DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-01-16 
Baltimore, Maryland  21244-1850 
 
CMCS Informational Bulletin
 
 
DATE:  June 20, 2019 
 
FROM:  Calder Lynch, Acting Deputy Administrator and Director 
Center for Medicaid and CHIP Services (CMCS) 
 
SUBJECT:    Oversight of State Medicaid Claiming and Program Integrity Expectations 
 
Purpose 
 
This letter discusses mutual obligations and accountability on the part of the state and federal 
governments for the integrity of the Medicaid program and the program safeguards necessary to 
ensure proper and appropriate use of both federal and state dollars.  States and the Centers for 
Medicare & Medicaid Services (CMS) share responsibility for operating Medicaid programs 
consistent with title XIX of the Social Security Act (the Act) and ensuring its overall fiscal integrity.  
This federal-state partnership is central to the success of the Medicaid program, but it depends on clear 
lines of responsibility and shared expectations.  CMS is reminding states of the requirements and 
expectations regarding their responsibilities to ensure proper and efficient administration of their 
Medicaid program.  To the extent necessary, CMS will use its enforcement mechanisms which could 
include deferrals, disallowances or compliance actions to recoup federal funds as appropriate.  We 
expect that all states are adhering to statutory requirements and monitoring compliance.   
 
While fiscal integrity is imperative for every aspect of the Medicaid program, we particularly want to 
highlight these responsibilities with respect to coverage of the Medicaid adult expansion group 
authorized under section 1902(a)(10)(A)(i)(VIII) of the Act and for other expenditures that are 
claimed at an enhanced federal matching rate.  CMS needs to ensure the fiscal integrity of the 
overall program.  As part of CMS ongoing program integrity efforts, any aspect of a states 
Medicaid program may be subject to future program oversight reviews or audits as provided by 
42 CFR 430.32.  This guidance is critical in light of recent audits conducted by the U.S. 
Department of Health and Human Services Office of Inspector General and others that found that 
some states did not always determine Medicaid eligibility in accordance with Federal and state 
requirements, potentially resulting in States inappropriately claiming significant Federal funds.1 
Beyond this guidance, CMS is developing other regulatory or subregulatory efforts to strengthen 
Medicaid fiscal integrity. 
 
Listed below, are the main four areas that a state should prioritize to ensure proper claiming federal 
match for their Medicaid program. 
 
1.  Development of necessary program integrity protections, 
2.  Implementation of appropriate system and financial oversight controls,  
                                                      
1 See: https://oig.hhs.gov/oas/reports/region9/91602023.asp; https://oig.hhs.gov/oas/reports/region2/21501015.asp 
https://oig.hhs.gov/oas/reports/region4/41608047.asp  3.  Monitoring the program effectively, and;  
4.  Documentation and evidence to support these activities.   
 
This information is important for those states that may be considering adopting the Medicaid 
expansion, it should also help those states that have already adopted the Medicaid expansion and 
operational oversight of their program.  The state should provide assurances of compliance with 
applicable program requirements to ensure appropriate expenditure categorization and claiming.   
 
Background 
 
States can elect to expand Medicaid coverage to adults age 19 or older and under the age of 65 
with household incomes at or below 133 percent of the federal poverty level, and who are not 
eligible for Medicaid on the basis of pregnancy, eligible for or enrolled in Medicare Part A or B, 
a recipient of SSI benefits due to disability or blindness, or are not otherwise enrolled in 
mandatory Medicaid coverage through a states Medicaid state plan, as outlined at 42 CFR 
435.119.  When a state elects to expand Medicaid coverage, states must have systems in place to 
accurately categorize individuals in this group as newly eligible or not newly eligible so that 
claims for Federal Financial Participation (FFP) are paid at the statutorily authorized matching 
rate.  For any eligibility state plan amendment (SPA) or waiver, documentation must be available to 
clearly demonstrate how individuals are appropriately identified and categorized, and how 
expenditures made for the relevant category(ies) of beneficiaries are claimed in state systems to ensure 
that expenditures are appropriately accounted for in the correct eligibility category and ultimately 
claimed at the proper federal medical assistance percentage (FMAP) rate. To this end, each state must 
develop comprehensive test plans specific to their beneficiary eligibility processes, as outlined at 
42 CFR 433.112(b)(17). These plans should describe the end-to-end testing strategy being 
employed to demonstrate the states operational capacity for accurate eligibility determinations, 
including renewals, and accurate beneficiary expenditure categorization.  
 
State Assurances  
 
CMS has identified certain necessary assurances that states should make when submitting any SPA 
and has developed a program readiness checklist to support states compliance with existing federal 
requirements addressed in these assurances, which states should consider in developing a SPA or 
demonstration submission.  When a state expands Medicaid coverage, through the adoption of the 
adult group, states must submit three SPAs:  Adult Group (Eligibility), FMAP and Alternative 
Benefits.  The state should consider these elements and provide the following assurances about 
oversight of its program as listed below with its submission of the FMAP SPA.  Further, for 
those states that have already adopted the adult group or who seek to do so, CMS will be 
developing an assurance template where states by which a state can attest to having proper 
systems and procedures in place to ensure appropriate claiming. 
 
Assurances: 
 
 
1.  The state is in compliance with section 1902(a)(4) of the Act regarding proper and 
efficient operation of the plan. 
 
2.  The state is in compliance with the requirements of section 1903 of the Act, including 
non-federal share financing and the availability and limitations on FFP.  
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3.  The state is in compliance with program integrity provisions in 42 CFR Part 455. 
 
4.  The single state agency and/or any agency delegated to make eligibility determinations is 
able to determine eligibility for all individuals applying for or receiving benefits in 
accordance with regulations in 42 CFR Part 435 (also see 1902(a)(4) and (5) of the Act) 
and specifically, if applicable, 42 CFR 435.119 (also see 1902(a)(10)(A)(i)(VIII.) 
 
5.  In accordance with 42 CFR 433.112(b)(14) a states eligibility/enrollment and claims 
systems must support accurate and timely processing and adjudications/eligibility 
determinations and effective communications with providers, beneficiaries, and the 
public.  
 
Program Readiness Checklist:  
 
This bulletin contains a Program Readiness Checklist to assist states in ensuring operational 
capacity to make accurate eligibility determinations and claim FFP at the appropriate matching 
rate that can be demonstrated on an ongoing basis.  The checklist can also assist in preparing for 
potential audits and/or program reviews. 
 
Ensuring Accurate Eligibility Determinations: 
  Systems readiness testing and results:  State eligibility and enrollment (E&E) systems 
must support accurate and timely processing of eligibility determinations and acceptable 
MAGI-based system functionality must be demonstrated through performance testing (42 
CFR 433.112(b)(14) and (17)).  Each state must have a comprehensive test plan specific 
to their environment and the plan should describe the end to end testing strategy.  CMS 
has developed recommendations for state E&E systems testing that can be found in 
Appendix A.  As states implement new systems functionality needed to support changes 
in eligibility, for example adoption of a new eligibility group, the end-to-end testing 
should be conducted far enough in advance to ensure all errors or defects can be 
corrected and retested prior to going live.    
 
  Updates to eligibility policies, procedures, and staff training to reflect any changes in 
eligibility, including adoption of the adult group identified in 42 CFR 435.119, if 
applicable.  This would include revisions to state rules and eligibility manuals (as 
referenced at 42 CFR 431.18).  States must also provide a training program for Medicaid 
agency personnel, including continuing training opportunities to improve the operation of 
the program (42 CFR 432.30).  This training should include all updates and the eligibility 
requirements for any Medicaid eligibility group that is newly added or for whom the 
eligibility requirements are changed, so that staff can make accurate eligibility 
determinations and otherwise ensure the proper and efficient administration of the plan. 
To the extent that audits, Payment Error Rate Measurement (PERM), Medicaid 
Eligibility Quality Control (MEQC), or other quality assurance efforts identify areas for 
improvement, these topics should be addressed as part of the training program and all 
relevant policies should be clarified in the eligibility manual.    
 
  Verification Plan: Regulations at 42 CFR 435.945(j) require states to develop and update 
a plan describing the eligibility verification policies and procedures adopted by the 
agency.  We encourage states to review their existing verification plans and update the 
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  plan as needed to ensure the state has a robust verification process that includes electronic 
data sources and effective processes to resolve inconsistencies including documentation 
requirements.  If a state has updated its verification plan, then the plan should be 
submitted to CMS for review. 
 
Ensuring State Claiming of FFP at the Appropriate FMAP or Administrative Matching Rate: 
  Systems readiness testing and results:  States must be able to demonstrate the operational 
capacity to claim FFP at the appropriate match rate.  As stated above, each state should 
have a comprehensive test plan specific to its environment and the plan should describe 
the end-to-end testing strategy.  Tests should include and check for interfaces with 
systems (e.g., MMIS) that perform payment operations and support claiming at the 
appropriate FMAP or administrative federal matching rate. As states develop system 
functionality, testing should be conducted far enough in advance to ensure all errors or 
defects can be corrected and retested prior to go-live.  CMS has developed 
recommendations for state eligibility/enrollment and claims systems testing that can be 
found in Appendix A. 
 
  Systems documentation related to claiming FFP for the adult group, if applicable: States 
should document how their systems are applying the threshold methodology to correctly 
claim increased FMAP only as allowable under the statute and regulations, consistent 
with requirements outlined at 42 CFR 433.112.  This includes the way the states MMIS 
interacts with the eligibility system and how the requirements in place result in accurate 
claiming for FFP, both initially and over time.  This should also include the ability to 
distinguish individuals in the adult group as newly eligible or not newly eligible and how 
individuals are identified/flagged in the states system.   
 
Program Oversight Monitoring: 
  Detailed program oversight monitoring plan: CMS expects a strong plan to assess on an 
ongoing-basis the continued accuracy of eligibility determinations and claiming of FFP, 
and include sampling methodologies, ongoing audit and monitoring activities, and a 
process for ensuring that any issues identified are addressed and resolved promptly. 
 
  Ability to share audit and testing results: CMS expects states to share audit, review, and 
systems testing results as well as any corrective action plans, as they are approved and 
implemented, with CMS for at least a one-year period after an approved SPA has been 
implemented, and at least annually thereafter. 
 
  Data: CMS expects state eligibility systems to be capable of, and ready to, submit 
required performance indicator data to CMS, including information regarding the 
timeliness and accuracy of eligibility determinations, and that state personnel would 
monitor this data to ensure ongoing accurate system operation. 
 
  Contract program integrity provisions: CMS expects states to indicate whether services to 
an eligibility group affected by a SPA will be provided via managed care, fee-for-service, 
or other delivery system, and share the program integrity provisions found in the states 
managed care or other contracts related to the delivery system as well as the states 
oversight plan for those contractual provisions. 
 
 
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  Additional Program Integrity Tools: 
  Previously completed beneficiary eligibility audit reports and quality reviews related to 
all covered Medicaid eligibility categories: This should include identifying beneficiary 
eligibility, program integrity, audit, and any other functions that have an impact on the 
functionality of a states systems.   
 
  Trend analysis: States should have and review a summary of trend analysis for eligibility-
related fraud, waste, and abuse activities and use this information in their ongoing 
program monitoring activities. 
 
  Corrective Action Plans:  States should review and incorporate any other corrective 
action plans related to beneficiary eligibility as a result of PERM, MEQC, or any other 
audit or review findings as part of their program integrity efforts. 
 
Financing: 
  State share:  Information on how the non-federal share for expenditures related to the 
SPA will be funded, including both medical assistance and administrative expenditures, 
as applicable. 
 
Other information 
 
Listed below are documents/reviews to which CMS has access and that may be used as part of its 
oversight efforts. 
 
  State program integrity reviews. 
 
  PERM findings and corrective action plans (when available). 
 
  MEQC findings and corrective action plans (when available). 
 
  OIG and GAO audit findings. 
 
In part, this guidance is focused on ensuring that states can make accurate eligibility 
determinations and have the ability to appropriately claim FMAP.  We also want to remind states 
of their obligation to ensure that beneficiaries continue to be eligible between regularly 
scheduled redeterminations. One strategy that states have successfully implemented to enhance 
program integrity is the use of periodic data matching to identify beneficiaries who may have 
had a change in circumstance that affects their eligibility.  In accordance with 42 CFR 
435.916(d), when implementing this strategy, the agency must promptly redetermine eligibility 
when it receives information about a change in the beneficiarys circumstances that may affect 
eligibility. If the information indicates that a beneficiary may no longer be eligible, the agency 
must also provide the individual an opportunity to respond and provide updated information. 
Currently, 43 states conduct periodic data matching against one or more income sources to 
identify changes in beneficiary income between renewal periods.   
 
Conclusion 
 
CMS is committed to working with states to comply with federal laws and regulations by 
assuring the accuracy of Medicaid eligibility determinations and states ability to appropriately 
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  claim FFP. The federal-state partnership is central to the success of the Medicaid program, and 
CMS will continue its work with states to strengthen Medicaid program integrity efforts. To the 
extent that states inappropriately or unlawfully claim Federal funds, CMS is committed to taking 
necessary actions to recoup those funds to ensure the program is properly managed. If you have 
questions or would like technical assistance on any of the issues addressed in this Informational 
Bulletin please contact Kristin Fan at 410-786-4581.   
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Appendix A: 
State Eligibility & Enrollment and Claims Systems Testing 
 
Regulations at 42 CFR 433.112(b)(17) requires that a state must have delivered acceptable 
MAGI-based system functionality, demonstrated by performance testing and results. To 
demonstrate this operational capacity for accurate eligibility determinations, renewal 
functionality, and claiming of FFP at the appropriate match rate, CMS anticipates each state will 
have a comprehensive test plan specific to its environment.  These plans would, as per industry 
best practice, describe the end-to-end testing strategy being employed to ensure sufficient 
coverage, and must include: 
 
  Systems Testing process: which encompasses the interactions between any subsystems, 
components, and interfaces necessary to support the functional validation of the outcome.  
  Regression Testing process: which includes the both the initial implementation to 
production and how future changes in functionality are managed in the enterprise. 
  Acceptance Testing process: which focuses on the final stage before the Medicaid 
Agency formally accepts the system functionality to move into operations.  
  Error Resolution process: which details how errors are identified and resolved, both for 
true defects and instances where a system may be working as designed but is not 
producing the intended result. 
  Specific Scenarios: which may include multiple test cases that are defined to establish the 
system is consistently producing accurate eligibility determinations.  The focus is not on 
the number of test cases, but rather the comprehensive coverage of the functionality being 
introduced. 
  Validation process: which can include the use of external/third party entities that 
potentially may be engaged to execute, validate and produce the results of the testing 
scenarios.  
 
Overall, the testing strategy must support demonstrating operational capacity prior to initial 
implementation into production, but also consistently demonstrated over time.   
 
 
 
 
 
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