DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
Center for Medicaid, CHIP, and Survey & Certification        
 
                SMDL# 11-009 
                ACA# 19 
August 5, 2011 
 
Dear State Medicaid Director: 
 
This letter and the accompanying Questions and Answers (Q&As) are part of a series that provide 
guidance on the maintenance of effort (MOE) provisions in the Patient Protection and Affordable 
Care Act, P.L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, 
P.L. 111-152 (together known as the Affordable Care Act).  The policies contained in the attached 
Q&As build upon and clarify the guidance previously issued on the MOE provisions of the American 
Reinvestment and Recovery Act (the Recovery Act) and their relationship to institutional level of 
care requirements and home and community-based services (HCBS).  We have also included a 
question and answer regarding ways in which States who have identified a program integrity concern 
can strengthen program integrity procedures consistent with the MOE provisions. 
 
Many States provide institutional care and HCBS to individuals who are eligible for Medicaid based 
on their need for those services.  HCBS are a vital element of State efforts to build cost-effective, 
person-centered systems that provide services that enable individuals to remain in or return to their 
homes and communities and avoid institutional services.  In the enclosed Q&As, we address the 
Affordable Care Act MOE provisions as they relate to institutional care and HCBS, based on 
questions we have received.  We note that States continue to have opportunities to make adjustments 
to services within their HCBS waivers that are not related to eligibility and thus do not implicate 
MOE.  States also have flexibility to modify their HCBS when a waiver authorizing such services 
expires. 
 
Medicaid-financed HCBS are frequently the key component of State strategies to deliver services for 
persons with disabilities that comply with the Americans with Disabilities Act (ADA), the Supreme 
Courts Olmstead decision and subsequent Federal court opinions interpreting that decision (see our 
May 20, 2011 State Medicaid Director Letter at 
http://www.cms.gov/smdl/downloads/SMD10008.pdf).  For that reason, we stress that this guidance 
pertains only to the Medicaid MOE provisions and does not address a States independent and 
ongoing obligations under the ADA.   States can get further information with respect to ADA 
compliance by contacting the Department of Health and Human Services (HHS), Office for Civil 
Rights (OCR) at OCR.Olmstead@hhs.gov or consulting OCRs website at http://www.hhs.gov/ocr.  
Information about ADA community integration cases and settlements in which the Civil Rights 
Division of the U.S. Department of Justice is involved may be found at http://www.ada.gov/.  
 
We recommend that States contact CMS for technical assistance with the MOE provisions if they are 
interested in pursuing any changes to their long-term care policies.  We note that other provisions of 
the Affordable Care Act, such as the Balancing Incentive Program and Community First Choice 
Option, include maintenance requirements for certain aspects of the Medicaid program in order to    
Page 2  State Medicaid Director  
 
receive new, increased Federal matching payments. This letter does not address a States 
requirements under those provisions; however, States may want to review these separate program 
requirements as they consider actions that affect the provision of HCBS.   
 
Please submit any questions you have about the Affordable Care Act MOE provisions relating to 
HCBS to Ms. Barbara Edwards at Barbara.Edwards@cms.hhs.gov. 
 
We hope this guidance is informative. We note that previous guidance on the Affordable Care Act 
MOE provisionsspecifically on the topics of 1115 demonstrations, premiums and the non-
application provisionwas contained in our February 25, 2011 State Medicaid Director letter 
available at http://www.cms.gov/smdl/downloads/SMD11001.pdf.  For general questions about MOE 
please contact Penny Thompson at Penny.Thompson@cms.hhs.gov.   
 
Sincerely,  
 
/s/ 
 
Cindy Mann  
Director  
   
Page 3  State Medicaid Director 
 
Enclosures 
 
cc:  
 
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
Matt Salo  
Executive Director  
National Association of Medicaid Directors  
 
Alan R. Weil, J.D., M.P.P.  
Executive Director  
National Academy for State Health Policy  
 
Director of Health Legislation  
National Governors Association  
 
Rick Fenton  
Acting Director  
Health Services Division  
American Public Human Services Association  
 
Christine Evans, M.P.H.  
Director, Government Relations  
Association of State and Territorial Health Officials  
 
Debra Miller  
Director for Health Policy  
Council of State Governments  
 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
 
Nancy Thaler 
Executive Director 
National Association of State Directors of Developmental Disabilities Services 
 
Martha Roherty 
Executive Director 
National Association of States United for Aging and Disability  ENCLOSURE A: THE AFFORDABLE CARE ACT  
MAINTENANCE OF EFFORT (MOE)--QUESTIONS & ANSWERS 
Q1.  Are there flexibilities that a State can utilize to manage their section 1915(c) home 
and community-based care services (HCBS) waivers? 
 
Answer.  Yes.  States maintain flexibility to implement mechanisms that simplify 
administration and control costs in their HCBS waivers. States also can combine waivers 
of similar target groups for administrative simplicity as long as eligibility criteria remain 
the same. 
 
While the MOE provisions of the Affordable Care Act require that States maintain 
eligibility standards, methodologies and procedures, the MOE provisions do not affect a 
States ability to manage waiver costs by modifying waiver benefits, rates or introducing 
new waiver service-specific medical necessity criteria or utilization controls which do not 
affect individuals eligibility for Medicaid. For example, a State may change the criteria 
for receipt of a particular service that would not impact an individuals overall Medicaid 
eligibility, but would instead impact their ability to receive a specific service.    However, 
States must also carefully consider the implications of such changes on their obligations 
to ensure the health and welfare of individuals served within the waiver programs, as well 
as their community integration obligations under the Americans with Disabilities Act 
(ADA) and the right of individuals to receive public benefits in the most integrated 
setting appropriate to their needs.  That is, irrespective of whether there is an MOE issue, 
a reduction in benefits could potentially result in individuals losing the ability to have 
their needs met and live in a home and community-based setting, which could have 
implications under the ADA, the Olmstead decision, and subsequent Federal court 
decisions.  For example, a reduction in benefits could place individuals with disabilities 
living in the community at risk of institutionalization or could make it more difficult for 
individuals who are inappropriately institutionalized to leave the institution and receive 
services in the most integrated setting.   
 
As detailed in our May 20, 2010 State Medicaid Director Letter at 
http://www.cms.gov/smdl/downloads/SMD10008.pdf, there are a variety of mechanisms 
available to States to rebalance their long-term support systems for persons with 
disabilities to achieve compliance with the ADA. 
   
 
Q2.  How does Institutional Level of Care, which serves as the level of care for HCBS 
waivers as well, interact with MOE? 
 
Answer. Because the Recovery Act MOE, its extension, and the Affordable Care Act 
MOE use the same language, we are applying the same basic principle we articulated in 
the Recovery Act MOE to the Affordable Care Act MOE.  As outlined in our August 19, 
2009 guidance on Recovery Act MOE 
(http://www.cms.gov/SMDL/downloads/SMD081909.pdf), implementing more stringent 
institutional level of care (LOC) criteria affects eligibility for individuals in institutional 
and section 1915(c) home and community-based settings and therefore are considered  more restrictive eligibility policies.  Individuals eligible for Medicaid through their 
receipt of HCBS waiver services are in an eligibility group defined in regulation at 42 
CFR 435.217.   
 
However, States may upwardly adjust institutional LOC criteria in order to promote 
community-based care and to achieve cost savings in ways that are consistent with the 
MOE provision.   Under these circumstances, the adjustment will not change eligibility, 
but rather the setting in which services are provided. Below are examples to illustrate this 
flexibility:  
 
a.  A State may upwardly adjust its institutional LOC criteria if it has an alternative 
vehicle to offer Medicaid eligibility to long-term care services and support in the 
community to all individuals that would have previously been able to gain 
eligibility under the original LOC.  For example, a State could design a 1915(i) 
benefit package that is narrowly targeted to individuals who would have been 
eligible under former LOC levels.  In this example, the State, through an 
eligibility group that provides Medicaid eligibility based on need for 1915(i) 
services, would ensure continued access to Medicaid eligibility for those who no 
longer meet LOC levels.  The State would then need to ensure that the financial 
and needs-based criteria for the eligibility group are crafted in a manner that 
protects Medicaid eligibility for all individuals previously eligible under the 
former LOC. 
 
b.  Another example may be a State that operates an 1115 demonstration offering 
different levels of care for receipt of HCBS and institutional services, ensuring 
that the available capacity for Medicaid eligibility remains unchanged.   
 
c.  A State may also upwardly adjust its institutional LOC if it does not cover the 42 
CFR 435.217 group in its waivers, provided such an adjustment would not result 
in individuals in institutions losing eligibility for Medicaid.  Loss of eligibility, 
and a resulting MOE issue, could occur if an upward adjustment in institutional 
LOC means that some individuals eligible under the special income level group 
would have to leave the institution because they do not meet the new LOC 
criteria, but could not then maintain eligibility in the community because the State 
does not cover the 435.217 group for waiver services.  To upwardly adjust its 
institutional LOC while adhering to the MOE, a State that does not cover the 
435.217 group for waiver services must be able to make its adjustments without 
negatively impacting Medicaid eligibility. 
 
Q3.  How is the termination or modification of a Medicaid HCBS waiver affected by the 
Affordable Care Act MOE provisions? 
  Answer.  The requirements for HCBS waivers and the Affordable Care Act MOE are 
similar to the policies outlined for 1115 demonstrations in our February 25, 2011 State 
Medicaid Director Letter (http://www.cms.gov/smdl/downloads/SMD11001.pdf).  Every 
HCBS waiver is approved for a time-limited period, after which the waiver continues 
operation only if a State requests a renewal.  The MOE provisions in the Affordable Care 
Act do not require a State to request that the Secretary continue a HCBS waiver after the 
date that the waiver would expire under the approval in effect on March 23, 2010.  States 
may discontinue HCBS waivers when the approval period expires.  If a State requests a 
renewal at the end of the approved waiver period in effect as of March 23, 2010, with 
modifications to the waiver program, it may do so. This would not create an MOE issue.  
States that do not renew a waiver or that make modifications that have the effect of 
constricting waiver eligibility must provide to CMS a transition/phase-out plan that 
describes steps to ensure minimal adverse impact on individuals served.  This plan should 
include, at a minimum: (a) efforts to evaluate individuals who would lose eligibility to 
see if they may be eligible under another category of Medicaid eligibility, and to link 
such individuals with continued Medicaid eligibility without a lapse in coverage; and (b) 
a plan for how the State will phase out treatment services and what alternative services, if 
any, are available to the impacted individuals.  This should be submitted to CMS at least 
60 days before waiver expiration. 
 
If a State seeks to modify waiver programs in ways that would restrict eligibility 
standards, methodologies or procedures before the demonstration approval period has 
expired, that would not be consistent with the MOE provisions.   
 
We strongly encourage States interested in pursuing these options to contact CMS for 
technical assistance in order to ensure that any changes made to LOC are consistent with 
the MOE provisions. 
 
Q4.    What program-integrity related changes to eligibility processes are permissible 
under the MOE provisions? 
 
Ensuring that Medicaid and CHIP cover all eligible people consistent with the highest 
standards of program integrity is a priority for the Federal government.  At the same time, 
Congress in drafting the Affordable Care Act MOE provision explicitly limited changes 
not just to eligibility standards, but also to eligibility methods and procedures.  There is 
extensive evidence that eligibility methods and procedures are strong determinants of 
whether eligible individuals can actually gain and retain coverage.  Our experience 
working with States suggests States can meet their program integrity objectives 
consistent with the MOE provisions.   
 
Specifically, State administrative activities that address an identified program integrity 
issue can be designed in ways that do not make the eligibility and renewal process more 
restrictive and burdensome for eligible individuals.  For example, States may: 
 
  Undertake administrative activities, such as conducting data matches to verify 
eligibility information and pursuing any questions that might arise from these  matches; this would include implementing corrective action procedures of this 
nature to address specific program integrity issues identified in the payment error 
rate measurement (PERM) or audit review processes; 
  Improve State program integrity implementation efforts, if the policies were in 
effect, but had not been fully implemented by the State;  
  Change transfer of assets requirements to the extent they affect benefits rather 
than eligibility.  
 
States that have specific program integrity concerns should contact CMS for technical assistance 
so that we can work with the State in taking any necessary steps to strengthen program integrity 
while ensuring compliance with the MOE provision.