[Federal Register Volume 75, Number 215 (Monday, November 8, 2010)]
[Proposed Rules]
[Pages 68583-68595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27971]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 433
[CMS-2346-P]
RIN 0938-AQ53
Medicaid; Federal Funding for Medicaid Eligibility Determination
and Enrollment Activities
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise Medicaid regulations for
Mechanized Claims Processing and Information Retrieval Systems.
Specifically, we are proposing to amend the definition of Mechanized
Claims Processing and Information Retrieval Systems to include systems
used for eligibility determination, enrollment, and eligibility
reporting activities. We propose to modify our regulations so that the
enhanced Federal financial participation (FFP) is available for design,
development and installation or enhancement of eligibility
determination systems until December 31, 2015, with enhanced FFP for
maintenance and operations available for such systems beyond that date
in certain circumstances. We also propose that all Medicaid Management
Information Systems (MMISs) meet certain defined standards and
conditions in terms of timeliness, accuracy, efficiency, and integrity
and that they achieve high positive levels of consumer experience,
acceptance and satisfaction in order to receive enhanced FFP.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. January 7, 2011.
ADDRESSES: In commenting, please refer to file code CMS-2346-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-2346-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-2346-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses: a. For delivery in Washington,
DC--Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building is
not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
FOR FURTHER INFORMATION CONTACT: Richard Friedman, (410) 786-4451.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background
A. The Current State of the Medicaid Management Information System
(MMIS)
A Medicaid management information system (MMIS) is a mechanized
system of claims processing and information retrieval used in State
Medicaid programs under title XIX of the Social Security Act (the Act).
The system is used to process Medicaid claims from providers and to
retrieve and produce utilization data and management information about
medical care and services furnished to Medicaid recipients. The system
also is potentially eligible to receive enhanced administrative funding
from the Federal government under section 1903(a)(3) of the Act.
Specifically, section 1903(a)(3)(A)(i) of the Act provides that Federal
financial participation (FFP) is available at 90 percent of
expenditures for the design, development, or installation of mechanized
claims processing and information retrieval systems as the ``Secretary
determines is likely to provide more efficient, economical and
effective administration of the plan and to be compatible with the
claims processing and information retrieval systems utilized in the
administration of title XVIII [that is, Medicare].'' In addition,
section 1903(a)(3)(B) provides for the availability of FFP at 75
percent of expenditures attributable to operating the ``systems * * *
of the type described in [section 1903(a)(3)] subparagraph (A)(i),''
which are approved by the Secretary and meet certain other requirements
(including requirements relating to explanations of benefits). For
purposes of this proposed rule, we refer to 90 percent and 75 percent
FFP as ``enhanced'' FFP since it is greater than the 50 percent FFP
available for most Medicaid administrative expenses. Finally, section
1903(r) of the Act places conditions on a State's ability to receive
Federal funding for automated data systems in the administration of the
State plan.
In order to receive an enhanced match, the Secretary must find that
the mechanized claims and information retrieval system is adequate to
provide
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efficient, economical, and effective administration of the State plan.
The Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-
148, as amended by the Health Care and Education Recovery Act of 2010;
Pub. L. 111-152, together referred to as the Affordable Care Act) also
made additional changes to the requirements within section 1903(r) of
the Act relating to the reporting of data to the Secretary; these
requirements will be discussed in separate rulemaking.
Our Federal regulations concerning mechanized claims processing and
information retrieval systems are at 42 CFR part 433, subpart C. A
State that chooses to develop, enhance, or replace its required system
or subsystems must first submit for approval an Advanced Planning
Document (APD). The general HHS requirements for approval of APDs are
found at 45 CFR part 95, subpart F.
B. Availability of Enhanced FFP for Automated Eligibility Systems
Historically, Medicaid eligibility for many applicants and
recipients was determined by an agency other than the State Medicaid
agency; under section 1902(a)(10)(A)(i) of the Act, States were
required to provide Medicaid to recipients under the Aid to Families
with Dependent Children (AFDC) program, as well as recipients of the
Supplemental Security Income (SSI) program. In these cases, eligibility
determinations were derived from the cash welfare-assistance
determination. As a result, States that maintained a Medicaid
eligibility determination system usually integrated these systems into
the public welfare systems. In 1989, we published a final rule on
October 13, 1989 (54 FR 41966, effective November 13, 1989) excluding
eligibility determination systems from the enhanced funding that was
available under section 1903(a)(3) of the Act, reasoning that the close
interrelationship between these cash assistance programs and Medicaid
eligibility rendered such enhanced assistance redundant and unnecessary
(54 FR 41966 through 41974). As a result, we revised the definition of
mechanized claims processing and information retrieval systems to
exclude eligibility determination systems.
We also indicated in the final rule that to receive any FFP for
Medicaid purposes for an eligibility determination system after
November 13, 1989, a State must submit an APD for funding in accordance
with the requirements of 45 CFR part 95, subpart F. If we approved the
APD, the State agency would receive 50 percent FFP for administrative
costs under section 1903(a)(7) of the Act for the system's design,
development, and installation, and operation.
C. Changes in Medicaid Eligibility Policies
Since promulgation of the 1989 regulation, a series of statutory
changes have dramatically affected eligibility for Medicaid and how
Medicaid eligibility is determined. Among other things, new eligibility
coverage groups were created and expanded, and in 1996, Medicaid
eligibility was ``de-linked'' from the receipt of cash assistance when
the AFDC program was replaced by the Temporary Assistance to Needy
Families (Pub. L. 104-193, enacted on July 1, 1997) (TANF) program.
With the passage of the Balanced Budget Act of 1997 (Pub. L. 105-
33) (BBA), States were required to coordinate eligibility for and
enrollment in Medicaid, with the new Children's Health Insurance
Program (CHIP) to ensure enrollment of children in the appropriate
program. With passage of the ``Express Lane Eligibility'' provisions in
section 203 of the Children's Health Insurance Reauthorization Program
Reauthorization Act of 2009 (Pub. L. 111-3) (CHIPRA), States were
provided with the option, and are encouraged, to coordinate and
expedite eligibility for children in Medicaid and CHIP by using
findings regarding income and other eligibility criteria made by other
agencies, such as the Supplemental Nutrition Assistance Program, as the
basis for Medicaid and CHIP eligibility adjudications.
With the passage of the Affordable Care Act, we expect that changes
to eligibility policies and business processes would need to be
adopted. States would need to apply new rules to adjudicate eligibility
for the program; enroll millions of newly eligible individuals through
multiple channels; renew eligibility for existing enrollees; operate
seamlessly with newly authorized Health Insurance Exchanges whether run
by the State or HHS if the State chooses not to operate a State
Exchange (hereafter referred to as ``Exchanges''); participate in a
system to verify information from applicants electronically;
incorporate a streamlined application used to apply for multiple
sources of coverage and health insurance assistance; and produce
notices and communications to applicants and beneficiaries concerning
the process, outcomes, and their rights to dispute or appeal. We
further anticipate, following consultation with States and other
stakeholders, additional standard Federal requirements for more timely
and detailed reporting of eligibility and enrollment status statistics,
including breakdowns by eligibility group, demographic characteristics,
enrollment in managed care plans, and participation in waiver programs.
System transformations would be needed in most States to accomplish
these changes. These systems transformations should be undertaken in
full partnership with Exchanges in order to meet coverage goals,
minimize duplication, ensure effective reuse of infrastructure and
applications, produce seamless enrollment for consumers, and ensure
accuracy of program placements. Extensive coordination and
collaboration would be required between Exchanges and Medicaid,
including on oversight and evaluation of the interoperability of the
Exchange and Medicaid systems.
II. Provisions of the Proposed Regulations
A. Medicaid Eligibility Determinations
Because of the changes made by the Affordable Care Act with respect
to Medicaid eligibility, as well as changes in Medicaid eligibility and
business processes that have occurred since our 1989 final rule, we
propose to consider Medicaid eligibility determinations to be
``claims'' of eligibility that can be considered part of the MMIS
systems that are potentially eligible for the enhanced 90 and 75
percent FFP under section 1903(a)(3) of the Act. This proposed policy
would apply only upon the effective date of the subsequent final rule.
Additionally, we note that enhanced FFP does not eliminate the
responsibility of States to ensure compliance with cost allocation
principles outlined in OMB Circular A-87.
Further, as explained below, enhanced FFP at the 90 percent rate
for design, development, installation or enhancement would be available
for State expenditures only through calendar year (CY) 2015, even if
work on approved APDs continues after 2015. Enhanced FFP at the 75
percent rate to maintain and operate systems that previously qualified
for 90 percent FFP would be available after 2015 if those systems
continue to meet the requirements specified in this rule. Additionally,
enhanced funding at 75 percent to maintain and operate systems meeting
the standards and conditions is available prior to December 31, 2015,
(but after the effective date of any final rule), in recognition of the
fact that some States may have already invested in improvements that
will allow systems to qualify without the need for additional enhanced
development,
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design, installation or enhancement funding. For any State receiving
enhanced FFP at 90 percent or 75 percent prior to December 31, 2015,
systems must continue to meet the requirements specified in this rule
in order to continue receiving 75 percent enhanced funding after
December 31, 2015.
We are limiting the timeframe for which enhanced 90 percent FFP is
available for design, development, installation or enhancement of
automated eligibility systems because we view the changes made by the
Affordable Care Act for the new eligibility rules in Medicaid as
requiring immediate, substantial commitment to, and investment in,
technologies. That is, we expect that changes to State systems would be
completed with the start of the new Affordable Care Act provisions and
support the operation of Exchanges on January 1, 2014. However, we
realize that States may need to make additional changes to State
systems to provide for additional functionality in support of Medicaid
eligibility rule modifications. Thus, we are providing for an
additional 2 years of 90 percent enhanced FFP so that States' systems
would have additional time to ensure the peak performance of their
systems.
At the same time, once appropriate systems are deployed to support
the eligibility changes in the Affordable Care Act, we anticipate
significant efficiencies in both application maintenance and business
operations. Thus, we believe that after CY 2015, 2 years after the
Affordable Care Act changes have gone into effect, additional
investments in the design, development, and installation of such
systems would no longer continue to result in ``more'' efficient,
effective or economical administration of the State plan, as required
by section 1903(a)(3)(A)(i) of the Act.
Additional investments in State eligibility systems are unlikely to
yield similar rates of improvement and a regular administrative match
(that is 50 percent FFP for design, development, installation or
enhancement) should be sufficient for efficient and effective
administration of State Medicaid programs. We also note that ending
enhanced funding in 2015 follows closely with the end of Federal grants
for development of health insurance exchanges. States would need to
incur costs for goods and services furnished no later than December 31,
2015 to receive 90 percent FFP for the design, development,
installation or enhancement of an eligibility determination system.
Further, we are proposing to limit the availability of 75 percent
enhanced funding for maintenance and operations to those eligibility
determination systems that have complied with the standards and
conditions in this rule by December 31, 2015. As discussed above, the
eligibility changes of the Affordable Care Act will require that States
modify their eligibility systems in time to comply with all such
eligibility changes, and we believe that to meet the requirements of
section 1903(a)(3)(A)(i) of the Act, all such modifications must be in
place by December 31, 2015. If eligibility systems cannot meet our
standards and conditions by such deadline, then we believe such systems
will not be operating in a more efficient, economical or effective
manner, because of their inability to timely meet the requirements of
the Affordable Care Act for seamless coordination with the Exchange and
implementation of simplified Medicaid eligibility rules and expanded
coverage. Therefore we believe their subsequent operation would not
meet the statutory requirements that they result in a more efficient,
economical and effective operation of the State plan.
B. Standards and Conditions for Receiving Enhanced Funding
Under sections 1903(a)(3)(A)(i) and 1903(a)(3)(B) of the Act, we
are proposing standards and conditions that must be met by States in
order for their Medicaid technology investments (including traditional
claims processing systems, as well as eligibility systems) to be
eligible for the enhanced match. These authorities provide that the
enhanced FFP of 90 percent is not available unless the Secretary
determines that a system is ``likely to provide more efficient,
economical, and effective administration of the plan'' as described in
section 1903(a)(3)(A)(i) of the Act. Similarly, section 1903(a)(3)(B)
of the Act specifies that enhanced FFP of 75 percent is not available
for maintenance or operations unless the system is ``of the type
described in subparagraph (A)(i)'' and is approved by the Secretary).
Over the last 5 years CMS developed and implemented the Medicaid
Information Technology Architecture (MITA). MITA is intended to foster
integrated business and IT transformation across the Medicaid
enterprise to improve the administration of the Medicaid program. (The
Medicaid enterprise is comprised of the Federal government, the States,
and any trading partners who exchange Medicaid transactions with either
the States or the Federal government).
We believe the MITA initiative has accelerated the pace of
modernization and over time, this effort will drive States' systems
toward a widespread network of technology and processes that support
improved State administration of the Medicaid program, with a focus on
streamlining and simplifying the enrollment process, and improving
health outcomes and administrative procedures for Medicaid
beneficiaries.
The MITA initiative began in 2005 with the concept of moving the
design and development of Medicaid information systems away from the
siloed, sub-system components that comprise a typical MMIS and moving
to a Service Oriented Architecture (SOA) method of designing Medicaid
information systems using discretely identified and described business
services to drive system requirements. The MITA initiative uses an
architecture framework--business, technical, and information--along
with a business maturity model and process and planning guidelines, to
provide a framework for the planned use of technology and
infrastructure to meet the changing business needs of Medicaid
programs. MITA enables all State Medicaid enterprises to meet common
objectives within the Framework, while still supporting local needs
unique to one particular State.
All MITA framework documents are available to the public at http://www.cms.gov/MedicaidInfoTechArch/. The MITA Framework describes the
maturity model, policies, and procedures.
We know that there is not a ``one size fits all'' technology
solution to every business challenge and recognize that each technology
investment must be viewed in light of existing, interrelated assets and
their maturity. We also recognize that there are trade-offs concerning
schedules, costs, risks, business goals, and other factors that should
be considered when making technology investments. However, we wish to
ensure that enhanced FFP is approved only when infrastructure and
application projects maximize the extent to which they utilize current
technology development and deployment practices and produce reliable
business outputs and outcomes.
We are proposing to define MITA at Sec. 433.111(c) in this rule
and we propose to build on the work of MITA by codifying that enhanced
FFP (either at the 90 percent rate for design, development,
installation or enhancement; or at the 75 percent rate for maintenance
and operations) is only available when certain standards and
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conditions are met. Specifically, we articulate a set of standards and
conditions that States must commit to in order to receive enhanced FFP:
Use of 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; and the availability of business rules in both
human and machine readable formats. We believe that this commitment is
extremely important in order to ensure that States can more easily
change and maintain systems, as well as integrate and interoperate with
a clinical and administrative ecosystem designed to deliver person- and
citizen-centric services and benefits.
Align to and advance increasingly in MITA maturity for
business, architecture, and data. We expect to see States continuing to
make measurable progress in implementing their MITA roadmaps. Already
the MITA investment by Federal, State, and private partners have
allowed us to make important incremental improvements to share data and
reuse business models, applications and components. However, it is
critical to build on and accelerate the modernization we have
collectively begun under MITA, so that States achieve the final vision
of MITA and have a comprehensive framework with which to meet the
technical and business demands required by an environment that will
increasingly rely on health information technology and the electronic
exchange of healthcare information to improve health outcomes and lower
program costs.
Ensure alignment with, and incorporation of, industry
standards: the Health Insurance Portability and Accountability Act of
1996 security, privacy 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.
We must ensure that Medicaid technology investments are made both
to ensure the timely and reliable adoption of industry standards and to
make most productive use of those standards as they become available.
Use of industry standards promotes reuse, data exchange, and reduces
administrative burden on patients, providers, and applicants. We would
communicate applicable standards to States. Standards would be updated
periodically to ensure conformance with the standards in the industry.
States would be required to update systems and practices to adhere to
evolving industry standards in order to remain eligible for enhanced
FFP. Use of standards to promote accessibility for individuals with
disabilities ensures that Medicaid technology investments would be
equally effective in providing access to benefits and services for all
users, and would comply with Federal civil rights laws prohibiting
discrimination against individuals with disabilities, such as section
504 of the Rehabilitation Act and Title II of the Americans with
Disabilities Act.
Promote sharing, leverage, and reuse of Medicaid
technologies and systems within and among States. We would examine APDs
to ensure that States make appropriate use and reuse of components and
technologies available off the shelf or with minimal customization to
maximize return on investment and minimize project risk. We intend to
work with States to identify promising State systems that can be
leveraged and used by other States. We anticipate that we would be able
to expedite review of APDs incorporating such successful models.
Further, we would strongly encourage States to move to regional or
multi-State solutions as often as possible, and we would help
facilitate collaboration and communication among States. We would also
scrutinize carefully any proposed investments in sub-State systems when
we are asked to share in the costs of updating or maintaining multiple
systems performing essentially the same functions within the same
State.
Support accurate and timely processing of claims
(including claims of eligibility), adjudications, and effective
communications with providers, beneficiaries, and the public.
Ultimately, the test of an effective and efficient system is whether it
supports and enables an effective and efficient business process,
producing and effectively communicating intended operational results
with a high degree of reliability and accuracy. We do not believe that
it would be appropriate for us to provide enhanced Federal funding for
systems that are unable to support desired business outcomes.
Produce transaction data, reports, and performance
information that would contribute to program evaluation, continuous
improvement in business operations, and transparency and
accountability. Systems should be able to electronically and accurately
produce and expose data necessary for oversight, administration,
evaluation, integrity, and transparency. This includes program data on
claims, expenditures, and enrolled individuals; participation in
waivers and plans; performance data, such as processing times,
accuracy, and appeal results; and traditional systems standards such as
availability and down time.
We would develop a range of data and performance metrics on which
States would be required to report on a regular basis, as a condition
of receiving ongoing enhanced FFP for maintenance and operation.
Ensure seamless coordination and integration with the
Exchange(whether run by the State or Federal government), and allow
interoperability with health information exchanges, public health
agencies, human services programs, and community organizations
providing outreach and enrollment assistance services.
We expect that a key outcome of our technology investments is a
much higher degree of interaction and interoperability in order to
maximize value and minimize burden and costs on providers and
beneficiaries. Additionally, we expect that technology investments must
comply with standards to ensure security and accessibility consistent
with current Federal law and investments must comply with the
requirements under existing Federal civil rights protections for all
individuals in developing the system architecture.
We seek comments on these standards and conditions. In particular,
we seek comments on the following:
What types of Federal leadership, technical assistance,
and sub-regulatory guidance would be helpful to support States as they
come into compliance with these standards and conditions.
Whether this list of standards and conditions is
sufficiently robust and complete to guide decisions on technology
investments of the scope and size of MMIS.
Further, to ensure that States have an opportunity to come into
compliance with these requirements, we are proposing that States
currently receiving enhanced FFP for MMIS have a period of transition
to come into compliance with the standards and conditions above. Under
our proposed schedule, the following transition periods would apply:
For new MMIS development (new APDs requesting 90 percent
FFP for design, development, installation, and enhancement): No
transition period. We believe all APD requests submitted after
[[Page 68587]]
the effective date of the final rule must comply with all of our final
standards and conditions.
For MMIS development already underway (approved APDs
providing 90 percent enhanced FFP): 12-month transition period
(beginning with the effective date of the final regulation) in which to
submit an updated Implementation APD (IAPD) detailing how systems would
be modified to meet the required conditions and standards. This
transition period would allow systems that are currently being
developed to come into compliance with our standard and conditions,
while ensuring that new systems receiving Federal funding are
eventually designed in a manner that results in the most efficient use
of technology.
For maintenance and operations of MMIS currently receiving
75 percent FFP: 36-month transition period (beginning with the
effective date of the final regulation) in which to submit an IAPD with
plans to upgrade or modify systems to meet the required conditions and
standards.
Eligibility systems (currently receiving 50 percent for
development and maintenance and operations): Because eligibility
systems are not currently receiving enhanced funding, we propose no
transition period for new requests for enhanced funding for eligibility
systems. Any APDs requesting enhanced funding for eligibility systems
funding following the effective date of this regulation would have to
meet the standards and conditions above. States with eligibility
systems currently under development (approved APDs providing 50 percent
FFP) can update their APDs to reflect how they would comply with these
standards and conditions in order to begin receiving 90 percent FFP.
Similarly, eligibility systems currently receiving 50 percent FFP for
State expenditures would need to comply with our final standards and
conditions to receive a 75-percent FFP.
We request comments on this proposed transition schedule and
whether the transition periods should be reduced or extended. We also
request comments on how, during the transition period and beyond, we
can provide strong Federal leadership by fostering collaboration among
States, identifying and disseminating best practices, creating Federal
models or components (e.g., the Office of Consumer Information and
Insurance Oversight's (OCIIO) Cooperative Agreement providing funding
to create efficiencies in the design, development, and implementation
of the Exchange IT systems), and assisting individual States.
Lastly, we are proposing that these standards and conditions be
enforced through both front-end and back-end review processes. Front-
end review would entail APD review and prior approval processes where
States apply for enhanced match before entering into IT investment
projects. Back-end reviews would entail certifications of the systems
capabilities, as well as ongoing performance monitoring.
C. Reviews and Performance Monitoring of MMISs
Previously, regulations at Sec. 433.119 indicated that we would
review at least once every 3 years each system operation initially
approved under Sec. 433.114 and, based on the results of the review,
reapprove it for FFP at 75 percent of expenditures if certain standards
and conditions were met. The 3-year system performance reviews (SPRs)
served as an evaluation instrument in determining the extent to which
an MMIS performance is sustained after the initial certification. As
part of SPRs, we determined if the system program logic was accurately
and timely processing claims and payment information according to
standards determined in Federal regulation. Subsequent recertification
of a State's MMIS was based upon the results of the SPR. Prior to 1998,
SPRs were performed annually.
We stopped performing such periodic reviews after enactment of
section 4753 of the BBA (See section 11100 of the State Medicaid
Manual). SPRs currently are performed only as part of focused reviews.
The BBA also eliminated references to development and application of
performance standards used to conduct periodic standards-based reviews
of previously certified MMISs. As such, many of the provisions in 42
CFR part 433, subpart C should have been revised to comply with the
repealed requirements; for example, much of the language included in
Sec. 433.119 through Sec. 433.121 references the SPRs and the
reduction of FFP in the event that States did not have systems that
remained capable of processing claims and payments and/or were not
performing well in completing these activities.
While the BBA eliminated the mandate that we perform SPRs, we do
not believe it removed our discretion to perform reviews under our
general authority to ensure that MMISs continue to operate in a manner
that complies with Federal law, regulations, and guidance. The
Secretary has authority to perform periodic reviews of MMIS systems
(including eligibility determination systems receiving an enhanced FFP)
to ensure that systems receiving enhanced FFP continue to meet the
requirements of section 1903(a)(3) of the Act and that they continue to
provide efficient, economical, and effective administration of the
plan. Section 1903(a)(3)(B) of the Act allows for 75 percent FFP for
the sums expended that are ``attributable to the operation of systems *
* * of the type described in subparagraph (A)(i).'' The type of system
described in ``subparagraph (A)(i)'' is one that, on an ongoing basis,
results in ``more efficient, economical and effective administration of
the plan.'' In addition, the Secretary has authority under section
1903(r) of the Act to ensure continuing compliance with the
requirements of that section.
Given our proposed modifications to part 433 of our regulations, as
well as the new enhanced FFP for certain eligibility determination
systems, we believe it is prudent for us to clearly state the
expectation that ongoing successful performance is a necessary
condition for receipt of the 75 percent FFP for operations and
maintenance. We plan to establish standards and conditions that would
ensure that all MMIS systems receiving enhanced FFP are complying with
regulatory and statutory requirements. Through sub-regulatory guidance,
we would explain further how we would measure whether the requirements
are being met, such as through a core set of standards and conditions
that focuses on the dimensions for systems that communicate to
beneficiaries. We would also explain how States can meet any such
performance measures.
For example, we would measure how a system meets requirements for
providing notices to beneficiaries, claims and applications intake and
acceptance, efficient timely and accurate processing of claims,
applications and renewals, proper determinations, and experience with
appeals, interoperability with Exchanges, as well as traditional
systems standards such as availability and down time. We expect to see
such data automatically generated by the systems in which we invest,
with standards and conditions established in consultation with
stakeholders and based on industry experience.
Additionally, we propose to evaluate systems based upon their
interoperability with other Federal and State health programs. Thus, in
operating their systems, States would need to ensure that they consult
documents articulating the
[[Page 68588]]
Department's strategy on interoperability, such as the Guidance for
Exchange and Medicaid Information Technology Systems.
We would expect that any failures or deficiencies would be the
basis for investigation and opportunity for corrective action before
making a determination that enhanced FFP would be discontinued.
Therefore, we propose to modify Sec. Sec. 433.119 through 433.121
to eliminate any reference to SPRs but, more importantly, to reflect
this requirement for performance monitoring and review. We are
requesting comments on this proposal, as well as on the types of
standards and conditions that should be employed initially and over
time.
Additionally, States should consider that we propose to evaluate
systems and consider interoperability with other Federal and State
health programs. Thus, States should consider other documents that
articulate the Department's strategy such as the Guidance for Exchange
and Medicaid Information Technology Systems and continue to consider
such guidance in meeting the requirements of this proposed rule.
D. Partial Systems Improvements or Modernizations
Throughout this proposed rule, we have used the word ``system'' or
``technology'' to refer to what might well be a system of systems
maintained in States in support of MMIS functions. We recognize that a
modernization agenda in such a State might well move in phases.
However, States submitting partial system updates would need to submit
and have an approved roadmap for achieving full compliance with the
standards and conditions in this regulation. We would track progress
against approved roadmap when determining if system updates meet the
standards and conditions for the enhanced match. We also recognize that
some enhancements currently eligible for enhanced funding are intended
to satisfy a specific requirement or to address a compliance issue, for
example, ICD-10 or implementation of the National Correct Coding
Initiative. We invite comments on alternative approaches to best
address these cases in applying our standards and conditions or
performance monitoring.
E. Other Technical Changes to Federal Regulations at 42 CFR Part 433
Subpart C--Mechanized Claims Processing and Information Retrieval
Systems
Since the enactment of the BBA, other provisions of our regulations
have since been superseded. For example, regulations at Sec. 433.113
(referencing the need to have mechanized claims processing and
information retrieval systems by a certain deadline, or face reduced
Federal Medicaid funds as a consequence) and Sec. 433.130 (referencing
waiver provisions for qualifying States with a certain 1976 population
and expenditures) no longer apply. As we are revising our regulations
to provide for the enhanced FFP for systems that perform eligibility
and enrollment activities, we propose to also revise other provisions
in part 433, subpart C to conform to the proposals set out in this
rule. Thus, we are proposing to delete Sec. Sec. 433.113 and 433.130
in their entirety, and references to the provisions in these sections
that we are deleting.
Specifically, we propose to add a new definition to Sec. 433.111
at (c) to include MITA. MITA is both an initiative and a framework. It
is a national framework to support improved systems development and
health care management for the Medicaid enterprise. It is an initiative
to establish national guidelines for technologies and processes that
enable improved program administration for the Medicaid enterprise. The
MITA initiative includes an architecture framework, models, processes,
and planning guidelines for enabling State Medicaid enterprises to meet
common objectives with the framework while supporting unique local
needs.
Further, we propose to amend Sec. 433.111(b)(3) to eliminate the
requirement that ``Eligibility determination systems are not part of
mechanized claims processing and information retrieval systems or
enhancements to those systems.'' This, in effect, would mean that, once
the subsequent final rule is effective, mechanized claims processing
and information retrieval systems would include eligibility
determination systems, including the allocated Medicaid portion of
integrated eligibility determination systems. We note that eligibility
determination systems would be eligible for the 90 and 75 percent FFP
only after the effective date of our final rule.
We also propose to eliminate the provision at Sec. 433.112(c),
which currently states that ``eligibility determination systems are not
part of mechanized claims processing and information retrieval systems
and are not eligible for 75 percent FFP under this Subpart. These
systems are also not eligible for 90 percent FFP for any APD approved
after November 13, 1989.''
We propose to add language to Sec. 433.112 to indicate that 90
percent and 75 percent FFP would be available for the design,
development, installation or enhancement, and maintenance and operation
(respectively) of mechanized claims processing systems, including those
that perform eligibility determination and enrollment activities, as
well as the Medicaid portion of integrated eligibility determination
systems, if such systems meet our standards and conditions. (The 90
percent FFP for eligibility determination systems would be available
only for a time-limited period, and the 75 percent FFP for eligibility
determinations would be available only for those systems that come into
compliance with the standards and conditions before the end of that
time-limited period.)
By amending Sec. 433.112, 90 percent and 75 percent FFP for a
State's reasonable administrative expenditures for the design,
development, installation or enhancement, and maintenance and
operations to mechanized claims processing and information retrieval
systems, (MMISs), including those that perform eligibility
determination and enrollment activities, as well as the Medicaid
portion of eligibility determination systems, would be available only
if the APD is approved by us before the State's expenditure of funds
and if the system meets the standards and conditions. For those systems
that are currently approved for 90 percent FFP, we would provide a
transition period of 12 months for States to submit an IAPD to modify
and upgrade systems meet the standards and conditions established by
this rule. For those systems that are already approved and currently
receiving 75 percent FFP for maintenance and operations, the States
would be required to submit an IAPD to modify and upgrade systems to
meet the standards and conditions within 36 months. Both transition
periods would begin with the effective date of the subsequent final
rule. New systems seeking 90 percent FFP would need to demonstrate that
they would meet all standards and conditions established by this rule.
Eligibility determination systems currently operating would need to
come into compliance with the standards and conditions in order to
begin receiving 75 percent FFP for State expenditures. We believe this
would provide States with a reasonable period of transition while still
ensuring that State systems move expeditiously towards improvement and
advanced technology.
States would be required to supply information and demonstrate
consideration of the following items to CMS for review and approval and
as part of the APD before we would grant approval of enhanced funding.
We
[[Page 68589]]
would scrutinize all proposed investments and would decline to approve
enhanced funding (resulting in 50 percent FFP) for proposals that do
not demonstrate careful consideration and application of these
standards and conditions. States would ensure that MMIS systems,
including those that perform eligibility determinations and enrollment
activities (as well as the Medicaid portion of eligibility
determination systems) would be required to meet the following
requirements:
(1) 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.
(2) Align to and advance increasingly in MITA maturity for
business, architecture, and data.
(3) Ensure alignment with, and incorporation of, industry
standards: The Health Insurance Portability and Accountability Act of
1996 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.
(4) Promote sharing, leverage, and reuse of Medicaid technologies
and systems within and among States.
(5) Support accurate and timely processing of claims (including
claims of eligibility), adjudications, and effective communications
with providers, beneficiaries, and the public.
(6) Produce transaction data, reports, and performance information
that would contribute to program evaluation, continuous improvement in
business operations, and transparency and accountability.
(7) 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.
States can also choose to continue as they currently operate and
receive 50 percent matching. However, this would not change the need
for States to meet the substantive requirements of Federal legislation.
Further, we are proposing to codify at Sec. 433.112(c) that we
would provide 90 percent FFP for the design, development, installation
or enhancement of an eligibility determination system only before
December 31, 2015, even if work on an approved APD continues after
2015.
We believe that changes to State systems would be completed with
the start of the new Affordable Care Act and support the operation of
Exchanges on January 1, 2014. However, we realize that States may need
to make additional changes to State systems to provide for additional
functionality in support of the Exchanges, and/or Medicaid and CHIP
eligibility expansions. Thus, we are providing for an additional 2
years of 90 percent enhanced FFP so that States' systems are provided
with additional time to ensure the performance and efficiency of their
systems.
States would need to incur costs for goods and services furnished
no later than December 31, 2015 to receive 90 percent FFP for the
design, development, installation or enhancement of an eligibility
determination system.
Lastly, we propose to revise Sec. 433.119 to account for
performance monitoring and reviews and to make related conforming
changes to part 433.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The changes specified in this proposed rule do not impose any new
reporting, recordkeeping or disclosure requirements. States already
submit to us for review and approval APDs for funding for automated
data processing in accordance with Federal regulations at 45 CFR part
95, subpart F. The burden associated with the aforementioned
information collection requirements is currently approved under OCN
0938-1088 and expires May 31, 2013. We are, however, requesting
comments on our analysis; that is, that the specific requirements
imposed by this rule do not mandate any additional information
collection requirements on States.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Regulatory Impact Analysis
A. Overall Impact
The estimated costs of the Federal-share for Medicaid
administration have been reflected in the Mid-Session Review of the FY
2011 President's Budget.
We have examined the proposed impacts of this rule as required by
Executive Order 12866, the Regulatory Flexibility Act (RFA), section
1102(b) of the Act regarding rural hospital impacts, the Unfunded
Mandates Reform Act, Executive Order 13132 on Federalism, and the
Congressional Review Act.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for rules with economically significant
effects ($100 million or more in any 1 year). This proposed rule is
anticipated to have an annual effect on the economy of $100 million or
more, making it an economically significant rule under the Executive
Order and a major rule under the Congressional Review Act. Accordingly,
we have prepared a RIA that to the best of our ability presents the
costs and benefits of the proposed rule.
States could continue to receive the traditional 50 percent FFP for
reasonable administrative expenditures for designing, developing,
installing, or enhancing the Medicaid portion of their integrated
eligibility determination
[[Page 68590]]
systems. Similarly, States could continue to receive 50 percent FFP for
expenditures associated with the maintenance and operation of such
systems.
This proposed rule addresses the impact related to enhanced FFP for
mechanized claims processing and information retrieval systems,
including those that perform eligibility determination and enrollment
activities, as well as the Medicaid portion of integrated eligibility
determination systems that the Secretary determines are likely to
provide more efficient, economical, and effective administration of the
State plan.
In projecting the impact to the Federal government and State
Medicaid agencies, we considered how the proposed standards and
conditions on MMIS and the availability of enhanced match for State
eligibility systems through CY 2015 would impact State investments over
the 10-year period of 2011 through 2020. As discussed further below, we
considered the expected costs to the Federal government of providing
the enhanced match rate, changes in state investments due to the
application of standards and conditions on MMIS (including eligibility
systems), and possible savings as a result of the use of more modern,
reusable, and efficient technologies.
B. Potential Savings
We considered a number of ways in which application of the
standards and conditions, including increased use of MITA, could result
in savings; however, as no States have yet reached MITA maturity, it is
difficult to predict the savings that may accrue over any certain
timeframe. These areas include the following:
(1) Modular technology solutions: As States, or groups of States,
would begin to develop ``modular'' technology solutions, these
solutions could be used by others through a ``plug and play'' approach,
in which pieces of a new MMIS would not need to be reinvented from
scratch every time, but rather, could be incorporated into the MMIS
framework.
We assume that savings associated with reusable technology could be
achieved in both the development and operation of new systems. We
expect that States would dispense with the need to engage in
significant requirements analyses and the need to pay for new modules
to be built when there are successful models around the country that
they can draw down from a ``technology bank'' maintained by the Federal
or State governments.
(2) Increased use of industry standards and open source
technologies: While HIPAA administrative transaction standards have
existed for 5 to 7 years, use of more specific industry standards to
build new systems would allow such systems to exchange information
seamlessly--a major goal of the Affordable Care Act, and one that is
the explicit purpose of the standards work envisioned within section
1561 of the Act. We also believe that more open source technology would
encourage the development of software solutions that address the needs
of a variety of diverse activities--such as eligibility, member
enrollment, and pharmacy analysis of drug claims. Software that is
sufficiently flexible to meet different needs and perform different
functions could result in cost savings, as States are able to use the
systems without making major adaptations to them.
(3) Maintenance and operations: As States take up the changes in
this proposed rule, the maintenance/operation costs of new systems
should decrease. Less maintenance should be required than that
necessary to reengineer special, highly customized systems every time
there is a new regulatory or legal requirement.
(4) Reengineering business processes, more Web-based solutions,
service-oriented architecture (SOA): Savings are likely to result from
the modular design and operation of systems, combined with use of
standardized business processes, as States are be compelled to rethink
and streamline processes as a result of greater reliance on technology.
C. Calculation of MMIS Costs
MMIS costs are estimated at approximately $10.0 billion over the 5-
year budget window and $23.0 billion over the 10-year budget window.
These costs represent only the Federal share.
To calculate the impact of the regulation on MMIS costs, we assumed
that new systems on average would cost $150 million over 3 years for
each State ($50 million total cost per year, or $45 million Federal
costs at 90 percent FFP per year). We assumed ten States have
sophisticated systems that are very close to meeting the proposed
regulation standards. As a result, we assumed the remaining 41 States
would have approved APDs in place to replace or update their MMIS
between FY 2011 and FY 2013 to comply with the new regulation standards
and conditions.
We assumed that early adopter States would see increased
development, design, and installation costs, whereas late adopter
States would see increased development, design, and installation
savings as they are able to take advantage of efficiencies gained by
the early adopter States. Specifically, for those States that update or
build new systems in FY 2011 and FY 2012, we assumed a 10 percent
annual cost increase to new MMIS systems for design, development, and
installation. For those States that build new systems in FY 2013 and FY
2014, we assumed a 5 percent annual savings to new MMIS systems for
design, development, and installation.
While it is difficult to predict State behavior, we believe all
States would comply with the standards and conditions proposed in this
regulation to receive the 90 percent FFP, and have assumed that for the
purpose of these estimates.
For maintenance, we assumed those States that have implemented the
new regulation requirements would see a 20 percent annual savings, and
for operations, we assumed those States that have implemented the new
regulation requirements would see a 5 percent annual savings.
Based on these assumptions, we estimate the net Federal budgetary
impact on baseline MMIS costs from FY 2011 through 2015 of implementing
the proposed regulation is approximately $1.1 billion, and the net
Federal budgetary impact from FY 2011 through 2020 is approximately
$557 million in savings.
D. Calculation of Eligibility Systems Costs
For eligibility systems, we applied the same methodology we used to
calculate net Federal costs to MMIS under the proposed regulation.
In order to meet the requirements of the Affordable Care Act,
States would build new systems or modernize existing systems. Rather,
most States will add new functionalities to interface with the
Exchanges and implement new adaptability standards and conditions (such
as incorporation of new mandated eligibility categories). We assume
baseline costs for development, design, and installation at 50 percent
FFP for all States are approximately $815 million from FY 2011 through
2015 and $1.1 billion from FY 2011 through 2020. Eligibility systems
costs for maintenance and operations at 50 percent for all States are
approximately $1.2 billion from FY 2011 through 2015 and $2.7 billion
from FY 2011 through 2020. These costs represent only the Federal
share.
To calculate the impact of the regulation, we assumed that new
systems on average would cost $50 million over 3 years for each State
[[Page 68591]]
($16.7 million total cost per year, or $15 million Federal costs at 90
percent FFP per year). We assumed that 25 States would replace their
eligibility systems in FY 2011 through CY 2015. We assumed no States
would build new systems past FY 2014 (beyond what is assumed in the
baseline) due to the timing of the start of major coverage provisions
in the Affordable Care Act, the length of time needed to build new
systems (approximately 3 years), and the enhanced match ending after CY
2015. For maintenance, we assumed States that have implemented new
systems meeting the required standards and conditions would see a 20
percent annual savings, and for operations, we assumed those States
that have implemented the new systems would see a 5 percent annual
savings. These assumptions are consistent with our approach for savings
under MMIS in the proposed regulation.
The net Federal cost impact from FY 2011 through 2015 of
implementing the proposed regulation on eligibility systems is
approximately $2.2 billion, and the net Federal cost from FY 2011
through 2020 is $2.9 billion. These costs represent only the Federal
share.
E. Total Net Cost Impact
Combining the impact of the proposed regulation, the total net
Federal cost impact is approximately $3.3 billion for FY 2011 through
2015 and approximately $2.3 billion for FY 2011 through 2020. We see
lower costs over the 10-year budget window due to the increased savings
to MMIS over time.
Aligned with these Federal net costs, States will see a
corresponding decrease in their net State share due to the enhanced
Federal match for eligibility systems they will receive through CY 2015
and the benefits accrued to their systems by putting in place the set
of standards and conditions articulated in this proposed regulation.
Combining the impact of the proposed regulation, the total net State
budget impact is approximately $792.5 million in savings for FY 2011
through 2015 and approximately $1.9 billion in savings for FY 2011
through 2020. Similar to the Federal budget impact, we expect to see
higher savings achieved by States over the 10-year budget window due to
the increased savings to MMIS over time.
The projections in this analysis are subject to considerable
uncertainty, as they reflect projected costs based on technology and
innovation. While we believe that advancements in technology would
likely have an impact on States' systems, it is difficult to predict
with certainty how significant the technology advancements may be and
how they would affect State systems. For example, we have worked for
many years developing the MITA maturity model. We believe that States
should adopt the MITA framework as the basis for all MMIS replacements
and major system upgrades related to the MMIS, and while we are
requiring that States move to a MITA framework in order to receive
enhanced funding, to date there are no States that have reached full
MITA maturity. Consequently, having no States at full MITA maturity
would indicate that it takes time, money and considerable effort for
States to make changes to their current technology.
Additional uncertainty exists because we are unsure of the rate of
adoption for States to make the changes in this proposed rule. The
enhanced FFP is available for approximately 5 years, from CY 2011
through CY 2015, and States could upgrade or replace their systems at
any point within the 5-year period. Further, States may simply choose
to make moderate changes to existing systems, and even with the 90 and
75 percent enhanced FFP, such moderate changes could be less costly
overall for States than replacing their systems.
Additional uncertainty exists about the rate of State adoption
since some States may consider the costs needed to move to a more
advanced system to be too high to undertake such a project. Similarly,
States may decide not to make changes due to implementation of
performance requirements and the performance reviews.
We acknowledge that there are uncertainties regarding our
assumptions, including State behavior, and the associated cost
estimates with respect to states implementing new systems within the
timeframe assessed. However, we have offered our estimates with a 25
percent upper and lower range to capture such uncertainty in actual
implementation outcomes. Due to a number of uncertainties in our
assumptions, we believe a range of estimates better represents the net
cost impact of this proposed regulation. Tables 1 and 2 represent a 25
percent range for these aggregate net costs to the Federal and State
government, respectively. It is important to point out that we believe
that systems transformation is necessary to meet the vision of the
Affordable Care Act and consequently, these costs are necessary and
would provide for efficient systems that in the end would provide for
more efficient and effective administration of the State plan. The
separate impacts to MMIS and eligibility systems are summarized below.
Table 1--Net Federal Cost Impact of Proposed Regulation
[Dollars in millions*]
------------------------------------------------------------------------
FY 2011-2020
------------------------------------------------------------------------
MMIS (excluding Eligibility)......................... (417.4)-(695.7)
Eligibility Systems.................................. 2,154.6-3,591.0
------------------
Total............................................ 1,737.2-2,895.3
------------------------------------------------------------------------
* Numbers in parentheses represent savings to the Federal Government.
Table 1.1--Net Federal Cost Impact of Proposed Regulation by Fiscal Year
[Dollars in millions*]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-2020
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
MMIS (excluding Eligibility)................................. 231.1 469.4 435.6 54.3 (83.0) (322.6) (329.0) (333.1) (337.4) (341.8) (556.6)
Eligibility Systems.......................................... 328.9 436.7 634.6 469.3 337.4 127.9 130.5 133.1 135.8 138.5 2,872.8
----------------------------------------------------------------------------------------------------------------------------------
Total.................................................... 560.0 906.1 1,070.2 523.6 254.4 (194.7) (198.5) (200.0) (201.6) (203.3) 2,316.2
* Numbers in parentheses represent savings to the Federal Government.
[[Page 68592]]
Table 2--Net State Cost Impact of Proposed Regulation
[Dollars in millions *]
------------------------------------------------------------------------
FY 2011-2020
------------------------------------------------------------------------
MMIS (excluding Eligibility)......................... (170.6)-(284.4)
Eligibility Systems.................................. (1,255.4)-(2,092.
3)
Total................................................ (1,426.0)-(2,376.
7)
------------------------------------------------------------------------
* Numbers in parentheses represent savings to State governments.
Table 2.1--Net State Cost Impact of Proposed Regulation by Fiscal Year
[Dollars in millions *]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
MMIS (excluding Eligibility)...... 25.7 52.2 48.4 1.3 (24.1) (61.6) (65.2) (66.6) (68.0) (69.5) (227.5)
Eligibility Systems............... (285.6) (276.7) (258.0) (139.9) 64.3 (149.5) (152.5) (155.5) (158.6) (161.8) (1,673.8)
---------------------------------------------------------------------------------------------------------------------
Total......................... (259.9) (224.6) (209.6) (138.6) 40.2 (211.1) (217.7) (222.1) (226.6) (231.3) (1,901.3)
* Numbers in parentheses represent savings to State Governments.
F. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (RFA) requires agencies to prepare
an Initial Regulatory Flexibility Analysis to describe and analyze the
impact of proposed rule on small entities unless the Secretary can
certify that the regulation would not have a significant impact on a
substantial number of small entities. In the healthcare sector, Small
Business Administration size standards define a small entity as one
with between $7 million and $34 million in annual revenues. For the
purposes of the RFA, essentially all non-profit organizations are
considered small entities, regardless of size. Individuals and States
are not included in the definition of a small entity.
Since this rule would affect States, which are not considered small
entities, the Secretary has determined that this proposed rule would
not be likely to have a significant economic impact on a substantial
number of small entities. Therefore, we have not prepared a regulatory
flexibility analysis.
Additionally, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operation of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define small rural hospital
as a hospital that is located outside of a Metropolitan Statistical
Area and has fewer than 100 beds. We are not preparing an analysis for
section 1102(b) of the Act because we have determined that this rule
would not have a significant impact on the operations of a substantial
amount of small rural hospitals. There is no negative impact on the
program or on small businesses.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditures in any one year by
State, local, or tribal governments, in the aggregate, or by the
private sector of $135 million. This rule does not mandate expenditures
by the State governments, local governments, tribal governments, or the
private sector. This rule provides that States can receive enhanced FFP
if States ensure that the mechanized claims processing and information
retrieval systems, (MMISs), including--for a limited time--those that
perform eligibility determination and enrollment activities, as well as
the Medicaid portion of integrated eligibility determination systems,
meet with certain conditions including migrating to the MITA framework
and meeting certain performance requirements. This is a voluntary
activity; i.e., States can continue to receive the traditional 50
percent FFP match rate for reasonable administrative expenditures for
the design, development, or enhancement and maintenance and operations
to the Medicaid portion of integrated eligibility determination systems
in order to make eligibility determinations for Title XIX. This rule
imposes no substantial mandates on States. The State role in
determining Medicaid eligibility is dependent upon the population type;
specifically, some populations such as the elderly, blind, and disabled
are typically determined by the Medicaid State agency whereas other
population types may have their Medicaid eligibility determined by
cash-assistance programs. Mechanized claims processing and information
retrieval systems, including those that perform eligibility
determination and enrollment activities and the Medicaid portion of
integrated eligibility determination systems, at a minimum, will need
to be updated. However, providing 90 percent FFP for design,
development, and installation or 75 percent FFP for maintenance and
operations of such systems reduces the financial burden on States to 10
percent of the costs compared to the 50 percent financial burden
currently in place. Specifically, while this entails certain procedural
responsibilities, these activities do not involve substantial State
expense; providing 90 percent and 75 percent FFP reduces the total
State outlay.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We wish to note again that this is a voluntary activity
and as such this regulation does not mandate any direct costs on State
or local governments. Consequently, the requirements of Executive Order
13132 are not applicable.
G. Alternatives Considered
We considered that an alternative to our proposed rule would be
that we not provide enhanced match for State systems builds and not
provide Federal standards and conditions. In fact, States could
continue to receive the traditional 50 percent FFP for reasonable
administrative expenditures for designing, developing, installing, or
enhancing Medicaid eligibility determination systems. Similarly, States
could continue to receive 50 percent FFP for expenditures associated
with
[[Page 68593]]
the maintenance and operation of such systems.
However, States must continue to meet the requirements of Federal
legislation. Since the Affordable Care Act significantly alters
Medicaid eligibility and requires coordination with the Exchanges, it
is imperative that States have the resources and systems to be able to
meet this challenge.
Therefore, we believe that if States were left to develop
eligibility systems without Federal standards and conditions and
without the benefit of enhanced match, States systems may not comport
with our ultimate goal; that is, that design, development,
implementation, and operation of IT and systems projects are in support
of the Affordable Care Act.
H. Statement of Need
This regulation is important since with the passage of the
Affordable Care Act, we expect that changes to eligibility policies and
business processes would need to be adopted. System transformations
would be needed in most States to apply new rules to adjudicate
eligibility for the program; enroll millions of newly eligible
individuals through multiple channels; renew eligibility for existing
enrollees; operate seamlessly with newly authorized Health Insurance
Exchanges (``Exchanges''), or with Federal ``Exchanges'' if States
choose not to operate a State Exchange; participate in a system to
verify information from applicants electronically; incorporate a
streamlined application used to apply for multiple sources of coverage
and financial assistance; and produce notices and communications to
applicants and beneficiaries concerning the process, outcomes, and
their rights to dispute or appeal.
We wish to ensure that that a key outcome of our technology
investments is a much higher degree of interaction and interoperability
in order to maximize value and minimize burden and costs on providers
and beneficiaries. Thus, we are committed to providing 90 percent FFP
for design, development, and installation through CY 2015 or 75 percent
FFP for maintenance and operations of such systems. We have provided
that States must commit to a set of standards and conditions in order
to receive the enhanced FFP. This enhanced FFP reduces the financial
burden on States to 10 percent of the costs compared to the 50 percent
financial burden currently in place and ensures that States utilize
current technology development and deployment practices and produce
reliable business outputs and outcomes.
I. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 3, we have
prepared an accounting statement showing the classification of the
expenditures associated with the provisions of this rule. This table
provides our best estimate of the net costs decrease in Medicaid
payments as a result of the changes presented in this rule. Because of
the uncertainties identified in establishing the cost estimates, CMS
intends to update the estimates with any final rule.
Table 3--Accounting Statement: Classification of Estimated Net Costs, From FY 2011 to FY 2020
[In $ millions]
----------------------------------------------------------------------------------------------------------------
TRANSFERS
------------------------------------------------------------------------------
Category Year dollar Units discount rate
------------------------------------------------------------ Period covered
2010 7% 3%
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers... Primary Estimate.... $311.31 $266.55 FYs 2011-2020
Low Estimate........ 233.48 199.91
High Estimate....... 389.14 333.19
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From............................. Federal Government to State Governments
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Annualized Monetized Transfers... Primary Estimate.... -189.87 -189.82 FYs 2011-2020
Low Estimate........ -142.40 -142.36
High Estimate....... -237.34 -237.28
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From............................. State Governments to System Vendors, Integrators
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In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 433
Administrative practice and procedure, Child support Claims, Grant
programs--health, Medicaid, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
PART 433--STATE FISCAL ADMINISTRATION
1. The authority citation for part 433 continues to read as
follows:
Authority: Section 1102 of the Social Security Act, (42 U.S.C.
1302).
Subpart C--Mechanized Claims Processing and Information Retrieval
Systems.
2. Section 433.110 is amended by revising paragraph (a)(2) to read
as follows:
Sec. 433.110 Basis, purpose, and applicability.
(a) * * *
(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.
* * * * *
3. Section 433.111 is amended by--
A. Removing paragraph (b)(3).
B. Adding paragraph (c).
The addition reads as follows:
Sec. 433.111 Definitions.
* * * * *
[[Page 68594]]
(c) ``Medicaid Information Technology Architecture (MITA)'' is
defined at Sec. 495.302.
4. Section 433.112 is amended by--
A. Adding ``Subject to paragraph (c) of this section,'' at the
beginning of paragraph (a).
B. Revising paragraphs (b)(2) and (c).
C. Removing the cross-reference to ``45 CFR 74.171'' and adding
``45 CFR 74.27(a)'' in its place in paragraph (b)(7).
D. Adding paragraphs (b)(10) through (16).
The revisions and additions read as follows:
Sec. 433.112 FFP for design, development, installation or enhancement
of mechanized claims processing and information retrieval systems.
* * * * *
(b) * * *
(2) The system meets the system requirements and standards and
conditions in Part 11 of the State Medicaid Manual, as periodically
amended.
* * *
(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 Health Insurance Portability and Accountability Act of
1996 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 system that meets the requirements of this subpart
beginning, and no earlier than, [effective date of the final rule], and
only through December 31, 2015.
Sec. 433.113 [Removed]
5. Section 433.113 is removed.
6. Section 433.114 is amended by--
A. In paragraph (a), removing ``(h)'' and adding in its place
``(i)''.
B. Revising paragraph (b).
The revision reads as follows:
Sec. 433.114 Procedures for obtaining initial approval; notice of
decision.
* * * * *
(b) If CMS disapproves the system, the notice will include 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.
7. Section 433.116 is amended by--
A. In paragraph (a), removing ``Subject to 42 CFR 433.113(c),'' and
replacing it with ``Subject to paragraph (j) of this section,''.
B. In paragraph (b), removing ``(h)'' and adding in its place
``(i)''.
C. Adding new paragraphs (i) and (j).
The additions read as follows:
Sec. 433.116 FFP for operation of mechanized claims processing and
information retrieval systems.
* * * * *
(i) The standards and conditions of Sec. 433.112(b)(10) through
(16) must be met.
(j) Beginning and no earlier than, [add in effective date of final
rule], 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.
Sec. 433.117 [Amended]
8. Section 433.117 is amended by--
A. Amending paragraph (a) by removing the phrase ``all conditions''
and adding in its place the phrase ``all standards and conditions''.
B. Amending paragraph (c)(2) by removing the reference ``(h)'' and
adding ``(i)'' in its place.
9. Section 433.119 is amended by--
A. Revising paragraphs (a) introductory text.
B. Revising paragraph (a)(1).
C. Amending paragraph (a)(2) by removing the reference ``(h)'' and
adding ``(i)'' in its place.
D. Revising paragraphs (a)(4) and (c).
The revisions read as follows:
Sec. 433.119 Conditions for reapproval; notice of decision.
(a) CMS periodically reviews each system operation initially
approved under Sec. 433.114 and reapproves it for FFP at 75 percent of
expenditures if the following standards and conditions are met:
(1) The system meets the requirements of Sec. 433.112(b)(1), (3),
(4), (7) through (16).
* * * * *
(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).
* * * * *
(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.
10. Section 433.120 is amended by revising paragraph (b) to read as
follows:
Sec. 433.120 Procedures for reduction of FFP after reapproval review.
* * * * *
(b) CMS will reduce FFP in expenditures for system operations from
75 percent to 50 percent.
11. Section 433.121 is amended by revising paragraph (a) to read as
follows:
Sec. 433.121 Reconsideration of the decision to reduce FFP after
reapproval review.
(a) The State Medicaid agency may appeal (to the Departmental
Appeals Board under 45 CFR part 16) a disallowance concerning a
reduction in
[[Page 68595]]
FFP claimed for system operations caused by a disapproval of the
State's system.
* * * * *
Sec. 433.130 [Removed]
12. Section 433.130 is removed.
Authority: (Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program).
Dated: October 14, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: October 28, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2010-27971 Filed 11-3-10; 11:15 am]
BILLING CODE 4120-01-P