DEPARTMENT OF HEALTH & HUMAN SERVICES 
Health Care Financing Administration  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
December 30, 1997  
Dear State Medicaid Director:  
This letter is one of a series that provides guidance on the implementation of the Balanced Budget Act of 1997 (BBA). The BBA 
contains numerous provisions relating specifically to managed care. In order to provide guidance on these as quickly as possible, we 
are issuing a number of managed care State letters (list of those already issued is attached). This letter is the third in this managed care 
series.  
The provision in section 4707(a) of the BBA relating to restrictions on marketing enrollment for managed care entities is described in 
this letter. HCFA believes this provision will enable States to strengthen consumer protections in the area of marketing and will 
encourage beneficiary participation in the marketing review process.  
According to the new BBA provision, managed care entities (either by themselves or through any agent, such as an independent 
contractor) cannot distribute marketing materials without prior State approval and the materials cannot contain false or misleading 
information. HCFA is proposing that this prior approval provision be effective February 1, 1998. We welcome any comments about 
this effective date, as the law requires HCFA to consult with the States to determine this date. Please provide comments by January 
16, 1998. Once comments have been received, HCFA will either confirm the date proposed or select an alternative date. All other 
marketing restrictions within the BBA are effective October 1, 1997.  
In the process of approving these materials, the new law requires States to consult with a medical care advisory committee. Currently, 
there is a medical care advisory committee (MCAC) established by regulation. Since the term "medical care advisory committee" is 
written precisely in the BBA, States must use an MCAC for consultation in review of marketing material, whose composition meets 
the regulatory definition. States, if they choose, do not have to consult with their current MCAC, but can establish a new MCAC for 
marketing review consultation. The committee's membership must include physicians and other representatives of health professions 
who are familiar with the needs of low-income population groups, as well as various consumer group representatives, including 
Medicaid beneficiaries and consumer advocates for this population. Although States must provide for consultation with an MCAC, the 
structure of the consultation is to be determined by the States. HCFA understands that States have concerns regarding this provision 
and we are interested in providing technical assistance to help States with implementation.  
In addition to the above requirements, the law requires managed care entities to distribute marketing materials within the entire service 
area specified in their contract. Further, managed care entities may not entice a potential enrollee to join the managed care entity by 
offering the sale of any other type of insurance as a bonus for enrollment and they must ensure that each potential enrollee receives 
accurate oral and written information in order that a potential enrollee can make his/her own informed decision as to whether to enroll 
or not.  
Finally, the managed care entity may not conduct, directly or indirectly, door-to-door, telephonic or other cold-call' marketing 
enrollment practices. These three marketing practices are prohibited, whether conducted by the managed care entity itself ("directly") 
or by an agent or independent contractor ("indirectly"). Cold call marketing is defined as any unsolicited personal contact with a 
potential enrollee by an employee or agent of a managed care entity for the purpose of influencing the individual to enroll with the 
entity. Marketing by an employee of the entity would be considered direct; marketing by an agent would be indirect. This would still 
allow managed care entities to market at health fairs and to contact, in person, potential enrollees who request further information 
about the entity.  
More detailed descriptions of the statute and regulatory references are provided in the attached document.  
If your staff has any questions about this letter or the BBA provisions described, please have them contact Kristin McGinn on (410) 
786-4581 or by email at kmcginn@hcfa.gov  
Sincerely,  
/s/  
 Sally K. Richardson  
 Director   
Center for Medicaid and State Operations   
Attachment  
cc:  All HCFA Regional Administrators  All HCFA Associate Regional Administrators for Medicaid and State Operations  Lee 
Partridge - American Public Welfare Association  Jennifer Baxendell - National Governors' Association  Joy Wilson - National 
Conference of State Legislatures  HCFA Press Office   SUMMARY OF MEDICAID MARKETING RESTRICTIONS in BALANCED BUDGET ACT of 1997  
Restrictions on Marketing (SSA 1932(d)(2)) -- BBA 4707(a) 
Section 1932(d)(2)(A) of the Social Security Act (the Act) requires that managed care entities may not distribute, directly or through 
any agent or independent contractor, marketing materials within any State  
(cid:131)  without prior approval of the State, and   
(cid:131)  that contain false or misleading information.   
The Secretary is required to consult with States regarding the effective date of the prior approval provision. HCFA has proposed an 
effective date of February 1, 1998, but will wait for comments from the States before the date is finalized. In addition, in the process 
of reviewing and approving marketing materials, States must consult with a medical care advisory committee.  
Section 1932(d)(2)(B) of the Act requires managed care entities to distribute marketing materials to the entire service area of the 
entities contract under section 1903(m) or section 1903(t)(3).  
Section 1932(d)(2)(C) of the Act specifies that a managed care entity, or any agency of such entity, may not seek to influence an 
individual's enrollment with the entity in conjunction with the sale of any other insurance.  
Section 1932(d)(2)(D) of the Act prohibits marketing fraud. Managed care entities can not, either directly or indirectly, conduct door-
to-door, telephonic or "cold call" marketing of enrollment.  
42 CFR 431.12 Medical Care Advisory Committee 
42 CFR 431.12(d) defines the membership of a medical care advisory committee. The committee must include the following:  
   board certified physicians and other representatives of the health professions who are familiar with the medical needs of 
low-income population groups and with the resources available and required for their care;   
   members of consumers' groups, including Medicaid beneficiaries, and consumer organizations such as labor unions, 
cooperatives, and others; and   
   the director of the public welfare department or the public health department, whichever does not head the Medicaid 
agency.   
BBA MANAGED CARE STATE LETTERS  
Section Subject Date Issued  
4701 SPA Option for Managed Care 12/17/97  
4704(e) Specification of Benefits 12/17/97