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:  September 10, 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 a summary of recent activities and guidance to the 
States over the past several weeks.  CMS has published two final regulations that affect State 
Medicaid and CHIP programs  the HITECH and PERM final rules -- and released five policy 
and operational guidance letters to State Medicaid and CHIP Directors.  In addition, we provided 
information regarding the extension of the increase in the Medicaid Federal Medical Assistance 
Percentage (FMAP) that was recently enacted.  A description of each item is below:  
 
  Extending Hospice Care for Children.  Released on September 9, 2010, this letter 
provides guidance to States on the implementation of section 2302 of the Affordable Care 
Act, entitled Concurrent Care for Children.  Section 2302 amends sections 1905(o)(1) 
and 2110(a)(23) of the Social Security Act to assure that children can receive curative 
treatment upon the election of the hospice benefit for children enrolled in Medicaid or 
CHIP. 
   
Hospice services are an optional benefit under Medicaid for adults, but are a required 
service under the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) 
provision for children. This rule also applies to CHIP programs administered as Medicaid 
expansions.  In separate CHIP programs, hospice care is an optional service.  In order to 
qualify for the hospice service in either Medicaid or CHIP, a physician must certify that 
the eligible person is within the last 6 months of life.   
 
The Affordable Care Act does not change the criteria for receiving hospice services, but 
by making these new services available to families, this new provision ensures that 
children will receive hospice services, such as pain and symptom management and family 
counseling provided by specially-trained hospice staff, without forgoing any other service 
covered by Medicaid or CHIP for treatment of the terminal condition. This change will 
improve access to hospice services and supports for children and their families without 
having to forgo curative treatment.   
   
  Page 2  CMCS Informational Bulletin 
 
  Connecting Kids to Coverage Challenge.  On September 3, 2010 Secretary Sebelius 
and Secretary of Education, Arne Duncan formally launched the Connecting Kids to 
Coverage Challenge in an event in Washington, DC that also featured the release of a 
new report by the Urban Institute in the journal Health Affairs. The article can be 
accessed at http://content.healthaffairs.org/cgi/reprint/hlthaff.2010.0747v2. The report 
includes new State-by-State estimates of Medicaid and CHIP participation rates among 
eligible children and data regarding the number of children nationally that are eligible but 
are not enrolled.  The HHS InsureKidsNow website includes a State-by-State map that 
details each States participation rate -- see 
http://www.insurekidsnow.gov/facts/index.html. 
 
In addition, Health Affairs released a Commentary by Secretary Sebelius discussing the 
Challenge and several strategies States and community organizations can pursue to 
further promote childrens coverage.  The Commentary is available at 
http://content.healthaffairs.org/cgi/reprint/hlthaff.2010.0852v1 
 
Finally, the event also featured three videos highlighting activities that have taken place 
over the past several weeks in Rhode Island, Oregon and Iowa.  The videos are available 
on the HHS Insure Kids Now website at  
http://www.insurekidsnow.gov/professionals/campaigns/Connecting%20Kids%20Challe
nge/organizations.html#videos 
 
States and other partners that want to learn more about the Challenge may contact Donna 
Cohen Ross at donna.cohenross@cms.hhs.gov or (202) 260-0509.  
 
  Change in Average Manufacturer Price Definition.  On September 3, 2010, CMS 
published The Medicaid Program: Withdrawal of Determination of Average 
Manufacturer Price, Multiple Source Drug Definition, and Upper Limits for Multiple 
Source Drugs (CMS-2238-P2).  The regulation text is available on the Federal Registers 
Website at: http://edocket.access.gpo.gov/2010/pdf/2010-22115.pdf 
 
  National Correct Coding Initiative.  On September 1, 2010 we issued the first in a 
series of guidance on section 6507 of the Affordable Care Act, regarding the mandatory 
State use of the National Correct Coding Initiative (NCCI). NCCI is a tool to help States 
guard against improper payment of claims.  The Affordable Care Act required CMS to 
take specific action by September 1, 2010 to: 1) notify States of NCCI methodologies 
that are compatible with claims filed with Medicaid; 2) notify States of the NCCI 
methodologies that should be incorporated for claims filed with Medicaid for which no 
national correct coding methodology has been established for Medicare; and 3) inform 
States as to how they must incorporate these methodologies for Medicaid claims filed on 
or after October 1, 2010.   
 
   
  Page 3  CMCS Informational Bulletin 
 
In this guidance CMS advised States that five NCCI methodologies currently in place in 
Medicare are compatible methodologies for claims filed in Medicaid.  States are now able 
to begin the process of editing claims against NCCI methodologies, promote correct 
coding, protect against improper coding, work to reduce the payment error rate, and 
potentially accrue savings for Medicaid programs nationwide.  The letter can be accessed 
at http://www.cms.gov/smdl/downloads/SMD10017.pdf 
 
  PERM Final Rule  On August 11, 2010, CMS issued the final regulation to fully 
implement improvements to the Payment Error Rate Measurement (PERM) program for 
Medicaid and the Childrens Health Insurance Program (CHIP) (75 FR 48816).  The final 
regulation implements changes to the PERM program required by the Childrens Health 
Insurance Program Reauthorization Act (CHIPRA) of 2009 and makes other operational 
changes to the PERM program based on stakeholder feedback. The rule changes the 
process for reviewing cases in which States have used simplified enrollment efforts such 
as self-declaration of income; eliminates duplication of effort between the Medicaid 
Eligibility Quality Control (MEQC) eligibility reviews and PERM eligibility reviews 
when a State is included in the PERM cycle; extends the timeframe for providers to 
submit documentation; and provides States additional time to submit corrective action 
plans. The regulation can be accessed at: http://www.gpo.gov/fdsys/pkg/FR-2010-08-
11/pdf/2010-18582.pdf  
 
  PERM Guidance  On August 20, CMS announced the release of two letters regarding 
operational changes to the Payment Error Rate Measurement (PERM) program The first 
letter addressed changes to PERM that were included in the Childrens Health Insurance 
Program Reauthorization Act (CHIPRA) of 2009.  Under Section 601 of CHIPRA, States 
measured for fiscal year (FY) 2007 or FY 2008 may elect to accept any CHIP PERM 
error rate determined in whole or in part for the State on the basis of data for the fiscal 
year for which they were measured (FY 2007 or FY 2008) as their base year.  In addition, 
they may elect to consider the CHIP PERM measurement conducted for FY 2010 or FY 
2011 as the first FY for which PERM applies to the State.   
 
The second letter, also released on August 20, provides operational guidance addressing 
two of five findings from the HHS Office of the Inspector General Medicaid PERM 
audits for FYs 2006 and 2007.  The two audit findings address: (1) information security 
requirements; and (2) re-pricing claims.  The letter also provides guidance regarding a 
third finding relating to reconciliation of State universe data to CMS financial report.  
This reconciliation process is also addressed in the PERM final regulations referenced 
above.   
 
  FMAP Extension.  On August 18, CMCS released a set of guidance materials related to 
the passage of the Education, Jobs and Medicaid Assistance Act (P.L. 111-226) which 
was signed into law on August 10, 2010. Among other things, the legislation extends the 
increased Medicaid Federal medical assistance percentage (FMAP) under Section 5001 
of ARRA through June 30, 2011. As a condition of receiving these additional Federal 
funds for the extension period of January 1, 2011 through June 30, 2011, the Chief  
 
  Page 4  CMCS Informational Bulletin 
 
Executive Officer of the State must submit a request for those funds within 45 days 
of enactment, or by September 24, 2010.    
 
We released a letter template that Governors may use in making their request for these 
funds and urge States to submit this letter as soon as possible to ensure that the 
certification is received in advance of the September deadline.  All of the materials can be 
accessed at: http://www.cms.gov/apps/docs/08-18-10-cmcs-informational-bulletin-
FMAP-Extension-Guidance.pdf 
 
 
  HITECH Guidance.  Released on August 17, 2010, this letter provides extensive 
guidance to State Medicaid agencies regarding use of the 90/10 administrative matching 
funds for the implementation of section 4201 of the American Recovery and 
Reinvestment Act (ARRA) of 2009.  It follows the issuance of the final regulations in 
July at 42 CFR Part 495, Subpart D which allow the payment of incentives to eligible 
professionals (EPs) and eligible hospitals to promote the adoption and meaningful use of 
certified electronic health record (EHR) technology.   
 
The Recovery Act provides 100 percent Federal financial participation (FFP) to States for 
incentive payments to eligible Medicaid providers to adopt, implement, upgrade, and 
meaningfully use certified EHR technology, and 90 percent FFP for State administrative 
expenses related to the program.  In order to qualify for the 90 percent FFP administrative 
match, a State must, at a minimum, demonstrate to the satisfaction of the Secretary 
compliance with requirements related to Administration, Oversight, and encouraging 
adoption of HER technologies.  This letter and the accompanying enclosures provided 
more detailed guidance about CMSs expectations relating to the activities and potential 
uses of the 90/10 matching funds.  The letter is available at 
http://www.cms.gov/smdl/downloads/SMD10016.pdf 
 
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