Affordable Care Act: State Resources FAQ 
April 25, 2013 
 
Enhanced Funding for Medicaid Eligibility Systems Operation and Maintenance  
 
Under the Medicaid program, CMS has provided 90 percent federal matching funds for the 
design and development of new or improved Medicaid eligibility determination systems that 
states are developing to accommodate the new Affordable Care Act modified adjusted gross 
income (MAGI) rules and to coordinate coverage with the Marketplaces.  States may also 
receive 75 percent federal match for maintenance and operations.  Receipt of these enhanced 
funds is conditioned on states meeting a series of standards and conditions to ensure investments 
are efficient and effective.  CMS has examined our current practices under Medicaid 
Management Information Systems (MMIS) rules for approval of 75 percent federal match for 
maintenance and operations in the context of eligibility determinations and has confirmed that, as 
with other parts of MMIS operations, certain eligibility determination-related costs are eligible 
for 75 percent Federal Financial Participation (FFP).  Eligibility for the enhanced FFP will be 
based on state systems being compliant with the Seven Conditions and Standards 
(see: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-
Systems/Downloads/EFR-Seven-Conditions-and-Standards.pdf), including meeting minimum 
critical success factors for accepting the new single streamlined application, making MAGI-
based determinations and coordinating with Marketplaces starting October 1, 2013.  The 
enhanced 75 percent funding will be available when the approved system becomes operational, 
with some exceptions outlined below.   
 
This set of FAQs provides general guidelines about what costs are eligible for enhanced funding, 
and how CMS will work with each state to review and approve the costs that will be covered.  As 
described in more detail in the following FAQs, CMS will use the advanced planning document 
(APD) process to confirm with states the specific implementation details, before states will be 
able to start claiming.  CMS will also regularly monitor enhanced claims. 
 
1.  Can states claim 75 percent FFP for ongoing operational costs of their eligibility 
determination system?  What costs are eligible for the enhanced FFP?  
 
Yes, 75 percent FFP is available for on-going costs of operating approved eligibility 
determination systems that meet the Seven Conditions and Standards and critical success factors. 
(see: http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-
Systems/Downloads/EFR-Seven-Conditions-and-Standards.pdf) 
 
Section 1903(a)(3)(B) of the Social Security Act provides 75 percent FFP for costs associated 
with operating an approved Medicaid management information system (MMIS).  The Medicaid 
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  manual further clarifies at Section 11276.3 A. MMIS Operations, FFP at 75 percent is available 
for direct costs directly attributable to the Medicaid program for ongoing automated processing 
of claims, payments, and reports.  Included are forms, use of system hardware and supplies, 
maintenance of software and documentation, and personnel costs of operations control clerks, 
suspense and/or exception claims processing clerks, data entry operators, microfilm operators, 
terminal operators, peripheral equipment operators, computer operators, and claims coding clerks 
if the coded data is used in the MMIS, and all direct costs specifically identified to these cost 
objectives.  Report users, such as staff who perform follow-up investigations, are not considered 
part of the MMIS. 
 
States may claim 75 percent FFP for the costs of certain personnel closely associated with 
operating claims processing and related systems under MMIS.  As noted in our final rule, 
Medicaid Program; Federal Funding for Medicaid Eligibility Determination and Enrollment 
Activities (CMS2346F), in response to comments, enhanced funding is available for staff 
time spent on mechanized eligibility determination systems in the same manner that they apply 
to all mechanized claims processing and information retrieval systems, since mechanized 
eligibility determination systems are now considered to be part of such systems, assuming the 
requirements of this section are met.  
(See: https://www.federalregister.gov/articles/2011/04/19/2011-9340/medicaid-program-federal-
funding-for-medicaid-eligibility-determination-and-enrollment-activities)  
 
The table below delineates, consistent with traditional MMIS functions, how states should 
distinguish between costs that can be matched at 75 percent and 50 percent FFP.  States should 
work closely with CMS during the APD process, as described below in more detail, to provide 
appropriate documentation concerning their cost allocation and claiming plans.  In states where 
workers determine eligibility or provide customer service for multiple health and human service 
programs, costs should be allocated across programs, as discussed further in Question 6. 
 
General Allocation Approach 
Eligible for 75/25  Eligible for 50/50 
Application, On-going Case Maintenance and  Policy, Outreach and Post-eligibility  
Renewal* 
  Intake - Application/data receipt (i)    Outreach and Marketing  General 
  Acceptance- Edits, verification and  public outreach, beneficiary education and 
resolution of inconsistencies (ii)  outreach, including explanation of 
  Eligibility determination (iii)  eligibility policies, program and benefits. 
  Outputs- Issuance of eligibility notices to    Policy development and research even if 
customer, file updates and transactions to  related to eligibility determination 
partners (iv)  standards and methodologies 
  On-going case maintenance activities,    Staff development and training even if 
including intake activities related to  related to eligibility determination, except 
renewals (v)  for Operational Readiness training as 
  Customer service, including call center  defined in the response to question 3 
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  Eligible for 75/25  Eligible for 50/50 
Application, On-going Case Maintenance and  Policy, Outreach and Post-eligibility  
Renewal* 
activities (vi) and out-stationed eligibility  below. 
worker activities (vii) related to eligibility    Community-based application assistance  
determination.    Program integrity, including auditing 
  Maintenance and Routine Updates,  efforts 
including routine system maintenance,    Appeals of final eligibility system 
security updates, and other routine 
determinations 
maintenance activities related to the 
  On-going case maintenance activities, 
Eligibility Determination System. 
including plan choice/counseling and 
 
enrollment 
  Customer service, including call center 
activities and out-stationed eligibility 
worker activities, related to beneficiary 
education, benefits, plan choice/enrollment, 
and civil rights complaints. 
 
*Includes line staff, supervisory staff and support staff for the activities listed. 
i.  Activities related to receipt of the application or data related to applications. 
 
ii.  Manual and automated edits and verification of data. 
 
iii.  Activities related to assisting the automated eligibility determination system in the evaluation of the edited, 
verified data to make an eligibility determination. 
 
iv.  Includes the issuance of the eligibility notice to the beneficiary, file updates and all activities related to 
notification to partners of the decision (e.g. Federally-facilitated Marketplace, SBMs, MCOs, POS, etc.). 
 
v.  Includes receipt of data related to the ongoing-eligibility and maintenance of a beneficiarys eligibility, 
such as annual renewals, address changes, income changes, household composition changes, etc. and the 
related steps as described in notes i, ii, iii & iv above. 
 
vi.  Costs of call center staff should be allocated based on the portion of staff time spent performing functions 
eligible at the 75 percent versus 50 percent FFP levels.  Those call center functions related to benefits, 
general beneficiary education, plan choice and enrollment would only be eligible at the 50 percent FFP 
level.   
 
vii.  Costs of out-stationed eligibility workers entering eligibility application data also would be eligible for 75 
percent FFP.  Costs of workers conducting consumer assistance would only be eligible for 50 percent FFP. 
 
2.  When will states be eligible to claim the 75 percent FFP for ongoing maintenance and 
operations of eligibility determination systems?  Does the 75 percent FFP expire? 
 
Eligibility for the enhanced FFP will be based on state systems being compliant with the Seven 
Standards and Conditions, including meeting minimum critical success factors for accepting the 
new single streamlined application, making MAGI-based determinations and coordinating with 
Marketplaces.  The 75 percent FFP will generally be available when the approved system 
becomes operational.  The 75 percent FFP will not expire. 
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The start date for the 75 percent FFP for maintenance and operations would be October 1, 2013 
or the actual start of the operations of the approved eligibility determination system, whichever is 
later.   
 
We recognize states may be phasing in system upgrades that implement modified adjusted gross 
income (MAGI)-based eligibility determinations first, with subsequent releases to include non-
MAGI and/or other human services programs eligibility.  We will allow the 75 percent FFP to 
begin with the start of the approved MAGI shared eligibility service, based upon an approved 
Operations APD, that meets the critical success factors.  Further, states with challenges in 
meeting critical success factors at the expected service level must have approved mitigation 
strategies in order to qualify. 
 
In order to begin claiming, states should submit an Operations APD to CMS that clearly 
identifies the functions, staff and costs to be charged at the 75 percent FFP level, and it must be 
approved by CMS before a state can begin claiming the enhanced match.   
 
3.  Can states use enhanced funding for staff that they will need to bring on prior to the 
October 1, 2013 start date in order to train them to be ready for the start of operations? 
 
Costs associated with the training of eligibility workers directly engaged in the operation of the 
new eligibility system may be eligible to be matched at the enhanced rate during the three 
months (or less) prior to the start of operations.  An APD update would be required to document 
the costs, scope and timing of the training period, which will be reviewed and approved by CMS 
prior to a state being eligible to claim the enhanced match.  States must be able to demonstrate 
their eligibility determination system will be operationally ready, comply with the Seven 
Conditions and Standards, and meet minimum critical success factors by October 1, 2013 in 
order to claim the enhanced funding during this training period. 
 
4.  Would the 75 percent FFP for eligibility workers (i.e. salaries/benefits) also include 
other resources needed to do the job (such as the phone lines for the call center, rent, 
computers, etc.)?  
 
Yes.  Certain types of personnel costs are eligible for the 75 percent matching rate, subject to 
current MMIS maintenance and operations claiming rules.  The State Medicaid Manual 
delineates which types of personnel costs can be claimed at enhanced match, including staff 
direct labor and fringe benefit costs.  Only direct costs allocable to the development or operation 
of an MMIS (including Medicaid eligibility determination system) are eligible for 
reimbursement at enhanced FFP rates. Such costs include: utilities, rent, telephone service, etc., 
necessitated by either the development or operation of an MMIS or eligibility determination 
system.  Costs which cannot be specifically identified with the development or operation of an 
MMIS (including Medicaid eligibility determination system) are matched at 50 percent FFP.  
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  Such costs are usually indirect costs including the staff costs associated with agency-wide 
functions such as accounting, budgeting, and general administration.  
 
The state must submit an Operations APD which includes an allocation or distribution plan 
showing the breakout of direct and indirect costs for equipment, supplies, and non-personnel 
resources it intends to claim, and justification for those.  
 
5.  Does the 75 percent FFP apply to program integrity activities associated with eligibility 
and enrollment?   
 
Verification services that are conducted as part of the eligibility determination process or to 
validate a clients attestation, after an eligibility record has been entered into the system, will be 
eligible for 75 percent FFP. 
 
Those verifications performed post eligibility and normally initiated as part of a sampling 
approach, including audits, PERM or MEQC activities would be considered program integrity 
activity and eligible for the 50 percent FFP. 
 
6.  Do states need to cost allocate eligibility worker costs across programs?  Will claiming 
the 75 percent FFP require new or increased time reporting by employees?  What must 
a state submit in its operations APD and cost allocation plan?  
 
In situations where eligibility workers determine eligibility for multiple programs, all costs must 
be distributed to the appropriate programs and governing FFP rates (90/75/50) based on 
approved time study methodologies and/or cost allocation plans consistent with OMB Circular 
A-87 cost allocation principles.  These costs must also clearly differentiate between resources 
needed for direct data and systems-related activities and resources needed for MMIS and 
eligibility determination systems versus program management and oversight activities, which are 
only eligible for 50 percent FFP.  State agencies performing eligibility determination currently 
develop and maintain methodologies for allocating costs among different health and human 
services programs.  CMS does not anticipate the additional reporting required to obtain 75 
percent FFP will add a significant amount of time to that process.  From 45 CFR 95.507, Plan 
requirements, the cost allocation support should include the following: 
 
-  A description of the procedures used to identify, measure, and allocate all costs to each of the programs 
-  Conform to the accounting principles and standards prescribed in Office of Management and Budget 
Circular A-87, and other pertinent Department regulations and instructions; 
-  Contain sufficient information in such detail to make an informed judgment on the correctness and fairness 
of the state's procedures for identifying, measuring, and allocating the costs  
-  The cost allocation plan shall contain the following information: 
  An organizational chart showing the placement of each unit whose costs are charged to the programs 
operated by the state agency. 
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    A listing of all federal and all non-federal programs performed, administered, or serviced by these 
organizational units. 
  A description of the activities performed by each organizational unit and, where not self-explanatory 
an explanation of the benefits provided to federal programs. 
-  The procedures used to identify, measure, and allocate all costs to each benefiting program and activity 
(including activities subject to different rates of FFP). 
 
States should consult with their CMS cost allocation leads to determine whether any change to 
their approved cost allocation plan is needed and work with their counterparts at human services 
agencies as necessary.  The methods of cost allocation should be documented in the state 
operations APD update submission to support the proposed budget. 
 
7.  How will CMS monitor and oversee state implementation?  Will CMS ask states to 
report on enhanced maintenance and operations activities separately on the CMS-64-10 
and 37-10?  How will CMS verify state reporting? 
 
As noted earlier, states must submit an Operations APD to request this funding.  CMS will 
monitor state implementation of the enhanced 75 percent FFP through ongoing review of state 
eligibility system implementation and operations, as well as through revised claims reporting.  
Specifically, CMS is revising the CMS-64-10 and 37-10 forms to separately capture eligibility 
determination system related maintenance and operations costs.  We will separately track costs 
related to IT systems and eligibility determination staff as follows: 
  For the IT and systems maintenance and operations, costs will be reported on the CMS-
64-10 and 37-10 on line 28C  Operation of an approved Medicaid eligibility 
determination system/cost of in-house activities  75 percent FFP and 28D  Operation of 
an approved Medicaid eligibility determination system/cost private sector contractors 75 
percent FFP.   
  For the Eligibility Determination workers staffing eligible for enhanced match, costs will 
be reported on the CMS-64-10 and 37-10 on line 28E - Eligibility Determination staff  
cost of in-house activities  75 percent FFP and 28F- Eligibility Determination staff  
cost of private sector contractors  75 percent FFP. 
  For the Eligibility Determinations workers staffing eligible for regular administrative 
match, costs will be reported on the CMS-64-10 and 37-10 on line 28G  Eligibility 
Determination staff  cost of in-hour activities  50 percent FFP and 28 H  cost of 
private sector contractors  50 percent FFP. 
 
As this enhanced match is implemented, CMS will closely monitor implementation and 
reporting, and if necessary, will revise how this data is collected on the estimate and expenditure 
reporting forms to ensure states and CMS have the proper break out to track these activities and 
their related claims.   
 
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  Furthermore, CMS will continue to work with states over time to ensure that their systems 
continue to remain compliant with the Seven Conditions and Standards.  For example, under the 
Reporting Condition, state systems should be able to produce accurate data that are necessary for 
oversight, administration, evaluation, integrity and transparency.  CMS has recently provided 
technical specifications for the Transformed Medicaid Statistical Information System (T-
MSIS) data file to states following more than a year of collaboration with states participating in 
the T-MSIS pilot.  CMS envisions that the T-MSIS data file will be submitted on a monthly 
basis.  We anticipate releasing additional guidance on this subject in the coming weeks. 
 
As with all expenditures, federal match must be properly claimed and is subject to review and 
approval.  Again, CMS will work closely with the each state to review and approve costs covered 
and will use the APD process to confirm with states specific implementation details, before 
states start to submit claims. 
 
Coordination between Medicaid/CHIP and the Federally-Facilitated Marketplace  
 
1.  Will the Federally-Facilitated Marketplace  apply Medicaid policies and verification 
procedures differently under the assessment and determination models? 
   
In an assessment model, the Federally-Facilitated Marketplace will not make a final Medicaid 
determination.  Instead, the Federally-Facilitated Marketplace will transmit the account to the 
Medicaid or CHIP agency when they have evaluated the individual and identified him or her as 
Medicaid or CHIP eligible, and the Medicaid or CHIP agency will make the formal 
determination.  In a determination model, the Medicaid or CHIP agency delegate the authority to 
make determinations to the Federally-Facilitated Marketplace.  In both an assessment and 
determination model, as described in more detail in 42 CFR 435.1200, the Federally-Facilitated 
Marketplace will utilize the same set of eligibility criteria, including selected state-specific 
options and standard verification procedures. If the state agency chooses the determination 
model, it must accept the Federally-Facilitated Marketplace determination as final.  If the state 
chooses the assessment model, it must accept findings made by the Federally-Facilitated 
Marketplace relating to a criterion of eligibility, as long as the Federally-Facilitated Marketplace 
applies the same policies and verification procedures as those the state agency employs.  In a 
state with a separate CHIP agency, the state Medicaid and CHIP agencies can make different 
choices allowing the Federally-Facilitated Marketplace to make an assessment or determination. 
States must choose either the assessment or determination model for all applications; they may 
not choose between models on a case-by-case basis.  States will need to indicate their assessment 
or determination decision to CMS in a State Plan Amendment, as well as in the Memorandum of 
Agreement it signs with the Federally-Facilitated Marketplace.  
 
2.  In an assessment model, an applicant may be assessed eligible by the Federally-
Facilitated Marketplace and later receive a determination as ineligible by the state 
Medicaid/CHIP agency.  Does the state Medicaid agency need to communicate the 
eligibility finding to the Federally-Facilitated Marketplace? 
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Yes.  In an assessment model, where an applicant is assessed eligible by the Federally-Facilitated 
Marketplace and later found to be ineligible by the state Medicaid agency, the state must transfer 
the account to the Federally-Facilitated Marketplace.  Once received, the state Medicaid 
determination will be accepted and the account will be assessed by the Federally-Facilitated 
Marketplace for enrollment in a qualified health plan (QHP) and eligibility for Advanced 
Premium Tax Credits/Cost Sharing Reductions.   
 
For the determination model, as discussed in 435.1200(c), as governed by the agreement signed 
between the Medicaid agency and the Federally-Facilitated Marketplace, the Federally-
Facilitated Marketplace determines eligibility for individuals applying to the Federally-
Facilitated Marketplace for Medicaid/CHIP based on MAGI, and the state Medicaid or CHIP 
agency agrees to accept eligibility findings made by the Federally-Facilitated Marketplace.   
 
3.  In an assessment model, if an applicant applied via the Federally-Facilitated 
Marketplace and is found eligible for Medicaid or CHIP, how will the Federally-
Facilitated Marketplace coordinate with the state Medicaid or CHIP agency regarding 
eligibility, enrollment, redeterminations, or renewals for Medicaid/CHIP? 
 
For individuals assessed eligible for Medicaid/CHIP by the Federally-Facilitated Marketplace, 
their account will be transferred to the state Medicaid/CHIP agency for a final determination.  
Once enrolled in Medicaid/CHIP, regardless of where the initial application was submitted, all 
updates, redeterminations and renewals are handled by the enrolling entity (e.g., the state 
Medicaid/CHIP agency).  No further coordination would be needed with the Federally-
Facilitated Marketplace except when an individual is found ineligible for Medicaid or CHIP 
during the redetermination process.  In this case, the state agency would transfer the individual's 
account to the Federally-Facilitated Marketplace to be assessed for enrollment in a qualified 
health plan (QHP) and eligibility for Advanced Premium Tax Credits /Cost Sharing Reductions.  
The Federally-Facilitated Marketplace will not handle redeterminations or renewals for 
Medicaid/CHIP and will refer individuals to the appropriate site in the state as appropriate.  
 
4.  Will the Federally-Facilitated Marketplace integrate its enrollment file with the states 
client registry so that data for households participating in both state programs and the 
Marketplace can be synchronized?  Will the Federally-Facilitated Marketplace 
routinely check the Medicaid/CHIP enrollment files to determine any overlap between 
the Federally-Facilitated Marketplace and Medicaid/CHIP enrollment logs? 
 
No.  There will not be integration of the Federally-Facilitated Marketplace and states client 
registries.  Instead, the Federally-Facilitated Marketplace will both verify current Medicaid/CHIP 
enrollment as part of the Federally-Facilitated Marketplaces applicants application, and will 
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  also conduct quarterly checks of the Medicaid/CHIP enrollment files to determine any overlap 
with Federally-Facilitated Marketplace enrollment logs.   
 
Section 1115 Demonstrations       
 
1.  Will CMS approve enrollment caps or periods of ineligibility in section 1115 
demonstrations? 
 
The Affordable Care Act provides significant federal support to ensure the availability of 
coverage to low-income adults.  Enrollment caps limit enrollment in coverage on a first come, 
first serve basis.  Periods of ineligibility delay or deny coverage for otherwise eligible 
individuals.  These policies do not further the objectives of the Medicaid program, which is the 
statutory requirement for allowing section 1115 demonstrations.  As such, we do not anticipate 
that we would authorize enrollment caps or similar policies through section 1115 demonstrations 
for the new adult group or similar populations. 
 
2.  Can states that extend eligibility for adults and propose, through a section 1115 
demonstration, changes to the delivery of health care services still be eligible for the 
increased federal match?   
 
Demonstrations focused on changes to how health care services are delivered, such as the use of 
managed care, will not generally affect the states matching rate.  Please refer to our February 
2013 FAQs (available at http://medicaid.gov/State-Resource-Center/FAQ-Medicaid-and-CHIP-
Affordable-Care-Act-ACA-Implementation/Downloads/ACA-FAQ-BHP.pdf), which provide 
further clarification on the two increased federal match rates: the newly eligible rate and the 
expansion state rate as well as the final FMAP rule published on April 2, 2013 (available 
at http://www.gpo.gov/fdsys/pkg/FR-2013-04-02/pdf/2013-07599.pdf).  Additionally, CMS 
issued two State Medicaid Director letters, on July 10, 2012, that provide guidance on how states 
can adopt integrated care models without the need for a section 1115 demonstration. 
 
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