SMDL #01-026  
August 2, 2001 
Dear State Medicaid Director: 
This letter clarifies the policy of the Centers for Medicare & Medicaid Services (CMS), 
formerly the Health Care Financing Administration, as it relates to the enrollment of 
Medicare eligible beneficiaries in Medicaid managed care. 
As the population of dual eligibles (beneficiaries who are entitled to Medicare as their 
primary coverage and Medicaid as their secondary coverage) represents a 
particularly vulnerable group of individuals, we are very concerned with protecting 
the rights and privileges due them under both the Medicare and Medicaid programs. 
To that end, we are communicating the following policy regarding the ability to 
mandatorily enroll dual eligibles, or to allow dual eligible beneficiaries to choose to 
voluntarily enroll in a Medicaid Managed Care plan that would withhold Medicare 
cost-sharing reimbursement in the absence of prior authorization for non-emergency 
out-of-network services. 
Mandatory Enrollment
Dual eligibles may be mandatorily enrolled into Medicaid managed care with CMS 
approval under Section 1115 demonstration or Section 1915 (b) waiver authority, so 
long as mandatory managed care enrollment does not effect dual eligibles' free 
choice of Medicare provider. It has been CMS policy not to permit mandatory 
enrollment of dual eligibles in a Medicaid managed care product (Managed Care 
Organization - MCO; Health Insurance Organization - HIO; Prepaid Health Plan - 
PHP; or Primary Care Case Management - PCCM - model) that limits Medicare choice 
of provider. This is consistent with the emphasis on freedom of choice contained in 
the Social Security Act. 
Furthermore, it has been CMS policy not to approve requests to mandatorily enroll 
dual eligibles into a Medicaid managed care plan that conditions reimbursement of 
Medicare cost-sharing (i.e. Medicare coinsurance, copayments, and deductible) on 
receiving prior authorization for non-emergency services obtained out-of-network. 
Voluntary Enrollment
States are permitted to allow dual eligible beneficiaries to choose to voluntarily enroll 
in a Medicaid managed care plan that would withhold Medicare cost-sharing 
reimbursement in the absence of prior authorization for non-emergency out-of-
network services, if the following protections are met: 
 Beneficiaries are fully informed about the health plan before they choose to enroll. 
This must include marketing materials that are free of language, literacy, or disability 
barriers. It particularly applies to any policy on denial of payment of Medicare cost-
sharing for out-of-network services that have not been prior authorized. We will not 
approve any waiver request or renewal that fails to include adequate provisions for 
informed choice.   The state is able to demonstrate that the principle of beneficiary informed choice is 
protected at the point of enrollment in the program; and that this practice results in 
added value to the beneficiary (i.e., coordination of Medicaid and Medicare services). 
 Beneficiaries must be permitted to disenroll from the Medicaid MCO (or HIO, PHP, 
or PCCM model) at the earliest date that is administratively feasible and that is 
identified in written policy consistent with Balanced Budget Act (BBA) provisions. 
Administratively feasible is defined as no later than the end of the month following 
the month in which the request to disenroll is received by the plan. 
Benefits
 Strengthened coordination of the Medicare and Medicaid programs is achieved, as 
both programs must work together to integrate covered services for which a dual 
eligible is entitled. 
 The level of beneficiary education of how both programs work is increased, enabling 
individuals to make more informed decisions about their total health care. 
 Dual eligible beneficiaries will be informed of any potential cost-sharing imposed for 
Medicare services in a Medicaid managed care plan, which could create a financial 
hardship on this population of Medicaid eligibles. 
CMS will ensure compliance with this policy through demonstration or waiver 
approval, ongoing monitoring, and contract approval. 
If you have any questions, please do not hesitate to contact Melissa Harris at (410) 
786-3397. 
Sincerely, 
/s/ 
Dennis G. Smith 
Director 
Center for Medicaid and State Operations 
cc: 
CMS Regional Administrators 
CMS Associate Regional Administrators for Medicaid and State Operations 
Lee Partridge 
Director, Health Policy Unit 
American Public Human Services Association 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures  Matt Salo 
Director of Health Legislation 
National Governors' Association 
Brent Ewig 
Senior Director, Access Policy 
Association of State and Territorial Officials