DEPARTMENT OF HEALTH & HUMAN SERVICES 
Health Care Financing Administration  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
May 6, 1998  
Dear State Medicaid Director:  
This letter is a follow up to the State Medicaid Director's (SMD) letter  that was issued on March 25, 1998 (#17 
in the series of letters on managed care) providing guidance on the implementation of the Balanced Budget Act 
of 1997(BBA). That letter explained the impact of the BBA's limited exemption from new managed care 
requirements for waiver programs under section 1115 and 1915(b) of the Act. This is the eighteenth in the series 
of letters on the BBA's managed care provisions. (See the Enclosure to this letter for a list of managed care 
letters already issued.)  
Section 4710(c) of the BBA provides that none of the provisions contained in sections 4701 through 4710 of the 
BBA will affect the terms and conditions of any approved waiver under section 1915(b) or 1115 of the Act, as 
the waiver stood on the date of the BBA enactment (August 5, 1997).  
The March 25 letter contained guidance to be used in reviewing each current waiver programs with regard to 
each provision in sections 4701 through 4710 (in consultation with the HCFA Regional Office) to determine 
whether and to what extent specific BBA provisions apply to the State's waiver programs. Since that letter was 
issued, a number of questions have been raised as to whether a State which operates a managed care program 
under a section 1915(b) or 1115 waiver would be exempt from the prudent layperson's definition of emergency 
medical condition contained in section 4704(a) of the BBA.  
The primary factor in determining whether a particular BBA provision applies to a waiver is whether that 
provision is specifically addressed in State documentation approved by HCFA. The use of a prudent layperson's 
definition of emergency medical condition was cited as an example of a BBA provision which would have to be 
implemented, in the response to Questions #2 in the enclosure to the March 25 letter. States which did not 
previously apply a prudent layperson concept to their definition of an emergency medical condition in their 
section 1915(b) or section 1115 waiver programs would have to implement this provision with respect to all 
contracts entered into or renewed on or after October 1, 1997.  
Although the answer in the March 25 letter was written in the context of a response to a question on 1915(b) 
waivers, it was intended that the rule be applied to all waiver programs. If you have any questions regarding this 
provisions, please contact Bruce Johnson in the Center for Medicaid and State Operations, on (410) 786-0615.  
Sincerely,  
/s/  
Sally Richardson   
Director   
Center for Medicaid and State Operations  
 
 
Enclosure  
cc:  Lee Partridge, American Public Welfare Association  Jennifer Baxendell, National Governors' Association  
Joy Wilson, National Conference of State Legislators  All HCFA Regional Administrators  All HCFA Associate 
Regional Administrators for Medicaid and State Operations  HCFA Press Office   Enclosure  
BBA MANAGED CARE STATE LETTERS  
Section Subject Date Issued  
4701 SPA Option for Managed Care 12/17/97  
4704(a) Specification of Benefits 12/17/97  
4707(a) Marketing Restrictions 12/30/97  
4704(a) Miscellaneous Managed Care Provisions 12/30/97  
4704(b) 4706  4707(a)  4707(c)  4708(b)  4708(c)  4708(d)  
4701 Choice, MCE Definition, Repeal of 75/25, and Approval Threshold 1/14/98  
4703  
4708(a)  
4705 External Quality Review 1/20/98  
4704(a) Mental Health Parity 1/20/98  
4701(a) Enrollment, Termination, and Default Assignment 1/21/98  
4702 PCCM Services Without Waiver 1/21/98  
4707(a) Sanctions for Noncompliance 2/20/98  
4701(a) Provision of Information & Effective Dates 2/20/98  
4710(a)  
4704(a) Emergency Services 2/20/98  
4704(a) Grievance Procedure 2/20/98  
4707(a) Prohibiting Affiliations with Debarred Individuals 2/20/98  
4704(a) Anti-discrimination of Providers and Anti-Gag Rule 2/20/98  
4707(a) Marketing Restrictions 2/20/98  
4710(c) Application to Waivers 3/25/98