DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
Center for Medicaid, CHIP and Survey & Certification 
 
CMCS Informational Bulletin 
  
 
DATE:  October 1, 2010 
     
FROM:  Cindy Mann  
  Director 
  Center for Medicaid, CHIP and Survey & Certification (CMCS) 
 
SUBJECT:  Recent Developments in Medicaid and CHIP Policy  
 
This Informational Bulletin is to provide you with a summary of recent activities and guidance to 
the States over the past week.  On September 28, CMCS released the second letter discussing the 
changes to the Medicaid drug rebate program in the Affordable Care Act.  On September 30, 
CMS released the congressionally-mandated Annual Report on the Quality of Care for Children 
in Medicaid and CHIP; and on October 1, we released three letters to State Medicaid Directors 
and State Health Officials regarding Medicaid and CHIP policy and Medicaid program integrity.  
In addition, CMCS has awarded a new contract vehicle to six organizations that will assist CMS 
with Medicaid and CHIP policy analysis among other projects. A description of each item and an 
update on the Puerto Rico Birth Certificate changes reviewed in our last Informational Bulletin is 
below:  
 
  Puerto Rico Birth Certificates -- UPDATE: The Government of Puerto Rico has 
extended the validity of expiring Puerto Rico birth certificates through Oct. 30, 2010, to 
provide a transition period as the Island continues issuing the new, more secure 
certificates that became available July 1, 2010. The latest news release on the extension is 
available at http://www.prfaa.com/news/?p=1160 
 
  State Plan Amendment Review Process -- This letter (SMD #10-020) provides 
guidance on a change in CMSs approach to the review and approval of Medicaid State 
plan amendments aimed at providing more timely and responsive resolutions of such 
amendments. Recognizing States need to move forward with modifications to their 
Medicaid programs through their every day course of business, the new process will 
facilitate a more expeditious review of SPAs, while ensuring that CMS and States resolve 
other questions that may arise.  CMS will not hold up the review of SPAS when other 
matters come to light in the review process. We will bifurcate the approval of the SPA 
from the issue(s) that emerge during the course of review.  States will receive, along with 
the approval letter, a companion letter summarizing any other issues that have been 
identified.  We will then work closely with the State over a 90-day period to obtain 
information that alleviates the concern or to implement a corrective action (such as a 
SPA) to remedy the situation.   
  Page 2  CMCS Informational Bulletin   
 
  CHIPRA Quality Report  CHIPRA required that the Secretary provide, by September 
30, 2010, an annual report on the quality of the care the Medicaid and CHIP programs 
provide to the nearly 40 million children they cover.  The report, which is available at 
http://www.cms.gov/MedicaidCHIPQualPrac/Downloads/secrep.pdf, also provides 
information on the status of current State reporting of child health quality measures, 
which vary widely across States.   CMS reviewed State data as well as quality review 
reports conducted by external evaluators in order to develop this report.   The report 
paves the way for future reports and efforts to improve the quality of childrens health 
care, which will be based, in part, on new quality measures and reporting established 
under CHIPRA. 
 
Key findings include: 
   Children enrolled in Medicaid/CHIP have much better access to primary care 
o
services than uninsured children and comparable access relative to privately insured 
children; however, access could be improved substantially for specialty care services 
(e.g., dental, mental health).  
  Performance on quality measures varied widely.  Strong performance was noted in 
o
the areas of asthma treatment and childhood immunizations; States generally rated 
low in the areas of lead screening, follow-up care for children prescribed medication 
for attention deficit hyperactivity disorder, and STD treatment.  
  Racial/ethnic minority children and children with special health care needs experience 
o
improved access to care once enrolled in Medicaid/CHIP.  Despite these gains, 
disparities in access to and quality of care remain.   
  There is wide variation in the reliability and completeness of State data on the quality 
o
of care received by children enrolled in Medicaid/CHIP. 
 
  Medicaid Recovery Audit Contractors (RACs) -- Section 6411 of the Affordable Care 
Act requires State Medicaid programs to establish Recovery Audit Contractor (RAC) 
programs by December 31, 2010.  Medicaid RACs will identify and recover provider 
overpayments, and will also identify underpayments.  RACs are private entities that are 
contracted to audit providers, review claims, and identify and collect improper payments 
on a contingency fee basis.  RACs began as a Medicare demonstration initially authorized 
by MMA of 2003 and were later permanently authorized and expanded nation-wide in 
2006.  The letter to State Medicaid Directors (SMD #10-021) provides guidance to States 
on the parameters for establishing RAC programs and includes a draft Medicaid State 
plan preprint States will need to submit to CMS to provide the required assurances 
regarding the establishment of the States RAC program.   
 
  CHIPRA Performance Bonuses -- This guidance provides States with additional 
information as they prepare their applications for the Fiscal Year 2010 CHIPRA 
Performance Bonuses. CHIPRA created an opportunity for States to obtain Performance 
Bonus Payments (bonus payments) for Federal fiscal years (FFYs) 2009 through 2013 as 
both an incentive and financial support for enrolling eligible children in Medicaid.  Ten 
States received a total of $75 million in bonus payments for FY 2009. To qualify for 
bonus payments, States must implement at least five of eight program features 
 
 
  Page 3  CMCS Informational Bulletin 
 
  strategies that are known to facilitate the enrollment and renewal process -- in order to 
  qualify for a bonus payment.  In addition, States must demonstrate increased Medicaid 
  enrollment of children above a baseline level each year.  This letter to State Health 
  Officials (SHO #10-008) provides answers to frequently asked questions regarding the 
  program features and the process for applying for a FY 2010 bonus payment. States 
  applications for this years CHIPRA performance bonus payments are due on October 
  15, 2010.  We encourage States that think they might qualify for a performance bonus to 
  submit an application; we will work with each State that applies to determine whether 
  they qualify. 
 
  Medicaid Prescription Drugs  On September 28, 2010, CMCS released a second letter 
addressing the changes to the Medicaid drug rebate program that were included in the 
Affordable Care Act.  This letter to State Medicaid Directors (SMD #10-019) revises the 
previous guidance on the Federal offset of rebates, noting that we will now calculate the 
offset amounts to reflect the smaller of the difference between the increased minimum 
Average Manufacturers Price (AMP) percentage or the AMP minus best price.  As a 
result, we will offset only the increased amount of the additional rebate beyond what the 
State would have received under the federal rebate program prior to the Affordable Care 
Act changes.  The letter also provides information to State Medicaid agencies and drug 
manufacturers on prescription drug rebates to covered outpatient drugs dispensed to 
Medicaid managed care organization (MCO) enrollees, MCO formularies, and the 
treatment of MCO physician administered drugs.  Also addressed in the guidance is the 
revised definition of multiple source drug, manufacturer reporting requirements, the 
treatment of discounts under the Medicare Coverage Gap Discount Program, and the 
changes to the excluded drug provisions in Medicaid.  The letter is available at 
http://www.cms.gov/smdl/downloads/SMD10019.pdf 
 
  CMCS Contract IDIQ Award  On September 30, 2010 the list of contractors receiving 
awards through the MACPIE IDIQ solicitation was posted on the website FedBizOpps  
(https://www.fbo.gov/index?s=opportunity&mode=form&id=4e9b1b662fd655deb324e3c
b67758862&tab=core&tabmode=list&=).  This group of contractors will have the 
opportunity to bid on projects that CMCS requests related to Medicaid/CHIP and Survey 
& Certification policy analysis and other tasks as presented.  The six organizations 
receiving awards are:  1) RTI International; 2) The Urban Institute; 3) Deloitte 
Consulting, LLP; 4) Mathematica Policy Research, Inc; 5) Thomson Reuters (Healthcare) 
Inc.; and 6) The George Washington University. 
   
I hope you will find this information helpful.  Thank you for your continued commitment to the 
success of these critical health coverage programs.   
 
Cindy Mann