FR 21974, Apr. 19, 2011]



Sec.  433.122  Reapproval of a disapproved system.

    When FFP has been reduced underSec. 433.120(a), and CMS determines 
upon subsequent review that the system meets all current performance 
standards, system requirements and other conditions of reapproval, the 
following provisions apply:
    (a) CMS will resume FFP in expenditures for system operations at the 
75 percent level beginning with the quarter following the review 
determination that the system again meets conditions of reapproval.
    (b) CMS may retroactively waive a reduction of FFP in expenditures 
for system operations if CMS determines that the waiver could improve 
the administration of the State Medicaid plan. However, CMS cannot waive 
this reduction for any quarter before the fourth quarter immediately 
preceding the quarter in which CMS issues the determination (as part of 
the review process) stating that the system is reapproved.

[54 FR 41974, Oct. 13, 1989]



Sec.  433.123  Notification of changes in system requirements, 
performance standards or other conditions for approval or reapproval.

    (a) Whenever CMS modifies system requirements or other conditions 
for approval underSec. 433.112 orSec. 433.116, CMS will--
    (1) Publish a notice in the Federal Register making available the 
proposed changes for public comment;
    (2) Respond in a subsequent Federal Register notice to comments 
received; and
    (3) Issue the new or modified requirements or conditions in the 
State Medicaid Manual.
    (b) For changes in system requirements or other conditions for 
approval, CMS will allow an appropriate period for Medicaid agencies to 
meet the requirement determining this period on the basis of the 
requirement's complexity and other relevant factors.
    (c) Whenever CMS modifies performance standards and other conditions 
for reapproval underSec. 433.119, CMS will notify Medicaid agencies at 
least one calendar quarter before the review period to which the new or 
modified standards or conditions apply.

[57 FR 38782, Aug. 27, 1992]



Sec.  433.127  Termination of FFP for failure to provide access to
claims processing and information retrieval systems.

    CMS will terminate FFP at any time if the Medicaid agency fails to 
provide State and Federal representatives with full access to the 
system, including on-site inspection. CMS may request such access at any 
time to determine whether the conditions in this subpart are being met.

[43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 
and 30848, July 30, 1985]



Sec.  433.131  Waiver for noncompliance with conditions of approval
and reapproval.

    If a State is unable to comply with the conditions of approval or of 
reapproval and the noncompliance will cause a percentum reduction in 
FFP, CMS will waive the FFP reduction in the following circumstances:
    (a) Good cause. If CMS determines that good cause existed, CMS will 
waive the FFP reduction attributable to those items for which the good 
cause existed. A waiver of FFP consequences of the failure to meet the 
conditions of approval or reapproval based upon good

[[Page 112]]

cause will not extend beyond two consecutive quarters.
    (b) Circumstances beyond the control of a State. The State must 
satisfactorily explain the circumstances that are beyond its control. 
When CMS grants the waiver, CMS will also defer all other system 
deadlines for the same length of time that the waiver applies.
    (c) Waiver of deadline. In no case will CMS waive the December 31, 
2015 deadlines referenced inSec. 433.112(c) andSec. 433.116(j).

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 
76 FR 21975, Apr. 19, 2011]



                     Subpart D_Third Party Liability

    Source: 45 FR 8984, Feb. 11, 1980, unless otherwise noted.



Sec.  433.135  Basis and purpose.

    This subpart implements sections 1902(a)(25), 1902(a)(45), 
1903(d)(2), 1903(o), 1903(p), and 1912 of the Act by setting forth State 
plan requirements concerning--
    (a) The legal liability of third parties to pay for services 
provided under the plan;
    (b) Assignment to the State of an individual's rights to third party 
payments; and
    (c) Cooperative agreements between the Medicaid agency and other 
entities for obtaining third party payments.

[50 FR 46664, Nov. 12, 1985]



Sec.  433.136  Definitions.

    For purposes of this subpart--
    Private insurer means:
    (1) Any commercial insurance company offering health or casualty 
insurance to individuals or groups (including both experience-rated 
insurance contracts and indemnity contracts);
    (2) Any profit or nonprofit prepaid plan offering either medical 
services or full or partial payment for services included in the State 
plan; and
    (3) Any organization administering health or casualty insurance 
plans for professional associations, unions, fraternal groups, employer-
employee benefit plans, and any similar organization offering these 
payments or services, including self-insured and self-funded plans.
    Third party means any individual, entity or program that is or may 
be liable to pay all or part of the expenditures for medical assistance 
furnished under a State plan.
    Title IV-D agency means the organizational unit in the State that 
has the responsibility for administering or supervising the 
administration of a State plan for child support enforcement under title 
IV-D of the Act.

[49 FR 8984, Feb. 11, 1980, as amended at 50 FR 46664, Nov. 12, 1985; 50 
FR 49389, Dec. 2, 1985]



Sec.  433.137  State plan requirements.

    (a) A State plan must provide that the requirements of Sec.Sec. 
433.138 and 433.139 are met for identifying third parties liable for 
payment of services under the plan and for payment of claims involving 
third parties.
    (b) A State plan must provide that--
    (1) The requirements of Sec.Sec. 433.145 through 433.148 are met 
for assignment of rights to benefits, cooperation with the agency in 
obtaining medical support or payments, and cooperation in identifying 
and providing information to assist the State in pursuing any liable 
third parties; and
    (2) The requirements of Sec.Sec. 433.151 through 433.154 are met 
for cooperative agreements and incentive payments for third party 
collections.
    (c) The requirements of paragraph (b)(1) of this section relating to 
assignment of rights to benefits and cooperation in obtaining medical 
support or payments and paragraph (b)(2) of this section are effective 
for medical assistance furnished on or after October 1, 1984. The 
requirements of paragraph (b)(1) of this section relating to cooperation 
in identifying and providing information to assist the State in pursuing 
liable third parties are effective for medical assistance furnished on 
or after July 1, 1986.

[50 FR 46665, Nov. 12, 1985, as amended at 55 FR 48606, Nov. 21, 1990; 
55 FR 52130, Dec. 19, 1990; 60 FR 35502, July 10, 1995]



Sec.  433.138  Identifying liable third parties.

    (a) Basic provisions. The agency must take reasonable measures to 
determine

[[Page 113]]

the legal liability of the third parties who are liable to pay for 
services furnished under the plan. At a minimum, such measures must 
include the requirements specified in paragraphs (b) through (k) of this 
section, unless waived under paragraph (l) of this section.
    (b) Obtaining health insurance information: Initial application and 
redetermination processes for Medicaid eligibility. (1) If the Medicaid 
agency determines eligibility for Medicaid, it must, during the initial 
application and each redetermination process, obtain from the applicant 
or beneficiary such health insurance information as would be useful in 
identifying legally liable third party resources so that the agency may 
process claims under the third party liability payment procedures 
specified inSec. 433.139 (b) through (f). Health insurance information 
may include, but is not limited to, the name of the policy holder, his 
or her relationship to the applicant or beneficiary, the social security 
number (SSN) of the policy holder, and the name and address of insurance 
company and policy number.
    (2) If Medicaid eligibility is determined by the Federal agency 
administering the supplemental security income program under title XVI 
in accordance with a written agreement under section 1634 of the Act, 
the Medicaid agency must take the following action. It must enter into 
an agreement with CMS or must have, prior to February 1, 1985, executed 
a modified section 1634 agreement that is still in effect to provide 
for--
    (i) Collection, from the applicant or beneficiary during the initial 
application and each redetermination process, of health insurance 
information in the form and manner specified by the Secretary; and
    (ii) Transmittal of the information to the Medicaid agency.
    (3) If Medicaid eligibility is determined by any other agency in 
accordance with a written agreement, the Medicaid agency must modify the 
agreement to provide for--
    (i) Collection, from the applicant or beneficiary during the initial 
application and each redetermination process, of such health insurance 
information as would be useful in identifying legally liable third party 
resources so that the Medicaid agency may process claims under the third 
party liability payment procedures specified inSec. 433.139 (b) 
through (f). Health insurance information may include, but is not 
limited to, those elements described in paragraph (b)(1) of this 
section; and
    (ii) Transmittal of the information to the Medicaid agency.
    (c) Obtaining other information. Except as provided in paragraph (l) 
of this section, the agency must, for the purpose of implementing the 
requirements in paragraphs (d)(1)(ii) and (d)(4)(i) of this section, 
incorporate into the eligibility case file the names and SSNs of absent 
or custodial parents of Medicaid beneficiaries to the extent such 
information is available.
    (d) Exchange of data. Except as provided in paragraph (l) of this 
section, to obtain and use information for the purpose of determining 
the legal liability of the third parties so that the agency may process 
claims under the third party liability payment procedures specified in 
Sec.  433.139(b) through (f), the agency must take the following 
actions:
    (1) Except as specified in paragraph (d)(2) of this section, as part 
of the data exchange requirements underSec. 435.945 of this chapter, 
from the State wage information collection agency (SWICA) defined in 
Sec.  435.4 of this chapter and from the SSA wage and earnings files 
data as specified inSec. 435.948(a)(2) of this chapter, the agency 
must--
    (i) Use the information that identifies Medicaid beneficiaries that 
are employed and their employer(s); and
    (ii) Obtain and use, if their names and SSNs are available to the 
agency under paragraph (c) of this section, information that identifies 
employed absent or custodial parents of beneficiaries and their 
employer(s).
    (2) If the agency can demonstrate to CMS that it has an alternate 
source of information that furnishes information as timely, complete and 
useful as the SWICA and SSA wage and earnings files in determining the 
legal liability of third parties, the requirements of paragraph (d)(1) 
of this section are deemed to be met.

[[Page 114]]

    (3) The agency must request, as required underSec. 
435.948(a)(6)(i), from the State title IV-A agency, information not 
previously reported that identifies those Medicaid beneficiaries that 
are employed and their employer(s).
    (4) Except as specified in paragraph (d)(5) of this section, the 
agency must attempt to secure agreements (to the extent permitted by 
State law) to provide for obtaining--
    (i) From State Workers' Compensation or Industrial Accident 
Commission files, information that identifies Medicaid beneficiaries 
and, (if their names and SSNs were available to the agency under 
paragraph (c) of this section) absent or custodial parents of Medicaid 
beneficiaries with employment-related injuries or illnesses; and
    (ii) From State Motor Vehicle accident report files, information 
that identifies those Medicaid beneficiaries injured in motor vehicle 
accidents, whether injured as pedestrians, drivers, passengers, or 
bicyclists.
    (5) If unable to secure agreements as specified in paragraph (d)(4) 
of this section, the agency must submit documentation to the regional 
office that demonstrates the agency made a reasonable attempt to secure 
these agreements. If CMS determines that a reasonable attempt was made, 
the requirements of paragraph (d)(4) of this section are deemed to be 
met.
    (e) Diagnosis and trauma code edits. (1) Except as specified under 
paragraph (e)(2) or (l) of this section, or both, the agency must take 
action to identify those paid claims for Medicaid beneficiaries that 
contain diagnosis codes 800 through 999 International Classification of 
Disease, 9th Revision, Clinical Modification, Volume 1 (ICD-9-CM) 
inclusive, for the purpose of determining the legal liability of third 
parties so that the agency may process claims under the third party 
liability payment procedures specified inSec. 433.139(b) through (f).
    (2) The agency may exclude code 994.6, Motion Sickness, from the 
edits required under paragraph (e)(1) of this section.
    (f) Data exchanges and trauma code edits: Frequency. Except as 
provided in paragraph (l) of this section, the agency must conduct the 
data exchanges required in paragraphs (d)(1) and (d)(3) of this section 
in accordance with the intervals specified inSec. 435.948 of this 
chapter, and diagnosis and trauma edits required in paragraphs (d)(4) 
and (e) of this section on a routine and timely basis. The State plan 
must specify the frequency of these activities.
    (g) Followup procedures for identifying legally liable third party 
resources. Except as provided in paragraph (l) of this section, the 
State must meet the requirements of this paragraph.
    (1) SWICA, SSA wage and earnings files, and title IV-A data 
exchanges. With respect to information obtained under paragraphs (d)(1) 
through (d)(3) of this section--
    (i) Except as specified inSec. 435.952(d) of this chapter, within 
45 days, the agency must followup (if appropriate) on such information 
in order to identify legally liable third party resources and 
incorporate such information into the eligibility case file and into its 
third party data base and third party recovery unit so the agency may 
process claims under the third party liability payment procedures 
specified inSec. 433.139 (b) through (f); and
    (ii) The State plan must describe the methods the agency uses for 
meeting the requirements of paragraph (g)(1)(i) of this section.
    (2) Health insurance information and workers' compensation data 
exchanges. With respect to information obtained under paragraphs (b) and 
(d)(4)(i) of this section--
    (i) Within 60 days, the agency must followup on such information (if 
appropriate) in order to identify legally liable third party resources 
and incorporate such information into the eligibility case file and into 
its third party data base and third party recovery unit so the agency 
may process claims under the third party liability payment procedures 
specified inSec. 433.139 (b) through (f); and
    (ii) The State plan must describe the methods the agency uses for 
meeting the requirements of paragraph (g)(2)(i) of this section.
    (3) State motor vehicle accident report file data exchanges. With 
respect to information obtained under paragraph (d)(4)(ii) of this 
section--

[[Page 115]]

    (i) The State plan must describe the methods the agency uses for 
following up on such information in order to identify legally liable 
third party resources so the agency may process claims under the third 
party liability payment procedures specified inSec. 433.139 (b) 
through (f);
    (ii) After followup, the agency must incorporate all information 
that identifies legally liable third party resources into the 
eligibility case file and into its third party data base and third party 
recovery unit; and
    (iii) The State plan must specify timeframes for incorporation of 
the information.
    (4) Diagnosis and trauma code edits. With respect to the paid claims 
identified under paragraph (e) of this section--
    (i) The State plan must describe the methods the agency uses to 
follow up on such claims in order to identify legally liable third party 
resources so the agency may process claims under the third party 
liability payment procedures specified inSec. 433.139 (b) through (f) 
(Methods must include a procedure for periodically identifying those 
trauma codes that yield the highest third party collections and giving 
priority to following up on those codes.);
    (ii) After followup, the agency must incorporate all information 
that identifies legally liable third party resources into the 
eligibility case file and into its third party data base and third party 
recovery unit; and
    (iii) The State plan must specify the timeframes for incorporation 
of the information.
    (h) Obtaining other information and data exchanges: Safeguarding 
information. (1) The agency must safeguard information obtained from and 
exchanged under this section with other agencies in accordance with the 
requirements set forth in part 431, subpart F of this chapter.
    (2) Before requesting information from, or releasing information to 
other agencies to identify legally liable third party resources under 
paragraph (d) of this section the agency must execute data exchange 
agreements with those agencies. The agreements, at a minimum, must 
specify--
    (i) The information to be exchanged;
    (ii) The titles of all agency officials with the authority to 
request third party information;
    (iii) The methods, including the formats to be used, and the timing 
for requesting and providing the information;
    (iv) The safeguards limiting the use and disclosure of the 
information as required by Federal or State law or regulations; and
    (v) The method the agency will use to reimburse reasonable costs of 
furnishing the information if payment is requested.
    (i) Reimbursement. The agency must, upon request, reimburse an 
agency for the reasonable costs incurred in furnishing information under 
this section to the Medicaid agency.
    (j) Reports. The agency must provide such reports with respect to 
the data exchanges and trauma code edits set forth in paragraphs (d)(1) 
through (d)(4) and paragraph (e) of this section, respectively, as the 
Secretary prescribes for the purpose of determining compliance under 
Sec.  433.138 and evaluating the effectiveness of the third party 
liability identification system. However, if the State is not meeting 
the provisions of paragraph (e) of this section because it has been 
granted a waiver of those provisions under paragraph (l) of this 
section, it is not required to provide the reports required in this 
paragraph.
    (k) Integration with the State mechanized claims processing and 
information retrieval system. Basic requirement--Development of an 
action plan. (1) If a State has a mechanized claims processing and 
information retrieval system approved by CMS under subpart C of this 
part, the agency must have an action plan for pursuing third party 
liability claims and the action plan must be integrated with the 
mechanized claims processing and information retrieval system.
    (2) The action plan must describe the actions and methodologies the 
State will follow to--
    (i) Identify third parties;
    (ii) Determine the liability of third parties;
    (iii) Avoid payment of third party claims as required inSec. 
433.139;

[[Page 116]]

    (iv) Recover reimbursement from third parties after Medicaid claims 
payment as required inSec. 433.139; and,
    (v) Record information and actions relating to the action plan.
    (3) The action plan must be consistent with the conditions for 
reapproval set forth inSec. 433.119. The portion of the plan which is 
integrated with MMIS is monitored in accordance with those conditions 
and if the conditions are not met; it is subject to FFP reduction in 
accordance with procedures set forth inSec. 433.120. The State is not 
subject to any other penalty as a result of other monitoring, quality 
control, or auditing requirements for those items in the action plan.
    (4) The agency must submit its action plan to the CMS Regional 
Office within 120 days from the date CMS issues implementing 
instructions for the State Medicaid Manual. If a State does not have an 
approved MMIS on the date of issuance of the State Medicaid Manual but 
subsequently implements an MMIS, the State must submit its action plan 
within 90 days from the date the system is operational. The CMS Regional 
Office approves or disapproves the action plan.
    (l) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements to determine third party liability 
found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), 
(g)(3), and (g)(4) of this section if the State determines the activity 
to be not cost-effective. An activity would not be cost-effective if the 
cost of the required activity exceeds the third party liability 
recoupment and the required activity accomplishes, at the same or at a 
higher cost, the same objective as another activity that is being 
performed by the State.
    (i) The agency must submit a request for waiver of the requirement 
in writing to the CMS regional office.
    (ii) The request must contain adequate documentation to establish 
that to meet a requirement specified by the agency is not cost-
effective. Examples of documentation are claims recovery data and a 
State analysis documenting a cost-effective alternative that 
accomplished the same task.
    (iii) The agency must agree, if a waiver is granted, to notify CMS 
of any event that occurs that changes the conditions upon which the 
waiver was approved.
    (2) CMS will review a State's request to have a requirement 
specified under paragraph (l)(1) of this section waived and will request 
additional information from the State, if necessary. CMS will notify the 
State of its approval or disapproval determination within 30 days of 
receipt of a properly documented request.
    (3) CMS may rescind a waiver at any time that it determines that the 
agency no longer meets the criteria for approving the waiver. If the 
waiver is rescinded, the agency has 6 months from the date of the 
rescission notice to meet the requirement that had been waived.

[52 FR 5975, Feb. 27, 1987, as amended at 54 FR 8741, Mar. 2, 1989; 55 
FR 1432, Jan. 16, 1990; 55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, 
1995]



Sec.  433.139  Payment of claims.

    (a) Basic provisions. (1) For claims involving third party liability 
that are processed on or after May 12, 1986, the agency must use the 
procedures specified in paragraphs (b) through (f) of this section.
    (2) The agency must submit documentation of the methods (e.g., cost 
avoidance, pay and recover later) it uses for payment of claims 
involving third party liability to the CMS Regional Office.
    (b) Probable liability is established at the time claim is filed. 
Except as provided in paragraph (e) of this section--
    (1) If the agency has established the probable existence of third 
party liability at the time the claim is filed, the agency must reject 
the claim and return it to the provider for a determination of the 
amount of liability. The establishment of third party liability takes 
place when the agency receives confirmation from the provider or a third 
party resource indicating the extent of third party liability. When the 
amount of liability is determined, the agency must then pay the claim to 
the extent that payment allowed under the agency's payment schedule 
exceeds the amount of the third party's payment.
    (2) The agency may pay the full amount allowed under the agency's

[[Page 117]]

payment schedule for the claim and then seek reimbursement from any 
liable third party to the limit of legal liability if the claim is for 
labor and delivery and postpartum care. (Costs associated with the 
inpatient hospital stay for labor and delivery and postpartum care must 
be cost-avoided.)
    (3) The agency must pay the full amount allowed under the agency's 
payment schedule for the claim and seek reimbursement from any liable 
third party to the limit of legal liability (and for purposes of 
paragraph (b)(3)(ii) of this section, from a third party, if the third 
party liability is derived from an absent parent whose obligation to pay 
support is being enforced by the State title IV-D agency), consistent 
with paragraph (f) of this section if--
    (i) The claim is prenatal care for pregnant women, or preventive 
pediatric services (including early and periodic screening, diagnosis 
and treatment services provided for under part 441, subpart B of this 
chapter), that is covered under the State plan; or
    (ii) The claim is for a service covered under the State plan that is 
provided to an individual on whose behalf child support enforcement is 
being carried out by the State title IV-D agency. The agency prior to 
making any payment under this section must assure that the following 
requirements are met:
    (A) The State plan specifies whether or not providers are required 
to bill the third party.
    (B) The provider certifies that before billing Medicaid, if the 
provider has billed a third party, the provider has waited 30 days from 
the date of the service and has not received payment from the third 
party.
    (C) The State plan specifies the method used in determining the 
provider's compliance with the billing requirements.
    (c) Probable liability is not established or benefits are not 
available at the time claim is filed. If the probable existence of third 
party liability cannot be established or third party benefits are not 
available to pay the beneficiary's medical expenses at the time the 
claim is filed, the agency must pay the full amount allowed under the 
agency's payment schedule.
    (d) Recovery of reimbursement. (1) If the agency has an approved 
waiver under paragraph (e) of this section to pay a claim in which the 
probable existence of third party liability has been established and 
then seek reimbursement, the agency must seek recovery of reimbursement 
from the third party to the limit of legal liability within 60 days 
after the end of the month in which payment is made unless the agency 
has a waiver of the 60-day requirement under paragraph (e) of this 
section.
    (2) Except as provided in paragraph (e) of this section, if the 
agency learns of the existence of a liable third party after a claim is 
paid, or benefits become available from a third party after a claim is 
paid, the agency must seek recovery of reimbursement within 60 days 
after the end of the month it learns of the existence of the liable 
third party or benefits become available.
    (3) Reimbursement must be sought unless the agency determines that 
recovery would not be cost effective in accordance with paragraph (f) of 
this section.
    (e) Waiver of requirements. (1) The agency may request initial and 
continuing waiver of the requirements in paragraphs (b)(1), (d)(1), and 
(d)(2) of this section, if it determines that the requirement is not 
cost-effective. An activity would not be cost-effective if the cost of 
the required activity exceeds the third party liability recoupment and 
the required activity accomplishes, at the same or at a higher cost, the 
same objective as another activity that is being performed by the State.
    (i) The agency must submit a request for waiver of the requirement 
in writing to the CMS regional office.
    (ii) The request must contain adequate documentation to establish 
that to meet a requirement specified by the agency is not cost-
effective. Examples of documentation are costs associated with billing, 
claims recovery data, and a State analysis documenting a cost-effective 
alternative that accomplishes the same task.
    (iii) The agency must agree, if a waiver is granted, to notify CMS 
of any event that occurs that changes the

[[Page 118]]

conditions upon which the waiver was approved.
    (2) CMS will review a State's request to have a requirement 
specified under paragraph (e)(1) of this section waived and will request 
additional information from the State, if necessary. CMS will notify the 
State of its approval or disapproval determination within 30 days of 
receipt of a properly documented request.
    (3) CMS may rescind the waiver at any time that it determines that 
the State no longer meets the criteria for approving the waiver. If the 
waiver is rescinded, the agency has 6 months from the date of the 
rescission notice to meet the requirement that had been waived.
    (4) An agency requesting a waiver of the requirements specifically 
concerning either the 60-day limit in paragraph (d)(1) or (d)(2) of this 
section must submit documentation of written agreement between the 
agency and the third party, including Medicare fiscal intermediaries and 
carriers, that extension of the billing requirement is agreeable to all 
parties.
    (f) Suspension or termination of recovery of reimbursement. (1) An 
agency must seek reimbursement from a liable third party on all claims 
for which it determines that the amount it reasonably expects to recover 
will be greater than the cost of recovery. Recovery efforts may be 
suspended or terminated only if they are not cost effective.
    (2) The State plan must specify the threshold amount or other 
guideline that the agency uses in determining whether to seek recovery 
of reimbursement from a liable third party, or describe the process by 
which the agency determines that seeking recovery of reimbursement would 
not be cost effective.
    (3) The State plan must also specify the dollar amount or period of 
time for which it will accumulate billings with respect to a particular 
liable third party in making the decision whether to seek recovery of 
reimbursement.

[50 FR 46665, Nov. 12, 1985, as amended at 51 FR 16319, May 2, 1986; 60 
FR 35503, July 10, 1995; 62 FR 23140, Apr. 29, 1997]



Sec.  433.140  FFP and repayment of Federal share.

    (a) FFP is not available in Medicaid payments if--
    (1) The agency failed to fulfill the requirements of Sec.Sec. 
433.138 and 433.139 with regard to establishing liability and seeking 
reimbursement from a third party;
    (2) The agency received reimbursement from a liable third party; or
    (3) A private insurer would have been obligated to pay for the 
service except that its insurance contract limits or excludes payments 
if the individual is eligible for Medicaid.
    (b) FFP is available at the 50 percent rate for the agency's 
expenditures in carrying out the requirements of this subpart.
    (c) If the State receives FFP in Medicaid payments for which it 
receives third party reimbursement, the State must pay the Federal 
government a portion of the reimbursement determined in accordance with 
the FMAP for the State. This payment may be reduced by the total amount 
needed to meet the incentive payment inSec. 433.153.

                    Assignment of Rights to Benefits



Sec.  433.145  Assignment of rights to benefits--State plan 
requirements.

    (a) A State plan must provide that, as a condition of eligibility, 
each legally able applicant or beneficiary is required to:
    (1) Assign to the Medicaid agency his or her rights, or the rights 
of any other individual eligible under the plan for whom he or she can 
legally make an assignment, to medical support and to payment for 
medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902(l)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and

[[Page 119]]

    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) A State plan must provide that the requirements for assignments, 
cooperation in establishing paternity and obtaining support, and 
cooperation in identifying and providing information to assist the State 
in pursuing any liable third party under Sec.Sec. 433.146 through 
433.148 are met.
    (c) A State plan must provide that the assignment of rights to 
benefits obtained from an applicant or beneficiary is effective only for 
services that are reimbursed by Medicaid.

[55 FR 48606, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993]



Sec.  433.146  Rights assigned; assignment method.

    (a) Except as specified in paragraph (b) of this section, the agency 
must require the individual to assign to the State--
    (1) His own rights to any medical care support available under an 
order of a court or an administrative agency, and any third party 
payments for medical care; and
    (2) The rights of any other individual eligible under the plan, for 
whom he can legally make an assignment.
    (b) Assignment of rights to benefits may not include assignment of 
rights to Medicare benefits.
    (c) If assignment of rights to benefits is automatic because of 
State law, the agency may substitute such an assignment for an 
individual executed assignment, as long as the agency informs the 
individual of the terms and consequences of the State law.



Sec.  433.147  Cooperation in establishing paternity and in obtaining
medical support and payments and in identifying and providing
information to assist in pursuing third parties who may be liable
to pay.

    (a) Scope of requirement. The agency must require the individual who 
assigns his or her rights to cooperate in--
    (1) Establishing paternity of a child born out of wedlock and 
obtaining medical support and payments for himself or herself and any 
other person for whom the individual can legally assign rights, except 
that individuals described in section 1902(l)(1)(A) of the Act (poverty 
level pregnant women) are exempt from these requirements involving 
paternity and obtaining medical support and payments from, or derived 
from, the father of the child born out of wedlock; and
    (2) Identifying and providing information to assist the Medicaid 
agency in pursuing third parties who may be liable to pay for care and 
services under the plan.
    (b) Essentials of cooperation. As part of a cooperation, the agency 
may require an individual to--
    (1) Appear at a State or local office designated by the agency to 
provide information or evidence relevant to the case;
    (2) Appear as a witness at a court or other proceeding;
    (3) Provide information, or attest to lack of information, under 
penalty of perjury;
    (4) Pay to the agency any support or medical care funds received 
that are covered by the assignment of rights; and
    (5) Take any other reasonable steps to assist in establishing 
paternity and securing medical support and payments, and in identifying 
and providing information to assist the State in pursuing any liable 
third party.
    (c) Waiver of cooperation for good cause. The agency must waive the 
requirements in paragraphs (a) and (b) of this section if it determines 
that the individual has good cause for refusing to cooperate.
    (1) With respect to establishing paternity of a child born out of 
wedlock or obtaining medical care support and payments, or identifying 
or providing information to assist the State in pursuing any liable 
third party for a child for whom the individual can legally assign 
rights, the agency must find the cooperation is against the best 
interests of the child, in accordance with factors specified for the 
Child Support Enforcement Program at 45 CFR part 232. If the State title 
IV-A agency has made a finding that good cause for refusal to cooperate 
does or does not

[[Page 120]]

exist, the Medicaid agency must adopt that finding as its own for this 
purpose.
    (2) With respect to obtaining medical care support and payments for 
an individual and identifying and providing information to assist in 
pursuing liable third parties in any case not covered by paragraph 
(c)(1) of this section, the agency must find that cooperation is against 
the best interests of the individual or the person to whom Medicaid is 
being furnished because it is anticipated that cooperation will result 
in reprisal against, and cause physical or emotional harm to, the 
individual or other person.
    (d) Procedures for waiving cooperation. With respect to establishing 
paternity, obtaining medical care support and payments, or identifying 
and providing information to assist the State in pursuing liable third 
parties for a child for whom the individual can legally assign rights, 
the agency must use the procedures specified for the Child Support 
Enforcement Program at 45 CFR part 232. With respect to obtaining 
medical care support and payments or to identifying and providing 
information to assist the State in pursuing liable third parties for any 
other individual, the agency must adopt procedures similar to those 
specified in 45 CFR part 232, excluding those procedures applicable only 
to children.

[45 FR 8984, Feb. 11, 1980, as amended at 55 FR 48606, Nov. 21, 1990; 58 
FR 4907, Jan. 19, 1993]



Sec.  433.148  Denial or termination of eligibility.

    In administering the assignment of rights provision, the agency 
must:
    (a) Deny or terminate eligibility for any applicant or beneficiary 
who--
    (1) Refuses to assign his own rights or those of any other 
individual for whom he can legally make an assignment; or
    (2) Refuses to cooperate as required underSec. 433.147(a) unless 
cooperation has been waived;
    (b) Provide Medicaid to any individual who--
    (1) Cannot legally assign his own rights; and
    (2) Would otherwise be eligible for Medicaid but for the refusal, by 
a person legally able to assign his rights, to assign his rights or to 
cooperate as required by this subpart; and
    (c) In denying or terminating eligibility, comply with the notice 
and hearing requirements of part 431, subpart E of this subchapter.

              Cooperative Agreements and Incentive Payments



Sec.  433.151  Cooperative agreements and incentive payments--State
plan requirements.

    For medical assistance furnished on or after October 1, 1984--
    (a) A State plan must provide for entering into written cooperative 
agreements for enforcement of rights to and collection of third party 
benefits with at least one of the following entities: The State title 
IV-D agency, any appropriate agency of any State, and appropriate courts 
and law enforcement officials. The agreements must be in accordance with 
the provisions ofSec. 433.152.
    (b) A State plan must provide that the requirements for making 
incentive payments and for distributing third party collections 
specified in Sec.Sec. 433.153 and 433.154 are met.

[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]



Sec.  433.152  Requirements for cooperative agreements for third party
collections.

    (a) Except as specified in paragraph (b) of this section, the State 
agency may develop the specific terms of cooperative agreements with 
other agencies as it determines appropriate for individual 
circumstances.
    (b) Agreements with title IV-D agencies must specify that the 
Medicaid agency will--
    (1) Meet the requirements of the Office of Child Support Enforcement 
for cooperative agreements under 45 CFR Part 306; and
    (2) Provide reimbursement to the IV-D agency only for those child 
support services performed that are not reimbursable by the Office of 
Child Support Enforcement under title IV-D of the Act and that are 
necessary for the collection of amounts for the Medicaid program.

[50 FR 46666, Nov. 12, 1985]

[[Page 121]]



Sec.  433.153  Incentive payments to States and political subdivisions.

    (a) When payments are required. The agency must make an incentive 
payment to a political subdivision, a legal entity of the subdivision 
such as a prosecuting or district attorney or a friend of the court, or 
another State that enforces and collects medical support and payments 
for the agency.
    (b) Amount and source of payment. The incentive payment must equal 
15 percent of the amount collected, and must be made from the Federal 
share of that amount.
    (c) Payment to two or more jurisdictions. If more than one State or 
political subdivision is involved in enforcing and collecting support 
and payments:
    (1) The agency must pay all of the incentive payment to the 
political subdivision, legal entity of the subdivision, or another State 
that collected medical support and payments at the request of the 
agency.
    (2) The political subdivision, legal entity or other State that 
receives the incentive payment must then divide the incentive payment 
equally with any other political subdivisions, legal entities, or other 
States that assisted in the collection, unless an alternative allocation 
is agreed upon by all jurisdictions involved.



Sec.  433.154  Distribution of collections.

    The agency must distribute collections as follows--
    (a) To itself, an amount equal to State Medicaid expenditures for 
the individual on whose right the collection was based.
    (b) To the Federal Government, the Federal share of the State 
Medicaid expenditures, minus any incentive payment made in accordance 
withSec. 433.153.
    (c) To the beneficiary, any remaining amount. This amount must be 
treated as income or resources under part 435 or part 436 of this 
subchapter, as appropriate.



   Subpart E_Methodologies for Determining Federal Share of Medicaid 
                Expenditures for Adult Eligibility Group

    Source: 78 FR 19942, April 2, 2013, unless otherwise noted.



Sec.  433.202  Scope.

    This subpart sets forth the requirements and procedures that are 
applicable to support State claims for the increased FMAP specified at 
Sec.  433.10(c)(6) for the medical assistance expenditures for 
individuals determined eligible as specified inSec. 435.119 of this 
chapter who meet the definition of newly eligible individual specified 
inSec. 433.204(a)(1). These procedures will also identify individuals 
determined eligible as specified inSec. 435.119 of this chapter for 
whom the State may claim the regular FMAP rate specified atSec. 
433.10(b) or the increased FMAP rate specified atSec. 433.10(c)(7) or 
(8), as applicable.



Sec.  433.204  Definitions.

    (a)(1) Newly eligible individual means an individual determined 
eligible for Medicaid in accordance with the requirements of the adult 
group described inSec. 435.119 of this chapter, and who, as determined 
by the State in accordance with the requirements ofSec. 433.206, would 
not have been eligible for Medicaid under the State's eligibility 
standards and methodologies for the Medicaid State plan, waiver or 
demonstration programs in effect in the State as of December 1, 2009, 
for full benefits or for benchmark coverage described inSec. 
440.330(a), (b), or (c) of this chapter or benchmark equivalent coverage 
described inSec. 440.335 of this chapter that has an aggregate 
actuarial value that is at least actuarially equivalent to benchmark 
coverage described inSec. 440.330(a), (b), or (c) of this chapter, or 
would have been eligible but not enrolled (or placed on a waiting list) 
for such benefits or coverage through a waiver under the plan that had a 
capped or limited enrollment that was full.
    (2) Full benefits means, for purposes of paragraph (a)(1) of this 
section, with respect to an adult individual, medical assistance for all 
services covered

[[Page 122]]

under the State plan under Title XIX of the Act that is not less in 
amount, duration, or scope, or is determined by the Secretary to be 
substantially equivalent, to the medical assistance available for an 
individual described in section 1902(a)(10)(A)(i) of the Act.
    (3) For purposes of establishing under paragraphs (a)(1) and (2) of 
this section whether an individual would not have been eligible for full 
benefits, benchmark coverage, or benchmark equivalent coverage under a 
waiver or demonstration program in effect on December 1, 2009, the State 
must provide CMS with its analysis, in accordance with guidance issued 
by CMS, about whether the benefits available under such waiver or 
demonstration constituted full benefits, benchmark coverage, or 
benchmark equivalent coverage. CMS will review such analysis and confirm 
the applicable FMAP. Individuals for whom such benefits or coverage 
would have been available under such waiver or demonstration are not 
newly eligible individuals.
    (b)(1) Expansion State means a State that, as of March 23, 2010, 
offered health benefits coverage statewide to parents and nonpregnant, 
childless adults whose income is at least 100 percent of the Federal 
Poverty Level. A State that offers health benefits coverage to only 
parents or only nonpregnant childless adults described in the preceding 
sentence will not be considered to be an expansion State. Such health 
benefits coverage must:
    (i) Have included inpatient hospital services;
    (ii) Not have been dependent on access to employer coverage, 
employer contribution, or employment; and
    (iii) Not have been limited to premium assistance, hospital-only 
benefits, a high deductible health plan, or benefits under a 
demonstration program authorized under section 1938 of the Act.
    (2) For purposes of paragraph (b)(1) of this section and forSec. 
433.10(c)(8), a nonpregnant childless adult means an individual who is 
not eligible based on pregnancy and does not meet the definition of a 
caretaker relative inSec. 435.4 of this chapter.



Sec.  433.206  Threshold methodology.

    (a) Overview. Effective January 1, 2014, States must apply the 
threshold methodology described in this paragraph for purposes of 
determining the appropriate claiming for the Federal share of 
expenditures at the applicable FMAP rates described inSec. 433.10(b) 
and (c) for medical assistance provided with respect to individuals who 
have been determined eligible for the Medicaid program underSec. 
435.119 of this chapter. Subject to the provisions of this paragraph, 
States must apply the CMS-approved State specific threshold methodology 
to determine and distinguish such individuals as newly or not newly 
eligible individuals in accordance with the definition inSec. 
433.204(a)(1), and in accordance with States' Medicaid eligibility 
criteria as in effect on December 1, 2009 and to attribute their 
associated medical expenditures with the appropriate FMAP. The threshold 
methodology must not be applied by States for the purpose of determining 
the applicable FMAP for individuals under any other eligibility category 
other thanSec. 435.119 of this chapter.
    (b) General principles. The threshold methodology should:
    (1) Not impact the timing or approval of an individual's eligibility 
for Medicaid.
    (2) Not be biased in such a manner as to inappropriately establish 
the numbers of, or medical assistance expenditures for, individuals 
determined to be newly or not newly eligible.
    (3) Provide a valid and accurate accounting of individuals who would 
have been eligible in accordance with the December 1, 2009 eligibility 
standards and applicable eligibility categories for the benefits 
described inSec. 433.204(a)(1), and subject to paragraphs (d), (e), 
and (g) of this section, by incorporating simplified assessments of 
resources, enrollment cap requirements in place at that time, and other 
special circumstances as approved by CMS, respectively.
    (4) Operate efficiently, without further review once an individual 
has been determined not to be newly eligible based on the December 1, 
2009 standards for any eligibility category.

[[Page 123]]

    (c) Components of the threshold methodology. Subject to the 
submission of a threshold methodology State plan amendment as specified 
in paragraph (h) of this section, the provisions of the threshold 
methodology consist of two components, the individual income-based 
determination and population-based non-income adjustments to reflect 
resource criteria, enrollment caps in effect on December 1, 2009, and 
other factors in accordance with paragraph (g) of this section.
    (1) Scope. The threshold methodology shall apply with respect to the 
population, and the associated expenditures for such population, which 
has been determined eligible for Medicaid under section 
1902(a)(10)(A)(i)(VIII) of the Act and in accordance withSec. 435.119 
of this chapter. This population and associated expenditures must not 
include individuals who have been determined eligible for Medicaid under 
any other mandatory or optional eligibility category.
    (2) Benefit criteria for newly eligible. An individual eligible for 
and enrolled underSec. 435.119 of this chapter is considered newly 
eligible if, with respect to the applicable eligibility category in 
effect on December 1, 2009, the benefits did not meet the criteria 
described in the newly eligible definition atSec. 433.204(a)(1).
    (3) Individual income-based determination. The individual income-
based determination shall be a comparison of the individual's MAGI-based 
income to the income standard in effect on December 1, 2009, as 
converted to an equivalent MAGI-based income standard for each 
applicable eligibility category as in effect on that date, as follows.
    (i) The amount of an individual's income under the threshold 
methodology is the MAGI-based income determined in accordance withSec. 
435.603 of this chapter.
    (ii) For each individual, the equivalent MAGI-based income 
eligibility standard is the applicable income eligibility standard for 
the applicable category of eligibility as in effect on December 1, 2009 
that is converted to an equivalent MAGI-based income standard. For 
example, as applicable, a separate MAGI-based income standard will be 
applied for individuals determined to be disabled who would have been 
eligible under an optional eligibility category in effect on December 1, 
2009 that was based on disability. For these purposes, the applicable 
equivalent MAGI-based standard is the standard as submitted by the State 
and approved by CMS in accordance with CMS guidance.
    (iii) With respect to income eligibility criteria, if the 
individual's MAGI-based income is at or below the applicable converted 
MAGI-based income standard for the relevant eligibility category or 
group, then the individual is included in the population that is not 
newly eligible;
    (iv) With respect to income eligibility criteria, if the 
individual's MAGI-based income is greater than the applicable converted 
MAGI-based income standard for the relevant eligibility category or 
group, then the individual is included in the population that is newly 
eligible;
    (v) Treatment of spend-down programs. Treatment of medically needy 
or spend-down programs under the threshold methodology is described in 
paragraph (f) of this section.
    (vi) For purposes of comparing the individual's MAGI-based income to 
the applicable converted MAGI-based income standard in effect on 
December 1, 2009, an individual will not be considered disabled absent 
an actual disability determination for the individual that is in 
accordance with the disability definition applicable for the State under 
Title XIX of the Act.
    (4) Treatment of disability. For purposes of applying the 
appropriate FMAP underSec. 433.10(b) or (c) for the medical assistance 
expenditures of an individual in applying the definition of newly 
eligible underSec. 433.204(a)(1), for eligibility categories or groups 
as in effect on December 1, 2009 for which disability was an eligibility 
criteria:
    (i) During the period of a disability determination. During the 
period for which a disability determination is pending, including during 
the period of any appeal process, and absent an actual disability 
determination for the individual that is in accordance with the 
disability definition applicable for the State under Title XIX of the 
Act,

[[Page 124]]

the individual is not considered to be disabled.
    (ii) Following a disability determination. With respect to an 
individual for which a disability determination was pending, following 
the actual determination of disability, the individual will be 
considered disabled effective with the date of the disability 
determination, or, if later, the disability onset date, as determined.
    (5) Population-based adjustments to the populations of newly 
eligible and not newly eligible.
    (i) The State may elect a resource criteria proxy adjustment 
described in paragraph (d) of this section.
    (ii) States that had a waiver or demonstration program with an 
enrollment cap in effect as of December 1, 2009 must apply an adjustment 
based on enrollment caps, subject to the definition of newly eligible 
individual inSec. 433.204(a)(1) and paragraph (e) of this section.
    (iii) States that have special circumstances may need to submit 
associated proxy methodologies to CMS for approval by CMS as described 
in paragraph (g) of this section.
    (6) Application of FMAP rates to adult group expenditures. Subject 
to population adjustments under paragraphs (d), (e), or (g) of this 
section, federal funding for a State's expenditures for medical 
assistance provided to individuals determined eligible underSec. 
435.119 of this chapter, including individuals determined eligible under 
that eligibility group during the evaluation for another eligibility 
category, must be claimed using the applicable FMAP as follows:
    (i) The newly eligible FMAP underSec. 433.10(c)(6) is applicable 
for the medical assistance expenditures for individuals determined to be 
newly eligible, as defined inSec. 433.204(a)(1).
    (ii) The applicable FMAP underSec. 433.10(b) orSec. 433.10(c)(7) 
or (8) is applicable for the medical assistance expenditures for 
individuals determined not to be newly eligible.
    (7) Status as newly or not newly eligible. Under the threshold 
methodology States must provide that once individuals are determined 
under the threshold methodology to be either newly or not newly eligible 
individuals in accordance with the applicable December 1, 2009 
eligibility criteria, the State would apply that determination until a 
new determination of MAGI-based income has been made in accordance with 
Sec.  435.916 of this chapter, or the individual has been otherwise 
determined not to be covered under the adult group set forth atSec. 
435.119 of this chapter.
    (d) Optional resource criteria proxy adjustment. (1) General. Under 
an election under this paragraph (d), the State may use a resource proxy 
methodology for purposes of adjusting the claims for the expenditures of 
the population enrolled underSec. 435.119 of this chapter to account 
for individuals who would not have been eligible for Medicaid because of 
the application of resource criteria as in effect for such population as 
of December 1, 2009, and therefore would meet the newly eligible 
individual definition atSec. 433.204(a)(1). Under this paragraph (d), 
a State may elect to apply a resource proxy methodology with respect to 
the resource criteria as in effect on December 1, 2009 and applied to 
the expenditures for a specific eligibility category or categories of 
individuals as in effect on December 1, 2009, or applied to the 
expenditures of the entire population enrolled underSec. 435.119 of 
this chapter. As provided in paragraph (d)(4) of this section, the State 
must indicate any resource proxy election in the threshold methodology 
State plan amendment submitted under paragraph (h) of this section. The 
use of a resource proxy methodology must not delay or interfere with the 
eligibility determination for an individual.
    (2) A State's resource proxy methodology must:
    (i) Describe each eligibility group or groups for which an 
individual eligible underSec. 435.119 would have been eligible on 
December 1, 2009, subject to resource criteria, and a methodology to 
apply those resource criteria as an adjustment to the total expenditures 
to adjust determinations of the newly eligible population under 
paragraph (c) of this section.
    (ii) Be auditable.
    (iii) Be based on statistically valid data, which is either:
    (A) Existing State data from and for periods before January 1, 2014 
on the

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resources of individuals who had applied and received a determination 
with respect to Medicaid eligibility, including resource eligibility 
under the State's applicable December 1, 2009 eligibility criteria. The 
existing State data must be specifically related to resource eligibility 
determinations, indicate the number and types of individuals for whom 
resource determinations were made, and establish the denial rates 
specifically identified as due to excess resources; or
    (B) Post-eligibility State data on the resources of individuals 
described in paragraph (d)(2)(iii)(B)(1) and (2) of this section, based 
on and obtained through a post-eligibility statistically valid sample of 
such individuals with respect to the applicable Medicaid eligibility 
categories and resource eligibility criteria under the State's 
applicable December 1, 2009 eligibility criteria:
    (1) State data from and for periods before January 1, 2014 must be 
for individuals in eligibility categories relevant toSec. 435.119 of 
this chapter who apply and receive a determination with respect to 
Medicaid eligibility, including both approvals and denials, to establish 
denial rates specifically due to excess resources and identify numbers 
and types of individuals.
    (2) State data from and for periods on or after January 1, 2014 must 
only be for individuals determined eligible and enrolled underSec. 
435.119 of this chapter, must compare individuals' resources to the 
applicable December 1, 2009 resource criteria to establish denial rates 
specifically due to excess resources, and identify numbers and types of 
individuals.
    (iv) Describe the State data on individuals' resources used and the 
application of such data. Whether such State data is based on data 
described in paragraph (d)(2)(iii)(A) or (B) of this section, such State 
data must represent sampling results for a period of sufficient length 
to be statistically valid.
    (v) Provide that the resource proxy methodology will account for the 
treatment of resources in a statistically valid manner when there is a 
lack of sufficient information to make a resource determination for a 
particular individual in a sampled population.
    (vi) Describe the application of the resource proxy methodology in 
establishing the amount and submission of claims for Federal funding by 
the State for the medical assistance expenditures of the applicable 
eligibility group(s). Such claims submitted under the resource proxy 
methodology must reflect the appropriate FMAP for the medical assistance 
expenditures of the affected eligibility group(s).
    (vii) As appropriate, describe and demonstrate the statistical 
validity of the resource proxy methodology and the use of data under 
such methodology.
    (3) Effective date for application of resource proxy. The resource 
proxy shall not be effective prior to the beginning of the quarter in 
which such resource proxy is submitted to CMS under the threshold 
methodology State plan in paragraph (h) of this section.
    (4) One time election for resource proxy. The election, application, 
and description of a resource proxy methodology under this paragraph for 
individuals determined eligible underSec. 435.119 must be included in 
a one-time submission of a State plan amendment submitted under 
paragraph (h) of this section no later than one year from the first day 
of the quarter in which eligibility for individuals underSec. 435.119 
of this chapter is initially effective for the State.
    (e) Enrollment caps adjustment. (1) Scope. Certain States may have 
applied enrollment caps, limits, or waiting lists in their Medicaid 
programs as in effect on December 1, 2009. Under the definition of newly 
eligible individual inSec. 433.204(a)(1), such States must consider as 
newly eligible those individuals eligible underSec. 435.119 of this 
chapter who would otherwise be eligible for full benefits, benchmark 
coverage, or benchmark equivalent coverage provided through a 
demonstration under the State plan effective December 1, 2009, but would 
not have been enrolled (or would have been on a waiting list) based on 
the application of an enrollment cap or limit determined in accordance 
with the approved demonstration as in effect on that date. Such

[[Page 126]]

States must only apply such enrollment cap, limit or waiting list 
provisions with respect to eligibility category or categories for which 
such provisions were applicable (for example, nonpregnant childless 
adults or parents/caretaker relatives) and in effect under the State's 
Medicaid program on December 1, 2009. For this purpose, individuals who 
would have been on a waiting list are considered as not enrolled under 
the demonstration.
    (2) A State for which multiple enrollment caps or limits were in 
effect under its December 1, 2009 Medicaid program may elect to combine 
such enrollment caps or limits, unless such treatment would preclude 
claiming of Federal funding at the applicable FMAP rate required under 
Sec.  433.10(b) or (c) (for example, to distinguish claims for childless 
adults and parents in an expansion State) for the medical assistance 
expenditures of individuals determined eligible and enrolled underSec. 
435.119 of this chapter; a State with enrollment cap or limit provisions 
that would preclude combining enrollment caps or limit provisions must 
use separate caps; or, the State, at its option, may elect to use 
separate caps.
    (3) For purposes of claiming Federal funding, with respect to each 
claiming period for which the State claims Federal funding for an 
eligibility category for which an enrollment cap or limit is applicable 
and in effect on December 1, 2009, the State must account for:
    (i) The total unduplicated number of individuals eligible and 
enrolled underSec. 435.119 of this chapter for the applicable claiming 
period.
    (ii) The total State medical assistance expenditures for individuals 
eligible and enrolled underSec. 435.119 of this chapter for the 
applicable claiming period.
    (iii) The enrollment cap or limit in effect on December 1, 2009 for 
the eligibility category, determined in accordance with the approved 
demonstration as in effect on December 1, 2009.
    (A) For States that elect under paragraph (e)(2) of this section to 
combine the enrollment caps, the enrollment cap is the sum of the 
enrollment caps for each eligibility group which is being combined.
    (B) For States that elect to treat the enrollment caps separately 
under paragraph (e)(2) of this section, each enrollment cap will be 
accounted for separately.
    (C) The level of the enrollment cap will be as authorized under the 
demonstration in effect on December 1, 2009; or, if the State had 
affirmatively set the cap at a lower level consistent with flexibility 
provided by the demonstration terms and conditions, the State may elect 
to apply the lower cap as in effect in the State on December 1, 2009. If 
a State elects to use such an alternate State-specified enrollment cap, 
the State will provide CMS with evidence, in its State plan amendment 
submitted to CMS under paragraph (h) of this section, that it had 
affirmatively implemented such a cap. Whether the State uses the 
authorized cap or a lower, verifiable cap as in effect in the State 
consistent with the demonstration special terms and conditions, the 
amount of expenditures up to the proportion of the 2009 enrollment cap 
to the total number of currently enrolled people in the group would not 
be claimed at the newly eligible FMAP.
    (4) States for which an enrollment cap, limit, or waiting list was 
applicable under their Medicaid programs as in effect on December 1, 
2009, must describe the treatment of such provision or provisions in the 
submission to CMS for approval by CMS in accordance with the State plan 
requirements outlined inSec. 433.206(h).
    (f) Application of spend-down income eligibility criteria. (1) 
General. Certain States' Medicaid programs as in effect on December 1, 
2009 may have included eligibility categories for which deduction of 
incurred medical expenses from income (referred to as spend-down) under 
the provisions of sections 1902(a)(10)(C) or 1902(f) of the Act was 
applied in determining individuals' Medicaid eligibility. Paragraphs 
(f)(2) and (3) of this section apply, for purposes of determining 
whether an individual enrolled underSec. 435.119 of this chapter meets 
the definition of newly eligible underSec. 433.204(a)(1), and for 
purposes of applying the appropriate FMAP underSec. 433.10(b) or (c) 
for the medical assistance expenditures of the

[[Page 127]]

individual for which a spend-down eligibility category of a State 
effective on December 1, 2009 is applicable.
    (2) Not newly eligible individual. For purposes of a State's spend-
down provision, an individual enrolled underSec. 435.119 of this 
chapter whose income before the deduction of incurred medical expenses 
is less than or equal to the applicable December 1, 2009 State spend-
down eligibility income level that would have resulted in full benefits 
is considered not newly eligible. The FMAP applicable for the medical 
assistance expenditures of such an individual is the appropriate FMAP 
underSec. 433.10(b) and (c) as applicable for an individual who is not 
newly eligible.
    (3) Newly eligible individual. For purposes of a State's spend-down 
provision, an individual enrolled underSec. 435.119 of this chapter 
whose income before the deduction of incurred medical expenses is 
greater than the applicable State spend-down eligibility income level is 
considered newly eligible. The FMAP applicable for the medical 
assistance expenditures of such an individual is the appropriate FMAP 
underSec. 433.10(b) and (c) as applicable for an individual who is 
newly eligible.
    (g) Special circumstances. States may submit additional proxy 
methodologies to CMS for approval by CMS in accordance with the State 
plan requirements outlined inSec. 433.206(h).
    (h) Threshold methodology State plan requirements. To claim 
expenditures at the increased FMAPs described inSec. 433.210(c)(6) or 
(c)(8), the State must amend its State plan under the provisions of 
subpart B of part 430 to reflect the threshold methodology the State 
implements in accordance with the provisions of this section. The 
threshold methodology will be included as an attachment to the State 
plan and, explicitly and by reference, must:
    (1) Specify that the threshold methodology the State implements is 
in accordance with this section;
    (2) Specify that the threshold methodology the State implements 
accounts for the individuals determined eligible under the adult group 
inSec. 435.119 of this chapter as a newly eligible individual or not 
newly eligible individual; and, on that basis, the State implements 
appropriate tracking for purpose of claiming Federal Medicaid funding 
for the associated medical assistance expenditures.
    (3) Reference the converted MAGI-based December 1, 2009 income 
eligibility standards and the associated eligibility groups, describe 
how the State will apply such standards and methodologies, and include 
other relevant criteria in the assignment of FMAP.
    (4) Indicate any required provisions, or options and alternatives 
the State elects, with respect to:
    (i) Treatment of resources, in accordance with paragraph (d) of this 
section;
    (ii) Treatment of enrollment caps or waiting lists, in accordance 
with paragraph (e) of this section; and
    (iii) Special circumstances as approved by CMS in accordance with 
paragraph (g) of this section.

[78 FR 19942, April 2, 2013, as amended at 78 FR 32991, June 3, 2013]



    Subpart F_Refunding of Federal Share of Medicaid Overpayments to 
                                Providers

    Source: 54 FR 5460, Feb. 3, 1989, unless otherwise noted.



Sec.  433.300  Basis.

    This subpart implements--
    (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly 
Federal payments to the States under title XIX (Medicaid) of the Act are 
to be reduced or increased to make adjustment for prior overpayments or 
underpayments that the Secretary determines have been made.
    (b) Section 1903(d)(2)(C) and (D) of the Act, which provides that a 
State has 1 year from discovery of an overpayment for Medicaid services 
to recover or attempt to recover the overpayment from the provider 
before adjustment in the Federal Medicaid payment to the State is made; 
and that adjustment will be made at the end of the 1-year period, 
whether or not recovery is made, unless the State is unable to recover 
from a provider because the overpayment is a debt that has been 
discharged in bankruptcy or is otherwise uncollectable.
    (c) Section 1903(d)(3) of the Act, which provides that the Secretary 
will

[[Page 128]]

consider the pro rata Federal share of the net amount recovered by a 
State during any quarter to be an overpayment.

[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31511, May 29, 2012]



Sec.  433.302  Scope of subpart.

    This subpart sets forth the requirements and procedures under which 
States have 1 year following discovery of overpayments made to providers 
for Medicaid services to recover or attempt to recover that amount 
before the States must refund the Federal share of these overpayments to 
CMS, with certain exceptions.

[77 FR 31511, May 29, 2012]



Sec.  433.304  Definitions.

    As used in this subpart--
    Discovery (or discovered) means identification by any State Medicaid 
agency official or other State official, the Federal Government, or the 
provider of an overpayment, and the communication of that overpayment 
finding or the initiation of a formal recoupment action without notice 
as described inSec. 433.316.
    Final written notice means that written communication, immediately 
preceding the first level of formal administrative or judicial 
proceedings, from a Medicaid agency official or other State official 
that notifies the provider of the State's overpayment determination and 
allows the provider to contest that determination, or that notifies the 
State Medicaid agency of the filing of a civil or criminal action.
    Fraud (in accordance withSec. 455.2) means an intentional 
deception or misrepresentation made by a person with the knowledge that 
the deception could result in some unauthorized benefit to himself or 
some other person. It includes any act that constitutes fraud under 
applicable Federal or State law.
    Overpayment means the amount paid by a Medicaid agency to a provider 
which is in excess of the amount that is allowable for services 
furnished under section 1902 of the Act and which is required to be 
refunded under section 1903 of the Act.
    Provider (in accordance withSec. 400.203) means any individual or 
entity furnishing Medicaid services under a provider agreement with the 
Medicaid agency.
    Recoupment means any formal action by the State or its fiscal agent 
to initiate recovery of an overpayment without advance official notice 
by reducing future payments to a provider.
    Third party (in accordance withSec. 433.136) means an individual, 
entity, or program that is or may be liable to pay for all or part of 
the expenditures for medical assistance furnished under a State plan.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 
FR 31511, May 29, 2012]



Sec.  433.310  Applicability of requirements.

    (a) General rule. Except as provided in paragraphs (b) and (c) of 
this section, the provisions of this subpart apply to--
    (1) Overpayments made to providers that are discovered by the State;
    (2) Overpayments made to providers that are initially discovered by 
the provider and made known to the State agency; and
    (3) Overpayments that are discovered through Federal reviews.
    (b) Third party payments and probate collections. The requirements 
of this subpart do not apply to--
    (1) Cases involving third party liability because, in these 
situations, recovery is sought for a Medicaid payment that would have 
been made had another party not been legally responsible for payment; 
and
    (2) Probate collections from the estates of deceased Medicaid 
beneficiaries, as they represent the recovery of payments properly made 
from resources later determined to be available to the State.
    (c) Unallowable costs paid under rate-setting systems. (1) 
Unallowable costs for a prior year paid to an institutional provider 
under a rate-setting system that a State recovers through an adjustment 
to the per diem rate for a subsequent period do not constitute 
overpayments that are subject to the requirements of this subpart.
    In such cases, the State is not required to refund the Federal share 
explicitly related to the original overpayment in accordance with the 
regulations in this subpart. Refund of the

[[Page 129]]

Federal share occurs when the State claims future expenditures made to 
the provider at a reduced rate.
    (2) Unallowable costs for a prior year paid to an institutional 
provider under a rate-setting system that a State seeks to recover in a 
lump sum, by an installment repayment plan, or through reduction of 
future payments to which the provider would otherwise be entitled 
constitute overpayments that are subject to the requirements of this 
subpart.
    (d) Recapture of depreciation upon gain on the sale of assets. 
Depreciation payments are considered overpayments for purposes of this 
subpart if a State requires their recapture in a discrete amount(s) upon 
gain on the sale of assets.



Sec.  433.312  Basic requirements for refunds.

    (a) Basic rules. (1) Except as provided in paragraph (b) of this 
section, the State Medicaid agency has 1 year from the date of discovery 
of an overpayment to a provider to recover or seek to recover the 
overpayment before the Federal share must be refunded to CMS.
    (2) The State Medicaid agency must refund the Federal share of 
overpayments at the end of the 1-year period following discovery in 
accordance with the requirements of this subpart, whether or not the 
State has recovered the overpayment from the provider.
    (b) Exception. The agency is not required to refund the Federal 
share of an overpayment made to a provider when the State is unable to 
recover the overpayment amount because the provider has been determined 
bankrupt or out of business in accordance withSec. 433.318.
    (c) Applicability. (1) The requirements of this subpart apply to 
overpayments made to Medicaid providers that occur and are discovered in 
any quarter that begins on or after October 1, 1985.
    (2) The date upon which an overpayment occurs is the date upon which 
a State, using its normal method of reimbursement for a particular class 
of provider (e.g., check, interfund transfer), makes the payment 
involving unallowable costs to a provider.

[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31511, May 29, 2012]



Sec.  433.316  When discovery of overpayment occurs and its 
significance.

    (a) General rule. The date on which an overpayment is discovered is 
the beginning date of the 1-year period allowed for a State to recover 
or seek to recover an overpayment before a refund of the Federal share 
of an overpayment must be made to CMS.
    (b) Requirements for notification. Unless a State official or fiscal 
agent of the State chooses to initiate a formal recoupment action 
against a provider without first giving written notification of its 
intent, a State Medicaid agency official or other State official must 
notify the provider in writing of any overpayment it discovers in 
accordance with State agency policies and procedures and must take 
reasonable actions to attempt to recover the overpayment in accordance 
with State law and procedures.
    (c) Overpayments resulting from situations other than fraud. An 
overpayment resulting from a situation other than fraud is discovered on 
the earliest of---
    (1) The date on which any Medicaid agency official or other State 
official first notifies a provider in writing of an overpayment and 
specifies a dollar amount that is subject to recovery;
    (2) The date on which a provider initially acknowledges a specific 
overpaid amount in writing to the medicaid agency; or
    (3) The date on which any State official or fiscal agent of the 
State initiates a formal action to recoup a specific overpaid amount 
from a provider without having first notified the provider in writing.
    (d) Overpayments resulting from fraud. (1) An overpayment that 
results from fraud is discovered on the date of the final written notice 
(as defined inSec. 433.304 of this subchapter) of the State's 
overpayment determination.
    (2) When the State is unable to recover a debt which represents an 
overpayment (or any portion thereof) resulting from fraud within 1 year 
of discovery because no final determination

[[Page 130]]

of the amount of the overpayment has been made under an administrative 
or judicial process (as applicable), including as a result of a judgment 
being under appeal, no adjustment shall be made in the Federal payment 
to such State on account of such overpayment (or any portion thereof) 
until 30 days after the date on which a final judgment (including, if 
applicable, a final determination on an appeal) is made.
    (3) The Medicaid agency may treat an overpayment made to a Medicaid 
provider as resulting from fraud under subsection (d) of this section 
only if it has referred a provider's case to the Medicaid fraud control 
unit, or appropriate law enforcement agency in States with no certified 
Medicaid fraud control unit, as required bySec. 455.15,Sec. 455.21, 
orSec. 455.23 of this chapter, and the Medicaid fraud control unit or 
appropriate law enforcement agency has provided the Medicaid agency with 
written notification of acceptance of the case; or if the Medicaid fraud 
control unit or appropriate law enforcement agency has filed a civil or 
criminal action against a provider and has notified the State Medicaid 
agency.
    (e) Overpayments identified through Federal reviews. If a Federal 
review at any time indicates that a State has failed to identify an 
overpayment or a State has identified an overpayment but has failed to 
either send written notice of the overpayment to the provider that 
specified a dollar amount subject to recovery or initiate a formal 
recoupment from the provider without having first notified the provider 
in writing, CMS will consider the overpayment as discovered on the date 
that the Federal official first notifies the State in writing of the 
overpayment and specifies a dollar amount subject to recovery.
    (f) Effect of changes in overpayment amount. Any adjustment in the 
amount of an overpayment during the 1-year period following discovery 
(made in accordance with the approved State plan, Federal law and 
regulations governing Medicaid, and the appeals resolution process 
specified in State administrative policies and procedures) has the 
following effect on the 1-year recovery period:
    (1) A downward adjustment in the amount of an overpayment subject to 
recovery that occurs after discovery does not change the original 1-year 
recovery period for the outstanding balance.
    (2) An upward adjustment in the amount of an overpayment subject to 
recovery that occurs during the 1-year period following discovery does 
not change the 1-year recovery period for the original overpayment 
amount. A new 1-year period begins for the incremental amount only, 
beginning with the date of the State's written notification to the 
provider regarding the upward adjustment.
    (g) Effect of partial collection by State. A partial collection of 
an overpayment amount by the State from a provider during the 1-year 
period following discovery does not change the 1-year recovery period 
for the balance of the original overpayment amount due to CMS.
    (h) Effect of administrative or judicial appeals. Any appeal rights 
extended to a provider do not extend the date of discovery.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 
FR 31511, May 29, 2012]



Sec.  433.318  Overpayments involving providers who are bankrupt
or out of business.

    (a) Basic rules. (1) The agency is not required to refund the 
Federal share of an overpayment made to a provider as required bySec. 
433.312(a) to the extent that the State is unable to recover the 
overpayment because the provider has been determined bankrupt or out of 
business in accordance with the provisions of this section.
    (2) The agency must notify the provider that an overpayment exists 
in any case involving a bankrupt or out-of-business provider and, if the 
debt has not been determined uncollectable, take reasonable actions to 
recover the overpayment during the 1-year recovery period in accordance 
with policies prescribed by applicable State law and administrative 
procedures.
    (b) Overpayment debts that the State need not refund. Overpayments 
are considered debts that the State is unable

[[Page 131]]

to recover within the 1-year period following discovery if the following 
criteria are met:
    (1) The provider has filed for bankruptcy, as specified in paragraph 
(c) of this section; or
    (2) The provider has gone out of business and the State is unable to 
locate the provider and its assets, as specified in paragraph (d) of 
this section.
    (c) Bankruptcy. The agency is not required to refund to CMS the 
Federal share of an overpayment at the end of the 1-year period 
following discovery, if--
    (1) The provider has filed for bankruptcy in Federal court at the 
time of discovery of the overpayment or the provider files a bankruptcy 
petition in Federal court before the end of the 1-year period following 
discovery; and
    (2) The State is on record with the court as a creditor of the 
petitioner in the amount of the Medicaid overpayment.
    (d) Out of business. (1) The agency is not required to refund to CMS 
the Federal share of an overpayment at the end of the 1-year period 
following discovery if the provider is out of business on the date of 
discovery of the overpayment or if the provider goes out of business 
before the end of the 1-year period following discovery.
    (2) A provider is considered to be out of business on the effective 
date of a determination to that effect under State law. The agency 
must--
    (i) Document its efforts to locate the party and its assets. These 
efforts must be consistent with applicable State policies and 
procedures; and
    (ii) Make available an affidavit or certification from the 
appropriate State legal authority establishing that the provider is out 
of business and that the overpayment cannot be collected under State law 
and procedures and citing the effective date of that determination under 
State law.
    (3) A provider is not out of business when ownershp is transferred 
within the State unless State law and procedures deem a provider that 
has transferred ownership to be out of business and preclude collection 
of the overpayment from the provider.
    (e) Circumstances requiring refunds. If the 1-year recovery period 
has expired before an overpayment is found to be uncollectable under the 
provisions of this section, if the State recovers an overpayment amount 
under a court-approved discharge of bankruptcy, or if a bankruptcy 
petition is denied, the agency must refund the Federal share of the 
overpayment in accordance with the procedures specified inSec. 433.320 
of this subpart.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 
FR 31512, May 29, 2012]



Sec.  433.320  Procedures for refunds to CMS.

    (a) Basic requirements. (1) The agency must refund the Federal share 
of overpayments that are subject to recovery to CMS through a credit on 
its Quarterly Statement of Expenditures (Form CMS-64).
    (2) The agency must credit CMS with the Federal share of 
overpayments subject to recovery on the earlier of--
    (i) The Form CMS-64 submission due to CMS for the quarter in which 
the State recovers the overpayment from the provider; or
    (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year 
period following discovery, established in accordance withSec. 
433.316, ends.
    (3) A credit on the Form CMS-64 must be made whether or not the 
overpayment has been recovered by the State from the provider.
    (4) If the State does not refund the Federal share of such 
overpayment as indicated in paragraph (a)(2) of this section, the State 
will be liable for interest on the amount equal to the Federal share of 
the non-recovered, non-refunded overpayment amount. Interest during this 
period will be at the Current Value of Funds Rate (CVFR), and will 
accrue beginning on the day after the end of the 1-year period following 
discovery until the last day of the quarter for which the State submits 
a CMS-64 report refunding the Federal share of the overpayment.
    (b) Effect of reporting collections and submitting reduced 
expenditure claims. (1) The State is not required to refund the Federal 
share of an overpayment at the end of the 1-year period if the State has 
already reported a collection or submitted an expenditure claim reduced 
by a discrete amount to recover the

[[Page 132]]

overpayment prior to the end of the 1-year period following discovery.
    (2) The State is not required to report on the Form CMS-64 any 
collections made on overpayment amounts for which the Federal share has 
been refunded previously.
    (3) If a State has refunded the Federal share of an overpayment as 
required under this subpart and the State subsequently makes recovery by 
reducing future provider payments by a discrete amount, the State need 
not reflect that reduction in its claim for Federal financial 
participation.
    (c) Reclaiming overpayment amounts previously refunded to CMS. If 
the amount of an overpayment is adjusted downward after the agency has 
credited CMS with the Federal share, the agency may reclaim the amount 
of the downward adjustment on the Form CMS-64. Under this provision--
    (1) Downward adjustment to an overpayment amount previously credited 
to CMS is allowed only if it is properly based on the approved State 
plan, Federal law and regulations governing Medicaid, and the appeals 
resolution processes specified in State administrative policies and 
procedures.
    (2) The 2-year filing limit for retroactive claims for Medicaid 
expenditures does not apply. A downward adjustment is not considered a 
retroactive claim but rather a reclaiming of costs previously claimed.
    (d) Expiration of 1-year recovery period. If an overpayment has not 
been determined uncollectable in accordance with the requirements of 
Sec.  433.318 of this subpart at the end of the 1-year period following 
discovery of the overpayment, the agency must refund the Federal share 
of the overpayment to CMS in accordance with the procedures specified in 
paragraph (a) of this section.
    (e) Court-approved discharge of bankruptcy. If the State recovers 
any portion of an overpayment under a court-approved discharge of 
bankruptcy, the agency must refund to CMS the Federal share of the 
overpayment amount collected on the next quarterly expenditure report 
that is due to CMS for the period that includes the date on which the 
collection occurs.
    (f) Bankruptcy petition denied. If a provider's petition for 
bankruptcy is denied in Federal court, the agency must credit CMS with 
the Federal share of the overpayment on the later of--
    (1) The Form CMS-64 submission due to CMS immediately following the 
date of the decision of the court; or
    (2) The Form CMS-64 submission for the quarter in which the 1-year 
period following discovery of the overpayment ends.
    (g) Reclaim of refunds. (1) If a provider is determined bankrupt or 
out of business under this section after the 1-year period following 
discovery of the overpayment ends and the State has not been able to 
make complete recovery, the agency may reclaim the amount of the Federal 
share of any unrecovered overpayment amount previously refunded to CMS. 
CMS allows the reclaim of a refund by the agency if the agency submits 
to CMS documentation that it has made reasonable efforts to obtain 
recovery.
    (2) If the agency reclaims a refund of the Federal share of an 
overpayment--
    (i) In bankruptcy cases, the agency must submit to CMS a statement 
of its efforts to recover the overpayment during the period before the 
petition for bankruptcy was filed; and
    (ii) In out-of-business cases, the agency must submit to CMS a 
statement of its efforts to locate the provider and its assets and to 
recover the overpayment during any period before the provider is found 
to be out of business in accordance withSec. 433.318.
    (h) Supporting reports. The agency must report the following 
information to support each Quarterly Statement of Expenditures Form 
CMS-64:
    (1) Amounts of overpayments not collected during the quarter but 
refunded because of the expiration of the 1-year period following 
discovery;
    (2) Upward and downward adjustments to amounts credited in previous 
quarters;
    (3) Amounts of overpayments collected under court-approved 
discharges of bankruptcy;
    (4) Amounts of previously reported overpayments to providers 
certified as bankrupt or out of business during the quarter; and

[[Page 133]]

    (5) Amounts of overpayments previously credited and reclaimed by the 
State.

[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31512, May 29, 2012]



Sec.  433.322  Maintenance of Records.

    The Medicaid agency must maintain a separate record of all 
overpayment activities for each provider in a manner that satisfies the 
retention and access requirements of 45 CFR 92.42.

[77 FR 31512, May 29, 2012]



PART 434_CONTRACTS--Table of Contents



                      Subpart A_General Provisions

Sec.
434.1 Basis and scope.
434.2 Definitions.
434.4 State plan requirement.
434.6 General requirements for all contracts and subcontracts.

     Subpart B_Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions

434.10 Contracts with fiscal agents.
434.12 Contracts with private nonmedical institutions.
434.14 [Reserved]

Subpart C [Reserved]

         Subpart D_Contracts With Health Insuring Organizations

434.40 Contract requirements.

Subpart E [Reserved]

                Subpart F_Federal Financial Participation

434.70 Conditions for Federal Financial Participation (FFP).
434.76 Costs under fiscal agent contracts.
434.78 Right to reconsideration of disallowance.

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

    Source: 48 FR 54020, Nov. 30, 1983, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  434.1  Basis and scope.

    (a) Statutory basis. This part is based on section 1902(a)(4) of the 
Act, which requires that the State plan provide for methods of 
administration that the Secretary finds necessary for the proper and 
efficient operation of the plan.
    (b) Scope. This part sets forth the requirements for contracts with 
certain organizations for furnishing Medicaid services or processing or 
paying Medicaid claims, or enchancing the agency's capability for 
effective administration of the program.

[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 67 
FR 41095, June 14, 2002]



Sec.  434.2  Definitions.

    As used in this part, unless the context indicates otherwise--
    Fiscal agent means an entity that processes or pays vendor claims 
for the agency.
    Health care projects grant center means an entity that--
    (a) Is supported in whole or in part by Federal project grant 
financial assistance; and
    (b) Provides or arranges for medical services to beneficiaries.
    Private nonmedical institution means an institution (such as a 
child-care facility or a maternity home) that--
    (a) Is not, as a matter of regular business, a health insuring 
organization or a community health care center;
    (b) Provides medical care to its residents through contracts or 
other arrangements with medical providers; and
    (c) Receives capitation payments from the Medicaid agency, under a 
nonrisk contract, for its residents who are eligible for Medicaid.
    Professional management service or consultant firm means a firm that 
performs management services such as auditing or staff training, or 
carries out studies or provides consultation aimed at improving State 
Medicaid operations, for example, with respect to reimbursement formulas 
or accounting systems.

[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 52 
FR 22322, June 11, 1987; 55 FR 51295, Dec. 13, 1990; 67 FR 41095, June 
14, 2002]



Sec.  434.4  State plan requirement.

    If the State plan provides for contracts of the types covered by 
this part, the plan must also provide for meeting the applicable 
requirements of this part.

[[Page 134]]



Sec.  434.6  General requirements for all contracts and subcontracts.

    (a) Contracts. All contracts under this part must include all of the 
following:
    (1) Include provisions that define a sound and complete procurement 
contract, as required by 45 CFR part 74.
    (2) Identify the population covered by the contract.
    (3) Specify any procedures for enrollment or reenrollment of the 
covered population.
    (4) Specify the amount, duration, and scope of medical services to 
be provided or paid for.
    (5) Provide that the agency and HHS may evaluate through inspection 
or other means, the quality, appropriateness and timeliness of services 
performed under the contract.
    (6) Specify procedures and criteria for terminating the contract, 
including a requirement that the contractor promptly supply all 
information necessary for the reimbursement of any outstanding Medicaid 
claims.
    (7) Provide that the contractor maintains an appropriate record 
system for services to enrolled beneficiaries.
    (8) Provide that the contractor safeguards information about 
beneficiaries as required by part 431, subpart F of this chapter.
    (9) Specify any activities to be performed by the contractor that 
are related to third party liability requirements in part 433, subpart D 
of this chapter.
    (10) Specify which functions may be subcontracted.
    (11) Provide that any subcontracts meet the requirements of 
paragraph (b) of this section.
    (12) Specify the following:
    (i) No payment will be made by the contractor to a provider for 
provider-preventable conditions, as identified in the State plan.
    (ii) The contractor will require that all providers agree to comply 
with the reporting requirements inSec. 447.26(d) of this subchapter as 
a condition of payment from the contractor.
    (iii) The contractor will comply with such reporting requirements to 
the extent the contractor directly furnishes services.
    (b) Subcontracts. All subcontracts must be in writing and fulfill 
the requirements of this part that are appropriate to the service or 
activity delegated under the subcontract.
    (c) Continued responsibility of contractor. No subcontract 
terminates the legal responsibility of the contractor to the agency to 
assure that all activities under the contract are carried out.

[48 FR 54020, Nov. 30, 1983, as amended at 67 FR 41095, June 14, 2002; 
76 FR 32837, June 6, 2011]



     Subpart B_Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions



Sec.  434.10  Contracts with fiscal agents.

    Contracts with fiscal agents must--
    (a) Meet the requirements ofSec. 434.6;
    (b) Include termination procedures that require the contractors to 
supply promptly all material necessary for continued operation of 
payment and related systems. This material includes--
    (1) Computer programs;
    (2) Data files;
    (3) User and operation manuals, and other documentation;
    (4) System and program documentation; and
    (5) Training programs for Medicaid agency staff, their agents or 
designated representatives in the operation and maintenance of the 
system;
    (c) Offer to the State one or both of the following options, if the 
fiscal agent or the fiscal agent's subcontractor has a proprietary right 
to material specified in paragraph (b) of this section:
    (1) Purchasing the material; or
    (2) Purchasing the use of the material through leasing or other 
means; and
    (d) State that payment to providers will be made in accordance with 
part 447 of this chapter.



Sec.  434.12  Contracts with private nonmedical institutions.

    Contracts with private nonmedical institutions must--
    (a) Meet the requirements ofSec. 434.6;
    (b) Specify a capitation fee based on the cost of the services 
provided, in accordance with the reimbursement requirements prescribed 
in part 447 of this chapter; and

[[Page 135]]

    (c) Specify when the capitation fee must be paid.



Sec.  434.14  [Reserved]

Subpart C [Reserved]



         Subpart D_Contracts With Health Insuring Organizations



Sec.  434.40  Contract requirements.

    (a) Contracts with health insuring organizations that are not 
subject to the requirements in section 1903(m)(2)(A) must:
    (1) Meet the general requirements for all contracts and subcontracts 
specified inSec. 434.6;
    (2) Specify that the contractor assumes at least part of the 
underwriting risk and;
    (i) If the contractor assumes the full underwriting risk, specify 
that payment of the capitation fees to the contractor during the 
contract period constitutes full payment by the agency for the cost of 
medical services provided under the contract;
    (ii) If the contractor assumes less than the full underwriting risk, 
specify how the risk is apportioned between the agency and the 
contractor;
    (3) Specify whether the contractor returns to the agency part of any 
savings remaining after the allowable costs are deducted from the 
capitations fees, and if savings are returned, the apportionment between 
agency and the contractor; and
    (4) Specify the extent, if any, to which the contractor may obtain 
reinsurance of a portion of the underwriting risk.
    (b) The contract must--
    (1) Specify that the capitation fee will not exceed the limits set 
forth under part 447 of this chapter.
    (2) Specify that, except as permitted under paragraph (b) of this 
section, the capitation fee paid on behalf of each beneficiary may not 
be renegotiated--
    (i) During the contract period if the contract period is 1 year or 
less; or
    (ii) More often than annually if the contract period is for more 
than 1 year.
    (3) Specify that the capitation fee will not include any amount for 
recoupment of any specific losses suffered by the contractor for risks 
assumed under the same contract or a prior contract with the agency; and
    (4) Specify the actuarial basis for computation of the capitation 
fee.
    (c) The capitation fee may be renegotiated more frequently than 
annually for beneficiaries who are not enrolled at the time of 
renegotiation or if the renegotiation is required by changes in Federal 
or State law.

[55 FR 51295, Dec. 13, 1990]

Subpart E [Reserved]



                Subpart F_Federal Financial Participation

    Source: 48 FR 54020, Nov. 20, 1983, unless otherwise noted. 
Redesignated at 55 FR 51295, Dec. 13, 1990.



Sec.  434.70  Conditions for Federal Financial Participation (FFP).

    (a) Basic requirements. FFP is available only for periods during 
which the contract--
    (1) Meets the requirements of this part;
    (2) Meets the applicable requirements of 45 CFR part 74; and
    (3) Is in effect.
    (b) Basis for withholding. CMS may withhold FFP for any period 
during which the State fails to meet the State plan requirements of this 
part.

[67 FR 41095, June 14, 2002]



Sec.  434.76  Costs under fiscal agent contracts.

    Under each contract with a fiscal agent--
    (a) The amount paid to the provider of medical services is a medical 
assistance cost; and
    (b) The amount paid to the contractor for performing the agreed-upon 
functions is an administrative cost.



Sec.  434.78  Right to reconsideration of disallowance.

    A Medicaid agency dissatisfied with a disallowance of FFP under this 
subpart may request and will be granted reconsideration in accordance 
with 45 CFR part 16.

[[Page 136]]



PART 435_ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE NORTHERN
MARIANA ISLANDS, AND AMERICAN SAMOA--Table of Contents



              Subpart A_General Provisions and Definitions

Sec.
435.2 Purpose and applicability.
435.3 Basis.
435.4 Definitions and use of terms.
435.10 State plan requirements.

                      Subpart B_Mandatory Coverage

435.100 Scope.

               Mandatory Coverage of Families and Children

435.110 Parents and other caretaker relatives.
435.112 Families terminated from AFDC because of increased earnings or 
          hours of employment.
435.113 Individuals who are ineligible for AFDC because of requirements 
          that do not apply under title XIX of the Act.
435.114 Individuals who would be eligible for AFDC except for increased 
          OASDI income under Pub. L. 92-336 (July 1, 1972).
435.115 Individuals deemed to be receiving AFDC.

  Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn 
                                Children

435.116 Pregnant women.
435.117 Newborn children.

             Mandatory Coverage of Qualified Family Members

435.118 Infants and children under age 19.

          Mandatory Coverage for Individuals Age 19 Through 64

435.119 Coverage for individuals age 19 or older and under age 65 at or 
          below 133 percent FPL.

           Mandatory Coverage of the Aged, Blind, and Disabled

435.120 Individuals receiving SSI.
435.121 Individuals in States using more restrictive requirements for 
          Medicaid than the SSI requirements.
435.122 Individuals who are ineligible for SSI or optional State 
          supplements because of requirements that do not apply under 
          title XIX of the Act.
435.130 Individuals receiving mandatory State supplements.
435.131 Individuals eligible as essential spouses in December 1973.
435.132 Institutionalized individuals who were eligible in December 
          1973.
435.133 Blind and disabled individuals eligible in December 1973.
435.134 Individuals who would be eligible except for the increase in 
          OASDI benefits under Pub. L. 92-336 (July 1, 1972).
435.135 Individuals who become ineligible for cash assistance as a 
          result of OASDI cost-of-living increases received after April 
          1977.
435.136 State agency implementation requirements for one-time notice and 
          annual review system.
435.137 Disabled widows and widowers who would be eligible for SSI 
          except for the increase in disability benefits resulting from 
          elimination of the reduction under Pub. L. 98-31.
435.138 Disabled widows and widowers aged 60 through 64 who would be 
          eligible for SSI benefits except for receipt of early social 
          security benefits.

                  Mandatory Coverage of Certain Aliens

435.139 Coverage for certain aliens.

   Mandatory Coverage of Adoption Assistance and Foster Care Children

435.145 Children for whom adoption assistance or foster care maintenance 
          payments are made.

                  Mandatory Coverage of Special Groups

435.170 Pregnant women eligible for extended coverage.

                     Subpart C_Options for Coverage

435.200 Scope.
435.201 Individuals included in optional groups.

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled

435.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
435.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
435.212 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
435.217 Individuals receiving home and community-based services.
435.218 Individuals with MAGI-based income above 133 percent FPL.

              Options for Coverage of Families and Children

435.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.

[[Page 137]]

435.221 [Reserved]
435.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.
435.223 Individuals who would be eligible for AFDC if coverage under the 
          State's AFDC plan were as broad as allowed under title IV-A.
435.225 Individuals under age 19 who would be eligible for Medicaid if 
          they were in a medical institution.
435.227 Individuals under age 21 who are under State adoption assistance 
          agreements.
435.229 Optional targeted low-income children.

          Options for Coverage of the Aged, Blind, and Disabled

435.230 Aged, blind, and disabled individuals in States that use more 
          restrictive requirements for Medicaid than SSI requirements: 
          Optional coverage.
435.232 Individuals receiving only optional State supplements.
435.234 Individuals receiving only optional State supplements in States 
          using more restrictive eligibility requirements than SSI and 
          certain States using SSI criteria.
435.236 Individuals in institutions who are eligible under a special 
          income level.

           Subpart D_Optional Coverage of the Medically Needy

435.300 Scope.
435.301 General rules.
435.308 Medically needy coverage of individuals under age 21.
435.310 Medically needy coverage of specified relatives.
435.320 Medically needy coverage of the aged in States that cover 
          individuals receiving SSI.
435.322 Medically needy coverage of the blind in States that cover 
          individuals receiving SSI.
435.324 Medically needy coverage of the disabled in States that cover 
          individuals receiving SSI.
435.326 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
435.330 Medically needy coverage of the aged, blind, and disabled in 
          States using more restrictive eligibility requirements for 
          Medicaid than those used under SSI.
435.340 Protected medically needy coverage for blind and disabled 
          individuals eligible in December 1973.
435.350 Coverage for certain aliens.

               Subpart E_General Eligibility Requirements

435.400 Scope.
435.401 General rules.
435.402 [Reserved]
435.403 State residence.
435.404 Applicant's choice of category.
435.406 Citizenship and alienage.
435.407 Types of acceptable documentary evidence of citizenship.

           Subpart F_Categorical Requirements for Eligibility

435.500 Scope.

                               Dependency

435.510 Determination of dependency.

                                   Age

435.520 Age requirements for the aged.
435.522 Determination of age.

                                Blindness

435.530 Definition of blindness.
435.531 Determinations of blindness.

                               Disability

435.540 Definition of disability.
435.541 Determinations of disability.

    Subpart G_General Financial Eligibility Requirements and Options

435.600 Scope.
435.601 Application of financial eligibility methodologies.
435.602 Financial responsibility of relatives and other individuals.
435.603 Application of modified adjusted gross income (MAGI).
435.604 [Reserved]
435.606 [Reserved]
435.608 Applications for other benefits.
435.610 Assignment of rights to benefits.
435.622 Individuals in institutions who are eligible under a special 
          income level.
435.631 General requirements for determining income eligibility in 
          States using more restrictive requirements for Medicaid than 
          SSI.
435.640 Protected Medicaid eligibility for individuals eligible in 
          December 1973.

   Subpart H_Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy

435.700 Scope.
435.725 Post-eligibility treatment of income of institutionalized 
          individuals in SSI States: Application of patient income to 
          the cost of care.
435.726 Post-eligibility treatment of income of individuals receiving 
          home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.
435.733 Post-eligibility treatment of income of institutionalized 
          individuals in States

[[Page 138]]

          using more restrictive requirements than SSI: Application of 
          patient income to the cost of care.
435.735 Post-eligibility treatment of income and resources of 
          individuals receiving home and community-based services 
          furnished under a waiver: Application of patient income to the 
          cost of care.

     Subpart I_Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy

435.800 Scope.

                     Medically Needy Income Standard

435.811 Medically needy income standard: General requirements.
435.814 Medically needy income standard: State plan requirements.

                   Medically Needy Income Eligibility

435.831 Income eligibility.
435.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

                    Medically Needy Resource Standard

435.840 Medically needy resource standard: General requirements.
435.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

435.845 Medically needy resource eligibility.
435.850-435.852 [Reserved]

      Subpart J_Eligibility in the States and District of Columbia

435.900 Scope.

                    General Methods of Administration

435.901 Consistency with objectives and statutes.
435.902 Simplicity of administration.
435.903 Adherence of local agencies to State plan requirements.
435.904 Establishment of outstation locations to process applications 
          for certain low-income eligibility groups.

                              Applications

435.905 Availability of program information.
435.906 Opportunity to apply.
435.907 Written application.
435.908 Assistance with application.
435.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.
435.910 Use of social security number.

                  Determination of Medicaid Eligibility

435.911 Determination of eligibility.
435.912 Timely determination of eligibility.
435.913 Notice of agency's decision concerning eligibility.
435.914 Case documentation.
435.915 Effective date.

                Redeterminations of Medicaid Eligibility

435.916 Periodic redeterminations of Medicaid eligibility.
435.918 Use of electronic notices.
435.919 Timely and adequate notice concerning adverse actions.
435.920 Verification of SSNs.
435.923 Authorized representatives.

                           Furnishing Medicaid

435.930 Furnishing Medicaid.

            Income and Eligibility Verification Requirements

435.940 Basis and scope.
435.945 General requirements.
435.948 Requesting information.
435.949 Verification of information through an electronic service.
435.952 Use of information.
435.955 Additional requirements regarding information released by a 
          Federal agency.
435.956 Verification of other non-financial information.
435.960 Standardized formats for furnishing and obtaining information to 
          verifying income and eligibility.
435.965 Delay of effective date.

                Subpart K_Federal Financial Participation

435.1000 Scope.

 FFP in Expenditures for Determining Eligibility and Providing Services

435.1001 FFP for administration.
435.1002 FFP for services.
435.1003 FFP for redeterminations.
435.1004 Beneficiaries overcoming certain conditions of eligibility.

                           Limitations on FFP

435.1005 Beneficiaries in institutions eligible under a special income 
          standard.
435.1006 Beneficiaries of optional State supplements only.
435.1007 Categorically needy, medically needy, and qualified Medicare 
          beneficiaries.
435.1008 FFP in expenditures for medical assistance for individuals who 
          have declared United States citizenship or nationality under 
          section 1137(d) of the Act and with respect to whom the State 
          has not documented citizenship and identity.
435.1009 Institutionalized individuals.

[[Page 139]]

435.1010 Definitions relating to institutional status.

                   Requirements for State Supplements

435.1011 Requirement for mandatory State supplements.
435.1012 Requirement for maintenance of optional State supplement 
          expenditures.

                       FFP for Premium Assistance

435.1015 FFP for premium assistance for plans in the individual market.

   Subpart L_Options for Coverage of Special Groups under Presumptive 
                               Eligibility

435.1100 Basis and scope.

                  Presumptive Eligibility for Children

435.1101 Definitions related to presumptive eligibility for children.
435.1102 Children covered under presumptive eligibility.
435.1103 Presumptive eligibility for other individuals.
435.1110 Presumptive eligibility determined by hospitals.

 Subpart M_Coordination of Eligibility and Enrollment Between Medicaid, 
       CHIP, Exchanges and Other Insurance Affordability Programs

435.1200 Medicaid agency responsibilities.
435.1205 Alignment with exchange initial open enrollment period.

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

    Source: 43 FR 45204, Sept. 29, 1978, unless otherwise noted.



              Subpart A_General Provisions and Definitions



Sec.  435.2  Purpose and applicability.

    This part sets forth, for the 50 States, the District of Columbia, 
the Northern Mariana Islands, and American Samoa--
    (a) The eligibility provisions that a State plan must contain;
    (b) The mandatory and optional groups of individuals to whom 
Medicaid is provided under a State plan;
    (c) The eligibility requirements and procedures that the Medicaid 
agency must use in determining and redetermining eligibility, and 
requirements it may not use;
    (d) The availability of FFP for providing Medicaid and for 
administering the eligibility provisions of the plan; and
    (e) Other requirements concerning eligibility determinations, such 
as use of an institutionalized individual's income for the cost of care.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 
51 FR 41350, Nov. 14, 1986]



Sec.  435.3  Basis.

    (a) This part implements the following sections of the Act and 
public laws that mandate eligibility requirements and standards:

402(a)(22) Eligibility of deemed beneficiaries of AFDC who receive zero 
payments because of recoupment of overpayments.
402(a)(37) Eligibility of individuals who lose AFDC eligibility due to 
increased earnings.
414(g) Eligibility of certain individuals participating in work 
supplementation programs.
473(b) Eligibility of children in foster care and adopted children who 
are deemed AFDC beneficiaries.
1619(b) Benefits for blind individuals or those with disabling 
impairments whose income equals or exceeds a specific SSI limit.
1634(b) Preservation of benefit status for disabled widows and widowers 
who lost SSI benefits because of 1983 changes in actuarial reduction 
formula.
1634(d) Individuals who lose eligibility for SSI benefits due to 
entitlement to early widow's or widower's social security disability 
benefits under section 202(e) or (f) of the Act.
1902(a)(8) Opportunity to apply; assistance must be furnished promptly.
1902(a)(10) Required and optional groups.
1902(a)(12) Determination of blindness.
1902(a)(17) Standards for determining eligibility: flexibility in the 
application of income eligibility standards.
1902(a)(19) Safeguards for simplicity of administration and best 
interests of beneficiaries.
1902(a)(34) Three-month retroactive eligibility.
1902(a) (second paragraph after (47)) Eligibility despite increased 
monthly insurance benefits under title II.
1902(a)(55) Mandatory use of outstation locations other than welfare 
offices to receive and initially process applications of certain low-
income pregnant women, infants, and children under age 19.
1902(b) Prohibited conditions for eligibility: Age requirement of more 
that 65 years;
    State residence requirements excluding individuals who reside in the 
state; and

[[Page 140]]

    Citizenship requirement excluding United States citizens.
1902(e) Four-month continued eligibility for families ineligible because 
of increased hours or income from employment.
1902(e)(2) Minimum eligibility period for beneficiary enrolled in an 
HMO.
1902(e)(3) Optional coverage of certain disabled children being cared 
for at home.
1902(e)(4) Eligibility of newborn children of Medicaid eligible women.
1902(e)(5) Eligibility of pregnant woman for extended coverage for 
specified postpartum period after pregnancy ends.
1902(f) State option to restrict Medicaid eligibility for aged, blind, 
or disabled individuals to those who would have been eligible under 
State plan in effect in January 1972.
1902(j) Medicaid program in American Samoa.
1903(f) Income limitations for medically needy and individuals covered 
by State supplement eligibility requirements.
1903(v) Payment for emergency services under Medicaid provided to 
aliens.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
to certain institutionalized individuals.
1905(a) (second sentence) Definition of essential person.
1905(a)(i)-(viii) List of eligible individuals.
1905(d)(2) Definition of resident of an intermediate care facility for 
individuals with intellectual disabilities.
1905(j) Definition of State supplementary payment.
1905(k) Eligibility of essential spouses of eligible individuals.
1905(n) Definition of qualified pregnant woman and child.
1912(a) Conditions of eligibility.
1915(c) Home or community-based services.
1915(d) Home or community-based services for individuals age 65 or 
older.
412(e)(5) of Immigration and Nationality Act--Eligibility of certain 
refugees.
Pub. L. 93-66, section 230 Deemed eligibility of certain essential 
persons.
Pub. L. 93-66, section 231 Deemed eligibility of certain persons in 
medical institutions.
Pub. L. 93-66, section 232 Deemed eligibility of certain blind and 
disabled medically indigent persons.
Pub. L. 93-233, section 13(c) Deemed eligibility of certain individuals 
receiving mandatory State supplementary payments.
Pub. L. 94-566, section 503 Deemed eligibility of certain individuals 
who would be eligible for supplemental security income benefits but for 
cost-of-living increases in social security benefits.
Pub. L. 96-272, section 310(b)(1) Continued eligibility of certain 
beneficiaries of Veterans Administration pensions.
Pub. L. 99-509, section 9406 Payment for emergency medical services 
provided to aliens.
Pub. L. 99-603, section 201 Aliens granted legalized status under 
section 245A of the Immigration and Nationality Act (8 U.S.C. 1255a) may 
under certain circumstances be eligible for Medicaid.
Pub. L. 99-603, section 302 Aliens granted legalized status under 
section 210 of the Immigration and Nationality Act may under certain 
circumstances be eligible for Medicaid (8 U.S.C. 1160).
Pub. L. 99-603, section 303 Aliens granted legal status under section 
210A of the Immigration and Nationality Act may under certain 
circumstances be eligible for Medicaid (8 U.S.C. 1161).

    (b) This part implements the following other provisions of the Act 
or public laws that establish additional State plan requirements:

1618 Requirement for operation of certain State supplementation 
programs.
Pub. L. 93-66, section 212(a) Required mandatory minimum State 
supplementation of SSI benefits programs.

[52 FR 43071, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 
FR 36819, Sept. 7, 1990; 55 FR 48607, Nov. 21, 1990; 57 FR 29155, June 
30, 1992; 59 FR 48809, Sept. 23, 1994]



Sec.  435.4  Definitions and use of terms.

    As used in this part--
    AABD means aid to the aged, blind, and disabled under title XVI of 
the Act;
    AB means aid to the blind under title X of the Act;
    Advance payments of the premium tax credit (APTC) has the meaning 
given the term in 45 CFR 155.20.
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    Affordable Care Act means the Patient Protection and Affordable Care 
Act of 2010 (Pub. L. 111-148), as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended by 
the Three Percent Withholding Repeal and Job Creation Act (Pub. L. 112-
56).
    Affordable Insurance Exchanges (Exchanges) has the meaning given the 
term ``Exchanges'' in 45 CFR 155.20.
    Agency means a single State agency designated or established by a 
State in accordance withSec. 431.10(b) of this subchapter.
    Applicable modified adjusted gross income (MAGI) standard has the 
meaning provided inSec. 435.911(b)(1) of this part.

[[Page 141]]

    Applicant means an individual who is seeking an eligibility 
determination for himself or herself through an application submission 
or a transfer from another agency or insurance affordability program.
    Application means the single streamlined application described at 
Sec.  435.907(b) of this part or an application described inSec. 
435.907(c)(2) of this part submitted by or on behalf of an individual.
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    Beneficiary means an individual who has been determined eligible and 
is currently receiving Medicaid.
    Caretaker relative means a relative of a dependent child by blood, 
adoption, or marriage with whom the child is living, who assumes primary 
responsibility for the child's care (as may, but is not required to, be 
indicated by claiming the child as a tax dependent for Federal income 
tax purposes), and who is one of the following--
    (1) The child's father, mother, grandfather, grandmother, brother, 
sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, 
first cousin, nephew, or niece.
    (2) The spouse of such parent or relative, even after the marriage 
is terminated by death or divorce.
    (3) At State option, another relative of the child based on blood 
(including those of half-blood), adoption, or marriage; the domestic 
partner of the parent or other caretaker relative; or an adult with whom 
the child is living and who assumes primary responsibility for the 
dependent child's care.
    Categorically needy refers to families and children, aged, blind, or 
disabled individuals, and pregnant women, described under subparts B and 
C of this part who are eligible for Medicaid. Subpart B of this part 
describes the mandatory eligibility groups who, generally, are receiving 
or deemed to be receiving cash assistance under the Act. These mandatory 
groups are specified in sections 1902(a)(10)(A)(i), 1902(e), 1902(f), 
and 1928 of the Act. Subpart C of this part describes the optional 
eligibility groups of individuals who, generally, meet the categorical 
requirements or income or resource requirements that are the same as or 
less restrictive than those of the cash assistance programs and who are 
not receiving cash payments. These optional groups are specified in 
sections 1902(a)(10)(A)(ii), 1902(e), and 1902(f) of the Act.
    Dependent child means a child who meets both of the following 
criteria:
    (1) Is under the age of 18, or, at State option, is age 18 and a 
full-time student in secondary school (or equivalent vocational or 
technical training), if before attaining age 19 the child may reasonably 
be expected to complete such school or training.
    (2) Is deprived of parental support by reason of the death, absence 
from the home, physical or mental incapacity, or unemployment of at 
least one parent, unless the State has elected in its State plan to 
eliminate such deprivation requirement. A parent is considered to be 
unemployed if he or she is working less than 100 hours per month, or 
such higher number of hours as the State may elect in its State plan.
    Effective income level means the income standard applicable under 
the State plan for an eligibility group, after taking into consideration 
any disregard of a block of income applied in determining financial 
eligibility for such group.
    Electronic account means an electronic file that includes all 
information collected and generated by the State regarding each 
individual's Medicaid eligibility and enrollment, including all 
documentation required underSec. 435.914 of this part.
    Eligibility determination means an approval or denial of eligibility 
in accordance withSec. 435.911 as well as a renewal or termination of 
eligibility in accordance withSec. 435.916 of this part.
    Family size has the meaning provided inSec. 435.603(b) of this 
part.
    Federal poverty level (FPL) means the Federal poverty level updated 
periodically in the Federal Register by the Secretary of Health and 
Human Services under the authority of 42 U.S.C. 9902(2), as in effect 
for the applicable budget period used to determine an individual's 
eligibility in accordance withSec. 435.603(h) of this part.
    Household income has the meaning provided inSec. 435.603(d) of 
this part.

[[Page 142]]

    Insurance affordability program means a program that is one of the 
following:
    (1) A State Medicaid program under title XIX of the Act.
    (2) A State children's health insurance program (CHIP) under title 
XXI of the Act.
    (3) A State basic health program established under section 1331 of 
the Affordable Care Act.
    (4) A program that makes coverage in a qualified health plan through 
the Exchange with advance payments of the premium tax credit established 
under section 36B of the Internal Revenue Code available to qualified 
individuals.
    (5) A program that makes available coverage in a qualified health 
plan through the Exchange with cost-sharing reductions established under 
section 1402 of the Affordable Care Act.
    MAGI-based income has the meaning provided inSec. 435.603(e) of 
this part.
    Mandatory State supplement means a cash payment a State is required 
to make under section 212, Pub. L. 93-66 (July 9, 1973) to an aged, 
blind, or disabled individual. Its purpose is to provide an individual 
with the same amount of cash assistance he was receiving under OAA, AB, 
APTD, or AABD if his SSI payment is less than that amount;
    Medically needy refers to families, children, aged, blind, or 
disabled individuals, and pregnant women listed under subpart D of this 
part who are not listed in subparts B and C of this part as 
categorically needy but who may be eligible for Medicaid under this part 
because their income and resources are within limits set by the State 
under its Medicaid plan (including persons whose income and resources 
fall within these limits after their incurred expenses for medical or 
remedial care are deducted) (Specific financial requirements for 
determining eligibility of the medically needy appear in subpart I of 
this part.);
    Minimum essential coverage means coverage defined in section 
5000A(f) of subtitle D of the Internal Revenue Code, as added by section 
1401 of the Affordable Care Act, and implementing regulations of such 
section issued by the Secretary of the Treasury.
    Modified adjusted gross income (MAGI) has the meaning provided at 26 
CFR 1.36B-1(e)(2).
    Non-applicant means an individual who is not seeking an eligibility 
determination for himself or herself and is included in an applicant's 
or beneficiary's household to determine eligibility for such applicant 
or beneficiary.
    OAA means old age assistance under title I of the Act;
    OASDI means old age, survivors, and disability insurance under title 
II of the Act;
    Optional State supplement means a cash payment made by a State, 
under section 1616 of the Act, to an aged, blind, or disabled 
individual;
    Optional targeted low-income child means a child under age 19 who 
meets the financial and categorical standards described below.
    (1) Financial need. An optional targeted low-income child:
    (i) Has a household income at or below 200 percent of the Federal 
poverty line for a family of the size involved; and
    (ii) Resides in a State with no Medicaid applicable income level (as 
defined atSec. 457.10 of this chapter); or
    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined atSec. 457.10 of this chapter) and has household income 
that either:
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points; or
    (B) Does not exceed the income level specified for such child to be 
eligible for medical assistance under the policies of the State plan 
under title XIX on June 1, 1997.
    (2) No other coverage and State maintenance of effort. An optional 
targeted low-income child is not covered under a group health plan or 
health insurance coverage, or would not be eligible for Medicaid under 
the policies of the State plan in effect on March 31, 1997; except that, 
for purposes of this standard--
    (i) A child shall not be considered to be covered by health 
insurance coverage based on coverage offered by the State under a 
program in operation

[[Page 143]]

prior to July 1, 1997 if that program received no Federal financial 
participation;
    (ii) A child shall not be considered to be covered under a group 
health plan or health insurance coverage if the child did not have 
reasonable geographic access to care under that coverage.
    (3) For purposes of this section, policies of the State plan a under 
title XIX plan include policies under a Statewide demonstration project 
under section 1115(a) of the Act other than a demonstration project that 
covered an expanded group of eligible children but that either--
    (i) Did not provide inpatient hospital coverage; or
    (ii) Limited eligibility to children previously enrolled in 
Medicaid, imposed premiums as a condition of initial or continued 
enrollment, and did not impose a general time limit on eligibility.
    Pregnant woman means a woman during pregnancy and the post partum 
period, which begins on the date the pregnancy ends, extends 60 days, 
and then ends on the last day of the month in which the 60-day period 
ends.
    Secure electronic interface means an interface which allows for the 
exchange of data between Medicaid and other insurance affordability 
programs and adheres to the requirements in part 433, subpart C of this 
chapter.
    Shared eligibility service means a common or shared eligibility 
system or service used by a State to determine individuals' eligibility 
for insurance affordability programs.
    SSI means supplemental security income under title XVI of the Act.
    SWICA means the State Wage Information Collection Agency under 
section 1137(a) of the Act. It is the State agency administering the 
State unemployment compensation law; a separate agency administering a 
quarterly wage reporting system; or a State agency administering an 
alternative system which has been determined by the Secretary of Labor, 
in consultation with the Secretary of Agriculture and the Secretary of 
Health and Human Services, to be as effective and timely in providing 
employment related income and eligibility data.
    Tax dependent has the same meaning as the term ``dependent'' under 
section 152 of the Internal Revenue Code, as an individual for whom 
another individual claims a deduction for a personal exemption under 
section 151 of the Internal Revenue Code for a taxable year.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 
46 FR 6909, Jan. 22, 1981; 46 FR 47984, Sept. 30, 1981; 51 FR 7211, Feb. 
28, 1986; 58 FR 4925, Jan. 19, 1993; 66 FR 2666, Jan. 11, 2001; 77 FR 
17203, Mar. 23, 2012]



Sec.  435.10  State plan requirements.

    A State plan must--
    (a) Provide that the requirements of this part are met; and
    (b) Specify the groups to whom Medicaid is provided, as specified in 
subparts B, C, and D of this part, and the conditions of eligibility for 
individuals in those groups.



                      Subpart B_Mandatory Coverage



Sec.  435.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.

               Mandatory Coverage of Families and Children



Sec.  435.110  Parents and other caretaker relatives.

    (a) Basis. This section implements sections 1931(b) and (d) of the 
Act.
    (b) Scope. The agency must provide Medicaid to parents and other 
caretaker relatives, as defined inSec. 435.4, and, if living with such 
parent or other caretaker relative, his or her spouse, whose household 
income is at or below the income standard established by the agency in 
the State plan, in accordance with paragraph (c) of this section.
    (c) Income standard. The agency must establish in its State plan the 
income standard as follows:
    (1) The minimum income standard is a State's AFDC income standard in 
effect as of May 1, 1988 for the applicable family size converted to a 
MAGI-equivalent standard in accordance with guidance issued by the 
Secretary under section 1902(e)(14)(A) and (E) of the Act.
    (2) The maximum income standard is the higher of--

[[Page 144]]

    (i) The effective income level in effect for section 1931 low-income 
families under the Medicaid State plan or waiver of the State plan as of 
March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-
equivalent standard in accordance with guidance issued by the Secretary 
under section 1902(e)(14)(A) and (E) of the Act; or
    (ii) A State's AFDC income standard in effect as of July 16, 1996 
for the applicable family size, increased by no more than the percentage 
increase in the Consumer Price Index for all urban consumers between 
July 16, 1996 and the effective date of such increase.

[77 FR 17204, Mar. 23, 2012, as amended at 77 FR 42302, July 15, 2012]



Sec.  435.112  Families terminated from AFDC because of increased 
earnings or hours of employment.

    (a) If a family loses AFDC solely because of increased income from 
employment or increased hours of employment, the agency must continue to 
provide Medicaid for 4 months to all members of the family if--
    (1) The family received AFDC in any 3 or more months during the 6-
month period immediately before the month in which it became ineligible 
for AFDC; and
    (2) At least one member of the family is employed throughout the 4-
month period, although this need not be the same member for the whole 
period.
    (b) The 4 calendar month period begins on the date AFDC is 
terminated. If AFDC benefits are terminated retroactively, the 4 
calendar month period also begins retroactively with the first month in 
which AFDC was erroneously paid.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



Sec.  435.113  Individuals who are ineligible for AFDC because of
requirements that do not apply under title XIX of the Act.

    The agency must provide Medicaid to:
    (a) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act;
    (1) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (2) Grandparents;
    (3) Legal guardians;
    (4) Alien sponsors who are not organizations; and
    (5) Siblings.
    (b) [Reserved]

[58 FR 4926, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.114  Individuals who would be eligible for AFDC except for
increased OASDI income under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving AFDC; or
    (2) He would have been eligible for AFDC if he had applied, and the 
Medicaid plan covered this optional group; or
    (3) He would have been eligible for AFDC if he were not in a medical 
institution or intermediate care facility, and the Medicaid plan covered 
this optional group.
    (b) The individual would currently be eligible for AFDC except that 
the increase in OASDI under Pub. L. 92-336 raised his income over the 
limit allowed under AFDC. This includes an individual who--
    (1) Meets all current AFDC requirements except for the requirement 
to file an application; or
    (2) Would meet all current AFDC requirements if he were not in a 
medical institution or intermediate care facility, and the current 
Medicaid plan covers this optional group.



Sec.  435.115  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of

[[Page 145]]

the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--
    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E of the Act, whether or not adoption assistance is being 
provided or an interlocutory or other judicial decree of adoption has 
been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of the child or spousal 
support collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals who are eligible for extended Medicaid lose this coverage if 
they move to another State during the 4-month period. However, if they 
move back to and reestablish residence in the State in which they have 
extended coverage, they are eligible for any of the months remaining in 
the 4-month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in income or changes in other 
circumstances and the other changes in income or circumstances cannot 
alone or in combination result in termination without the change in 
support.
    (2) In cases of increases in the amounts of both support collections 
and earned income, eligibility under this section does not preclude 
eligibility under 45 CFR 233.20(a)(14) or section 1925 of the Social 
Security Act (which was added by section 303(a) of the Family Support 
Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting from both 
an increase in the

[[Page 146]]

amount of the support collection and from an increase in earned income 
must run concurrently.

[46 FR 47985, Sept. 30, 1981, as amended at 52 FR 43071, Nov. 9, 1987; 
55 FR 48607, Nov. 21, 1990; 59 FR 59376, Nov. 17, 1994]

  Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn 
                                Children



Sec.  435.116  Pregnant women.

    (a) Basis. This section implements sections 1902(a)(10)(A)(i)(III) 
and (IV); 1902(a)(10)(A)(ii)(I), (IV), and (IX); and 1931(b) and (d) of 
the Act.
    (b) Scope. The agency must provide Medicaid to pregnant women whose 
household income is at or below the income standard established by the 
agency in its State plan, in accordance with paragraph (c) of this 
section.
    (c) Income standard. The agency must establish in its State plan the 
income standard as follows:
    (1) The minimum income standard is the higher of:
    (i) 133 percent FPL for the applicable family size; or
    (ii) Such higher income standard up to 185 percent FPL, if any, as 
the State had established as of December 19, 1989 for determining 
eligibility for pregnant women, or, as of July 1, 1989, had authorizing 
legislation to do so.
    (2) The maximum income standard is the higher of--
    (i) The highest effective income level in effect under the Medicaid 
State plan for coverage under the sections specified at paragraph (a) of 
this section, or waiver of the State plan covering pregnant women, as of 
March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-
equivalent standard in accordance with guidance issued by the Secretary 
under section 1902(e)(14)(A) and (E) of the Act; or
    (ii) 185 percent FPL.
    (d) Covered services. (1) Pregnant women are covered under this 
section for the full Medicaid coverage described in paragraph (d)(2) of 
this section, except that the agency may provide only pregnancy-related 
services described in paragraph (d)(3) of this section for pregnant 
women whose income exceeds the applicable income limit established by 
the agency in its State plan, in accordance with paragraph (d)(4) of 
this section.
    (2) Full Medicaid coverage consists of all services which the State 
is required to cover underSec. 440.210(a)(1) of this subchapter and 
all services which it has opted to cover underSec. 440.225 andSec. 
440.250(p) of this subchapter.
    (3) Pregnancy-related services consists of services covered under 
the State plan consistent withSec. 440.210(a)(2) andSec. 440.250(p) 
of this subchapter.
    (4) Applicable income limit for full Medicaid coverage of pregnant 
women. For purposes of paragraph (d)(1) of this section--
    (i) The minimum applicable income limit is the State's AFDC income 
standard in effect as of May 1, 1988 for the applicable family size 
converted to a MAGI-equivalent standard in accordance with guidance 
issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.
    (ii) The maximum applicable income limit is the highest effective 
income level for coverage under section 1902(a)(10)(A)(i)(III) of the 
Act or under section 1931(b) and (d) of the Act in effect under the 
Medicaid State plan or waiver of the State plan as of March 23, 2010 or 
December 31, 2013, if higher, converted to a MAGI-equivalent standard.

[77 FR 17204, Mar. 23, 2012, as amended at 77 FR 42302, July 15, 2012]



Sec.  435.117  Newborn children.

    (a) The agency must provide Medicaid eligibility to a child born to 
a woman who has applied for, has been determined eligible and is 
receiving Medicaid on the date of the child's birth. The child is deemed 
to have applied and been found eligible for Medicaid on the date of 
birth and remains eligible for one year so long as the woman remains (or 
would remain if pregnant) eligible and the child is a member of the 
woman's household. This provision applies in instances where the labor 
and delivery services were furnished prior to the date of application 
and covered by Medicaid based on retroactive eligibility.
    (b) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section

[[Page 147]]

to a child born to an otherwise-eligible qualified alien woman subject 
to the 5-year bar so long as the woman has filed a complete Medicaid 
application, including but not limited to meeting residency, income and 
resource requirements, has been determined eligible, is receiving 
Medicaid on the date of the child's birth, and remains (or would remain 
if pregnant) Medicaid eligible. All standard Medicaid application 
procedures apply, including timely determination of eligibility and 
adequate notice of the agency's decision concerning eligibility. A 5-
year bar qualified alien receiving emergency medical services only under 
Sec.  435.139 is considered to be Medicaid-eligible and receiving 
Medicaid for purposes of this provision. With respect to whether the 
mother remains (or would remain if pregnant) eligible for Medicaid after 
the birth of the child, the State must determine whether a 5-year bar 
qualified alien would remain eligible for emergency services underSec. 
435.139. In determining whether the woman would remain eligible for 
these services, the State must consider whether the woman would remain 
eligible if pregnant. This provision applies in instances where the 
labor and delivery services were furnished prior to the date of 
application and covered by Medicaid based on retroactive eligibility.
    (c) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible non-qualified alien woman so long as the woman has 
filed a complete Medicaid application (other than providing a social 
security number or demonstrating immigration status), including but not 
limited to meeting residency, income and resource requirements, has been 
determined eligible, is receiving Medicaid on the date of the child's 
birth, and remains (or would remain if pregnant) Medicaid eligible. All 
standard Medicaid application procedures apply, including timely 
determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A non-qualified alien receiving 
emergency medical services only underSec. 435.139 is considered to be 
Medicaid-eligible and receiving Medicaid for purposes of this provision. 
With respect to whether the mother remains (or would remain if pregnant) 
eligible for Medicaid after the birth of the child, the State must 
determine whether a non-qualified alien would remain eligible for 
emergency services underSec. 435.139. In determining whether the woman 
would remain eligible for these services, the State must consider 
whether the woman would remain eligible if pregnant. This provision 
applies in instances where the labor and delivery services were 
furnished prior to the date of application and covered by Medicaid based 
on retroactive eligibility.
    (d) A redetermination of eligibility must be completed on behalf of 
the children described in this provision in accordance with the 
procedures atSec. 435.916. At that time, the State must collect 
documentary evidence of citizenship and identity as required underSec. 
435.406.

[72 FR 38690, July 13, 2007]



Sec.  435.118  Infants and children under age 19.

    (a) Basis. This section implements sections 1902(a)(10)(A)(i)(III), 
(IV), (VI), and (VII); 1902(a)(10)(A)(ii)(IV) and (IX); and 1931(b) and 
(d) of the Act.
    (b) Scope. The agency must provide Medicaid to children under age 19 
whose household income is at or below the income standard established by 
the agency in its State plan, in accordance with paragraph (c) of this 
section.
    (c) Income standard. (1) The minimum income standard is the higher 
of--
    (i) 133 percent FPL for the applicable family size; or
    (ii) For infants under age 1, such higher income standard up to 185 
percent FPL, if any, as the State had established as of December 19, 
1989 for determining eligibility for infants, or, as of July 1, 1989 had 
authorizing legislation to do so.
    (2) The maximum income standard for each of the age groups of 
infants under age 1, children age 1 through age 5, and children age 6 
through age 18 is the higher of--
    (i) 133 percent FPL;
    (ii) The highest effective income level for each age group in effect 
under

[[Page 148]]

the Medicaid State plan for coverage under the applicable sections of 
the Act listed at paragraph (a) of this section or waiver of the State 
plan covering such age group as of March 23, 2010 or December 31, 2013, 
if higher, converted to a MAGI-equivalent standard in accordance with 
guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of 
the Act; or
    (iii) For infants under age 1, 185 percent FPL.

[77 FR 17205, Mar. 23, 2012]

          Mandatory Coverage for Individuals Age 19 Through 64



Sec.  435.119  Coverage for individuals age 19 or older and under age
65 at or below 133 percent FPL.

    (a) Basis. This section implements section 1902(a)(10)(A)(i)(VIII) 
of the Act.
    (b) Eligibility. Effective January 1, 2014, the agency must provide 
Medicaid to individuals who:
    (1) Are age 19 or older and under age 65;
    (2) Are not pregnant;
    (3) Are not entitled to or enrolled for Medicare benefits under part 
A or B of title XVIII of the Act;
    (4) Are not otherwise eligible for and enrolled for mandatory 
coverage under a State's Medicaid State plan in accordance with subpart 
B of this part; and
    (5) Have household income that is at or below 133 percent FPL for 
the applicable family size.
    (c) Coverage for dependent children. (1) A State may not provide 
Medicaid under this section to a parent or other caretaker relative 
living with a dependent child if the child is under the age specified in 
paragraph (c)(2) of this section, unless such child is receiving 
benefits under Medicaid, the Children's Health Insurance Program under 
subchapter D of this chapter, or otherwise is enrolled in minimum 
essential coverage as defined inSec. 435.4 of this part.
    (2) For the purpose of paragraph (c)(1) of this section, the age 
specified is under age 19, unless the State had elected as of March 23, 
2010 to provide Medicaid to individuals under age 20 or 21 underSec. 
435.222 of this part, in which case the age specified is such higher 
age.

[58 FR 48614, Sept. 17, 1993, as amended at 77 FR 17205, Mar. 23, 2012; 
77 FR 42302, July 15, 2012]

           Mandatory Coverage of the Aged, Blind, and Disabled



Sec.  435.120  Individuals receiving SSI.

    Except as allowed underSec. 435.121, the agency must provide 
Medicaid to aged, blind, and disabled individuals or couples who are 
receiving or are deemed to be receiving SSI. This includes individuals 
who are--
    (a) Receiving SSI pending a final determination of blindness or 
disability;
    (b) Receiving SSI under an agreement with the Social Security 
Administration to dispose of resources that exceed the SSI dollar limits 
on resources; or
    (c) Receiving benefits under section 1619(a) of the Act or in 
section 1619(b) status (blind individuals or those with disabling 
impairments whose income equals or exceeds a specific Supplemental 
Security Income limit). (Regulations at 20 CFR 416.260 through 416.269 
contain requirements governing determinations of eligibility under this 
provision.) For purposes of this paragraph (c), this mandatory 
categorically needy group of individuals includes those qualified 
severely impaired individuals defined in section 1905(q) of the Act.

[55 FR 33705, Aug. 17, 1990]



Sec.  435.121  Individuals in States using more restrictive 
requirements for Medicaid than the SSI requirements.

    (a) Basic eligibility group requirements. (1) If the agency does not 
provide Medicaid underSec. 435.120 to aged, blind, and disabled 
individuals who are SSI beneficiaries, the agency must provide Medicaid 
to aged, blind, and disabled individuals who meet eligibility 
requirements that are specified in this section.
    (2) Except to the extent provided in paragraph (a)(3) of this 
section, the agency may elect to apply more restrictive eligibility 
requirements to the aged, blind, and disabled that are more restrictive 
than those of the SSI

[[Page 149]]

program. The more restrictive requirements may be no more restrictive 
than those requirements contained in the State's Medicaid plan in effect 
on January 1, 1972. If any of the State's 1972 Medicaid plan 
requirements were more liberal than of the SSI program, the State must 
use the SSI requirement instead of the more liberal requirements, except 
to the extent the State elects to use more liberal criteria underSec. 
435.601.
    (3) The agency must not apply a more restrictive requirement under 
the provisions of paragraph (a)(2) of this section if:
    (i) The requirement conflicts with the requirements of section 1924 
of the Act, which governs the eligibility and post-eligibility treatment 
of income and resources of institutionalized individuals with community 
spouses;
    (ii) The requirement conflicts with a more liberal requirement which 
the agency has elected to use underSec. 435.601; or
    (iii) The more restrictive requirement conflicts with a more liberal 
requirement the State has elected to use underSec. 435.234(c) in 
determining eligibility for State supplementary payments.
    (b) Mandatory coverage. If the agency chooses to apply more 
restrictive requirements than SSI to aged, blind, or disabled 
individuals, it must provide Medicaid to:
    (1) Individuals who meet the requirements of section 1619(b)(3) of 
the Act even though they may not continue to meet the requirements of 
this section; and
    (2) Qualified Medicare beneficiaries described in section 1905(p) of 
the Act and qualified working disabled individuals described in section 
1905(s) of the Act without consideration of the more restrictive 
eligibility requirements specified in this section.
    (3) Individuals who:
    (i) Qualify for benefits under section 1619(a) or are in eligibility 
status under section 1619(b)(1) of the Act as determined by SSA; and
    (ii) Were eligible for Medicaid under the more restrictive criteria 
in the State's approved Medicaid plan in the reference month--the month 
immediately preceding the first month in which they became eligible 
under section 1619(a) or (b)(1) of the Act. ``Were eligible for 
Medicaid'' means that individuals were issued Medicaid cards by the 
State for the reference month. Under this provision, the reference month 
for determining Medicaid eligibility for all individuals under section 
1619 of the Act is the month immediately preceding the first month of 
the most recent period of eligibility under section 1619 of the Act.
    (c) Group composition. The agency may apply more restrictive 
requirements only to the aged, to the blind, to the disabled, or to any 
combination of these groups. For example, the agency may apply more 
restrictive requirements to the aged and disabled under this provision 
and provide Medicaid to all blind individuals who are SSI beneficiaries.
    (d) Nonfinancial conditions. The agency may apply more restrictive 
requirements that are nonfinancial conditions of eligibility. For 
example, the agency may use a more restrictive definition of disability 
or may limit eligibility of the disabled to individuals age 18 and 
older, or both. If the agency limits eligibility of disabled individuals 
to individuals age 18 or older, it must provide Medicaid to individuals 
under age 18 who receive SSI benefits and who would be eligible to 
receive AFDC under the State's approved plan if they did not receive 
SSI. If the agency imposed an age limit for disabled individuals under 
its 1972 approved State plan but does not use that limit, it must apply 
the same nonfinancial requirement to individuals under age 18 that it 
applies to disabled individuals age 18 and older.
    (e) Financial conditions. (1) The agency may apply more restrictive 
requirements that are financial conditions of eligibility.
    (2) Any income eligibility standards that the agency applies must:
    (i) Equal the income standard (or Federal Benefit Rate (FBR)) that 
would be used under SSI based on an individual's living arrangement; or
    (ii) Be a more restrictive standard which is no more restrictive 
than that under the approved State's January 1, 1972 Medicaid plan.
    (3) If the categorically needy income standard established under 
paragraph

[[Page 150]]

(e)(2) of this section is less than the optional categorically needy 
standard established underSec. 435.230, the agency must provide 
Medicaid to all aged, blind, and disabled individuals who have income 
equal to or below the higher standard.
    (4) In a State that does not have a medically needy program that 
covers aged, blind, and disabled individuals, the agency must allow 
individuals to deduct from income incurred medical and remedial expenses 
(that is, spend down) to become eligible under this section. However, 
individuals with income above the categorically needy standards may only 
spend down to the standard selected by the State under paragraph (e)(2) 
of this section which applies to the individual's living arrangement.
    (5) In a State that elects to provide medically needy coverage to 
aged, blind, and disabled individuals, the agency must allow individuals 
to deduct from income incurred medical and remedial care expenses (spend 
down) to become categorically needy when they are SSI beneficiaries 
(including individuals deemed to be SSI beneficiaries under Sec.Sec. 
435.135, 435.137, and 435.138), eligible spouses of SSI beneficiaries, 
State supplement beneficiaries, and individuals who are eligible for a 
supplement but who do not receive supplementary payments. Such persons 
may only spend down to the standard selected by the State under 
paragraph (e)(2) of this section. Individuals who are not SSI 
beneficiaries, eligible spouses of SSI beneficiaries, State supplement 
beneficiaries, or individuals who are eligible for a supplement must 
spend down to the State's medically needy income standards for aged, 
blind, and disabled individuals in order to become Medicaid eligible.
    (f) Deductions from income. (1) In addition to any income disregards 
specified in the approved State plan in accordance withSec. 
435.601(b), the agency must deduct from income:
    (i) SSI payments;
    (ii) State supplementary payments that meet the conditions specified 
in Sec.Sec. 435.232 and 435.234; and
    (iii) Expenses incurred by the individual or financially responsible 
relatives for necessary medical and remedial services that are 
recognized under State law and are not subject to payment by a third 
party, unless the third party is a public program of a State or 
political subdivision of a State. These expenses include Medicare and 
other health insurance premiums, deductions and coinsurance charges, and 
copayments or deductibles imposed underSec. 447.52,Sec. 447.53, or 
Sec.  447.54 of this chapter. The agency may set reasonable limits on 
the amounts of incurred medical expenses that are deducted.
    (2) For purposes of counting income with respect to individuals who 
are receiving benefits under section 1619(a) f the Act or are in section 
1619(b)(1) of the Act status but who do not meet the requirements of 
paragraph (b)(3)(ii) of this section, the agency may disregard some or 
all of the amount of the individual's income that is in excess of the 
SSI Federal benefit rate under section 1611(b) of the Act.

[58 FR 4926, Jan. 19, 1993, as amended at 77 FR 42302, July 15, 2012]



Sec.  435.122  Individuals who are ineligible for SSI or optional State
supplements because of requirements that do not apply under title XIX
of the Act.

    If an agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or optional State supplements, it must provide 
Medicaid to individuals who would be eligible for SSI or optional State 
supplements except for an eligibility requirement used in those programs 
that is specifically prohibited under title XIX.

[47 FR 43648, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]



Sec.  435.130  Individuals receiving mandatory State supplements.

    The agency must provide Medicaid to individuals receiving mandatory 
State supplements.



Sec.  435.131  Individuals eligible as essential spouses in 
December 1973.

    (a) The agency must provide Medicaid to any person who was eligible 
for Medicaid in December 1973 as an essential spouse of an aged, blind, 
or disabled individual who was receiving cash assistance, if the 
conditions in paragraph (b) of this section are met.

[[Page 151]]

An ``essential spouse'' is defined in section 1905(a) of the Act as one 
who is living with the individual; whose needs were included in 
determining the amount of cash payment to the individual under OAA, AB, 
APTD, or AABD; and who is determined essential to the individual's well-
being.
    (b) The agency must continue Medicaid if--
    (1) The aged, blind, or disabled individual continues to meet the 
December 1973 eligibility requirements of the applicable State cash 
assistance plan; and
    (2) The essential spouse continues to meet the conditions that were 
in effect in December 1973 under the applicable cash assistance plan for 
having his needs included in computing the payment to the aged, blind, 
or disabled individual.



Sec.  435.132  Institutionalized individuals who were eligible in 
December 1973.

    The agency must provide Medicaid to individuals who were eligible 
for Medicaid in December 1973, or any part of that month, as inpatients 
of medical institutions or residents of intermediate care facilities 
that were participating in the Medicaid program and who--
    (a) For each consecutive month after December 1973--
    (1) Continue to meet the requirements for Medicaid eligibility that 
were in effect under the State's plan in December 1973 for 
institutionalized individuals; and
    (2) Remain institutionalized; and
    (b) Are determined by the State or a professional standards review 
organization to continue to need institutional care.



Sec.  435.133  Blind and disabled individuals eligible in December 1973.

    The agency must provide Medicaid to individuals who--
    (a) Meet all current requirements for Medicaid eligibility except 
the criteria for blindness or disability;
    (b) Were eligible for Medicaid in December 1973 as blind or disabled 
individuals, whether or not they were receiving cash assistance in 
December 1973; and
    (c) For each consecutive month after December 1973, continue to meet 
the criteria for blindness or disability and the other conditions of 
eligibility used under the Medicaid plan in December 1973.



Sec.  435.134  Individuals who would be eligible except for the
increase in OASDI benefits under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving OAA, AB, APTD, or AABD; or
    (2) He would have been eligible for one of those programs except 
that he had not applied, and the Medicaid plan covered this optional 
group; or
    (3) He would have been eligible for one of those programs if he were 
not in a medical institution or intermediate care facility, and the 
Medicaid plan covered this optional group.
    (b) The individual would currently be eligible for SSI or a State 
supplement except that the increase in OASDI under Pub. L. 92-336 raised 
his income over the limit allowed under SSI. This includes an individual 
who--
    (1) Meets all current SSI requirements except for the requirement to 
file an application; or
    (2) Would meet all current SSI requirements if he were not in a 
medical institution or intermediate care facility, and the State's 
Medicaid plan covers this optional group.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]



Sec.  435.135  Individuals who become ineligible for cash assistance
as a result of OASDI cost-of-living increases received after April 1977.

    (a) If an agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, it must provide Medicaid 
to individuals who--
    (1) Are receiving OASDI;
    (2) Were eligible for and receiving SSI or State supplements but 
became ineligible for those payments after April 1977; and

[[Page 152]]

    (3) Would still be eligible for SSI or State supplements if the 
amount of OASDI cost-of-living increases paid under section 215(i) of 
the Act, after the last month after April 1977 for which those 
individuals were both eligible for and received SSI or a State 
supplement and were entitled to OASDI, were deducted from current OASDI 
benefits.
    (b) Cost-of-living increases include the increases received by the 
individual or his or her financially responsible spouse or other family 
member (e.g., a parent).
    (c) If the agency adopts more restrictive eligibility requirements 
than those under SSI, it must provide Medicaid to individuals specified 
in paragraph (a) of this section on the same basis as Medicaid is 
provided to individuals continuing to receive SSI or State supplements. 
If the individual incurs enough medical expenses to reduce his or her 
income to the financial eligibility standard for the categorically 
needy, the agency must cover that individual as categorically needy. In 
determining the amount of his or her income, the agency may deduct the 
cost-of-living increases paid under section 215(i) after the last month 
after April 1977 for which that individual was both eligible for and 
received SSI or a State supplement and was entitled to OASDI, up to the 
amount that made him or her ineligible for SSI.

[51 FR 12330, Apr. 10, 1986]



Sec.  435.136  State agency implementation requirements for one-time
notice and annual review system.

    An agency must--
    (a) Provide a one-time notice of potential Medicaid eligibility 
underSec. 435.135 to all individuals who meet the requirements of 
Sec.  435.135 (a) or (c) who were not receiving Medicaid as of March 9, 
1984; and
    (b) Establish an annual review system to identify individuals who 
meet the requirements ofSec. 435.135 (a) or (c) and who lose 
categorically needy eligibility for Medicaid because of a loss of SSI. 
States without medically needy programs must send notices of potential 
eligibility for Medicaid to these individuals for 3 consecutive years 
following their identification through the annual review system.

[51 FR 12330, Apr. 10, 1986]



Sec.  435.137  Disabled widows and widowers who would be eligible for
SSI except for the increase in disability benefits resulting from 
elimination of the reduction factor under Pub. L. 98-21.

    (a) If the agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, the agency much provide 
Medicaid to disabled widows and widowers who--
    (1) Became ineligible for SSI or a mandatory or optional State 
supplement as a result of the elimination of the additional reduction 
factor for disabled widows and widowers under age 60 required by section 
134 of Pub. L. 98-21, and for purposes of title XIX, are deemed to be 
title XVI payment beneficiaries under section 1634(b) of the Social 
Security Act; and
    (2) Meet the conditions of paragraphs (b) and (e) of this section.
    (b) The individuals must meet the following conditions:
    (1) They were entitled to monthly OASDI benefits under title II of 
the Act for December 1983:
    (2) They were entitled to and received widow's or widower's 
disability benefits under section 202(e) or (f) of the Act for January 
1984;
    (3) They became ineligible for SSI or a mandatory or optional State 
supplement in the first month in which the increase under Pub. L. 98-21 
was paid (and in which a retroactive payment for that increase for prior 
months was not made);
    (4) They have been continously entitled to widow's or widower's 
disability benefits under section 202(e) or (f) from the first month 
that the increase under Pub. L. 98-21 was received; and
    (5) They would be eligible for SSI benefits or a mandatory or 
optional State supplement if the amount of the increase under Pub. L. 
98-21 and subsequent cost-of-living adjustments in widow's or widower's 
benefits under section 215(i) of the Act were deducted from their 
income.
    (c) If the agency adopts more restrictive requirements than those 
under

[[Page 153]]

SSI, it must provide Medicaid to individuals specified in paragraph (a) 
of this section on the same basis as Medicaid is provided to individuals 
continuing to receive SSI or a mandatory or optional State supplement. 
The State must consider the individuals specified in paragraph (a) of 
this section to have no more income than the SSI Federal benefit rate if 
the individual was eligible for SSI in the month prior to the first 
month in which the increase under Public Law 98-21 was paid (and in 
which retroactive payments for that increase for prior months was not 
being made), and the individual would be eligible for SSI except for the 
amount of the increase under Public Law 98-21 and subsequent cost-of-
living adjustments in his or her widow's or widower's benefits under 
section 215(i) of the Act. The State must consider individuals who 
qualify under paragraph (a) of this section on the basis of loss of a 
mandatory or optional State supplementary payment, rather than the loss 
of SSI, to have no more income than the relevant SSP rate. If the 
State's income eligibility level is lower than the SSP or SSI Federal 
benefit rates, individuals qualifying under paragraph (a) of this 
section who are deemed to have income at either the SSP rate or the SSI 
Federal benefit rate may further reduce their countable income by 
incurring medical expenses in the amount by which their income exceeds 
the State's income eligibility standard. When the individual has reduced 
his or her income by this amount, he or she will be eligible for 
Medicaid as categorically needy.
    (d) The agency must notify each individual who may be eligible for 
Medicaid under this section of his or her potential eligibility, in 
accordance with instructions issued by the Secretary.
    (e)(1) Except as provided in paragraph (e)(2) of this section, the 
provisions of this section apply only to those individuals who filed a 
written application for Medicaid on or before June 30, 1988, to obtain 
protected Medicaid coverage.
    (2) Individuals who may be eligible under this section residing in 
States that use a more restrictive income standard than that of the SSI 
program, under section 1902(f) of the Act, have up to six months after 
the State sends notice pursuant to the District Court's order in Darling 
v. Bowen (685 F. Supp. 1125 (W.D.Mo. 1988) to file a written application 
to obtain protected Medicaid coverage.

[55 FR 48607, Nov. 21, 1990]



Sec.  435.138  Disabled widows and widowers aged 60 through 64 who 
would be eligible for SSI except for early receipt of social security
benefits.

    (a) If the agency provides Medicaid to aged, blind, or disabled 
individuals receiving SSI or State supplements, the agency must provide 
Medicaid to disabled widows and widowers who--
    (1) Are at least age 60;
    (2) Are not entitled to hospital insurance benefits under Medicare 
Part A; and
    (3) Become ineligible for SSI or a State supplement because of 
mandatory application (under section 1611(e)(2)) for and receipt of 
widow's or widower's social security disability benefits under section 
202(e) or (f) (or any other provision of section 202 if they are also 
eligible for benefits under subsections (e) or (f)) of the Act.
    For purposes of title XIX, individuals who meet these requirements 
are deemed to be title XVI payment beneficiaries under section 1634(d) 
of the Act.
    (b) If the agency adopts more restrictive eligibility requirements 
than those under SSI, it must provide Medicaid to individuals specified 
in paragraph (a) of this section on the same basis as Medicaid is 
provided to individuals continuing to receive SSI or a mandatory or 
optional State supplement. If the individual incurs enough medical 
expenses to reduce his or her income to the financial eligibility 
standard for the categorically needy under the State's more restrictive 
eligibility criteria, the agency must cover the individual as 
categorically needy. In determining the amount of his or her income, the 
agency may deduct all, part, or none of the amount of the social 
security disability benefits that made him or her ineligible for SSI or 
a State supplement, up to the amount that made him or her ineligible for 
SSI.

[[Page 154]]

    (c) Individuals who may be eligible under this section must file a 
written application for Medicaid. Medicaid coverage may begin no earlier 
than July 1, 1988.
    (d) The agency must determine whether individuals may be eligible 
for Medicaid under this section.

[55 FR 48608, Nov. 21, 1990]

                  Mandatory Coverage of Certain Aliens



Sec.  435.139  Coverage for certain aliens.

    The agency must provide services necessary for the treatment of an 
emergency medical condition, as defined inSec. 440.255(c) of this 
chapter, to those aliens described inSec. 435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]

   Mandatory Coverage of Adoption Assistance and Foster Care Children



Sec.  435.145  Children for whom adoption assistance or foster care
maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28665, July 1, 1982. Redesignated at 55 FR 48607, Nov. 21, 1990. 
Redesignated at 58 FR 48614, Sept. 17, 1993]

                  Mandatory Coverage of Special Groups



Sec.  435.170  Pregnant women eligible for extended coverage.

    (a) The agency must provide categorically needy Medicaid eligibility 
for an extended period following termination of pregnancy to women who, 
while pregnant, applied for, were eligible for, and received Medicaid 
services on the day that their pregnancy ends. This period extends from 
the last day of pregnancy through the end of the month in which a 60-day 
period, beginning on the last day of the pregnancy, ends. Eligibility 
must be provided regardless of changes in the woman's financial 
circumstances that may occur within this extended period. These women 
are eligible for the extended period for all services under the plan 
that are pregnancy-related (as defined inSec. 440.210(c)(1) of this 
subchapter).
    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48608, Nov. 21, 1990]



                     Subpart C_Options for Coverage



Sec.  435.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec.  435.201  Individuals included in optional groups.

    (a) The agency may choose to cover as optional categorically needy 
any group or groups of the following individuals who are not receiving 
cash assistance and who meet the appropriate eligibility criteria for 
groups specified in the separate sections of this subpart:
    (1) Aged individuals (65 years of age of older);
    (2) Blind individuals (as defined inSec. 435.530);
    (3) Disabled individuals (as defined inSec. 435.541);
    (4) Individuals under age 21 (or, at State option, under age 20, 19, 
or 18) or reasonable classifications of these individuals;
    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent (or would, 
if needy, be dependent) as specified inSec. 435.510; and
    (6) Pregnant women.
    (b) If the agency provides Medicaid to any individual in an optional 
group specified in paragraph (a) of this section, the agency must 
provide Medicaid to all individuals who apply and are found eligible to 
be members of that group.
    (c) States that elect to use more restrictive eligibility 
requirements for Medicaid than the SSI requirements for any group or 
groups of aged, blind, and disabled individuals underSec. 435.121 must 
apply the specific requirements ofSec. 435.230 in establishing 
eligibility of these groups of individuals as optional categorically 
needy.

[58 FR 4927, Jan. 19, 1993]

[[Page 155]]

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled



Sec.  435.210  Individuals who meet the income and resource
requirements of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified inSec. 435.201 (a)(1) through (a)(3) and (a)(5) 
and (a)(6) who are not mandatory categorically needy, who meet the 
income and resource requirements of the appropriate cash assistance 
program for their status (that is, the State's approved AFDC plan or 
SSI, or optional State supplements in States that provide Medicaid to 
optional State supplement beneficiaries).

[58 FR 4927, Jan. 19, 1993]



Sec.  435.211  Individuals who would be eligible for cash assistance
if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified inSec. 435.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, AFDC or SSI, or optional State supplements in 
States that provide Medicaid to optional State supplement beneficiaries) 
because of lower income standards used under the program to determine 
eligibility for institutionalized individuals; but
    (b) Would be eligible for aid or assistance under the State's 
approved AFDC plan, SSI, or an optional State supplement as specified in 
Sec.Sec. 435.232 and 435.234 if they were not institutionalized.

[58 FR 4927, Jan. 19, 1993]



Sec.  435.212  Individuals who would be ineligible if they were not
enrolled in an MCO or PCCM.

    The State agency may provide that a beneficiary who is enrolled in 
an MCO or PCCM and who becomes ineligible for Medicaid is considered to 
continue to be eligible--
    (a) For a period specified by the agency, ending no later than 6 
months from the date of enrollment; and
    (b) Except for family planning services (which the beneficiary may 
obtain from any qualified provider) only for services furnished to him 
or her as an MCO enrollee.

[56 FR 8849, Mar. 1, 1991, as amended at 67 FR 41095, June 14, 2002]



Sec.  435.217  Individuals receiving home and community-based services.

    The agency may provide Medicaid to any group or groups of 
individuals in the community who meet the following requirements:
    (a) The group would be eligible for Medicaid if institutionalized.
    (b) In the absence of home and community-based services under a 
waiver granted under part 441--
    (1) Subpart G of this subchapter, the group would otherwise require 
the level of care furnished in a hospital, NF, or an ICF/IIDICF/IID; or
    (2) Subpart H of this subchapter, the group would otherwise require 
the level of care furnished in an NF and are age 65 or older.
    (c) The group receives the waivered services.

[57 FR 29155, June 30, 1992]



Sec.  435.218  Individuals with MAGI-based income above 133 percent FPL.

    (a) Basis. This section implements section 1902(a)(10)(A)(ii)(XX) of 
the Act.
    (b) Eligibility--(1) Criteria. The agency may provide Medicaid to 
individuals who:
    (i) Are under age 65;
    (ii) Are not eligible for and enrolled for mandatory coverage under 
a State's Medicaid State plan in accordance with subpart B of this part;
    (iii) Are not otherwise eligible for and enrolled for optional 
coverage under a State's Medicaid State plan in accordance with section 
1902(a)(10)(A)(ii)(I) through (XIX) of the Act and subpart C of this 
part, based on information available to the State from the application 
filed by or on behalf of the individual; and
    (iv) Have household income that exceeds 133 percent FPL but is at or 
below the income standard elected by the agency and approved in its 
Medicaid State plan, for the applicable family size.
    (2) Limitations. (i) A State may not, except as permitted under an 
approved phase-in plan adopted in accordance

[[Page 156]]

with paragraph (b)(3) of this section, provide Medicaid to higher income 
individuals described in paragraph (b)(1) of this section without 
providing Medicaid to lower income individuals described in such 
paragraph.
    (ii) The limitation on eligibility of parents and other caretaker 
relatives specified inSec. 435.119(c) of this section also applies to 
eligibility under this section.
    (3) Phase-in plan. A State may phase in coverage to all individuals 
described in paragraph (b)(1) of this section under a phase-in plan 
submitted in a State plan amendment to and approved by the Secretary.

[77 FR 17205, Mar. 23, 2012]

              Options for Coverage of Families and Children



Sec.  435.220  Individuals who would meet the income and resource
requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified underSec. 435.201 (a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's 
approved AFDC plan if their work-related child care costs were paid from 
their earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4927, Jan. 19, 1993]



Sec.  435.221  [Reserved]



Sec.  435.222  Individuals under age 21 who meet the income and resource
requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or, 
at State option, under age 20, 19, or 18); or reasonable categories of 
these individuals as specified in paragraph (b) of this section, who are 
not receiving cash assistance under any program but who meet the income 
and resource requirements of the State's approved AFDC plan.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals of the same age placed in foster homes or private 
institutions by private nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
individuals with intellectual disabilities.
    (4) Individuals under age 21 receiving active treatment as 
inpatients in pyschiatric facilities or programs, if inpatient 
psychiatric services for individuals under 21 are provided under the 
plan.

[46 FR 47985, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
58 FR 4927, Jan. 19, 1993]



Sec.  435.223  Individuals who would be eligible for AFDC if coverage
under the State's AFDC plan were as broad as allowed under title IV-A.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified underSec. 435.210 (a)(4), (a)(5), and (a)(6) 
who:
    (1) Would be eligible for AFDC if the State's AFDC plan included 
individuals whose coverage under title IV-A is optional (for example, 
Medicaid may be provided to members of families with an unemployed 
parent even though AFDC is not available to them under the State's AFDC 
plan); or
    (2) Would be eligible for AFDC if the State's AFDC plan did not 
contain eligibility requirements more restrictive than, or in addition 
to, those required under title IV-A.

[[Page 157]]

    (b) The agency may cover any AFDC optional group without covering 
all such groups.

[46 FR 47985, Sept. 30, 1981, as amended at 58 FR 4927, Jan. 19, 1993]



Sec.  435.225  Individuals under age 19 who would be eligible for
Medicaid if they were in a medical institution.

    (a) The agency may provide Medicaid to children 18 years of age or 
younger who qualify under section 1614(a) of the Act, who would be 
eligible for Medicaid if they were in a medical institution, and who are 
receiving, while living at home, medical care that would be provided in 
a medical institution.
    (b) If the agency elects the option provided by paragraph (a) of 
this section, it must determine, in each case, that the following 
conditions are met:
    (1) The child requires the level of care provided in a hospital, 
SNF, or ICF.
    (2) It is appropriate to provide that level of care outside such an 
institution.
    (3) The estimated Medicaid cost of care outside an institution is no 
higher than the estimated Medicaid cost of appropriate institutional 
care.
    (c) The agency must specify in its State plan the method by which it 
determines the cost-effectiveness of caring for disabled children at 
home.

[55 FR 48608, Nov. 21, 1990]



Sec.  435.227  Individuals under age 21 who are under State adoption
assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and the adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance, has 
determined cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the title IV-E foster care program were used without 
employing the threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraphs (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid before the adoption assistance agreement was 
entered into.

[55 FR 48608, Nov. 21, 1990]



Sec.  435.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined inSec. 435.4; or
    (b) Reasonable categories of these individuals.

[66 FR 2667, Jan. 11, 2001]

          Options for Coverage of the Aged, Blind, and Disabled



Sec.  435.230  Aged, blind, and disabled individuals in States that
use more restrictive requirements for Medicaid than SSI requirements:
Optional coverage.

    (a) Basic optional coverage rule. If the agency elects the option 
underSec. 435.121 to provide mandatory eligibility for aged, blind, 
and disabled SSI beneficiaries using more restrictive requirements than 
those used under SSI, the agency may provide eligibility as optional 
categorically needy to additional individuals who meet the requirements 
of this section.
    (b) Group composition. Subject to the conditions specified in 
paragraphs (d)

[[Page 158]]

and (e) of this section, the agency may provide Medicaid to individuals 
who:
    (1) Meet the nonfinancial criteria that the State has elected to 
apply underSec. 435.121;
    (2) Meet the resource requirements that the State has elected to 
apply underSec. 435.121; and
    (3) Meet the income eligibility standards specified in paragraph (c) 
of this section.
    (c) Criteria for income standards. The agency may provide Medicaid 
to the following individuals who meet the requirements of paragraphs 
(b)(1) and (b)(2) of this section:
    (1) Individuals who are financially eligible for but not receiving 
SSI benefits and who, before deduction of incurred medical and remedial 
expenses, meet the State's more restrictive eligibility requirements 
described inSec. 435.121;
    (2) Individuals who meet the income standards of the following 
eligibility groups:
    (i) Individuals who would be eligible for cash assistance except for 
institutional status described inSec. 435.211;
    (ii) Individuals who are enrolled in an HMO or other entity and who 
are deemed to continue to be Medicaid eligible for a period specified by 
the agency up to 6 months from the date of enrollment and who became 
ineligible during the specified enrollment period, as described inSec. 
435.212;
    (iii) Individuals receiving home and community-based waiver services 
described inSec. 435.217;
    (iv) Individuals receiving only optional State supplements described 
inSec. 435.234;
    (v) Institutionalized individuals with income below a special income 
level described inSec. 435.236;
    (vi) Aged and disabled individuals who have income below 100 percent 
of the Federal poverty level described in section 1905(m) of the Act.
    (3) Individuals who qualify for special status under Sec.Sec. 
435.135 and 435.138, and with respect to whom the State elects to 
disregard some or the maximum amount of title II payments permitted to 
be disregarded under those sections.
    (d) Use of more liberal methods. The agency may elect to apply more 
liberal methods of counting income and resources that are approved for 
this eligibility group under the provisions ofSec. 435.601.

[58 FR 4928, Jan. 19, 1993]



Sec.  435.232  Individuals receiving only optional State supplements.

    (a) If the agency provides Medicaid to individuals receiving SSI 
underSec. 435.120, it may provide Medicaid, in one or more of the 
following classifications, to individuals who receive only an optional 
State supplement that meets the conditions specified in paragraph (b) of 
this section and who would be eligible for SSI except for the level of 
their income.
    (1) All aged individuals.
    (2) All blind individuals.
    (3) All disabled individuals.
    (4) Only aged individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (5) Only blind individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (6) Only disabled individuals in domiciliary facilities or other 
group living arrangements as defined under SSI.
    (7) Individuals receiving a federally administered optional State 
supplement that meets the conditions specified in this section.
    (8) Individuals in additional classifications specified by the 
Secretary for federally administered supplementary payments under 20 CFR 
416.2020(d).
    (9) Reasonable groups of individuals, as specified by the State, 
receiving State-administered supplementary payments.
    (b) Payments under the optional supplement program must be--
    (1) Based on need and paid in cash on a regular basis;
    (2) Equal to the difference between the individual's countable 
income and the income standard used to determine eligibility for 
supplement. Countable income is income remaining after deductions 
required under SSI or, at State option, more liberal deductions are made 
(seeSec. 435.1006 for limitations on FFP in Medicaid expenditures for 
individuals receiving optional State supplements); and
    (3) Available to all individuals in each classification in paragraph 
(a) of

[[Page 159]]

this section and available on a statewide basis. However, the plan may 
provide for variations in the income standard by political subdivision 
according to cost-of-living differences.

[43 FR 45204, Sept. 29, 1978. Redesignated and amended at 58 FR 4928, 
Jan. 19, 1993]



Sec.  435.234  Individuals receiving only optional State supplements
in States using more restrictive eligibility requirements than SSI
and certain States using SSI criteria.

    (a) In States using more restrictive eligibility requirements than 
SSI or in States that use SSI criteria but do not have section 1616 or 
1634 agreements with the Social Security Administration for eligibility 
determinations, the agency may provide Medicaid to individuals specified 
in paragraph (b) of this section who receive only a State supplement if 
the State supplement meets the conditions specified in paragraph (c) of 
this section.
    (b) The agency may provide Medicaid to all individuals receiving 
only State supplements if, except for their income, the individuals meet 
the more restrictive eligibility requirements underSec. 435.121 or SSI 
criteria, or to one or more of the following classifications of 
individuals who meet these criteria:
    (1) All aged individuals.
    (2) All blind individuals.
    (3) All disabled individuals.
    (4) Only aged individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (5) Only blind individuals in domiciliary facilities or other group 
living arrangements as defined under SSI.
    (6) Only disabled individuals in domiciliary facilities or other 
group living arrangements as defined under SSI.
    (7) Individuals receiving a Federally-administered optional State 
supplement that meets the conditions specified in this section.
    (8) Individuals in additional classifications specified by the 
Secretary.
    (9) Reasonable groups of individuals, as specified by the State, 
receiving State-administered supplementary payments.
    (c) Payments under the optional supplement program must be:
    (1) Based on need and paid in cash on a regular basis;
    (2) Equal to the difference between the individual's countable 
income and the income standard used to determine eligibility for 
supplements. Countable income is income remaining after deductions are 
applied. The income deductions may be more restrictive than required 
under SSI (seeSec. 435.1006 for limitations on FFP in Medicaid 
expenditures for individuals receiving optional State supplements); and
    (3) Available to all individuals in each classification in paragraph 
(b) of this section and available on a statewide basis. However, the 
plan may provide for variations in the income standard by political 
subdivision according to cost-of-living differences.

[58 FR 4928, Jan. 19, 1993]



Sec.  435.236  Individuals in institutions who are eligible under
a special income level.

    (a) If the agency provides Medicaid underSec. 435.211 to 
individuals in institutions who would be eligible for AFDC, SSI, or 
State supplements except for their institutional status, it may also 
cover aged, blind, and disabled individuals in institutions who--
    (1) Because of their income, would not be eligible for SSI or State 
supplements if they were not institutionalized; but
    (2) Have income below a level specified in the plan underSec. 
435.722. (SeeSec. 435.1005 for limitations on FFP in Medicaid 
expenditures for individuals specified in this section.)
    (b) The agency may cover individuals under this section whether or 
not the State pays optional supplements.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980. 
Redesignated at 58 FR 4928, Jan. 19, 1993]



           Subpart D_Optional Coverage of the Medically Needy



Sec.  435.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec.  435.301  General rules.

    (a) An agency may provide Medicaid to individuals specified in this 
subpart who:

[[Page 160]]

    (1) Either:
    (i) Have income that meets the applicable standards in Sec.Sec. 
435.811 and 435.814; or
    (ii) If their income is more than allowed under the standard, have 
incurred medical expenses at least equal to the difference between their 
income and the applicable income standard; and
    (2) Have resources that meet the applicable standards in Sec.Sec. 
435.840 and 435.843.
    (b) If the agency chooses this option, the following provisions 
apply:
    (1) The agency must provide Medicaid to the following individuals 
who meet the requirements of paragraph (a) of this section:
    (i) All pregnant women during the course of their pregnancy who, 
except for income and resources, would be eligible for Medicaid as 
mandatory or optional categorically needy under subparts B or C of this 
part;
    (ii) All individuals under 18 years of age who, except for income 
and resources, would be eligible for Medicaid as mandatory categorically 
needy under subpart B of this part;
    (iii) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and is receiving Medicaid on 
the date of the child's birth. The child is deemed to have applied and 
been found eligible for Medicaid on the date of birth and remains 
eligible as medically needy for one year so long as the woman remains 
eligible and the child is a member of the woman's household. If the 
woman's basis of eligibility changes to categorically needy, the child 
is eligible as categorically needy underSec. 435.117. The woman is 
considered to remain eligible if she meets the spend-down requirements 
in any consecutive budget period following the birth of the child.
    (iv) Women who, while pregnant, applied for, were eligible for, and 
received Medicaid services as medically needy on the day that their 
pregnancy ends. The agency must provide medically needy eligibility to 
these women for an extended period following termination of pregnancy. 
This period extends from the last day of the pregnancy through the end 
of the month in which a 60-day period, beginning on the last day of 
pregnancy, ends. Eligibility must be provided, regardless of changes in 
the woman's financial circumstances that may occur within this extended 
period. These women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined inSec. 
440.210(c)(1) of this subchapter).
    (2) The agency may provide Medicaid to any of the following groups 
of individuals;
    (i) Individuals under age 21 (Sec.  435.308).
    (ii) Specified relatives (Sec.  435.310).
    (iii) Aged (Sec.  435.330.320 and 435.330).
    (iv) Blind (Sec.Sec. 435.322, 435.330 and 435.340).
    (v) Disabled (Sec.Sec. 435.324, 435.330, and 435.340).
    (3) If the agency provides Medicaid to any individual in a group 
specified in paragraph (b)(2) of this section, the agency must provide 
Medicaid to all individuals eligible to be members of that group.

[46 FR 47986, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 
52 FR 48438, Dec. 22, 1987; 55 FR 48609, Nov. 21, 1990; 58 FR 4929, Jan. 
19, 1993]



Sec.  435.308  Medically needy coverage of individuals under age 21.

    (a) If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals under age 21 (or, at State option, under 
age 20, 19, or 18), as specified in paragraph (b) of this section:
    (1) Who would not be covered under the mandatory medically needy 
group of individuals under 18 underSec. 435.301(b)(1)(ii); and
    (2) Who meet the income and resource requirements of subpart I of 
this part.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals placed in foster homes or private institutions by private 
nonprofit agencies.

[[Page 161]]

    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. When the agency covers such individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
individuals with intellectual disabilities.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47986, Sept. 30, 1981, as amended at 58 FR 4929, Jan. 19, 1993]



Sec.  435.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, as defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified inSec. 435.510.

[58 FR 4929, Jan. 19, 1993]



Sec.  435.320  Medically needy coverage of the aged in States that
cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to 
individuals who--
    (a) Are 65 years of age and older, as specified inSec. 435.520; 
and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47986, Sept. 30, 1981]



Sec.  435.322  Medically needy coverage of the blind in States that
cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to blind 
individuals who meet--
    (a) The requirements for blindness, as specified in Sec.Sec. 
435.530 and 435.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47986, Sept. 30, 1981]



Sec.  435.324  Medically needy coverage of the disabled in States that
cover individuals receiving SSI.

    If the agency provides Medicaid to individuals receiving SSI and 
elects to cover the medically needy, it may provide Medicaid to disabled 
individuals who meet--
    (a) The requirements for disability, as specified in Sec.Sec. 
435.540 and 435.541; and
    (b) The income and resource requirements of Subpart I of this part.

[46 FR 47986, Sept. 30, 1981; 46 FR 54743, Nov. 11, 1981]



Sec.  435.326  Individuals who would be ineligible if they were not 
enrolled in an MCO or PCCM.

    If the agency provides Medicaid to the categorically needy under 
Sec.  435.212, it may provide it under the same rules to medically needy 
beneficiaries who are enrolled in MCOs or PCCMs.

[67 FR 41095, June 14, 2002]



Sec.  435.330  Medically needy coverage of the aged, blind, and
disabled in States using more restrictive eligibility requirements
for Medicaid than those used under SSI.

    (a) If an agency provides Medicaid as categorically needy only to 
those aged, blind, or disabled individuals who meet more restrictive 
requirements than used under SSI and elects to cover the medically 
needy, it may provide Medicaid as medically needy to those aged, blind, 
or disabled individuals who:
    (1) Do not qualify for Medicaid as categorically needy underSec. 
435.121 orSec. 435.230; and
    (2) If applying as blind or disabled, meet the definition of 
blindness or disability established underSec. 435.121.
    (b) Except as specified in paragraph (c) of this section, the agency 
must apply to individuals covered under the option of this section the 
same financial and nonfinancial requirements that are applied to 
individuals covered

[[Page 162]]

as categorically needy under Sec.Sec. 435.121 and 435.230.
    (c) In determining the financial eligibility of individuals who are 
considered as medically needy under this section, the agency must apply 
the financial eligibility requirements of subparts G and I of this part.

[58 FR 4929, Jan. 19, 1993]



Sec.  435.340  Protected medically needy coverage for blind and 
disabled individuals eligible in December 1973.

    If an agency provides Medicaid to the medically needy, it must cover 
individuals who--
    (a) Where eligible as medically needy under the Medicaid plan in 
December 1973 on the basis of the blindness or disability criteria of 
the AB, APTD, or AABD plan;
    (b) For each consecutive month after December 1973, continue to 
meet--
    (1) Those blindness or disability criteria; and
    (2) The eligibility requirements for the medically needy under the 
December 1973 Medicaid plan; and
    (c) Meet the current requirements for eligibility as medically needy 
under the Medicaid plan except for blindness or disability criteria.

[46 FR 47987, Sept. 30, 1981]



Sec.  435.350  Coverage for certain aliens.

    If an agency provides Medicaid to the medically needy, it must 
provide the services necessary for the treatment of an emergency medical 
condition, as defined inSec. 440.255(c) of this chapter, to those 
aliens described inSec. 435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]



               Subpart E_General Eligibility Requirements



Sec.  435.400  Scope.

    This subpart prescribes general requirements for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part.



Sec.  435.401  General rules.

    (a) A Medicaid agency may not impose any eligibility requirement 
that is prohibited under Title XIX of the Act.
    (b) The agency must base any optional group covered under subparts B 
and C of this part on reasonable classifications that do not result in 
arbitrary or inequitable treatment of individuals and groups and that 
are consistent with the objectives of Title XIX.
    (c) The agency must not use requirements for determining eligibility 
for optional coverage groups that are--
    (1) For families and children, more restrictive than those used 
under the State's AFDC plan; and
    (2) For aged, blind, and disabled individuals, more restrictive than 
those used under SSI, except for individuals receiving an optional State 
supplement as specified inSec. 435.230 or individuals in categories 
specified by the agency underSec. 435.121.



Sec.  435.402  [Reserved]



Sec.  435.403  State residence.

    (a) Requirement. The agency must provide Medicaid to eligible 
residents of the State, including residents who are absent from the 
State. The conditions under which payment for services is provided to 
out-of-State residents are set forth inSec. 431.52 of this chapter.
    (b) Definition. For purposes of this section--Institution has the 
same meaning as Institution and Medical institution, as defined inSec. 
435.1010. For purposes of State placement, the term also includes foster 
care homes, licensed as set forth in 45 CFR 1355.20, and providing food, 
shelter and supportive services to one or more persons unrelated to the 
proprietor.
    (c) Incapability of indicating intent. For purposes of this section, 
an individual is considered incapable of indicating intent if the 
individual--
    (1) Has an I.Q. of 49 or less or has a mental age of 7 or less, 
based on tests acceptable to the Intellectual Disability agency in the 
State:
    (2) Is judged legally incompetent; or
    (3) Is found incapable of indicating intent based on medical 
documentation obtained from a physician, psychologist, or other person 
licensed by the

[[Page 163]]

State in the field of intellectual disability.
    (d) Who is a State resident. A resident of a State is any individual 
who:
    (1) Meets the conditions in paragraphs (e) through (i) of this 
section; or
    (2) Meets the criteria specified in an interstate agreement under 
paragraph (k) of this section.
    (e) Placement by a State in an out-of-State institution--(1) General 
rule. Any agency of the State, including an entity recognized under 
State law as being under contract with the State for such purposes, that 
arranges for an individual to be placed in an institution located in 
another State, is recognized as acting on behalf of the State in making 
a placement. The State arranging or actually making the placement is 
considered as the individual's State of residence.
    (2) Any action beyond providing information to the individual and 
the individual's family would constitute arranging or making a State 
placement. However, the following actions do not constitute State 
placement:
    (i) Providing basic information to individuals about another State's 
Medicaid program, and information about the availability of health care 
services and facilities in another State.
    (ii) Assisting an individual in locating an institution in another 
State, provided the individual is capable of indicating intent and 
independently decides to move.
    (3) When a competent individual leaves the facility in which the 
individual is placed by a State, that individual's State of residence 
for Medicaid purposes is the State where the individual is physically 
located.
    (4) Where a placement is initiated by a State because the State 
lacks a sufficient number of appropriate facilities to provide services 
to its residents, the State making the placement is the individual's 
State of residence for Medicaid purposes.
    (f) Individuals receiving a State supplementary payment (SSP). For 
individuals of any age who are receiving an SSP, the State of residence 
is the State paying the SSP.
    (g) Individuals receiving Title IV-E payments. For individuals of 
any age who are receiving Federal payments for foster care and adoption 
assistance under title IV-E of the Social Security Act, the State of 
residence is the State where the child lives.
    (h) Individuals age 21 and over. Except as provided in paragraph (f) 
of this section, with respect to individuals age 21 and over --
    (1) For an individual not residing in an institution as defined in 
paragraph (b) of this section, the State of residence is the State where 
the individual is living and--
    (i) Intends to reside, including without a fixed address; or
    (ii) Has entered the State with a job commitment or seeking 
employment (whether or not currently employed).
    (2) For an individual not residing in an institution as defined in 
paragraph (b) of this section who is not capable of stating intent, the 
State of residency is the State where the individual is living.
    (3) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--
    (i) That of the parent applying for Medicaid on the individual's 
behalf, if the parents reside in separate States (if a legal guardian 
has been appointed and parental rights are terminated, the State of 
residence of the guardian is used instead of the parent's);
    (ii) The parent's or legal guardian's State of residence at the time 
of placement (if a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the parent's); or
    (iii) The current State of residence of the parent or legal guardian 
who files the application if the individual is institutionalized in that 
State (if a legal guardian has been appointed and parental rights are 
terminated, the State of residence of the guardian is used instead of 
the parent's).
    (iv) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (4) For any institutionalized individual who became incapable of 
indicating intent at or after age 21, the

[[Page 164]]

State of residence is the State in which the individual is physically 
present, except where another State makes a placement.
    (5) For any other institutionalized individual, the State of 
residence is the State where the individual is living and intends to 
reside.
    (i) Individuals under age 21. For an individual under age 21 who is 
not eligible for Medicaid based on receipt of assistance under title IV-
E of the Act, as addressed in paragraph (g) of this section, and is not 
receiving a State supplementary payment, as addressed in paragraph (f) 
of this section, the State of residence is as follows:
    (1) For an individual who is capable of indicating intent and who is 
emancipated from his or her parent or who is married, the State of 
residence is determined in accordance with paragraph (h)(1) of this 
section.
    (2) For an individual not described in paragraph (i)(1) of this 
section, not living in an institution as defined in paragraph (b) of 
this section and not eligible for Medicaid based on receipt of 
assistance under title IV-E of the Act, as addressed in paragraph (g) of 
this section, and is not receiving a State supplementary payment, as 
addressed in paragraph (f) of this section, the State of residence is:
    (i) The State where the individual resides, including without a 
fixed address; or
    (ii) The State of residency of the parent or caretaker, in 
accordance with paragraph (h)(1) of this section, with whom the 
individual resides.
    (3) For any institutionalized individual who is neither married nor 
emancipated, the State of residence is--
    (i) The parent's or legal guardian's State of residence at the time 
of placement (if a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the parent's); or
    (ii) The current State of residence of the parent or legal guardian 
who files the application if the individual is institutionalized in that 
State (if a legal guardian has been appointed and parental rights are 
terminated, the State or residence of the guardian is used instead of 
the parent's).
    (iii) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (j) Specific prohibitions. (1) The agency may not deny Medicaid 
eligibility because an individual has not resided in the State for a 
specified period.
    (2) The agency may not deny Medicaid eligibility to an individual in 
an institution, who satisfies the residency rules set forth in this 
section, on the grounds that the individual did not establish residence 
in the State before entering the institution.
    (3) The agency may not deny or terminate a resident's Medicaid 
eligibility because of that person's temporary absence from the State if 
the person intends to return when the purpose of the absence has been 
accomplished, unless another State has determined that the person is a 
resident there for purposes of Medicaid.
    (k) Interstate agreements. A State may have a written agreement with 
another State setting forth rules and procedures resolving cases of 
disputed residency. These agreements may establish criteria other than 
those specified in paragraphs (c) through (i) of this section, but must 
not include criteria that result in loss of residency in both States or 
that are prohibited by paragraph (j) of this section. The agreements 
must contain a procedure for providing Medicaid to individuals pending 
resolution of the case. States may use interstate agreements for 
purposes other than cases of disputed residency to facilitate 
administration of the program, and to facilitate the placement and 
adoption of title IV-E individuals when the child and his or her 
adoptive parent(s) move into another State.
    (l) Continued Medicaid for institutionalized beneficiaries. If an 
agency is providing Medicaid to an institutionalized beneficiary who, as 
a result of this section, would be considered a resident of a different 
State--
    (1) The agency must continue to provide Medicaid to that beneficiary 
from June 24, 1983 until July 5, 1984, unless it makes arrangements with 
another

[[Page 165]]

State of residence to provide Medicaid at an earlier date: and
    (2) Those arrangements must not include provisions prohibited by 
paragraph (i) of this section.
    (m) Cases of disputed residency. Where two or more States cannot 
resolve which State is the State of residence, the State where the 
individual is physically located is the State of residence.

[49 FR 13531, Apr. 5, 1984, as amended at 55 FR 48609, Nov. 21, 1990; 71 
FR 39222, July 12, 2006; 77 FR 17206, Mar. 23, 2012]



Sec.  435.404  Applicant's choice of category.

    The agency must allow an individual who would be eligible under more 
than one category to have his eligibility determined for the category he 
selects.



Sec.  435.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--
    (1) Citizens: (i) Under a declaration required by section 1137(d) of 
the Act that the individual is a citizen or national of the United 
States; and
    (ii) The individual has provided satisfactory documentary evidence 
of citizenship or national status, as described inSec. 435.407.
    (iii) An individual for purposes of the declaration and citizenship 
documentation requirements discussed in paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section includes both applicants and beneficiaries 
under a section 1115 demonstration (including a family planning 
demonstration project) for which a State receives Federal financial 
participation in their expenditures, as though the expenditures were for 
medical assistance.
    (iv) Individuals must declare their citizenship and the State must 
document the individual's citizenship in the individual's eligibility 
file on initial applications and initial redeterminations effective July 
1, 2006.
    (v) The following groups of individuals are exempt from the 
requirements in paragraph (a)(1)(ii) of this section:
    (A) Individuals receiving SSI benefits under title XVI of the Act.
    (B) Individuals entitled to or enrolled in any part of Medicare.
    (C) Individuals receiving disability insurance benefits under 
section 223 of the Act or monthly benefits under section 202 of the Act, 
based on the individual's disability (as defined in section 223(d) of 
the Act).
    (D) Individuals who are in foster care and who are assisted under 
Title IV-B of the Act, and individuals who are beneficiaries of foster 
care maintenance or adoption assistance payments under Title IV-E of the 
Act.
    (2)(i) Except as specified in 8 U.S.C. 1612(b)(1) (permitting States 
an option with respect to coverage of certain qualified aliens), 
qualified aliens as described in section 431 of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1641) (including qualified aliens subject to the 5-year bar) who have 
provided satisfactory documentary evidence of Qualified Alien status, 
which status has been verified with the Department of Homeland Security 
(DHS) under a declaration required by section 1137(d) of the Act that 
the applicant or beneficiary is an alien in a satisfactory immigration 
status.
    (ii) The eligibility of qualified aliens who are subject to the 5-
year bar in 8 U.S.C. 1613 is limited to the benefits described in 
paragraph (b) of this section.
    (b) The agency must provide payment for the services described in 
Sec.  440.255(c) of this chapter to residents of the State who otherwise 
meet the eligibility requirements of the State plan (except for receipt 
of AFDC, SSI, or State Supplementary payments) who are qualified aliens 
subject to the 5-year bar or who are non-qualified aliens who meet all 
Medicaid eligibility criteria, except non-qualified aliens need not 
present a social security number or document immigration status.

[55 FR 36819, Sept. 7, 1990, as amended at 56 FR 10807, Mar. 14, 1991; 
71 FR 39222, July 12, 2006; 72 FR 38691, July 13, 2007]



Sec.  435.407  Types of acceptable documentary evidence of citizenship.

    For purposes of this section, the term ``citizenship'' includes 
status as a ``national of the United States'' as defined by section 
101(a)(22) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(22)) 
to include both citizens of

[[Page 166]]

the United States and non-citizen nationals of the United States.
    (a) Primary evidence of citizenship and identity. The following 
evidence must be accepted as satisfactory documentary evidence of both 
identity and citizenship:
    (1) A U.S. passport. The Department of State issues this. A U.S. 
passport does not have to be currently valid to be accepted as evidence 
of U.S. citizenship, as long as it was originally issued without 
limitation.

    Note: Spouses and children were sometimes included on one passport 
through 1980. U.S. passports issued after 1980 show only one person. 
Consequently, the citizenship and identity of the included person can be 
established when one of these passports is presented. Exception: Do not 
accept any passport as evidence of U.S. citizenship when it was issued 
with a limitation. However, such a passport may be used as proof of 
identity.

    (2) A Certificate of Naturalization (DHS Forms N-550 or N-570.) 
Department of Homeland Security issues for naturalization.
    (3) A Certificate of U.S. Citizenship (DHS Forms N-560 or N-561.) 
Department of Homeland Security issues certificates of citizenship to 
individuals who derive citizenship through a parent.
    (4) A valid State-issued driver's license, but only if the State 
issuing the license requires proof of U.S. citizenship before issuance 
of such license or obtains a social security number from the applicant 
and verifies before certification that such number is valid and assigned 
to the applicant who is a citizen. (This provision is not effective 
until such time as a State makes providing evidence of citizenship a 
condition of issuing a driver's license and evidence that the license 
holder is a citizen is included on the license or in a system of records 
available to the Medicaid agency. The State must ensure that the process 
complies with this statutory provision in section 6036 of the Deficit 
Reduction Act of 2005. CMS will monitor compliance of States 
implementing this provision.).
    (b) Secondary evidence of citizenship. If primary evidence from the 
list in paragraph (a) of this section is unavailable, an applicant or 
beneficiary should provide satisfactory documentary evidence of 
citizenship from the list specified in this section to establish 
citizenship and satisfactory documentary evidence from paragraph (e) of 
this section to establish identity, in accordance with the rules 
specified in this section.
    (1) A U.S. public birth certificate showing birth in one of the 50 
States, the District of Columbia, Puerto Rico (if born on or after 
January 13, 1941), Guam (on or after April 10, 1899), the Virgin Islands 
of the U.S. (on or after January 17, 1917), American Samoa, Swain's 
Island, or the Northern Mariana Islands (after November 4, 1986 (NMI 
local time)). A State, at its option, may use a cross match with a State 
vital statistics agency to document a birth record. The birth record 
document may be issued by the State, Commonwealth, Territory, or local 
jurisdiction. It must have been recorded before the person was 5 years 
of age. A delayed birth record document that is recorded at or after 5 
years of age is considered fourth level evidence of citizenship. (Note: 
If the document shows the individual was born in Puerto Rico, the Virgin 
Islands of the U.S., or the Northern Mariana Islands before these areas 
became part of the U.S., the individual may be a collectively 
naturalized citizen. Collective naturalization occurred on certain dates 
listed for each of the territories.) The following will establish U.S. 
citizenship for collectively naturalized individuals:
    (i) Puerto Rico:
    (A) Evidence of birth in Puerto Rico on or after April 11, 1899 and 
the applicant's statement that he or she was residing in the U.S., a 
U.S. possession, or Puerto Rico on January 13, 1941; or
    (B) Evidence that the applicant was a Puerto Rican citizen and the 
applicant's statement that he or she was residing in Puerto Rico on 
March 1, 1917 and that he or she did not take an oath of allegiance to 
Spain.
    (ii) U.S. Virgin Islands:
    (A) Evidence of birth in the U.S. Virgin Islands, and the 
applicant's statement of residence in the U.S., a U.S. possession, or 
the U.S. Virgin Islands on February 25, 1927; or
    (B) The applicant's statement indicating residence in the U.S. 
Virgin Islands as a Danish citizen on January

[[Page 167]]

17, 1917 and residence in the U.S., a U.S. possession, or the U.S. 
Virgin Islands on February 25, 1927, and that he or she did not make a 
declaration to maintain Danish citizenship; or
    (C) Evidence of birth in the U.S. Virgin Islands and the applicant's 
statement indicating residence in the U.S., a U.S. possession or 
Territory, or the Canal Zone on June 28, 1932.
    (iii) Northern Mariana Islands (NMI) (formerly part of the Trust 
Territory of the Pacific Islands (TTPI)):
    (A) Evidence of birth in the NMI, TTPI citizenship and residence in 
the NMI, the U.S., or a U.S. Territory or possession on November 3, 1986 
NMI local time) and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time); or
    (B) Evidence of TTPI citizenship, continuous residence in the NMI 
since before November 3, 1981 (NMI local time), voter registration 
before January 1, 1975 and the applicant's statement that he or she did 
not owe allegiance to a foreign State on November 4, 1986 (NMI local 
time); or
    (C) Evidence of continuous domicile in the NMI since before January 
1, 1974 and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time).
    (D) Note: If a person entered the NMI as a nonimmigrant and lived in 
the NMI since January 1, 1974, this does not constitute continuous 
domicile and the individual is not a U.S. citizen.
    (2) A Certification of Report of Birth (DS-1350). The Department of 
State issues a DS-1350 to U.S. citizens in the U.S. who were born 
outside the U.S. and acquired U.S. citizenship at birth, based on the 
information shown on the FS-240. When the birth was recorded as a 
Consular Report of Birth (FS-240), certified copies of the Certification 
of Report of Birth Abroad (DS-1350) can be issued by the Department of 
State in Washington, DC. The DS-1350 contains the same information as 
that on the current version of Consular Report of Birth FS-240. The DS-
1350 is not issued outside the U.S.
    (3) A Report of Birth Abroad of a U.S. Citizen (Form FS-240). The 
Department of State consular office prepares and issues this. A Consular 
Report of Birth can be prepared only at an American consular office 
overseas while the child is under the age of 18. Children born outside 
the U.S. to U.S. military personnel usually have one of these.
    (4) A Certification of birth issued by the Department of State (Form 
FS-545 or DS-1350). Before November 1, 1990, Department of State 
consulates also issued Form FS-545 along with the prior version of the 
FS-240. In 1990, U.S. consulates ceased to issue Form FS-545. Treat an 
FS-545 the same as the DS-1350.
    (5) A U.S. Citizen I.D. card. (This form was issued until the 1980s 
by INS. Although no longer issued, holders of this document may still 
use it consistent with the provisions of section 1903(x) of the Act.) 
INS issued the I-179 from 1960 until 1973. It revised the form and 
renumbered it as Form I-197. INS issued the I-197 from 1973 until April 
7, 1983. INS issued Form I-179 and I-197 to naturalized U.S. citizens 
living near the Canadian or Mexican border who needed it for frequent 
border crossings. Although neither form is currently issued, either form 
that was previously issued is still valid.
    (6) A Northern Mariana Identification Card (I-873). (Issued by the 
DHS to a collectively naturalized citizen of the United States who was 
born in the Northern Mariana Islands before November 4, 1986.) The 
former Immigration and Naturalization Service (INS) issued the I-873 to 
a collectively naturalized citizen of the U.S. who was born in the NMI 
before November 4, 1986. The card is no longer issued, but those 
previously issued are still valid.
    (7) An American Indian Card (I-872) issued by the Department of 
Homeland Security with the classification code ``KIC.'' (Issued by DHS 
to identify U.S. citizen members of the Texas Band of Kickapoos living 
near the United States/Mexican border.) DHS issues this card to identify 
a member of the Texas Band of Kickapoos living near the U.S./Mexican 
border. A classification code ``KIC'' and a statement on the back denote 
U.S. citizenship.
    (8) A final adoption decree showing the child's name and U.S. place 
of birth. The adoption decree must show the child's

[[Page 168]]

name and U.S. place of birth. In situations where an adoption is not 
finalized and the State in which the child was born will not release a 
birth certificate prior to final adoption, a statement from a State 
approved adoption agency that shows the child's name and U.S. place of 
birth is acceptable. The adoption agency must state in the certification 
that the source of the place of birth information is an original birth 
certificate.
    (9) Evidence of U.S. Civil Service employment before June 1, 1976. 
The document must show employment by the U.S. government before June 1, 
1976. Individuals employed by the U.S. Civil Service prior to June 1, 
1976 had to be U.S. citizens.
    (10) U.S. Military Record showing a U.S. place of birth. The 
document must show a U.S. place of birth (for example a DD-214 or 
similar official document showing a U.S. place of birth.)
    (11) A data verification with the Systematic Alien Verification for 
Entitlements (SAVE) Program for naturalized citizens. A State may 
conduct a verification with SAVE to determine if an individual is a 
naturalized citizen, provided that such verification is conducted 
consistent with the terms of a Memorandum of Understanding or other 
agreement with the Department of Homeland Security (DHS) authorizing 
verification of claims to U.S. citizenship through SAVE, including but 
not limited to provision of the individual's alien registration number 
if required by DHS.
    (12) Child Citizenship Act. Adopted or biological children born 
outside the United States may establish citizenship obtained 
automatically under section 320 of the Immigration and Nationality Act 
(8 U.S.C. 1431), as amended by the Child Citizenship Act of 2000 (Pub. 
L. 106-395, enacted on October 30, 2000). The State must obtain 
documentary evidence that verifies that at any time on or after February 
27, 2001, the following conditions have been met:
    (i) At least one parent of the child is a United States citizen by 
either birth or naturalization (as verified under the requirements of 
this Part);
    (ii) The child is under the age of 18;
    (iii) The child is residing in the United States in the legal and 
physical custody of the U.S. citizen parent;
    (iv) The child was admitted to the United States for lawful 
permanent residence (as verified under the requirements of 8 U.S.C. 1641 
pertaining to verification of qualified alien status); and
    (v) If adopted, the child satisfies the requirements of section 
101(b)(1) of the Immigration and Nationality Act (8 U.S.C. 1101(b)(1) 
pertaining to international adoptions (admission for lawful permanent 
residence as IR-3 (child adopted outside the United States)), or as IR-4 
(child coming to the United States to be adopted) with final adoption 
having subsequently occurred).
    (c) Third level evidence of citizenship. Third level evidence of 
U.S. citizenship is documentary evidence of satisfactory reliability 
that is used when both primary and secondary evidence is unavailable. 
Third level evidence may be used only when the applicant or beneficiary 
alleges being born in the U.S. A second document from paragraph (e) of 
this section to establish identity must also be presented:
    (1) Extract of a hospital record on hospital letterhead established 
at the time of the person's birth that was created 5 years before the 
initial application date and that indicates a U.S. place of birth. (For 
children under 16 the document must have been created near the time of 
birth or 5 years before the date of application.) Do not accept a 
souvenir ``birth certificate'' issued by the hospital.
    (2) Life, health, or other insurance record showing a U.S. place of 
birth that was created at least 5 years before the initial application 
date that indicates a U.S. place of birth. (For children under 16 the 
document must have been created near the time of birth or 5 years before 
the date of application.) Life or health insurance records may show 
biographical information for the person including place of birth; the 
record can be used to establish U.S. citizenship when it shows a U.S. 
place of birth.
    (3) Religious record recorded in the U.S. within 3 months of birth 
showing the birth occurred in the U.S. and showing either the date of 
the birth or the individual's age at the time the record was made.

[[Page 169]]

The record must be an official record recorded with the religious 
organization. CAUTION: In questionable cases (for example, where the 
child's religious record was recorded near a U.S. international border 
and the child may have been born outside the U.S.), the State must 
verify the religious record and/or document that the mother was in the 
U.S. at the time of birth.
    (4) Early school record showing a U.S. place of birth. The school 
record must show the name of the child, the date of admission to the 
school, the date of birth, a U.S. place of birth, and the name(s) and 
place(s) of birth of the applicant's parents.
    (d) Fourth level evidence of citizenship. Fourth level evidence of 
citizenship is documentary evidence of the lowest reliability. Fourth 
level evidence should only be used in the rarest of circumstances. This 
level of evidence is used only when primary, secondary and third level 
evidence is unavailable. With the exception of the affidavit process 
described in paragraph (d)(5) of this section, the applicant may only 
use fourth level evidence of citizenship if alleging a U.S. place of 
birth. In addition, a second document establishing identity must be 
presented as described in paragraph (e) of this section.
    (1) Federal or State census record showing U.S. citizenship or a 
U.S. place of birth. (Generally for persons born 1900 through 1950.) The 
census record must also show the applicant's age.

    Note: Census records from 1900 through 1950 contain certain 
citizenship information. To secure this information the applicant, 
beneficiary or State should complete a Form BC-600, Application for 
Search of Census Records for Proof of Age. Add in the remarks portion 
``U.S. citizenship data requested.'' Also add that the purpose is for 
Medicaid eligibility. This form requires a fee.

    (2) One of the following documents that show a U.S. place of birth 
and was created at least 5 years before the application for Medicaid. 
(For children under 16 the document must have been created near the time 
of birth or 5 years before the date of application.) This document must 
be one of the following and show a U.S. place of birth:
    (i) Seneca Indian tribal census.
    (ii) Bureau of Indian Affairs tribal census records of the Navajo 
Indians.
    (iii) U.S. State Vital Statistics official notification of birth 
registration.
    (iv) A delayed U.S. public birth record that is recorded more than 5 
years after the person's birth.
    (v) Statement signed by the physician or midwife who was in 
attendance at the time of birth.
    (vi) The Roll of Alaska Natives maintained by the Bureau of Indian 
Affairs.
    (3) Institutional admission papers from a nursing facility, skilled 
care facility or other institution created at least 5 years before the 
initial application date that indicates a U.S. place of birth. Admission 
papers generally show biographical information for the person including 
place of birth; the record can be used to establish U.S. citizenship 
when it shows a U.S. place of birth.
    (4) Medical (clinic, doctor, or hospital) record created at least 5 
years before the initial application date that indicates a U.S. place of 
birth. (For children under 16 the document must have been created near 
the time of birth or 5 years before the date of application.)
    Medical records generally show biographical information for the 
person including place of birth; the record can be used to establish 
U.S. citizenship when it shows a U.S. place of birth. (Note:An 
immunization record is not considered a medical record for purposes of 
establishing U.S. citizenship.)
    (5) Written affidavit. Affidavits should ONLY be used in rare 
circumstances. If the documentation requirement needs to be met through 
affidavits, the following rules apply:
    (i) There must be at least two affidavits by two individuals who 
have personal knowledge of the event(s) establishing the applicant's or 
beneficiary's claim of citizenship (the two affidavits could be combined 
in a joint affidavit).
    (ii) At least one of the individuals making the affidavit cannot be 
related to the applicant or beneficiary. Neither of the two individuals 
can be the applicant or beneficiary.
    (iii) In order for the affidavit to be acceptable the persons making 
them must be able to provide proof of their own citizenship and 
identity.
    (iv) If the individual(s) making the affidavit has (have) 
information which

[[Page 170]]

explains why documentary evidence establishing the applicant's claim or 
citizenship does not exist or cannot be readily obtained, the affidavit 
should contain this information as well.
    (v) The State must obtain a separate affidavit from the applicant/
Beneficiary or other knowledgeable individual (guardian or 
representative) explaining why the evidence does not exist or cannot be 
obtained.
    (vi) The affidavits must be signed under penalty of perjury and need 
not be notarized.
    (e) Evidence of identity. The following documents may be accepted as 
proof of identity and must accompany a document establishing citizenship 
from the groups of documentary evidence of citizenship in the groups in 
paragraphs (b) through (d) of this section.
    (1) Identity documents described in 8 CFR 274a.2(b)(1)(v)(B)(1).
    (i) Driver's license issued by State or Territory either with a 
photograph of the individual or other identifying information of the 
individual such as name, age, sex, race, height, weight or eye color.
    (ii) School identification card with a photograph of the individual.
    (iii) U.S. military card or draft record.
    (iv) Identification card issued by the Federal, State, or local 
government with the same information included on drivers' licenses.
    (v) Military dependent's identification card.
    (vi) Certificate of Degree of Indian Blood, or other American 
Indian/Alaska Native Tribal document with a photograph or other personal 
identifying information relating to the individual. Acceptable if the 
document carries a photograph of the applicant or beneficiary, or has 
other personal identifying information relating to the individual such 
as age, weight, height, race, sex, and eye color.
    (vii) U.S. Coast Guard Merchant Mariner card.

    Note to paragraph (e)(1): Exception: Do not accept a voter's 
registration card or Canadian driver's license as listed in 8 CFR 
274a.2(b)(1)(v)(B)(1). CMS does not view these as reliable for identity.

    (2) At State option, a State may use a cross match with a Federal or 
State governmental, public assistance, law enforcement or corrections 
agency's data system to establish identity if the agency establishes and 
certifies true identity of individuals. Such agencies may include food 
stamps, child support, corrections, including juvenile detention, motor 
vehicle, or child protective services. The State Medicaid Agency is 
still responsible for assuring the accuracy of the identity 
determination.
    (3) At State option, a State may accept three or more documents that 
together reasonably corroborate the identity of an individual provided 
such documents have not been used to establish the individual's 
citizenship and the individual submitted second or third tier evidence 
of citizenship. The State must first ensure that no other evidence of 
identity is available to the individual prior to accepting such 
documents. Such documents must at a minimum contain the individual's 
name, plus any additional information establishing the individual's 
identity. All documents used must contain consistent identifying 
information. These documents include employer identification cards, high 
school and college diplomas from accredited institutions (including 
general education and high school equivalency diplomas), marriage 
certificates, divorce decrees and property deeds/titles.
    (f) Special identity rules for children. For children under 16, a 
clinic, doctor, hospital or school record may be accepted for purposes 
of establishing identity. School records may include nursery or daycare 
records and report cards. If the State accepts such records, it must 
verify them with the issuing school. If none of the above documents in 
the preceding groups are available, an affidavit may be used. An 
affidavit is only acceptable if it is signed under penalty of perjury by 
a parent, guardian or caretaker relative (as defined in the regulations 
at 45 CFR 233.90(c)(v)) stating the date and place of the birth of the 
child and cannot be used if an affidavit for citizenship was provided. 
The affidavit is not required to be notarized. A State may accept an 
identity affidavit on behalf of a child under the age of 18 in instances 
when school ID cards and drivers' licenses

[[Page 171]]

are not available to the individual in that area until that age.
    (g) Special identity rules for disabled individuals in institutional 
care facilities. A State may accept an identity affidavit signed under 
penalty of perjury by a residential care facility director or 
administrator on behalf of an institutionalized individual in the 
facility. States should first pursue all other means of verifying 
identity prior to accepting an affidavit. The affidavit is not required 
to be notarized.
    (h) Special populations needing assistance. States must assist 
individuals to secure satisfactory documentary evidence of citizenship 
when because of incapacity of mind or body the individual would be 
unable to comply with the requirement to present satisfactory 
documentary evidence of citizenship in a timely manner and the 
individual lacks a representative to assist him or her.
    (i) Documentary evidence. (1) All documents must be either originals 
or copies certified by the issuing agency. Uncertified copies, including 
notarized copies, shall not be accepted.
    (2) States must maintain copies of citizenship and identification 
documents in the case record or electronic data base and make these 
copies available for compliance audits.
    (3) States may permit applicants and beneficiaries to submit such 
documentary evidence without appearing in person at a Medicaid office. 
States may accept original documents in person, by mail, or by a 
guardian or authorized representative.
    (4) If documents are determined to be inconsistent with pre-existing 
information, are counterfeit, or altered, States should investigate for 
potential fraud and abuse, including but not limited to, referral to the 
appropriate State and Federal law enforcement agencies.
    (5) Presentation of documentary evidence of citizenship is a one 
time activity; once a person's citizenship is documented and recorded in 
a State database subsequent changes in eligibility should not require 
repeating the documentation of citizenship unless later evidence raises 
a question of the person's citizenship. The State need only check its 
databases to verify that the individual already established citizenship.
    (6) CMS requires that as a check against fraud, using currently 
available automated capabilities, States will conduct a match of the 
applicant's name against the corresponding Social Security number that 
was provided. In addition, in cooperation with other agencies of the 
Federal government, CMS encourages States to use automated capabilities 
to verify citizenship and identity of Medicaid applicants. Automated 
capabilities may fall within the computer matching provisions of the 
Privacy Act of 1974, and CMS will explore any implementation issues that 
may arise with respect to those requirements. When these capabilities 
become available, States will be required to match files for individuals 
who used third or fourth tier documents to verify citizenship and 
documents to verify identity, and CMS will make available to States 
necessary information in this regard. States must ensure that all case 
records within this category will be so identified and made available to 
conduct these automated matches. CMS may also require States to match 
files for individuals who used first or second level documents to verify 
citizenship as well. CMS may provide further guidance to States with 
respect to actions required in a case of a negative match.
    (j) Record retention. The State must retain documents in accordance 
with 45 CFR 74.53.
    (k) Reasonable opportunity to present satisfactory documentary 
evidence of citizenship. States must give an applicant or beneficiary a 
reasonable opportunity to submit satisfactory documentary evidence of 
citizenship before taking action affecting the individual's eligibility 
for Medicaid. The time States give for submitting documentation of 
citizenship should be consistent with the time allowed to submit 
documentation to establish other facets of eligibility for which 
documentation is requested. (See Sec. $sect; 435.930 and 435.912.)

[71 FR 39222, July 12, 2006, as amended at 72 FR 38691, July 13, 2007; 
77 FR 17206, Mar. 23, 2012]

[[Page 172]]



           Subpart F_Categorical Requirements for Eligibility



Sec.  435.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part.

                               Dependency



Sec.  435.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures set forth under the 
State's AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4929, Jan. 19, 1993]

                                   Age



Sec.  435.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4929, Jan. 19, 1993]



Sec.  435.522  Determination of age.

    (a) Except as specified in paragraphs (b) and (c) of this section, 
in determining age, the agency must use the common-law method (under 
which an age reached the day before the anniversary of birth).
    (b) For families and children, the agency must use the popular usage 
method (under which an age is reached on the anniversary of birth), if 
this method is used under the State's AFDC plan.
    (c) For aged, blind, or disabled individuals, the agency must use 
the popular usage method, if the plan provides underSec. 435.121, 
Sec.  435.230, orSec. 435.330, for coverage of aged, blind, or 
disabled individuals who meet more restrictive eligibility requirements 
than those under SSI.
    (d) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4929, Jan. 19, 1993]

                                Blindness



Sec.  435.530  Definition of blindness.

    (a) Definition. The agency must use the same definition of blindness 
as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Sec.Sec. 435.130 through 435.134, the 
agency must use the definition of blindness that was used under the 
Medicaid plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility underSec. 435.121, if the definition is no more 
restrictive than that used under the Medicaid plan on January 1, 1972.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec.  435.531  Determinations of blindness.

    (a) Except as specified in paragraph (b) of this section, in 
determining blindness--
    (1) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine him, unless 
both of the applicant's eyes are missing;
    (2) The examiner must submit a report of examination to the Medicaid 
agency; and
    (3) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (i) Whether the individual meets the definition of blindness; and
    (ii) Whether and when re-examinations are necessary for periodic 
redeterminations of eligibility, as required underSec. 435.916 of this 
part.
    (b) If an agency provides Medicaid to individuals receiving SSI on 
the basis of blindness, this section does not apply for those 
individuals.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979]

[[Page 173]]

                               Disability



Sec.  435.540  Definition of disability.

    (a) Definition. The agency must use the same definition of 
disability as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Sec.Sec. 435.130 through 435.134, the 
agency must use the definition of disability that was used under the 
Medicaid plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility underSec. 435.121, if the definition is no more 
restrictive than that used under the Medicaid plan on January 1, 1972.
    (b) State plan requirements. The State plan must contain the 
definition of disability.



Sec.  435.541  Determinations of disability.

    (a) Determinations made by SSA. The following rules and those under 
paragraph (b) of this section apply where an individual has applied for 
Medicaid on the basis of disability.
    (1) If the agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act, the agency may not 
make a determination of disability when the only application is filed 
with SSA.
    (2) The agency may not make an independent determination of 
disability if SSA has made a disability determination within the time 
limits set forth inSec. 435.912 on the same issues presented in the 
Medicaid application. A determination of eligibility for SSI payments 
based on disability that is made by SSA automatically confers Medicaid 
eligibility, as provided for underSec. 435.909.
    (b) Effect of SSA determinations. (1) Except in the circumstances 
specified in paragraph (c)(3) of this section--
    (i) An SSA disability determination is binding on an agency until 
the determination is changed by SSA.
    (ii) If the SSA determination is changed, the new determination is 
also binding on the agency.
    (2) The agency must refer to SSA all applicants who allege new 
information or evidence affecting previous SSA determinations of 
ineligibility based upon disability for reconsideration or reopening of 
the determination, except in cases specified in paragraph (c)(4) of this 
section.
    (c) Determinations made by the Medicaid agency. The agency must make 
a determination of disability in accordance with the requirements of 
this section if any of the following circumstances exist:
    (1) The individual applies for Medicaid as a non-cash beneficiary 
and has not applied to SSA for SSI cash benefits, whether or not a State 
has a section 1634 agreement with SSA; or an individual applies for 
Medicaid and has applied to SSA for SSI benefits and is found ineligible 
for SSI for a reason other than disability.
    (2) The individual applies both to SSA for SSI and to the State 
Medicaid agency for Medicaid, the State agency has a section 1634 
agreement with SSA, and SSA has not made an SSI disability determination 
within 90 days from the date of the individual's application for 
Medicaid.
    (3) The individual applies to SSA for SSI and to the State Medicaid 
agency for Medicaid, the State does not have a section 1634 agreement 
with SSA, and either the State uses more restrictive criteria than SSI 
for determining Medicaid eligibility under its section 1902(f) option 
or, in the case of a State that uses SSI criteria, SSA has not made an 
SSI disability determination in time for the State to comply with the 
Medicaid time limit for making a prompt determination on an individual's 
application for Medicaid.
    (4) The individual applies for Medicaid as a non-cash beneficiary, 
whether or not the State has a section 1634 agreement with SSA, and--
    (i) Alleges a disabling condition different from, or in addition to, 
that considered by SSA in making its determination; or
    (ii) Alleges more than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination and alleges a new period of 
disability which meets the durational requirements of the Act, and has 
not applied to SSA for a determination with respect to these 
allegations.

[[Page 174]]

    (iii) Alleges less than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination, alleges a new period of 
disability which meets the durational requirements of the Act, and--
    (A) Has applied to SSA for reconsideration or reopening of its 
disability decision and SSA refused to consider the new allegations; 
and/or
    (B) He or she no longer meets the nondisability requirements for SSI 
but may meet the State's nondisability requirements for Medicaid 
eligibility.
    (d) Basis for determinations. The agency must make a determination 
of disability as provided in paragraph (c) of this section--
    (1) On the basis of the evidence required under paragraph (e) of 
this section; and
    (2) In accordance with the requirements for evaluating that evidence 
under the SSI program specified in 20 CFR 416.901 through 416.998.
    (e) Medical and nonmedical evidence. The agency must obtain a 
medical report and other nonmedical evidence for individuals applying 
for Medicaid on the basis of disability. The medical report and 
nonmedical evidence must include diagnosis and other information in 
accordance with the requirements for evidence applicable to disability 
determinations under the SSI program specified in 20 CFR part 416, 
subpart I.
    (f) Disability review teams--(1) Function. A review team must review 
the medical report and other evidence required under paragraph (e) of 
this section and determine on behalf of the agency whether the 
individual's condition meets the definition of disability.
    (2) Composition. The review team must be composed of a medical or 
psychological consultant and another individual who is qualified to 
interpret and evaluate medical reports and other evidence relating to 
the individual's physical or mental impairments and, as necessary, to 
determine the capacities of the individual to perform substantial 
gainful activity, as specified in 20 CFR part 416, subpart J.
    (3) Periodic reexaminations. The review team must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required underSec. 435.916 of this part, using the 
principles set forth in 20 CFR 416.989 and 416.990. If a State uses the 
same definition of disability as SSA, as provided for underSec. 
435.540, and a beneficiary is Medicaid eligible because he or she 
receives SSI, this paragraph (f)(3) does not apply. The reexamination 
will be conducted by SSA.

[54 FR 50761, Dec. 11, 1989; 77 FR 17206, Mar. 23, 2012]



    Subpart G_General Financial Eligibility Requirements and Options



Sec.  435.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part. Subparts H and I of this 
part prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the AFDC, SSI, or State supplement programs, or, for aged, blind, and 
disabled individuals in States that use more restrictive criteria than 
SSI, the methodologies established in accordance with the requirements 
of Sec.Sec. 435.121 and 435.230.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section or inSec. 435.121 
in determining financial eligibility of individuals as categorically and 
medically needy, the agency must apply the financial methodologies and 
requirements of the cash assistance program that is most closely 
categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec.  435.602.

[[Page 175]]

    (d) Use of less restrictive methodologies than those under cash 
assistance programs. (1) At State option, and subject to the conditions 
of paragraphs (d)(2) through (d)(5) of this section, the agency may 
apply income and resource methodologies that are less restrictive than 
the cash assistance methodologies in determining eligibility of the 
following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group underSec. 435.116;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i)(IV), 1902(a)(10)(A)(i)(VI), and 
1902(a)(10)(A)(i)(VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act;
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act; 
and
    (vi) Aged, blind, and disabled individuals in States using more 
restrictive eligibility requirements than SSI under groups established 
under Sec.Sec. 435.121 and 435.230.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals described in paragraph (d)(1) of this 
section may be less restrictive, but no more restrictive (except in 
States using more restrictive requirements than SSI), than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind, or disabled, or AFDC related) within an eligibility group. For 
example, if the agency chooses to apply less restrictive income or 
resource methodology to an eligibility group of aged individuals, it 
must apply that methodology to all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded inSec. 435.602, in determining 
financial eligibility of individuals, the agency will apply the cash 
assistance financial methodologies and requirements, unless the agency 
chooses to apply less restrictive income and resource methodologies in 
accordance with paragraph (d) of this section.
    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will be used; and
    (ii) The eligibility group or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.602  Financial responsibility of relatives and other 
individuals.

    (a) Basic requirements. Subject to the provisions of paragraphs (b) 
and (c) of this section, in determining financial responsibility of 
relatives and other persons for individuals under Medicaid, the agency 
must apply the following requirements and methodologies:
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under age 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies that apply include considering the income and resources of 
parents or spouses whose income and resources would be considered if the 
individual under age

[[Page 176]]

21 were dependent under the State's approved AFDC plan, whether or not 
they are actually contributed, except as specified under paragraphs (c) 
and (d) of this section. These requirements and methodologies must be 
applied in accordance with the provisions of the State's approved AFDC 
plan.
    (3) When a couple ceases to live together, the agency must count 
only the income of the individual spouse in determining his or her 
eligibility, beginning the first month following the month the couple 
ceases to live together.
    (4) In the case of eligible institutionalized spouses who are aged, 
blind, and disabled and who have shared the same room in a title XIX 
Medicaid institution, the agency has the option of considering these 
couples as eligible couples for purposes of counting income and 
resources or as eligible individuals, whichever is more advantageous to 
the couple.
    (b) Requirements for States using more restrictive requirements. 
Subject to the provisions of paragraph (c) of this section, in 
determining financial eligibility of aged, blind, or disabled 
individuals in States that apply eligibility requirements more 
restrictive than those used under SSI, the agency must apply:
    (1) The requirements and methodologies for financial responsibility 
of relatives used under the SSI program; or
    (2) More extensive requirements for relative responsibility than 
specified inSec. 435.602(a) but no more extensive than the 
requirements under the Medicaid plan in effect on January 1, 1972.
    (c) Use of less restrictive methodologies. The agency may apply 
income and resources methodologies that are less restrictive than those 
used under the cash assistance programs as specified in the State 
Medicaid plan in accordance withSec. 435.601(d).
    (d) [Reserved]

[58 FR 4930, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.603  Application of modified adjusted gross income (MAGI).

    (a) Basis, scope, and implementation. (1) This section implements 
section 1902(e)(14) of the Act.
    (2) Effective January 1, 2014, the agency must apply the financial 
methodologies set forth in this section in determining the financial 
eligibility of all individuals for Medicaid, except for individuals 
identified in paragraph (j) of this section and as provided in paragraph 
(a)(3) of this section.
    (3) In the case of determining ongoing eligibility for beneficiaries 
determined eligible for Medicaid coverage to begin on or before December 
31, 2013, application of the financial methodologies set forth in this 
section will not be applied until March 31, 2014 or the next regularly-
scheduled renewal of eligibility for such individual underSec. 435.916 
of this part, whichever is later.
    (b) Definitions. For purposes of this section--
    Child means a natural or biological, adopted or step child.
    Code means the Internal Revenue Code.
    Family size means the number of persons counted as members of an 
individual's household. In the case of determining the family size of a 
pregnant woman, the pregnant woman is counted as herself plus the number 
of children she is expected to deliver. In the case of determining the 
family size of other individuals who have a pregnant woman in their 
household, the pregnant woman is counted, at State option, as either 1 
or 2 person(s) or as herself plus the number of children she is expected 
to deliver.
    Parent means a natural or biological, adopted or step parent.
    Sibling means natural or biological, adopted, half, or step sibling.
    Tax dependent has the meaning provided inSec. 435.4 of this part.
    (c) Basic rule. Except as specified in paragraph (i), (j), and (k) 
of this section, the agency must determine financial eligibility for 
Medicaid based on ``household income'' as defined in paragraph (d) of 
this section.
    (d) Household income--(1) General rule. Except as provided in 
paragraphs (d)(2) through (d)(4) of this section, household income is 
the sum of the MAGI-based income, as defined in paragraph (e) of this 
section, of every individual included in the individual's household.
    (2) Income of children and tax dependents. (i) The MAGI-based income 
of an

[[Page 177]]

individual who is included in the household of his or her natural, 
adopted or step parent and is not expected to be required to file a tax 
return under section 6012(a)(1) of the Code for the taxable year in 
which eligibility for Medicaid is being determined, is not included in 
household income whether or not the individual files a tax return.
    (ii) The MAGI-based income of a tax dependent described in paragraph 
(f)(2)(i) of this section who is not expected to be required to file a 
tax return under section 6012(a)(1) of the Code for the taxable year in 
which eligibility for Medicaid is being determined is not included in 
the household income of the taxpayer whether or not such tax dependent 
files a tax return.
    (3) In the case of individuals described in paragraph (f)(2)(i) of 
this section, household income may, at State option, also include 
actually available cash support, exceeding nominal amounts, provided by 
the person claiming such individual as a tax dependent.
    (4) Effective January 1, 2014, in determining the eligibility of an 
individual using MAGI-based income, a state must subtract an amount 
equivalent to 5 percentage points of the Federal poverty level for the 
applicable family size only to determine the eligibility of an 
individual for medical assistance under the eligibility group with the 
highest income standard using MAGI-based methodologies in the applicable 
Title of the Act, but not to determine eligibility for a particular 
eligibility group.
    (e) MAGI-based income. For the purposes of this section, MAGI-based 
income means income calculated using the same financial methodologies 
used to determine modified adjusted gross income as defined in section 
36B(d)(2)(B) of the Code, with the following exceptions--
    (1) An amount received as a lump sum is counted as income only in 
the month received.
    (2) Scholarships, awards, or fellowship grants used for education 
purposes and not for living expenses are excluded from income.
    (3) American Indian/Alaska Native exceptions. The following are 
excluded from income:
    (i) Distributions from Alaska Native Corporations and Settlement 
Trusts;
    (ii) Distributions from any property held in trust, subject to 
Federal restrictions, located within the most recent boundaries of a 
prior Federal reservation, or otherwise under the supervision of the 
Secretary of the Interior;
    (iii) Distributions and payments from rents, leases, rights of way, 
royalties, usage rights, or natural resource extraction and harvest 
from--
    (A) Rights of ownership or possession in any lands described in 
paragraph (e)(3)(ii) of this section; or
    (B) Federally protected rights regarding off-reservation hunting, 
fishing, gathering, or usage of natural resources;
    (iv) Distributions resulting from real property ownership interests 
related to natural resources and improvements--
    (A) Located on or near a reservation or within the most recent 
boundaries of a prior Federal reservation; or
    (B) Resulting from the exercise of federally-protected rights 
relating to such real property ownership interests;
    (v) Payments resulting from ownership interests in or usage rights 
to items that have unique religious, spiritual, traditional, or cultural 
significance or rights that support subsistence or a traditional 
lifestyle according to applicable Tribal Law or custom;
    (vi) Student financial assistance provided under the Bureau of 
Indian Affairs education programs.
    (f) Household--(1) Basic rule for taxpayers not claimed as a tax 
dependent. In the case of an individual who expects to file a tax return 
for the taxable year in which an initial determination or renewal of 
eligibility is being made, and who does not expect to be claimed as a 
tax dependent by another taxpayer, the household consists of the 
taxpayer and, subject to paragraph (f)(5) of this section, all persons 
whom such individual expects to claim as a tax dependent.
    (2) Basic rule for individuals claimed as a tax dependent. In the 
case of an individual who expects to be claimed as a tax dependent by 
another taxpayer for the taxable year in which an initial determination 
or renewal of eligibility is being made, the household is the household 
of the taxpayer claiming

[[Page 178]]

such individual as a tax dependent, except that the household must be 
determined in accordance with paragraph (f)(3) of this section in the 
case of--
    (i) Individuals other than a spouse or a biological, adopted, or 
step child who expect to be claimed as a tax dependent by another 
taxpayer;
    (ii) Individuals under the age specified by the State under 
paragraph (f)(3)(iv) of this section who expect to be claimed by one 
parent as a tax dependent and are living with both parents but whose 
parents do not expect to file a joint tax return; and
    (iii) Individuals under the age specified by the State under 
paragraph (f)(3)(iv) of this section who expect to be claimed as a tax 
dependent by a non-custodial parent. For purposes of this section--
    (A) A court order or binding separation, divorce, or custody 
agreement establishing physical custody controls; or
    (B) If there is no such order or agreement or in the event of a 
shared custody agreement, the custodial parent is the parent with whom 
the child spends most nights.
    (3) Rules for individuals who neither file a tax return nor are 
claimed as a tax dependent. In the case of individuals who do not expect 
to file a Federal tax return and do not expect to be claimed as a tax 
dependent for the taxable year in which an initial determination or 
renewal of eligibility is being made, or who are described in paragraph 
(f)(2)(i), (f)(2)(ii), or (f)(2)(iii) of this section, the household 
consists of the individual and, if living with the individual--
    (i) The individual's spouse;
    (ii) The individual's natural, adopted and step children under the 
age specified in paragraph (f)(3)(iv) of this section; and
    (iii) In the case of individuals under the age specified in 
paragraph (f)(3)(iv) of this section, the individual's natural, adopted 
and step parents and natural, adoptive and step siblings under the age 
specified in paragraph (f)(3)(iv) of this section.
    (iv) The age specified in this paragraph is either of the following, 
as elected by the agency in the State plan--
    (A) Age 19; or
    (B) Age 19 or, in the case of full-time students, age 21.
    (4) Married couples. In the case of a married couple living 
together, each spouse will be included in the household of the other 
spouse, regardless of whether they expect to file a joint tax return 
under section 6013 of the Code or whether one spouse expects to be 
claimed as a tax dependent by the other spouse.
    (5) For purposes of paragraph (f)(1) of this section, if, consistent 
with the procedures adopted by the State in accordance withSec. 
435.956(f) of this part, a taxpayer cannot reasonably establish that 
another individual is a tax dependent of the taxpayer for the tax year 
in which Medicaid is sought, the inclusion of such individual in the 
household of the taxpayer is determined in accordance with paragraph 
(f)(3) of this section.
    (g) No resource test or income disregards. In the case of 
individuals whose financial eligibility for Medicaid is determined in 
accordance with this section, the agency must not--
    (1) Apply any assets or resources test; or
    (2) Apply any income or expense disregards under sections 1902(r)(2) 
or 1931(b)(2)(C), or otherwise under title XIX of the Act, except as 
provided in paragraph (d)(1) of this section.
    (h) Budget period--(1) Applicants and new enrollees. Financial 
eligibility for Medicaid for applicants, and other individuals not 
receiving Medicaid benefits at the point at which eligibility for 
Medicaid is being determined, must be based on current monthly household 
income and family size.
    (2) Current beneficiaries. For individuals who have been determined 
financially-eligible for Medicaid using the MAGI-based methods set forth 
in this section, a State may elect in its State plan to base financial 
eligibility either on current monthly household income and family size 
or income based on projected annual household income and family size for 
the remainder of the current calendar year.
    (3) In determining current monthly or projected annual household 
income and family size under paragraphs (h)(1) or (h)(2) of this 
section, the agency

[[Page 179]]

may adopt a reasonable method to include a prorated portion of 
reasonably predictable future income, to account for a reasonably 
predictable increase or decrease in future income, or both, as evidenced 
by a signed contract for employment, a clear history of predictable 
fluctuations in income, or other clear indicia of such future changes in 
income. Such future increase or decrease in income or family size must 
be verified in the same manner as other income and eligibility factors, 
in accordance with the income and eligibility verification requirements 
atSec. 435.940 throughSec. 435.965, including by self-attestation if 
reasonably compatible with other electronic data obtained by the agency 
in accordance with such sections.
    (i) If the household income of an individual determined in 
accordance with this section results in financial ineligibility for 
Medicaid and the household income of such individual determined in 
accordance with 26 CFR 1.36B-1(e) is below 100 percent FPL, Medicaid 
financial eligibility will be determined in accordance with 26 CFR 
1.36B-1(e).
    (j) Eligibility Groups for which MAGI-based methods do not apply. 
The financial methodologies described in this section are not applied in 
determining the Medicaid eligibility of individuals described in this 
paragraph. The agency must use the financial methods described inSec. 
435.601 andSec. 435.602 of this subpart.
    (1) Individuals whose eligibility for Medicaid does not require a 
determination of income by the agency, including, but not limited to, 
individuals receiving Supplemental Security Income (SSI) eligible for 
Medicaid underSec. 435.120 of this part, individuals deemed to be 
receiving SSI and eligible for Medicaid underSec. 435.135,Sec. 
435.137 orSec. 435.138 of this part and individuals for whom the State 
relies on a finding of income made by an Express Lane agency, in 
accordance with section 1902(e)(13) of the Act.
    (2) Individuals who are age 65 or older when age is a condition of 
eligibility.
    (3) Individuals whose eligibility is being determined on the basis 
of being blind or disabled, or on the basis of being treated as being 
blind or disabled, including, but not limited to, individuals eligible 
underSec. 435.121,Sec. 435.232 orSec. 435.234 of this part or 
under section 1902(e)(3) of the Act, but only for the purpose of 
determining eligibility on such basis.
    (4) Individuals who request coverage for long-term services and 
supports for the purpose of being evaluated for an eligibility group 
under which long-term services and supports are covered. ``Long-term 
services and supports'' include nursing facility services, a level of 
care in any institution equivalent to nursing facility services; home 
and community-based services furnished under a waiver or State plan 
under sections 1915 or 1115 of the Act; home health services as 
described in sections 1905(a)(7) of the Act and personal care services 
described in sections 1905(a)(24) of the Act.
    (5) Individuals who are being evaluated for eligibility for Medicare 
cost sharing assistance under section 1902(a)(10)(E) of the Act, but 
only for purposes of determining eligibility for such assistance.
    (6) Individuals who are being evaluated for coverage as medically 
needy under subparts D and I of this part, but only for the purpose of 
determining eligibility on such basis.

[77 FR 17206, Mar. 23, 2012, as amended at 77 FR 42302, July 15, 2012]



Sec.  435.604  [Reserved]



Sec.  435.606  [Reserved]



Sec.  435.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and beneficiaries to take all necessary steps to obtain any 
annuities, pensions, retirement, and disability benefits to which they 
are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, retirement and disability benefits include, 
but are not limited to, veterans' compensation and pensions, OASDI 
benefits, railroad retirement benefits, and unemployment compensation.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4931, Jan. 19, 1993]

[[Page 180]]



Sec.  435.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and beneficiaries to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902 (1)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and
    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for the 
assignment of rights to medical support and other payments and 
cooperation in obtaining medical support and payments are effective for 
medical assistance furnished on or after October 1, 1984. The 
requirement for cooperation in identifying and providing information for 
pursuing liable third parties is effective for medical assistance 
furnished on or after July 1, 1988.

[55 FR 48609, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993. 
Redesignated at 58 FR 4931, Jan. 19, 1993]



Sec.  435.622  Individuals in institutions who are eligible under
a special income level.

    (a) If an agency, underSec. 435.231, provides Medicaid to 
individuals in medical institutions, nursing facilities, and 
intermediate care facilities for Individuals with Intellectual 
Disabilities who would not be eligible for SSI or State supplements if 
they were not institutionalized, the agency must use income standards 
based on the greater need for financial assistance that the individuals 
would have if they were not in the institution. The standards may vary 
by the level of institutional care needed by the individual (hospital, 
nursing facility, or intermediate level care for individuals with 
intellectual disabilities), or by other factors related to individual 
needs. (SeeSec. 435.1005 for FFP limits on income standards 
established under this section.)
    (b) In determining the eligibility of individuals under the income 
standards established under this section, the agency must not take into 
account income that would be disregarded in determining eligibility for 
SSI or for an optional State supplement.
    (c) The agency must apply the income standards established under 
this section effective with the first day of a period of not less than 
30 consecutive days of institutionalization.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
53 FR 3595, Feb. 8, 1988. Redesignated and amended at 58 FR 4932, Jan. 
19, 1993]



Sec.  435.631  General requirements for determining income eligibility
in States using more restrictive requirements for Medicaid than SSI.

    (a) Income eligibility methods. In determining income eligibility of 
aged, blind, and disabled individuals in a State using more restrictive 
eligibility requirements than SSI, the agency must use the methods for 
treating income elected under Sec.Sec. 435.121 and 435.230, under 
Sec.  435.601. The methods used must be comparable for all individuals 
within each category of individuals underSec. 435.121 and each 
category of individuals within each optional categorically needy group 
included underSec. 435.230 and for each category of individuals under 
the medically needy option described underSec. 435.800.
    (b) Categorically needy versus medically needy eligibility. (1) 
Individuals who have income equal to, or below, the categorically needy 
income standards described in Sec.Sec. 435.121 and 435.230 are 
categorically needy in States that include the medically needy under 
their plans.

[[Page 181]]

    (2) Categorically needy eligibility in States that do not include 
the medically needy is determined in accordance with the provisions of 
Sec.  435.121 (e)(4) and (e)(5).

[58 FR 4932, Jan. 19, 1993]



Sec.  435.640  Protected Medicaid eligibility for individuals eligible
in December 1973.

    In determining whether individuals continue to meet the income 
requirements used in December 1973, for purposes of determining 
eligibility under Sec.Sec. 435.131, 435.132, and 435.133, the agency 
must deduct increased OASDI payments to the same extent that these 
deductions were in effect in December 1973. These deductions are 
required by section 306 of the Social Security Amendments of 1972 (Pub. 
L. 92-603) and section 1007 of Pub. L. 91-172 (enacted Dec. 30, 1969), 
modified by section 304 of Pub. L. 92-603.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4932, Jan. 19, 1993]



   Subpart H_Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy



Sec.  435.700  Scope.

    This subpart prescribes specific financial requirements for 
determining the post-eligibility treatment of income of categorically 
needy individuals, including requirements for applying patient income to 
the cost of care.

[58 FR 4931, Jan. 19, 1993]



Sec.  435.725  Post-eligibility treatment of income of institutionalized
individuals in SSI States: Application of patient income to the 
cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income,
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities.
    (1) Individuals receiving cash assistance under SSI or AFDC who are 
eligible for Medicaid underSec. 435.110 orSec. 435.120.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid underSec. 435.211.
    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, underSec. 435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. In reducing its payment to the institution, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income, as determined under paragraph (e) of 
this section. Income that was disregarded in determining eligibility 
must be considered in this process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own

[[Page 182]]

home, if the agency provides Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement beneficiaries 
underSec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established underSec. 435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established underSec. 
435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (3) For single individuals and couples, an amount (in addition to 
the personal needs allowance) for maintenance of the individual's or 
couple's home if--
    (i) The amount is deducted for not more than a 6-month period; and
    (ii) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project monthly income for a prospective period not to exceed 6 months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and on medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency

[[Page 183]]

must reconcile estimates with incurred medical expenses.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
48 FR 5735, Feb. 8, 1983; 53 FR 3595, Feb. 8, 1988; 55 FR 33705, Aug. 
17, 1990; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]



Sec.  435.726  Post-eligibility treatment of income of individuals
receiving home and community-based services furnished under a waiver:
Application of patient income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid underSec. 435.217 and are receiving home and community-based 
services furnished under a waiver of Medicaid requirements specified in 
part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.
    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the highest 
of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home, if the agency provides 
Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement beneficiaries 
underSec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec.Sec. 435.811 and 435.814, if the agency 
provides Medicaid under the medically needy coverage option.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's AFDC plan or 
the medically needy income standard established underSec. 435.811 for 
a family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.

[46 FR 48539, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37715, July 
25, 1994]



Sec.  435.733  Post-eligibility treatment of income of institutionalized
individuals in States using more restrictive requirements than SSI:
Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.

[[Page 184]]

    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities:
    (1) Individuals receiving cash assistance under AFDC who are 
eligible for Medicaid underSec. 435.110 and individuals eligible under 
Sec.  435.121.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid underSec. 435.211.
    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, underSec. 435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the higher of--
    (i) The more restrictive income standard established underSec. 
435.121; or
    (ii) The amount of the medically needy income standard for one 
person established underSec. 435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established underSec. 
435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.

[[Page 185]]

    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses that may be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24884, Apr. 11, 1980, as amended at 48 FR 5735, Feb. 8, 1983; 53 
FR 3596, Feb. 8, 1988; 55 FR 33705, Aug. 17, 1990; 56 FR 8850, 8854, 
Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]



Sec.  435.735  Post-eligibility treatment of income and resources
of individuals receiving home and community-based services furnished
under a waiver: Application of patient income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid underSec. 435.217, and are eligible for home and community-
based services furnished under a waiver of State plan requirements 
specified in part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.
    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the higher 
of--
    (i) The more restrictive income standard established underSec. 
435.121; or
    (ii) The medically needy standard for an individual.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established underSec. 
435.811 for a family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the

[[Page 186]]

agency may establish on amounts of these expenses.

[46 FR 48540, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37716, July 
25, 1994]



     Subpart I_Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy



Sec.  435.800  Scope.

    This subpart prescribes specific financial requirements for 
determining the eligibility of medically needy individuals under subpart 
D of this part.

[58 FR 4932, Jan. 19, 1993]

                     Medically Needy Income Standard



Sec.  435.811  Medically needy income standard: General requirements.

    (a) Except as provided in paragraph (d)(2) of this section, to 
determine eligibility of medically needy individuals, a Medicaid agency 
must use a single income standard under this subpart that meets the 
requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. Subject to the limitations specified in 
paragraph (e) of this section. The standard may not diminish by an 
increase in the number of persons in the assistance unit. For example, 
if the income level in the standard for an assistance unit of two is set 
at $400, the income level in the standard for an assistance unit of 
three may not be less than $400.
    (c) In States that do not use more restrictive requirements than 
SSI, the income standard must be set at an amount that is no lower than 
the lowest income standards used under the cash assistance programs that 
are related to the State's covered medically needy eligibility group or 
groups of individuals underSec. 435.301. The amount of the income 
standard is subject to the limitations specified in paragraph (e) of 
this section.
    (d) In States that use more restrictive requirements for aged, 
blind, and disabled individuals than SSI:
    (1) For all individuals except aged, blind, and disabled 
individuals, the income standard must be set in accordance with 
paragraph (c) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy income standard that is more restrictive than the 
single income standard set under paragraph (c) of this section. However, 
the amount of the more restrictive separate standard for aged, blind, or 
disabled individuals must be no lower than the higher of the lowest 
categorically needy income standard currently applied under the State's 
more restrictive criteria underSec. 435.121 or the medically needy 
income standard in effect under the State's Medicaid plan on January 1, 
1972. The amount of the income standard is subject to the limitations 
specified in paragraph (e) of this section.
    (e) The income standards specified in paragraphs (c) and (d) of this 
section must not exceed the maximum dollar amount of income allowed for 
purposes of FFP underSec. 435.1007.
    (f) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4932, Jan. 19, 1993]



Sec.  435.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

                   Medically Needy Income Eligibility



Sec.  435.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency may include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec.  435.915. The budget period can begin no earlier than the first 
month in the retroactive period in which the individual received

[[Page 187]]

covered services. This provision applies to all medically needy 
individuals except in groups for whom criteria more restrictive than 
that used in the SSI program apply.
    (3) If the agency elects to begin the first budget period for the 
medically needy in any month of the 3-month period prior to the date of 
the application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must deduct the 
following amounts from income to determine the individual's countable 
income.
    (1) For individuals under age 21 and caretaker relatives, the agency 
must deduct amounts that would be deducted in determining eligibility 
under the State's AFDC plan.
    (2) For aged, blind, or disabled individuals in States covering all 
SSI beneficiaries, the agency must deduct amounts that would be deducted 
in determining eligibility under SSI. However, the agency must also 
deduct the highest amounts from income that would be deducted in 
determining eligibility for optional State supplements if these 
supplements are paid to all individuals who are receiving SSI or would 
be eligible for SSI except for their income.
    (3) For aged, blind, or disabled individuals in States using income 
requirements more restrictive than SSI, the agency must deduct amounts 
that are no more restrictive than those used under the Medicaid plan on 
January 1, 1972 and no more liberal than those used in determining 
eligibility under SSI or an optional State supplement. However, the 
amounts must be at least the same as those that would be deducted in 
determining eligibility, underSec. 435.121, of the categorically 
needy.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard underSec. 435.814, the individual or 
family is eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f), and (g) of this section and deduct those expenses 
in accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g), in determining incurred medical expenses to be deducted 
from income, the agency must include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed underSec. 447.51 orSec. 447.53 of 
this subchapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration, or scope of services.
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g), in determining incurred medical expenses to be deducted 
from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or unpaid, to the 
extent that the expenses have not been deducted previously in 
establishing eligibility;
    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent

[[Page 188]]

that the expenses have not been deducted previously in establishing 
eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such budget period and any of the 3 preceding months, whether paid or 
unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income in 
establishing eligibility, to the extent that such expenses are unpaid 
and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses to be deducted from 
income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the State and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application (except States using more restrictive 
eligibility criteria under the option in section 1902(f) of the Act must 
deduct incurred expenses regardless of when the expenses were incurred); 
and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section in the order prescribed under one of the following three 
options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of expense or service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed limitations on amounts, duration, 
or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance or 
deductible charges, the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.
    (i) Eligibility based on incurred medical expenses. (1) Whether a 
State elects

[[Page 189]]

partial or full month coverage, an individual who is expected to 
contribute a portion of his or her income toward the costs of 
institutional care or home and community-based services under Sec.Sec. 
435.725, 435.726, 435.733, 435.735 or 435.832 is eligible on the first 
day of the applicable budget (spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses under 
Sec.Sec. 435.725, 435.726, 435.733, 435.735 or 435.832 greater than 
the individual's contributable income determined under these sections.
    (2) At the end of the prospective period specified in paragraphs 
(f)(2) and (f)(3) of this section, and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, in 
States that elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, in 
States that elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. To the extent necessary to prevent the transfer of an 
individual's spenddown liability to the Medicaid program, States must 
reduce the amount of provider charges that would otherwise be 
reimbursable under Medicaid.

[59 FR 1672, Jan. 12, 1994, as amended at 77 FR 17208, Mar. 23, 2012]



Sec.  435.832  Post-eligibility treatment of income of institutionalized
individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
diability.
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--

[[Page 190]]

    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement beneficiaries 
underSec. 435.230; or
    (iii) The amount of the medically needy income standard for one 
person established underSec. 435.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (B) The medically needy income standard established underSec. 
435.811.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24886, Apr. 11, 1980, as amended at 46 FR 47988, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3596, Feb. 8, 1988; 53 FR 5344, Feb. 23, 
1988; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4933, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec.  435.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, a 
Medicaid agency must use a single resource standard that meets the 
requirements of this section.
    (b) In States that do not use more restrictive criteria than SSI for 
aged, blind, and disabled individuals, the resource standard must be 
established at an amount that is no lower than the lowest resource 
standard used under

[[Page 191]]

the cash assistance programs that relate to the State's covered 
medically needy eligibility group or groups of individuals underSec. 
435.301.
    (c) In States using more restrictive requirements than SSI:
    (1) For all individuals except aged, blind, and disabled 
individuals, the resource standard must be set in accordance with 
paragraph (b) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy resource standard that is more restrictive than 
the single resource standard set under paragraph (b) of this section. 
However, the amount of the more restrictive separate standard for aged, 
blind, or disabled individuals must be no lower than the higher of the 
lowest categorically needy resource standard currently applied under the 
State's more restrictive criteria underSec. 435.121 or the medically 
needy resource standard in effect under the State's Medicaid plan on 
January 1, 1972.
    (d) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource standard for an assistance 
unit of three may not be less than that set for a unit of two.

[58 FR 4933, Jan. 19, 1993]



Sec.  435.843  Medically needy resource standard: State plan 
requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec.  435.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must:
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives inSec. 435.602.
    (b) Deduct the amounts that would be deducted in determining 
resource eligibility for the medically needy group as provided for in 
Sec.  435.601 or under the criteria of States using more restrictive 
criteria than SSI as provided for inSec. 435.121. In determining the 
amount of an individual's resources for Medicaid eligibility, States 
must count amounts of resources that otherwise would not be counted 
under the conditional eligibility provisions of the SSI or AFDC 
programs.
    (c) Apply the resource standard specified underSec. 435.840.

[58 FR 4933, Jan. 19, 1993]



Sec.Sec. 435.850-435.852  [Reserved]



      Subpart J_Eligibility in the States and District of Columbia

    Source: 44 FR 17937, Mar. 23, 1979, unless otherwise noted.



Sec.  435.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.

                    General Methods of Administration



Sec.  435.901  Consistency with objectives and statutes.

    The Medicaid agency's standards and methods for determining 
eligibility must be consistent with the objectives of the program and 
with the rights of individuals under the United States Constitution, the 
Social Security Act, title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act of 1973, and all other relevant provisions 
of Federal and State laws.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec.  435.902  Simplicity of administration.

    The agency's policies and procedures must ensure that eligibility is 
determined in a manner consistent with simplicity of administration and 
the best interests of the applicant or beneficiary.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]

[[Page 192]]



Sec.  435.903  Adherence of local agencies to State plan requirements.

    The agency must--
    (a) Have methods to keep itself currently informed of the adherence 
of local agencies to the State plan provisions and the agency's 
procedures for determining eligibility; and
    (b) Take corrective action to ensure their adherence.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec.  435.904  Establishment of outstation locations to process
applications for certain low-income eligibility groups.

    (a) State plan requirements. The Medicaid State plan must specify 
that the requirements of this section are met.
    (b) Opportunity to apply. The agency must provide an opportunity for 
the following groups of low-income pregnant women, infants, and children 
under age 19 to apply for Medicaid at outstation locations other than 
AFDC offices:
    (1) The groups of pregnant women or infants with incomes up to 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(IV) of the Act;
    (2) The group of children age 1 up to age 6 with incomes at 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(VI) of the Act;
    (3) The group of children age 6 up to age 19 born after September 
30, 1983, with incomes up to 100 percent of the Federal poverty level as 
specified under section 1902(a)(10)(A)(i)(VII) of the Act; and
    (4) The groups of pregnant women or infants, children age 1 up to 
age 6, and children age 6 up to age 19, who are not eligible as a 
mandatory group, with incomes up to 185 percent of the Federal poverty 
level as specified under section 1902(a)(10)(A)(ii)(IX) of the Act.
    (c) Outstation locations: general requirements. (1) The agency must 
establish either--
    (i) Outstation locations at each disproportionate share hospital, as 
defined in section 1923(a)(1)(A) of the Act, and each Federally-
qualified health center, as defined in section 1905(1)(2)(B) of the Act, 
participating in the Medicaid program and providing services to 
Medicaid-eligible pregnant women and children; or
    (ii) Other outstation locations, which include at least some, 
disproportionate share hospitals and federally-qualified health centers, 
as specified under an alternative State plan that is submitted to and 
approved by CMS if the following conditions are met:
    (A) The State must demonstrate that the alternative plan for 
outstationing is equally effective as, or more effective than, a plan 
that would meet the requirements of paragraph (c)(1)(i) of this section 
in enabling the individuals described in paragraph (b) of this section 
to apply for and receive Medicaid; and
    (B) The State must provide assurances that the level of staffing and 
funding committed by the State under the alternative plan equals or 
exceeds the level of staffing and funding under a plan that would meet 
the requirements of establishing the outstation locations at the sites 
specified in paragraph (c)(1)(i) of this section.
    (2) The agency must establish outstation locations at Indian health 
clinics operated by a tribe or tribal organization as these clinics are 
specifically included in the definition of Federally-qualified health 
centers under section 1905(l)(2)(B) of the Act and are also included in 
the definition of rural health clinics under part 491, subpart A of this 
chapter.
    (3) The agency may establish additional outstation locations at any 
other site where potentially eligible pregnant women or children receive 
services--for example, at school-linked service centers and family 
support centers. These additional sites may also include sites other 
than the main outstation location of those Federally-qualified health 
centers or disproportionate share hospitals providing services to 
Medicaid-eligible pregnant women and to children and that operate more 
than one site.
    (4) The agency may, at its option, enter into reciprocal agreements 
with neighboring States to ensure that the groups described in paragraph 
(b) of this section who customarily receive services in a neighboring 
State have the opportunity to apply at outstation

[[Page 193]]

locations specified in paragraphs (c)(l) and (2) of this section.
    (d) Outstation functions. (1) The agency must provide for the 
receipt and initial processing of Medicaid applications from the 
designated eligibility groups at each outstation location.
    (2) ``Initial processing'' means taking applications, assisting 
applicants in completing the application, providing information and 
referrals, obtaining required documentation to complete processing of 
the application, assuring that the information contained on the 
application form is complete, and conducting any necessary interviews. 
It does not include evaluating the information contained on the 
application and the supporting documentation nor making a determination 
of eligibility or ineligibility.
    (3) The agency may, at its option, allow appropriate State 
eligibility workers assigned to outstation locations to evaluate the 
information contained on the application and the supporting 
documentation and make a determination of eligibility if the workers are 
authorized to determine eligibility for the agency which determines 
Medicaid eligibility underSec. 431.10 of this subchapter.
    (e) Staffing. (1) Except for outstation locations that are 
infrequently used by the low-income eligibility groups, the State agency 
must have staff available at each outstation location during the regular 
office operating hours of the State Medicaid agency to accept 
applications and to assist applicants with the application process.
    (2) The agency may station staff at one outstation location or 
rotate staff among several locations as workload and staffing 
availability dictate.
    (3) The agency may use State employees, provider or contractor 
employees, or volunteers who have been properly trained to staff 
outstation locations under the following conditions:
    (i) State outstation intake staff may perform all eligibility 
processing functions, including the eligibility determination, if the 
staff is authorized to do so at the regular Medicaid intake office.
    (ii) Provider or contractor employees and volunteers may perform 
only initial processing functions as defined in paragraph (d)(2) of this 
section.
    (4) Provider and contractor employees and volunteers are subject to 
the confidentiality of information rules specified in part 431, subpart 
F, of this subchapter, to the prohibition against reassignment of 
provider claims specified inSec. 447.10 of this subchapter, and to all 
other State or Federal laws concerning conflicts of interest.
    (5) At locations that are infrequently used by the designated low-
income eligibility groups, the State agency may use volunteers, provider 
or contractor employees, or its own eligibility staff, or telephone 
assistance.
    (i) The agency must display a notice in a prominent place at the 
outstation location advising potential applicants of when outstation 
intake workers will be available.
    (ii) The notice must include a telephone number that applicants may 
call for assistance.
    (iii) The agency must comply with Federal and State laws and 
regulations governing the provision of adequate notice to persons who 
are blind or deaf or who are unable to read or understand the English 
language.

[59 FR 48809, Sept. 23, 1994]

                              Applications



Sec.  435.905  Availability of program information.

    (a) The agency must furnish the following information in electronic 
and paper formats (including through the Internet Web site described in 
Sec.  435.1200(f) of this part), and orally as appropriate, to all 
applicants and other individuals who request it:
    (1) The eligibility requirements;
    (2) Available Medicaid services; and
    (3) The rights and responsibilities of applicants and beneficiaries.
    (b) Such information must be provided to applicants and 
beneficiaries in plain language and in a manner that is accessible and 
timely to--
    (1) Individuals who are limited English proficient through the 
provision of language services at no cost to the individual; and
    (2) Individuals living with disabilities through the provision of 
auxiliary aids

[[Page 194]]

and services at no cost to the individual in accordance with the 
Americans with Disabilities Act and section 504 of the Rehabilitation 
Act.

[77 FR 17208, Mar. 23, 2012]



Sec.  435.906  Opportunity to apply.

    The agency must afford an individual wishing to do so the 
opportunity to apply for Medicaid without delay.



Sec.  435.907  Application.

    (a) Basis and implementation. In accordance with section 
1413(b)(1)(A) of the Affordable Care Act, the agency must accept an 
application from the applicant, an adult who is in the applicant's 
household, as defined inSec. 435.603(f), or family, as defined in 
section 36B(d)(1) of the Code, an authorized representative, or if the 
applicant is a minor or incapacitated, someone acting responsibly for 
the applicant, and any documentation required to establish eligibility--
    (1) Via the internet Web site described inSec. 435.1200(f) of this 
part;
    (2) By telephone;
    (3) Via mail;
    (4) In person; and
    (5) Through other commonly available electronic means.
    (b) The application must be--
    (1) The single, streamlined application for all insurance 
affordability programs developed by the Secretary; or
    (2) An alternative single, streamlined application for all insurance 
affordability programs, which may be no more burdensome on the applicant 
than the application described in paragraph (b)(1) of this section, 
approved by the Secretary.
    (c) For individuals applying, or who may be eligible, for assistance 
on a basis other than the applicable MAGI standard in accordance with 
Sec.  435.911(c)(2) of this part, the agency may use either--
    (1) An application described in paragraph (b) of this section and 
supplemental forms to collect additional information needed to determine 
eligibility on such other basis; or
    (2) An application designed specifically to determine eligibility on 
a basis other than the applicable MAGI standard. Such application must 
minimize burden on applicants.
    (3) Any MAGI-exempt applications and supplemental forms in use by 
the agency must be submitted to the Secretary.
    (d) The agency may not require an in-person interview as part of the 
application process for a determination of eligibility using MAGI-based 
income.
    (e) Limits on information. (1) The agency may only require an 
applicant to provide the information necessary to make an eligibility 
determination or for a purpose directly connected to the administration 
of the State plan.
    (2) The agency may request information necessary to determine 
eligibility for other insurance affordability or benefit programs.
    (3) The agency may request a non-applicant's SSN provided that--
    (i) Provision of such SSN is voluntary;
    (ii) Such SSN is used only to determine an applicant's or 
beneficiary's eligibility for Medicaid or other insurance affordability 
program or for a purpose directly connected to the administration of the 
State plan; and
    (iii) At the time such SSN is requested, the agency provides clear 
notice to the individual seeking assistance, or person acting on such 
individual's behalf, that provision of the non-applicant's SSN is 
voluntary and information regarding how the SSN will be used.
    (f) The agency must require that all initial applications are signed 
under penalty of perjury. Electronic, including telephonically recorded, 
signatures and handwritten signatures transmitted via any other 
electronic transmission must be accepted.
    (g) Any application or supplemental form must be accessible to 
persons who are limited English proficient and persons who have 
disabilities, consistent withSec. 435.905(b) of this subpart.
    (h) Reinstatement of withdrawn applications. (1) In the case of 
individuals described in paragraph (h)(2) of this section, the agency 
must reinstate the application submitted by the individual, effective as 
of the date the application was first received by the Exchange.
    (2) Individuals described in this paragraph are individuals who--

[[Page 195]]

    (i) Submitted an application described in paragraph (b) of this 
section to the Exchange;
    (ii) Withdrew their application for Medicaid in accordance with 45 
CFR 155.302(b)(4)(A);
    (iii) Are assessed as potentially eligible for Medicaid by the 
Exchange appeals entity.

[77 FR 17208, Mar. 23, 2012, as amended at 77 FR 42302, July 15, 2013]



Sec.  435.908  Assistance with application and renewal.

    (a) The agency must provide assistance to any individual seeking 
help with the application or renewal process in person, over the 
telephone, and online, and in a manner that is accessible to individuals 
with disabilities and those who are limited English proficient, 
consistent withSec. 435.905(b) of this subpart.
    (b) The agency must allow individual(s) of the applicant or 
beneficiary's choice to assist in the application process or during a 
renewal of eligibility.

[77 FR 17208, Mar. 23, 2012, as am nded at 77 FR 42302, July 15, 2013]



Sec.  435.909  Automatic entitlement to Medicaid following a 
determination of eligibility under other programs.

    The agency must not require a separate application for Medicaid from 
an individual, if--
    (a) The individual receives AFDC; or
    (b) The agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act for determining 
Medicaid eligibility; and--
    (1) The individual receives SSI;
    (2) The individual receives a mandatory State supplement under 
either a federally-administered or State-administered program; or
    (3) The individual receives an optional State supplement and the 
agency provides Medicaid to beneficiaries of optional supplements under 
Sec.  435.230.



Sec.  435.910  Use of social security number.

    (a) Except as provided in paragraph (h) of this section, the agency 
must require, as a condition of eligibility, that each individual 
(including children) seeking Medicaid furnish each of his or her Social 
Security numbers (SSN).
    (b) The agency must advise the applicant of--
    (1) [Reserved]
    (2) The statute or other authority under which the agency is 
requesting the applicant's SSN; and
    (3) The uses the agency will make of each SSN, including its use for 
verifying income, eligibility, and amount of medical assistance payments 
under Sec.Sec. 435.940 through 435.960.
    (c)-(d) [Reserved]
    (e) If an applicant cannot recall his SSN or SSNs or has not been 
issued a SSN the agency must--
    (1) Assist the applicant in completing an application for an SSN;
    (2) Obtain evidence required under SSA regulations to establish the 
age, the citizenship or alien status, and the true identity of the 
applicant; and
    (3) Either send the application to SSA or, if there is evidence that 
the applicant has previously been issued a SSN, request SSA to furnish 
the number.
    (f) The agency must not deny or delay services to an otherwise 
eligible individual pending issuance or verification of the individual's 
SSN by SSA or if the individual meets one of the exceptions in paragraph 
(h) of this section.
    (g) The agency must verify the SSN furnished by an applicant or 
beneficiary to insure the SSN was issued to that individual, and to 
determine whether any other SSNs were issued to that individual.
    (h) Exception. (1) The requirement of paragraph (a) of this section 
does not apply and a State may give a Medicaid identification number to 
an individual who--
    (i) Is not eligible to receive an SSN;
    (ii) Does not have an SSN and may only be issued an SSN for a valid 
non-work reason in accordance with 20 CFR 422.104; or
    (iii) Refuses to obtain an SSN because of well-established religious 
objections.
    (2) The identification number may be either an SSN obtained by the 
State on the applicant's behalf or another unique identifier.

[[Page 196]]

    (3) The term well established religious objections means that the 
applicant--
    (i) Is a member of a recognized religious sect or division of the 
sect; and
    (ii) Adheres to the tenets or teachings of the sect or division of 
the sect and for that reason is conscientiously opposed to applying for 
or using a national identification number.
    (4) A State may use the Medicaid identification number established 
by the State to the same extent as an SSN is used for purposes described 
in paragraph (b)(3) of this section.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986; 66 
FR 2667, Jan. 11, 2001; 77 FR 17209, Mar. 23, 2012]

                  Determination of Medicaid Eligibility



Sec.  435.911  Determination of eligibility.

    (a) Statutory basis. This section implements sections 1902(a)(4), 
(a)(8), (a)(10)(A), (a)(19), and (e)(14) and section 1943 of the Act.
    (b)(1) Applicable modified adjusted gross income standard means 133 
percent of the Federal poverty level or, if higher--
    (i) In the case of parents and other caretaker relatives described 
inSec. 435.110(b) of this part, the income standard established in 
accordance withSec. 435.110(c) of this part;
    (ii) In the case of pregnant women, the income standard established 
in accordance withSec. 435.116(c) of this part;
    (iii) In the case of individuals under age 19, the income standard 
established in accordance withSec. 435.118(c) of this part;
    (iv) The income standard established underSec. 435.218(b)(1)(iv) 
of this part, if the State has elected to provide coverage under such 
section and, if applicable, coverage under the State's phase-in plan has 
been implemented for the individual whose eligibility is being 
determined.
    (2) [Reserved]
    (c) For each individual who has submitted an application described 
inSec. 435.907 or whose eligibility is being renewed in accordance 
withSec. 435.916 and who meets the non-financial requirements for 
eligibility (or for whom the agency is providing a reasonable 
opportunity to provide documentation of citizenship or immigration 
status, in accordance with sections 1903(x), 1902(ee) or 1137(d) of the 
Act), the State Medicaid agency must comply with the following--
    (1) The agency must, promptly and without undue delay consistent 
with timeliness standards established underSec. 435.912, furnish 
Medicaid to each such individual who is under age 19, pregnant, or age 
19 or older and under age 65 and not entitled to or enrolled for 
Medicare benefits under part A or B of title XVIII of the Act, and whose 
household income is at or below the applicable modified adjusted gross 
income standard.
    (2) For each individual described in paragraph (d) of this section, 
the agency must collect such additional information as may be needed 
consistent withSec. 435.907(c), to determine whether such individual 
is eligible for Medicaid on any basis other than the applicable modified 
adjusted gross income standard, and furnish Medicaid on such basis.
    (3) For individuals not eligible on the basis of the applicable 
modified adjusted gross income standard, the agency must comply with the 
requirements set forth inSec. 435.1200(e) of this part.
    (d) For purposes of paragraph (c)(2) of this section, individuals 
described in this paragraph include:
    (1) Individuals whom the agency identifies, on the basis of 
information contained in an application described inSec. 435.907(b) of 
this part, or renewal form described inSec. 435.916(a)(3) of this 
part, or on the basis of other information available to the State, as 
potentially eligible on a basis other than the applicable MAGI standard;
    (2) Individuals who submit an alternative application described in 
Sec.  435.907(c) of this part; and
    (3) Individuals who otherwise request a determination of eligibility 
on a basis other than the applicable MAGI standard as described inSec. 
435.603(j) of this part.

[77 FR 17209, Mar. 23, 2012]



Sec.  435.912  Timely determination of eligibility.

    (a) The agency must establish time standards for determining 
eligibility

[[Page 197]]

and inform the applicant of what they are. These standards may not 
exceed--
    (1) Ninety days for applicants who apply for Medicaid on the basis 
of disability; and
    (2) Forty-five days for all other applicants.
    (b) The time standards must cover the period from the date of 
application to the date the agency mails notice of its decision to the 
applicant.
    (c) The agency must determine eligibility within the standards 
except in unusual circumstances, for example--
    (1) When the agency cannot reach a decision because the applicant or 
an examining physician delays or fails to take a required action, or
    (2) When there is an administrative or other emergency beyond the 
agency's control.
    (d) The agency must document the reasons for delay in the 
applicant's case record.
    (e) The agency must not use the time standards--
    (1) As a waiting period before determining eligibility; or
    (2) As a reason for denying eligibility (because it has not 
determined eligibility within the time standards).

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
54 FR 50762, Dec. 11, 1989. Redesignated at 77 FR 17209, Mar. 23, 2012]



Sec.  435.913  Notice of agency's decision concerning eligibility.

    The agency must send each applicant a written notice of the agency's 
decision on his application, and, if eligibility is denied, the reasons 
for the action, the specific regulation supporting the action, and an 
explanation of his right to request a hearing. (See subpart E of part 
431 of this subchapter for rules on hearings.)

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986. 
Redesignated at 77 FR 17209, Mar. 23, 2012]



Sec.  435.914  Case documentation.

    (a) The agency must include in each applicant's case record facts to 
support the agency's decision on his application.
    (b) The agency must dispose of each application by a finding of 
eligibility or ineligibility, unless--
    (1) There is an entry in the case record that the applicant 
voluntarily withdrew the application, and that the agency sent a notice 
confirming his decision;
    (2) There is a supporting entry in the case record that the 
applicant has died; or
    (3) There is a supporting entry in the case record that the 
applicant cannot be located.

[44 FR 17937, Mar. 23, 1979. Redesignated at 77 FR 17209, Mar. 23, 2012]



Sec.  435.915  Effective date.

    (a) The agency must make eligibility for Medicaid effective no later 
than the third month before the month of application if the individual--
    (1) Received Medicaid services, at any time during that period, of a 
type covered under the plan; and
    (2) Would have been eligible for Medicaid at the time he received 
the services if he had applied (or someone had applied for him), 
regardless of whether the individual is alive when application for 
Medicaid is made.
    (b) The agency may make eligiblity for Medicaid effective on the 
first day of a month if an individual was eligible at any time during 
that month.
    (c) The State plan must specify the date on which eligibility will 
be made effective.

[44 FR 17937, Mar. 23, 1979. Redesignated at 77 FR 17209, Mar. 23, 2012]

                Redeterminations of Medicaid Eligibility



Sec.  435.916  Periodic redeterminations of Medicaid eligibility.



Sec.  435.916  Periodic renewal of Medicaid eligibility.

    (a) Renewal of individuals whose Medicaid eligibility is based on 
modified adjusted gross income methods (MAGI). (1) Except as provided in 
paragraph (d) of this section, the eligibility of Medicaid beneficiaries 
whose financial eligibility is determined using MAGI-based income must 
be renewed once every 12 months, and no more frequently than once every 
12 months.
    (2) Renewal on basis of information available to agency. The agency 
must make a redetermination of eligibility

[[Page 198]]

without requiring information from the individual if able to do so based 
on reliable information contained in the individual's account or other 
more current information available to the agency, including but not 
limited to information accessed through any data bases accessed by the 
agency underSec. 435.948,Sec. 435.949 andSec. 435.956 of this 
part. If the agency is able to renew eligibility based on such 
information, the agency must, consistent with the requirements of this 
subpart and subpart E of part 431 of this chapter, notify the 
individual--
    (i) Of the eligibility determination, and basis; and
    (ii) That the individual must inform the agency, through any of the 
modes permitted for submission of applications underSec. 435.907(a) of 
this subpart, if any of the information contained in such notice is 
inaccurate, but that the individual is not required to sign and return 
such notice if all information provided on such notice is accurate.
    (3) Use of a pre-populated renewal form. If the agency cannot renew 
eligibility in accordance with paragraph (a)(2) of this section, the 
agency must--
    (i) Provide the individual with--
    (A) A renewal form containing information, as specified by the 
Secretary, available to the agency that is needed to renew eligibility.
    (B) At least 30 days from the date of the renewal form to respond 
and provide any necessary information through any of the modes of 
submission specified inSec. 435.907(a) of this part, and to sign the 
renewal form in a manner consistent withSec. 435.907(f) of the part;
    (C) Notice of the agency's decision concerning the renewal of 
eligibility in accordance with this subpart and subpart E of part 431 of 
this chapter;
    (ii) Verify any information provided by the beneficiary in 
accordance withSec. 435.945 throughSec. 435.956 of this part;
    (iii) Reconsider in a timely manner the eligibility of an individual 
who is terminated for failure to submit the renewal form or necessary 
information, if the individual subsequently submits the renewal form 
within 90 days after the date of termination, or a longer period elected 
by the State, without requiring a new application;
    (iv) Not require an individual to complete an in-person interview as 
part of the renewal process.
    (b) Redetermination of individuals whose Medicaid eligibility is 
determined on a basis other than modified adjusted gross income. The 
agency must redetermine the eligibility of Medicaid beneficiaries 
excepted from modified adjusted gross income underSec. 435.603(j) of 
this part, for circumstances that may change, at least every 12 months. 
The agency must make a redetermination of eligibility in accordance with 
the provisions of paragraph (a)(2) of this section, if sufficient 
information is available to do so. The agency may adopt the procedures 
described atSec. 435.916(a)(3) for individuals whose eligibility 
cannot be renewed in accordance with paragraph (a)(2) of this section.
    (1) The agency may consider blindness as continuing until the 
reviewing physician underSec. 435.531 of this part determines that a 
beneficiary's vision has improved beyond the definition of blindness 
contained in the plan; and
    (2) The agency may consider disability as continuing until the 
review team, underSec. 435.541 of this part, determines that a 
beneficiary's disability no longer meets the definition of disability 
contained in the plan.
    (c) Procedures for reporting changes. The agency must have 
procedures designed to ensure that beneficiaries make timely and 
accurate reports of any change in circumstances that may affect their 
eligibility and that such changes may be reported through any of the 
modes for submission of applications described inSec. 435.907(a) of 
this part.
    (d) Agency action on information about changes. (1) Consistent with 
the requirements ofSec. 435.952 of this part, the agency must promptly 
redetermine eligibility between regular renewals of eligibility 
described in paragraphs (b) and (c) of this section whenever it receives 
information about a change in a beneficiary's circumstances that may 
affect eligibility.
    (i) For renewals of Medicaid beneficiaries whose financial 
eligibility is determined using MAGI-based income, the agency must limit 
any requests for

[[Page 199]]

additional information from the individual to information relating to 
such change in circumstance.
    (ii) If the agency has enough information available to it to renew 
eligibility with respect to all eligibility criteria, the agency may 
begin a new 12-month renewal period under paragraphs (a) or (b) of this 
section.
    (2) If the agency has information about anticipated changes in a 
beneficiary's circumstances that may affect his or her eligibility, it 
must redetermine eligibility at the appropriate time based on such 
changes.
    (e) The agency may request from beneficiaries only the information 
needed to renew eligibility. Requests for non-applicant information must 
be conducted in accordance withSec. 435.907(e) of this part.
    (f) Determination of ineligibility and transmission of data 
pertaining to individuals no longer eligible for Medicaid.
    (1) Prior to making a determination of ineligibility, the agency 
must consider all bases of eligibility, consistent withSec. 435.911 of 
this part.
    (2) For individuals determined ineligible for Medicaid, the agency 
must determine potential eligibility for other insurance affordability 
programs and comply with the procedures set forth inSec. 435.1200(e) 
of this part.
    (g) Any renewal form or notice must be accessible to persons who are 
limited English proficient and persons with disabilities, consistent 
withSec. 435.905(b) of this subpart.

[77 FR 17210, Mar. 23, 2012]



Sec.  435.918  Use of electronic notices.

    (a) Effective no earlier than October 1, 2013 and no later than 
January 1, 2015, the agency must provide individuals with a choice to 
receive notices and information required under this part or subpart E of 
part 431 of this chapter in electronic format or by regular mail and 
must be permitted to change such election.
    (b) If the individual elects to receive communications from the 
agency electronically, the agency must--
    (1) Ensure that the individual's election to receive notices 
electronically is confirmed by regular mail.
    (2) Ensure that the individual is informed of his or her right to 
change such election to receive notices through regular mail.
    (3) Post notices to the individual's electronic account within 1 
business day of notice generation.
    (4) Send an email or other electronic communication alerting the 
individual that a notice has been posted to his or her account. The 
agency may not include confidential information in the email or 
electronic alert.
    (5) Send a notice by regular mail within three business days of the 
date of a failed electronic communication if an electronic communication 
is undeliverable.
    (6) At the individual's request, provide through regular mail any 
notice posted to the individual's electronic account.

[78 FR 42303, July 15, 2013]



Sec.  435.919  Timely and adequate notice concerning adverse actions.

    (a) The agency must give beneficiaries timely and adequate notice of 
proposed action to terminate, discontinue, or suspend their eligibility 
or to reduce or discontinue services they may receive under Medicaid.
    (b) The notice must meet the requirements of subpart E of part 431 
of this subchapter.

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
51 FR 7211, Feb. 28, 1986]



Sec.  435.920  Verification of SSNs.

    (a) In redetermining eligibility, the agency must review case 
records to determine whether they contain the beneficiary's SSN or, in 
the case of families, each family member's SSN.
    (b) If the case record does not contain the required SSNs, the 
agency must require the beneficiary to furnish them and meet other 
requirements ofSec. 435.910.
    (c) For any beneficiary whose SSN was established as part of the 
case record without evidence required under the SSA regulations as to 
age, citizenship, alien status, or true identity, the agency must obtain 
verification of these factors in accordance withSec. 435.910.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]

[[Page 200]]



Sec.  435.923  Authorized Representatives.

    (a)(1) The agency must permit applicants and beneficiaries to 
designate an individual or organization to act responsibly on their 
behalf in assisting with the individual's application and renewal of 
eligibility and other ongoing communications with the agency. Such a 
designation must be in accordance with paragraph (f) of this section, 
including the applicant's signature, and must be permitted at the time 
of application and at other times.
    (2) Authority for an individual or entity to act on behalf of an 
applicant or beneficiary accorded under state law, including but not 
limited to, a court order establishing legal guardianship or a power of 
attorney, must be treated as a written designation by the applicant or 
beneficiary of authorized representation.
    (b) Applicants and beneficiaries may authorize their representatives 
to--
    (1) Sign an application on the applicant's behalf;
    (2) Complete and submit a renewal form;
    (3) Receive copies of the applicant or beneficiary's notices and 
other communications from the agency;
    (4) Act on behalf of the applicant or beneficiary in all other 
matters with the agency.
    (c) The power to act as an authorized representative is valid until 
the applicant or beneficiary modifies the authorization or notifies the 
agency that the representative is no longer authorized to act on his or 
her behalf, or the authorized representative informs the agency that he 
or she no longer is acting in such capacity, or there is a change in the 
legal authority upon which the individual or organization's authority 
was based. Such notice must be in accordance with paragraph (f) of this 
section and should include the applicant or authorized representative's 
signature as appropriate.
    (d) The authorized representative--
    (1) Is responsible for fulfilling all responsibilities encompassed 
within the scope of the authorized representation, as described in 
paragraph (b)(2) of this section, to the same extent as the individual 
he or she represents;
    (2) Must agree to maintain, or be legally bound to maintain, the 
confidentiality of any information regarding the applicant or 
beneficiary provided by the agency.
    (e) The agency must require that, as a condition of serving as an 
authorized representative, a provider or staff member or volunteer of an 
organization must affirm that he or she will adhere to the regulations 
in part 431, subpart F of this chapter and at 45 CFR 155.260(f) 
(relating to confidentiality of information),Sec. 447.10 of this 
chapter (relating to the prohibition against reassignment of provider 
claims as appropriate for a facility or an organization acting on the 
facility's behalf), as well as other relevant State and Federal laws 
concerning conflicts of interest and confidentiality of information.
    (f) For purposes of this section, the agency must accept electronic, 
including telephonically recorded, signatures and handwritten signatures 
transmitted by facsimile or other electronic transmission. Designations 
of authorized representatives must be accepted through all of the 
modalities described inSec. 435.907(a).

[78 FR 42303, July 15, 2013]

                           Furnishing Medicaid



Sec.  435.930  Furnishing Medicaid.

    The agency must--
    (a) Furnish Medicaid promptly to beneficiaries without any delay 
caused by the agency's administrative procedures;
    (b) Continue to furnish Medicaid regularly to all eligible 
individuals until they are found to be ineligible; and
    (c) Make arrangements to assist applicants and beneficiaries to get 
emergency medical care whenever needed, 24 hours a day and 7 days a 
week.

            Income and Eligibility Verification Requirements

    Source: Sections 435.940 through 935.965 appear at 51 FR 7211, Feb. 
28, 1986, unless otherwise noted.



Sec.  435.940  Basis and scope.

    The income and eligibility verification requirements set forth at 
Sec.  435.940 throughSec. 435.960 of this subpart are based on 
sections 1137, 1902(a)(4), 1902(a)(19), 1903(r)(3) and 1943(b)(3) of

[[Page 201]]

the Act and section 1413 of the Affordable Care Act. Nothing in the 
regulations in this subpart should be construed as limiting the State's 
program integrity measures or affecting the State's obligation to ensure 
that only eligible individuals receive benefits, consistent with parts 
431 and 455 of this subchapter, or its obligation to provide for methods 
of administration that are in the best interest of applicants and 
beneficiaries and are necessary for the proper and efficient operation 
of the plan, consistent withSec. 431.15 of this subchapter and section 
1902(a)(19) of the Act.

[77 FR 17211, Mar. 23, 2012]



Sec.  435.945  General requirements.

    (a) Except where the law requires other procedures (such as for 
citizenship and immigration status information), the agency may accept 
attestation of information needed to determine the eligibility of an 
individual for Medicaid (either self-attestation by the individual or 
attestation by an adult who is in the applicant's household, as defined 
inSec. 435.603(f) of this part, or family, as defined in section 
36B(d)(1) of the Internal Revenue Code, an authorized representative, 
or, if the individual is a minor or incapacitated, someone acting 
responsibly for the individual) without requiring further information 
(including documentation) from the individual.
    (b) The agency must request and use information relevant to 
verifying an individual's eligibility for Medicaid in accordance with 
Sec.  435.948 throughSec. 435.956 of this subpart.
    (c) The agency must furnish, in a timely manner, income and 
eligibility information, subject to regulations at part 431 subpart F of 
this chapter, needed for verifying eligibility to the following 
programs:
    (1) To other agencies in the State and other States and to the 
Federal programs both listed inSec. 435.948(a) of this subpart and 
identified in section 1137(b) of the Act;
    (2) Other insurance affordability programs;
    (3) The child support enforcement program under part D of title IV 
of the Act; and
    (4) SSA for OASDI under title II and for SSI benefits under title 
XVI of the Act.
    (d) All State eligibility determination systems must conduct data 
matching through the Public Assistance Reporting Information System 
(PARIS).
    (e) The agency must, as required under section 1137(a)(7) of the 
Act, and upon request, reimburse another agency listed inSec. 
435.948(a) of this subpart or paragraph (c) of this section for 
reasonable costs incurred in furnishing information, including new 
developmental costs.
    (f) Prior to requesting information for an applicant or beneficiary 
from another agency or program under this subpart, the agency must 
inform the individual that the agency will obtain and use information 
available to it under this subpart to verify income and eligibility or 
for other purposes directly connected to the administration of the State 
plan.
    (g) Consistent withSec. 431.16 of this subchapter, the agency must 
report information as prescribed by the Secretary for purposes of 
determining compliance withSec. 431.305 of this subchapter, subpart P 
of part 431,Sec. 435.910,Sec. 435.913, andSec. 435.940 through 
Sec.  435.965 of this subpart and of evaluating the effectiveness of the 
income and eligibility verification system.
    (h) Information exchanged electronically between the State Medicaid 
agency and any other agency or program must be sent and received via 
secure electronic interfaces as defined inSec. 435.4 of this part.
    (i) The agency must execute written agreements with other agencies 
before releasing data to, or requesting data from, those agencies. Such 
agreements must provide for appropriate safeguards limiting the use and 
disclosure of information as required by Federal or State law or 
regulations.
    (j) Verification plan. The agency must develop, and update as 
modified, and submit to the Secretary, upon request, a verification plan 
describing the verification policies and procedures adopted by the State 
agency to implement the provisions set forth inSec. 435.940 through 
Sec.  435.956 of this subpart

[[Page 202]]

in a format and manner prescribed by the Secretary.
    (k) Flexibility in information collection and verification. Subject 
to approval by the Secretary, the agency may request and use information 
from a source or sources alternative to those listed inSec. 435.948(a) 
of this subpart, or through a mechanism other than the electronic 
service described inSec. 435.949(a) of this subpart, provided that 
such alternative source or mechanism will reduce the administrative 
costs and burdens on individuals and States while maximizing accuracy, 
minimizing delay, meeting applicable requirements relating to the 
confidentiality, disclosure, maintenance, or use of information, and 
promoting coordination with other insurance affordability programs.

[77 FR 17211, Mar. 23, 2012



Sec.  435.948  Verifying financial information.

    (a) The agency must in accordance with this section request the 
following information relating to financial eligibility from other 
agencies in the State and other States and Federal programs to the 
extent the agency determines such information is useful to verifying the 
financial eligibility of an individual:
    (1) Information related to wages, net earnings from self-employment, 
unearned income and resources from the State Wage Information Collection 
Agency (SWICA), the Internal Revenue Service (IRS), the Social Security 
Administration (SSA), the agencies administering the State unemployment 
compensation laws, the State-administered supplementary payment programs 
under section 1616(a) of the Act, and any State program administered 
under a plan approved under Titles I, X, XIV, or XVI of the Act; and
    (2) Information related to eligibility or enrollment from the 
Supplemental Nutrition Assistance Program, the State program funded 
under part A of title IV of the Act, and other insurance affordability 
programs.
    (b) To the extent that the information identified in paragraph (a) 
of this section is available through the electronic service established 
in accordance withSec. 435.949 of this subpart, the agency must obtain 
the information through such service.
    (c) The agency must request the information by SSN, or if an SSN is 
not available, using other personally identifying information in the 
individual's account, if possible.

[77 FR 17211, Mar. 23, 2012]



Sec.  435.949  Verification of information through an electronic
service.

    (a) The Secretary will establish an electronic service through which 
States may verify certain information with, or obtain such information 
from, Federal agencies and other data sources, including SSA, the 
Department of Treasury, and the Department of Homeland Security.
    (b) To the extent that information related to eligibility for 
Medicaid is available through the electronic service established by the 
Secretary, States must obtain the information through such service, 
subject to the requirements in subpart C of part 433 of this chapter, 
except as provided for inSec. 435.945(k) of this subpart.

[77 FR 17212, Mar. 23, 2012]



Sec.  435.952  Use of information and requests of additional 
information from individuals.

    (a) The agency must promptly evaluate information received or 
obtained by it in accordance with regulations underSec. 435.940 
throughSec. 435.960 of this subpart to determine whether such 
information may affect the eligibility of an individual or the benefits 
to which he or she is entitled.
    (b) If information provided by or on behalf of an individual (on the 
application or renewal form or otherwise) is reasonably compatible with 
information obtained by the agency in accordance withSec. 435.948, 
Sec.  435.949 orSec. 435.956 of this subpart, the agency must 
determine or renew eligibility based on such information.
    (c) An individual must not be required to provide additional 
information or documentation unless information needed by the agency in 
accordance withSec. 435.948,Sec. 435.949 orSec. 435.956 of this 
subpart cannot be obtained electronically or the information obtained

[[Page 203]]

electronically is not reasonably compatible, as provided in the 
verification plan described inSec. 435.945(j) with information 
provided by or on behalf of the individual.
    (1) Income information obtained through an electronic data match 
shall be considered reasonably compatible with income information 
provided by or on behalf of an individual if both are either above or at 
or below the applicable income standard or other relevant income 
threshold.
    (2) If information provided by or on behalf of an individual is not 
reasonably compatible with information obtained through an electronic 
data match, the agency must seek additional information from the 
individual, including--
    (i) A statement which reasonably explains the discrepancy; or
    (ii) Other information (which may include documentation), provided 
that documentation from the individual is permitted only to the extent 
electronic data are not available and establishing a data match would 
not be effective, considering such factors as the administrative costs 
associated with establishing and using the data match compared with the 
administrative costs associated with relying on paper documentation, and 
the impact on program integrity in terms of the potential for ineligible 
individuals to be approved as well as for eligible individuals to be 
denied coverage;
    (iii) The agency must provide the individual a reasonable period to 
furnish any additional information required under paragraph (c) of this 
section.
    (d) The agency may not deny or terminate eligibility or reduce 
benefits for any individual on the basis of information received in 
accordance with regulations underSec. 435.940 throughSec. 435.960 of 
this subpart unless the agency has sought additional information from 
the individual in accordance with paragraph (c) of this section, and 
provided proper notice and hearing rights to the individual in 
accordance with this subpart and subpart E of part 431.

[77 FR 17212, Mar. 23, 2012]



Sec.  435.955  Additional requirements regarding information released
by a Federal agency.

    (a) Unless waived under paragraph (d) of this section, based on 
information received from a computerized data match in which information 
on an individual is provided to the agency by a Federal agency, the 
agency may not terminate, deny, suspend, or reduce medical assistance to 
that individual until it has taken appropriate steps to verify the 
information independently. The agency must independently verify 
information relating to--
    (1) The amount of the income and resource that generated the income 
involved;
    (2) Whether the applicant or beneficiary actually has (or had) 
access to the resource or income (or both) for his or her own use;
    (3) The period or periods when the individual actually has (or had) 
access to the resource or income or both.
    (b) The agency must verify the information by either
    (1) Requesting the entity from which the information originally came 
to verify the fact and amount of income or resource; or
    (2) Sending the applicant or beneficiary a letter informing that 
individual of the information received and asking him or her to respond 
within a specified period. The letter must clearly explain the 
information the agency has and its possible relevance to the 
individual's past or future eligibility, and be as neutral in tone as 
possible.
    (c)(1) If the original source of the income or resource or the 
applicant or beneficiary verifies the information, and the agency 
intends to reduce, suspend, terminate or deny medical assistance based 
on the information, the agency must send the applicant or beneficiary a 
notice of the action to be taken and include information on the right to 
appeal and opportunity for a hearing under Sec.Sec. 431.200 through 
431.246 of this chapter (see alsoSec. 435.912 andSec. 435.919).
    (2) If the applicant or beneficiary fails to respond after 
reasonable attempts to contact him or her, the agency must proceed to 
deny, terminate, reduce or suspend medical assistance

[[Page 204]]

based on the applicant's or beneficiary's failure to cooperate.
    (3) If the applicant or beneficiary disputes the information, the 
agency must obtain evidence (from the source of the data, applicant, 
beneficiary, or otherwise) to substantiate any negative case action it 
may take.
    (d) The independent verification requirement concerning a category 
of data received from a Federal benefit agency may be waived if the 
Federal agency's Data Integrity Board approves the waiver. The Federal 
benefit agency involved in the data exchange will develop the request by 
petitioning its Data Integrity Board for a waiver of independent 
verification by a Medicaid State agency. The State agency must furnish 
the Federal agency with any information it needs to seek the Data 
Integrity Board's approval of the waiver.
    (e) In accordance with the Federal agency's procedures, the agency 
must provide data on the costs and benefits of the matching program to 
the Federal agency from which it receives information on individuals.
    (f) In accordance with the Federal agency's procedures, the agency 
must certify to the Federal agency that it will not take adverse action 
against an individual until the information has been independently 
verified and until 10 days (or sooner if permitted bySec. 431.213 or 
Sec.  431.214) after the individual has been notified of the findings 
and given an opportunity to contest.
    (g) In accordance with the Federal agency's procedures for renewals 
of matching programs, the agency must certify to the Federal agency that 
the terms of the agreement have been followed.

[59 FR 4255, Jan. 31, 1994]

    Effective Date Note: At 77 FR 17212, Mar. 23, 2012,Sec. 435.955 
was removed, effective Jan. 1, 2014.



Sec.  435.956  Verification of other non-financial information.

    (a) [Reserved]
    (b) [Reserved]
    (c) State residency. (1) The agency may verify State residency in 
accordance withSec. 435.945(a) of this subpart or through other 
reasonable verification procedures consistent with the requirements in 
Sec.  435.952 of this subpart.
    (2) Evidence of immigration status may not be used to determine that 
an individual is not a State resident.
    (d) Social Security numbers. The agency must verify Social Security 
numbers (SSNs) in accordance withSec. 435.910 of this subpart.
    (e) Pregnancy. The agency must accept self-attestation of pregnancy 
unless the State has information that is not reasonably compatible with 
such attestation, subject to the requirements ofSec. 435.952 of this 
subpart.
    (f) Age, date of birth and household size. The agency may verify 
date of birth and the individuals that comprise an individual's 
household, as defined inSec. 435.603(f) of this part, in accordance 
withSec. 435.945(a) of this subpart or through other reasonable 
verification procedures consistent with the requirements inSec. 
435.952 of this subpart.

[77 FR 17212, Mar. 23, 2012]



Sec.  435.960  Standardized formats for furnishing and obtaining 
information to verifying income and eligibility.

    (a) The agency must maintain for all applicants and beneficiaries 
within an agency file the SSN, surname and other data elements in a 
format that at a minimum allows the agency to furnish and to obtain 
eligibility and income information from the agencies or programs 
referenced inSec. 435.945(b) andSec. 435.948(a).
    (b) The format to be used will be prescribed by--
    (1) CMS when the agency furnishes information to, or requests 
information from, any Federal or State agency, except SSA and the 
Internal Revenue Service as specified in paragraphs (b) (2) and (3), 
respectively;
    (2) The Commissioner of Social Security when the agency requests 
information from SSA; and
    (3) The Commissioner of Internal Revenue when the agency requests 
information from the Internal Revenue Service.

[52 FR 5977, Feb. 27, 1987]

[[Page 205]]



Sec.  435.965  Delay of effective date.

    (a) If the agency submits, by May 29, 1986, a plan describing a good 
faith effort to come into compliance with the requirements of section 
1137 of the Act and of Sec.Sec. 435.910 and 435.940 through 435.960 of 
this subpart, the Secretary may, after consultation with the Secretary 
of Agriculture and the Secretary of Labor, grant a delay in the 
effective date of Sec.Sec. 435.910 and 435.940 through 435.960, but 
not beyond September 30, 1986.
    (b) The Secretary may not grant a delay of the effective date of 
section 1137(c) of the Act, which is implemented bySec. 435.955 (a) 
and (c). (The provisions of these statutory and regulation sections 
require the agency to follow certain procedures before taking any 
adverse actions based on information from the Internal Revenue Service 
concerning unearned income.)



                Subpart K_Federal Financial Participation



Sec.  435.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP in Expenditures for Determining Eligibility and Providing Services



Sec.  435.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45204, Sept. 29, 1978, as amended at 66 FR 2667, Jan. 11, 2001]



Sec.  435.1002  FFP for services.

    (a) Except for the limitations and conditions specified in 
Sec.Sec. 435.1007, 35.1008, 435.1009, and 438.814 of this chapter, FFP 
is available in expenditures for Medicaid services for all beneficiaries 
whose coverage is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
beneficiaries who were eligible for Medicaid in the month in which the 
medical care or services were provided except that, for beneficiaries 
who establish eligibility for Medicaid by deducting incurred medical 
expenses from income, FFP is not available for expenses that are the 
beneficiary's liability. (See Sec.Sec. 435.915 and 436.901 of this 
subchapter for regulations on retroactive eligibility for Medicaid.)
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
66 FR 2667, Jan. 11, 2001; 67 FR 41095, June 14, 2002; 71 FR 39225, July 
12, 2006; 77 FR 17212, Mar. 23, 2012]



Sec.  435.1003  FFP for redeterminations.

    (a) If the Social Security Administration (SSA) notifies an agency 
that a beneficiary has been determined ineligible for SSI, FFP is 
available in Medicaid expenditures for services to the beneficiary as 
follows:
    (1) If the agency receives the SSA notice by the 10th day of the 
month, FFP is available under this section only through the end of the 
month unless the beneficiary requests a hearing under subpart E, part 
431 of this subchapter.
    (2) If the agency receives the SSA notice after the 10th day of the 
month, FFP is available only through the end

[[Page 206]]

of the following month, unless the beneficiary requests a hearing under 
subpart E, part 431 of this subchapter.
    (3) If a beneficiary requests a hearing, FFP is available as 
specified in subpart E, part 431 of this subchapter.
    (b) The agency must take prompt action to determine eligibility 
after receiving the SSA notice.
    (c) When a change in Federal law affects the eligibility of 
substantial numbers of Medicaid beneficiaries, the Secretary may waive 
the otherwise applicable FFP requirements and redetermination time 
limits of this section, in order to provide a reasonable time to 
complete such redeterminations. The Secretary will designate an 
additional amount of time beyond that allowed under paragraphs (a) and 
(b) of this section, within which FFP will be available, to perform 
large numbers of redeterminations arising from a change in Federal law.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
62 FR 1685, Jan. 13, 1997]



Sec.  435.1004  Beneficiaries overcoming certain conditions 
of eligibility.

    (a) FFP is available, as specified in paragraph (b) of this section, 
in expenditures for services provided to beneficiaries who are 
overcoming certain eligibility conditions, including blindness, 
disability, continued absence or incapacity of a parent, or unemployment 
of a parent.
    (b) FFP is available for a period not to exceed--
    (1) The period during which a beneficiary of AFDC, SSI or an 
optional State supplement continues to receive cash payments while these 
conditions are being overcome; or
    (2) For beneficiaries eligible for Medicaid only and beneficiaries 
of AFDC, SSI or an optional State supplement who do not continue to 
receive cash payments, the second month following the month in which the 
beneficiary's Medicaid eligibility would have been terminated.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]

                           Limitations on FFP



Sec.  435.1005  Beneficiaries in institutions eligible under a special
income standard.

    For beneficiaries in institutions whose Medicaid eligibility is 
based on a special income standard established underSec. 435.236, FFP 
is available in expenditures for services provided to those individuals 
only if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual in his own 
home who has no income or resources.

[58 FR 4933, Jan. 19, 1993]



Sec.  435.1006  Beneficiaries of optional State supplements only.

    FFP is available in expenditures for services provided to 
individuals receiving optional State supplements but not receiving SSI, 
if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual who has no 
income and resources.

[45 FR 24887, Apr. 11, 1980]



Sec.  435.1007  Categorically needy, medically needy, and qualified
Medicare beneficiaries.

    (a) FFP is available in expenditures for covered services provided 
to categorically needy beneficiaries, medically needy beneficiaries, and 
qualified Medicare beneficiaries, subject to the restrictions contained 
in subpart K of this part and as provided in paragraphs (b) and (e) of 
this section. However, the restrictions listed in paragraphs (b) and (e) 
of this section do not apply to expenditures for medical assistance made 
on behalf of qualified Medicare beneficiaries under section 1905(p) of 
the Act; individuals receiving Medicaid as categorically needy under 
section 1902(a)(10)(A)(i) (I), (II), (III), (IV), (V), (VI), or (VII) 
and section 1902(a)(10)(A)(ii) (I), (IX), or (X) and section 1905(u) of 
the Act; individuals who are eligible to receive benefits (or would be 
eligible for those benefits if they were not in a medical institution);

[[Page 207]]

and any individuals deemed to be members of the groups identified in 
this sentence.
    (b) Except as provided in paragraphs (c) and (d) of this section, 
FFP is not available in State expenditures for individuals (including 
the medically needy) whose annual income after deductions specified in 
Sec.  435.831(a) and (c) exceeds the following amounts, rounded to the 
next higher multiple of $100.
    (c) In the case of a family consisting only of two individuals, both 
of whom are adults and at least one of whom is aged, blind, or disabled, 
the State of California may use the amount of the AFDC payment most 
frequently made to a family of one adult and two children for purposes 
of computing the 133\1/3\ percent limitation (under the authority of 
section 4106 of Public Law 100-230).
    (d) For purposes of paragraph (b)(1) of this section, a State that 
as of June 1, 1989, has in its State plan (as defined in section 
2373(c)(5) of Public Law 98-369 as amended by section 9 of Public Law 
100-93) an amount for individuals that was reasonably related to 133\1/
3\ percent of the highest amount of AFDC which would ordinarily be paid 
to a family of two without income or resources may use an amount based 
upon a reasonable relationship to such an AFDC standard for a family of 
two.
    (e) FFP is not available in expenditures for services provided to 
categorically needy and medically needy beneficiaries subject to the FFP 
limits if their annual income, after the cash assistance income 
deductions and any income disregards in the State plan authorized under 
section 1902(r)(2) of the Act are applied, exceeds the 133\1/3\ percent 
limitation described under paragraphs (b), (c), and (d) of this section.
    (f) A State may use the less restrictive income methodologies 
included under its State plan as authorized underSec. 435.601 in 
determining whether a family's income exceeds the limitation described 
in paragraph (b) of this section.

[58 FR 4933, Jan. 19, 1993, as amended at 66 FR 2321, 2667, Jan. 11, 
2001]



Sec.  435.1008  FFP in expenditures for medical assistance for 
individuals who have declared United States citizenship or nationality
under section 1137(d) of the Act and with respect to whom the State
has not documented citizenship and identity.

    Except for individuals described inSec. 435.406(a)(1)(v), FFP will 
not be available to a State with respect to expenditures for medical 
assistance furnished to individuals unless the State has obtained 
satisfactory documentary evidence of citizenship or national status, as 
described inSec. 435.407 that complies with the requirements of 
section 1903(x) of the Act.

[72 FR 38694, July 13, 2007]



Sec.  435.1009  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec.  435.1010; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services underSec. 440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
tuberculosis or mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not considered to be a patient in 
that institution. However, such an individual who is under age 22 and 
has been receiving inpatient psychiatric services underSec. 440.160 of 
this subchapter is considered to be a patient in the institution until 
he is unconditionally released or, if earlier, the date he reaches age 
22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13199, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985. Redesignated and amended at 71 FR 39225, 
July 12, 2006]

[[Page 208]]



Sec.  435.1010  Definitions relating to institutional status.

    For purposes of FFP, the following definitions apply:
    Active treatment in intermediate care facilities for individuals 
with intellectual disabilities means treatment that meets the 
requirements specified in the standard concerning active treatment for 
intermediate care facilities for persons with Intellectual Disability 
underSec. 483.440(a) of this subchapter.
    Child-care institution means a nonprofit private child-care 
institution, or a public child-care institution that accommodates no 
more than twenty-five children, which is licensed by the State in which 
it is situated, or has been approved by the agency of the State 
responsible for licensing or approval of institutions of this type, as 
meeting the standards established for licensing. The term does not 
include detention facilities, forestry camps, training schools or any 
other facility operated primarily for the detention of children who are 
determined to be delinquent.
    In an institution refers to an individual who is admitted to live 
there and receive treatment or services provided there that are 
appropriate to his requirements.
    Inmate of a public institution means a person who is living in a 
public institution. An individual is not considered an inmate if--
    (a) He is in a public educational or vocational training institution 
for purposes of securing education or vocational training; or
    (b) He is in a public institution for a temporary period pending 
other arrangements appropriate to his needs.
    Inpatient means a patient who has been admitted to a medical 
institution as an inpatient on recommendation of a physician or dentist 
and who--
    (1) Receives room, board and professional services in the 
institution for a 24 hour period or longer, or
    (2) Is expected by the institution to receive room, board and 
professional services in the institution for a 24 hour period or longer 
even though it later develops that the patient dies, is discharged or is 
transferred to another facility and does not actually stay in the 
institution for 24 hours.
    Institution means an establishment that furnishes (in single or 
multiple facilities) food, shelter, and some treatment or services to 
four or more persons unrelated to the proprietor.
    Institution for mental diseases means a hospital, nursing facility, 
or other institution of more than 16 beds that is primarily engaged in 
providing diagnosis, treatment or care of persons with mental diseases, 
including medical attention, nursing care and related services. Whether 
an institution is an institution for mental diseases is determined by 
its overall character as that of a facility established and maintained 
primarily for the care and treatment of individuals with mental 
diseases, whether or not it is licensed as such. An institution for 
Individuals with Intellectual Disabilities is not an institution for 
mental diseases.
    Institution for Individuals with Intellectual Disabilities or 
persons with related conditions means an institution (or distinct part 
of an institution) that--
    (a) Is primarily for the diagnosis, treatment, or rehabilitation of 
Individuals with Intellectual Disabilities or persons with related 
conditions; and
    (b) Provides, in a protected residential setting, ongoing 
evaluation, planning, 24-hour supervision, coordination, and integration 
of health or rehabilitative services to help each individual function at 
his greatest ability.
    Institution for tuberculosis means an institution that is primarily 
engaged in providing diagnosis, treatment, or care of persons with 
tuberculosis, including medical attention, nursing care, and related 
services. Whether an institution is an institution for tuberculosis is 
determined by its overall character as that of a facility established 
and maintained primarily for the care and treatment of tuberculosis, 
whether or not it is licensed as such.
    Medical institution means an institution that--
    (a) Is organized to provide medical care, including nursing and 
convalescent care;
    (b) Has the necessary professional personnel, equipment, and 
facilities to manage the medical, nursing, and other health needs of 
patients on a continuing basis in accordance with accepted standards;

[[Page 209]]

    (c) Is authorized under State law to provide medical care; and
    (d) Is staffed by professional personnel who are responsible to the 
institution for professional medical and nursing services. The services 
must include adequate and continual medical care and supervision by a 
physician; registered nurse or licensed practical nurse supervision and 
services and nurses' aid services, sufficient to meet nursing care 
needs; and a physician's guidance on the professional aspects of 
operating the institution.
    Outpatient means a patient of an organized medical facility or 
distinct part of that facility who is expected by the facility to 
receive, and who does receive, professional services for less than a 24-
hour period regardless of the hour of admission, whether or not a bed is 
used or whether or not the patient remains in the facility past 
midnight.
    Patient means an individual who is receiving needed professional 
services that are directed by a licensed practitioner of the healing 
arts toward maintenance, improvement, or protection of health, or 
lessening of illness, disability, or pain.
    Persons with related conditions means individuals who have a severe, 
chronic disability that meets all of the following conditions:
    (a) It is attributable to--
    (1) Cerebral palsy or epilepsy; or
    (2) Any other condition, other than mental illness, found to be 
closely related to Intellectual Disability because this condition 
results in impairment of general intellectual functioning or adaptive 
behavior similar to that of mentally retarded persons, and requires 
treatment or services similar to those required for these persons.
    (b) It is manifested before the person reaches age 22.
    (c) It is likely to continue indefinitely.
    (d) It results in substantial functional limitations in three or 
more of the following areas of major life activity:
    (1) Self-care.
    (2) Understanding and use of language.
    (3) Learning.
    (4) Mobility.
    (5) Self-direction.
    (6) Capacity for independent living.
    Public institution means an institution that is the responsibility 
of a governmental unit or over which a governmental unit exercises 
administrative control. The term ``public institution'' does not 
include--
    (a) A medical institution as defined in this section;
    (b) An intermediate care facility as defined in Sec.Sec. 440.140 
and 440.150 of this chapter;
    (c) A publicly operated community residence that serves no more than 
16 residents, as defined in this section; or
    (d) A child-care institution as defined in this section with respect 
to--
    (1) Children for whom foster care maintenance payments are made 
under title IV-E of the Act; and
    (2) Children receiving AFDC--foster care under title IV-A of the 
Act.
    Publicly operated community residence that serves no more than 16 
residents is defined in 20 CFR 416.231(b)(6)(i). A summary of that 
definition is repeated here for the information of readers.
    (a) In general, a publicly operated community residence means--
    (1) It is publicly operated as defined in 20 CFR 416.231(b)(2).
    (2) It is designed or has been changed to serve no more than 16 
residents and it is serving no more than 16; and
    (3) It provides some services beyond food and shelter such as social 
services, help with personal living activities, or training in 
socialization and life skills. Occasional medical or remedial care may 
also be provided as defined in 45 CFR 228.1; and
    (b) A publicly operated community residence does not include the 
following facilities, even though they accommodate 16 or fewer 
residents:
    (1) Residential facilities located on the grounds of, or immediately 
adjacent to, any large institution or multiple purpose complex.
    (2) Educational or vocational training institutions that primarily 
provide an approved, accredited, or recognized program to individuals 
residing there.
    (3) Correctional or holding facilities for individuals who are 
prisoners, have been arrested or detained pending disposition of 
charges, or are held under

[[Page 210]]

court order as material witnesses or juveniles.
    (4) Hospitals, nursing facilities, and intermediate care facilities 
for individuals with intellectual disabilities.

[43 FR 45204, Sept. 29, 1978, as amended at 47 FR 28655, July 1, 1982; 
47 FR 31532, July 20, 1982; 51 FR 19181, May 28, 1986; 52 FR 47934, Dec. 
17, 1987; 53 FR 657, Jan. 11, 1988; 53 FR 20495, June 3, 1988; 56 FR 
8854, Mar. 1, 1991; 56 FR 23022, May 20, 1991; 59 FR 56233, Nov. 10, 
1994. Redesignated at 71 FR 39225, July 12, 2006]

                   Requirements for State Supplements



Sec.  435.1011  Requirement for mandatory State supplements.

    (a) Except as specified in paragraph (b) of this section, FFP is not 
available in Medicaid expenditures in any quarter in which the State 
does not have in effect an agreement with the Secretary under section 
212 of Pub. L. 93-66 (July 9, 1973) for minimum mandatory State 
supplements of the basic SSI benefit.
    (b) This section does not apply to any State that meets the 
conditions of section 212(f) of Pub. L. 93-66.

[43 FR 45204, Sept. 29, 1978. Redesignated at 71 FR 39225, July 12, 
2006]



Sec.  435.1012  Requirement for maintenance of optional State supplement
expenditures.

    (a) This section applies to States that make optional State 
supplement payments under section 1616(a) of the Act and mandatory 
supplement payments under section 212(a) of Pub. L. 93-66.
    (b) FFP in Medicaid expenditures is not available during any period 
in which the State does not have in effect an agreement with the 
Secretary under section 1618 of the Act to maintain its supplementary 
payments.

[43 FR 45204, Sept. 29, 1978, as amended at 55 FR 48609, Nov. 21, 1990. 
Redesignated at 71 FR 39225, July 12, 2006]

                       FFP for Premium Assistance



Sec.  435.1015  FFP for premium assistance for plans in the individual
market.

    (a) FFP is available for payment of the costs of insurance premiums 
on behalf of an eligible individual for a health plan offered in the 
individual market that provides the individual with benefits for which 
the individual is covered under the State plan, subject to the following 
conditions:
    (1) The insurer is obligated to pay primary to Medicaid for all 
health care items and services for which the insurer is legally and 
contractually responsible under the individual health plan, as required 
under part 433 subpart D of this chapter;
    (2) The agency furnishes all benefits for which the individual is 
covered under the State plan that are not available through the 
individual health plan;
    (3) The individual does not incur any cost sharing charges in excess 
of any amounts imposed by the agency under subpart A of part 447; and
    (4) The total cost of purchasing such coverage, including 
administrative expenditures, the costs of paying all cost sharing 
charges in excess of the amounts imposed by the agency under subpart A 
of part 447, and the costs of providing benefits as required by (a)(2) 
of this section, must be comparable to the cost of providing direct 
coverage under the State plan.
    (b) A State may not require an individual to receive benefits 
through premium assistance under this section, and a State must inform 
an individual that it is the individual's choice to receive either 
direct coverage under the Medicaid State plan or coverage through 
premium assistance for an individual health plan. A State must require 
that an individual who elects premium assistance obtain through the 
insurance coverage all benefits for which the insurer is responsible and 
must provide the individual with information on how to access any 
additional benefits and cost sharing assistance not provided by the 
insurer.

[77 FR 42303, July 15, 2012]



   Subpart L_Options for Coverage of Special Groups under Presumptive 
                               Eligibility

    Source: 66 FR 2667, Jan. 11, 2001, unless otherwise noted.

[[Page 211]]



Sec.  435.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.
    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec.  435.1101  Definitions related to presumptive eligibility for 
children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or
    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under title XIX, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter).

[66 FR 2667, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec.  435.1102  Children covered under presumptive eligibility.

    (a) The agency may elect to provide Medicaid services for children 
under age 19 or a younger age specified by the State during a 
presumptive eligibility period following a determination by a

[[Page 212]]

qualified entity, on the basis of preliminary information, that the 
individual has gross income (or, at state option, a reasonable estimate 
of household income, as defined inSec. 435.603 of this part, 
determined using simplified methods prescribed by the agency) at or 
below the income standard established by the State for the age of the 
child underSec. 435.118(c) or underSec. 435.229 if applicable and 
higher.
    (b) If the agency elects to provide services to children during a 
period of presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a regular 
Medicaid application form;
    (iii) Within five working days after the date that the determination 
is made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last day of the following month, the child's presumptive eligibility 
will end on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application.
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and
    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency; and
    (vi) Do not delegate the authority to determine presumptive 
eligibility to another entity.
    (3) Establish oversight mechanisms to ensure that presumptive 
eligibility determinations are being made consistent with the statute 
and regulations.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.
    (d) The agency--
    (1) May require, for purposes of making a presumptive eligibility 
determination under this section, that the individual has attested to 
being, or another person who attests to having reasonable knowledge of 
the individual's status has attested to the individual being, a--
    (i) Citizen or national of the United States or in satisfactory 
immigration status; or
    (ii) Resident of the State; and
    (2) May not--
    (i) Impose other conditions for presumptive eligibility not 
specified in this section; or
    (ii) Require verification of the conditions for presumptive 
eligibility.
    (e) Notice and fair hearing regulations in subpart E of part 431 of 
this chapter do not apply to determinations of presumptive eligibility 
under this section.

[43 FR 45204, Sept. 29, 1978, as amended at 77 FR 17212, Mar. 23, 2012]



Sec.  435.1103  Presumptive eligibility for other individuals.

    (a) The terms ofSec. 435.1101 andSec. 435.1102 apply to pregnant 
women such that the agency may provide Medicaid to pregnant women during 
a presumptive eligibility period following a determination by a 
qualified entity that the pregnant woman has income at or below the 
income standard established by the State underSec. 435.116(c), except 
that coverage of services provided to such women is limited to 
ambulatory prenatal care and the number of presumptive eligibility 
periods that may

[[Page 213]]

be authorized for pregnant women is one per pregnancy.
    (b) If the agency provides Medicaid during a presumptive eligibility 
period to children underSec. 435.1102 or to pregnant women under 
paragraph (a) of this section, the agency may also apply the terms of 
Sec.Sec. 435.1101 and 435.1102 to the individuals described in one or 
more of the following sections of this part, based on the income 
standard established by the state for such individuals and providing the 
benefits covered under that section: Sec.Sec. 435.110 (parents and 
caretaker relatives), 435.119 (individuals aged 19 or older and under 
age 65), 435.150 (former foster care children), and 435.218 (individuals 
under age 65 with income above 133 percent FPL).
    (c)(1) The terms of Sec.Sec. 435.1101 and 435.1102 apply to 
individuals who may be eligible underSec. 435.213 of this part 
(relating to individuals with breast or cervical cancer) orSec. 
435.214 of this part (relating to eligibility for limited family 
planning benefits) such that the agency may provide Medicaid during a 
presumptive eligibility period following a determination by a qualified 
entity described in paragraph (c)(2) of this section that--
    (i) The individual meets the eligibility requirements ofSec. 
435.213; or
    (ii) The individual meets the eligibility requirements ofSec. 
435.214, except that coverage provided during a presumptive eligibility 
period to such individuals is limited to the services described inSec. 
435.214(d).
    (2) Qualified entities described in this paragraph include qualified 
entities which participate as providers under the State plan and which 
the agency determines are capable of making presumptive eligibility 
determinations.

[77 FR 42304, July 15, 2012]



Sec.  435.1110  Presumptive eligibility determined by hospitals.

    (a) Basic rule. The agency must provide Medicaid during a 
presumptive eligibility period to individuals who are determined by a 
qualified hospital, on the basis of preliminary information, to be 
presumptively eligible subject to the same requirements as apply to the 
State options under Sec.Sec. 435.1102 and 435.1103, but regardless of 
whether the agency provides Medicaid during a presumptive eligibility 
period under such sections.
    (b) Qualified hospitals. A qualified hospital is a hospital that--
    (1) Participates as a provider under the State plan or a 
demonstration under section 1115 of the Act, notifies the agency of its 
election to make presumptive eligibility determinations under this 
section, and agrees to make presumptive eligibility determinations 
consistent with State policies and procedures;
    (2) At State option, assists individuals in completing and 
submitting the full application and understanding any documentation 
requirements; and
    (3) Has not been disqualified by the agency in accordance with 
paragraph (d) of this section.
    (c) State options for bases of presumptive eligibility. The agency 
may--
    (1) Limit the determinations of presumptive eligibility which 
hospitals may elect to make under this section to determinations based 
on income for all of the populations described inSec. 435.1102 and 
Sec.  435.1103; or
    (2) Permit hospitals to elect to make presumptive eligibility 
determinations on additional bases approved under the State plan or an 
1115 demonstration.
    (d) Disqualification of hospitals. (1) The agency may establish 
standards for qualified hospitals related to the proportion of 
individuals determined presumptively eligible for Medicaid by the 
hospital who:
    (i) Submit a regular application, as described inSec. 435.907, 
before the end of the presumptive eligibility period; or
    (ii) Are determined eligible for Medicaid by the agency based on 
such application.
    (2) The agency must take action, including, but not limited to, 
disqualification of a hospital as a qualified hospital under this 
section, if the agency determines that the hospital is not--
    (i) Making, or is not capable of making, presumptive eligibility 
determinations in accordance with applicable state policies and 
procedures; or
    (ii) Meeting the standard or standards established by the agency 
under paragraph (d)(1) of this section.
    (3) The agency may disqualify a hospital as a qualified hospital 
under this

[[Page 214]]

paragraph only after it has provided the hospital with additional 
training or taken other reasonable corrective action measures to address 
the issue.

[77 FR 42304, July 15, 2012]



 Subpart M_Coordination of Eligibility and Enrollment Between Medicaid, 
       CHIP, Exchanges and Other Insurance Affordability Programs

    Source: 77 FR 17212, Mar. 23, 2012, unless otherwise noted.



Sec.  435.1200  Medicaid agency responsibilities.

    (a) Statutory basis and purpose. This section implements sections 
1943 and 2102(b)(3)(B) of the Affordable Care Act to ensure coordinated 
eligibility and enrollment among insurance affordability programs.
    (b) General requirements. The State Medicaid agency must--
    (1) Fulfill the responsibilities set forth in paragraphs (d) and (e) 
and, if applicable, paragraph (c) of this section in partnership with 
other insurance affordability programs.
    (2) Certify for the Exchange and other insurance affordability 
programs the criteria applied in determining Medicaid eligibility.
    (3) Enter into and, upon request, provide to the Secretary one or 
more agreements with the Exchange and the agencies administering other 
insurance affordability programs as are necessary to fulfill the 
requirements of this section, including a clear delineation of the 
responsibilities of each program to--
    (i) Minimize burden on individuals;
    (ii) Ensure compliance with paragraphs (d) through (f) of this 
section and, if applicable, paragraph (c) of this section;
    (iii) Ensure prompt determinations of eligibility and enrollment in 
the appropriate program without undue delay, consistent with timeliness 
standards established underSec. 435.912, based on the date the 
application is submitted to any insurance affordability program.
    (c) Provision of Medicaid for individuals found eligible for 
Medicaid by another insurance affordability program. If the agency has 
entered into an agreement in accordance withSec. 431.10(d) of this 
subchapter under which the Exchange or other insurance affordability 
program makes final determinations of Medicaid eligibility, for each 
individual determined so eligible by the Exchange or other program, the 
agency must--
    (1) Establish procedures to receive, via secure electronic 
interface, the electronic account containing the determination of 
Medicaid eligibility;
    (2) Comply with the provisions ofSec. 435.911 of this part to the 
same extent as if the application had been submitted to the Medicaid 
agency; and
    (3) Comply with the provisions ofSec. 431.10 of this subchapter to 
ensure it maintains oversight for the Medicaid program.
    (d) Transfer from other insurance affordability programs to the 
State Medicaid agency. For individuals for whom another insurance 
affordability program has not made a determination of Medicaid 
eligibility, but who have been screened as potentially Medicaid 
eligible, the agency must--
    (1) Accept, via secure electronic interface, the electronic account 
for the individual;
    (2) Not request information or documentation from the individual 
already provided to another insurance affordability program and included 
in the individual's electronic account or other transmission from the 
other program.
    (3) Promptly and without undue delay, consistent with timeliness 
standards established underSec. 435.912, determine the Medicaid 
eligibility of the individual, in accordance withSec. 435.911 of this 
part, without requiring submission of another application.
    (4) Accept any finding relating to a criterion of eligibility made 
by such program, without further verification, if such finding was made 
in accordance with policies and procedures which are the same as those 
applied by the agency or approved by it in the agreement described in 
paragraph (b) of this section;
    (5) Notify such program of the receipt of the electronic account.
    (6) Notify such program of the final determination of the 
individual's eligibility or ineligibility for Medicaid.

[[Page 215]]

    (e) Evaluation of eligibility for other insurance affordability 
programs--(1) Individuals determined not eligible for Medicaid. For each 
individual who submits an application or renewal form to the agency 
which includes sufficient information to determine Medicaid eligibility, 
or whose eligibility is being renewed pursuant to a change in 
circumstance in accordance withSec. 435.916(d) of this part, and whom 
the agency determines is not eligible for Medicaid, the agency must, 
promptly and without undue delay, consistent with timeliness standards 
established underSec. 435.912 of this part, determine potential 
eligibility for, and, as appropriate, transfer via a secure electronic 
interface the individual's electronic account to, other insurance 
affordability programs.
    (2) Individuals undergoing a Medicaid eligibility determination on a 
basis other than MAGI. In the case of an individual with household 
income greater than the applicable MAGI standard and for whom the agency 
is determining eligibility in accordance withSec. 435.911(c)(2) of 
this part, the agency must promptly and without undue delay, consistent 
with timeliness standards established underSec. 435.912 of this part, 
determine potential eligibility for, and as appropriate transfer via 
secure electronic interface, the individual's electronic account to, 
other insurance affordability programs and provide timely notice to such 
other program--
    (i) That the individual is not Medicaid eligible on the basis of the 
applicable MAGI standard, but that a final determination of Medicaid 
eligibility is still pending; and
    (ii) Of the agency's final determination of eligibility or 
ineligibility for Medicaid.
    (3) The agency may enter into an agreement with the Exchange to make 
determinations of eligibility for advance payments of the premium tax 
credit and cost sharing reductions, consistent with 45 CFR 
155.110(a)(2).
    (f) Internet Web site. (1) The State Medicaid agency must make 
available to current and prospective Medicaid applicants and 
beneficiaries a Web site that--
    (i) Operates in conjunction with or is linked to the Web site 
described inSec. 457.340(a) of this subchapter and to the Web site 
established by the Exchange under 45 CFR 155.205; and
    (ii) Supports applicant and beneficiary activities, including 
accessing information on the insurance affordability programs available 
in the State, applying for and renewing coverage, and other activities 
as appropriate.
    (2) Such Web site, any interactive kiosks and other information 
systems established by the State to support Medicaid information and 
enrollment activities must be in plain language and be accessible to 
individuals with disabilities and persons who are limited English 
proficient, consistent withSec. 435.905(b) of this subpart.



Sec.  435.1205  Alignment with exchange initial open enrollment period.

    (a) Definitions. For purposes of this section--
    Eligibility based on MAGI means Medicaid eligibility based on the 
eligibility requirements which will be effective under the State plan, 
or waiver of such plan, as of January 1, 2014, consistent with 
Sec.Sec. 435.110 through 435.119, 435.218 and 435.603.
    (b) Medicaid agency responsibilities to achieve coordinated open 
enrollment. For the period beginning October 1, 2013 through December 
31, 2013, the agency must
    (1) Accept all of the following:
    (i) The single streamlined application described inSec. 435.907.
    (ii) Via secure electronic interface, an electronic account 
transferred from another insurance affordability program.
    (2) For eligibility based on MAGI, comply with the terms ofSec. 
435.1200 of this part, such that--
    (i) For each electronic account transferred to the agency under 
paragraph (c)(1)(ii) of this section, the agency consistent with either 
of the following:
    (A) Section 435.1200(c), accepts a determination of Medicaid 
eligibility based on MAGI, made by another insurance affordability 
program.
    (B) Section 435.1200(d), determines eligibility for Medicaid based 
on MAGI.
    (ii) Consistent withSec. 435.1200(e), for each single streamlined 
application

[[Page 216]]

submitted directly to the agency under paragraph (b)(1)(i) of this 
section--
    (A) Determine eligibility based on MAGI; and
    (B) For each individual determined not Medicaid eligible based on 
MAGI, determine potential eligibility for other insurance affordability 
programs, based on the requirements which will be effective for each 
program, and transfer the individual's electronic account to such 
program via secure electronic interface.
    (iii) Provide notice and fair hearing rights, in accordance with 
Sec.  435.917 of this part, part 431 subpart E of this chapter, and 
Sec.  435.1200 for those determined ineligible for Medicaid.
    (3) For each individual determined eligible based on MAGI in 
accordance with paragraph (c)(2) of this section--
    (i) Provide notice, including the effective date of eligibility, to 
such individual, consistent withSec. 435.917 of this part, and furnish 
Medicaid.
    (ii) Apply the terms ofSec. 435.916 (relating to beneficiary 
responsibility to inform the agency of any changes in circumstances that 
may affect eligibility) andSec. 435.952 (regarding use of information 
received by the agency). The first renewal underSec. 435.916 of this 
part may, at State option, be scheduled to occur anytime between 12 
months from the date of application and 12 months from January 1, 2014.
    (4) For eligibility effective in 2013, for all applicants--
    (i) Consistent with the requirements of subpart J of this part, and 
applying the eligibility requirements in effect under the State plan, or 
waiver of such plan, as of the date the individual submits an 
application to any insurance affordability program--
    (A) Determine the individual's eligibility based on the information 
provided on the application or in the electronic account; or
    (B) Request additional information from the individual needed by the 
agency to determine eligibility based on the eligibility requirements in 
effect on such date, including on a basis excepted from application of 
MAGI-based methods, as described inSec. 435.603, and determine such 
eligibility if such information is provided; and
    (C) Furnish Medicaid to individuals determined eligible under this 
clause or provide notice and fair hearing rights in accordance with part 
431 subpart E of this part if eligibility effective in 2013 is denied; 
or
    (ii) Notify the individual of the opportunity to submit a separate 
application for coverage effective in 2013 and information on how to 
obtain and submit such application.

[78 FR 42305, July 15, 2013]



PART 436_ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS--
Table of Contents



              Subpart A_General Provisions and Definitions

Sec.
436.1 Purpose and applicability.
436.2 Basis.
436.3 Definitions and use of terms.
436.10 State plan requirements.

         Subpart B_Mandatory Coverage of the Categorically Needy

436.100 Scope.
436.110 Individuals receiving cash assistance.
436.111 Individuals who are not eligible for cash assistance because of 
          a requirement not applicable under Medicaid.
436.112 Individuals who would be eligible for cash assistance except for 
          increased OASDI under Pub. L. 92-336 (July 1, 1972).
436.114 Individuals deemed to be receiving AFDC.
436.116 Families terminated from AFDC because of increased earnings or 
          hours of employment.
436.118 Children for whom adoption assistance or foster care maintenance 
          payments are made.
436.120 Qualified pregnant women and children who are not qualified 
          family members.
436.121 Qualified family members.
436.122 Pregnant women eligible for extended coverage.
436.124 Newborn children.
436.128 Coverage for certain qualified aliens.

          Subpart C_Options for Coverage as Categorically Needy

436.200 Scope.
436.201 Individuals included in optional groups.

[[Page 217]]

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women

436.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
436.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
436.212 Individuals who would be eligible for cash assistance if the 
          State plan for OAA, AFDC, AB, APTD, or AABD were as broad as 
          allowed under the Act.
436.217 Individuals receiving home and community-based services.
436.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.
436.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.
436.224 Individuals under age 21 who are under State adoption assistance 
          agreements.
436.229 Optional targeted low-income children.

          Options for Coverage of the Aged, Blind, and Disabled

436.230 Essential spouses of aged, blind, or disabled individuals 
          receiving cash assistance.

           Subpart D_Optional Coverage of the Medically Needy

436.300 Scope.
436.301 General rules.
436.308 Medically needy coverage of individuals under age 21.
436.310 Medically needy coverage of specified relatives.
436.320 Medically needy coverage of the aged.
436.321 Medically needy coverage of the blind.
436.322 Medically needy coverage of the disabled.
436.330 Coverage for certain aliens.

               Subpart E_General Eligibility Requirements

436.400 Scope.
436.401 General rules.
436.402 [Reserved]
436.403 State residence.
436.404 Applicant's choice of category.
436.406 Citizenship and alienage.
436.407 Types of acceptable documentary evidence of citizenship.
436.408 [Reserved]

       Subpart F_Categorical Requirements for Medicaid Eligibility

436.500 Scope.

                               Dependency

436.510 Determination of dependency.

                                   Age

436.520 Age requirements for the aged.
436.522 Determination of age.

                                Blindness

436.530 Definition of blindness.
436.531 Determination of blindness.

                               Disability

436.540 Definition of disability.
436.541 Determination of disability.

    Subpart G_General Financial Eligibility Requirements and Options

436.600 Scope.
436.601 Application of financial eligibility methodologies.
436.602 Financial responsibility of relatives and other individuals.
436.604 [Reserved]
436.606 [Reserved]
436.608 Applications for other benefits.
436.610 Assignment of rights to benefits.

Subpart H [Reserved]

        Subpart I_Financial Requirements for the Medically Needy

436.800 Scope.

                     Medically Needy Income Standard

436.811 Medically needy income standard: General requirements.
436.814 Medically needy income standard: State plan requirements.

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses

436.831 Income eligibility.
436.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

                    Medically Needy Resource Standard

436.840 Medically needy resource standard: General requirements.
436.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

436.845 Medically needy resource eligibility.

   Subpart J_Eligibility in Guam, Puerto Rico, and the Virgin Islands

436.900 Scope.
436.901 General requirements.

[[Page 218]]

436.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.

             Subpart K_Federal Financial Participation (FFP)

436.1000 Scope.

 FFP for Expenditures for Determining Eligibility and Providing Services

436.1001 FFP for administration.
436.1002 FFP for services.
436.1003 Beneficiaries overcoming certain conditions of eligibility.
436.1004 FFP in expenditures for medical assistance for individuals who 
          have declared United States citizenship or nationality under 
          section 1137(d) of the Act and with respect to whom the State 
          has not documented citizenship and identity.
436.1005 Institutionalized individuals.
436.1006 Definitions relating to institutional status.

             Subpart L_Option for Coverage of Special Groups

436.1100 Basis and scope.

                  Presumptive Eligibility for Children

436.1101 Definitions related to presumptive eligibility for children.
436.1102 General rules.

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

    Source: 43 FR 45218, Sept. 29, 1978, unless otherwise noted.



              Subpart A_General Provisions and Definitions



Sec.  436.1  Purpose and applicability.

    This part sets forth, for Guam, Puerto Rico, and the Virgin 
Islands--
    (a) The eligibility provisions that a State plan must contain;
    (b) The mandatory and optional groups of individuals to whom 
Medicaid is provided under a State plan;
    (c) The eligibility requirements and procedures that a Medicaid 
agency must use in determining and redetermining eligibility, and 
requirements it may not use; and
    (d) The availability of FFP for providing Medicaid and for 
administering the eligibility provisions of the plan.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]



Sec.  436.2  Basis.

    This part implements the following sections of the Act and public 
laws that state requirements and standards for eligibility:

402(a)(22) Eligibility of deemed beneficiaries of AFDC who receive zero 
payments because of recoupment of overpayments.
402(a)(37) Eligibility of individuals who lose AFDC eligibility due to 
increased earnings.
414(g) Eligibility of certain individuals participating in work 
supplementation programs.
473(b) Eligibility of children in foster care and adopted children who 
are deemed AFDC beneficiaries.
1902(a)(8) Opportunity to apply; assistance must be furnished promptly.
1902(a)(10) Required and optional groups.
1902(a)(12) Determination of blindness.
1902(a)(16) Out-of-State care for State residents.
1902(a)(17) Standards for determining eligibility; flexibility in the 
application of income eligibility standards.
1902(a)(19) Safeguards for simplicity of administration and best 
interests of beneficiaries.
1902(a)(34) Three-month retroactive eligibility.
1902(a) (second paragraph after (47)) Eligibility despite increased 
monthly insurance benefits under title II.
1902(a)(55) Mandatory use of outstation locations other than welfare 
offices to receive and initially process applications of certain low-
income pregnant women, infants, and children under age 19.
1902(b) Prohibited conditions for eligibility:
    Age requirements of more than 65 years;
    State residence requirements excluding individuals who reside in the 
State; and
    Citizenship requirement excluding United States citizens.
1902(e) Four-month continued eligibility for families ineligible because 
of increased hours or income from employment.
1902(e)(2) Minimum eligibility period for beneficiaries enrolled in HMO.
1902(e)(3) Optional coverage of certain disabled children at home.
1902(e)(4) Eligibility of newborn children of Medicaid-eligible women.
1902(e)(5) Eligibility of pregnant women for extended coverage for a 
specified period after pregnancy ends.
1903(v) Payment for emergency services under Medicaid provided to 
aliens.
1905(a) (i)-(viii) List of eligible individuals.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
to certain institutionalized individuals.
1905(a) (second sentence) Definition f essential person.

[[Page 219]]

1905(d)(2) Definition of resident of an intermediate care facility for 
individuals with intellectual disabilities.
1905(n) Definition of qualified pregnant woman and child.
1912(a) Conditions of eligibility.
1915(c) Home or community based services.
1915(d) Home and community-based services for individuals age 65 or 
older.
412(e)(5) of Immigration and Nationality Act-Eligibility of certain 
refugees.
Pub. L. 93-66, section 230 Deemed eligibility of certain essential 
persons.
Pub. L. 93-66, section 231 Deemed eligibility of certain persons in 
medical institutions.
Pub. L. 93-66, section 232 Deemed eligibility of certain blind and 
disabled medically indigent persons.
Pub. L. 96-272, section 310(b)(1) Continued eligibility of certain 
beneficiaries of Veterans Administration pensions.
Pub. L. 99-509, section 9406 Payment for emergency medical services 
provided to aliens.
Pub. L. 99-603, section 201 Aliens granted legalized status under 
section 245A of the Immigration and Nationality Act (8 U.S.C. 1255a) may 
under certain circumstances be eligible for Medicaid.
Pub. L. 99-603, section 302 Aliens granted legalized status under 
section 210 of the Immigration and Nationality Act may under certain 
circumstances be eligible for Medicaid (8 U.S.C. 1160).
Pub. L. 99-603, section 303 Aliens granted legal status under section 
210A of the Immigration and Nationality Act may under certain 
circumstances be eligible for Medicaid (8 U.S.C. 1161).

[52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 
FR 36820, Sept. 7, 1990; 55 FR 48609, Nov. 21, 1990; 57 FR 29155, June 
30, 1992; 59 FR 48811, Sept. 23, 1994]



Sec.  436.3  Definitions and use of terms.

    As used in this part--
    AABD means aid to the aged, blind, and disabled under title XVI of 
the Act;
    AB means aid to the blind under title X of the Act;
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    Categorically needy refers to families and children, aged, blind or 
disabled individuals, and pregnant women listed under subparts B and C 
of this part who are eligible for Medicaid. Subpart B of this part 
describes the mandatory eligibility groups who, generally, are receiving 
or deemed to be receiving cash assistance under the Act. These mandatory 
groups are specified in sections 1902(a)(10)(A)(i) and 1902(e) of the 
Act. Subpart C of this part describes the optional eligibility groups of 
individuals who, generally, meet the categorical requirements that are 
the same as or less restrictive than those of the cash assistance 
programs but are not receiving cash payments. These optional groups are 
specified in sections 1902(a)(10)(A)(ii) and 1902(e) of the Act.
    Families and children refers to eligible members of families with 
children who are financially eligible under AFDC or medically needy 
rules and who are deprived of parental support or care as defined under 
the AFDC program (see 45 CFR 233.90; 233.100). In addition, this group 
includes individuals under age 21 who are not deprived of parental 
support or care but who are financially eligible under AFDC or medically 
needy rules (see optional coverage group,Sec. 436.222);
    Medically needy means families, children, aged, blind, or disabled 
individuals, and pregnant women listed in subpart D of this part who are 
not listed in subparts B and C of this part as categorically needy but 
who may be eligible for Medicaid under this part because their income 
and resources are within limits set by the State under its Medicaid plan 
(including persons whose income and resources fall within these limits 
after their incurred expenses for medical or remedial care are 
deducted). (Specific financial requirements for determining eligibility 
of the medically needy appear in subpart I of this part.)
    OAA means old age assistance under title I of the Act;
    OASDI means old age, survivors, and disability insurance under Title 
II of the Act.
    Optional targeted low-income child means a child under age 19 who 
meets the financial and categorical standards described below.
    (1) Financial need. An optional targeted low-income child:
    (i) Has a family income at or below 200 percent of the Federal 
poverty line for a family of the size involved;
    (ii) Resides in a State with no Medicaid applicable income level (as 
defined inSec. 457.10 of this chapter); or,

[[Page 220]]

    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined inSec. 457.10) and has family income that either:
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points (expressed as a 
percentage of the Federal poverty line); or
    (B) Does not exceed the income level specified for such child to be 
eligible for medical assistance under the policies of the State plan 
under title XIX on June 1, 1997.
    (2) No other coverage and State maintenance of effort. An optional 
targeted low-income child is not covered under a group health plan or 
health insurance coverage, or would not be eligible for Medicaid under 
the policies of the State plan in effect on March 31, 1997; except that, 
for purposes of this standard--
    (i) A child shall not be considered to be covered by health 
insurance coverage based on coverage offered by the State under a 
program in operation prior to July 1, 1997 if that program received no 
Federal financial participation;
    (ii) A child shall not be considered to be covered under a group 
health plan or health insurance coverage if the child did not have 
reasonable geographic access to care under that coverage.
    (3) For purposes of this section, policies of the State plan under 
title XIX plan include policies under a Statewide demonstration project 
under section 1115(a) of the Act other than a demonstration project that 
covered an expanded group of eligible children but that either--
    (i) Did not provide inpatient hospital coverage; or
    (ii) Limited eligibility to children previously enrolled in 
Medicaid, imposed premiums as a condition of initial or continued 
enrollment, and did not impose a general time limit on eligibility.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47989, Sept. 30, 1981; 58 FR 4934, Jan. 19, 1993; 66 FR 2668, Jan. 
11, 2001]



Sec.  436.10  State plan requirements.

    A State plan must--
    (a) Provide that the requirements of this part are met; and
    (b) Specify the groups to whom Medicaid is provided, as specified in 
subparts B, C, and D of this part, and the conditions of eligibility for 
individuals in those groups.



         Subpart B_Mandatory Coverage of the Categorically Needy



Sec.  436.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.



Sec.  436.110  Individuals receiving cash assistance.

    (a) A Medicaid agency must provide Medicaid to individuals receiving 
cash assistance under OAA, AFDC, AB, APTD, or AABD.
    (b) For purposes of this section, an individual is receiving cash 
assistance if his needs are considered in determining the amount of the 
payment. This includes an individual whose presence in the home is 
considered essential to the well-being of a beneficiary under the 
State's plan for OAA, AFDC, AB, APTD, or AABD if that plan were as broad 
as allowed under the Act for FFP.



Sec.  436.111  Individuals who are not eligible for cash assistance 
because of a requirement not applicable under Medicaid.

    (a) The agency must provide Medicaid to individuals who would be 
eligible for OAA, AB, APTD, or AABD except for an eligibility 
requirement used in those programs that is specifically prohibited under 
title XIX of the Act.
    (b) The agency also must provide Medicaid to:
    (1) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act:
    (i) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (ii) Grandparents
    (iii) Legal guardians;

[[Page 221]]

    (iv) Aliens sponsors who are not organizations; and
    (v) Siblings.
    (2) [Reserved]

[58 FR 4934, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.112  Individuals who would be eligible for cash assistance
except for increased OASDI under Pub. L. 92-336 (July 1, 1972).

    The agency must provide Medicaid to individuals who meet the 
following conditions:
    (a) In August 1972, the individual was entitled to OASDI and--
    (1) He was receiving cash assistance; or
    (2) He would have been eligible for cash assistance if he had 
applied, and the Medicaid plan covered this optional group; or
    (3) He would have been eligible for cash assistance if he were not 
in a medical institution or intermediate care facility, and the Medicaid 
plan covered this optional group.
    (b) The individual would currently be eligible for cash assistance 
except that the increase in OASDI under Pub. L. 92-336 raised his income 
over the limit allowed under the cash assistance program. This includes 
an individual who--
    (1) Meets all current requirements for cash assistance except for 
the requirement to file an application; or
    (2) Would meet all current requirements for cash assistance if he 
were not in a medical institution or intermediate care facility, and the 
Medicaid plan covers this optional group.



Sec.  436.114  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--
    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E of the Act, whether or not adoption assistance is being 
provided or an interlocutory or other judicial decree of adoption has 
been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of a child or spousal support 
collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals

[[Page 222]]

who are eligible for extended Medicaid lose this coverage if they move 
to another State during the 4-month period. However, if they move back 
to and reestablish residence in the State in which they have extended 
coverage, they are eligible for any of the months remaining in the 4-
month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in income or changes in other 
circumstances and the other changes in income or circumstances cannot 
alone or in combination result in termination without the change in 
support.
    (2) In cases of increases in the amounts of both the support 
collections and earned income, eligibility under this section does not 
preclude eligibility under 45 CFR 233.20(a)(14) or section 1925 of the 
Social Security Act (which was added by section 303(a) of the Family 
Support Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting 
from both an increase in the amount of the support collection and from 
an increase in earned income must run concurrently.

[46 FR 47989, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 
52 FR 48438, Dec. 22, 1987; 55 FR 48610, Nov. 21, 1990; 59 FR 59377, 
Nov. 17, 1994]



Sec.  436.116  Families terminated from AFDC because of increased 
earnings or hours of employment.

    (a) If a family loses AFDC solely because of increased income from 
employment or increased hours of employment, the agency must continue to 
provide Medicaid for 4 months to all members of the family if--
    (1) The family received AFDC in any 3 or more months during the 6-
month period immediately before the month in which it became ineligible 
for AFDC; and
    (2) At least one member of the family is employed throughout the 4-
month period, although this need not be the same member for the whole 
period.
    (b) The 4 calendar month period begins on the date AFDC is 
terminated. If AFDC benefits are terminated retroactively, the 4 
calendar month period also begins retroactively with the first month in 
which AFDC was erroneously paid.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]



Sec.  436.118  Children for whom adoption assistance or foster care
maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28656, July 1, 1982]



Sec.  436.120  Qualified pregnant women and children who are not
qualified family members.

    (a) The Medicaid agency must provide Medicaid to a pregnant woman 
whose pregnancy has been medically verified and who--
    (1) Would be eligible for an AFDC cash payment (or would be eligible 
for an AFDC cash payment if coverage under the State's AFDC plan 
included the AFDC-unemployed parents program) if her child had been born 
and was living with her in the month of payment;
    (2) Is a member of a family that would be eligible for an AFDC cash 
payment if the State's AFDC plan included an AFDC-unemployed parents 
program; or

[[Page 223]]

    (3) Meets the income and resource requirements of the State's 
approved AFDC plan. In determining whether the woman meets the AFDC 
income and resource requirements, the unborn child or children are 
considered members of the household, and the woman's family is treated 
as though deprivation exists.
    (b) The provisions of paragraphs (a) (1) and (2) of this section are 
effective October 1, 1984. The provisions of paragraph (a)(3) of this 
section are effective July 1, 1986.
    (c) The agency must provide Medicaid to children who meet all of the 
following criteria:
    (1) They are born after September 30, 1983;
    (2) Effective October 1, 1988, they are under age 6 (or if 
designated by the State, any age that exceeds age 6 but does not exceed 
age 8), and effective October 1, 1989 they are under age 7 (or if 
designated by the State, any age that exceeds age 7 but does not exceed 
age 8); and
    (3) They meet the income and resource requirements of the State's 
approved AFDC plan.

[52 FR 43072, Nov. 9, 1987, as amended at 55 FR 48610, Nov. 21, 1990; 58 
FR 48614, Sept. 17, 1993]



Sec.  436.121  Qualified family members.

    (a) Definition. A qualified family member is any member of a family, 
including pregnant women and children eligible for Medicaid underSec. 
436.120 of this subpart, who would be receiving AFDC cash benefits on 
the basis of the unemployment of the principal wage earner under section 
407 of the Act had the State not chosen to place time limits on those 
benefits as permitted under section 407(b)(2)(B)(i) of the Act.
    (b) State plan requirement. The State plan must provide that the 
State makes Medicaid available to any individual who meets the 
definition of ``qualified family member'' as specified in paragraph (a) 
of this section.
    (c) Applicability. The provisions in this section are applicable 
from October 1, 1992, through September 30, 1998.

[58 FR 48614, Sept. 17, 1993]



Sec.  436.122  Pregnant women eligible for extended coverage.

    (a) The Medicaid agency must provide categorically needy Medicaid 
eligibility for an extended period following termination of pregnancy to 
women who, while pregnant, applied for, were eligible for, and received 
Medicaid services on the day that their pregnancy ends. This period 
extends from the last day of pregnancy through the end of the month in 
which a 60-day period, beginning on the last day of the pregnancy, ends. 
Eligibility must be provided, regardless of changes in the woman's 
financial circumstances that may occur within this extended period. 
These pregnant women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined inSec. 
440.210(c)(1) of this subchapter).
    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48610, Nov. 21, 1990]



Sec.  436.124  Newborn children.

    (a) The agency must provide Medicaid eligibility to a child born to 
a woman who has applied for, has been determined eligible and is 
receiving Medicaid on the date of the child's birth. The child is deemed 
to have applied and been found eligible for Medicaid on the date of 
birth and remains eligible for one year so long as the woman remains (or 
would remain if pregnant) eligible and the child is a member of the 
woman's household. This provision applies in instances where the labor 
and delivery services were furnished prior to the date of application 
and covered by Medicaid based on retroactive eligibility.
    (b) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible qualified alien woman subject to the 5-year bar so 
long as the woman has filed a complete Medicaid application, including 
but not limited to meeting residency, income and resource requirements, 
has been determined eligible, is receiving Medicaid on the date of the 
child's birth, and remains (or

[[Page 224]]

would remain if pregnant) Medicaid eligible. All standard Medicaid 
application procedures apply, including timely determination of 
eligibility and adequate notice of the agency's decision concerning 
eligibility. A 5-year bar qualified alien receiving emergency medical 
services only underSec. 435.139 of this chapter is considered to be 
Medicaid-eligible and receiving Medicaid for purposes of this provision. 
With respect to whether the mother remains (or would remain if pregnant) 
eligible for Medicaid after the birth of the child, the State must 
determine whether a 5-year bar qualified alien would remain eligible for 
emergency services underSec. 435.139 of this chapter. In determining 
whether the woman would remain eligible for these services, the State 
must consider whether the woman would remain eligible if pregnant. This 
provision applies in instances where the labor and delivery services 
were furnished prior to the date of application and covered by Medicaid 
based on retroactive eligibility.
    (c) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible non-qualified alien woman so long as the woman has 
filed a complete Medicaid application (other than providing a social 
security number or demonstrating immigration status), including but not 
limited to meeting residency, income and resource requirements, has been 
determined eligible, is receiving Medicaid on the date of the child's 
birth, and remains (or would remain if pregnant) Medicaid eligible. All 
standard Medicaid application procedures apply, including timely 
determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A non-qualified alien receiving 
emergency medical services only underSec. 435.139 of this chapter is 
considered to be Medicaid-eligible and receiving Medicaid for purposes 
of this provision. With respect to whether the mother remains (or would 
remain if pregnant) eligible for Medicaid after the birth of the child, 
the State must determine whether a non-qualified alien would remain 
eligible for emergency services underSec. 435.139 of this chapter. In 
determining whether the woman would remain eligible for these services, 
the State must consider whether the woman would remain eligible if 
pregnant. This provision applies in instances where the labor and 
delivery services were furnished prior to the date of application and 
covered by Medicaid based on retroactive eligibility.
    (d) A redetermination of eligibility must be completed on behalf of 
the children described in this provision in accordance with the 
procedures atSec. 435.916. At that time, the State must collect 
documentary evidence of citizenship and identity as required underSec. 
436.406.

[52 FR 43073, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 72 
FR 38694, July 13, 2007]



Sec.  436.128  Coverage for certain qualified aliens.

    The agency must provide the services necessary for the treatment of 
an emergency medical condition as defined inSec. 440.255(c) of this 
chapter to those aliens described inSec. 436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



          Subpart C_Options for Coverage as Categorically Needy



Sec.  436.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec.  436.201  Individuals included in optional groups.

    (a) The agency may choose to cover as optional categorically needy 
any group or groups of the following individuals who are not receiving 
cash assistance and who meet the appropriate eligibility criteria for 
groups specified in the separate sections of this subpart:
    (1) Aged individuals (65 years of age or older);
    (2) Blind individuals (as defined inSec. 436.530);
    (3) Disabled individuals (as defined inSec. 436.541);
    (4) Individuals under age 21 (or, at State option), under age 20, 
19, or 18) or reasonable classifications of these individuals;

[[Page 225]]

    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent) as 
specified inSec. 436.510;
    (6) Pregnant women; and
    (7) Essential spouses specified underSec. 436.230.
    (b) If the agency provides Medicaid to any individual in an optional 
group specified in paragraph (a) of this section, the agency must 
provide Medicaid to all individuals who apply and are found eligible to 
be members of that group.

[58 FR 4934, Jan. 19, 1993]

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women



Sec.  436.210  Individuals who meet the income and resource requirements
of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified underSec. 436.201(a)(1), (a)(2), (a)(3), (a)(5), 
and (a)(6) who are not mandatory categorically needy and who meet the 
income and resource requirements of the appropriate cash assistance 
program for their status (that is, OAA, AFDC, AB, APTD, or AABD).

[58 FR 4935, Jan. 19, 1993]



Sec.  436.211  Individuals who would be eligible for cash assistance
if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified inSec. 436.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, OAA, AFDC, AB, APTD, or AABD) because of lower 
income standards used under the program to determine eligibility for 
institutionalized individuals; but
    (b) Would be eligible for aid or assistance under the State's 
approved plan under OAA, AFDC, AB, APTD, or AABD if they were not 
institutionalized.

[58 FR 4935, Jan. 19, 1993]



Sec.  436.212  Individuals who would be eligible for cash assistance
if the State plan for OAA, AFDC, AB, APTD, or AABD were as broad 
as allowed under the Act.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified underSec. 436.201(a) who:
    (1) Would be eligible for OAA, AFDC, AB, APTD, or AABD if the 
State's plan under those programs included individuals whose coverage 
under title I, IV-A, X, XIV, or XVI of the Act is optional (for example, 
the agency may provide Medicaid to individuals who are 18 years of age 
and who are attending secondary school full-time and are expected to 
complete their education before age 19, even though the State's AFDC 
plan does not include them); or
    (2) Would qualify for OAA, AFDC, AB, APTD, or AABD if the State's 
plan under those programs did not contain eligibility requirements more 
restrictive than, or in addition to, those required under the 
appropriate title of the Act. (For example, the agency may provide 
Medicaid to individuals who would meet the Federal definition of 
disability, 45 CFR 233.80, but who do not meet the State's more 
restrictive definitions.)
    (b) The agency may cover one or more optional groups under any of 
the titles of the Act without covering all such groups.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47990, Sept. 30, 1981; 58 FR 4935, Jan. 19, 1993]



Sec.  436.217  Individuals receiving home and community-based services.

    The agency may provide Medicaid to any group or groups of 
individuals in the community who meet the following requirements:
    (a) The group would be eligible for Medicaid if institutionalized.
    (b) In the absence of home and community-based services under a 
waiver granted under part 441--
    (1) Subpart G of this subchapter, the group would otherwise require 
the level of care furnished in a hospital, NF, or an ICF/IIDICF/IID; or
    (2) Subpart H of this subchapter, the group would otherwise require 
the level of care furnished in a NF and are age 65 or older.

[[Page 226]]

    (c) The group receives the waivered services.

[57 FR 29155, June 30, 1992]



Sec.  436.220  Individuals who would meet the income and resource
requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified underSec. 436.201(a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's AFDC 
plan if their work-related child care costs were paid from their 
earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4935, Jan. 19, 1993]



Sec.  436.222  Individuals under age 21 who meet the income and 
resource requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or 
at State option, under age 20, 19, or 18) or reasonable categories of 
these individuals as specified in paragraph (b) of this section, who are 
not receiving cash assistance but who meet the income and resource 
requirements of the State's approved AFDC plan.
    (b) The agency may cover all individuals described in paragraph (a) 
of this section or reasonable classifications of those individuals. 
Examples of reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals of the same age in foster homes or private institutions by 
private nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
individuals with intellectual disabilities.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]



Sec.  436.224  Individuals under age 21 who are under State adoption
assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance has 
determined, cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the foster care program were used without employing the 
threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraph (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid

[[Page 227]]

before the adoption assistance agreement was entered into.

[55 FR 48610, Nov. 21, 1990]



Sec.  436.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined inSec. 436.3; or
    (b) Reasonable categories of these individuals.

[66 FR 2668, Jan. 11, 2001]

          Options for Coverage of the Aged, Blind, and Disabled



Sec.  436.230  Essential spouses of aged, blind, or disabled 
individuals receiving cash assistance.

    The agency may provide Medicaid to the spouse of an individual 
receiving OAA, AB, APTD, or AABD, if--
    (a) The spouse is living with the individual receiving cash 
assistance;
    (b) The cash assistance agency has determined that the spouse is 
essential to the well-being of the individual and has considered the 
spouse's needs in determining the amount of cash assistance provided to 
the individual.



           Subpart D_Optional Coverage of the Medically Needy



Sec.  436.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec.  436.301  General rules.

    (a) A Medicaid agency may provide Medicaid to individuals specified 
in this subpart who:
    (1) Either:
    (i) Have income that meets the standard inSec. 436.811; or
    (ii) If their income is more than allowed under the standard, have 
incurred medical expenses at least equal to the difference between their 
income and the applicable income standards; and
    (2) Have resources that meet the standard in Sec.Sec. 436.840 and 
436.843.
    (b) If the agency chooses this option, the following provisions 
apply:
    (1) The agency must provide Medicaid to the following individuals 
who meet the requirements of paragraph (a) of this section:
    (i) All pregnant women during the course of their pregnancy who, 
except for income and resources, would be eligible for Medicaid as 
mandatory or optional categorically needy under subparts B and C of this 
part;
    (ii) All individuals under 18 years of age who, except for income 
and resources, would be eligible for Medicaid as mandatory categorically 
needy under subpart B of this part;
    (iii) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and receiving Medicaid on the 
date of the child's birth. The child is deemed to have applied and been 
found eligible for Medicaid on the date of birth and remains eligible as 
medically needy for ne year so long as the woman remains eligible and 
the child is a member of the woman's household. If the woman's basis of 
eligibility changes to categorically needy, the child is eligible as 
categorically needy underSec. 436.124. The woman is considered to 
remain eligible if she meets the spend-down requirements in any 
consecutive budget period following the birth of the child.
    (iv) Women who, while pregnant, applied for, were eligible for, and 
received Medicaid services as medically needed on the day that their 
pregnancy ends. The agency must provide medically needy eligibility to 
these women for an extended period following termination of pregnancy. 
This period begins on the last day of the pregnancy and extends through 
the end of the month in which a 60-day period following termination of 
pregnancy ends. Eligibility must be provided, regardless of changes in 
the women's financial circumstances that may occur within this extended 
period. These women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined inSec. 
440.210(c)(1) of this subchapter).
    (2) The agency may provide Medicaid to any or all of the following 
groups of individuals:
    (i) Individuals under age 21 (Sec.  436.308).
    (ii) Specified relatives (Sec.  436.310).
    (iii) Aged (Sec.  436.320).

[[Page 228]]

    (iv) Blind (Sec.  436.321).
    (v) Disabled (Sec.  436.322).
    (3) If the agency provides Medicaid to any individual in a group 
specified in paragraph (b)(2) of this section, the agency must provide 
Medicaid to all individuals eligible to be members of that group.

[46 FR 47990, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
52 FR 43073, Nov. 9, 1987; 55 FR 48610, Nov. 21, 1990; 58 FR 4935, Jan. 
19, 1993]



Sec.  436.308  Medically needy coverage of individuals under age 21.

    (a) If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals under age 21 (or at State option, under 
age 20, 19, or 18) as specified in paragraph (b) of this section:
    (1) Who would not be covered under the mandatory medically needy 
group of individuals under 18 underSec. 436.301(b)(1)(ii); and
    (2) Who meet the income and resource requirements of subpart I of 
this part.
    (b) The agency may cover all individuals in paragraph (a) of this 
section or individuals in reasonable classifications. Examples of 
reasonable classifications are as follows:
    (1) Individuals in foster homes or private institutions for whom a 
public agency is assuming a full or partial financial responsibility. If 
the agency covers these individuals, it may also provide Medicaid to 
individuals placed in foster homes or private institutions by private 
nonprofit agencies.
    (2) Individuals in adoptions subsidized in full or in part by a 
public agency.
    (3) Individuals in nursing facilities when nursing facility services 
are provided under the plan to individuals within the age group selected 
under this provision. When the agency covers such individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
individuals with intellectual disabilities.
    (4) Individuals receiving active treatment as inpatients in 
psychiatric facilities or programs, if inpatient psychiatric services 
for individuals under 21 are provided under the plan.

[46 FR 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]



Sec.  436.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and in 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified inSec. 436.510.

[58 FR 4936, Jan. 19, 1993]



Sec.  436.320  Medically needy coverage of the aged.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals who--
    (a) Are 65 years of age and older, as provided for inSec. 436.520; 
and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.321  Medically needy coverage of the blind.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to blind individuals who meet--
    (a) The requirements for blindness, as specified in Sec.Sec. 
436.530 and 436.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.322  Medically needy coverage of the disabled.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to disabled individuals who meet--
    (a) The requirements for disability, as specified in Sec.Sec. 
436.540 and 436.541; and

[[Page 229]]

    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.330  Coverage for certain aliens.

    If an agency provides Medicaid to the medically needy, it must 
provide the services necessary for the treatment of an emergency medical 
condition, as defined inSec. 440.255(c) of this chapter to those 
aliens described inSec. 436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



               Subpart E_General Eligibility Requirements



Sec.  436.400  Scope.

    This subpart prescribes general requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of the part.



Sec.  436.401  General rules.

    (a) The agency may not impose any eligibility requirement that is 
prohibited under title XIX.
    (b) The agency must base any optional group covered under subparts B 
and C of this part on reasonable classifications that do not result in 
arbitrary or inequitable treatment of individuals and groups and are 
consistent with the objectives of title XIX.
    (c) The agency must not use requirements for determining eligibility 
for optional coverage groups that are more restrictive than those used 
under the State plans for OAA, AFDC, AB, APTD, or AABD.



Sec.  436.402  [Reserved]



Sec.  436.403  State residence.

    (a) Requirement. The agency must provide Medicaid to eligible 
residents of the State, including residents who are absent from the 
State. The conditions under which payment for service is provided to 
out-of-State residents are set forth inSec. 431.52 of this chapter.
    (b) Definition. For purposes of this section--Institution has the 
same meaning as Institution and Medical institution, as defined inSec. 
435.1010 of this chapter. For purposes of State placement, the term also 
includes ``foster care homes'', licensed as set forth in 45 CFR 1355.20, 
and providing food, shelter and supportive services to one or more 
persons unrelated to the proprietor.
    (c) Incapability of indicating intent. For purposes of this section, 
an individual is considered incapable of indicating intent if the 
individual--
    (1) Has an I.Q. of 49 or less or has a mental age of 7 or less, 
based on tests acceptable to the Intellectual Disability agency in the 
State;
    (2) Is judged legally incompetent; or
    (3) Is found incapable of indicating intent based on medical 
documentation obtained from a physician, psychologist, or other person 
licensed by the State in the field of intellectual disability.
    (d) Who is a State resident. A resident of a State is any individual 
who:
    (1) Meets the conditions in paragraphs (e) through (h) of this 
section; or
    (2) Meets the criteria specified in an interstate agreement under 
paragraph (j) of this section.
    (e) Placement by a State in an out-of-state institution--(1) General 
rule. Any agency of the State, including an entity recognized under 
State law as being under contract with the State for such purposes, that 
arranges for an individual to be placed in an institution located in 
another State, is recognized as acting on behalf of the State in making 
a placement. The State arranging or actually making the placement is 
considered as the individual's State of residence.
    (2) Any action beyond providing information to the individual and 
the individual's family would constitute arranging or making a State 
placement. However, the following actions do not constitute State 
placement:
    (i) Providing basic information to individuals about another State's 
Medicaid program, and information about the availability of health care 
services and facilities in another State.
    (ii) Assisting an individual in locating an institution in another 
State provided the individual is capable of indicating intent and 
independently decides to move.

[[Page 230]]

    (3) When a competent individual leaves the facility in which the 
individual is placed by a State, that individual's State of residency 
for Medicaid purposes is the State where the individual is physically 
located.
    (4) Where placement is initiated by a State because the State lacks 
a sufficient number of appropriate facilities to provide services to its 
residents, the State making the placement is the individual's State of 
residence for Medicaid purposes.
    (f) Individuals receiving title IV-E payments. For individuals of 
any age who are receiving Federal payment for foster care and adoption 
assistance under title IV-E of the Social Security Act, the State of 
residence is the State where the child lives.
    (g) Individuals under age 21. (1) For any individual who is 
emancipated from his or her parents or who is married and capable of 
indicating intent, the State of residence is the State where the 
individual is living with the intention to remain there permanently or 
for an indefinite period.
    (2) For any individual not residing in an institution as defined in 
paragraph (b) whose Medicaid eligibility is based on blindness or 
disability, the State of residence is the State in which the individual 
is living.
    (3) For any other non-institutionalized individual not subject to 
paragraph (h)(1) or (h)(2) of this section, the State of residence is 
determined in accordance with 45 CFR 233.40, the rules governing 
residence under the AFDC program.
    (4) For any institutionalized individual who is neither married nor 
emancipated, the State of residence is--
    (i) The parents' or legal guardian's current State of residence at 
the time of placement; or
    (ii) The current State of residence of the parent or legal guardian 
who files the application, if the individual is institutionalized in 
that State. If a legal guardian has been appointed and the parental 
rights are terminated, the State of residence of the guardian is used 
instead of the parent's.
    (iii) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (h) Individuals age 21 and over. (1) For any individual not residing 
in an institution as defined in paragraph (b), the State of residence is 
the State where the individual is--
    (i) Living with the intention to remain there permanently or for an 
indefinite period (or if incapable of stating intent, where the 
individual is living); or
    (ii) Living and which the individual entered with a job commitment 
or seeking employment (whether or not currently employed).
    (2) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--
    (i) That of the parents applying for Medicaid on the individual's 
behalf, if the parents reside in separate States;
    (ii) The parent's or legal guardian's State of residence at the time 
of placement; or
    (iii) The current State of residence of the parent or legal guardian 
who files the application, if the individual is institutionalized in 
that State. If a legal guardian has been appointed and parental rights 
are terminated, the State of residence of the guardian is used instead 
of the legal parent's.
    (iv) The State of residence of the individual or party who files an 
application is used if the individual has been abandoned by his or her 
parent(s), does not have a legal guardian and is institutionalized in 
that State.
    (3) For any institutionalized individual who became incapable of 
indicating intent at or after age 21, the State of residence is the 
State in which the individual is physically present, except where 
another State makes a placement.
    (4) For any other institutionalized individual, the State of 
residence is the State where the individual is living with the intention 
to remain there permanently or for an indefinite period.
    (i) Specific prohibitions. (1) The agency may not deny Medicaid 
eligibility because an individual has not resided in the State for a 
specified period.
    (2) The agency may not deny Medicaid eligibility to an individual in 
an

[[Page 231]]

institution, who satisfies the residency rules set forth in this 
section, on the grounds that the individual did not establish residence 
in the State before entering the institution.
    (3) The agency may not deny or terminate a resident's Medicaid 
eligibility because of that person's temporary absence from the State if 
the person intends to return when the purpose of the absence has been 
accomplished, unless another State has determined that the person is a 
resident there for purposes of Medicaid.
    (j) Interstate agreements. A State may have a written agreement with 
another State setting forth rules and procedures resolving cases of 
disputed residency. These agreements may establish criteria other than 
those specified in paragraphs (c) through (h) of this section, but must 
not include criteria that result in loss of residency in both States or 
that are prohibited by paragraph (i) of this section. The agreements 
must contain a procedure for providing Medicaid to individuals pending 
resolution of the case.

States may use interstate agreements for purposes other than cases of 
disputed residency to facilitate administration of the program, and to 
facilitate the placement and adoption of title IV-E individuals when the 
child and his or her adoptive parent(s) move into another State.
    (k) Continued Medicaid for institutionalized beneficiaries. An 
agency is providing Medicaid to an institutionalized beneficiary who, as 
a result of this section, would be considered a resident of a different 
State--
    (1) The agency must continue to provide Medicaid to that beneficiary 
from June 24, 1983 until July 5, 1984 unless it makes arrangements with 
another State of residence to provide Medicaid at an earlier date; and
    (2) Those arrangements must not include provisions prohibited by 
paragraph (g) of this section.
    (l) Cases of disputed residency. Where two or more States cannot 
resolve which State is the State of residence, the State where the 
individual is physically located is the State of residence.

[49 FR 13533, Apr. 5, 1984, as amended at 55 FR 48610, Nov. 21, 1990; 71 
FR 39225, July 12, 2006]



Sec.  436.404  Applicant's choice of category.

    The agency must allow an individual who would be eligible under more 
than one category to have his eligibility determined for the category he 
selects.



Sec.  436.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--
    (1) Citizens: (i) Under a declaration required by section 1137(d) of 
the Act that the individual is a citizen or national of the United 
States; and
    (ii) The individual has provided satisfactory documentary evidence 
of citizenship or national status, as described inSec. 435.407.
    (iii) An individual for purposes of the declaration and citizenship 
documentation requirements discussed in paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section includes both applicants and beneficiaries 
under a section 1115 demonstration (including a family planning 
demonstration project) for which a State receives Federal financial 
participation in their expenditures, as though the expenditures were for 
medical assistance.
    (iv) Individuals must declare their citizenship and the State must 
document an individual's eligibility file on initial applications and 
initial redeterminations effective July 1, 2006.
    (v) The following groups of individuals are exempt from the 
requirements in paragraph (a)(1)(ii) of this section:
    (A) Individuals receiving SSI benefits under title XVI of the Act;
    (B) Individuals entitled to or enrolled in any part of Medicare;
    (C) Individuals receiving disability insurance benefits under 
section 223 of the Act or monthly benefits under section 202 of the Act, 
based on the individual's disability (as defined in section 223(d) of 
the Act); and
    (D) Individuals who are in foster care and who are assisted under 
Title IV-B of the Act, and individuals who are beneficiaries of foster 
care maintenance or adoption assistance payments under Title IV-E of the 
Act.
    (2)(i) Except as specified in 8 U.S.C. 1612(b)(1) (permitting States 
an option with respect to coverage of certain

[[Page 232]]

qualified aliens), qualified aliens as described in section 431 of the 
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 
(8 U.S.C. 1641) (including qualified aliens subject to the 5-year bar) 
who have provided satisfactory documentary evidence of Qualified Alien 
status, which status has been verified with the Department of Homeland 
Security (DHS) under a declaration required by section 1137(d) of the 
Act that the applicant or beneficiary is an alien in a satisfactory 
immigration status.
    (ii) The eligibility of qualified aliens who are subject to the 5-
year bar in 8 U.S.C. 1613 is limited to the benefits described in 
paragraph (b) of this section.
    (b) The agency must provide payment for the services described in 
Sec.  440.255(c) of this chapter to residents of the State who otherwise 
meet the eligibility requirements of the State plan (except for receipt 
of AFDC, SSI, or State Supplementary payments) who are qualified aliens 
subject to the 5-year bar or who are non-qualified aliens who meet all 
Medicaid eligibility criteria, except non-qualified aliens need not 
present a social security number or document immigration status.

[55 FR 36820, Sept. 7, 1990, as amended at 71 FR 39225, July 12, 2006; 
72 FR 38694, July 13, 2007]



Sec.  436.407  Types of acceptable documentary evidence of citizenship.

    For purposes of this section, the term ``citizenship'' includes 
status as a ``national of the United States'' as defined by section 
101(a)(22) of the Immigration and Nationality Act (8 U.S.C.Sec. 
1101(a)(22)) to include both citizens of the United States and non-
citizen nationals of the United States.
    (a) Primary evidence of citizenship and identity. The following 
evidence must be accepted as satisfactory documentary evidence of both 
identity and citizenship:
    (1) A U.S. passport. The Department of State issues this. A U.S. 
passport does not have to be currently valid to be accepted as evidence 
of U.S. citizenship, as long as it was originally issued without 
limitation.

    Note: Spouses and children were sometimes included on one passport 
through 1980. U.S. passports issued after 1980 show only one person. 
Consequently, the citizenship and identity of the included person can be 
established when one of these passports is presented. Exception: Do not 
accept any passport as evidence of U.S. citizenship when it was issued 
with a limitation. However, such a passport may be used as proof of 
identity.

    (2) A Certificate of Naturalization (DHS Forms N-550 or N-570.) 
Department of Homeland Security issues for naturalization.
    (3) A Certificate of U.S. Citizenship (DHS Forms N-560 or N-561.) 
Department of Homeland Security issues certificates of citizenship to 
individuals who derive citizenship through a parent.
    (4) A valid State-issued driver's license, but only if the State 
issuing the license requires proof of U.S. citizenship before issuance 
of such license or obtains a social security number from the applicant 
and verifies before certification that such number is valid and assigned 
to the applicant who is a citizen. (This provision is not effective 
until such time as a State makes providing evidence of citizenship a 
condition of issuing a driver's license and evidence that the license 
holder is a citizen is included on the license or in a system of records 
available to the Medicaid agency. States must ensure that the process 
complies with this statutory provision in section 6036 of the Deficit 
Reduction Act of 2005. CMS will monitor compliance of States 
implementing this provision.)
    (b) Secondary evidence of citizenship. If primary evidence from the 
list in paragraph (a) of this section is unavailable, an applicant or 
beneficiary should provide satisfactory documentary evidence of 
citizenship from the list specified in this section to establish 
citizenship and satisfactory documentary evidence from paragraph (e) of 
this section to establish identity, in accordance with the rules 
specified in this section.
    (1) A U.S. public birth certificate showing birth in one of the 50 
States, the District of Columbia, Puerto Rico (if born on or after 
January 13, 1941), Guam (on or after April 10, 1899), the Virgin Islands 
of the U.S. (on or after January 17, 1917), American Samoa, Swain's 
Island, or the Northern Mariana Islands (after November 4, 1986

[[Page 233]]

(NMI local time)). A State, at its option, may use a cross match with a 
State vital statistics agency to document a birth record. The birth 
record document may be issued by the State, Commonwealth, Territory, or 
local jurisdiction. It must have been recorded before the person was 5 
years of age. A delayed birth record document that is recorded at or 
after 5 years of age is considered fourth level evidence of citizenship. 
(Note: If the document shows the individual was born in Puerto Rico, the 
Virgin Islands of the U.S., or the Northern Mariana Islands before these 
areas became part of the U.S., the individual may be a collectively 
naturalized citizen. Collective naturalization occurred on certain dates 
listed for each of the territories.) The following will establish U.S. 
citizenship for collectively naturalized individuals:
    (i) Puerto Rico:
    (A) Evidence of birth in Puerto Rico on or after April 11, 1899 and 
the applicant's statement that he or she was residing in the U.S., a 
U.S. possession, or Puerto Rico on January 13, 1941; or
    (B) Evidence that the applicant was a Puerto Rican citizen and the 
applicant's statement that he or she was residing in Puerto Rico on 
March 1, 1917 and that he or she did not take an oath of allegiance to 
Spain.
    (ii) U.S. Virgin Islands:
    (A) Evidence of birth in the U.S. Virgin Islands, and the 
applicant's statement of residence in the U.S., a U.S. possession, or 
the U.S. Virgin Islands on February 25, 1927; or
    (B) The applicant's statement indicating residence in the U.S. 
Virgin Islands as a Danish citizen on January 17, 1917 and residence in 
the U.S., a U.S. possession, or the U.S. Virgin Islands on February 25, 
1927, and that he or she did not make a declaration to maintain Danish 
citizenship; or
    (C) Evidence of birth in the U.S. Virgin Islands and the applicant's 
statement indicating residence in the U.S., a U.S. possession, or 
Territory or the Canal Zone on June 28, 1932.
    (iii) Northern Mariana Islands (NMI) (formerly part of the Trust 
Territory of the Pacific Islands (TTPI)):
    (A) Evidence of birth in the NMI, TTPI citizenship and residence in 
the NMI, the U.S., or a U.S. Territory or possession on November 3, 1986 
(NMI local time) and the applicant's statement that he or she did not 
owe allegiance to a foreign State on November 4, 1986 (NMI local time); 
or
    (B) Evidence of TTPI citizenship, continuous residence in the NMI 
since before November 3, 1981 (NMI local time), voter registration 
before January 1, 1975 and the applicant's statement that he or she did 
not owe allegiance to a foreign State on November 4, 1986 (NMI local 
time); or
    (C) Evidence of continuous domicile in the NMI since before January 
1, 1974 and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time).
    (D) Note: If a person entered the NMI as a nonimmigrant and lived in 
the NMI since January 1, 1974, this does not constitute continuous 
domicile and the individual is not a U.S. citizen.
    (2) A Certification of Report of Birth (DS-1350). The Department of 
State issues a DS-1350 to U.S. citizens in the U.S. who were born 
outside the U.S. and acquired U.S. citizenship at birth, based on the 
information shown on the FS-240. When the birth was recorded as a 
Consular Report of Birth (FS-240), certified copies of the Certification 
of Report of Birth Abroad (DS-1350) can be issued by the Department of 
State in Washington, DC. The DS-1350 contains the same information as 
that on the current version of Consular Report of Birth FS-240. The DS-
1350 is not issued outside the U.S.
    (3) A Report of Birth Abroad of a U.S. Citizen (Form FS-240). The 
Department of State consular office prepares and issues this. A Consular 
Report of Birth can be prepared only at an American consular office 
overseas while the child is under the age of 18. Children born outside 
the U.S. to U.S. military personnel usually have one of these.
    (4) A Certification of birth issued by the Department of State (Form 
FS-545 or DS-1350). Before November 1, 1990, Department of State 
consulates also issued Form FS-545 along with the prior version of the 
FS-240. In 1990, U.S. consulates ceased to issue Form FS-545. Treat an 
FS-545 the same as the DS-1350.

[[Page 234]]

    (5) A U.S. Citizen I.D. card. (This form was issued until the 1980s 
by INS. Although no longer issued, holders of this document may still 
use it consistent with the provisions of section 1903(x) of the Act.) 
INS issued the I-179 from 1960 until 1973. It revised the form and 
renumbered it as Form I-197. INS issued the I-197 from 1973 until April 
7, 1983. INS issued Form I-179 and I-197 to naturalized U.S. citizens 
living near the Canadian or Mexican border who needed it for frequent 
border crossings. Although neither form is currently issued, either form 
that was previously issued is still valid.
    (6) A Northern Mariana Identification Card (I-873). (Issued by the 
DHS to a collectively naturalized citizen of the United States who was 
born in the Northern Mariana Islands before November 4, 1986.) The 
former Immigration and Naturalization Service (INS) issued the I-873 to 
a collectively naturalized citizen of the U.S. who was born in the NMI 
before November 4, 1986. The card is no longer issued, but those 
previously issued are still valid.
    (7) An American Indian Card (I-872) issued by the Department of 
Homeland Security with the classification code ``KIC.'' (Issued by DHS 
to identify U.S. citizen members of the Texas Band of Kickapoos living 
near the United States/Mexican border.) DHS issues this card to identify 
a member of the Texas Band of Kickapoos living near the U.S./Mexican 
border. A classification code ``KIC'' and a statement on the back denote 
U.S. citizenship
    (8) A final adoption decree showing the child's name and U.S. place 
of birth. The adoption decree must show the child's name and U.S. place 
of birth. In situations where an adoption is not finalized and the State 
in which the child was born will not release a birth certificate prior 
to final adoption, a statement from a State approved adoption agency 
that shows the child's name and U.S. place of birth is acceptable. The 
adoption agency must state in the certification that the source of the 
place of birth information is an original birth certificate.
    (9) Evidence of U.S. Civil Service employment before June 1, 1976. 
The document must show employment by the U.S. government before June 1, 
1976. Individuals employed by the U.S. Civil Service prior to June 1, 
1976 had to be U.S. citizens.
    (10) U.S. Military Record showing a U.S. place of birth. T he 
document must show a U.S. place of birth (for example a DD-214 or 
similar official document showing a U.S. place of birth.)
    (11) A data verification with the Systematic Alien Verification for 
Entitlements (SAVE) Program for naturalized citizens. A State may 
conduct a verification with SAVE to determine if an individual is a 
naturalized citizen, provided that such verification is conducted 
consistent with the terms of a Memorandum of Understanding or other 
agreement with the Department of Homeland Security (DHS) authorizing 
verification of claims to U.S. citizenship through SAVE, including but 
not limited to provision of the individual's alien registration number 
if required by DHS.
    (12) Child Citizenship Act. Adopted or biological children born 
outside the United States may establish citizenship obtained 
automatically under section 320 of the Immigration and Nationality Act 
(8 U.S.C. 1431), as amended by the Child Citizenship Act of 2000 (Pub. 
L. 106-395, enacted on October 30, 2000). The State must obtain 
documentary evidence that verifies that at any time on or after February 
27, 2001, the following conditions have been met:
    (i) At least one parent of the child is a United States citizen by 
either birth or naturalization (as verified under the requirements of 
this part);
    (ii) The child is under the age of 18;
    (iii) The child is residing in the United States in the legal and 
physical custody of the U.S. citizen parent;
    (iv) The child was admitted to the United States for lawful 
permanent residence (as verified under the requirements of 8 U.S.C. 1641 
pertaining to verification of qualified alien status); and
    (v) If adopted, the child satisfies the requirements of section 
101(b)(1) of the Immigration and Nationality Act (8 U.S.C. 1101(b)(1) 
pertaining to international adoptions (admission for lawful permanent 
residence as IR-3 (child adopted outside the United States)), or as IR-4 
(child coming to the United

[[Page 235]]

States to be adopted) with final adoption having subsequently occurred).
    (c) Third level evidence of citizenship. Third level evidence of 
U.S. citizenship is documentary evidence of satisfactory reliability 
that is used when both primary and secondary evidence is unavailable. 
Third level evidence may be used only when the applicant or beneficiary 
alleges birth in the U.S. A second document from paragraph (e) of this 
section to establish identity must also be presented:
    (1) Extract of a hospital record on hospital letterhead established 
at the time of the person's birth that was created 5 years before the 
initial application date and that indicates a U.S. place of birth. (For 
children under 16 the document must have been created near the time of 
birth or 5 years before the date of application.) Do not accept a 
souvenir ``birth certificate'' issued by the hospital.
    (2) Life, health, or other insurance record showing a U.S. place of 
birth that was created at least 5 years before the initial application 
date that indicates a U.S. place of birth. (For children under 16 the 
document must have been created near the time of birth or 5 years before 
the date of application.) Life or health insurance records may show 
biographical information for the person including place of birth; the 
record can be used to establish U.S. citizenship when it shows a U.S. 
place of birth.
    (3) Religious record recorded in the U.S. within 3 months of birth 
showing the birth occurred in the U.S. and showing either the date of 
the birth or the individual's age at the time the record was made. The 
record must be an official record recorded with the religious 
organization. Caution: In questionable cases (for example, where the 
child's religious record was recorded near a U.S. international border 
and the child may have been born outside the U.S.), the State must 
consider verifying the religious record and/or documenting that the 
mother was in the U.S. at the time of the birth.
    (4) Early school record showing a U.S. place of birth. The school 
record must show the name of the child, the date of admission to the 
school, the date of birth (or age at the time the record was made), a 
U.S. place of birth, and the name(s) and place(s) of birth of the 
applicant's parents.
    (d) Fourth level evidence of citizenship. Fourth level evidence of 
citizenship is documentary evidence of the lowest reliability. Fourth 
level evidence should only be used in the rarest of circumstances. This 
level of evidence is used only when primary, secondary and third level 
evidence is unavailable. With the exception of the affidavit process 
described in paragraph (d)(5) of this section, the applicant may only 
use fourth level evidence of citizenship if alleging a U.S. place of 
birth. In addition, a second document establishing identity must be 
presented as described in paragraph (e) of this section
    (1) Federal or State census record showing U.S. citizenship or a 
U.S. place of birth. (Generally for persons born 1900 through 1950.) The 
census record must also show the applicant's age.

    Note: Census records from 1900 through 1950 contain certain 
citizenship information. To secure this information the applicant, 
beneficiary or State should complete a Form BC-600, Application for 
Search of Census Records for Proof of Age. Add in the remarks portion 
``U.S. citizenship data requested.'' Also add that the purpose is for 
Medicaid eligibility. This form requires a fee.

    (2) One of the following documents that show a U.S. place of birth 
and was created at least 5 years before the application for Medicaid. 
(For children under 16 the document must have been created near the time 
of birth or 5 years before the date of application.) This document must 
be one of the following and show a U.S. place of birth:
    (i) Seneca Indian tribal census.
    (ii) Bureau of Indian Affairs tribal census records of the Navajo 
Indians.
    (iii) U.S. State Vital Statistics official notification of birth 
registration.
    (iv) A delayed U.S. public birth record that is recorded more than 5 
years after the person's birth.
    (v) Statement signed by the physician or midwife who was in 
attendance at the time of birth.
    (vi) The Roll of Alaska Natives maintained by the Bureau of Indian 
Affairs.
    (3) Institutional admission papers from a nursing facility, skilled 
care facility or other institution created at

[[Page 236]]

least 5 years before the initial application date that indicates a U.S. 
place of birth. Admission papers generally show biographical information 
for the person including place of birth; the record can be used to 
establish U.S. citizenship when it shows a U.S. place of birth.
    (4) Medical (clinic, doctor, or hospital) record created at least 5 
years before the initial application date that indicates a U.S. place of 
birth. (For children under 16 the document must have been created near 
the time of birth or 5 years before the date of application.) Medical 
records generally show biographical information for the person including 
place of birth; the record can be used to establish U.S. citizenship 
when it shows a U.S. place of birth. (Note: An immunization record is 
not considered a medical record for purposes of establishing U.S. 
citizenship.)
    (5) Written affidavit. Affidavits should ONLY be used in rare 
circumstances. If the documentation requirement needs to be met through 
affidavits, the following rules apply:
    (i) There must be at least two affidavits by two individuals who 
have personal knowledge of the event(s) establishing the applicant's or 
beneficiary's claim of citizenship (the two affidavits could be combined 
in a joint affidavit).
    (ii) At least one of the individuals making the affidavit cannot be 
related to the applicant or beneficiary. Neither of the two individuals 
can be the applicant or beneficiary.
    (iii) In order for the affidavit to be acceptable the persons making 
them must be able to provide proof of their own citizenship and 
identity.
    (iv) If the individual(s) making the affidavit has (have) 
information which explains why documentary evidence establishing the 
applicant's claim or citizenship does not exist or cannot be readily 
obtained, the affidavit should contain this information as well.
    (v) The State must obtain a separate affidavit from the applicant/
beneficiary or other knowledgeable individual (guardian or 
representative) explaining why the evidence does not exist or cannot be 
obtained.
    (vi) The affidavits must be signed under penalty of perjury and need 
not be notarized.
    (e) Evidence of identity. The following documents may be accepted as 
proof of identity and must accompany a document establishing citizenship 
from the groups of documentary evidence of citizenship in the groups in 
paragraphs (b) through (d) of this section.
    (1) Identity documents described in 8 CFR 274a.2(b)(1)(v)(B)(1).
    (i) Driver's license issued by State or Territory either with a 
photograph of the individual or other identifying information of the 
individual such as name, age, sex, race, height, weight, or eye color.
    (ii) School identification card with a photograph of the individual.
    (iii) U.S. military card or draft record.
    (iv) Identification card issued by the Federal, State, or local 
government with the same information included on driver's licenses.
    (v) Military dependent's identification card.
    (vi) Certificate of Degree of Indian Blood, or other American 
Indian/Alaska Native Tribal document with a photograph or other personal 
identifying information relating to the individual. Acceptable if the 
document carries a photograph of the applicant or beneficiary, or has 
other personal identifying information relating to the individual such 
as age, weight, height, race, sex, and eye color.
    (vii) U.S. Coast Guard Merchant Mariner card.

    Note to paragraph (e)(1): Exception: Do not accept a voter's 
registration card or Canadian driver's license as listed in 8 CFR 
274a.2(b)(1)(v)(B)(1). CMS does not view these as reliable for identity.

    (2) At State option, a State may use a cross match with a Federal or 
State governmental, public assistance, law enforcement or corrections 
agency's data system to establish identity if the agency establishes and 
certifies true identity of individuals. Such agencies may include food 
stamps, child support, corrections, including juvenile detention, motor 
vehicle, or child protective services. The State Medicaid Agency is 
still responsible for assuring

[[Page 237]]

the accuracy of the identity determination.
    (3) At State option, a State may accept three or more documents that 
together reasonably corroborate the identity of an individual provided 
such documents have not been used to establish the individual's 
citizenship and the individual submitted second or third tier evidence 
of citizenship. The State must first ensure that no other evidence of 
identity is available to the individual prior to accepting such 
documents. Such documents must at a minimum contain the individual's 
name, plus any additional information establishing the individual's 
identity. All documents used must contain consistent identifying 
information. These documents include employer identification cards, high 
school and college diplomas from accredited institutions (including 
general education and high school equivalency diplomas), marriage 
certificates, divorce decrees, and property deeds/titles.
    (f) Special identity rules for children. For children under 16, a 
clinic, doctor, hospital or school record may be accepted for purposes 
of establishing identity. School records may include nursery or daycare 
records and report cards. If the State accepts such records, it must 
verify them with the issuing school. If none of the above documents in 
the preceding groups are available, an affidavit may be used. An 
affidavit is only acceptable if it is signed under penalty of perjury by 
a parent, guardian or caretaker relative (as defined in the regulations 
at 45 CFR 233.90(c)(v)) stating the date and place of the birth of the 
child and cannot be used if an affidavit for citizenship was provided. 
The affidavit is not required to be notarized. A State may accept an 
identity affidavit on behalf of a child under the age of 18 in instances 
when school ID cards and drivers' licenses are not available to the 
individual in that area until that age.
    (g) Special identity rules for disabled individuals in institutional 
care facilities. A State may accept an identity affidavit signed under 
penalty of perjury by a residential care facility director or 
administrator on behalf of an institutionalized individual in the 
facility. States should first pursue all other means of verifying 
identity prior to accepting an affidavit. The affidavit is not required 
to be notarized.
    (h) Special populations needing assistance. States must assist 
individuals to secure satisfactory documentary evidence of citizenship 
when because of incapacity of mind or body the individual would be 
unable to comply with the requirement to present satisfactory 
documentary evidence of citizenship in a timely manner and the 
individual lacks a representative to assist him or her.
    (i) Documentary evidence. (1) All documents must be either originals 
or copies certified by the issuing agency. Uncertified copies, including 
notarized copies, shall not be accepted.
    (2) States must maintain copies of citizenship and identification 
documents in the case record or electronic data base and make these 
copies available for compliance audits.
    (3) States may permit applicants and beneficiaries to submit such 
documentary evidence without appearing in person at a Medicaid office. 
States may accept original documents in person, by mail, or by a 
guardian or authorized representative.
    (4) If documents are determined to be inconsistent with pre-existing 
information, are counterfeit, or altered, States should investigate for 
potential fraud and abuse, including but not limited to, referral to the 
appropriate State and Federal law enforcement agencies.
    (5) Presentation of documentary evidence of citizenship is a one 
time activity; once a person's citizenship is documented and recorded in 
a State database subsequent changes in eligibility should not require 
repeating the documentation of citizenship unless later evidence raises 
a question of the person's citizenship. The State need only check its 
databases to verify that the individual already established citizenship.
    (6) CMS requires that as a check against fraud, using currently 
available automated capabilities, States will conduct a match of the 
applicant's name against the corresponding Social Security number that 
was provided. In addition, in cooperation with other agencies of the 
Federal government,

[[Page 238]]

CMS encourages States to use automated capabilities to verify 
citizenship and identity of Medicaid applicants. Automated capabilities 
may fall within the computer matching provisions of the Privacy Act of 
1974, and CMS will explore any implementation issues that may arise with 
respect to those requirements. When these capabilities become available, 
States will be required to match files for individuals who used third or 
fourth tier documents to verify citizenship and documents to verify 
identity, and CMS will make available to States necessary information in 
this regard. States must ensure that all case records within this 
category will be so identified and made available to conduct these 
automated matches. CMS may also require States to match files for 
individuals who used first or second level documents to verify 
citizenship as well. CMS may provide further guidance to States with 
respect to actions required in a case of a negative match.
    (j) Record retention. The State must retain documents in accordance 
with 45 CFR 74.53.
    (k) Reasonable opportunity to present satisfactory documentary 
evidence of citizenship. States must give an applicant or beneficiary a 
reasonable opportunity to submit satisfactory documentary evidence of 
citizenship before taking action affecting the individual's eligibility 
for Medicaid. The time States give for submitting documentation of 
citizenship should be consistent with the time allowed to submit 
documentation to establish other facets of eligibility for which 
documentation is requested. (SeeSec. 435.930 andSec. 435.911 of this 
chapter.)

[71 FR 39226, July 12, 2006, as amended at 72 FR 38695, July 13, 2007]



Sec.  436.408  [Reserved]



       Subpart F_Categorical Requirements for Medicaid Eligibility



Sec.  436.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part.

                               Dependency



Sec.  436.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures used under the State's 
AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4936, Jan. 19, 1993]

                                   Age



Sec.  436.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4936, Jan. 19, 1993]



Sec.  436.522  Determination of age.

    (a) In determining age, the agency must use the common law method 
(under which an age is reached the day before the anniversary of birth) 
or the popular usage method (under which a specific age is reached on 
the anniversary of birth), whichever is used under the corresponding 
State plan for OAA, AFDC, AB, APTD, or AABD.
    (b) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4936, Jan. 19, 1993]

                                Blindness



Sec.  436.530  Definition of blindness.

    (a) Definition. The agency must use the definition of blindness that 
is used in the State plan for AB or AABD.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec.  436.531  Determination of blindness.

    In determining blindness--
    (a) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine

[[Page 239]]

him, unless both of the applicant's eyes are missing;
    (b) The examiner must submit a report of examination to the Medicaid 
agency; and
    (c) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (1) Whether the individual meets the definition of blindness; and
    (2) Whether and when reexaminations are necessary for periodic 
redeterminations of eligibility, as required underSec. 435.916 of this 
subchapter. Blindness is considered to continue until the reviewing 
physician determines that the beneficiary's vision no longer meets the 
definition.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]

                               Disability



Sec.  436.540  Definition of disability.

    (a) Definition. The agency must use the definition of permanent and 
total disability that is used in the State plan for APTD or AABD. (See 
45 CFR 233.80(a)(1) for the Federal recommended definition of permanent 
and total disability.)
    (b) State plan requirement. The State plan must contain the 
definition of permanent and total disability.



Sec.  436.541  Determination of disability.

    (a) Basic requirements. (1) At a minimum, the agency must use the 
review team, information, and evidence requirements specified in 
paragraph (b) through (d) of this section in making a determination of 
disability.
    (2) If the requirements or determining disability under the State's 
APTD or AABD program are more restrictive than the minimum requirements 
specified in this section, the agency must use the requirements applied 
under the APTD or AABD program.
    (b) The agency must obtain a medical report and a social history for 
individuals applying for Medicaid on the basis of disability. The 
medical report must include a diagnosis based on medical evidence. The 
social history must contain enough information to enable the agency to 
determine disability.
    (c) A physician and social worker, qualified by professional 
training and experience, must review the medical report and social 
history and determine on behalf of the agency whether the individual 
meets the definition of disability. The physician must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required underSec. 435.916 of this subchapter.
    (d) In subsequently determining disability, the physician and social 
worker must review reexamination reports and the social history and 
determine whether the individual continues to meet the definition. 
Disability is considered to continue until this determination is made.

[54 FR 50762, Dec. 11, 1989]



    Subpart G_General Financial Eligibility Requirements and Options



Sec.  436.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part. Subparts H and I of this 
part prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the OAA, AFDC, AB, APTD, and AABD programs.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section, in determining 
financial eligibility of individuals as categorically and medically 
needy, the agency must apply the cash assistance financial methodologies 
and requirements of the cash assistance program that is most closely

[[Page 240]]

categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec.  436.602.
    (d) Use of less restrictive methodologies than under cash assistance 
program. (1) At State option, and subject to the conditions of 
paragraphs (d)(2) through (d)(5) of this section, the agency may apply 
income and resource methodologies that are less restrictive than the 
cash assistance methodologies in determining financial eligibility of 
the following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group underSec. 436.120;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i) (IV), (VI), and (VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act; and
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals under paragraph (c)(1) of this section 
may be less restrictive, but no more restrictive, than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind, or disabled, or AFDC-related) within each eligibility group. 
For example, if the agency chooses to apply a less restrictive income or 
resource methodology to aged individuals, it must apply that methodology 
to an eligibility group of all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded bySec. 436.602 in determining financial 
eligibility of individuals, the agency will apply the cash assistance 
financial methodologies and requirements, unless the agency chooses to 
apply less restrictive income and resource methodologies, in accordance 
with paragraph (d) of this section.
    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will used; and
    (ii) The eligibility groups or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.602  Financial responsibility of relatives and other 
individuals.

    (a) Subject to the provisions of paragraphs (b) and (c) of this 
section, in determining financial responsibility of relatives and other 
persons for individuals under Medicaid, the agency must use the 
following financial eligibility requirements and methodologies.
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies include considering the income and resources of parents or 
spouses whose income and resources would be considered if the individual 
under age 21 were dependent under the State's approved AFDC plan,

[[Page 241]]

whether or not they are actually contributed. These requirements and 
methodologies must be applied in accordance with provisions of the 
State's approved AFDC plan.
    (3) When a couple ceases to live together, the agency must count 
only the income and resources of the individual in determining his or 
her eligibility, beginning the first month following the month the 
couple ceases to live together.
    (b) The agency may apply income and resource methodologies that are 
less restrictive than the cash assistance methodologies as specified in 
the State plan in accordance withSec. 436.601(d).
    (c) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.604  [Reserved]



Sec.  436.606  [Reserved]



Sec.  436.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and beneficiaries to take all necessary steps to obtain any 
annuities, pensions, and retirement and disability benefits to which 
they are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, and retirement and disability benefits 
include, but are not limited to, veterans' compensation and pensions, 
OASDI benefits, railroad retirement benefits, and unemployment 
compensation.

[43 FR 45218, Sept. 29, 1978. Redesignated at 58 FR 4937, Jan. 19, 1993]



Sec.  436.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and beneficiaries to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902(l)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; and
    (3) Cooperate in identifying and providing information to assist the 
Medicaid agency in pursuing third parties who may be liable to pay for 
care and services under the plan, unless the individual establishes good 
cause for not cooperating.
    (b) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for assignment 
of rights to medical support and other payments and cooperation in 
obtaining medical support and payments are effective for medical 
assistance furnished on or after October 1, 1984. The requirement for 
cooperation in identifying and providing information for pursuing liable 
third parties is effective for medical assistance furnished on or after 
July 1, 1986.

[55 FR 48610, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990, as amended at 
58 FR 4908, Jan. 19, 1993. Redesignated at 58 FR 4937, Jan. 19, 1993]

Subpart H [Reserved]



        Subpart I_Financial Requirements for the Medically Needy



Sec.  436.800  Scope.

    This subpart prescribes financial requirements for determining the 
eligibility of medically needy individuals under subpart D of this part.

                     Medically Needy Income Standard



Sec.  436.811  Medically needy income standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
agency must use a single income standard for all covered medically needy 
groups that meets the requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. The standard may not diminish by the number of 
persons in the unit (for example, if the income level in the standard 
for an assistance

[[Page 242]]

unit of two is set at $400, the income level in the standard for an 
assistance unit of three may not be less than $400).
    (c) The income standard must be set at an amount that is no lower 
than the lowest income standard used on or after January 1, 1966, to 
determine eligibility under the cash assistance programs that are 
related to the State's covered medically needy group or groups of 
individuals underSec. 436.301.
    (d) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4938, Jan. 19, 1993]



Sec.  436.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses



Sec.  436.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency must include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec.  435.914. The budget period can begin no earlier then the first 
month in the retroactive period in which the individual received covered 
services.
    (3) If the agency elects to begin the first budget period for the 
medically needy in any month of the 3-month period prior to the date of 
application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must, to determine 
countable income, deduct amounts that would be deducted in determining 
eligibility under the State's approved plan for OAA, AFDC, AB, APTD, or 
AABD.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard underSec. 436.814, the individual is 
eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f) and (g) of this section and deduct those expenses in 
accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed underSec. 447.51 orSec. 447.53 of 
this chapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration or scope of services;
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or

[[Page 243]]

unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such budget period and any of the 3 preceding months, whether paid or 
unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income, to the 
extent that such expenses are unpaid and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Are carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses to be deducted from 
income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the agency and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application; and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section, in the order prescribed under one of the following three 
options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed agency limitations on amount, 
duration, or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance, or 
deductibles charges the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.

[[Page 244]]

    (i) Eligibility based on incurred medical expenses. (1) Whether a 
State elects partial or full month coverage, an individual who is 
expected to contribute a portion of his or her income toward the costs 
of institutional care or home and community-based services underSec. 
436.832 is eligible on the first day of the applicable budget 
(spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses underSec. 
436.832 greater than the individual's contributable income determined 
under this section.
    (2) At the end of the prospective period specified in paragraph 
(f)(2) or (f)(3) of this section and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, if 
agencies elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, if 
agencies elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. Therefore, to the extent necessary to prevent the 
transfer of an individual's spenddown liability to the Medicaid program, 
States must reduce the amount of provider charges that would otherwise 
be reimbursable under Medicaid.

[59 FR 1674, Jan. 12, 1994]

    Effective Date Note: At 78 FR 42305, July 15, 2013,Sec. 436.831 
was amended by removing the reference ``Sec.  447.51 orSec. 447.53'' 
and by adding in its place the reference ``Sec.  447.52,,Sec. 447.53, 
orSec. 447.54'', effective Jan. 1, 2014.



Sec.  436.832  Post-eligibility treatment of income of institutionalized
individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, or disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable

[[Page 245]]

assessment of need but must not exceed the higher of--
    (i) The amount of the highest need standard for an individual 
without income and resources under the State's approved plan for OAA, 
AFDC, AB, APTD, or AABD; or
    (ii) The amount of the highest medically needy income standard for 
one person established underSec. 436.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
Medicaid plan, as provided for inSec. 436.811.
    (B) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24888, Apr. 11, 1980, as amended at 46 FR 47991, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3597, Feb. 8, 1988; 56 FR 8851, 8854, 
Mar. 1, 1991; 58 FR 4938, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec.  436.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
Medicaid agency must use a single resource standard that is set at an 
amount that is no lower than the lowest resource standard used on or 
after January 1, 1966, to determine eligibility under the cash 
assistance programs that are related to the State's covered medically 
needy group or groups of individuals underSec. 436.301.
    (b) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource level in the standard for an 
assistance unit of

[[Page 246]]

three may not be less than that set for an assistance unit of two.

[58 FR 4938, Jan. 19, 1993]



Sec.  436.843  Medically needy resource standard: State plan 
requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec.  436.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must--
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives underSec. 436.602;
    (b) Consider only resources available during the period for which 
income is computed underSec. 436.831(a);
    (c) Deduct the value of resources that would be deducted in 
determining eligibility under the State's plan for OAA, AFDC, AB, APTD, 
or AABD or under the State's less restrictive financial methodology 
specified in the State Medicaid plan in accordance withSec. 436.601. 
In determining the amount of an individual's resources for Medicaid 
eligibility, States must count amounts of resources that otherwise would 
not be counted under the conditional eligibility provisions of the AFDC 
program.
    (d) Apply the resource standards established underSec. 436.840.

[43 FR 45218, Sept. 29, 1978, as amended at 46 FR 47992, Sept. 30, 1981; 
58 FR 4938, Jan. 19, 1993]



   Subpart J_Eligibility in Guam, Puerto Rico, and the Virgin Islands

    Source: 44 FR 17939, Mar. 23, 1979, unless otherwise noted.



Sec.  436.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.



Sec.  436.901  General requirements.

    The Medicaid agency must comply with all the requirements of part 
435, subpart J, of this subchapter, except those specified inSec. 
435.909.



Sec.  436.909  Automatic entitlement to Medicaid following
a determination of eligibility under other programs.

    The agency may not require a separate application for Medicaid from 
an individual if the individual receives cash assistance under a State 
plan for OAA, AFDC, AB, APTD, or AABD.



             Subpart K_Federal Financial Participation (FFP)



Sec.  436.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP for Expenditures for Determining Eligibility and Providing Services



Sec.  436.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45218, Sept. 29, 1978, as amended at 66 FR 2668, Jan. 11, 2001]



Sec.  436.1002  FFP for services.

    (a) FFP is available in expenditures for Medicaid services for all 
beneficiaries whose coverage is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
beneficiaries who were eligible for Medicaid in the

[[Page 247]]

month in which the medical care or services were provided, except that, 
for beneficiaries who establish eligibility for Medicaid by deducting 
incurred medical expenses from income, FFP is not available for expenses 
that are the beneficiary's liability.
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17940, Mar. 23, 1979; 
66 FR 2669, Jan. 11, 2001]



Sec.  436.1003  beneficiaries overcoming certain conditions of eligibility.

    FFP is available for a temporary period specified in the State plan 
in expenditures for services provided to beneficiaries who are 
overcoming certain eligibility conditions, including blindness, 
disability, continued absence or incapacity of a parent, or unemployment 
of a parent.

[45 FR 24888, Apr. 11, 1980]



Sec.  436.1004  FFP in expenditures for medical assistance for
individuals who have declared United States citizenship or nationality
under section 1137(d) of the Act and with respect to whom the State 
has not documented citizenship and identity.

    Except for individuals described inSec. 436.406(a)(1)(v), FFP will 
not be available to a State with respect to expenditures for medical 
assistance furnished to individuals unless the State has obtained 
satisfactory documentary evidence of citizenship or national status, as 
described inSec. 436.407 of this chapter that complies with the 
requirements of section 1903(x) of the Act.

[72 FR 38697, July 13, 2007]



Sec.  436.1005  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec.  435.1010 of this chapter; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services underSec. 440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not considered to be a patient in 
that institution. However, such an individual who is under age 22 and 
has been receiving inpatient pyschiatric services underSec. 440.160 of 
this subchapter is considered to be a patient in the institution until 
he is unconditionally released or, if earlier, the date he reaches age 
22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13200, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985. Redesignated and amended at 71 FR 39229, 
July 12, 2006]



Sec.  436.1006  Definitions relating to institutional status.

    For purposes of FFP, the definitions inSec. 435.1010 of this 
chapter apply to this part.

[44 FR 17939, Mar. 23, 1979. Redesignated and amended at 71 FR 39229, 
July 12, 2006]



             Subpart L_Option for Coverage of Special Groups

    Source: 66 FR 2669, Jan. 11, 2001, unless otherwise noted.



Sec.  436.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.

[[Page 248]]

    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec.  436.1101  Definitions related to presumptive eligibility period 
for children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or
    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under this title, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter.)

[66 FR 2669, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec.  436.1102  General rules.

    (a) The agency may provide services to children under age 19 during 
one or more periods of presumptive eligibility following a determination 
made by a qualified entity that the child's estimated gross family 
income or, at the State's option, the child's estimated family income 
after applying simple disregards, does not exceed the applicable income 
standard.
    (b) If the agency elects to provide services to children during a 
period of

[[Page 249]]

presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a Medicaid 
application form;
    (iii) Within 5 working days after the date that the determination is 
made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last day of the following month, the child's presumptive eligibility 
will end on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application; 
and
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and
    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency; and
    (3) Provide all services covered under the plan, including EPSDT.
    (4) Allow determinations of presumptive eligibility to be made by 
qualified entities on a Statewide basis.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.



PART 438_MANAGED CARE--Table of Contents



                      Subpart A_General Provisions

Sec.
438.1 Basis and scope.
438.2 Definitions.
438.6 Contract requirements.
438.8 Provisions that apply to PIHPs and PAHPs.
438.10 Information requirements.
438.12 Provider discrimination prohibited.

                    Subpart B_State Responsibilities

438.50 State Plan requirements.
438.52 Choice of MCOs, PIHPs, PAHPs, and PCCMs.
438.56 Disenrollment: Requirements and limitations.
438.58 Conflict of interest safeguards.
438.60 Limit on payment to other providers.
438.62 Continued services to beneficiaries.
438.66 Monitoring procedures.

                Subpart C_Enrollee Rights and Protections

438.100 Enrollee rights.
438.102 Provider-enrollee communications.
438.104 Marketing activities.
438.106 Liability for payment.
438.108 Cost sharing.
438.114 Emergency and poststabilization services.
438.116 Solvency standards.

        Subpart D_Quality Assessment and Performance Improvement

438.200 Scope.
438.202 State responsibilities.
438.204 Elements of State quality strategies.

                            Access Standards

438.206 Availability of services.
438.207 Assurances of adequate capacity and services.
438.208 Coordination and continuity of care.
438.210 Coverage and authorization of services.

                    Structure and Operation Standards

438.214 Provider selection.
438.218 Enrollee information.
438.224 Confidentiality.
438.226 Enrollment and disenrollment.
438.228 Grievance systems.
438.230 Subcontractual relationships and delegation.

                  Measurement and Improvement Standards

438.236 Practice guidelines.
438.240 Quality assessment and performance improvement program.
438.242 Health information systems.

[[Page 250]]

                    Subpart E_External Quality Review

438.310 Basis, scope, and applicability.
438.320 Definitions.
438.350 State responsibilities.
438.352 External quality review protocols.
438.354 Qualifications of external quality review organizations.
438.356 State contract options.
438.358 Activities related to external quality review.
438.360 Nonduplication of mandatory activities.
438.362 Exemption from external quality review.
438.364 External quality review results.
438.370 Federal financial participation.

                       Subpart F_Grievance System

438.400 Statutory basis and definitions.
438.402 General requirements.
438.404 Notice of action.
438.406 Handling of grievances and appeals.
438.408 Resolution and notification: Grievances and appeals.
438.410 Expedited resolution of appeals.
438.414 Information about the grievance system to providers and 
          subcontractors.
438.416 Recordkeeping and reporting requirements.
438.420 Continuation of benefits while the MCO or PIHP appeal and the 
          State fair hearing are pending.
438.424 Effectuation of reversed appeal resolutions.

Subpart G [Reserved]

             Subpart H_Certifications and Program Integrity

438.600 Statutory basis.
438.602 Basic rule.
438.604 Data that must be certified.
438.606 Source, content, and timing of certification.
438.608 Program integrity requirements.
438.610 Prohibited affiliations with individuals debarred by Federal 
          agencies.

                           Subpart I_Sanctions

438.700 Basis for imposition of sanctions.
438.702 Types of intermediate sanctions.
438.704 Amounts of civil money penalties.
438.706 Special rules for temporary management.
438.708 Termination of an MCO or PCCM contract.
438.710 Due process: Notice of sanction and pre-termination hearing.
438.722 Disenrollment during termination hearing process.
438.724 Notice to CMS.
438.726 State plan requirement.
438.730 Sanction by CMS: Special rules for MCOs.

        Subpart J_Conditions for Federal Financial Participation

438.802 Basic requirements.
438.804 Primary care provider payment increases.
438.806 Prior approval.
438.808 Exclusion of entities.
438.810 Expenditures for enrollment broker services.
438.812 Costs under risk and nonrisk contracts.

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

    Source: 67 FR 41095, June 14, 2002, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  438.1  Basis and scope.

    (a) Statutory basis. This part is based on sections 1902(a)(4), 
1903(m), 1905(t), and 1932 of the Act.
    (1) Section 1902(a)(4) requires that States provide for methods of 
administration that the Secretary finds necessary for proper and 
efficient operation of the State plan. The application of the 
requirements of this part to PIHPs and PAHPs that do not meet the 
statutory definition of an MCO or a PCCM is under the authority in 
section 1902(a)(4).
    (2) Section 1903(m) contains requirements that apply to 
comprehensive risk contracts.
    (3) Section 1903(m)(2)(H) provides that an enrollee who loses 
Medicaid eligibility for not more than 2 months may be enrolled in the 
succeeding month in the same MCO or PCCM if that MCO or PCCM still has a 
contract with the State.
    (4) Section 1905(t) contains requirements that apply to PCCMs.
    (5) Section 1932--
    (i) Provides that, with specified exceptions, a State may require 
Medicaid beneficiaries to enroll in MCOs or PCCMs;
    (ii) Establishes the rules that MCOs, PCCMs, the State, and the 
contracts between the State and those entities must meet, including 
compliance with requirements in sections 1903(m) and 1905(t) of the Act 
that are implemented in this part;
    (iii) Establishes protections for enrollees of MCOs and PCCMs;

[[Page 251]]

    (iv) Requires States to develop a quality assessment and performance 
improvement strategy;
    (v) Specifies certain prohibitions aimed at the prevention of fraud 
and abuse;
    (vi) Provides that a State may not enter into contracts with MCOs 
unless it has established intermediate sanctions that it may impose on 
an MCO that fails to comply with specified requirements; and
    (vii) Makes other minor changes in the Medicaid program.
    (b) Scope. This part sets forth requirements, prohibitions, and 
procedures for the provision of Medicaid services through MCOs, PIHPs, 
PAHPs, and PCCMs. Requirements vary depending on the type of entity and 
on the authority under which the State contracts with the entity. 
Provisions that apply only when the contract is under a mandatory 
managed care program authorized by section 1932(a)(1)(A) of the Act are 
identified as such.



Sec.  438.2  Definitions.

    As used in this part--
    Capitation payment means a payment the State agency makes 
periodically to a contractor on behalf of each beneficiary enrolled 
under a contract for the provision of medical services under the State 
plan. The State agency makes the payment regardless of whether the 
particular beneficiary receives services during the period covered by 
the payment.
    Comprehensive risk contract means a risk contract that covers 
comprehensive services, that is, inpatient hospital services and any of 
the following services, or any three or more of the following services:
    (1) Outpatient hospital services.
    (2) Rural health clinic services.
    (3) FQHC services.
    (4) Other laboratory and X-ray services.
    (5) Nursing facility (NF) services.
    (6) Early and periodic screening, diagnostic, and treatment (EPSDT) 
services.
    (7) Family planning services.
    (8) Physician services.
    (9) Home health services.
    Federally qualified HMO means an HMO that CMS has determined is a 
qualified HMO under section 1310(d) of the PHS Act.
    Health care professional means a physician or any of the following: 
a podiatrist, optometrist, chiropractor, psychologist, dentist, 
physician assistant, physical or occupational therapist, therapist 
assistant, speech-language pathologist, audiologist, registered or 
practical nurse (including nurse practitioner, clinical nurse 
specialist, certified registered nurse anesthetist, and certified nurse 
midwife), licensed certified social worker, registered respiratory 
therapist, and certified respiratory therapy technician.
    Health insuring organization (HIO) means a county operated entity, 
that in exchange for capitation payments, covers services for 
beneficiaries--
    (1) Through payments to, or arrangements with, providers;
    (2) Under a comprehensive risk contract with the State; and
    (3) Meets the following criteria--
    (i) First became operational prior to January 1, 1986; or
    (ii) Is described in section 9517(e)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as amended by section 4734 of the Omnibus 
Budget Reconciliation Act of 1990).
    Managed care organization (MCO) means an entity that has, or is 
seeking to qualify for, a comprehensive risk contract under this part, 
and that is--
    (1) A Federally qualified HMO that meets the advance directives 
requirements of subpart I of part 489 of this chapter; or
    (2) Any public or private entity that meets the advance directives 
requirements and is determined to also meet the following conditions:
    (i) Makes the services it provides to its Medicaid enrollees as 
accessible (in terms of timeliness, amount, duration, and scope) as 
those services are to other Medicaid beneficiaries within the area 
served by the entity.
    (ii) Meets the solvency standards ofSec. 438.116.
    Nonrisk contract means a contract under which the contractor--
    (1) Is not at financial risk for changes in utilization or for costs 
incurred under the contract that do not exceed

[[Page 252]]

the upper payment limits specified inSec. 447.362 of this chapter; and
    (2) May be reimbursed by the State at the end of the contract period 
on the basis of the incurred costs, subject to the specified limits.
    Prepaid ambulatory health plan (PAHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Does not provide or arrange for, and is not otherwise 
responsible for the provision of any inpatient hospital or institutional 
services for its enrollees; and
    (3) Does not have a comprehensive risk contract.
    Prepaid inpatient health plan (PIHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Provides, arranges for, or otherwise has responsibility for the 
provision of any inpatient hospital or institutional services for its 
enrollees; and
    (3) Does not have a comprehensive risk contract.
    Primary care means all health care services and laboratory services 
customarily furnished by or through a general practitioner, family 
physician, internal medicine physician, obstetrician/gynecologist, or 
pediatrician, to the extent the furnishing of those services is legally 
authorized in the State in which the practitioner furnishes them.
    Primary care case management means a system under which a PCCM 
contracts with the State to furnish case management services (which 
include the location, coordination and monitoring of primary health care 
services) to Medicaid beneficiaries.
    Primary care case manager (PCCM) means a physician, a physician 
group practice, an entity that employs or arranges with physicians to 
furnish primary care case management services or, at State option, any 
of the following:
    (1) A physician assistant.
    (2) A nurse practitioner.
    (3) A certified nurse-midwife.
    Risk contract means a contract under which the contractor--
    (1) Assumes risk for the cost of the services covered under the 
contract; and
    (2) Incurs loss if the cost of furnishing the services exceeds the 
payments under the contract.



Sec.  438.6  Contract requirements.

    (a) Regional office review. The CMS Regional Office must review and 
approve all MCO, PIHP, and PAHP contracts, including those risk and 
nonrisk contracts that, on the basis of their value, are not subject to 
the prior approval requirement inSec. 438.806.
    (b) Entities eligible for comprehensive risk contracts. A State 
agency may enter into a comprehensive risk contract only with the 
following:
    (1) An MCO.
    (2) The entities identified in section 1903(m)(2)(B)(i), (ii), and 
(iii) of the Act.
    (3) Community, Migrant, and Appalachian Health Centers identified in 
section 1903(m)(2)(G) of the Act. Unless they qualify for a total 
exemption under section 1903(m)(2)(B) of the Act, these entities are 
subject to the regulations governing MCOs under this part.
    (4) An HIO that arranges for services and became operational before 
January 1986.
    (5) An HIO described in section 9517(c)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as added by section 4734(2) of the Omnibus 
Budget Reconciliation Act of 1990).
    (c) Payments under risk contracts--(1) Terminology. As used in this 
paragraph, the following terms have the indicated meanings:
    (i) Actuarially sound capitation rates means capitation rates that--
    (A) Have been developed in accordance with generally accepted 
actuarial principles and practices;
    (B) Are appropriate for the populations to be covered, and the 
services to be furnished under the contract; and
    (C) Have been certified, as meeting the requirements of this 
paragraph (c), by actuaries who meet the qualification standards 
established by the American Academy of Actuaries and

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follow the practice standards established by the Actuarial Standards 
Board.
    (ii) Adjustments to smooth data means adjustments made, by cost-
neutral methods, across rate cells, to compensate for distortions in 
costs, utilization, or the number of eligibles.
    (iii) Cost neutral means that the mechanism used to smooth data, 
share risk, or adjust for risk will recognize both higher and lower 
expected costs and is not intended to create a net aggregate gain or 
loss across all payments.
    (iv) Incentive arrangement means any payment mechanism under which a 
contractor may receive additional funds over and above the capitation 
rates it was paid for meeting targets specified in the contract.
    (v) Risk corridor means a risk sharing mechanism in which States and 
contractors share in both profits and losses under the contract outside 
of predetermined threshold amount, so that after an initial corridor in 
which the contractor is responsible for all losses or retains all 
profits, the State contributes a portion toward any additional losses, 
and receives a portion of any additional profits.
    (2) Basic requirements. (i) All payments under risk contracts and 
all risk-sharing mechanisms in contracts must be actuarially sound.
    (ii) The contract must specify the payment rates and any risk-
sharing mechanisms, and the actuarial basis for computation of those 
rates and mechanisms.
    (3) Requirements for actuarially sound rates. In setting actuarially 
sound capitation rates, the State must apply the following elements, or 
explain why they are not applicable:
    (i) Base utilization and cost data that are derived from the 
Medicaid population, or if not, are adjusted to make them comparable to 
the Medicaid population.
    (ii) Adjustments made to smooth data and adjustments to account for 
factors such as medical trend inflation, incomplete data, MCO, PIHP, or 
PAHP administration (subject to the limits in paragraph (c)(4)(ii) of 
this section), and utilization;
    (iii) Rate cells specific to the enrolled population, by--
    (A) Eligibility category;
    (B) Age;
    (C) Gender;
    (D) Locality/region; and
    (E) Risk adjustments based on diagnosis or health status (if used).
    (iv) Other payment mechanisms and utilization and cost assumptions 
that are appropriate for individuals with chronic illness, disability, 
ongoing health care needs, or catastrophic claims, using risk 
adjustment, risk sharing, or other appropriate cost-neutral methods.
    (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.
    (4) Documentation. The State must provide the following 
documentation:
    (i) The actuarial certification of the capitation rates.
    (ii) An assurance (in accordance with paragraph (c)(3) of this 
section) that all payment rates are--
    (A) Based only upon services covered under the State plan (or costs 
directly related to providing these services, for example, MCO, PIHP, or 
PAHP administration).
    (B) Provided under the contract to Medicaid-eligible individuals.
    (iii) The State's projection of expenditures under its previous 
year's contract (or under its FFS program if it did not have a contract 
in the previous year) compared to those projected under the proposed 
contract.
    (iv) An explanation of any incentive arrangements, or stop-loss, 
reinsurance, or any other risk-sharing methodologies under the contract.
    (5) Special contract provisions. (i) Contract provisions for 
reinsurance, stop-loss limits or other risk-sharing methodologies must 
be computed on an actuarially sound basis.
    (ii) If risk corridor arrangements result in payments that exceed 
the approved capitation rates, these excess payments will not be 
considered actuarially sound to the extent that they result in total 
payments that exceed the amount Medicaid would have paid, on a fee-for-
service basis, for the State

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plan services actually furnished to enrolled individuals, plus an amount 
for MCO, PIHP, or PAHP administrative costs directly related to the 
provision of these services.
    (iii) Contracts with incentive arrangements may not provide for 
payment in excess of 105 percent of the approved capitation payments 
attributable to the enrollees or services covered by the incentive 
arrangement, since such total payments will not be considered to be 
actuarially sound.
    (iv) For all incentive arrangements, the contract must provide that 
the arrangement is--
    (A) For a fixed period of time;
    (B) Not to be renewed automatically;
    (C) Made available to both public and private contractors;
    (D) Not conditioned on intergovernmental transfer agreements; and
    (E) Necessary for the specified activities and targets.
    (v) If a State makes payments to providers for graduate medical 
education (GME) costs under an approved State plan, the State must 
adjust the actuarially sound capitation rates to account for the GME 
payments to be made on behalf of enrollees covered under the contract, 
not to exceed the aggregate amount that would have been paid under the 
approved State plan for FFS. States must first establish actuarially 
sound capitation rates prior to making adjustments for GME.
    (vi) For CYs 2013 and 2014, and payments to an MCO, PIHP or PAHP for 
primary care services furnished to enrollees under part 447, subpart G, 
of this chapter, the contract must require that the MCO, PIHP or PAHP 
meet the following requirements:
    (A) Make payments to those specified physicians (whether directly or 
through a capitated arrangement) at least equal to the amounts set forth 
and required under part 447, subpart G, of this chapter.
    (B) Provide documentation to the state, sufficient to enable the 
state and CMS to ensure that provider payments increase as required by 
paragraph (c)(5)(vi)(A) of this section.
    (d) Enrollment discrimination prohibited. Contracts with MCOs, 
PIHPs, PAHPs, and PCCMs must provide as follows:
    (1) The MCO, PIHP, PAHP, or PCCM accepts individuals eligible for 
enrollment in the order in which they apply without restriction (unless 
authorized by the Regional Administrator), up to the limits set under 
the contract.
    (2) Enrollment is voluntary, except in the case of mandatory 
enrollment programs that meet the conditions set forth inSec. 
438.50(a).
    (3) The MCO, PIHP, PAHP, or PCCM will not, on the basis of health 
status or need for health care services, discriminate against 
individuals eligible to enroll.
    (4) The MCO, PIHP, PAHP, or PCCM will not discriminate against 
individuals eligible to enroll on the basis of race, color, or national 
origin, and will not use any policy or practice that has the effect of 
discriminating on the basis of race, color, or national origin.
    (e) Services that may be covered. An MCO, PIHP, or PAHP contract may 
cover, for enrollees, services that are in addition to those covered 
under the State plan, although the cost of these services cannot be 
included when determining the payment rates underSec. 438.6(c).
    (f) Compliance with contracting rules. All contracts must meet the 
following provisions:
    (1) Comply with all applicable Federal and State laws and 
regulations including title VI of the Civil Rights Act of 1964; title IX 
of the Education Amendments of 1972 (regarding education programs and 
activities); the Age Discrimination Act of 1975; the Rehabilitation Act 
of 1973; and the Americans with Disabilities Act of 1990 as amended.
    (2) Provide for the following:
    (i) Compliance with the requirements mandating provider 
identification of provider-preventable conditions as a condition of 
payment, as well as the prohibition against payment for provider-
preventable conditions as set forth inSec. 434.6(a)(12) andSec. 
447.26 of this subchapter.
    (ii) Reporting all identified provider-preventable conditions in a 
form or frequency as may be specified by the State.
    (3) Meet all the requirements of this section.

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    (g) Inspection and audit of financial records. Risk contracts must 
provide that the State agency and the Department may inspect and audit 
any financial records of the entity or its subcontractors.
    (h) Physician incentive plans. (1) MCO, PIHP, and PAHP contracts 
must provide for compliance with the requirements set forth in 
Sec.Sec. 422.208 and 422.210 of this chapter.
    (2) In applying the provisions of Sec.Sec. 422.208 and 422.210 of 
this chapter, references to ``M+C organization'', ``CMS'', and 
``Medicare beneficiaries'' must be read as references to ``MCO, PIHP, or 
PAHP'', ``State agency'' and ``Medicaid beneficiaries'', respectively.
    (i) Advance directives. (1) All MCO and PIHP contracts must provide 
for compliance with the requirements ofSec. 422.128 of this chapter 
for maintaining written policies and procedures for advance directives.
    (2) All PAHP contracts must provide for compliance with the 
requirements ofSec. 422.128 of this chapter for maintaining written 
policies and procedures for advance directives if the PAHP includes, in 
its network, any of those providers listed inSec. 489.102(a) of this 
chapter.
    (3) The MCO, PIHP, or PAHP subject to this requirement must provide 
adult enrollees with written information on advance directives policies, 
and include a description of applicable State law.
    (4) The information must reflect changes in State law as soon as 
possible, but no later than 90 days after the effective date of the 
change.
    (j) Special rules for certain HIOs. Contracts with HIOs that began 
operating on or after January 1, 1986, and that the statute does not 
explicitly exempt from requirements in section 1903(m) of the Act, are 
subject to all the requirements of this part that apply to MCOs and 
contracts with MCOs. These HIOs may enter into comprehensive risk 
contracts only if they meet the criteria of paragraph (a) of this 
section.
    (k) Additional rules for contracts with PCCMs. A PCCM contract must 
meet the following requirements:
    (1) Provide for reasonable and adequate hours of operation, 
including 24-hour availability of information, referral, and treatment 
for emergency medical conditions.
    (2) Restrict enrollment to beneficiaries who reside sufficiently 
near one of the manager's delivery sites to reach that site within a 
reasonable time using available and affordable modes of transportation.
    (3) Provide for arrangements with, or referrals to, sufficient 
numbers of physicians and other practitioners to ensure that services 
under the contract can be furnished to enrollees promptly and without 
compromise to quality of care.
    (4) Prohibit discrimination in enrollment, disenrollment, and re-
enrollment, based on the beneficiary's health status or need for health 
care services.
    (5) Provide that enrollees have the right to disenroll from their 
PCCM in accordance withSec. 438.56(c).
    (l) Subcontracts. All subcontracts must fulfill the requirements of 
this part that are appropriate to the service or activity delegated 
under the subcontract.
    (m) Choice of health professional. The contract must allow each 
enrollee to choose his or her health professional to the extent possible 
and appropriate.

[67 FR 41095, June 14, 2002, as amended at 76 FR 32837, June 6, 2011; 77 
FR 66699, Nov. 6, 2012]



Sec.  438.8  Provisions that apply to PIHPs and PAHPs.

    (a) The following requirements and options apply to PIHPs, PIHP 
contracts, and States with respect to PIHPs, to the same extent that 
they apply to MCOs, MCO contracts, and States for MCOs.
    (1) The contract requirements ofSec. 438.6, except for 
requirements that pertain to HIOs.
    (2) The information requirements inSec. 438.10.
    (3) The provision against provider discrimination inSec. 438.12.
    (4) The State responsibility provisions of subpart B of this part 
exceptSec. 438.50.
    (5) The enrollee rights and protection provisions in subpart C of 
this part.
    (6) The quality assessment and performance improvement provisions in 
subpart D of this part to the extent

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that they are applicable to services furnished by the PIHP.
    (7) The grievance system provisions in subpart F of this part.
    (8) The certification and program integrity protection provisions 
set forth in subpart H of this part.
    (b) The following requirements and options for PAHPs apply to PAHPs, 
PAHP contracts, and States.
    (1) The contract requirements ofSec. 438.6, except requirements 
for--