DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
 
SHO #16-002 
Re: Federal Funding for Services Received 
Through an IHS/Tribal Facility and Furnished 
to Medicaid-Eligible American Indians and 
Alaska Natives 
February 26, 2016 
Dear State Health Official:  
The purpose of this letter is to inform state Medicaid agencies and other state health officials 
about an update in payment policy affecting federal funding for services received by Medicaid-
eligible individuals, who are American Indians and Alaska Natives (AI/AN) through facilities of 
the Indian Health Service (IHS), whether operated by IHS or by Tribes.  As described in this 
letter, IHS/Tribal facilities1 may enter into care coordination agreements with non-IHS/Tribal 
providers to furnish certain services for their patients who are AI/AN Medicaid beneficiaries, and 
the amounts paid by the state for services requested by facility practitioners in accordance with 
those agreements would be eligible for the enhanced federal matching authorized under section 
1905(b) of the Social Security Act at a rate of 100 percent. Upon execution of a written care 
coordination agreement, this will be effective immediately for states for the expenditures for 
services furnished by non-IHS/Tribal providers to AI/AN Medicaid beneficiaries who are 
patients of an IHS/Tribal facility acting under such agreement, as described below. This update 
in payment policy is intended to help states, the IHS, and Tribes to improve delivery systems for 
AI/ANs by increasing access to care, strengthening continuity of care, and improving population 
health.    
Background 
The IHS, a federal agency within the Department of Health and Human Services, is responsible 
for furnishing comprehensive, culturally-appropriate health services to almost 2.2 million 
AI/ANs who are eligible for services from the IHS, per regulations at 42 CFR Part 136.  To 
achieve this goal, IHS operates its own hospitals and clinics and partners with Tribes as 
authorized by the Indian Self-Determination and Education Assistance Act, P.L. 93-638, as 
amended.  The IHS also provides funding for Urban Indian Health Organizations to operate 
Urban Indian Health Programs (UIHPs) under title V of the Indian Health Care Improvement 
Act, P.L. 94-437, as amended. The IHS, Tribes, and UIHPs operate health programs in 36 
states.2 
                                                           
1   For purposes of this document, Tribal facilities are facilities that are operated by Tribes and Tribal organizations 
under the Indian Self-Determination and Education Assistance Act, P.L. 93-638.  
 
2 As of the date of this SHO, the states are: AL, AK, AZ, CA, CO, CT, FL, ID, IL, IN, IA, KS, LA, ME, MD, MA, 
MI, MN, MS, MT, NE, NV, NM, NY, NC, ND, OK, OR, RI, SC, SD, TX, UT, WA, WI, and WY.  This list is 
subject to change.   Page 2 - State Health Official and State Medicaid Director 
 
AI/ANs who meet the eligibility requirements for the Medicaid program in the state in which 
they reside are entitled to Medicaid coverage, whether or not they are eligible for services from 
IHS.  IHS-eligible AI/ANs who are also Medicaid beneficiaries may choose to receive covered 
services from an IHS facility, a Tribal facility, a UIHP, or from any other provider participating 
in a states Medicaid program.  
Under section 1905(b) of the Social Security Act, the federal government is required to match 
state expenditures at the Federal Medical Assistance Percentage (FMAP) rate, which is 100 
percent for state expenditures on behalf of AI/AN Medicaid beneficiaries for covered services 
received through an Indian Health Service facility whether operated by the Indian Health 
Service or by a Tribe or Tribal organization (as defined in section 4 of the Indian Health Care 
Improvement Act).  If services are not received through an IHS/Tribal facility, the federal 
government will match the states payment for the services at the states regular FMAP rate, 
which in FY 2016 ranges from 50.00 percent to 74.17 percent.  
Our long-standing interpretation of this statutory provision as reflected in sub-regulatory 
guidance,3 Departmental Appeals Board decisions,4 and federal court decisions,5 has been that 
100 percent FMAP is available for amounts expended for services under the following 
circumstances:  
(1) The service must be furnished to a Medicaid-eligible AI/AN; 
(2) The service must be a facility service  i.e., within the scope of services that a facility 
(e.g., inpatient hospital, outpatient hospital, clinic, Federally Qualified Health 
Center/Rural Health Clinic, nursing facility) can offer under Medicaid law and 
regulation;   
(3) The service must be furnished by an IHS/Tribal facility or by its contractual agent as part 
of the facilitys services; and 
(4) The IHS/Tribal facility must maintain responsibility for the provision of the service and 
must bill the state Medicaid program directly for the service. 
Last year, the Centers for Medicare & Medicaid Services (CMS) announced it was strongly 
considering re-interpreting the statutory language to expand the services it considers received 
through an IHS/Tribal facility and eligible for the 100 percent FMAP.  Specifically, in October 
2015, we posted on the CMS Medicaid.gov website a Request for Comment, in which we sought 
comments on a proposal to re-interpret the statutory language providing 100 percent FMAP for 
services received through an IHS facility by: (1) Modifying the scope of services eligible for 
enhanced FMAP; (2) Expanding the meaning of contractual agent to be an enrolled Medicaid 
provider that provides services that are identified in the states approved Medicaid plan and are 
arranged for and overseen by the IHS/Tribal facility; and (3) Increasing the flexibility for billing 
arrangements so that IHS/Tribal facilities or their contractual agents could bill Medicaid directly 
                                                           
3 Memorandum of Agreement (MOA) between IHS and HCFA (July 11, 1996); HCFA Memorandum to Associate 
Regional Administrators (May, 1997). 
4 North Dakota Dept. of Human Services, DAB No. 1854 (2002); South Dakota Dept. of Social Services, DAB No. 
1847 (2002); Arizona Health Care Cost Containment System, DAB No. 1779 (2001); Alaska Department of Health 
and Social Services, DAB No. 1919 (2004). 
5 North Dakota ex. Rel. Olson v. Centers for Medicare & Medicaid Services, 403 F.3d 537 (8th Cir. 2005); Alaska 
Department of Health & Social Services v. Centers for Medicare & Medicaid Services, 424 F. 3rd 931 (9th Cir. 
2005); Arizona Health Care Cost Containment System v. McClellan, 508 F.3rd 1243 (9th Cir. 2007).  Page 3 - State Health Official and State Medicaid Director 
 
for services. CMS received 182 comments from 91 commenters including Tribes, Tribal 
organizations, Urban Indian Health Organizations, states, and other stakeholders.  We have 
reviewed and considered those comments in establishing this new policy interpretation.  
Permitting a Wider Scope of Services  
In this letter, we are re-interpreting the scope of services considered to be received through an 
IHS/Tribal facility. Under our previous interpretation, in order to be received through an 
IHS/Tribal facility, and therefore, qualify for 100 percent FMAP, the service had to be a facility 
service. By that, we meant that it had to be within the scope of services that a Medicaid facility 
of the same type (e.g., inpatient hospital, outpatient hospital, clinic, Federally Qualified Health 
Center/Rural Health Clinic, nursing facility) can provide under Medicaid law and regulation.  
Under our new interpretation, as described more fully below, the scope of services that can be 
considered to be received through an IHS/Tribal facility for purposes of 100 percent FMAP 
includes any services that the IHS/Tribal facility is authorized to provide according to IHS rules, 
that are also covered under the approved Medicaid state plan, including long-term services and 
supports (LTSS).  Medicaid coverable benefit categories include all 1905(a), 1915(i), 1915(j), 
1915(k), 1945, and 1915(c) services set forth in the state plan, as well as any other authority 
established in the future as a state plan benefit.   
This scope of service change also applies to transportation that is covered as a service under the 
state Medicaid plan.  Under regulations at 42 CFR 440.170(a), a state can elect to cover 
transportation and other related travel expenses determined  necessary to secure medical 
examinations and treatment for a beneficiary.  Related travel expenses include the cost of meals 
and lodging en route to and from medical care, and while receiving medical care, as well as the 
cost for an attendant to accompany the beneficiary, if necessary.  Covered transportation services 
can include both emergency medical transportation and non-emergency medical transportation. 
Medicaid Beneficiary and IHS/Tribal Facility Participation is Voluntary  
This new interpretation does not provide authority for states to require any AI/AN Medicaid 
beneficiary to receive services through an IHS/Tribal facility.  Nothing in this letter affects the 
entitlement of AI/AN Medicaid beneficiaries to freedom of choice of provider under section 
1902(a)(23) of the Social Security Act.  State Medicaid agencies may not, directly or indirectly, 
require AI/ANs who are eligible for Medicaid to receive covered services from IHS/Tribal 
facilities for the purpose of qualifying the cost of their services for 100 percent FMAP.  
Similarly, neither state Medicaid agencies nor IHS/Tribal facilities may require an AI/AN 
Medicaid beneficiary to receive services from a non-IHS/Tribal provider to whom the facility 
has referred the beneficiary for care.  Nor can a state delay the provision of medical assistance by 
requiring that beneficiaries initiate or continue a patient relationship with the IHS/Tribal facility.  
Finally, federal Medicaid law does not require either IHS/Tribal facilities or non-IHS/Tribal 
providers to enter into the written care coordination agreements described in this SHO. 
 
 
  Page 4 - State Health Official and State Medicaid Director 
 
Request for Services In Accordance With a Written Care Coordination Agreement 
In this letter, CMS also revises its interpretation to provide that a service may be considered 
received through an IHS/Tribal facility when an IHS/Tribal facility practitioner requests the 
service, for his or her patient, from a non-IHS/Tribal provider (outside of the IHS/Tribal facility), 
who is also a Medicaid provider, in accordance with a care coordination agreement meeting the 
criteria described below.  The purpose of this revised policy interpretation is to enable 
IHS/Tribal facilities to expand the scope of services they are able to offer to their AI/AN patients 
while ensuring coordination of care in accordance with best medical practice standards.   
A covered service will be considered to be received through an IHS/Tribal facility not only 
when the service is furnished directly by the facility to a Medicaid-eligible AI/AN patient, but 
also when the service is furnished by a non-IHS/Tribal provider at the request of an IHS/Tribal 
facility practitioner on behalf of his or her patient and the patient remains in the Tribal facility 
practitioners care in accordance with a written care coordination agreement meeting the 
requirements described below.  Under this policy, both the IHS/Tribal facility and the non-
IHS/Tribal provider must be enrolled in the states Medicaid program as rendering providers. 
Second, there must be an established relationship between the patient and a qualified practitioner 
at an IHS/Tribal facility. Third, care must be provided pursuant to a written care coordination 
agreement between the IHS/Tribal facility and the non-IHS/Tribal provider, under which the 
IHS/Tribal facility practitioner remains responsible for overseeing his or her patients care and 
the IHS/Tribal facility retains control of the patients medical record.  
A non-IHS/Tribal provider from which an IHS/Tribal facility practitioner could request services 
could include an Urban Indian Health Organization that participates in Medicaid, or any other 
Medicaid-participating provider.  Furthermore, the relationship between the IHS/Tribal facility 
practitioner and the patient could be based on visits, including the initial visit, through telehealth 
procedures that meet state and/or IHS standards for such procedures, if the IHS/Tribal facility 
has that capacity6. 
A self-request by the beneficiary, or a request from a non-IHS/Tribal provider, does not suffice 
for purposes of 100 percent FMAP; in such circumstances, the non-IHS/Tribal provider could 
furnish the service and bill the state Medicaid program, but the state expenditure for the service 
would not qualify for 100 percent FMAP.  Similarly, the non-IHS/Tribal provider may refer the 
facility patient to another non-IHS/Tribal provider; however, if the patient receives a covered 
service from that other provider without a request from the IHS/Tribal facility practitioner, or the 
IHS/Tribal facility practitioner does not remain responsible for the patients care, the state 
expenditure for the service would not qualify for 100 percent FMAP. 
At a minimum, care coordination will involve:  
(1) The IHS/Tribal facility practitioner providing a request for specific services (by 
electronic or other verifiable means) and relevant information about his or her patient to 
the non-IHS/Tribal provider;  
                                                           
6 Or as specified in a demonstration project authorized under section 1637 of the Indian Health Care Improvement 
Act.  Page 5 - State Health Official and State Medicaid Director 
 
(2) The non-IHS/Tribal provider sending information about the care it provides to the 
patient, including the results of any screening, diagnostic or treatment procedures, to the 
IHS/Tribal facility practitioner; 
(3) The IHS/Tribal facility practitioner continuing to assume responsibility for the patients 
care by assessing the information and taking appropriate action, including, when 
necessary, furnishing or requesting additional services; and  
(4) The IHS/Tribal facility incorporating the patients information in the medical record 
through the Health Information Exchange or other agreed-upon means.  
Written care coordination agreements under this policy could take various forms, including but 
not limited to a formal contract, a provider agreement, or a memorandum of understanding and, 
to the extent it is consistent with IHS authority, would not be governed by federal procurement 
rules. The IHS/Tribal facility may decide the form of the written agreement that is executed with 
the non-IHS/Tribal provider.   
Medicaid Billing and Payments to Non-IHS/Tribal Providers  
For services provided to Medicaid-eligible AI/AN beneficiaries that are rendered by a non-
IHS/Tribal provider in accordance with a written care coordination arrangement, there are 
several options regarding how those services may be billed to Medicaid.   
The first option is for the non-IHS/Tribal provider to bill the Medicaid agency directly.  If the 
non-IHS/Tribal provider bills the state Medicaid program directly, the provider would be 
reimbursed at the rate authorized under the Medicaid state plan applicable to the provider type 
and service rendered.  To support the application of the 100 percent FMAP, the state should 
ensure that claims include fields that document that the item or service was received through 
an IHS/Tribal facility.   When a non-IHS provider bills a state directly, the states payment rate 
for a covered service furnished by a non-IHS/Tribal provider to an AI/AN Medicaid beneficiary 
under a written care coordination agreement must be the same as the rate for that service 
furnished by that provider to a non-AI/AN beneficiary or to an AI/AN beneficiary who self-
refers to the provider. Similarly, a state agency cannot establish one rate for services furnished 
by the facility to AI/AN beneficiaries and another for the same services provided by that facility 
to non-AI/AN Medicaid beneficiaries.  
A second option is for the IHS or Tribal facility to handle all billing.  In that case, the IHS/Tribal 
facility would have to separately identify services provided by non-IHS/Tribal providers under 
agreement that can be claimed as services of the IHS/Tribal facility (IHS/Tribal facility 
services) from those that cannot.  Inpatient services that are furnished by non-IHS providers 
outside of IHS/Tribal facilities could never be claimed as IHS/Tribal facility services.  For IHS, 
other services provided by non-IHS providers outside of an IHS facility generally cannot be 
claimed as IHS facility services.  Tribal facilities generally may have more flexibility than IHS 
and should consult with their state to determine the circumstances in which other services 
provided by non-Tribal providers can be claimed as Tribal facility services. The circumstances 
under which Tribal facilities may claim services as their own are the same as those that apply for 
other similar facilities in the state (e.g., inpatient or outpatient hospitals, nursing facilities, 
Federally Qualified Health Centers, etc.).  Services that can properly be claimed as IHS/Tribal 
facility services may be billed directly by the IHS/Tribal facility and are paid at the applicable 
Medicaid state plan IHS/Tribal facility rate.  For all other services provided by non-IHS/Tribal  Page 6 - State Health Official and State Medicaid Director 
 
providers, IHS or the Tribe could bill for these services as an assigned claim by that provider and 
the payment rate would be the state plan rate applicable to the furnishing provider and the 
service, not the applicable Medicaid state plan IHS/Tribal facility rate.  These services are still 
eligible for the 100 percent FMAP, provided other requirements have been met. 
The billing arrangement should be reflected in the written agreement between the IHS/Tribal 
facility and the non-IHS/Tribal provider.  Payment methodologies for facility services furnished 
by both the IHS/Tribal facility and rate methodologies paid to non-IHS/Tribal providers must be 
set forth in an approved state Medicaid plan.  Payment rates can reflect the unique access 
concerns in particular geographic areas, or with respect to certain types of providers.  However, 
rates may not vary based on the applicable FMAP. States should review existing state plans to 
ensure compliance with the policy articulated in this letter.   
Managed Care 
The discussion above assumes that the Medicaid-eligible AI/AN has received [services] 
through the IHS/Tribal facility on a fee-for-service basis.  In some cases, however, Medicaid-
eligible AI/ANs may be enrolled in a risk-based Medicaid managed care organization (MCO), 
prepaid inpatient health plan (PIHP), or prepaid ambulatory health plan (PAHP), in which case 
the state Medicaid agency is making monthly capitation payments on behalf of the AI/AN 
enrollee to the MCO, PIHP, or PAHP.   The state may claim 100 percent FMAP for the portion 
of the capitation payment attributable to the cost of services received through an IHS/Tribal 
facility if the following conditions are met:  
(1) The service is furnished to an AI/AN Medicaid beneficiary who is enrolled in the 
managed care plan; 
(2) The service meets the same requirements to be considered received through an 
IHS/Tribal facility as would apply in a fee-for-service delivery system and the managed 
care plan maintains auditable documentation to demonstrate that those requirements are 
met;   
(3) The non-IHS/Tribal provider is a network provider of the enrollees managed care plan; 
(4) The non-IHS/Tribal provider is paid by the managed care plan consistent with the 
network providers contractual agreement with the managed care plan; and 
(5) The state has complied with section 1932(h)(2)(C)(ii) of the Act consistent with CMS 
guidance.  
States would be permitted to claim the 100 percent FMAP for a portion of the capitation payment 
for AI/ANs who are enrolled in managed care, even though the state itself has made no direct 
payment for services received through an IHS/Tribal facility.  The portion of the managed care 
payment eligible to be claimed at 100 percent FMAP must be based on the cost of services 
attributable to IHS/Tribal services or encounters received through an IHS/Tribal provider 
meeting the requirements outlined in this section.   
Compliance and Documentation  
To ensure accountability for program expenditures, in states where IHS/Tribal facilities elect to 
implement the policy described in this letter, the Medicaid agency will need to establish a 
process for documenting claims for expenditures for items or services received through an  Page 7 - State Health Official and State Medicaid Director 
 
IHS/Tribal facility. The documentation must be sufficient to establish that (1) the item or service 
was furnished to an AI/AN patient of an IHS/Tribal facility practitioner pursuant to a request for 
services from the practitioner; (2) the requested service was within the scope of a written care 
coordination agreement under which the IHS/Tribal facility practitioner maintains responsibility 
for the patients care; (3) the rate of payment is authorized under the state plan and is consistent 
with the requirements set forth in this letter; and (4) there is no duplicate billing by both the 
facility and the provider for the same service to the same beneficiary.  
Applicability to Section 1115 Demonstrations 
State expenditures for services covered under section 1115 demonstration authority are eligible 
for 100 percent FMAP as long as all of the elements of being received through an IHS or 
Tribal facility that are described in this SHO are present.  
Relationship Between 100 Percent FMAP for Tribal Services and Other Federal Matching Rates 
The 100 percent FMAP for services received through an IHS/Tribal facility is available for 
services provided to AI/ANs as described in this SHO instead of the regular FMAP rate 
described in section 1905(b) of the Act, the newly eligible FMAP rate described in section 
1905(y) of the Act, the enhanced FMAP rate for breast and cervical cancer, or the enhanced rate 
for Community First Choice services.   
We intend to issue additional guidance materials after the release of this SHO. CMS is available 
to work closely with each state to implement the policy established in this state health official 
letter regarding receiving 100 percent FMAP for services received through an IHS/Tribal 
facility.  If you have any questions regarding this information, please contact 
TribalAffairs@cms.hhs.gov or Kirsten Jensen, Director, Division of Benefits and Coverage, 410-
786-8146.          
Sincerely, 
                   /s/ 
Vikki Wachino   
               Director 
cc:  
National Association of Medicaid Directors  
National Academy for State Health Policy 
American Public Human Services Association 
National Governors Association 
Council of State Governments 
Association of State and Territorial Health Officials