CMS Answers to Frequently Asked Questions:   
Telephonic Applications, Medicaid and CHIP Eligibility Policy and 75/25 Federal 
Matching Rate 
August 9, 2013 
 
TELEPHONE APPLICATIONS IN 2014 
 
Q1: What are the expectations for states in implementing telephonic applications as 
required by the statute at section 1413(b)(1)(A) and regulations at 42 CFR 435.907?    
 
A1: The statute and regulations require that states provide individuals several channels through 
which they can apply for Medicaid and CHIP coverage  by mail, in person, on line and over the 
telephone.  Following are some guiding principles for administering telephonic applications 
based on successful strategies many states have in place today. 
1.  Accepting a Telephonic Application:  States may develop their own processes for 
accepting and adjudicating telephonic applications. The process for accepting 
applications by phone must be designed to gather data into a sufficient format that will be 
accessible for account transfer to the appropriate insurance affordability program. For 
example, a customer service representative could verbally communicate application 
questions to the applicant, while electronically filling out the online version of the single 
streamlined application.    
2.  Voice Signatures: All applications must be signed (under penalty of perjury) in order to 
complete an eligibility determination.  In the case of telephonic applications, states must 
have a process in place to assist individuals in applying by phone and be able to accept 
telephonically recorded signatures at the time of application submission.  If applicable, 
states can maintain their current practices of audio recording and accepting voice 
signatures as required for identity proofing. 
3.  Records and Storage: Upon request, states must be able to provide individuals with a 
record of their completed application, including all information used to make the 
eligibility determination.  As such, CMS recommends that states record all telephonic 
applications. This may be accomplished by taping the complete application transaction as 
an audio file, or by producing a written transcript of the application transaction, among 
other options. The length of storage of these records should comply with current 
regulations on application storage.  
4.  Confirmations and Receipts: States should provide a confirmation receipt documenting 
the telephonic application to the applicant.   Such confirmation should be provided upon 
submission of the application or at any time the applicant wishes to end the customer 
representative interaction. Confirmation receipts can be delivered via electronic or paper 
mail (based on the applicants preference). Confirmation receipts must include key 
information for applicants, including but not limited to the application summary, the 
eligibility determination summary page, a copy of the attestations/rights and 
responsibilities and the submission date of the signed application. 
 
 
 
 
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MAGI-BASED ELIGIBILITY 
 
Q2:  How will a state determine a childs household composition when the child leaves the 
home of his/her parent(s) to live with a caretaker relative, but is still expected to be claimed 
as a tax dependent by one or both parents.   
 
A2: CMS regulations at 42 CFR 435.603(f)(2) provide that the parents would be included in the 
childs household in this situation. However, if the parents do not intend to continue to claim the 
child as a tax dependent for the following tax year, states may alternatively use the option 
provided at 435.603(h)(3) to consider the childs move to the live with another caretaker relative 
as a reasonably predictable change in income and apply the non-filer rules to the child at 
435.603(f)(3).  Under the non-filer rules, neither the parents nor the caretaker with whom the 
child is living would be included in the childs household for purposes of Medicaid and CHIP 
eligibility.   
 
Note that to be claimed  as a qualifying child, children generally must live with their parents 
for at least half of the year (certain exceptions apply), but parents may also be able to continue to 
claim a child as a qualifying relative. States are not expected to determine whether or not a 
parent is permitted to claim their child as a tax dependent or not, but states may wish to consult 
IRS Publication 501 to better understand the general requirements which must be met for a tax 
filer to claim another individual either as a qualifying child or qualifying relative.  IRS 
Publication 501 can be accessed at the following link:  http://www.irs.gov/pub/irs-pdf/p501.pdf.  
 
Q3: Is there a difference between the definition of Indian/Native American for Medicaid 
and the Exchange.  Can you clarify what the difference is? 
 
A3: For purposes of eligibility for coverage through the Marketplace, the Affordable Care Act 
defines Indians as individuals who are members of a federally recognized Indian Tribe.  The 
definition of Indian currently in use for Medicaid beneficiaries follows a broader definition that 
includes descendants of Indians and all American Indians and Alaska Natives. As a result, 
American Indians and Alaska Natives who are not members of an Indian tribe would not be 
eligible for exemptions available through an Exchange, including from individual responsibility 
payments, qualification for special monthly enrollment periods and cost-sharing reductions.   
 
Q4: What are some examples of income that is not considered taxable, and therefore 
excluded from MAGI? 
 
A4: Supplemental Security Income (SSI), Temporary Assistance to Needy Families (TANF), 
Veterans disability, Workers Compensation, child support, federal tax credits, and cash 
assistance are common types of income that are not taxable. Please see Question 5 below for 
additional details on veterans benefits.  
 
 
 
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  Q5: Will Veterans Administration (VA) benefits be counted as taxable income 
effective January 1, 2014?      
 
A5: The IRS has provided guidance on how VA benefits should be considered when calculating 
income.  As noted in IRS Publication 17, states should not count any veterans benefits paid under 
any law, regulation or administrative practice administered by the Department of Veterans 
Affairs in their income calculations. CMS agrees that VA benefits are not part of the Modified 
Adjusted Gross Income (MAGI) calculation. 
 
Following are some examples of payments issued to veterans or their families that are not 
taxable: 
  Education, training and subsistence allowances 
  Disability compensation and pensions payments for disabilities paid either to 
veterans or their families 
  Grants for homes designed for wheelchair living 
  Grants for motor vehicles for veterans who lost their sight or the use of their limbs 
  Veterans insurance proceeds and dividend paid either to veterans or their 
beneficiaries, including the proceeds of a veterans endowment policy paid before 
death 
  Interest on insurance dividends left on deposit with the VA 
  Benefits under a dependent care assistance program 
  The death gratuity paid to a survivor of a member of the Armed Forces who died 
after September 10, 2001 
  Payments made under the compensated work therapy program 
  Any bonus payment by a state or political subdivision because of service in a 
combat zone  
 
Additional information on how the IRS views veterans income can be found at 
http://www.irs.gov/pub/irs-pdf/p17.pdf. 
  
Q6: With respect to MAGI conversion, how will the 5% disregard be applied?  
 
A6: The Affordable Care Act established an income disregard equal to five percentage points of 
the FPL disregard for the purposes of determining income eligibility for individuals whose 
eligibility is based on MAGI.  In our final rule issued July 15, 2013, we provide that the 
disregard is applied to the income calculation of individuals only to the extent that the disregard 
matters for the purposes of determining eligibility for Medicaid or CHIP under MAGI-based 
rulesthat is, those for whom the application of the disregard means the difference between 
being eligible for Medicaid or CHIP and being ineligible.   
 
The disregard matters for purposes of determining Medicaid or CHIP eligibility only in cases 
where individuals have MAGI-based income that is above the highest applicable income 
standard under the program (Medicaid or CHIP), but would be within that income standard if the 
disregard were applied.  This is the case only when the MAGI-based income is no higher than 
five percent of the FPL higher than that income standard.  The disregard would not be applied for 
a determination of the particular eligibility group in which the individual qualifies, but only for 
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  overall eligibility for Medicaid or CHIP.  We understand that this policy changes how disregards 
have been applied in the past, but believe this policy should be administratively simple to apply, 
for example, by applying the disregard at the point before a decision of ineligibility based on 
income would otherwise be made.  This also ensures that the disregard does not reduce the 
newly eligible population for whom the increased federal matching rate is available.   
 
For example, in a state that extends coverage to the new adult group, if a parent applied and has 
MAGI-based income within five percentage points of the FPL above the net income standard for 
the mandatory parent/caretaker relative group, the disregard would not apply because the 
disregard would not be needed for eligibility. The parent could be made eligible in the adult 
group instead.  In that same state, if a parent applied with MAGI income within five percentage 
points of the FPL above the net income standard for the adult group (133% FPL), the five 
percent disregard would be applied to ensure that the parent could obtain eligibility in Medicaid 
and the parent would be made eligible in the adult group.   
 
 
RENEWALS IN 2014 
 
Q7: How should states handle eligibility renewals between January 1, 2014 and March 31, 
2014 in order to comply with the ACA provisions that prohibit states from terminating an 
individuals existing Medicaid eligibility prior to April 1, 2014. 
 
A7: According to section 1902(e)(14)(D)(v) of the Act, implemented at 42 CFR 435.603(a)(3), a 
person enrolled in Medicaid on or before December 31, 2013, shall not be found ineligible solely 
because of the application of MAGI and new household composition rules before March 31, 
2014, or the individuals next regular renewal date, whichever is later.  
 
States have two options regarding implementation. They can apply both pre-MAGI rules and 
MAGI rules to anyone whose renewal date falls between January 1 and March 31, 2014 as 
described below.  Alternately, states may request the waiver authority to delay renewals outlined 
in our May 17, 2013 guidance titled, Facilitating Medicaid and CHIP Enrollment and Renewal 
in 2014  (available at http://medicaid.gov/Federal-Policy-Guidance/Downloads/SHO-13-
003.pdf). 
 
The steps described below will ensure that Medicaid enrollees who come up for renewal between 
January and March 2014 are addressed appropriately. For example, for an individual who comes 
up for renewal on February 1, 2014, states need to: 
 
1.  Conduct an eligibility redetermination by applying MAGI-based methods (at the 
converted income standard).  If eligible, renew coverage for a 12-month period ending in 
February 2015. 
 
2.  If the individual is found to be ineligible under step 1, determine whether s/he remains 
eligible based on 2013 (current) methods and income standard.   If so, a finding of 
eligibility until April 1, 2014 is necessary under the 2013 methods.  Go to step 4. 
 
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  3.  If the individual is not eligible per either step 1 or 2, consider whether the individual 
might be eligible on other bases of eligibility, and pursue any possibilities.  If no other 
pathways apply, provide the individual with notice of termination and appeal rights and 
transfer their account to the Exchange (or CHIP) for eligibility determination and 
enrollment in a QHP (or CHIP).  
 
4.  On April 1, 2014, for those who remain eligible per step 2 (using 2013 methods and 
income standards), consider whether the individual qualifies on other bases of eligibility.  
If the individual does, renew eligibility until April 1, 2015.  If not, provide notice and 
appeal rights for termination effective April 1, 2014. 
 
 
PREGNANT WOMEN 
 
Q8: Is there a strategy for states to retain coverage of pregnant teens without being 
required to count parents income in 2014? 
 
A8: States wishing to continue the practice of disregarding parental income may do so by 
adopting coverage of a reasonable classification of individuals under age 21 under section 42 
CFR 435.222.  In this case, the reasonable classification would be pregnant individuals under 
age 21 (or under age 18, 19, or 20).  The statutory income standard for this group would be based 
on the states AFDC payment standard in effect in the state in July 1996.  But if a state uses 
section 1902(r)(2) of the Act to disregard all income for this group, as has been done for other 
reasonable classifications of children (such as those in state foster care), there will be no 
determination of income required for eligibility, and MAGI-based income requirements will not 
apply. 
 
To effectuate this option, states should submit a state plan amendment (SPA) to amend 
Attachment 2.2-A of the Medicaid state plan to cover a reasonable classification of pregnant 
individuals under age 21 under 42 CFR 435.222.  The state should also amend Supplement 8a to 
Attachment 2.6-A to disregard all income for this new group.   
 
 
CHIP  
 
Q10:  How does section 2001(a)(5)(B) of the Affordable Care Act impact states currently 
covering children 6-18 up to 133 percent of the FPL under a separate CHIP?  
 
A10:   Section 2001(a)(5)(B) of the Affordable Care Act (implemented through regulations for 
the Medicaid program at 435.118) increased the minimum income limit applicable to Medicaid 
eligibility for the mandatory group for poverty-level related children aged 6-18 from 100 to 133 
percent of the FPL under section 1902(a)(10)(A)(i)(VII)  of the Act.  Therefore, if a state is 
currently covering uninsured children up to 133 percent of the FPL under a separate CHIP, these 
children must be transitioned to the Medicaid state plan under this childrens group effective 
January 1, 2014.  CMS is available to work with states individually on their transition plans for 
this population. 
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Q11:  Are these children who are being transferred from CHIP to the Medicaid state plan 
considered optional targeted low-income children under section 1902(a)(10)(A)(ii)(XIV) of 
the Act? 
 
A11:  No.  For the purposes of eligibility, these children are considered a mandatory Medicaid 
group for poverty-level related children under section 1902(a)(10)(A)(i)(VII) of the Act.  As 
described below, states will continue to receive the CHIP matching rate for this population.   
 
Q12:  Will new applicants/children ages 6-18 with incomes between 100 and 133 percent of 
the FPL with other health insurance qualify for coverage under the Medicaid state plan? 
 
A12:  Yes.  Under the Medicaid mandatory group for poverty-level related children under 
section 1902(a)(10)(A)(i)(VII) of the Act, insured children must be covered in addition to 
uninsured children (please also see applicable match rate questions below).  This is different 
from the rules governing a separate CHIP program, which preclude coverage for insured 
children.   
 
Q13:  Does 2001(a)(5)(B) of the Affordable Care Act impact children eligible in a separate 
or Medicaid expansion that are currently covered at income levels above 133 percent of the 
FPL? 
 
A13:  No.  States continue to have the option to cover children above 133 percent of the FPL 
either under a Medicaid expansion or separate program.  States must maintain CHIP eligibility 
standards, methodologies, and procedures for children that are no more restrictive than those in 
effect on March 23, 2010 as specified under the maintenance of effort provision at 2105(d)(3) 
of the Act.  A parallel requirement in Medicaid can be found at sections 1902(a)(74) and 
1902(gg) of the Act.  These provisions are effective through September 30, 2019.   
 
 
 
Q14:  Will states continue to receive the CHIP enhanced FMAP for children currently 
enrolled in a separate CHIP up to 133 percent of the FPL after the transition to coverage of 
these children under the Medicaid mandatory group for poverty-level related children? ?  
A14: Yes.  The CHIP enhanced FMAP will continue to be available for children whose income 
is greater than the Medicaid applicable income level (defined in  457.301 and based on the 1997 
Medicaid income standard for children) after these children transition to Medicaid.  This includes 
children who previously qualified for CHIP in a separate program and uninsured children whose 
family incomes are up to 133 percent of the Federal poverty level, and therefore will be eligible 
for Medicaid in 2014.  Regular Medicaid matching rates will apply for all other children covered 
under the mandatory group for children aged 6-18children with income no more than 100 
percent FPL and insured children with income above 100 percent to 133 percent FPL. 
 
Q15:  Will a Medicaid and/or CHIP SPA be necessary for this transition?   
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A15:  Yes.  States that are transitioning children from a separate CHIP to the Medicaid state plan 
under the mandatory group for poverty-level related children under section 
1902(a)(10)(A)(i)(VII) of the Act (which will be part of the newly consolidated mandatory group 
for children at 42 CFR 435.118), will need to submit both a Medicaid and CHIP SPA.  The 
Medicaid SPA will need to be approved prior to, or simultaneously with, the CHIP SPA.   
 
In addition, states that currently cover  uninsured children aged 6-18 with income above 100 
percent to 133 percent FPL under the Medicaid eligibility group for optional targeted low-
income children at section 1902(a)(10)(A)(ii)(XIV) of the Act (42 CFR 435.229) will need  a 
Medicaid SPA to transition these children to the mandatory group for poverty-level related 
children under section 1902(a)(10)(A)(i)(VII) of the Act under the mandatory childrens 
consolidated group at 42 CFR 435.118 and must expand their coverage to include insured 
children. 
 
The SPA templates are available at   http://www.medicaid.gov/State-Resource-Center/Medicaid-
and-CHIP-Program-Portal/Medicaid-and-CHIP-Program-Portal.html and CMS is available to 
provide technical assistance to states as they work through this transition. 
 
Q16:  What are the key considerations for states preparing for this transition from CHIP 
to Medicaid?   
 
A16:  In order to ensure a smooth transition of children from a separate CHIP to Medicaid state 
plan coverage, we encourage states to consider the following points as they prepare for this 
transition.  CMS will work with states on these issues as part of the CHIP SPA review process: 
 
  Proper and timely notification to families, including detailed information on changes 
related to managed care plans, providers, benefits and cost sharing and what families can 
expect and need to do in preparation for the transition.   
  Education and notification to key stakeholders, including providers, managed care plans, 
and carve outs, such as mental health or dental services.   
  Establishment of a help line to address questions from families during the transition. 
  Continuity of care for children in treatment, such as the transfer of prior authorization 
requests from CHIP to Medicaid providers.  
 
Q17: Are states permitted to continue to cover children protected by section 2101(f) of the 
Affordable Care Act (ACA) in Medicaid? 
 
A17: Yes.  While coverage of children protected by 2101(f) is mandated through a separate 
CHIP, states may instead continue to provide coverage of these children in the states Medicaid 
program, thereby eliminating the need to provide coverage in a separate CHIP in accordance 
with section 2101(f).     
 
If a state chooses this option, children in the state would not lose Medicaid eligibility due to the 
elimination of disregards under the new modified adjusted gross income (MAGI) based 
methodologies.  A Medicaid SPA could cover such children as an optional reasonable 
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  classification of children under 42 CFR 435.222, with a disregard of all income (so that there 
would be no required determination of income).   
 
The state will need to accurately identify the population of children who otherwise would lose 
Medicaid eligibility effective January 1, 2014 due to the elimination of income disregards as the 
new optional reasonable classification of children covered under this group.  Children covered 
under this classification would remain categorically eligible based on their enrollment in 
Medicaid on December 31, 2013.   
 
In order to limit the protection afforded under this strategy to the same timeframe as the 
protection which otherwise would be afforded to each affected child under a separate CHIP, the 
state may define this group as children who would lose Medicaid eligibility on the initial 
redetermination of income using MAGI-based income determination due to the elimination of 
income disregards.  The classification would thus not include individuals whose income is 
being redetermined after that time.  This would be parallel to the treatment of this population in a 
separate CHIP, as automatically eligible in CHIP only when initially losing Medicaid eligibility.   
 
For SPA page S52 for optional reasonable classifications of children that will be submitted for 
Medicaid state plan eligibility in 2014, the state should enter information for this new reasonable 
classification of children, just like it will enter information for any other reasonable classification 
covered by the state.  The state would define this reasonable classification using the approved 
state plan language and would enter that no income test is used for this classification because 
there was no income test (i.e., all income was disregarded) in 2013. 
 
In addition, once the Medicaid SPA has been approved, interested states should also submit a 
CHIP SPA (CS14) and check the first option indicating that:  The state has received approval 
from CMS to maintain Medicaid eligibility for children who would otherwise be subject to 
Section 2101(f) such that no child in the state will be subject to this provision.  
 
A state interested in covering children protected by section 2101(f) of the ACA should indicate 
its interest to CMS on its next State Operations and Technical Assistance (SOTA) call. 
 
 
75/25 FFP FOR ELIGIBILITY SYSTEMS 
 
Q18:  Is a level of care assessment eligible for the 75% match? 
 
A18:  No.  The 75%/25% matching rate for eligibility systems is limited by the statute to 
activities directly related to an eligibility determination.  A level of care assessment is not 
directly related to the eligibility determination.  Although the assessment itself is not eligible for 
the 75% match, the entry of the level of care result into the eligibility system may be matched at 
75%.   
 
Q19:  Is a disability determination eligible for the 75% match? 
 
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  A19:  No.  A disability determination is not directly related to the eligibility determination, even 
though the outcome of that determination may be used to identify the appropriate eligibility 
group, financial methodology and the benefits that will be available to the individual.  The 
eligibility group, financial methodology and benefits are based on the state plan, not on the 
eligibility system.   Although the disability determination itself is not eligible for the 75% match, 
the entry of the disability information into the eligibility system may be matched at 75%.  This 
analysis is based on the SMM Sec. 11276.7 B, which discusses prior authorization and claims 
processing.  The prior authorization itself is not eligible for the 75% match, however the program 
decision, based on that prior authorization, to pay or not pay a claim that is pending in the system 
is eligible for the 75% match. 
 
Q20:  Are application assisters, navigators and out-stationed eligibility workers eligible for 
the 75% match? 
 
Q20: Individuals who assist applicants by facilitating their applications, who perform outreach 
activities, or who enter application data on behalf of the applicant are not eligible for the 75% 
match.  Only individuals who are authorized by the single state agency to enter data other than 
application elements into the eligibility system, who have responsibility for evaluating data in 
order to make an eligibility determination, who are authorized to exercise discretion in the 
evaluation of data, who are authorized to make an eligibility determination and who are 
accountable to the single state agency for such determinations are eligible the 75% match for 
those activities.  This includes eligibility workers, whether in house or out-stationed, as long as 
there is a formal, written agreement with the single state agency that authorizes their eligibility 
activities and specifies direct lines of accountability to the single state agency.  Both intake 
workers and on-going eligibility workers who meet these requirements may be claimed at 75%, 
based on appropriate cost allocations. 
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