DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
February 20, 1998  
Dear State Medicaid Director:  
This letter is one in a series that provides guidance on the implementation of the Balanced 
Budget Act of 1997 (BBA). The BBA contains numerous provisions relating specifically to 
managed care. In order to provide guidance on these as quickly as possible, we are issuing a 
number of managed care letters. (List of those already issued is attached). This letter is the 
twelfth in this managed care series.  
The purpose of this letter is to advise you of the changes made by the BBA regarding coverage 
of emergency services by managed care organizations (MCOs). Section 4704 of the BBA added 
section 1932(b)(2) to the Social Security Act (the Act) to assure Medicaid managed care 
beneficiaries have the right to immediately obtain emergency care and services.  
Under the new statutory provision, each contract with an MCO must require the organization to 
provide for coverage of emergency services. (For PCCMs, see Application to PCCMs, below.) 
We interpret coverage to mean that an MCO must pay for the cost of emergency services 
obtained by Medicaid enrollees. In addition to establishing an obligation to cover emergency 
services, the law further stipulates that emergency services must be covered without regard to 
prior authorization or the emergency care provider's contractual relationship with the 
organization. These provisions collectively enable a Medicaid enrollee to immediately obtain 
emergency services at the nearest provider when and where the need arises. The responsibility of 
MCOs regarding the coverage of emergency services is explained in more detail in the 
attachment.  
Emergency services are defined broadly by the BBA to mean covered inpatient and outpatient 
services that are needed to evaluate or stabilize an emergency medical condition that is found to 
exist using a prudent layperson standard described below. The services must also be furnished by 
a provider that is qualified to furnish such services under Medicaid. Once the individual's 
condition is considered stabilized, the MCO may require authorization for hospital admission or 
follow-up care.  
The BBA defines emergency medical condition as a medical condition manifesting itself by 
acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, who 
possesses an average knowledge of health and medicine, could reasonably expect the absence of 
immediate medical attention to result in placing the health of the individual (or with respect to a 
pregnant woman, the health of the woman or her unborn child) in serious jeopardy, serious 
impairment to body functions or serious dysfunction of any bodily organ or part. While this 
standard encompasses clinical emergencies, it also clearly requires MCOs to base coverage 
decisions for emergency services on the severity of the symptoms at the time of presentation and 
to cover examinations where the presenting symptoms are of sufficient severity to constitute an 
emergency medical condition in the judgment of a prudent layperson.  
In addition to covering medical services that are needed to evaluate or stabilize an emergency  medical condition found using a prudent layperson standard, the contract must require the MCO 
to comply with the guidelines for coordinating post-stabilization care established under Medicare 
Part C. This particular requirement is effective 30 days after the date Medicare regulations are 
promulgated.  
Application to PCCMs  The prudent layperson standard should be applied to determine when 
Medicaid beneficiaries in a PCCM may immediately seek treatment without having to obtain 
prior authorization from the PCCM. However, we realize that the financial structure of PCCMs 
is significantly different from that of MCOs and we do not believe Congress intended to make 
PCCMs financially responsible for emergency services furnished on a fee-for-service basis. 
Therefore, HCFA will not require changes to PCCM contracts to provide for payment of 
emergency services.  
Sanctions  Medicaid MCOs that fail to cover emergency screening or stabilization services may 
be subject to intermediate sanctions or termination. Section 1932(e) of the Act authorizes States 
to use intermediate sanctions if an MCO fails substantially to provide medically necessary items 
and services that are required (under law or under the organization's contract with the State) to be 
provided to an enrollee covered under the contract. HCFA may also impose sanctions under 
1903(m)(5)(A) of the Act if the failure to cover emergency services as required under 1932(b)(2) 
of the Act adversely affects (or has a substantial likelihood of adversely affecting) a Medicaid 
beneficiary. Contract termination may also be imposed for any violation of the requirements in 
sections 1903(m) and/or 1932 of the Act.  
If you have any questions, please contact Rob Weaver at 410-786-5914.  
Sincerely,  
/s/  
Sally K. Richardson  Director   
Center for Medicaid and State Operations  
Attachments  
cc:  HCFA Regional Administrators   
HCFA Associate Regional Administrators   
HCFA Press Office   
Jennifer Baxendell, National Governors Association   
Lee Partridge, American Public Welfare Association   
Joy Wilson, National Conference of State Legislatures  
   CLARIFICATION OF BENEFICIARY ACCESS AND MCO FINANCIAL  
RESPONSIBILITIES FOR EMERGENCY SERVICES    
MCO Responsibility -- Beneficiary Information -- MCOs are required to inform beneficiaries 
of their rights and responsibilities and information on covered items and services. Plans should 
inform beneficiaries of the following regarding their rights of access to, and coverage of, 
emergency services, both inside and outside of the plan's network.  
Both In-Network and Out-of-Network Emergency Services Are Medicaid-Covered 
Benefits   
Definition of Emergency Services -- Emergency services are defined as covered inpatient and 
outpatient services furnished by a qualified Medicaid provider that are necessary to evaluate or 
stabilize an emergency medical condition.  
Definition of Emergency Medical Condition -- Coverage of emergency services by an MCO will 
be determined under the prudent layperson standard. That standard considers the symptoms 
(including severe pain) of the presenting beneficiary. MCOs must cover cases where the 
presenting symptoms are of sufficient severity that a person with average knowledge of health 
and medicine would reasonably expect the absence of immediate medical attention to result in (i) 
placing their health or the health of an unborn child in immediate jeopardy, (ii) serious 
impairment of bodily functions, or (iii) serious dysfunction of any bodily organ or part.  
Prohibition on Retrospective Denial for Services Which Appeared to Be Emergencies -- MCOs 
may not retroactively deny a claim for an emergency screening examination because the 
condition, which appeared to be an emergency medical condition under the prudent layperson 
standard (as defined above), turned out to be non-emergency in nature.  
Prohibition on Prior Authorization for Emergency Services--MCOs may not require prior 
authorization for emergency services. This applies to out-of-network as well as to in-network 
services which a beneficiary seeks in an emergency.  
MCO Responsibility--Payment Liability and Coverage of Emergency services -- Under the 
Emergency Medical Treatment and Active Labor Act, also commonly referred to as the anti-
dumping statute, Medicare participating hospitals that offer emergency services are required to 
perform a medical screening examination on all people who come to the hospital seeking 
emergency care, regardless of their insurance status or other personal characteristics. If an 
emergency medical condition is found to exist, the hospital must provide whatever treatment is 
necessary to stabilize that condition. A hospital may not transfer a patient in unstabilized 
emergency condition to another facility unless the medical benefits of the transfer outweigh the 
risks, and the transfer conforms with all applicable requirements. When emergency services are 
provided to an enrollee of a MCO, the organizations's liability for payment is determined as 
follows:  
Presence of a Clinical Emergency -- If the screening examination leads to a clinical 
determination by the examining physician that an actual emergency medical condition 
exists, MCOs must pay for both the services involved in the screening examination and 
the services required to stabilize the patient.   
  
Emergency Services Continue Until the Patient Can be Safely Discharged or Transferred --  MCOs are required to pay for all emergency services which are medically necessary until the 
clinical emergency is stabilized. This includes all treatment that may be necessary to assure, 
within reasonable medical probability, that no material deterioration of the patient's condition is 
likely to result from, or occur during, discharge of the patient or transfer of the patient to another 
facility.  
If there is a disagreement between a hospital and an MCO concerning whether the patient is 
stable enough for discharge or transfer, or whether the medical benefits of an unstabilized 
transfer outweigh the risks, the judgment of the attending physician(s) actually caring for the 
beneficiary at the treating facility prevails and is binding on the MCO. The MCO may establish 
arrangements with hospitals whereby the MCO may send one of its own physicians with 
appropriate ER privileges to assume the attending physician's responsibilities to stabilize, treat, 
and transfer the patient.  
Absence of a Clinical Emergency -- If the screening examination leads to a clinical 
determination by the examining physician that an actual emergency medical condition does not 
exist, then the determining factor for payment liability should be whether the beneficiary had 
acute symptoms of sufficient severity at the time of presentation. In these cases, the MCO must 
review the presenting symptoms of a beneficiary and must pay for all services involved in the 
screening examination where the presenting symptoms (including severe pain) were of sufficient 
severity to have warranted emergency attention under the prudent layperson standard. If a 
Medicaid beneficiary believes that a claim for emergency services has been inappropriately 
denied by an MCO, the beneficiary may seek recourse through the MCO or State appeal process.  
Referrals -- When a beneficiary's primary care physician or other plan representative instructs the 
beneficiary to seek emergency care in-network or out-of-network, the plan is responsible for 
payment for the medical screening examination and for other medically necessary emergency 
services, without regard to whether the patient meets the prudent layperson standard described 
above.  
  
BBA MANAGED CARE STATE LETTERS   
Section Subject Date Issued  
4701 SPA Option for Managed Care 12/17/97  
4704(a) Specification of Benefits 12/17/97  
4707(a) Marketing Restrictions 12/30/97  
4704(a) Miscellaneous Managed Care Provisions 12/30/97 4704(b) 4706 4707(a) 4707(c) 
4708(b) 4708(c) 4708(d)  
4701 Choice, MCE Definition, Repeal of 75/25, 1/14/98 4703 and Approval Threshold 4708(a)  
4705 External Quality Review 1/20/98  
4704(a) Mental Health Parity 1/20/98  
4701(a) Enrollment, Termination, and 1/21/98 Default Assignment  
4702 PCCM Services Without Waiver 1/21/98  
4707(a) Sanctions for Noncompliance 2/20/98  
4701(a) Provision of Information & Effective Dates 2/20/98 4710(a)