DEPARTMENT OF HEALTH  & HUMAN SERVICES  
Centers for Medicare & Medicaid Services  
7500 Security Boulevard,  Mail  Stop S2-26-12  
Baltimore, Maryland    21244-1850   CENTERS FOR MEDICARE & MEDICAID SERVICES 
  CENTER FOR MEDICAID & CHIP SERVICES 
CMCS Informational Bulletin  
 
DATE:   Augu st 17, 2022 
FROM:  Daniel Tsai, Deputy Administrator and D  irector 
Center for Medicaid and CHIP Services 
       
SUBJECT:   Applicable Federal Cost Principles for Ground Emergency Medical Transportation 
 
(GEMT) 
 
 
Backgr ound           
           
CMS  is issuing this  informational  bulletin to  remind states of exist ing federal requirements relevant to 
payment for GEMT services in Medicaid to assist them in developing state plan amendments (SPAs) and 
 
other proposals that are consistent with such federal requirements. 
         
 
Comprehensive Cost Reconciliatio n Methods in the Med icaid State Plan     
   
Section 1902(a)(30)(A) of the Social Security  Act (the Act) requires Medicaid state plan s to provide for  
methods and procedures relating to the utilization of, and payment for, Medicaid-covered service s as may 
be necessary to safeguard against unne cessary utilization and to assure that payments are consistent wi th 
efficiency,  econ omy, and  quality of care.  Further, state paym ent rates or m ethodologies must b e 
s ufficient to enlist enough providers so that care and services are available under the plan at least to the 
extent that such  care and services are available to the  general population in the ge ographic area.   
     
While states use a variety of pa yment met hodologi es for Medicaid transpo rtation services, this bulletin  
specifically concerns state proposals to make Medicaid payments to GEMT providers up to  the al lowable 
and  incurred cost of providing eme rgency medical transp ortation services to M edicaid beneficiari es.  In   
order to be approved, as requ ired b y regulations at 4 2 C.F.R  430.10 and  44 7.201, a SPA must contain 
all information nece ssary  for CMS to determine whether it c an be a pproved to serve as  a basis for federal 
financial participation (FFP) in the states Medicaid pro gram and req uires that a sta te p lan describe the 
policy and metho ds to be used to set payment rates for each type of serv ice included in the States 
Me dicai d program.  Accordingly, for an allowable cos t identification methodology that includes a n 
interim payment methodology with cost reconciliation, a p ayme nt SPA m ust  comprehensively describe   
the cost identification a nd reconciliation methodology that will be used to determin e payments to  
providers, where applicable.   Such a GEMT pa yment S PA must describe: the interim rate that will be 
paid to providers during the cost reporting period; t he allowab le direct and indi rect cost associa ted with   
furnishing  Medicaid-co vered GEMT services; the cost identification and allocation  processes used to 
determine the portion of provider costs claimed for Medicaid payment; and the procedures and timing for 
 
cost report completion and submission, and cost reconciliation with the providers. 
   
 
The states cost identification procedures and associated state-developed cost report templates and 
instructions must be consistent with federal cost allocation regulations under 2 C.F.R.  200 and 45  CMCS Informational Bulletin    Page 2  
 
C.F.R.   75.1   CMS reviews the states cost report  template and instructions prior  to approving proposed
SPAs to ensure that  they are consistent with the applicable federal cost  regulations; however,  it is 
incumbent upon states to ensure that reported costs and associated  claims for  FFP  are accurate and 
represent only costs associated with  the provision of  Medicaid-covered services.   Costs  that are claimed 
improperly may be subject  to financial reviews and/or  audit findings and place states at  financial risk of 
liability to repay the federal share of  any identified  overpayments. 
 
Use of Certified Public Expenditures  to Support  GEMT  Payment Proposals  
 
Section 1903(w)(6)(A)  of  the Act  allows state and local units of government to fund the non-federal share 
of Medicaid payments through a certified public expenditure (CPE) process.   Medicaid payments that  are 
funded through CPEs must be accompanied by an approved state plan  cost  identification  methodology in 
which a  unit of  government  certifies its  incurred costs  for  furnishing  Medicaid-covered  services.  As 
discussed above, states  that rely on cost  reconciliation  methodologies  to pay for  Medicaid-covered  
services must do so using federal cost principles  to identify and allocate  eligible  service costs to the 
Medicaid program.  
 
Past  GEMT SPAs  have  proposed funding  additional Medicaid payments through a CPE process  using  a 
cost  reconciliation methodology to pay  units of  local government for  costs incurred  in furnishing  GEMT  
services.   In reviewing these  proposals, CMS has  identified  potential issues  with  the scope of the costs 
that states have proposed as  potentially  allocable to Medicaid-covered  GEMT  services  and the methods of  
allocation states have proposed to apportion GEMT costs for purposes of claiming  Medicaid  FFP.   Cost  
identification and allocation methodologies  should not  shift costs to the Medicaid program that are not  
related to a Medicaid-covered  service, such as GEMT,  or allocate costs to  Medicaid without using an  
appropriate  allocation statistic to  identify the portion of GEMT  costs eligible  for  Medicaid payment.  
 
Costs such  as fire and rescue personnel and equipment  are generally not directly or indirectly related to  
Medicaid covered services.   As  such, cost  identification  methodologies that inappropriately  allocate  costs 
associated with  fire  and rescue personnel and equipment to the Medicaid program  potentially  would be 
unallowable under the federal cost  allocation requirements.   For example,  if  state  or local law  requires  
that both a  fire truck  and an  ambulance  be dispatched to emergency scenes to  transport  a potential patient,  
even though the ambulance will be  the only vehicle that participates  in the  transport  of  the  Medicaid  
beneficiaries  to a  facility  for treatment, h  only costs incurred in the provision of  a  Medicaid-covered  
service may be allocated to  Medicaid.   See  45 C.F.R.  75.405, specifying that [a] cost  is  allocable to a 
particular Federal award or  other cost objective if  the goods or services involved are chargeable or  
assignable to that  Federal  award or cost objective in accordance with  relative benefits received.   As  
relevant to GEMT, such costs are those  associated with the  personnel, vehicle, and equipment used to  
transport  a beneficiary to  a facility for treatment.    Similarly, costs associated with other emergency  
response personnel, vehicles, and equipment that are not involved in the provision of a  Medicaid-covered  
service,  such  as police and their  vehicles and  equipment,  should not  be  included in GEMT cost  
identification and allocation  methodologies  for Medicaid payment and potentially would be unallowable.  
For example, costs associated with fire and rescue personnel who do not provide  Medicaid covered 
services to Medicaid  beneficiaries on  the scene of an emergency but who are present during the  
emergency as required by state law or  local code would potentially be unallowable.  However, all 
                                                           
1  Certain specific federal regulations related to cost identification and cost allocation  processes  are detailed in the 
appendix to this informational bulletin.   CMCS Informational Bulletin    Page 3  
 
personnel who meet  applicable Medicaid provider qualifications  (such as  Medicaid-participating, licensed  
or  certified  emergency  medical technicians) and provide  Medicaid  -covered  services at an  emergency site  
to beneficiaries  may be included in the GEMT cost  allocations, provided   the unit  of government can  
properly identify the  portion of costs properly allocable to  the providers furnishing of  Medicaid-covered  
services  (as opposed to conducting other duties or functions that  do not constitute  a Medicaid-covered  
service)  and allocate that  portion of  costs  to the Medicaid  program.  
 
CMS encourages states to  look to the current federal cost allocation  regulations  to appropriately and 
accurately define and  allocate costs to the relevant Medicaid cost  objectives, which are  costs  incurred for  
the purpose of delivering allowable Medicaid services to Medicaid beneficiaries.   For example, there have 
been proposals  that attempted  to define fire and rescue costs that  appear unrelated  to Medicaid GEMT as 
shared direct costs  or  indirect  costs.  However, as  described below, shared  direct  cost  is not  defined 
as a category of  allowable costs  for  purposes  of federal claiming  under  applicable federal  regulations  in  
45 C.F.R.  75 subpart E,  and indirect cost is specifically defined  in regulation  in 45 C.F.R.  75.2  as 
benefitting more than one  cost  objective, and not  readily assignable to the  cost objectives specifically  
benefitted[.]  For Medicaid  GEMT  services, the cost  objective is the transportation of a Medicaid  
beneficiary  to a facility to  receive emergently needed  medical care; general  fire and rescue activities  
would not be  expected to benefit this objective.  In the case of  the costs associated with  fire and rescue 
personnel  who are not Medicaid-participating  providers performing  covered  services  and their vehicles 
and equipment, those costs are readily assignable to the fire and rescue cost objectives rather  than  to the  
Medicaid  objective of furnishing  GEMT services and  are not directly or indirectly attributable to  a 
Medicaid-covered service  furnished to a  beneficiary.  
 
Further, the  Medicaid assurance of transportation at 42 C.F.R.   431.53 and the  defined transportation 
benefit at  42 C.F.R. 440.170(a)  define the transportation, specifically, of a beneficiary.  This  is  also 
referred  to as loaded mileage or the time during which a beneficiary is traveling  in a transportation  
providers vehicle.2   There are no  Medicaid benefits which specifically cover  the transportation of a 
provider to a beneficiary.  That  is a  cost to the provider.  In addition, the definition of reasonable  cost  in 
45 C.F.R.   75.404  states that  a  cost is reasonable  if, in its nature and amount, it  does not exceed that  
which would be incurred by a prudent person  under the circumstances prevailing  at the time the decision  
was made to incur the cost.   Likewise, Medicare, in the Principles of Reasonable Cost  in 42 C.F.R. Part  
413 defines Apportionment of Allowable Cost using the principles  identified in 42 C.F.R.  413.50 which  
says: (a) Consistent with  prevailing practice in which  third-party organizations pay for health care on a  
cost basis, reimbursement  under the Medicare program involves a determination of  - (1) Each provider's  
allowable costs for producing services; and  (2)  The share of these costs which  is to be borne by  
Medicare.  Within the context of  the  provision of a  Medicaid-covered  transportation service requiring  
the presence of  a Medicaid  beneficiary, it would not be reasonable  to recognize the cost  of  any and all  
methods of  transportation a provider may  employ  to reach a beneficiarys location  in order to provide  a  
service.  
 
To properly allocate  GEMT costs to the Medicaid program, states must rely on data that appropriately  
apportion costs to the  Medicaid  GEMT  cost objective, then  allocate only those GEMT  costs to the  
Medicaid program  according to  the program's share of  the provider's total  services, that is, in proportion 
to the benefit to  the  Medicaid program of the providers activities.  Federal regulations  in 42 C.F.R.  
431.107(b) require  that [a]  State plan must provide for an agreement between the Medicaid agency and  
each provider or  organization furnishing services  under the plan in which the provider or organization 
                                                           
2  https://www.cms.gov/medicare-medicaid-coordination/fraud-prevention/medicaid-integrity-
education/downloads/nemt-booklet.pdf   CMCS Informational Bulletin    Page 4  
 
agrees to:   (1) Keep  any records necessary to disclose the extent of  services the provider furnishes to  
beneficiaries; (2) On request, furnish to the Medicaid agency, the Secretary, or  the State Medicaid fraud  
control  unit (if  such a unit  has been approved by the Secretary under  455.300 of  this chapter), any  
information maintained under paragraph (b)(1) of  this section and any information regarding payments  
claimed by the provider for furnishing services under  the plan[.]   CMS has  advised states to use such 
relevant documentation in  assigning  costs to  Medicaid  for cost-based payment  methodologies.   For  
instance, localities that operate GEMT providers and wish  to claim  payment from insurers, including  
Medicaid  payment,  must  gather  claims data by payer status for all  individuals who receive GEMT  
services from  the locality-operated provider  during  the cost reporting  period.  
 
Conclusion  
 
States are encouraged  to  request technical assistance from CMS on GEMT cost allocation  to ensure that  
proposed or  approved programs meet  the  policy requirements  described within this bulletin.   To the  extent  
states have approved  state plan  language describing  shared direct  costs,  states should review  those costs 
to ensure they are consistent with the applicable federal cost  principles, are direct  or indirect costs  of  
furnishing  Medicaid-covered  services,  and are  properly  allocated to Medicaid.  Based on the similarities  
of recent  proposals submitted to CMS by states, we are concerned that  there are significant  
misunderstandings  regarding the applicable federal  cost allocation  regulations and  that these 
misunderstandings may result  in  impermissible cost-shifting to Medicaid and potential  adverse financial  
findings for states.  CMS is available to assist states in  determining appropriate cost allocation  
methodologies  to ensure claims for FFP  are  accurate  and appropriate.  
 
For technical assistance, please contact Andrew Badaracco,  Acting  Director of  the Division of  
Reimbursement Policy  at  Andrew.Badaracco@cms.hhs.gov.    CMCS Informational Bulletin    Page 5  
 
Appendix  
 
Federal Citation   Transportation-Related Examples  
Allocation (45 C.F.R.  75.2)  - the process of assigning  a  For GEMT,  this means allocating  (or assigning)  
cost, or  a group of costs, to one or more cost objective(s),  transportation costs to the transportation cost objective, and 
in reasonable proportion to the benefit provided or other   other costs to other cost  objectives.  For  example, a 
equitable relationship.   qualified EMT/paramedics salary and benefits could be 
assigned to the transportation cost  objective, while fire  
fighters  who do not provide Medicaid-covered services  
would be assigned to the fire departments cost objective.    
Direct Cost  - 45 C.F.R.  75.413(a)  defines direct  costs  These are costs specifically related to the actual  
as those costs that can be identified specifically with a  transportation of a beneficiary to medical care, or provision 
particular final cost  objective,  such as a Federal award, or   of another Medicaid-covered service.  
other internally or  externally funded activity, or that  can be    
directly assigned to  such  activities relatively easily with a   Examples of direct costs  for transportation could include:   
high degree of accuracy.  Costs incurred  for  the same   Salary of the ambulance personnel 
purpose in like circumstances must be treated consistently    Transport vehicle expenses (including depreciated capital 
as either direct or  indirect (facilities &  administration)   expenses) 
costs.    Transport vehicle fuel expenses 
 
Any costs that are directly related to the provision of  the  
Medicaid-covered service would be a direct cost for cost  
reporting purposes.  A  cost  may not be defined as  
indirect for one purpose  and direct  for another.  
Additionally, applicable  federal regulations do not identify  
shared direct costs; costs are either direct or indirect  to a 
cost  objective for purposes of cost  identification.  See 45  
C.F.R.  75.2 (definition of Final cost objective). 
Direct Cost Allocation  - 45 C.F.R.  75.405(d)  elaborates  In instances where some direct  costs might serve more than  
on the direct cost  allocation processes by specifying, if a   one cost objective (e.g., the salary of an ambulance driver  
cost  benefits two or more projects or  activities in   whom the locality also employs as a fire truck driver), the 
proportions that  can be determined without undue effort  or   state must propose a process by which these costs 
cost,  the cost must be allocated  to  the projects based  on the  reasonably can be allocated to the two distinct cost  
proportional benefit.  If a cost benefits  two or more projects   objectives (i.e.,  Medicaid GEMT, and  fire and rescue).  
or activities in proportions  that cannot be  determined   
because of the interrelationship of  the work involved, then,  To  allocate these costs, states may use source 
notwithstanding  paragraph (c)  of this  section, the costs  may   documentation including time studies, trip logs, and/or  
be allocated or transferred to benefitted projects on any   worker logs.  
reasonable documented basis.   Where the purchase of    
equipment or other capital  asset is specifically authorized   Once the cost is allocated to  the Medicaid transportation  
under  a Federal award,  the costs are assignable to the  cost  objective, the remaining cost must be allocated  to  the 
Federal  award  regardless of the use that may be made of   other cost objective(s).  
the equipment or other capital  asset  involved when no    
longer needed for the purpose for which it was originally   A state or local law  that requires a fire truck to accompany  
required.   the ambulance on a call does not  authorize the  fire truck  or 
fire fighters to be  considered an allowable Medicaid 
service,  and such costs not otherwise attributable to  a 
Medicaid-covered service may not be allocated  to  
Medicaid.   CMCS Informational Bulletin    Page 6  
 
Federal Citation   Transportation-Related Examples  
Indirect (facilities &  administrative (F&A)) costs (45   Some of the providers  overhead expenses related to the  
C.F.R.  75.2;  see also   75.414)  means those costs operations and management  of the transportation activities.  
incurred for a  common or  joint  purpose benefitting more   
than one cost  objective, and not readily assignable to the Examples  of indirect costs could include:  
cost  objectives specifically benefitted, without effort   Administrative  support staff, 
disproportionate to the results achieved.  Indirect  cost pools   Rent, 
must be distributed to benefitted cost objectives on bases   Heating and cooling of  an office space,  
that will produce an  equitable result in consideration of the   Non-service provider supervisory salaries.  
benefits derived.   
Costs that serves multiple cost objectives and  cannot be 
readily assigned  to a particular cost objective without 
undue effort can be considered an indirect cost.  
Indirect Cost Rate   States have options  for  determining the allocation of  
  indirect costs, using the  following procedures:  
Appendix VII to Part 75 - States and Local Government    
and Indian Tribe Indirect Cost Proposals3      Develop an allocation of  indirect costs  to the  total direct
cost  using a methodology approved by CMS. 4  
 Use an approved federally-recognized indirect  cost rate 
negotiated between the subrecipient  and  the Federal 
Government. 
 Use a rate negotiated between the pass-through entity (in
this case,  the state Medicaid agency) and the subrecipient 
of the federal grant award  (in this case, the GEMT 
provider), in compliance with 42 C.F.R.  75.352. 
 Use a de minimis  indirect cost  rate as provided in 
75.414(f). 
 
Once the states and/or provider elects the method of  
indirect cost finding, the selected indirect cost  rate is 
multiplied by the total direct cost amount to determine the  
allowable indirect cost.  
 
                                                           
3  Appendix VII to Part  75 - https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-A/part-75/appendix-
Appendix%20VII%20to%20Part%2075   
4  One such  methodology is described in the Certified Community Behavioral Health Clinic Cost Report  
Instructions (OMB #0398-1148) published on December 14, 2015, Chapter 7.   
https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ccbhc-cost-report-instruction.pdf