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:  December 30, 2010 
 
FROM:  Cindy Mann, JD 
  Director 
  Center for Medicaid, CHIP and Survey & Certification (CMCS) 
 
SUBJECT:  Recent Developments in Medicaid and CHIP Policy  
 
As 2010 comes to a close, we wanted to share with you a series of announcements and updates 
regarding our work here at CMCS and to wish you all a productive and peaceful New Year.  This 
Informational Bulletin provides information about a range of issues related to Medicaid policy, 
continued efforts to effectively implement CHIPRA and the Affordable Care Act, and some new 
developments in our cross cutting work with the Medicare program.  We hope you will find this 
information helpful as you administer these critical health coverage programs. 
 
Federal Coordinated Health Care Office  
First, we are pleased to announce that the Centers for Medicare & Medicaid Services (CMS) has 
formally established the Federal Coordinated Health Care Office. This new office, created by 
Section 2602 of the Affordable Care Act, will bring together officers and employees at CMS in 
order to more effectively integrate benefits under the Medicare and Medicaid programs.   The 
new office will be led by Melanie Bella. 
 
The Federal Register notice announcing the Federal Coordinated Care Office is available at:  
http://www.gpo.gov/fdsys/pkg/FR-2010-12-30/pdf/2010-32957.pdf 
 
The Federal Coordinated Health Care Office will focus on: 
 
  Fostering overall improvements in the quality of health care and long-term services for 
individuals who are dually eligible for both Medicaid and Medicare;  
  Simplifying processes for dual eligible individuals to access items and services available to 
them; 
  Increasing dual eligible individuals understanding of and satisfaction with coverage under 
the Medicare and Medicaid programs; 
  Eliminating regulatory conflicts between rules under the Medicare and Medicaid programs; 
and 
  Improving coordination between the Federal government and the States.   
 
 
  Page 2  CMCS Informational Bulletin 
 
As you know, dual eligibles account for 16 to 18 percent of enrollees in Medicare and Medicaid, 
but roughly 25 to 45 percent of spending in these programs respectively. With the vast majority 
of these nine million individuals receiving fragmented care at an estimated cost of over $300 
billion in State and federal spending, improving care for this population is ripe for innovation.   
 
As we announced in an Informational Bulletin on December 10, the Center for Medicare and 
Medicaid Innovation is partnering with the Federal Coordinated Health Care Office on a new 
initiative to promote innovative service delivery models for dual eligible individuals. Through 
the State Demonstrations to Integrate Care for Dual Eligible Individuals, CMS will provide 
funding for States to design new person-centered models that align the full range of acute, 
behavioral health, and long-term supports and services and improve the actual care experience 
and lives of dual eligible beneficiaries. The solicitation for this contracting opportunity is 
available on the Innovation Center website (http://innovations.cms.gov) and at the following 
link: 
https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=7ffe8a7ccbd80dffeccfbb
55d7ae7d62&_cview=0 
 
Adult Quality Measures  
Section 2701 of the Affordable Care Act requires CMS to develop a recommended set of core 
quality measures that can be used for voluntary reporting by States to monitor and improve the 
quality of care obtained by adults enrolled in Medicaid.  The recommended adult quality 
measures were required to be published for public comment by January 1, 2011.  The Federal 
Register notice announcing the measures is available at: http://www.gpo.gov/fdsys/pkg/FR-
2010-12-30/pdf/2010-32978.pdf 
 
The Agency for Healthcare Research and Quality (AHRQ), on behalf of CMS, convened a 
meeting of a Subcommittee to its National Advisory Council on Healthcare Research and 
Quality (the Subcommittee) October 18-19, 2010 to provide guidance on adult quality measures.  
The Subcommittee consisted of State Medicaid representatives, health care quality experts from 
a range of clinical disciplines, and representatives of health professional organizations.   
 
Overall, the Subcommittee reviewed a thousand measures for assessing the quality of care for 
adults from a list of previously established measures, such as those endorsed by the National 
Quality Forum or measures currently being used at the Federal or state levels.  The 
Subcommittee identified 51 measures to recommend as the initial core set of adult quality 
measures.  These measures are organized into the following categories: prevention and health 
promotion, management of chronic conditions, management of acute conditions, family 
experiences of care, and availability of services.  
 
On October 28, 2010 CMCS held a listening session with States to obtain initial feedback on the 
core set.  And we are seeking comment in the Federal Register notice on how to balance the need 
for quality measurement with minimizing the reporting burden on States. AHRQ will also be 
providing additional information about the process for identifying the core set of adult quality 
measures on their website at www.ahrq.gov. 
 
   
  Page 3  CMCS Informational Bulletin 
 
Prohibition on Payments to Institutions or Entities Located Outside of the United States 
On December 30, 2010, CMCS released a letter to State Medicaid Directors providing guidance 
on the implementation of a Medicaid payment provision of the Affordable Care Act of 2010 -- 
Section 6505 - Prohibition on Payments to Institutions or Entities Located Outside of the United 
States.  Section 6505 amends section 1902(a) of the Social Security Act (the Act), and requires 
that a State shall not provide any payments for items or services provided under the Medicaid 
State plan or under a waiver to any financial institution or entity located outside of the United 
States (U.S.).  This section of the Affordable Care Act is effective January 1, 2011, unless the 
Secretary determines that implementation requires State legislation, other than legislation 
appropriating funds, in order for the plan to comply with this provision.  The letter is attached to 
this Bulletin. 
 
Report to Congress on Preventive and Obesity-Related Services Available to Medicaid 
Enrollees.  The Affordable Care Act requires the Department of Health and Human Services to 
provide guidance to States regarding preventive and obesity-related services available to 
individuals enrolled in Medicaid.  States are to design public awareness campaigns to educate 
Medicaid enrollees on the availability and coverage of such services.  HHS is required to issue a 
report to Congress no later than January 1, 2011, and every three years through 2017, addressing 
the status and effectiveness of these efforts. On December 23, 2010, the Secretary transmitted the 
first report to Congress, providing baseline information on the types of preventive and obesity-
related services covered by Medicaid, as well as a summary of current and planned Federal and 
State activities.  The report is attached to this Bulletin.  Future reports will identify and assess the 
effectiveness of Federal and State efforts to increase awareness of coverage for obesity-related 
services.   
 
CMS is preparing further guidance for States that will further clarify what obesity-related 
services Medicaid will cover and offer technical assistance to help States improve awareness of 
and access to obesity prevention and treatment services. 
 
Report to Congress on Improving Childrens Health Care Quality in Medicaid and CHIP 
The Childrens Health Insurance Program Reauthorization Act of 2009 (CHIPRA) includes a 
series of provisions designed improve the quality of care provided to children in the Medicaid 
and CHIP programs.  The law requires the Secretary to submit to Congress, every three years, a 
report that details the status of a) efforts to improve the duration and stability of childrens health 
insurance coverage in Medicaid and CHIP; b) voluntary quality reporting by States under 
Medicaid and CHIP, utilizing the initial core quality measurement set established under the 
statute; and c) recommendations for legislative changes needed to improve the quality of care 
provided to children in Medicaid and CHIP.  As reflected in the report, improving continuity of 
coverage for children is a top priority for CMCS and for the Department more broadly.  The 
Report was transmitted to Congress on December 30, 2010 and will soon be available on the 
CMS website. 
 
Report to Congress on the High Risk Pool Grant Program for FY08 and FY09 
The State High Risk Pool Extension Funding Act of 2006 requires an annual report to Congress 
on grants to States to support high risk pools for individuals who cannot afford or are unable to 
enroll in private health insurance programs due to complex or pre-existing health conditions.   
 
  Page 4  CMCS Informational Bulletin 
 
This second annual report covers federal fiscal years (FY) 2008 and 2009.  CMS awarded 30 
high risk pool grants in FY08 and 31 high risk pool grants in FY09, resulting in comprehensive 
healthcare coverage for nearly 200,000 individuals who were otherwise unable to obtain health  
insurance due to their health history. (Note that these high risk pool programs are separate from 
the Pre-Existing Condition Insurance Plans or PCIPs established under the Affordable Care Act.)  
 
Most State high risk pools have utilized the CMS grant funds to sustain existing programs by 
offsetting operational losses, but also to offer expanded consumer benefits, disease management 
services, and income-related premium subsidies.  Overall, high risk pool benefit packages, which 
largely serve individuals with chronic and/or severe conditions, include a strong emphasis on 
case management, utilization review, and disease management programs.  However, despite the 
low-income premium subsidies, the high risk pools are often still unaffordable to those in need of 
comprehensive health insurance coverage in the individual market.  The report was transmitted 
to Congress on December 30, 2010 and will soon be available on the CMS website. 
 
Medicaid Change as a Result of the Extenders Act 
On December 15, 2010, the President signed into law the Medicare and Medicaid Extenders Act 
of 2010, which repealed new section 1902(a)(78) of the Social Security Act (the Act), as added 
by Section 6502 of the Affordable Care Act.  Section 6502, Medicaid Exclusion from 
Participation Relating to Certain Ownership, Control, and Management Affiliations, required 
States to exclude individuals or entities from participating in Medicaid for a specified period of 
time if the individual or entity owns, controls, or manages an entity that: (1) has unpaid 
overpayments under Title 19; (2) is suspended, excluded, or terminated from participation in any 
Medicaid program; or (3) is affiliated with an individual or entity that has been suspended, 
excluded, or terminated from Medicaid participation.  The effective date of this provision was 
January 1, 2011. 
 
Although section 1902(a)(78) will no longer go into effect in January, States may continue to 
review providers affiliations when enrolling them in Medicaid as part of ongoing efforts to keep 
fraudulent providers out of the program. Questions regarding this information can be directed to 
Angela Brice-Smith of the CMS Center for Program Integrity at 410-786-4340 or via email at 
Angela.Brice-Smith@cms.hhs.gov. 
 
Medicares New End Stage Renal Disease Prospective Payment Systems Impact on Dual 
Eligible ESRD Beneficiaries. The Medicare Improvements for Patients and Providers Act 
(MIPPA) requires Medicares implementation of the ESRD bundled payment system effective 
January 1, 2011.  Under the End Stage Renal Disease Prospective Payment System (ESRD PPS), 
Medicare-certified ESRD facilities that provide outpatient maintenance dialysis services to 
Medicare beneficiaries will receive an all-inclusive bundled payment, replacing the current basic 
case-mix adjusted composite payment system used for the reimbursement of separately billable 
outpatient ESRD items and services. 
 
  Page 5  CMCS Informational Bulletin 
 
On August 12, 2010,  the CMS Center for Medicare (CM) published in the Federal Register, a 
final rule entitled, End-Stage Renal Disease Prospective Payment System (75 FR 49030), 
which is available at http://www.cms.gov/ESRDPayment/.  In the final rule, CM stated its intent 
to educate State Medicaid agencies regarding their responsibilities to adjust their systems so that 
co-insurance amounts are properly determined and paid for dual eligible beneficiaries.  
 
Under the new system, ESRD-related items and services furnished to Medicare beneficiaries on 
or after January 1, 2011, are considered renal dialysis services and are included in the payment 
amount paid to ESRD facilities.  Because MIPPA redesignated these services as renal dialysis 
services, under the ESRD PPS, Medicare beneficiaries will incur a 20 percent co-insurance 
liability for the full bundle of services or the ESRD-related items and services (lab tests, 
supplies, drugs, and biologicals). 
 
The statute requires a 4-year phase-in to the ESRD PPS and ESRD facilities are permitted to 
make a one-time election to be excluded from the transition.  For ESRD facilities that do not 
elect to transition to the ESRD PPS in 2011, Medicare payment will be made as a blended 
payment of the current composite payment rate and the ESRD PPS.  The beneficiary co-
insurance liability will be 20 percent of the total ESRD PPS payment amount regardless if the 
ESRD facility will go through the transition or will be excluded from the transition. 
 
Under the ESRD PPS, on or after January 1, 2011, ESRD facilities will continue to be required 
to report to Medicare on the ESRD claim items and services that they furnish.  However, these 
line items and services will not be separately paid.  For items and services that are not renal 
dialysis services, ESRD facilities will be required to place an AY modifier to indicate that an 
item or service is not ESRD-related, in order to receive separate payment.  Items and services 
without an AY modifier are considered renal dialysis services and therefore, are included in the 
Medicare bundled payment.  States should look to the total Medicare payment, excluding any 
items or service with an AY modifier and not the line items made to the ESRD facility for renal 
dialysis services, in determining the State obligation going forward.  Questions regarding 
adjustments to Medicaid Management Information Systems (MMIS), may be directed to Robert 
Guenther of the Data and Systems Group at (410) 786-0618, or by email at 
Robert.Guenther@cms.hhs.gov.  Questions regarding ESRD PPS policies may be directed to 
Terri Deutsch at (410) 786- 9462, or by email at Terri.Deutsch@cms.hhs.gov.  
 
We hope you will find this information helpful.  Thank you for your continued commitment to 
these critical health coverage programs.