DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
February 20, 1998  
Dear State Medicaid Director:  
This letter is one in a series of letters that provides guidance on the implementation of the Balanced Budget Act 
of 1997(BBA). The BBA contains numerous provisions relating specifically to managed care. In order to 
provide guidance on these as quickly as possible, we are issuing a number of managed care policy letters. (See 
Enclosure #2 to this letter.) This letter is the eleventh in this managed care series.  
The purpose of this letter is to provide guidance on BBA requirements for provision of information to managed 
care enrollees and potential enrollees and the effective dates of BBA managed care provisions  
This letter pertains to provisions regarding Medicaid managed care that are contained in sections 4701(a) and 
4710 of the BBA. Section 4701(a) sets forth requirements for the information that must be provided to 
beneficiaries regarding their enrollment or potential enrollment in managed care entities. Section 4710 
establishes effective dates for the managed care provisions in the BBA.  
As discussed in the State Medicaid Directors Letter dated January 14, 1998, the BBA contains new definitions 
of the entities with which States may contract in Medicaid managed care programs. The term managed care 
entity (MCE) is defined as either a managed care organization (MCO)--an organization with a prepaid, risk-
comprehensive contract (i.e. HMOs, organizations with section 1876 or Medicare+Choice contracts, provider 
sponsored organizations, or any other public or private organization meeting the statutory requirements), or a 
primary care case management (PCCM) provider (i.e. a physician, physician group practice, or other entity 
which contracts with the State to provide PCCM services). This distinction is significant because some of the 
following requirements apply to all MCEs, some only to MCOs, and others are dependent upon the authority 
under which a State operates its managed care program, i.e., on a voluntary basis or with mandatory enrollment 
through either a section 1915(b) or 1115 waiver or under the State plan amendment (SPA) option authority.  
Provision of Information 
Under approved waiver programs, HCFA has always required that beneficiaries be fully informed of the choices 
available to them in enrolling with an MCE. As a result of the BBA, these requirements are now spelled out in 
statute, which now describes the kind of information which must be made available to Medicaid enrollees and 
potential enrollees, and requires that this information, and all enrollment notices and instructional materials 
related to enrollment in MCEs, be in a format which can be easily understood by the individuals to which it is 
directed. This rule applies to all States, enrollment brokers, and MCEs.  
Specifically, all MCOs are required to make the following information available to enrollees and potential 
enrollees on request:  
  1. The identity, locations, qualifications, and availability of participating providers;   
  2. The rights and responsibilities of enrollees;   
  3. The procedures available to enrollees and providers to challenge or appeal the failure of the MCO to 
cover a service;   
  4. All items and services that are available to enrollees that are covered either directly or through a 
method of referral and/or prior authorization.   
 
Either the State or the MCO must also provide a written description of any benefits to which the enrollee is 
entitled, but which are not made available through the MCO. This notice must include information on where  and how an individual may obtain these benefits.  
PCCM providers are required to provide enrollees with information on how to challenge or appeal the failure of 
the PCCM to cover an item or service.  
The BBA also includes a specific information requirement for States that implement mandatory managed care 
programs under the SPA option in section 1932(a)(1)(A). On an annual basis (or upon request), States 
implementing SPA managed care programs must provide in a comparative or chart-like form, a list of all 
available MCEs which includes the following information for each MCE:  
  1. The benefits covered by the MCE and any cost sharing amounts imposed;   
  2. The MCE's service area; and   
  3. To the extent available, any quality and performance indicators for the services covered by the MCE.   
 
The BBA does not require this chart for managed care programs with voluntary enrollment or programs 
operating under a waiver authority, but we encourage States to use such a chart for these purposes.  
Effective Dates 
Except for provisions containing a specific alternative date, the BBA provisions in sections 4701 through 4709 
apply to contracts entered into or renewed on or after October 1, 1997. "Entered into or renewed" in this context 
refers to when contracts are signed by both the State and the MCE. A discussion on how this provision on the 
effective dates of contract requirements interacts with the BBA provision on application to section 1915(b) and 
1115 waivers will follow in a subsequent letter.  
Enclosure #1 includes a full list of effective dates and some questions and answers on these provisions that have 
been raised in discussion with various groups regarding these changes. If you have any questions regarding 
these 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 #1 QUESTIONS AND ANSWERS ON INFORMATION REQUIREMENTS  EFFECTIVE 
DATES AND APPLICATION TO WAIVERS    
1.  What is the interaction between the information required for MCOs and the comparative chart 
required for SPA option managed care programs? 
The requirements are somewhat different, in part because the one is based upon the type of contractor (an 
MCO), and the other is the authority under which the State operates the managed care program (through a State 
plan amendment). Thus, one requirement does not replace the other, and may in fact supplement it. If a State 
were contracting with MCOs to operate an SPA managed care program, both provisions would apply. A State 
could use the chart format to offer the necessary information regarding participating MCOs, but would not be 
required to do so.  
If a State only contracted with PCCMs in its SPA managed care program, then the information required of 
MCOs would not apply. However, the State would be required to provide information on the rules governing 
PCCM grievances and appeals, in addition to the other information required on the comparative chart.  
The comparative chart is required only when a State uses SPA authority to implement its managed care 
program. However, States may find such a chart to be a useful tool in educating beneficiaries about their options 
in other managed care settings.  
2.  What types of information must be made available regarding provider qualifications? 
This requirement is intended to provide managed care enrollees and potential enrollees sufficient information to 
make an informed choice with respect to their enrollment with an MCO, including specific information on the 
health care practitioners available to them. The requirement for information on provider qualifications applies 
specifically to the primary care and specialty care providers in the MCO, and should include at a minimum such 
information as area of specialty, board certification, and any special areas of expertise that would be helpful to 
individuals deciding whether to enroll with the MCO.  
3.  What are the effective dates for provisions other than those described in the letter? 
Below are listed the effective dates for each provision in the managed care chapter of the BBA:  
Provision  Effective Date 
PCCM Option (Sec. 4702)   Services furnished on or after 10/1/97  
75:25 Repeal (Sec. 4703)   Contracts on or after 6/20/97  
Quality Standards (Sec. 4705)  1/1/99  
Solvency Standards (Sec.  Contracts entered into or renewed on or after 10/1/98 (or 
4706)   three years  after enactment for MCOs with full risk 
contracts as of that date)  
Sanctions for Noncompliance  Contracts entered into or renewed on or after 4/1/98  
(Sec. 4707(a))  
Limits on FFP for Enrollment  Amounts expended on or after 10/1/97  
Brokers (sec.4707(b))  
6-Month Guaranteed  10/1/97  
Eligibility (Sec. 4709)  
4.  How and when will existing contracts be required to come into compliance with the new BBA 
provisions? 
Contracts signed by both parties prior to 10/1/97 will not be affected by the new provisions until they are 
subsequently renewed. At the time such a contract is renewed, it will need to comply with the BBA provisions 
in effect as of the date the renewal is entered into. Thus, it will not be necessary for a State to amend existing 
approved contracts that were entered into prior to 10/1/97.    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, 1/14/98 4703 and Approval Threshold 4708(a)  
4705 External Quality Review 1/20/98  
4704(a) Mental Health Parity 1/20/98  
4701(a) Enrollment, Termination, and 1/21/98 Default Assignment  
4702 PCCM Services Without Waiver 1/21/98  
4707(a) Sanctions for Noncompliance 2/20/98