DEPARTMENT OF HEALTH & HUMAN SERVICES  
Centers for Medicare & Medicaid Services  
7500 Security Boulevard, Mail Stop S2-01-16  
Baltimore, Maryland 21244-1850  
  
Centers for Medicaid and State Operations  
  
 March 31, 2006                     SMDL #06-009  
 
Dear State Medicaid Director:  
  
This is one of a series of letters designed to provide guidance to States on the implementation of the 
provisions of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), signed by President Bush on 
February 8, 2006.  Section 6083 of the DRA amends section 1902(a) of the Social Security Act (the 
Act) by adding a new section 1902(a)(70) that provides States the authority to establish, under the State 
plan, a non-emergency medical transportation (NEMT) brokerage program.  Under such a program, the 
State contracts with one or more brokers to manage the provision of NEMT services for beneficiaries 
who need transportation to or from medical providers.    
  
States are required in their Title XIX State plans to ensure necessary transportation of Medicaid 
beneficiaries to and from providers (42 CFR 431.53).  Expenditures for transportation may be claimed 
as administrative costs of the State plan.  Or the State may elect to include transportation as medical 
assistance under its State Medicaid plan, but use a direct vendor payment system consistent with 
applicable regulations (42 CFR 440.170(b)).    
  
Prior to enactment of this legislation, when a State elected to provide transportation as medical 
assistance under its State plan, the State needed to receive a waiver under section 1915(b) of the Act of 
certain requirements of section 1902(a) of the Act in order to institute a NEMT brokerage program.  
These waivers allowed States to restrict freedom of choice of providers, selectively contract with 
brokers, and operate their programs differently in different areas of the State.   
  
The law has now been changed.  States are no longer required to obtain a section 1915(b) waiver in 
order to provide NEMT as an optional medical service through a contracted broker.  Under new section 
1902(a)(70), a State may now use a NEMT brokerage program when providing transportation as 
medical assistance under the State plan.  Brokerage programs may include wheelchair vans, taxis, 
stretcher cars, transit passes and tickets, and other transportation methods.    
  
NEMT brokerage programs must be cost-effective in order to comply with section 1902(a)(70), and 
States must select NEMT brokers through a competitive procurement process.  Competitive 
procurement processes for grants are described in 45 CFR Part 92.36(b)-(f).  Cost-effectiveness may be 
determined through the cost or price analysis conducted as part of the competitive procurement.  The 
NEMT brokerage contract must provide that the broker will have in place oversight procedures to 
monitor beneficiary access and complaints; that transport personnel are licensed, qualified, competent, 
and courteous; and that the broker will comply with the requirements related to prohibitions on referrals 
and conflict of interest, as defined in section 1877 of the Act.  Additionally, States must  
 
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perform regular auditing and oversight of the brokerage program in order to assure the quality of the 
transportation services provided to beneficiaries, and to guarantee the adequacy of beneficiary access to 
medical care and services.   
  
To establish a cost-effective NEMT brokerage program for providing transportation as medical 
assistance, a State must submit a State plan amendment (SPA) that elects this option and assures that 
applicable requirements related to cost-effectiveness, competitive procurement, oversight and quality 
are being met.    
   
To assist States, we have attached a preprint that may be used when submitting a SPA to implement this 
provision.  Both an electronic copy and a hard copy of the SPA must be submitted simultaneously to the 
CMS Central Office, and to the Regional Office serving your State.  Additionally, States are required to 
include documentation proving cost effectiveness, and contracts with transportation brokers must be 
approved by CMS.    
  
At the earliest possible date following the release of this letter, CMS will arrange State training on these 
new provisions, if requested.  Should you have any questions regarding this new legislation or the 
submission of a SPA to implement an NEMT brokerage program, please contact Ms. Jean Sheil, 
Director, Family and Childrens Health Program Group, at 410-786-5647.  
  
                  Sincerely,  
  
/s/  
  
                  Dennis G. Smith   
Director  
  
  
Enclosure   Page 3  State Medicaid Director  
  
cc:  
CMS Regional Administrators  
  
CMS Associate Regional Administrators  
  for Medicaid and State Operations  
  
Martha Roherty       
Director, Health Policy Unit  
American Public Human Services Association  
  
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
  
Matt Salo  
Director of Health Legislation  
National Governors Association  
  
Jacalyn Bryan Carden  
Director of Policy and Programs  
Association of State and Territorial Health Officials  
  
Christie Raniszewski Herrera  
Director, Health and Human Services Task Force  
American Legislative Exchange Council  
  
Lynne Flynn  
Director for Health Policy  
Council of State Governments