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 and State Operations 
SMD# 09-004 
ARRA # 4 
 
July 30, 2009             
 
Dear State Medicaid Director: 
 
This letter provides guidance with respect to the prompt pay requirements contained in section 
5001(f)(2) of the American Recovery and Reinvestment Act of 2009 (ARRA, Public 
Law 111-5), under which States must comply with timely claims processing requirements in the 
Medicaid program, or potentially lose their eligibility for the increased Federal medical 
assistance percentage (FMAP) for certain expenditures.  More detailed technical guidance is 
attached to this letter. 
 
On February 17, 2009, President Obama signed ARRA into law.  Section 5001 of ARRA 
provides eligible States with significant increases in their respective FMAPs, which are used for 
the purpose of determining the amounts of Federal funds available to States for their medical 
assistance expenditures under the Medicaid program.  These increases will be effective for a 
period of 9 calendar quarters between October 1, 2008, and December 31, 2010.  Under the 
ARRA increased FMAP provision, there are a number of requirements and conditions that States 
must meet in order to continue to be eligible under ARRA for the increase in their FMAPs or for 
the increase in the FMAPs to be applicable to certain expenditures in their Medicaid programs 
during this period.   
 
Section 5001(f)(2) of ARRA provides that the increased FMAP is not available for any claim 
received by a State from a practitioner . . . for such days during any period in which the State has 
failed to pay claims in accordance with the timely processing of claims standards as referenced 
at section 1902(a)(37) of the Social Security Act (the Act), and in implementing Federal 
Medicaid regulations (at 42 CFR 447.45(d)).  Under ARRA, with respect to practitioners the 
prompt pay provision only applies to claims made for covered services after the date of 
enactment.  Since ARRA was enacted on February 17, 2009, the increased FMAP is not 
available for any practitioner claims received by a State on such day(s), beginning with 
February 18, 2009, that the State is not in compliance with the prompt pay provision.  As 
described below and in the Appendix to this letter, in accordance with the applicable timely 
processing standards, claims received prior to February 18, 2009, will be considered in 
determining compliance with these standards, beginning on February 18, 2009.   
 
Furthermore, ARRA also requires that beginning after a grace period ending May 31, 2009, the 
prompt pay standards as applicable to practitioner claims will also be applicable with respect to 
hospital and nursing facility provider claims, insofar as such claims are paid on the basis of 
submission of claims from such providers.  Page 2  State Medicaid Directors   
   
 
 
Under title XIX of the Act and Federal Medicaid regulations at 42 CFR 447.45(d) in effect prior 
to the enactment of ARRA, and which continue to be in effect, there are two prompt pay 
standards referenced by the ARRA prompt pay provisions which are applicable to claims (as 
specified in the regulation) that are received from practitioners on or after February 18, 2009: 
 
o  90 percent of clean claims received by the State must be paid within 30 days of receipt. 
 
o  99 percent of clean claims received by the State must be paid within 90 days of receipt. 
 
Note, that, under the ARRA legislation, the provider claims which are used to determine 
compliance with the prompt pay standards are separate and distinct from the provider claims that 
are received on days of non-compliance with the prompt pay standards.  The claims received on 
the days of non-compliance are not eligible for the increased FMAP.  These are not the claims 
that are reviewed to determine compliance.  This is discussed in the technical appendix. 
 
Under section 5001(f)(2)(a)(ii) of ARRA, States are required to report their compliance with the 
prompt payment provisions on a quarterly basis to the Centers for Medicare & Medicaid Services 
(CMS).  CMS will develop and provide guidance for an expenditure report format such that 
States will be able to identify and report to CMS on the quarterly expenditure report Form CMS-
64 the amounts of expenditures for those provider claims received on days of non-compliance 
with the prompt pay standards.  Although reporting will be on a quarterly basis, the State will 
need to be able to identify relevant provider claims on a daily basis so as to be able to report 
them quarterly to CMS.  
 
If you have questions regarding this guidance, please contact Mr. Richard Strauss, Acting 
Deputy Director, Financial Management Group, who may be reached at (410) 786-2019.  
 
            Sincerely, 
 
                 /S/ 
 
            Cindy Mann 
            Director 
Enclosure 
           
cc:  
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
Ann C. Kohler  
NASMD Executive Director  
American Public Human Services Association   Page 3  State Medicaid Directors   
   
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
 
Matt Salo  
Director of Health Legislation  
National Governors Association  
 
Debra Miller  
Director for Health Policy  
Council of State Governments  
 
Christine Evans, MPH 
Director, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State health Policy