DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid, CHIP, and Survey & Certification 
                  SMDL# 10-012 
                  ACA#    3 
 
June 22, 2010 
 
RE:  Extension of the Money Follows the Person 
Rebalancing Demonstration Program  
 
Dear State Medicaid Director: 
 
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care 
Act (the Affordable Care Act), Pub. L. No. 111-148.  This landmark legislation includes several 
provisions addressing the needs of people living with disabilities and elderly individuals who 
require long-term care, including the extension of the Money Follows the Person Rebalancing 
(MFP) Demonstration Program for an additional 5 years (the funding was scheduled to expire at 
the end of FY 2011).  The extension of the MFP Demonstration Program through 2016 offers 
States substantial resources and additional program flexibilities to remove barriers and improve 
peoples access to community supports and independent living arrangements.  
 
This letter provides background about the MFP Demonstration Program, explains improvements 
made by the Affordable Care Act, details how the Affordable Care Act will impact current MFP 
grantees, and provides preliminary information for non-participating States that may be 
interested in pursuing new funding.  As discussed in our letter of May 20, 2010, the MFP 
Demonstration Program is an important tool States can use to make greater progress in achieving 
the promise of the ADA and Olmstead.  That letter is available at 
http://www.cms.gov/smdl/downloads/SMD10008.pdf 
 
Background 
 
The MFP Rebalancing Demonstration Program provides assistance to States to balance their 
long-term care systems and help Medicaid enrollees transition from institutions to the 
community.  The MFP Demonstration Program, authorized by Congress in section 6071 of the 
Deficit Reduction Act of 2005 (DRA), is designed to help States shift Medicaids long-term care 
spending from institutional care to home- and community-based services (HCBS).  Congress 
initially authorized up to $1.75 billion in Federal funds through fiscal year (FY) 2011 to:  
 
1)  Increase the use of HCBS and reduce the use of institutionally-based services;  
2)  Eliminate barriers and mechanisms in State law, State Medicaid plans, or State budgets that 
prevent or restrict the flexible use of Medicaid funds to enable Medicaid-eligible individuals 
to receive long-term care in the settings of their choice;  
3)  Strengthen the ability of Medicaid programs to assure continued provision of HCBS to those 
individuals who choose to transition from institutions; and,  
4)  Ensure that procedures are in place to provide quality assurance and continuous quality 
improvement of HCBS.    Page 2  State Medicaid Director  
 
The MFP Demonstration Program offers an enhanced Federal Medical Assistance Percentage 
(FMAP), as well as significant financial resources, to support the administration of the 
demonstration and implementation of broader infrastructure investments.  These investments 
include initiatives such as: creating systems for performance improvement and quality assurance, 
developing housing initiatives, supporting staff for key transition activities, improving the direct 
care workforce, and building no wrong door access to care systems.   
 
Currently, twenty-nine States and the District of Columbia have implemented MFP 
Demonstration Programs.  After a pre-implementation period, States began actively transitioning 
individuals into community settings in the spring of 2008.  Since the beginning of calendar year 
2009, the number of participants transitioning has increased as solutions to barriers were 
identified and significant technical assistance is continuing to be provided to help States meet 
transition benchmarks they set.  As of December 2009, almost 6,000 individuals have returned to 
the community as a result of these demonstrations. 
 
Advantages to Participating States 
 
This section reviews some of the benefits to States of participating in the MFP Demonstration 
Program, including opportunities to develop unique home and community-based demonstration 
services to help individuals make the transition from institutional care to quality, person-centered 
services in the home: 
 
Enhanced FMAP:  The MFP Demonstration Program provides an enhanced FMAP rate for 
qualified services, which include HCBS services and demonstration services.  This rate is equal 
to taking the published FMAP for a State, subtracting it from 100 percent, and dividing the total 
by half, and adding that percentage to the published FMAP.  As an example, a State that 
normally has a 50 percent FMAP will have a 75 percent FMAP under MFP.  The enhanced MFP 
FMAP cannot exceed 90 percent.  The enhanced rate is available for qualified services provided 
to an MFP participant for 365 days after transition from an institution.  
 
Increased FMAP through December 31, 2010:  The American Recovery and Reinvestment Act 
of 2009 (Recovery Act) provides States an increased FMAP from October 1, 2008 through 
December 31, 2010.  CMS will use the applicable Recovery Act increased FMAP as the base 
from which to calculate States MFP-enhanced FMAP rate each quarter during this period, 
subject to a 90 percent cap.  To illustrate, if a States regular FMAP rate is 50 percent, and is 62 
percent under the Recovery Act, then the MFP enhanced rate would be 81 percent (rather than 75 
percent, as in the example above).  The resulting enhanced MFP FMAP rate cannot exceed 90 
percent. 
 
National Technical Assistance (TA):  CMS has contracted with experts in the long-term care 
field to assist grantees, at no cost to the State, by providing the support and expertise necessary 
to enable the States to work through problems and barriers to implementation.  The TA 
providers, along with support from the CMS Project Officers and Regional Office Analysts, are 
available to ensure success. 
HCBS and Demonstration Services:  HCBS and demonstration services are reimbursed at the 
enhanced MFP FMAP.  Qualified HCBS services are HCBS waiver services that will continue  Page 3  State Medicaid Director  
 
once the MFP Demonstration Program has ended.  Demonstration services are services that can 
be covered under Medicaid and that will only be billed to grant funding during an individuals 
12-month transition period.  After the demonstration period, the State is not obligated to continue 
the demonstration services, but may choose to fund them through Medicaid for eligible 
individuals, or through other funding streams. 
 
Supplemental Services:  Reimbursement is provided for services that will only be available for 
the MFP Demonstration Program period and are not covered by Medicaid.  These services are 
reimbursed at the States published FMAP (which includes the increased FMAP during the 
Recovery Act period). 
 
Full Reimbursement for Specific Administrative Costs:  Reimbursement associated with the 
operation of the MFP grant may be provided after the submission, review, and approval of the 
grant applications Operational Protocol.  Examples of eligible reimbursable items that may be 
considered in a State applications Operational Protocols are: key personnel; MFP travel, 
training, outreach and marketing; IT infrastructure to accommodate the MFP reporting 
requirements; and completing the Quality of Life survey requirements.  
 
The Affordable Care Act 
 
Section 2403 of the Affordable Care Act (ACA), titled Money Follows the Person Rebalancing 
Demonstration, provides an opportunity for those States that are presently participating in the 
program to continue building and strengthening their MFP Demonstration Programs and for 
additional States to participate.  The law amends section 6071 of the DRA to make the following 
changes: 
 
1)  Extends the MFP Demonstration Program through September 30, 2016, and appropriates an 
additional $450 million for each FY 2012-2016, totaling an additional $2.25 billion.  Any 
remaining MFP appropriation at the end of each FY carries over to subsequent FYs and is 
available to make grant awards to current and new grantees until FY 2016.  Grant awards 
shall be made available to the State for the FY in which the award was received and for 
additional FYs.  As such, any unused portion of a State grant award made in 2016 would be 
available to the State until 2020. 
 
2)  Expands the definition of who may be eligible for the demonstration.  Under the DRA, only 
those individuals who resided in a qualified institution for more than 6 months were eligible 
to participate in the MFP Demonstration Program.  For these individuals, the increased 
FMAP to the State for HCBS is available up to 365 days after the individual transitions from 
an institution to the community. 
 
Under the Affordable Care Act, individuals that reside in an institution for more than 90 
consecutive days are now eligible to participate in the demonstration.  However, one 
exception applies in the expanded definition of eligibility:  days that an individual was 
residing in the institution for the sole purpose of receiving short-term rehabilitation services 
that are reimbursed under Medicare are excluded and will not be counted toward the 90-day 
required period.  On May 17, 2010, CMS issued additional policy guidance to existing  Page 4  State Medicaid Director  
 
grantees regarding the criteria, detailed in the grant solicitation, that should be used to 
determine the applicability of the new 90-day exclusion. 
 
3)  Additional funding is provided through 2016 for the National MFP Evaluation.  The 
Affordable Care Act extends the DRA provision that a maximum of $1.1 million per year 
shall be available for research and evaluation purposes and is part of the $2.25 billion total 
noted above. 
 
What This Means for Current Grantees 
The current MFP Demonstration Programs will experience a seamless transition into the next 5 
years of the Demonstration authorized under the Affordable Care Act.  CMS will not require 
currently participating States to compete again through a new solicitation process.  States will 
only need to submit a written request to the CMS Grants Office in the summer of 2011 for 
continued participation in the MFP grant program.  All current MFP grantees may continue to 
operate their programs within their approved Operational Protocols, and, in response to annual 
budget requests, CMS will make supplemental grant awards through 2016.  However, given the 
program extension, additional funding, and added program flexibility provided by the Affordable 
Care Act, we expect and encourage current grantees to explore immediately  in consultation 
with CMS  opportunities to modify, extend, and expand their existing programs.   
 
MFP Grants May Be Awarded to States Not Currently Participating  
 
CMS will post a grant solicitation in late July to www.grants.gov to offer States not currently 
participating the opportunity to apply for an MFP Demonstration Program Grant through a 
competitive award process.  Early in the solicitation process, CMS will provide States with 
specifications for developing the grant application.  Assistance to interested States will be 
provided via State/applicant calls and Webinar briefings.  If awarded a grant, the States 
application will become the Operational Protocol for program implementation, enabling the State 
to begin transitioning individuals soon after the award.  After the posting to www.grants.gov, 
States will have 120 days to develop and submit the MFP application.   
 
Extension of the MFP Demonstration Program and funding is an important outcome of the 
Affordable Care Act for thousands of persons living with disabilities and elderly individuals who 
are unable to secure the support they need to achieve their choice of community living.  For 
participating States, the extension of the program with additional funding is an opportunity for 
States to continue to expand MFP Demonstration Programs and to make significant progress in 
rebalancing their long-term care systems.  For those States now eligible to apply for a new MFP 
Rebalancing Demonstration Program, it is a unique opportunity to give many individuals, now 
living in institutions across this nation, the choice to live and receive long-term care services in 
their homes and communities.   
    Page 5  State Medicaid Director  
 
 
We hope you will find this information helpful.  Questions regarding the MFP Demonstration 
Program may be directed to Ms. Barbara Edwards, Director, Disabled and Elderly Health 
Programs Group at 410-786-7089. 
 
Sincerely, 
 
/s/ 
 
Cindy Mann 
Director 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Ann C. Kohler 
NASMD Executive Director 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christine Evans, M.P.H. 
Director, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy