[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR430.35]

[Page 11]
 
                         TITLE 42--PUBLIC HEALTH
 
  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                 HEALTH AND HUMAN SERVICES--(Continued)
 
PART 430--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS--Table of Contents
 
   Subpart C--Grants; Reviews and Audits; Withholding for Failure To 
   Comply; Deferral and Disallowance of Claims; Reduction of Federal 
                            Medicaid Payments
 
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.