DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
Center for Medicaid, CHIP, and Survey & Certification 
 
CMCS Informational Bulletin 
  
 
DATE:  July 13, 2011 
 
FROM:  Cindy Mann, Director 
  Center for Medicaid, CHIP and Survey and & Certification (CMCS) 
 
SUBJECT:  Updates on Medicaid/CHIP  
 
This Informational Bulletin covers several important topics of interest to States: 
  New Initiative for Medicare-Medicaid Enrollees;  
  Proposed Regulations Regarding Affordable Insurance Exchanges 
  Home Health Services NPRM;  
  PRA Package for Medicaid and CHIP State Plan, Waiver, and Program Submissions; 
  CMS Second National Background Check Program Conference;  
  Inclusion of Training Costs in Rate Development: 
  Pharmacy Pricing Survey 
  
 
New Initiative for Medicare-Medicaid Enrollees 
 
CMCS and the Office of Medicare-Medicaid Coordination is pleased to announce the release of 
a State Medicaid Directors letter providing guidance on opportunities to test new financial 
models designed to help States improve quality and share in the lower costs that result from 
better coordinating care for individuals enrolled in both Medicare and Medicaid (Medicare-
Medicaid enrollees).   A longstanding barrier to coordinating care for Medicare-Medicaid 
enrollees has been the financial misalignment between Medicare and Medicaid.  To address this, 
and in response to State requests CMS is eager to collaborate with States to test two models to 
better align the financing of these two programs and integrate primary, acute, behavioral health 
and long term services and supports for their Medicare-Medicaid enrollees.  We will be setting 
up calls with States to review these opportunities. 
 
For more information, please visit:  
https://www.cms.gov/smdl/downloads/Financial_Models_Supporting_Integrated_Care_SMD.pd
f 
Proposed Regulations Regarding Affordable Insurance Exchanges 
On July 11, 2011, CMS issued the a proposed rule setting forth a framework to assist States in 
building Affordable Insurance Exchanges, state-based competitive marketplaces where 
individuals and small businesses will be able to purchase affordable private health insurance. 
Starting in 2014, Exchanges will make it easy for individuals and small businesses to compare 
health plans, get answers to questions, find out if they are eligible for tax credits for private  2 | P a ge -  Info rm a t i onal  Bul l et i n  
 
insurance or health programs like Medicaid and the Childrens Health Insurance Program 
(CHIP), and enroll in a health plan that meets their needs. 
The proposed rules offer States guidance and options on how to structure their Exchanges in two 
key areas: 
  Setting standards for establishing Exchanges, setting up a Small Business Health 
Options Program (SHOP), performing the basic functions of an Exchange, and certifying 
health plans for participation in the Exchange, and; 
  Ensuring premium stability for plans and enrollees in the Exchange, especially in the 
early years as new people come in to Exchanges to shop for health insurance. 
These proposed rules set minimum standards for Exchanges, give States the flexibility they need 
to design Exchanges that best fit their unique insurance markets, and are consistent with steps 
States have already taken to move forward with Exchanges.  The proposed rules build on over a 
years worth of work with States, small businesses, consumers and health insurance plans and 
offer States substantial flexibility. For example, it allows States to decide whether their 
Exchanges should be local, regional, or operated by a non-profit organization, how to select 
plans to participate, and whether to partner with the Department of Health and Human Services 
(HHS) to split up the work. 
 
To reduce duplication of effort and the administrative burden on the states, HHS also announced 
that the federal government will partner with States to make Exchange development and 
operations more efficient. States can choose to develop an Exchange in partnership with the 
federal government or develop these systems themselves. This provides States more flexibility to 
focus their resources on designing the right Exchanges for their local insurance markets. 
 
To review the proposed rule visit:  http://www.ofr.gov/OFRUpload/OFRData/2011-17610_PI.pdf . 
The comment period closes on September 28, 2011. HHS will also convene a series of regional 
listening sessions and meetings to facilitate pubic comments.  Additional guidanceincluding 
proposed rules related to eligibility and enrollment procedures for Exchanges and Medicaid
will be issued in the future.  
 
For more information on Exchanges, including fact sheets, visit 
http://www.healthcare.gov/exchanges. 
 
Home Health Services; Policy Changes and Clarifications Related to Home Health 
 
On Tuesday, July 5, 2011, CMS released a Notice of Proposed Rule Making (NPRM) providing 
additional guidance to States on the implementation of section 6407 of the Affordable Care Act 
which adds a requirement that in the course of authorizing home health services, physicians must 
document the existence of a face-to-face encounter (including through the use of telehealth) with 
the Medicaid eligible individual within specified timeframes. This proposed rule aligns Medicaid 
implementation of face-to-face encounters with Medicares regulatory guidance. This will 
improve facilitation of services for individuals dually eligible for both programs, and make it 
easier for providers participating in both programs to understand the rules.  This provision was 
effective on January 1, 2010, but this is a proposed rule and comments are welcome. 
 
  3 | P a ge -  Info rm a t i onal  Bul l et i n  
 
In addition, this proposed rule clarifies that home health services, including medical supplies, 
equipment and appliances may not be restricted to the home, and if medically necessary, should 
be provided in any non-institutional setting in which normal life activities take place.  It includes 
in regulation the definition of medical supplies, equipment and appliances. 
 
For more information and instructions on how to submit comments on this rule, please visit:  
http://www.gpo.gov/fdsys/pkg/FR-2011-07-12/pdf/2011-16937.pdf.  All comments are due by 
September 12, 2011.  
 
 
PRA Package for Medicaid and CHIP State Plan, Waiver, and Program Submissions 
 
On Friday, July 1, 2011, CMS published a generic Paperwork Reduction Act (PRA) package in 
the Federal Register that includes forms necessary for CMCS to conduct ongoing business with 
our State partners to continue the implementation of the Affordable Care Act provisions related 
to Medicaid and the CHIP. These forms include State plan amendments, waiver, demonstration 
and reporting templates that will be developed over the 3-year approval period.   
 
This PRA package provides support to both States and CMS by: 
 
  Developing streamlined submissions for States to implement health reform initiatives in 
Medicaid and CHIP; 
  Enhancing collaboration and partnerships by documenting CMS policy for States to use 
as they are developing program changes; and  
  Improving the efficiency of administration by creating a common and user friendly 
understanding of the information needed by CMS to process requests for State plan 
amendments, waiver, demonstrations and reporting.  
 
For more information and instructions on how to submit comments on this rule, please visit:  
http://www.gpo.gov/fdsys/pkg/FR-2011-07-01/pdf/2011-16600.pdf.   Comments and 
recommendations must be submitted by August 30, 2011.  
 
 
Encouraging States to Attend the CMS Second National Background Check Program 
Conference 
 
We are pleased to announce that the second CMS National Background Check Program (NBCP) 
Conference is scheduled for 2.5 days, September 13-15, 2011 at the Crowne Plaza Hotel, St. 
Louis-Downtown located at 200 N. Fourth Street, St. Louis, Missouri.  This conference will 
provide education to NBCP grantee States as well as non-grantee States interested in establishing 
or improving their background check programs for long term care providers and facilities.  
Although grantee States are required to use grant funds to send at least three attendees to each of 
the NBCP conferences, we also hope States who have not yet received a grant will attend.  
   
The NBCP conference is part of the technical assistance efforts CMS is providing to States in 
support of section 6201 of the Affordable Care Act of 2010, which directs the Secretary of the 
Department of Health and Human Services to establish a nationwide program to identify efficient, 
  4 | P a ge -  Info rm a t i onal  Bul l et i n  
 
effective, and economical procedures for long term care facilities and providers to conduct 
background checks on a statewide basis on all prospective direct patient access employees.  The 
NBCP will enhance the safety of residents and clients of long term care providers by 
disqualifying certain offenders from positions that would bring them into contact with vulnerable 
populations served in long term care settings.  
 
Non-grantee States interested in attending the second CMS NBCP Conference at their own 
expense, should contact Lisa Byrd, CMS Training Coordinator, via email at 
lisa.byrd@cms.hhs.gov by Monday, August 1, 2011 for registration assistance.  If you are a 
non-grantee State with travel funding issues that may prohibit attendance at this conference, 
please contact the Background Check Team at Background_Checks@cms.hhs.gov to discuss the 
potential for CMS assistance.  For all other questions related to conference registration, please 
contact lisa.byrd@cms.hhs.gov. 
 
 
Inclusion of Training Costs in Rate Development  
 
In light of questions we have received, CMCS is providing this information regarding the 
mechanism by which provider-related training costs may be considered in the development of 
the rate of payment for medical services.  Questions have come up particularly in the area of 
home health services. 
 
Medicaid statute and regulations (section 1902 of the Social Security Act and 42 Code of Federal 
Regulations 430 and 447) allow reimbursement for covered services delivered by a qualified 
provider to an eligible beneficiary.  Costs associated with requirements that are prerequisite to 
being a qualified Medicaid provider are not reimbursable by Medicaid.  However, costs 
associated with maintaining status as a qualified provider may be included in determining the 
rate for services.  Specifically, if as part of its provider qualification requirements, a State 
requires a provider to acquire a certain minimum number of hours of specified types of 
continuing education (CE) each period (annually or quarterly, for example), the State may 
recognize such CE expenses as a cost to the provider of doing business and may consider such 
costs in developing the rate paid for the service.  The cost of CE may only be included as part of 
the rate paid for the service and may not be claimed separately by the Medicaid agency as an 
administrative expense. 
  
For example, a States provider qualification standards could require the direct service provider 
to: 1) have a high school diploma (or its equivalent) and be at least 18 years of age, and 2) 
complete a certain number of specified CE hours or credits during the calendar or fiscal year (or 
quarter) in order to maintain eligible provider status.  The State could not pay, or include in its 
rates, costs for individuals to obtain a high school diploma or its equivalent.  However, the State 
may include the estimated costs of meeting ongoing CE requirements in determining the rate 
paid for the service.  If the provider fails to acquire the minimum required number of CE hours 
or credits, the provider would no longer be qualified, and no Medicaid payment could be made 
either for services or for the CE that would be needed as a prerequisite to regaining status as a 
qualified provider.    
 
  5 | P a ge -  Info rm a t i onal  Bul l et i n  
 
Similarly, should a State wish to promote advanced provider skills training to increase the 
availability of providers qualified to serve beneficiaries with more complicated or difficult 
medical needs, costs associated with that advanced training could also be included in the 
development of rates paid for services requiring more complex levels of care.  The State could 
set provider qualification requirements at a separate and distinct level for those advanced level 
providers, and pay rates commensurate with their higher skill levels.   The qualifications and 
rates could be higher than those for services furnished by less skilled individuals such as family 
members.  
 
If you have additional questions, please contact Dianne Heffron, Director, Financial 
Management Group, who may be reached at (410) 786-3247.  
 
 
Pharmacy Pricing Survey 
 
CMS is pleased to announce that Myers and Stauffer, LC has been awarded a contract to conduct 
a Survey of Pharmacy Retail Prices.  The survey, which was initially requested by States and 
which Secretary Sebelius committed to in her February 3, 2011 letter to Governors, is part of 
CMS commitment to working with States to ensure that they have accurate information about 
drug costs in order to make prudent purchasing decisions.   
  
The contractor will develop a monthly survey of retail community pharmacy prescription drug 
prices and generate of publicly available pricing files to help States.  We anticipate that these 
files will afford State Medicaid agencies with a valid array of covered outpatient drug 
information, regarding retail prices for the ingredient costs of prescription drugs and consumer 
purchase prices for such drugs.  We expect that State Medicaid agencies will be able to use this 
information to compare their own pricing methodologies and payments to those derived from 
this survey. 
 
Additionally, on an annual basis, CMS will obtain from State Medicaid agencies information on 
their prescription drug payment and utilization rates and prepare a comparative report regarding 
the performance of the States reimbursement prices and the national retail price data collected in 
the survey. 
 
I hope that this information will be helpful to you.