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   
                    SMD #10-020  
October 1, 2010 
Re: Revised State Plan Amendment Review Process 
Dear State Medicaid Director: 
Dear State Health Official: 
 
The Centers for Medicare & Medicaid Services (CMS) is issuing this letter to inform you of 
changes CMS is making in the State plan amendment (SPA) review process.  These changes are 
being made to implement a more efficient process for the review of proposed modifications to 
the State Medicaid plan. 
 
Background 
 
Federal statute and regulations require CMS to review and approve SPAs for consistency with 
the requirements of Section 1902(a) of the Social Security Act (the Act) before a State may 
implement Medicaid program modifications.  SPAs are generally transmitted to CMS as pages 
excerpted from the existing approved State plan containing the provisions that the State wishes to 
modify.  CMS reviews the proposed specific amendment and all other provisions contained on 
the submitted State plan page(s).  In addition, CMS reviews any related or corresponding State 
plan provisions contained elsewhere in the State plan that are integral to understanding the pages 
submitted.  This review process may lead to the identification of existing State plan provisions 
that the State is not proposing to modify and that are not integral to the proposed SPA 
modifications but that appear to be contrary to Federal statute, regulations, or established 
guidance.  In the past, the review process has required that any issue identified during the review 
of a SPA must be resolved in order to take action on the submitted SPA.  In some instances, this 
practice has resulted in a delay in the States authority to promptly implement the program 
change for which the amendment was originally submitted.   
 
Recognizing States need to advance modifications to their Medicaid programs, CMS has 
consulted with States and identified a process that will expedite the review of SPAs while 
ensuring that CMS and States resolve other questions that may arise.  As described in detail 
below, States will now have the option to resolve issues related to State plan provisions that are 
not integral to the SPA through a separate process. 
    Page 2  State Medicaid Directors and State Health Officials 
 
New Procedures for SPA Processing 
 
CMS has a continuing obligation to review all provisions of a State plan amendment for 
compliance with Federal statute and regulations State plans, including those on submitted pages 
and corresponding provisions contained within the existing approved State plan.  However, CMS 
will no longer require States to resolve those issues that may arise in the course of the review of 
the submitted SPA  but are not integral to the provision modified by the SPA  prior to taking 
action on the submitted SPA.  Instead, CMS will follow the procedure described below. 
 
  In the event that CMS identifies potentially non-compliant State plan provisions, we will 
discuss those provisions with the State during the initial stages of the SPA review.  The State 
will have the option to resolve all issues during the review of the submitted SPA or to focus 
solely on the provision modified by the SPA, and resolve issues unrelated to the actual SPA 
change through a separate process.   
 
  If the State chooses a separate process to resolve issues unrelated to the modifications 
proposed in the submitted SPA, and if CMS needs additional information relating to the SPA, 
a request for additional information (RAI) will be issued.  The RAI will include only those 
questions or requests for information that are applicable to the SPA submitted.  The SPA will 
not be delayed, but the decision letter communicating the disposition of the SPA will note 
that additional issues are being reviewed through a separate process.  
 
  CMS will describe the specific issues and/or questions related to those provisions that are not 
addressed in the context of the SPA review, but are problematic, in a letter to the State 
Medicaid Director on or before the date of ultimate SPA disposition.  In doing so, CMS will 
identify the statutory or regulatory provision or guidance pertaining to the issue identified.  
We will not pursue matters that are not based on statute, regulations, or generally available 
guidance.  Within 90 days from the date of the letter, States should provide information that 
explains why the provision is consistent with Federal statute, regulation, and existing 
guidance, or should submit to CMS a SPA which will bring the State plan into compliance.  
During this time, CMS will provide technical assistance and respond to questions from the 
State.   
 
  CMS may initiate formal compliance action as described in 42 CFR 430.35 at any time.  
However, CMS will ordinarily delay taking action pending the discussions with the State 
through the process described above, and may delay taking action if the State demonstrates 
good faith actions to come into compliance (for example, when there are implementation or 
State authority issues that must be resolved).  As always, the formal compliance process 
offers States formal appeal rights through an established hearing process.   
 
 
 
  Page 3  State Medicaid Directors and State Health Officials 
 
To further explain how this new process will work and to promote consistent application of the 
new policy, we have enclosed several examples in which the review of issues related to the State 
plan can be divorced from changes proposed in the submitted SPA.  The examples are based on 
actual State plan issues we have faced and are intended to clarify how we envision this new 
process.   
 
We hope you will find this information helpful.  We believe this new approach will resolve many 
SPA processing issues and allow SPAs to be approved more quickly.  We will also be taking this 
new approach in our review of SPAs related to the Childrens Health Insurance Program (CHIP). 
We are committed to working with States to ensure that CMS carries out its responsibilities in 
ways that advance States ability to carry out their responsibilities.   
If you have any additional questions, please contact Ms. Dianne Heffron, Director, Financial 
Management Group, who may be reached at 410-786-3247. 
 
Sincerely, 
 
/s/ 
 
Cindy Mann  
Director 
 
Enclosure 
 
cc: 
 
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
Richard Fenton 
Acting Director 
Health Services Division  
American Public Human Services Association  
 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
 
Matt Salo  
Director of Health Legislation  
National Governors Association  
 
  Page 4 -- State Medicaid Directors and State Health Officials 
 
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  
Page 3  State Medicaid Directors and State Health Officials 
 
Carol Steckel 
President 
National Association of Medicaid Directors 
 
Alan R. Weil, J.D., M.P.P.  
Executive Director  
National Academy for State Health Policy 
    Page 5  State Medicaid Directors and State Health Officials 
 
Enclosure 
 
IMPLEMENTATION OF NEW SPA REVIEW PROCESS  EXAMPLES 
 
The following examples represent common situations that have arisen during the review of SPAs 
in recent years.  They are intended to provide a general overview of the review process described 
in the enclosed letter and to give examples of issues that are, and are not, considered integral to a 
SPA.  The examples are not all-inclusive but are meant to give States concrete examples based 
on actual SPA review scenarios, and to ensure consistent implementation of the new procedures. 
 
SECTION I Proposed SPA Can Be Approved Before Resolution of Other Identified Issues 
 
Example 1:  A State submits a new, stand-alone reimbursement page describing a general rate 
reduction (or increase) for a number of different services.  The submitted page may, or may not, 
specifically identify the services subject to the rate adjustment. 
  
CMS Review Process -  The new, stand-alone reimbursement page must list each of the specific 
services subject to the rate adjustment(s) and include the location (page numbers) in the State 
plan of the related reimbursement methodologies so that the proposed amendments can be cross-
walked to the existing State plan provisions.  If this information is not included, the SPA must be 
amended to include this information. 
 
The underlying methodologies and related coverage provisions for the affected services will be 
reviewed.  If CMS has questions regarding content on the related pages, e.g., existing 
reimbursement methodologies or coverage provisions for the affected services, these issues can 
be resolved through the separate process described in this letter. 
 
Example 2:  A State submits a 4.19B reimbursement page to modify the reimbursement 
methodology for psychologists.  The existing methodology provides reimbursement to 
psychologists at 100 percent of the States physician fee schedule.  The amendment reduces 
reimbursement for psychologist services to 80 percent of the physician fee. 
 
CMS reviews the coverage provisions for psychologist services.  CMS also reviews the coverage 
provisions for physician services and the existing State plan language that describes the 
physician reimbursement methodology.  The existing physician reimbursement language in the 
State plan does not include the effective date of the physician fee schedule. 
  
CMS Review Process - CMS can approve the reimbursement language for the psychologist 
services even though an effective date of the physician fee schedule is not included in the State 
plan language  describing the reimbursement methodology for psychologist services.  CMS will 
resolve the effective date issue in the State plan's physician reimbursement methodology (the fee 
schedule) through the separate process described in this letter. 
 
  Page 6  State Medicaid Directors and State Health Officials 
 
Example 3:  A State submits a SPA to amend coverage of nurse practitioner services.  As part of 
the review, CMS examines the nurse practitioner reimbursement methodology.  CMS discovers 
that the existing nurse practitioner reimbursement methodology is not comprehensive because it 
lacks the effective date of the fee schedule. 
 
CMS Review Process - CMS will take action on the merits of the coverage amendment in the 
submitted SPA.  The related issue concerning the reimbursement methodology will be addressed 
through the separate process discussed in this letter. 
 
Example 4:  A State submits a SPA to remove coverage of dentures from the State plan. 
Rehabilitative services are described on the same page as the deleted denture service description.  
The SPA does not define the rehabilitative services nor does it identify the providers of those 
services. 
 
CMS Review Process - CMS can approve the SPA to remove dentures as a covered service 
based on its own merits.  CMS will address issues with the rehabilitative services coverage and 
reimbursement through the separate process described in this letter. 
 
Example 5:  A State submits a SPA for a new inpatient supplemental payment.  In response to 
the Standard Funding Questions in the RAI, CMS identifies a possibly unacceptable provider 
assessment that is the funding source for another supplemental payment identified on the 
submitted SPA page.  
CMS Review Process - CMS will take action on the SPA based on the merits of the new 
supplemental payment.  The issues identified concerning the other supplemental payment will be 
addressed through the separate process described in this letter.  
Example 6:  A State submits a SPA that changes one of the drug classes listed in its excluded 
drug coverage.  CMS reviews all of the other excluded drug categories listed in the approved 
State plan and finds several non-drug items that are included on the list. 
  
CMS Review Process - CMS will take action on the submitted SPA based on its own merits.  
The additional non-drug items included on the list will be addressed through the separate process 
described in this letter.  
 
 
 
    Page 7  State Medicaid Directors and State Health Officials 
 
SECTION II  Proposed SPA Language Must be Modified Before Approval 
 
Example 1:  A State submits a coverage SPA eliminating adult dental services.  This SPA 
requires tribal consultation because it will reduce benefits for eligible Indians and also will 
reduce reimbursements to Indian health providers that provide these services to eligible Indians.  
The State did not consult with the federally-recognized Tribes and Indian health providers prior 
to submission of the SPA. 
CMS Review Process - CMS cannot approve the SPA until the required tribal consultation has 
occurred.  To approve the SPA without the required consultation would violate Executive Order 
13175 and the sec. 1902(a)(73)  consultation requirements, as added by the Recovery Act. 
Example 2:  A State submits a SPA to modify coverage of chiropractic services.  There is no 
reimbursement methodology in the approved State plan for chiropractic services. 
CMS Review Process - CMS cannot approve this SPA until the State submits a reimbursement 
methodology.  The State would have no authority to request Federal financial participation (FFP) 
for expenditures associated with chiropractic services without a reimbursement methodology in 
the State plan. 
Example 3:  A State submits a SPA to modify the reimbursement methodology for nurse 
practitioners.  During the review process, CMS discovers that the approved State plan does not 
provide for coverage of nurse practitioners. 
CMS Review Process - CMS cannot approve the reimbursement SPA until the State submits a 
State plan page authorizing the coverage of nurse practitioner services.  States cannot claim FFP 
for expenditures for services that are not covered in the approved State plan. 
Example 4:  A State submits a SPA to increase fee schedule payments by 10 percent for a 
specific provider type.  Neither the existing nor the newly submitted State plan language 
describing the reimbursement methodology includes the effective date of the fee schedule. 
CMS Review Process  Because the State plan language that describes the reimbursement 
methodology for the specific service under review would not be considered a comprehensive 
reimbursement methodology, CMS cannot approve the SPA until the effective date of the fee 
schedule is included in the State plan language. 
Example 5:  A State submits a SPA to reimburse for services provided in schools.  There is no 
comprehensive description of the reimbursement methodology in the State plan for these 
services; the methodology in the SPA states only that reimbursement is based on cost and is 
funded with certified public expenditures.  The SPA contains only a brief description of the types 
of costs that will be certified. 
 
CMS Review Process - CMS cannot approve the SPA until the States cost-identification 
methodologies have been reviewed and determined to be appropriate for Medicaid certification.  
Because the funding of the payment is based on costs incurred by a political subdivision eligible   Page 8  State Medicaid Directors and State Health Officials 
 
for participation in the funding of the Medicaid program, CMS must ascertain that the costs 
being matched are appropriately identified and allocated to the Medicaid program. 
 
Example 6:  A State submits a SPA to extend to additional Rural Health Centers (RHC) an 
existing Alternative Payment Methodology (APM) which recognizes hospital deliveries as an 
RHC service.  Payment to RHCs for hospital deliveries is inconsistent with Federal regulatory 
requirements because a hospital delivery is not considered an RHC service.  Therefore, the SPA 
cannot be approved.  Upon learning this, the State withdraws the SPA. 
  
CMS Review Process - CMS may pursue a compliance action with respect to the existing 
problematic reimbursement methodology following the process described in 42 CFR 430.35.