January 2, 2001 
Dear State Medicaid Director: 
We are revising the process for reviewing and approving State plan amendments. As 
you know, when a State submits a plan amendment, HCFA has a 90-day timeframe 
within which to approve the amendment, disapprove the amendment, or request 
additional information. Failure by HCFA to act timely results in the plan being 
deemed approved. In cases in which we send the State a request for additional 
information, the State currently has an indefinite amount of time to respond, and 
often draws down Federal financial participation (FFP) on the amendment while it is 
in this pending status. Once the State responds, HCFA has a second 90-day 
timeframe within which to approve or disapprove the amendment. 
Over the years, there has been a steady increase in the number of pending State 
plan amendments that have been submitted by the State and for which the State has 
not responded to our request for additional information. The national backlog of 
pending amendments now exceeds three hundred. This backlog creates a number of 
problems. The complicated process of trying to determine which plan pages precede 
the new pages often hampers our review of new amendments. Problems arise when 
States make efforts to resolve older pending amendments because expertise on the 
older amendments is often lost due to staff turnover. Further, States are at risk of 
lawsuits from providers as they are operating under a State plan which is not yet 
approved. Finally, should a plan amendment be ultimately disapproved, the law 
requires HCFA to recover all funds drawn down under the amendment, which may be 
potentially large sums of money for unapproved services. 
Effective with this letter, we will track the time period from when we request 
additional information. If we have not received the State's response to our request 
for additional information within 90 days, we will initiate disapproval action on the 
amendment. We believe that this action will be in the best interest of the States, the 
Federal government and the public by assuring that all plans are acted on in a timely 
fashion. HCFA's timeframes for review, i.e., 90 days to review the initial amendment 
and 90 days to review the response, will still apply, although in conjunction with this 
initiative, we will do our utmost to approve or request additional information as 
quickly as possible. 
For plan amendments submitted after today and effective January 1, 2001 and 
thereafter, we also will not provide FFP for any State plan amendment until it is 
approved. This means we will not advance funds to the State through the Form 
HCFA-37 or Form HCFA-21B at the beginning of the quarter. Also, we will defer 
and/or disallow any claims for FFP submitted on the Form HCFA-64 or Form HCFA-21 
expenditure reports related to any pending State plan amendments submitted after 
January 1, 2001. Under our new procedures for timely resolution of these 
amendments, we do not believe this will generally be a hindrance to drawing FFP. 
However, this will prevent us from advancing funds on pending amendments that 
may be subsequently disapproved. 
To implement this new policy effectively, we know that we will need to address the 
backlog of pending amendments, which are superseded by new amendments.  Therefore, beginning today, we will work with you to separate the plan pages in new 
amendments from the plan pages in preceding amendments. However, we remain 
concerned about these earlier amendments and have asked the Regional Offices to 
work with you to resolve these amendments as soon as possible. We intend to 
resolve these older amendments in a manner that is both timely and satisfactory to 
us both. Where we believe the policy in the proposed amendment is not allowable 
under Medicaid law, regulations or, policy, we may take further action on these 
pending amendments. However, we would only do so where we cannot resolve our 
concerns with the State, or where the State continues to fail to respond to the 
pending request for additional information. 
I expect that our new process will prevent a future backlog of amendments while 
gradually resolving the current backlog. I know that you share our commitment to 
effectively administer the Medicaid program and hope you will endeavor to work with 
us to implement these new guidelines as smoothly as possible. 
Sincerely,  
/s/  
Timothy M. Westmoreland  
Director 
cc:  
HCFA Regional Administrators  
HCFA Associate Regional Administrators for Medicaid and State Operations  
Office of the Inspector General  
General Accounting Office  
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