21950 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 433 

[CMS–2346–F] 

RIN 0938–AQ53 

Medicaid Program; Federal Funding for 

Medicaid Eligibility Determination and 

Enrollment Activities 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will revise 

Medicaid regulations for Mechanized 

Claims Processing and Information 

Retrieval Systems. We are also 

modifying our regulations so that the 

enhanced Federal financial 

participation (FFP) is available for 

design, development and installation or 

enhancement of eligibility 

determination systems until December 

31, 2015. This final rule also imposes 

certain defined standards and 

conditions in terms of timeliness, 

accuracy, efficiency, and integrity for 

mechanized claims processing and 

information retrieval systems in order to 

receive enhanced FFP. 

DATES: Effective Date: These regulations 

are effective on April 19, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Richard Friedman, (410) 786–4451. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Current State of the Medicaid 

Management Information System 

(MMIS) 

A Medicaid management information 

system (MMIS) is a mechanized system 

of claims processing and information 

retrieval used in State Medicaid 

programs under title XIX of the Social 

Security Act (the Act). The system is 

used to process Medicaid claims from 

providers and to retrieve and produce 

utilization data and management 

information about medical care and 

services furnished to Medicaid 

recipients. The system also is 

potentially eligible to receive enhanced 

administrative funding from the Federal 

government under section 1903(a)(3) of 

the Act. Specifically, section 

1903(a)(3)(A)(i) of the Act provides that 

Federal financial participation (FFP) is 

available at 90 percent of expenditures 

for the design, development, or 

installation of mechanized claims 

processing and information retrieval 

systems as the ‘‘Secretary determines are 

likely to provide more efficient, 

economical and effective administration 

of the plan and to be compatible with 

the claims processing and information 

retrieval systems utilized in the 

administration of title XVIII [Medicare].’’ 

In addition, section 1903(a)(3)(B) of the 

Act provides for the availability of FFP 

at 75 percent of expenditures 

attributable to operating the ‘‘systems 

* * * of the type described in [section 

1903(a)(3)] subparagraph (A)(i),’’ which 

are approved by the Secretary and meet 

certain other requirements (including 

requirements relating to explanations of 

benefits). For purposes of this final rule, 

we refer to 90 percent and 75 percent 

FFP as ‘‘enhanced’’ FFP since it is 

greater than the 50 percent FFP 

available for most Medicaid 

administrative expenses. In addition, 

section 1903(r) of the Act places 

conditions on a State’s ability to receive 

Federal funding for automated data 

systems in the administration of the 

State plan. 

To receive an enhanced match, the 

Secretary must find that the mechanized 

claims and information retrieval system 

is adequate to provide more efficient, 

economical, and effective 

administration of the State plan. The 

Patient Protection and Affordable Care 

Act of 2010 (Pub. L. 111–148, enacted 

on March 23, 2010), as amended by the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted on March 30, 2010) 

(collectively referred to as the 

Affordable Care Act) also made 

additional changes to the requirements 

within section 1903(r) of the Act 

relating to the reporting of data to the 

Secretary; guidance on these 

requirements will be issued in a 

separate rulemaking document. Our 

Federal regulations concerning 

mechanized claims processing and 

information retrieval systems are at 42 

CFR part 433, subpart C. A State that 

chooses to develop, enhance, or replace 

its required system or subsystems must 

first submit for approval an Advanced 

Planning Document (APD). The general 

Health and Human Services (HHS) 

requirements for approval of APDs are 

found at 45 CFR part 95, subpart F. 

B. Availability of Enhanced FFP for 

Automated Eligibility Systems 

Historically, Medicaid eligibility for 

many applicants and recipients was 

determined by an agency other than the 

State Medicaid agency. Under section 

1902(a)(10)(A)(i) of the Act, States were 

required to provide Medicaid to 

recipients under the Aid to Families 

with Dependent Children (AFDC) 

program, as well as recipients of the 

Supplemental Security Income (SSI) 

program. In these cases, eligibility 

determinations were derived from the 

cash welfare-assistance determination. 

As a result, States that maintained a 

Medicaid eligibility determination 

system usually integrated these systems 

into the public welfare systems. In the 

October 13, 1989 Federal Register (54 

FR 41966, effective November 13, 1989), 

we published a final rule excluding 

eligibility determination systems from 

the enhanced funding that was available 

under section 1903(a)(3) of the Act, 

reasoning that the close 

interrelationship between these cash 

assistance programs and Medicaid 

eligibility rendered such enhanced 

assistance redundant and unnecessary 

(54 FR 41966 through 41974). As a 

result, we revised the definition of 

mechanized claims processing and 

information retrieval systems to exclude 

eligibility determination systems. 

We also indicated in the 1989 final 

rule that to receive any FFP for 

Medicaid purposes for an eligibility 

determination system after November 

13, 1989, a State must submit an APD 

for funding in accordance with the 

requirements of 45 CFR Part 95, Subpart 

F. If we approved the APD, the State 

agency would receive 50 percent FFP 

for administrative costs under section 

1903(a)(7) of the Act for the system’s 

design, development, and installation, 

and operation. 

C. Changes in Medicaid Eligibility 

Policies 

Since we issued the October 13, 1989 

final rule, a series of statutory changes 

have dramatically affected eligibility for 

Medicaid and how Medicaid eligibility 

is determined. Among other things, new 

eligibility coverage groups were created 

and expanded, and in 1996, Medicaid 

eligibility was ‘‘de-linked’’ from the 

receipt of cash assistance when the 

AFDC program was replaced by the 

Temporary Assistance to Needy 

Families (Pub. L. 104–193, enacted on 

August 22, 1996) (TANF) program 

created by the Personal Responsibility 

and Work Opportunity Reconciliation 

Act (PRWORA) (Pub. L. 104–193, 

enacted on August 22, 1996). 

With the passage of the Balanced 

Budget Act of 1997 (Pub. L. 105–33, 

enacted on August 5, 1997) (BBA), 

States were required to coordinate 

eligibility for and enrollment in 

Medicaid with the new Children’s 

Health Insurance Program (CHIP) to 

ensure enrollment of children in the 

appropriate program. With passage of 

the ‘‘Express Lane Eligibility’’ provisions 

in section 203 of the Children’s Health 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21951 

Insurance Program Reauthorization Act 

of 2009 (Pub. L. 111–3) (CHIPRA), States 

were provided with the option, and are 

encouraged, to coordinate and expedite 

eligibility for children in Medicaid and 

CHIP by using findings regarding 

income and other eligibility criteria 

made by other agencies, such as the 

Supplemental Nutrition Assistance 

Program (SNAP), as the basis for 

Medicaid and CHIP eligibility 

adjudications. 

With the passage of the Affordable 

Care Act, we expect that changes to 

Medicaid eligibility policies and 

business processes need to be adopted. 

States will need to apply new rules to 

adjudicate eligibility for the program; 

enroll millions of newly eligible 

individuals through multiple channels; 

renew eligibility for existing enrollees; 

operate seamlessly with newly 

authorized Health Insurance Exchanges 

(see section 1311 of the Affordable Care 

Act) whether run by the State or the 

U.S. Department of Health and Human 

Services (HHS) if the State chooses not 

to operate a State Exchange (hereafter 

referred to as ‘‘Exchanges’’); participate 

in a system to verify information from 

applicants electronically; incorporate a 

streamlined application used to apply 

for multiple sources of coverage and 

health insurance assistance; and 

produce notices and communications to 

applicants and beneficiaries concerning 

the process, outcomes, and their rights 

to dispute or appeal. We further 

anticipate, following consultation with 

States and other stakeholders, 

additional standard Federal 

requirements for more timely and 

detailed reporting of eligibility and 

enrollment status statistics, including 

breakdowns by eligibility group, 

demographic characteristics, enrollment 

in managed care plans, and 

participation in waiver programs. 

System transformations will be 

needed in most States to accomplish 

these changes. These systems 

transformations should be undertaken 

in full partnership with Exchanges in 

order to meet coverage goals, minimize 

duplication, ensure effective reuse of 

infrastructure and applications, produce 

seamless enrollment for consumers, and 

ensure accuracy of program placements 

(see sections 1413 and 2201 of the 

Affordable Care Act). Extensive 

coordination and collaboration will be 

required between Exchanges and 

Medicaid, including on oversight and 

evaluation of the interoperability of the 

Exchange and Medicaid systems. In 

addition, States may consider how to 

coordinate systems changes with the 

eligibility determination systems used 

for other health and human services 

programs, such as SNAP, because a 

large share of individuals who are 

eligible for Medicaid also are eligible for 

other programs as well. 

II. Provisions of the Proposed 

Regulations 

In the November 8, 2010 Federal 

Register (75 FR 68583), we published a 

proposed rule that revised the Medicaid 

regulations for Mechanized Claims 

Processing and Information Retrieval 

Systems. Specifically, we proposed to 

amend the definition of Mechanized 

Claims Processing and Information 

Retrieval Systems to include 

mechanized eligibility determination 

systems, which would include the 

enrollment and eligibility reporting 

activities associated with such systems. 

We also proposed that the enhanced 

FFP would be available for design, 

development and installation or 

enhancement of eligibility 

determination systems until December 

31, 2015. 

III. Analysis of and Responses to Public 

Comments 

We received 40 timely comments on 

the November 8, 2010 proposed rule 

(75 FR 68583 through 68595). 

Commenters expressed general 

support for the policies outlined in the 

proposed rule. Specifically, commenters 

agreed that providing enhanced 

matching funds for Medicaid eligibility 

systems is appropriate and necessary. 

Commenters expressed almost universal 

agreement that this enhanced match is 

critical to support State efforts to 

modernize their eligibility systems, and 

will allow States to bring these systems 

into the 21st Century so that they can 

provide cost-effective, accurate, reliable, 

and beneficiary-friendly assessments of 

eligibility for the Medicaid program. In 

light of the substantial changes made by 

the Affordable Care Act, commenters 

agreed that it is more important than 

ever to ensure that eligibility 

determination systems are designed and 

operated using the most up-to-date 

technological and business process 

solutions. With States expected to enroll 

millions of newly eligible individuals 

into Medicaid and to ensure seamless 

coordination with the new Exchanges, it 

is essential that States have modern and 

cost-effective eligibility systems that 

will accurately enroll eligible 

individuals, without unnecessarily 

cumbersome processes or delays. 

Commenters also believed that such 

initial investments would ultimately 

lower ongoing maintenance and 

operational expenses, driving savings 

for both States and the Federal 

government. 

Commenters also noted that HHS had 

released additional documents at 

approximately the same time as the 

November 8, 2010 proposed rule, which 

reinforced our strategic direction and 

received their support. Specifically, 

commenters acknowledged the joint 

guidance released by CMS and the 

Office of Consumer Information and 

Insurance Oversight (now CMS’ Center 

for Consumer Information and 

Insurance Oversight (CCIIO)) entitled, 

‘‘Exchange/Medicaid Information 

Technology Guidance, version 1.0,’’ and 

the Funding Opportunity 

Announcement for Cooperative 

Agreements to Support Early Innovator 

Grants for Exchanges. Commenters 

indicated that they greatly appreciated 

the foresight of CMS and CCIIO, and are 

supportive of the guidance providing 

direction towards a service-oriented IT 

infrastructure based on interoperable 

systems and that they fully support the 

concept of a collaborative IT 

development approach among States, 

CMS and CCIIO. 

A summary of additional major issues 

and our responses follow. Since many of 

the comments were general in nature 

and not specific to any particular 

regulatory provision, we have identified 

the comments by nine categories: 

• Requests for enhanced Federal 

funding. 

• Requests for additional guidance. 

• Public feedback and suggestions 

related to the seven standards and 

conditions. 

• Public feedback and suggestions 

related to the APD process. 

• Issues related to the transition 

period for compliance. 

• Comments regarding CMS’ strategy 

for monitoring and oversight, including 

performance reviews. 

• Issues related to partial systems 

improvements or modernizations. 

• Specific issues by regulatory 

provision. 

• Issues related to the Regulatory 

Impact Analysis including the cost 

estimates, and information collection. 

A. Requests for Enhanced Federal 

Funding 

Comment: Numerous commenters 

requested that the enhanced FFP for 

design, development, and installation or 

enhancement of eligibility 

determination systems be extended 

beyond the December 31, 2015 deadline. 

Commenters indicated that new and 

significant enhancements may be 

needed beyond December 31, 2015, 

particularly in order to affect future 

legislative changes to Medicaid 

eligibility or to keep pace with 

technological innovations. The 


srobinson on DSKHWCL6B1PROD with RULES2
21952 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

commenters noted that State budgets 

continue to be in a state of crisis and 

State revenues may not fully recover 

until 2016 or later; consequently, the 

Federal government must take 

responsibility for ensuring adequate 

funding of the program infrastructure to 

ensure compliance by January 1, 2014. 

Commenters recommended several 

different options in this regard. Some 

commenters indicated that CMS should 

consider that the requirement apply to 

funds allocated rather than expended. 

Other commenters believed that CMS 

could allow for the possibility of a 

continued enhanced match beyond the 

deadline in specified circumstances 

(many outside the control of State 

governments), such as new Federal 

requirements or major advances in 

computer technology. Other exception 

categories suggested by commenters 

included unforeseen issues in 

implementation and/or new 

opportunities for interoperability with 

other health and human services 

programs. Other commenters indicated 

that CMS should extend funding if 

States have approved APDs on or before 

December 31, 2015 and the project has 

not been completed or if States are 

planning to leverage improvements from 

other State Medicaid eligibility systems. 

The commenters further indicate that 

they are concerned that they will be 

unable to receive legislative approval to 

begin their project, develop an APD, 

receive Federal approval, and then 

complete work on the project while 

meeting the standards and conditions 

before the enhanced FFP ends on 

December 31, 2015. Still other 

commenters believed the date should be 

changed to coincide with the end of the 

Federal fiscal year 2015 and 2016, so 

that enhanced funding would expire 

September 30, 2016. One commenter 

suggests that the deadline should be 

interpreted to apply to costs for projects 

receiving enhanced funding and 

obligated by that date rather than 

expended by December 31, 2015. One 

commenter expressed concern that a 

requirement for States to maintain 

existing eligibility processes for 

pregnant women and children until 

September 30, 2019 will mean States 

have to maintain dual eligibility systems 

during this time period. At the end of 

2019, the IT systems will need to be 

updated to remove this function and 

that enhanced funding should be 

extended for States to make changes to 

eligibility systems when this 

requirement ends. 

Response: We appreciate the 

significant number of comments we 

received on this aspect of our proposed 

rule and the view of commenters that 

we should eliminate, extend, or modify 

the deadline for expiration of the 

enhanced match for eligibility systems. 

Nonetheless, while we appreciate the 

opinions of commenters, we continue to 

believe that the deadline we established 

in the proposed rule is appropriate and 

proper. We believe it is within our 

authority to determine that by a certain 

date, additional investments in 

eligibility determination systems will no 

longer continue to result in ‘‘more’’ 

efficient, effective or economical 

administration of the State Plan, as 

required by section 1903(a)(3)(A)(i) of 

the Act. Further, we continue to believe 

that December 31, 2015 is a reasonable 

and proper end-point for when 

investments cease to result in acceptable 

increases in efficiency, economy, or 

effectiveness. Our reason is threefold: 

First, changes imposed by the 

Affordable Care Act will require 

immediate attention and commitment to 

new technologies for eligibility and 

enrollment systems. Second, once 

appropriate systems are deployed to 

support the coverage expansions and 

other eligibility changes required by the 

Affordable Care Act, we anticipate 

significant efficiencies in both 

application maintenance and business 

operations. Third, the additional 2 years 

we provided to States after the Medicaid 

expansion goes into effect allows ample 

time for States to refine and enhance the 

capability of the systems, and to 

capitalize on the efficiencies of these 

investments. 

We articulated in the proposed rule 

that additional investments are unlikely 

to yield similar rates of improvement 

and a regular administrative match 

should be sufficient for efficient and 

effective administration of State 

Medicaid programs. We anticipate that 

the improved underlying infrastructure 

supporting both Medicaid and 

Exchanges will be strongly leveraged in 

support of a State’s person-centric 

outreach, eligibility and enrollment 

activities across the health and human 

services spectrum. 

With respect to the request made by 

some commenters to establish an 

exceptions process, we believe this is 

already sufficiently provided for 

through our extension of enhanced FFP 

for an additional 2 years beyond the 

date for operation of the Exchanges. We 

are concerned that broadening or 

codifying exceptions to the deadline in 

the way suggested by the commenters 

would effectively render the deadline 

moot for many purposes and projects. 

The September 30, 2019 date noted by 

one commenter is the end-date for 

maintenance of effort (MOE) provisions 

for children (not pregnant women). 

Because of these MOE provisions, States 

must not have more restrictive 

‘‘eligibility standards, methodologies, or 

procedures’’ for children than those in 

effect on March 23, 2010. The MOE 

requirement does not mean that States 

must maintain identical standards, 

methodologies or procedures as those in 

effect on March 23, 2010, and it does 

not mean that the same IT system or IT 

system processes be used. Rather, the 

MOE requires that the eligibility 

standards, methods, and procedures be 

no more restrictive than those in effect 

on March 23, 2010. 

We are not certain of what the 

commenter is concerned about in terms 

of States’ needing to maintain dual 

eligibility processes, but we assume he 

or she may be concerned about the 

interaction of the MOE requirements 

and the requirement under section 2002 

of the Affordable Care Act. The 

conversion to a MAGI-equivalent 

income standard required under section 

2002 of the Affordable Care Act is 

designed in the statute to ensure that 

individuals who meet the eligibility 

requirements in effect as of March 23, 

2010 do not lose eligibility as a result 

of the shift to MAGI. Guidance will be 

provided by the Secretary regarding 

how States can accomplish the required 

conversion, and once the new MAGIequivalent income standard has been 

determined, the MOE requirements will 

be applied to such converted standard, 

using the MAGI methodologies to 

determine an individual’s income, as 

required under the Affordable Care Act. 

Therefore, the MOE requirements will 

not require operating dual eligibility 

systems. 

After consideration of the public 

comments received, we are maintaining 

the December 31, 2015 deadline in our 

regulations for eligibility determination 

systems. 

Comment: One commenter requested 

that CMS consider interpreting the 

deadline of December 31, 2015 for 

projects receiving enhanced Federal 

funding to requiring the funds be 

obligated by that date rather than 

expended. 

Response: We indicated in the 

proposed rule (75 FR 68589) that States 

would need to incur costs for goods and 

services furnished no later than 

December 31, 2015 to receive 90 percent 

FFP for design, development, 

installation, or enhancement of an 

eligibility system. For further 

clarification, this means that States must 

ensure that goods and services (for 

example, eligibility and enrollment 

modules, applications, systems, etc.) are 

provided to States no later than close of 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21953 

business December 31, 2015. Thus, for 

example, if an amount has been 

obligated by December 31, 2015, but the 

good or service has not yet been 

furnished by that date, then such 

expenditure would not be eligible for 

enhanced FFP. 

As a result of this comment, we are 

adding language to the regulations text 

to clarify this point. 

Comment: Numerous commenters 

asked whether enhanced funding is 

available for subsystems that interface 

with and/or are part of the eligibility 

process since such subsystems will 

require modifications to meet the 

requirements of the Affordable Care Act. 

Additionally, commenters sought 

enhanced FFP for projects that meet 

Medicaid Information Technology 

Architecture (MITA) guidance, yet still 

may need to integrate with legacy 

systems, with the understanding that, 

where feasible, open rules and 

specifications developed for programs 

will be used to read, insert, or update 

data into systems that currently do not 

have the functionality of being 

interoperable. The commenters agreed 

that APDs would need to be put in place 

and approved to modernize the legacy 

systems/subsystems. 

Response: We agree that enhanced 

funding can be available for subsystems 

that meet the standards and conditions 

outlined in this final rule. However, to 

the extent that such subsystems are 

reliant on or tied to a larger legacy 

system or suite of systems that 

introduce performance risk or ongoing 

costs to the operation of the subsystem, 

we may find that the system as a whole 

is not meeting the standards and 

conditions of this final rule and decline 

to approve enhanced match on that 

basis. It is our desire to acknowledge 

that subsystem modernization may be 

an entirely appropriate pathway to a 

high performing Medicaid program, 

while at the same time not binding 

ourselves to approve enhanced match 

for minor components of a large, 

fragmented legacy system that has little 

chance of delivering to expected 

business results. CMS will review APDs 

and make determinations regarding 

such subsystems, and to the extent that 

such subsystems meet with the 

standards and conditions outlined in 

this final rule and States can document 

that there is no performance risk or 

ongoing unnecessary costs, as a result of 

the subsystem being a part of larger 

legacy system, CMS will make 

determinations regarding enhanced 

funding accordingly. 

Comment: Several commenters want 

to ensure that enhanced FFP is available 

to States that are not completely MITA 

compliant, but rather to States that can 

demonstrate efficiencies are being 

achieved, redundancy is being 

decreased/eliminated, and system 

integration is being realized through 

application programming interfaces 

(API). States could demonstrate that 

APIs, in which a particular set of rules 

and specifications for services and 

resources have been developed by one 

software program that can be accessed 

and used by another software program 

implementing the API, can be used and 

serve as an interface between different 

software programs and facilitating their 

interaction, and thus, leading to 

efficiencies. Commenters added that 

with an approved APD reasonable and 

measureable milestones of system 

compliance can be demonstrated. 

Response: Enhanced FFP is available 

for those systems that comply with the 

standards and conditions of this final 

rule. Aligning to, and advancing 

increasingly, in MITA maturity for 

business, architecture, and data is one of 

the standards and conditions that must 

be met. We did not use the term ‘‘MITA 

compliant’’ in our proposed rule because 

MITA maturity is by definition, a matter 

of degree. We agree that achieving 

increasing levels and degrees of MITA 

maturity is likely to happen in stages. 

Recognizing this, we will be requiring a 

MITA roadmap that delineates how the 

proposed system enhancements for 

eligibility and enrollment functions will 

fit into the States’ greater MITA 

framework. Such requirement will align 

with our expectations to see States 

continuing to make measurable progress 

in implementing their MITA roadmaps. 

We believe it is critical to build on and 

accelerate the modernization we have 

collectively begun under MITA, so that 

States achieve the final vision of MITA 

and have a comprehensive framework 

with which to meet the technical and 

business demands required by an 

environment that will increasingly rely 

on health information technology and 

the electronic exchange of healthcare 

information to improve health outcomes 

and lower program costs. 

Comment: One commenter requested 

clarification as to whether enhanced 

FFP will be available where a project 

has some components that meet the 

standards and guidelines required for 

enhanced FFP, but may include other 

components that do not. 

Response: We believe it is entirely 

appropriate to accomplish system 

modernization through phasing. In cases 

such as the one raised by the 

commenter, the changes being made to 

various system components will need to 

be reviewed through submission of an 

APD and review. We will need to ensure 

that component-based development is 

on a path toward an entire system or 

subsystem coming into compliance with 

the standards and conditions of this 

final rule. We would expect that if the 

components that do not meet the 

standards and conditions are essentially 

preventing the entire system or 

subsystem from meeting the standards 

and conditions, then the State would 

have a plan for updating such 

components, even if all components are 

not updated at the same time. For 

example, we do not expect that we 

would offer enhanced FFP for 

improvements to just the reporting 

aspect of the traditional, legacy 

eligibility system, if the State does not 

have a plan for bringing this entire 

legacy system into compliance with the 

standards and conditions. In addition, 

to receive enhanced FFP, States may not 

ignore any single standard or condition 

regardless of the level or breadth of their 

compliance with the remaining 

standards, although if a State is weaker 

or more at risk with certain standards or 

conditions, the State should include a 

roadmap in their APD demonstrating 

how they intend to come into 

compliance. We intend to carefully 

track progress against approved 

roadmaps when determining if system 

updates continue to meet the standards 

and conditions for enhanced match. 

Comment: One commenter suggests 

that CMS clarify that enhanced funding 

is also available for ‘‘traditional’’ 

eligibility determinations, such as those 

made on behalf of medically needy 

clients, buy-in, elderly, disabled, longterm care and home and communitybased individuals. 

Response: To the extent that 

eligibility systems meet all 

requirements, standards, and conditions 

contained in this final rule, States will 

be eligible for enhanced FFP, and such 

enhanced funding is not dependent 

upon the eligibility group using the 

system. 

Comment: One commenter 

recommended that CMS clarify that 

enhanced funding is available for 

personnel costs, as well as the costs of 

physical systems. Specifically, the 

commenter notes that Federal 

regulations at § 432.50(b) provide for 

enhanced funding at 75 percent for the 

costs of staff ‘‘engaged directly in the 

operation of mechanized claims 

processing and information retrieval 

systems’’ and for enhanced funding at 90 

percent for staff costs related to the 

design, development, and installation of 

these systems. FFP is provided at 50 

percent for the costs of training 

personnel when new systems are 

developed. 


srobinson on DSKHWCL6B1PROD with RULES2
21954 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

Response: We did not propose 

amendments to the regulations at 

§ 432.50(b); thus, enhanced funding is 

available for staff time spent on 

mechanized eligibility determination 

systems in the same manner that they 

apply to all mechanized claims 

processing and information retrieval 

systems, since mechanized eligibility 

determination systems are now 

considered to be part of such systems, 

assuming the requirements of this 

section are met. 

Comment: One commenter asked that 

we extend the enhanced funding to 

encompass the testing of the 

effectiveness of the eligibility systems, 

including testing beneficiary experience 

such as allowing States to receive 

reimbursement for conducting focus 

groups with community-based workers 

and/or beneficiaries who rely on the 

system to apply for and renew Medicaid 

coverage. 

Response: Again, to the extent these 

costs would be reimbursable under 

§ 432.50(b), they would be eligible for 

reimbursement under this rule as well 

(assuming all standards and conditions 

are met). States would need to ensure 

that the expenditures are tied to the 

mechanized eligibility determination 

system and follow all procedures for 

seeking approval. 

Comment: Several commenters 

requested that CMS require States to 

pass enhanced match through to 

counties. The commenters stated that 

CMS should ensure that if a State 

requires counties to contribute to the 

non-Federal share of Medicaid and 

Medicaid administrative costs, and that 

receives enhanced FFP; the State should 

be required to share the enhanced FFP 

in proportion to the counties’ 

contribution. The commenters stated 

that this requirement would reflect the 

clear Congressional intent as expressed 

in the enhanced Federal Medical 

Assistance Percentage (FMAP) 

requirements for certain States in 

section 5001(g)(2) of the American 

Recovery and Reinvestment Act (Pub. L. 

111–5, enacted on February 17, 2009) 

and strengthened by section 10201(c)(6) 

of the Affordable Care Act. 

Response: The commenters cite 

section 10201(c)(6) of the Affordable 

Care Act, which added section 1905(cc) 

to the Act. Under this provision, a State 

may not be eligible for certain increased 

FMAPs associated with health care 

reform and disaster recovery if the State 

‘‘requires that political subdivisions pay 

a greater percentage of the non-Federal 

share * * * than the respective 

percentages that would have been 

required by the State under the State 

plan under this title, State law, or both, 

as in effect on December 31, 2009.’’ 

Since the level of Federal funding 

available for the costs of the eligibility 

and enrollment determination systems 

under this final rule will increase and 

the level of the non-Federal share 

specific to such expenditures will 

decrease, there could be an effect on the 

level of required political subdivision 

contributions that would be subject to 

this limitation. We already issued 

guidance on how the political 

subdivision contribution limitations 

under section 1905(cc) apply in an SMD 

letter issued November, 9, 2010 (see 

http://www.cms.gov/smdl/downloads/ 

SMD10023.pdf). Rather than reiterate 

what is already in that guidance, we 

refer States and counties to such 

guidance. States and counties may also 

work with CMS to determine whether 

any required contributions by political 

subdivisions toward the non-federal 

share of these expenditures would be in 

compliance with political subdivision 

contribution provision. 

Comment: One commenter urged 

CMS to encourage States to consider in 

establishing actuarially sound Medicaid 

managed care rates, the additional 

systems-related investments by 

Medicaid health plans that are likely to 

be needed to interface with new State 

systems. 

Response: We believe this commenter 

is asking about managed care rates, and 

not the proposal we issued with regard 

to mechanized claims processing and 

information retrieval systems, and when 

they will be eligible for enhanced FFP. 

As our proposed rule did not address 

Medicaid managed care rates, we 

believe this comment is outside the 

scope of the proposed rule. 

Comment: One commenter asked for 

clarification on whether the addition of 

eligibility determination and enrollment 

systems is limited to stand-alone 

systems administered directly by the 

single State Medicaid Agency. The 

commenter indicates that some State 

eligibility systems are a joint venture 

with the HHS and the United States 

Department of Agriculture and are used 

to determine eligibility for financial 

assistance programs in addition to 

medical assistance programs. 

Response: The enhanced funding can 

apply to ‘‘stand alone’’ systems or 

‘‘integrated eligibility’’ systems, 

assuming they meet the standards and 

conditions specified in this final rule. 

Many States are considering ways to 

coordinate Medicaid, CHIP and 

Exchange eligibility with other health 

and human services programs. However, 

we will only provide enhanced funding 

for the portion of the costs that can be 

directly attributed to Medicaid 

eligibility and enrollment functions. We 

also direct the commenter to the 

discussion on cost-allocation in OMB 

Circular A–87 (http:// 

www.whitehouse.gov/omb/ 

circulars_a087_2004) specifying 

appropriate allocation of costs when the 

system includes various benefiting 

programs. 

Comment: Other commenters have 

asked whether the enhanced funding 

can be used to support updating and 

completing the MITA assessment and 

roadmap, and performance 

measurement. 

Response: We agree with the 

commenters that it is appropriate to 

request enhanced funding for updating 

the MITA assessment and the roadmap, 

since one of the standards and 

conditions listed in § 433.112 speaks 

directly to MITA maturity. Enhanced 

funding is available assuming that 

updates are related to the standards and 

conditions and the State’s plan for 

meeting them. We are making no further 

additions to the rule in response to this 

comment. 

Comment: Some commenters believed 

the timeframes related to the enhanced 

funding for the development of 

eligibility solutions seems to be 

extremely aggressive. Many of the 

activities related to the planning, 

design, development, and deployment 

of eligibility solutions will be new 

activities for both State and vendor staff. 

States will need to consider how they 

will integrate and leverage eligibility 

solutions into their Health Insurance 

Exchanges, their integrated human 

services eligibility solutions, their 

MMIS, and other points of intersection. 

Just the planning phase leading up to an 

approved APD and FFP release could 

easily consume more than a year. The 

commenters suggested that CMS should 

consider lengthening the timeframes for 

the completion of these efforts related to 

eligibility components. 

Response: We recognize that the 

timelines for developing new eligibility 

systems, and for submitting and 

approving new APDs, must be greatly 

accelerated from historical and 

traditional experiences and approaches 

in order to meet the timelines in the 

Affordable Care Act and to take 

advantage of enhanced match prior to 

December 31, 2015. We emphasize that 

we expect to operate efficiently in 

processing APDs and work 

collaboratively with States to implement 

these changes, and we expect States to 

operate quite differently in how they 

pursue new development, share and 

reuse assets, and take advantage of 

‘‘lightweight’’ applications and new 

technologies to meet these needs. We 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21955 

noted in our proposed rule that 

dramatic systems transformations would 

be necessary and while the timeframes 

may appear aggressive to some, the 

Department is committed to providing 

leadership, technical assistance, and 

financial support to produce the IT 

infrastructure necessary to accomplish 

the tasks required by the Affordable 

Care Act according to the timelines 

specified in the law. We note that the 

Affordable Care Act requires that States 

be able to enroll the newly eligible 

individuals and coordinate with Health 

Insurance Exchanges by January 1 of 

2014. Thus, our timeline accounts for 

this statutory deadline, while still 

maintaining a period of two years 

(through December 31, 2015) to account 

for potential delays or unforeseen 

obstacles in developing new or 

improved eligibility determination 

systems. 

We are making no further revisions to 

the rule as a result of this comment. 

B. Requests for Additional Guidance 

Comment: One commenter requested 

that CMS produce and make available to 

the States a project planning template 

illustrating key entry points to major 

phases of the projects. 

Response: We will be providing a 

whole series of artifacts and supporting 

tools, documentation, diagrams to States 

as part of our technical assistance, 

collaboration, and governance. We will 

consider the usefulness of a template for 

project planning as we develop and 

publish these materials. 

Comment: Several commenters 

requested additional guidance on the IT 

enterprise. 

Response: We will issue additional 

Guidance for Exchange and Medicaid 

Information Technology Systems (IT 

guidance). We issued IT guidance 

version 1.0 on November 30, 2010, and 

expect to issue, expand and renew that 

guidance over time. These guidance 

documents will help States with the 

business rules necessary to design, 

develop, and implement State eligibility 

systems that can meet the requirements 

of the Affordable Care Act. 

Comment: Several commenters 

inquired about future guidance on 

MITA, the MITA alignment process, and 

whether the process for certifying and/ 

or validating MITA alignment will be 

detailed in the final rule. 

Response: We have provided 

continued guidance and artifacts 

associated with MITA since the MITA 

Initiative began. We will continue to 

provide that guidance and related 

toolsets and details. We will consider a 

number of elements in reviewing states’ 

alignment with MITA and increasing 

MITA maturity, including States’ selfassessments and MITA roadmaps. 

Comment: Several commenters 

inquired about the ‘‘modular, flexible 

approach to systems development’’ and 

increasing MITA alignment 

requirements, as well as whether such 

requirements apply to all MMISs or only 

eligibility determination systems. The 

commenters believed that to promote 

the feasibility of a ‘‘modular, flexible 

approach to systems development’’ of 

Medicaid systems, CMS should 

continue to fund and aggressively 

develop necessary interfaces and 

technical standards that are required to 

facilitate MMIS interoperability. 

Response: As stated in the above 

responses, we intend to issue a series of 

tools for States to use in ensuring the 

facilitation of interoperability. It should 

be noted that the requirements of this 

final rule apply to all MMISs, not just 

eligibility determination systems (which 

will now be considered part of the 

MMIS). We are making no further 

additions to the rule as a result of this 

comment. 

Comment: Several commenters urged 

CMS to develop stronger Federal 

guidelines for enrollment and renewal 

procedures to accompany new 

eligibility systems, including guidance 

on acceptable data matches creating safe 

harbors for data sources used in 

electronic income verification, to allow 

States to move to paperless income 

verification with confidence that they 

comply with quality and accuracy 

standards. In developing additional 

requirements, the commenters urged 

CMS to ensure that Medicaid’s 

application, renewal and verification 

procedures are no more paperwork 

intensive or burdensome than those for 

Exchange tax credit applicants. 

Response: We agree with the 

commenters that simplification and 

streamlining of the consumer 

experience are expected outcomes of the 

Affordable Care Act. However, business 

process and policy requirements for 

determining eligibility are outside the 

scope of this regulation and will be 

addressed in separate rulemaking. As 

discussed later in the response to 

comments concerning performance 

measures, we will also publish 

measures concerning expected business 

outcomes in separate notices. We are 

making no further additions to this 

section of the final rule. 

Comment: Some commenters 

requested reforms and clarifications 

regarding cost allocation principles. 

Response: Our proposed rule did not 

contain any proposals to alter cost 

allocation principles, and we believe it 

is prudent that CMS and the States 

continue to follow the cost allocation 

principles outlined by OMB in Circular 

A–87. As stated in the proposed rule, for 

integrated eligibility systems, assuming 

those systems meet the standards and 

conditions outlined in the final rule, 

only the costs associated with Medicaid 

eligibility and enrollment functions will 

be eligible for the enhanced funding and 

funding for Exchange activities is fully 

Federally funded through January 1, 

2015. We discussed cost allocation and 

the principles of cost allocation in 

guidance that was released on 

November 2010; that is, the IT guidance 

version 1.0 and in the Funding 

Opportunity Announcement for the 

Early Innovator Grants. States can 

access the OMB Circular A–87 at 

http://www.whitehouse.gov/omb/ 

circulars_a087_2004. 

Comment: Several commenters asked 

for guidance on commercial off-the-shelf 

(COTS) software products, and 

indicated that such products are often 

modular, reusable, sharable, leveraged, 

and aligned with MITA. Commenters 

also stated that enhanced FFP should be 

available for COTS initial licensing and 

implementation service costs as well as 

ongoing software licensing and 

maintenance costs. Commenters also 

questioned why there is no language 

confirming established protections for 

COTS pre-existing intellectual property 

(IP) and newly developed IP used in 

eligibility modernization initiatives. 

Response: We are not dictating 

specific solutions to States as they 

undertake their technology projects, as 

long as the standards and conditions of 

this final rule are met and we expect to 

work with States in an effort to share, 

reuse, and leverage other State 

solutions. For COTS products, we have 

a longstanding rule that the State must 

own any software that is designed, 

developed, installed or improved with 

90 percent FFP (see § 433.112(b)(5)). In 

other words, software that is developed 

with public funds must be owned by the 

public and as a ‘‘public product’’ is 

available to be shared with other States. 

COTS-based solutions may still receive 

a 75 percent enhanced funding (that is, 

for licensing and implementation 

services costs), if they are related to the 

MMIS (including the eligibility 

determination system) and meet all the 

requirements of this final rule. In 

addition, current rules protecting 

intellectual property (such as copyright 

and/or patent laws) would simply apply 

in the way that they already do apply 

to intellectual property. Nothing in this 

final rule is attempting to alter those 

rules. 

Comment: Several commenters asked 

that we define the terms ‘‘modular’’, 


srobinson on DSKHWCL6B1PROD with RULES2
21956 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

‘‘modules’’, ‘‘models’’, and ‘‘successful 

models.’’ Commenters indicated they are 

unclear about whether a model is 

equivalent to an architecture, reference 

model, process design, etc. for a given 

customer or class of customers and 

consistent with MITA architecture 

framework, process and planning 

guidelines, and maturity model. 

Response: We believe it is important 

to frame our response in terms of the IT 

Guidance jointly issued by CMS and 

CCIIO. This guidance outlined a set of 

expectations and principles for sharing 

solutions and approaches between both 

Medicaid and the Exchanges. 

Consequently, we believe it is 

imperative for States and vendors to 

view all IT activities much more broadly 

than a single physical implementation 

of a set of technical capabilities. 

‘‘Modular’’ means reducing the 

complexity of a larger problem by 

breaking it down into small well 

defined pieces. For example, MITA 

business architecture reduced the 

complexity of the Medicaid program 

into eight high-level business areas. 

Each business area is further broken 

down/decomposed into smaller and 

manageable business processes. These 

business processes can be described as 

‘‘modules’’. System components can also 

perform tasks in a similar fashion. 

‘‘Modularity’’, if done right, 

accomplishes re-usability, 

maintainability, and reliability. The 

term also underscores our strong desire 

for States and the vendor community to 

develop ‘‘lighter-weight’’ and ‘‘looselycoupled’’ approaches to the design of 

health care systems, including, but not 

limited to eligibility determination and 

enrollment functions. 

In the MITA initiative, we have urged 

States to focus on designing sets of 

overarching and reusable functions that 

traditionally might have been included 

within one particular application and 

that would have been specific to that 

particular application, but that now 

could be used, in a consistent manner, 

by multiple applications used by the 

State. Additionally, we want to 

emphasize that the rules for processing 

data should be written in such a way as 

to be available to more than just one 

application. For example, whether it is 

a Web service querying for a response, 

or an Extract Transformation and Load 

(ETL) set of tools to move data from a 

database to an external interface, the 

rules that are invoked are the same, thus 

ensuring the underlying data maintains 

its inherent ability to consistently 

transform to the same information. 

‘‘Reference Models’’ focus on 

classification and conceptual structure. 

Typically, a Technical Reference Model, 

for example, consists of infrastructure 

and business applications that interface 

with a number of operating and network 

services through a variety of specific 

applications such as graphics and 

imaging, data management, data 

interchange, user interface, transaction 

processing, security and system/ 

network management. 

‘‘Reference Architecture’’ is about 

proven solutions and best practices, 

typically without being vendor/platform 

specific. Typically arrayed in different 

tiers (access client tier, middle tier and 

data tier, for example), a technical 

reference architecture includes a client 

browser and an XML appliance to allow 

for access, a presentation layer using a 

portal with HTML and an application/ 

Web server, business services 

applications, enterprise information 

integration, and operational data storage 

facility typically through a data base 

with data exploration capabilities 

sometimes arrayed via data marts. 

We believe MITA 2.0 addresses all of 

the defined terms. We also urge readers 

interested in these and related topics to 

familiarize themselves with the MITA 

Framework, look for additional 

guidance in the various iterations of the 

IT Guidance, and contact CMS staff for 

additional clarifications related to 

specific circumstances. 

Comment: Other commenters 

requested that the term ‘‘eligibility 

determination system’’ be defined. The 

term should indicate that eligibility 

determination system includes the 

technology interfaces for program 

applicants and beneficiaries, such as 

Web sites that include on-line 

applications and other Web features that 

allow individuals to use eligibility 

estimators, to report changes, to renew 

eligibility, or to seek information about 

their case status. Likewise, ‘‘eligibility 

determination system’’ should be 

defined to include computer generated 

notices and data. 

Response: Our final rule considers 

systems that process claims for 

eligibility to be part of mechanized 

claims processing and information 

retrieval systems. Thus, to the extent 

that a function is part of processing the 

claim for eligibility, we believe it could 

be eligible for enhanced FFP under this 

final rule. We believe building an online 

application would likely be part of the 

system that processes claims and 

applications for eligibility. Additionally, 

we can envision how all of the 

components identified by the 

commenters will be part of an eligibility 

determination system, but we would 

need to understand more fully how such 

components are integrated into a system 

that processes claims for eligibility. 

States will explain in their APDs how 

the various components are part of the 

mechanized claims processing and 

information retrieval system and will 

meet with our standards and conditions. 

We are making no further additions to 

this section of the final rule. 

Comment: One commenter indicated 

that it would be helpful if CMS 

provided additional leadership and 

technical assistance in further 

standardizing data semantics and 

information nomenclature across the 

eligibility function. 

Response: We agree with the 

commenter and look forward to working 

in close partnership with States, 

Exchanges, and the Office of the 

National Coordinator for Health 

Information Technology, and the HIT 

Policy and Standards Committees on 

this activity. We intend to enforce 

industry standards as they develop in 

order to promote interoperability, 

improve reliability of outputs and 

outcomes, and reduce development 

costs. 

Comment: A few commenters spoke 

of the importance of ensuring that 

county governments act as full partners 

in the planning, design, oversight and 

operations of necessary Medicaid 

eligibility system transformations. To 

ensure that counties are poised to best 

assist Medicaid applicants and 

recipients, the commenters suggested 

that the Secretary develop model 

systems and deploy the necessary 

resources for implementation including 

technical assistance and support for 

capital investment. 

Response: We agree with the 

commenter that States, Tribal 

organizations, County governments, and 

Federal government agencies should 

work together to ensure effective 

interoperability and to develop model 

systems, as well as to deploy the 

necessary resources for implementation 

including technical assistance and 

support for capital investment. We 

recognize the historical contribution 

made by counties to making eligibility 

determinations in most States. We look 

to States to determine how best to 

deploy and optimize assets within the 

State to accomplish the purpose and 

requirements of the Affordable Care Act. 

Comment: Several commenters 

believe that, to support the one 

application concept and streamlined 

eligibility determinations for Medicaid 

and related programs (including CHIP, 

TANF, Food Stamps, and WIC), CMS 

should work with other Federal 

agencies to obtain agreement to allow 

sharing of data across those related 

programs. 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21957 

Response: Our standard and condition 

regarding data exchange requires 

seamlessness with the Exchanges and 

also requires that States allow for 

interoperability with other health and 

human services programs. We also note 

that our standards and conditions 

require compliance with the standards 

and protocols adopted by the Secretary 

under sections 1104 and 1561 of the 

Affordable Care Act. We expect that 

such standards and protocols will 

promote reuse and data exchange. 

Comment: One commenter believes 

that to support timely processing of 

eligibility, CMS should work with other 

Federal agencies that interface with 

State Medicaid agencies to allow a 

single point for correction of client data 

errors, including birthdates and 

erroneously posted death dates. 

Response: We believe this comment 

addresses the actual program 

instructions and policy requirements for 

eligibility systems, and not the 

information technology solutions that 

will be needed for the systems 

themselves. Our requirements regarding 

these matters will be established in 

separate rulemaking. 

Comment: One commenter requested 

that CMS offer strong guidance to the 

States on privacy and confidentiality 

issues that need to be observed in the 

new State systems. 

Response: We agree that 

confidentiality and privacy are critical 

to protecting beneficiaries and 

providers. The final rule includes as a 

standard that systems ensure alignment 

with the HIPAA privacy, security and 

transaction standards. 

Comment: One commenter indicates 

that we should issue guidance more 

definitively discussing the standards 

developed in response to section 1561 

of the Affordable Care Act. The 

commenter noted that while section 

1561 the Affordable Care Act is an 

outstanding source of ideas and 

information, section 1561 the Affordable 

Care Act standards appear to stop short 

of creating specific, concrete 

requirements. 

Response: Section 1561 the 

Affordable Care Act requires HHS, in 

consultation with the Health 

Information Technology (HIT) Policy 

Committee and the HIT Standards 

Committee, to develop interoperable 

and secure standards and protocols that 

facilitate electronic enrollment of 

individuals in Federal and State health 

and human services programs. The HIT 

Policy and Standards Committees 

approved initial recommendations, and 

in September 2010, the Secretary 

adopted these recommendations. The 

recommendations include initial 

standards and protocols that encourage 

adoption of modern electronic systems 

and processes that allow a consumer to 

seamlessly obtain and maintain the full 

range of available health coverage and 

other human services benefits. 

The HIT Policy and Standards 

Committees recommendations are 

available at http://healthit.hhs.gov/ 

portal/server.pt?open=512&

mode=2&objID=3161. We wish to note 

that one of the seven standards and 

conditions specifically requires States to 

ensure alignment with, and 

incorporation of, industry standards and 

specifies several national standards 

including standards and protocols 

adopted by the Secretary under section 

1561 of the Affordable Care Act. 

Comment: Another commenter 

suggested that we make all guidance 

documents, including the State 

Medicaid manual readily available. 

Response: We agree. We are currently 

working to gather all applicable 

guidance documents on the CMS Web 

site. Guidance documents are already 

posted to several web sites, including 

the proposed rule (see regulations.gov), 

the IT guidance version 1.0, (see 

http://www.hhs.gov/ociio/regulations/

joint_cms_ociio_guidance.pdf), 

Overview on the MITA framework, (see 

http://www.cms.gov/

MedicaidInfoTechArch), and Overview 

of the MMIS (see http://www.cms.gov/ 

MMIS). Please note that Chapter 11 of 

the State Medicaid Manual can be 

accessed electronically at http:// 

www.cms.gov/Manuals/PBM/

itemdetail.asp?filterType=

none&filterByDID=-99&sortByDID=1&

sortOrder=ascending&

itemID=CMS021927. 

In summary, we are making no 

revisions to regulation text as a result of 

these comments. 

Comment: Several commenters 

suggested that CMS provide educational 

materials to ensure consumers get 

individualized assistance and have their 

questions answered to assure 

enrollment in Medicaid and the 

Exchanges. 

Response: We believe this comment 

addresses the actual program 

instructions and policy requirements for 

eligibility systems, and not the 

information technology solutions that 

will be needed for the systems 

themselves. Our requirements regarding 

these matters will be established in 

separate rulemaking. 

Comment: Commenters also requested 

that CMS issue ‘‘Frequently Asked 

Questions,’’ establishing a direct contact 

line for assistance, make available a 

complete contact list of all of the States 

and their designated person/ 

representatives, and develop a 

Webpage/module to the existing Web 

site that will use this information and 

any ongoing data exchange information 

for the State. Commenters further 

recommended that CMS Regional 

Offices be fully trained and educated on 

the regulations and standards. 

Response: We will consider these 

recommendations as we begin 

implementation of this final rule. We 

expect to provide numerous venues for 

sharing of information, including 

conferences, information posted to the 

CMS.gov Web site, letters, program 

memoranda, and training materials. The 

final rule and additional IT guidance 

will provide information regarding 

funding standards and conditions. We 

expect to release additional guidance on 

performance matrices. We are currently 

exploring several approaches to 

expedite the APD process and will be 

providing guidance on this process soon 

after publication of this final rule. 

Additionally, we have recently 

awarded seven cooperative agreements 

to help a group of ‘‘Early Innovator’’ 

States design and implement the IT 

infrastructure needed to operate 

Exchanges. We expect to share 

information among these Innovator 

States and, as Exchanges are being 

developed, we expect to share 

information from these Innovator States 

with other States as well through the 

use of the CMS.gov Web site, 

conferences, and face-to-face meetings. 

C. Public Feedback and Suggestions 

Related to the Seven Standard and 

Conditions 

Comment: Several commenters 

requested clarification on the standards 

and conditions, and questioned how 

progress would be measured. 

Specifically, several commenters were 

concerned about our reference at 

§ 433.112(b)(13) to ‘‘promoting sharing, 

leverage, and reuse of Medicaid 

technologies and systems within and 

among States.’’ Commenters requested 

that CMS define ‘‘promoting’’ and 

specify how States will be required to 

leverage this information between 

States. Further, the commenters 

questioned when CMS will provide 

States with information regarding 

‘‘promising State systems that can be 

leveraged and used by other States.’’ 

They also questioned how these 

‘‘promising State systems’’ will be 

identified. The commenters noted that it 

will be important for CMS to provide 

sufficient time for States to leverage 

promising systems and qualify for 

enhanced FFP to fund the development 

of those Medicaid eligibility systems. 

Other commenters expressed concern 


srobinson on DSKHWCL6B1PROD with RULES2
21958 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

that to meet the standards and 

conditions required for the Medicaid 

eligibility system to qualify for the 

enhanced funding, significant systems 

changes will be necessary to integrate 

Medicaid/CHIP eligibility and develop a 

single client identifier for all Medicaid 

and CHIP members to establish seamless 

coordination for eligibility and 

enrollment. Some commenters 

requested that CMS provide clarity on 

the criteria CMS will use to assess how 

States have demonstrated compliance 

with these standards and conditions 

including what documentation States 

will be expected to provide. 

Several commenters questioned the 

phrase ‘‘seamless coordination.’’ That is, 

§ 433.112(b)(16) requires seamless 

Medicaid coordination and integration 

between Medicaid eligibility systems 

and the Exchange, allowing for 

interoperability with the Exchanges, and 

other health information systems. The 

required interoperability would involve 

the exchange of eligibility and 

enrollment status to the health 

information system, however, the rule 

did not specify the health information 

being exchanged among the eligibility 

and enrollment systems. The 

commenters believed it would be 

important for CMS to provide additional 

guidance on the type of data to be 

exchanged between eligibility and 

enrollment systems and other health 

information systems; thus, the 

commenters requested a definition of 

‘‘seamless coordination.’’ Additionally, 

the commenters requested that CMS 

provide clarity around whether other 

programs, such as the Supplemental 

Nutrition Assistance Program and the 

Temporary Assistance for Needy 

Families Program, are considered part of 

CMS’ vision for ‘‘seamless coordination’’ 

and whether enhanced Medicaid funds 

would be used to make related changes 

to eligibility systems for these programs 

as well. 

One commenter suggested that we 

add stronger language to the list of 

standards and conditions in § 433.112(b) 

consistent with the preamble language 

included in the proposed rule regarding 

the emphasis on the customer 

experience. Specifically, the commenter 

stated CMS references the goal of 

creating an ecosystem designed to 

deliver person- and citizen-centric 

services and benefits. The commenter 

requested similar language be added in 

regulations text. 

Numerous commenters were 

supportive of our proposed standards 

and conditions. Specifically, several 

commenters have indicated they 

welcome our efforts to identify 

‘‘promising State systems’’ that can be 

leveraged and used by other States. 

Commenters indicated that they support 

our perspective that State eligibility and 

enrollment systems must be conceived 

of as contributing to a ‘‘system of 

systems.’’ To achieve interconnected, 

functional systems in time to implement 

the Affordable Care Act, States must 

leverage existing systems to the greatest 

extent possible and successfully connect 

across silos. Commenters further stated 

that CMS should develop a repository or 

method of sharing information and 

support the development of reference 

applications. Additionally, commenters 

stated CMS should establish a means for 

communication between agencies at the 

Federal level in a manner that can be 

replicated at the State level. The 

commenters also stated that CMS 

should also provide support to those 

States that choose to ‘‘phase in’’ some of 

the changes, to ensure that they can 

proceed while also receiving enhanced 

funds. Additionally, the commenters 

requested that CMS should consider the 

MITA governance model for 

disseminating more detailed 

specifications for the standards and 

conditions; that is, the MITA 

governance model which includes the 

Business, Information, and Technical 

Review Boards, organized to support the 

MITA model for review, approval, and 

adoption of national standards. 

Response: All of these comments are 

specific to § 433.112 and § 433.116 in 

which we have required that to receive 

enhanced funding for development, 

design, installation or enhancement of 

mechanized claims processing and 

information retrieval systems and 

operation of such systems, the standards 

and conditions specified in 

§ 433.112(b)(10) through (16) must be 

met. The standards and conditions are 

prescriptive in nature; we did, however, 

recognize that for State systems to meet 

these standards and conditions, it 

would be necessary to provide 

additional guidance that clearly 

articulates our criteria for meeting these 

standards and conditions, the 

performance measures that we will use 

to ensure that State systems are 

complying with these standards and 

conditions, and the collaboration efforts 

we will take with CCIIO and other 

human services programs. 

As mentioned previously, we released 

several guidance materials last year 

including the proposed rule and the IT 

guidance version 1.0, and we are 

committed to releasing additional 

guidance in the near future which will 

detail our criteria for ensuring 

compliance with the standards and 

conditions. States should consider that 

we will be interested in partnering with 

them to ensure that they are making 

progress and meeting measurable goals. 

We consider that States may progress in 

several phases and ensure compliance 

by meeting goals along the way. Some 

examples that States may wish to 

consider in meeting the standards and 

conditions would be (1) That States 

should supply roadmaps for major 

improvements in current systems based 

on ‘‘as/is’’ MITA assessments and 

demonstrate how they will increase in 

MITA maturity by at least one maturity 

level; (2) States should identify how 

they plan to achieve full MITA maturity 

and in what timeframe; (3) States should 

ensure that their business architecture 

conforms to concept of operation and 

business process models distributed by 

CMS for specific business functions, or 

identify divergences to CMS; and 

(4) States should use a business rules 

engine which is maintained and 

operated separate from transactional 

programming language, which allow for 

modification and updates on an 

emergency as well as a regularly 

scheduled (at least quarterly) change 

control process. 

Additionally, we will be releasing IT 

guidance version 2.0 soon and we will 

be releasing future versions of IT 

guidance, as the January 1, 2014 

deadline approaches. We will also be 

issuing guidance surrounding APDs. We 

continue to work with the Early 

Innovator grant awardees to ensure that 

State ‘‘early innovator’’ systems will 

meet the goal of seamless coordination 

with the Exchange. Furthermore, we 

continue to provide technical assistance 

and support to States through several 

vehicles including CMS State calls, 

State workgroups, and conferences. We 

will convene an annual MMIS 

conference in which States can share 

their experiences and provide feedback 

and request assistance regarding issues 

surrounding the implementation of the 

Affordable Care Act. We have 

committed to providing leadership and 

technical assistance in not only 

developing national standards and 

conditions but in ensuring systems 

transformation will provide that the 

goals of the Affordable Care Act goals 

can be met. That is, with systems 

transformation, States can meet 

coverage goals, minimize duplication, 

ensure effective reuse of infrastructure 

and applications, produce seamlessness 

for consumers, and ensure accuracy of 

program placements. 

In terms of our plans for use of the 

MITA governance model which 

includes the Business, Information, and 

Technical Review Boards, organized to 

support the MITA model for review, 

approval and adoption of national 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21959 

standards, it should be noted that the 

standards and conditions were 

developed considering many 

perspectives; that is, the Office of the 

National Coordinator’s standards for 

enrollment, the HIPAA standards for 

privacy and security, the Office of Civil 

Right’s views on the Rehabilitation Act 

and other accessibility standards, other 

Federal government agencies, States and 

other stakeholders. 

Comment: Several commenters 

requested that we promote transparency 

and provide opportunities for 

beneficiary input since the proposed 

§ 433.112(b)(14) would require effective 

communications with providers, 

beneficiaries, and the public. The 

commenters believed that States should 

be required to consult with 

beneficiaries, advocates, provider 

groups, including safety net providers 

such as Federally Qualified Health 

Centers, and public workers as they 

plan their new or improved eligibility 

systems; to make public copies of the 

business rules used to determine the 

decisions on eligibility that will be 

made by their new systems; and to 

gather data directly from beneficiaries 

on their experiences with eligibility 

determinations (for example, via fieldtested procedures such as focus groups 

or meetings with beneficiaries or lowincome advocates) on a periodic basis. 

Additionally, commenters believed that 

States must demonstrate that their 

modernized eligibility systems produce 

communications with beneficiaries 

(regardless of whether they are 

distributed through the mail, on-line, or 

through other alternative means) that 

are appropriate for their literacy level 

and consider the needs of people with 

disabilities. Commenters believed that 

policies regarding notices help ensure 

user-friendly notices which should 

include involvement of stakeholders, 

such as beneficiaries. Similarly, the 

commenters believed that CMS should 

actively solicit and include data on 

beneficiaries’ perspectives when it 

conducts its periodic reviews of State’s 

eligibility systems. Lastly, commenters 

believed that this standard and 

condition will be difficult to measure, 

and therefore, should include definable 

metrics. 

Response: We believe it is wise for 

States to consult with their stakeholders 

as they implement the Affordable Care 

Act, and in developing business process 

models and technology roadmaps. 

While we do not intend to set Federal 

requirements regarding consultation in 

this rule and specific to this activity, we 

do note that other eligibility policy 

rulemaking may address this issue. One 

of our standards and conditions 

specifically states the expectation that 

business rules should be maintained in 

human readable form; we agree with the 

recommendations of the HIT Policy and 

Standards Committees considering the 

requirements of section 1561 of the 

Affordable Care Act that such business 

rules should be submitted and 

maintained in a common repository, 

and are designing approaches to support 

that activity. These rules will be 

available to the public to the fullest 

extent possible and practicable, and we 

urge States to make their business rules 

public on the same basis. As for the 

request that we define the metrics that 

will be used in periodic reviews of State 

systems, such metrics will be published 

in a subsequent notice or notices. We 

will consider the suggestion to add 

beneficiary feedback and user 

experience in these measures. 

Comment: One commenter questioned 

if the standards and conditions for 

Medicaid eligibility systems apply also 

to MMISs and claims adjudication and 

whether States have to meet the 

standards and conditions for MMISs to 

collect the enhanced FFP. 

Response: Yes, under our proposed 

and final regulations, a State’s entire 

MMIS (including its eligibility 

determination system) will be required 

to comply with all of the standards and 

conditions outlined in § 433.112. Please 

see our proposed rule (75 FR 68585) 

where we clarify that we were 

proposing standards and conditions that 

would apply to both ‘‘traditional claims 

processing systems, as well as eligibility 

systems to be eligible for the enhanced 

match.’’ 

We are making no further additions to 

this section of the final rule. 

Comment: Several commenters 

requested that CMS ensure eligibility 

systems comply with all civil rights 

laws and provide beneficiaries with the 

opportunity to secure information in a 

culturally and linguistically appropriate 

manner. Commenters requested that 

CMS ensure that the experiences of 

people with disabilities are considered 

when CMS conducts its periodic 

reviews of the system. In addition, 

commenters believed that CMS should 

more clearly delineate that eligibility 

systems must be in compliance with all 

civil rights protections based on race, 

color, and national origin and be 

designed in a culturally and 

linguistically appropriate manner. Some 

commenters expressed concern 

regarding eligible children in immigrant 

families and individuals with limited 

English proficiency and the difficulties 

they experience in communicating with 

public assistance caseworkers and in 

navigating the Medicaid application 

process in general. Commenters 

suggested that new systems and/or 

modifications to current systems 

address these needs. Additionally, 

commenters suggest that the eligibility 

systems qualifying for the enhanced 

match should be in compliance with 

Title VI of the Civil Rights Act of 1964, 

section 1557 of the Affordable Care Act, 

and all related rules, regulations and 

guidance, including the Department of 

Justice’s policy document, ‘‘Guidance to 

Federal Financial Assistance Recipients 

Regarding Title VI Prohibition Against 

National Origin Discrimination 

Affecting Limited English Proficient 

Persons.’’ 

Response: While we believe the 

majority of these comments address 

determinations of eligibility, but are not 

specifically addressed to the actual 

systems technical requirements that are 

the subject of our proposed and final 

rules, we wish to clarify that we are 

requiring that States meet the standards 

and conditions outlined in § 433.112 

and that one of the standards and 

conditions relates to effective 

communication with beneficiaries. 

States should consider that State 

systems should provide a 21st Century 

customer experience for all individuals 

and should provide for person-centric 

outreach, eligibility, and enrollment. In 

terms of determining eligibility, we are 

happy to work with States regarding 

assistance to individuals with limited 

English proficiency in the context of the 

Department’s ‘‘Guidance to Federal 

Financial Assistance Recipients 

Regarding Title VI Prohibition Against 

National Origin Discrimination 

Affecting Limited English Proficient 

Persons’’ (‘‘Revised HHS LEP Guidance’’) 

accessible at: http://www.hhs.gov/ocr/ 

civilrights/resources/specialtopics/lep/ 

policyguidancedocument.html. 

Additionally, we note that section 

201(b) of the Children’s Health 

Insurance Program Reauthorization Act 

of 2009 (Pub. L. 111–3, enacted on 

February 4, 2009) (CHIPRA), added 

section 1903(a)(2)(E) to the Act to 

provide increased Federal funding for 

translation and/or interpretation 

services provided in connection with 

the enrollment of, retention of, and use 

of services by children of families where 

English is not their primary language. 

Further, we note that our current 

regulation at 45 CFR 95.633 holds that 

State agencies that acquire automated 

data processing equipment and services 

are subject to nondiscrimination 

requirements in 45 CFR parts 90, 84 and 

80 (nondiscrimination on the basis of 

age; disability; and national origin, race 

or color, respectively). Federal guidance 


srobinson on DSKHWCL6B1PROD with RULES2
21960 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

issued on September 21, 2000 by the 

Office of Civil Rights and the U.S. 

Department of Agriculture, 

Administration for Children and 

Families and the Health Care Financing 

Administration (as CMS was formerly 

known) ‘‘Policy Guidance Regarding 

Inquiries into Citizenship, Immigration 

Status and Social Security Numbers in 

State Applications for Medicaid, State 

Children’s Health Insurance program 

(SCHIP), Temporary Assistance for 

Needy Families (TANF), and Food 

Stamp Benefits’’ (‘‘Tri-Agency 

Guidance’’) also discusses application 

practices involving the citizen/legal 

immigrant children of immigrant 

parents, where questions asked of 

nonapplicant parents may deter the 

eligible children from enjoying equal 

participation in and access to the 

Medicaid program, thereby potentially 

violating prohibitions on national origin 

discrimination in Title VI of the Civil 

Rights Act). (See http://www.hhs.gov/ 

ocr/civilrights/resources/specialtopics/ 

tanf/triagencyletter.html). We also will 

continue to consider the Institute of 

Medicine’s, 2009 report, ‘‘Race, 

Ethnicity, and Language Data: 

Standardization for Health Care Quality 

Improvement,’’ for collecting race, 

ethnicity, and language. Finally, we 

expect to address section 1557 of the 

Affordable Care Act in separate 

rulemaking. 

Comment: One commenter suggested 

that, in considering the standard and 

condition supporting accurate and 

timely processing and adjudications/ 

eligibility determinations and effective 

communications with providers, 

beneficiaries, and the public, CMS 

should require States to adopt and 

implement translated notices and 

taglines in their eligibility systems to 

ensure effective communication with 

limited English proficient applicants 

and enrollees. 

Response: We will consider this 

suggestion as we develop further 

technical guidance and additional 

rulemaking. We agree that such 

practices are worthy of consideration in 

development activities. 

Comment: Other commenters 

expressed concerns regarding current 

barriers that immigrant families face 

when applying for public assistance 

benefits. Some of the barriers identified 

include the following: Requests for 

Social Security numbers in the 

application for non-applicants (that is, 

undocumented parents that wish to 

apply on behalf of their United States 

citizen children), requirements for 

income verification that nontraditional 

workers cannot access; and lack of 

translated forms and interpretive 

services for individuals with limited 

English proficiency. Commenters 

wanted CMS to consider the ‘‘TriAgency Guidance,’’ discussed in the 

responses above and require that 

eligibility determination systems should 

ensure that individuals can seek all of 

the benefits for which they or their 

family members may be eligible without 

providing unnecessary information. 

Response: These comments address 

program and policy requirements, and 

will be addressed in separate 

rulemaking. 

Comment: One commenter wanted 

CMS to require that State systems 

determine eligibility for low-income, 

lawfully present immigrants who are 

income eligible for Medicaid but whose 

immigration status makes them 

ineligible for Federal Medicaid. 

Specifically, since these individuals 

would not be eligible for Federal 

Medicaid but may be eligible for tax 

credits and Exchange coverage, their 

applications should be delivered to the 

Exchange without requiring a new 

application be submitted, while also 

providing the applicant clear notice of 

the status of their application and 

eligibility. 

Response: These comments address 

program and policy requirements, and 

will be addressed in separate 

rulemaking. However, we wish to clarify 

that one standard and condition that 

must be met to receive enhanced match 

is seamless coordination and integration 

with the Exchange. 

Comment: One commenter requested 

that CMS require that eligibility 

determination systems demonstrate how 

they will comply with sections 1411(e) 

and (g) of the Affordable Care Act. 

Section 1411(e) of the Affordable Care 

Act provides that certain procedures 

governing verification of eligibility in 

the Medicaid program, including its due 

process protections, apply to the 

Exchange. Section 1411(g) of the 

Affordable Care Act prohibits 

unnecessary questions during the 

application process and limits the use of 

information provided to the Exchange. 

Response: These comments address 

program and policy requirements and 

will be addressed in separate 

rulemaking. 

Comment: One commenter suggested 

that CMS prohibit States from 

delegating responsibility to private 

entities for administering on-line 

Medicaid eligibility systems without the 

State accepting the legal responsibility 

for the system. 

Response: These comments address 

program and policy requirements, and 

will be addressed in separate 

rulemaking. 

Comment: A commenter suggested 

that CMS oversee providing periodic 

notice to Medicaid beneficiaries for 

their individual use of medical services, 

similar to an explanation of benefits 

(EOB). The commenter believed this 

would alert Medicaid beneficiaries of 

fraud, provide treatment history, and 

could help with redeterminations. 

Response: While we appreciate the 

commenter’s proposal, such provisions 

are beyond the scope of the regulation 

of the final rule. As such, we are making 

no changes in response to the comment. 

Comment: The commenters believed 

that the requirements for timely and 

accurate processing of claims and 

adjudications should take into account 

what is known about the major factors 

that contribute to system performance, 

such as system architecture, capacity, 

and usability by workers. Commenters 

recommended that decision logic and 

coding used by eligibility systems be 

publicly available, and States should be 

required to have a process for 

identifying errors and promptly 

correcting them. Further, the 

commenters believed that systems 

should be capable of producing audit 

trails of decisions. 

Response: We agree with the 

commenter. We expect to address these 

issues when we issue performance 

metrics in a separate notice. 

Comment: Several commenters agreed 

with our requirements that the 

eligibility determination system 

produce performance data and reports 

that contribute to program, evaluation, 

continuous improvement, and 

transparency and accountability. The 

commenters suggested that we further 

specify the minimum data and 

performance reports that the system 

must generate and provide the 

specifications for these reports and that 

we should aim for basic program and 

performance data that is comparable 

across States and that addresses 

fundamental program objectives and 

compliance with key requirements. 

Commenters believed this information 

should be posted to Web sites on a 

regular and timely basis. 

Response: We agree with the 

commenters’ suggestions, and further 

clarify the applicability of this standard 

to all MMISs and not just eligibility 

systems. While the regulation 

establishes standards and conditions for 

transaction data, reports and 

performance information, additional 

specifications will be addressed in 

future subregulatory IT guidance 

continuously as the January 1, 2014 

deadline approaches. 

Comment: Some commenters stated 

that the proposed regulatory changes 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21961 

did not address the needs of Medicare 

beneficiaries for seamless enrollment to 

Medicaid, Medicare Savings Programs 

(MSPs), and Part D low income subsidy 

(LIS) support older people and people 

with disabilities. 

Response: Because the regulatory 

changes addressed availability of 

enhanced Federal funding for Medicaid 

eligibility and enrollment functions and 

necessary standards, specific provisions 

impacting enrollment of Medicare 

recipients was outside the scope of 

these changes. We would like to note 

that the newly established Federal 

Coordinated Health Care Office within 

CMS, under section 2602 of the 

Affordable Care Act, will be addressing 

administrative and regulatory barriers 

between the Medicare and Medicaid 

programs in order to better serve this 

population and it is our belief that 

improvements in Medicaid eligibility 

systems will benefit many populations 

including individuals that are dually 

eligible for Medicaid and Medicare. 

Comment: Several commenters noted 

that the systems should be built in a 

manner that allows for the effective 

expansion to other populations. 

Response: We agree that systems 

should be built to allow for expansion 

and leverage, and indeed note that many 

of the standards and conditions (such as 

separation of business rules, serviceoriented architecture, MITA, etc.) will 

effectively enable such downstream 

activities and extensions. 

Comment: Several commenters 

believed that CMS standards and 

conditions should not be the only factor 

in considering enhanced FFP. For 

example, commenters believed that 

Federal leadership, technical assistance, 

and sub-regulatory guidance should 

focus on outcomes, as well as the 

standards and conditions. 

Response: We concur that Federal 

(and State) leadership, technical 

assistance and subregulatory guidance 

needs to increasingly focus on 

outcomes. One of the standards and 

conditions is that systems effectively 

support and contribute to intended 

business results. We expect to publish 

proposed performance measures to help 

assess compliance with this condition 

and standard. 

Comment: Commenters stated that the 

standard and condition regarding use of 

a modular, flexible approach to systems 

development and the separation of 

business rules from core programming 

available in human and machine 

readable formats do not address the 

maintainability, quality or governance 

process for changes to the rule sets 

which they believe have a much greater 

effect on quality and timeliness than the 

particular syntax structure of the rules 

source code. 

Response: While we do not believe 

this particular standard and condition 

will solve all of these challenges, we 

believe it will significantly reduce 

maintenance costs and provide added 

systems flexibility in an environment 

that is continually evolving. Use of a 

modular, flexible approach to systems 

development and the separation of 

business rules from core programming 

will allow States to make changes more 

quickly and efficiently than the 

situation in place today for most States. 

We did not attempt to tackle the 

governance process as we believe that, 

while very important, the relationship 

between systems performance and 

governance can be accommodated using 

different approaches depending upon 

the specific conditions within the 

States. 

Comment: Several commenters 

recommended that the separation of 

business rules from core programming 

should recommend the use of 

commercially available business rules 

engines as opposed to custom or one-ofa-kind implementation of rules 

processing techniques. 

Response: One of our standards and 

conditions focuses on reuse and 

leveragability. This encourages and even 

demands consideration of existing 

solutions, including proprietary and 

open source solutions, solutions in 

place at other States, or solutions 

already in place within a State, before 

embarking on ground up custom 

development. We believe this standard 

and condition adequately ensures that 

States give due attention and 

consideration to these options without 

dictating specific solutions. 

Comment: Several commenters 

requested that CMS provide additional 

guidance on the business rules and 

specifically requested that since every 

State will have to meet the business 

rules requirement, it might be more 

efficient for CMS to develop a repository 

of business rules along the lines of the 

recommendations transmitted to HHS 

(recommendation 3.2) by the HIT Policy 

and Standards Committees. States could 

then adopt and adapt the rules to their 

own systems. 

Response: We agree with the 

commenters that we should provide 

additional guidance on the business 

rules. As mentioned, we will continue 

to provide leadership, technical 

assistance, and guidance with an eye 

toward the January 1, 2014 date for 

required operation of the Exchanges and 

Medicaid expansion. We have also 

provided that States should consider 

other documents that articulate the 

Department’s strategy such as the IT 

guidance 1.0, Guidance for Exchange 

and Medicaid Information Technology 

Systems, and continue to consider such 

guidance in meeting the requirements of 

this final rule. As the commenters 

stated, the HIT Policy and Standards 

Committees’ recommendations should 

be considered when developing systems 

that comply with the standard and 

condition regarding ensuring alignment 

with, and incorporation of, industry 

standards: HIPAA security, privacy, and 

transaction standards; accessibility 

standards under section 508 of the 

Rehabilitation Act and compliance with 

Federal civil rights laws; and standards 

adopted by Secretary under sections 

1104 and 1561 of the Affordable Care 

Act. Our final rules will require that 

systems include usability features or 

functions that accommodate the needs 

of persons with disabilities, including 

those who use assistive technology. As 

noted in the IT guidance issued 

November 30, 2010, State enrollment 

and eligibility systems already are 

subject to the program accessibility 

provisions of section 504 of the 

Rehabilitation Act, which include an 

obligation to provide individuals with 

disabilities an equal and effective 

opportunity to benefit from or 

participate in a program, including 

those offered through electronic and 

information technology. The 

Department noted in that guidance that 

a State’s Web sites, interactive kiosks, 

and other information systems 

addressed by section 508 Standards 

would be viewed as being in 

compliance with section 504 if such 

technologies meet the 508 standards. 

The Department also encouraged States 

to follow either the 508 guidelines or 

guidelines that provider greater 

accessibility to individuals with 

disabilities, and noted that States could 

consult the latest Section 508 guidelines 

issued by the US Access Board or W3C’s 

Web Content Accessibility Guidelines 

(WCAG) 2.0 (see http://www.accessboard.gov/sec508/guide/index.htm). 

Therefore, we believe that as a result of 

complying with section 504, many 

States will already be in or moving 

toward compliance with the 

accessibility standards we have 

included in this final rule. 

Lastly, we will be developing a 

repository of business rules; however, 

we wish to clarify that it may take some 

time to populate. Considering the 

deadlines imposed by the Affordable 

Care Act, we realize a repository of 

business rules may be helpful to some 

States and not others depending upon a 

given State’s IT configuration at the time 


srobinson on DSKHWCL6B1PROD with RULES2
21962 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

it is in need of such rules. We are also 

considering the possibility of the 

development of model rules, in a 

collaborative project with States. 

Comment: One commenter requested 

further clarification for the standards 

and conditions listed in § 433.112(b)(2) 

that require that the system meet the 

requirements of Part 11 of the State 

Medicaid Manual, and § 433.112(b)(12) 

that require that ensuring alignment 

with, and incorporation of, industry 

standards: HIPAA security, privacy, and 

transaction standards; accessibility 

standards under section 508 of the 

Rehabilitation Act and compliance with 

Federal civil rights laws; and standards 

adopted by Secretary under sections 

1104 and 1561 of the Affordable Care 

Act. The commenter questioned how 

CMS will measure compliance with 

these requirements and if States are 

found to be out of compliance with this 

requirement in one area such as a small 

part of the conversion to ICD–10 coding 

or revision of the 5010 transaction 

standards, will States risk losing all 

enhanced FFP. 

Response: States are required to meet 

all conditions for their mechanized 

claims processing and information 

retrieval system described in Title XIX 

of the Act in order to receive FFP. We 

have the authority to withhold 

enhanced FFP (or potentially all FFP) 

for issues of noncompliance with the 

conditions listed in Title XIX of the Act. 

It is not our intention to withhold FFP 

for a frivolous or insubstantial reason. 

We will give States the opportunity to 

correct any failures that might endanger 

FFP. However, a States’ continued or 

persistent failure to adopt industry 

standards in a timely and compliant 

way would, in fact, place enhanced FFP 

at risk. We note that we have outlined 

a transition period for State MMIS 

systems to come into compliance that 

allows for up to 38 months of transition 

while, at the same time, still ensuring 

that State systems move expeditiously 

towards improvement and advanced 

technology (see our discussion below in 

section III.E. regarding the transition 

period). 

D. Public Feedback and Suggestions 

Related to the APD Process 

Comment: Several commenters 

suggested that the APD process and the 

Federal organizations responsible for its 

administration will likely be taxed in an 

unprecedented way by the volume of 

work spurred by the implementation of 

the Health Information Technology for 

Economic and Clinical Health Act and 

the Affordable Care Act. The 

commenters noted that even when 

applied to projects supporting a single 

program with a fairly limited set of 

requirements, the many moving parts in 

the APD process can work more slowly 

than anticipated and lead to unforeseen 

outcomes. Consequently, the 

commenters suggested that the APD 

process be reformed. Commenters 

suggested that CMS make the APD 

process more transparent and that 

making the large history of APD 

documents and outcomes available to 

other States would promote increased 

collaboration. Other commenters agreed 

and indicate that with many States 

submitting APDs for both eligibility and 

MMIS systems within the same window 

of time, the APD approval process will 

put increased pressure on both State 

and Federal agencies to meet deadlines. 

The commenters urged CMS to provide 

an APD template and to examine ways 

to expedite the APD process to make 

sure it can support the critical 

timeframe and urged CMS to consult 

with States and the vendor community 

to identify options to ensure timely 

approval of APDs. Additionally, 

commenters recommended that CMS 

consider the waiver option in 45 CFR 

95.627 as a method to streamline the 

enhanced funding approval process 

during this time limited availability of 

enhanced funds. This could allow States 

to submit alternative approaches to 

hasten implementation of needed 

systems changes. 

Response: On October 28, 2010, HHS 

released a final rule (75 FR 66319) that 

introduced a new concept of ‘‘high risk’’ 

APDs that specified software 

development as a ‘‘high risk’’ trigger. 

Additionally, the period for Federal 

review currently identified in 45 CFR 

95.611(d) allows up to 60 days for APD 

approval, disapproval, or requests for 

information. 

We realize it will be important to 

conduct APD reviews quickly so as not 

to delay the projects the States are 

pursuing. As we are issuing this rule, 

we are also preparing additional 

guidance for APDs, and for the 

governance and collaboration process 

we will use to work with States to 

minimize project risk, optimize 

outcomes, and to ensure successful 

compliance with the seven standards 

and conditions added by this final rule. 

In response to the commenters’ 

suggestions to make APDs more 

transparent and public, we agree. We 

are evaluating how, and in what form, 

to make APDs available as they are 

submitted. 

E. Issues Related to the Transition 

Period for Compliance 

Comment: One commenter proposed 

that the regulation not be retroactive to 

initiatives with an APD already. 

Response: While not directly 

suggested here, we believe it is 

important to clarify that enhanced 

funding is currently not available for 

eligibility initiatives that have already 

been approved by CMS. However, we 

have provided that States currently 

receiving enhanced FFP for MMIS have 

a period of transition to come into 

compliance with the standards and 

conditions outlined in this rule. 

Specifically, for new MMIS 

development (new APDs requesting 90 

percent FFP for design, development, 

installation, and enhancement), we 

provide for no transition period. For 

MMIS development already underway 

(approved APDs providing 90 percent 

enhanced FFP), we proposed a 12- 

month transition period (beginning with 

the effective date of this final rule) in 

which to submit an updated 

Implementation APD (IAPD) detailing 

how systems would be modified to meet 

the required conditions and standards. 

For maintenance and operations of 

MMIS currently receiving 75 percent 

FFP, we proposed a 36-month transition 

period in which to submit an IAPD with 

plans to upgrade or modify systems to 

meet the required conditions and 

standards. Since we are providing that 

this final rule is effective upon 

publication, we are revising the 

transition periods by 2 months (to 14 

and 38 months, respectively). 

For new MMIS development (new 

APDs requesting 90 percent FFP for 

design, development, installation, and 

enhancement), we will continue to 

provide for no transition period. For 

MMIS development already underway 

(approved APDs providing 90 percent 

enhanced FFP), we provide for a 14- 

month transition period (beginning with 

the effective date of this final rule) in 

which to submit an updated 

Implementation APD (IAPD) detailing 

how systems would be modified to meet 

the required conditions and standards. 

For maintenance and operations of 

MMIS currently receiving 75 percent 

FFP, we provide for a 38-month 

transition period (beginning with the 

effective date of this final rule) in which 

to submit an IAPD with plans to 

upgrade or modify systems to meet the 

required conditions and standards. 

Additionally, we have discussed a 

period of transition to come into 

compliance with the standards and 

conditions outlined in this rule for 

eligibility systems as well. Specifically, 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21963 

for eligibility systems (currently 

receiving 50 percent for development 

and maintenance and operations), we 

are providing for no transition period 

for new requests for enhanced funding 

for eligibility systems. States with 

eligibility systems currently under 

development (approved APDs providing 

50 percent FFP) can update their APDs 

to reflect how they would comply with 

these standards and conditions in order 

to begin receiving 90 percent FFP. 

Similarly, eligibility systems currently 

receiving 50 percent FFP for State 

expenditures would need to comply 

with our final standards and conditions 

to receive a 75-percent FFP. 

We are making no change to the 

transition period for eligibility 

determination systems. 

Comment: One commenter questioned 

whether CMS will impose additional 

deadlines on States following the 

submission of an IAPD requesting 

funding and specifying the plans for 

updating MMISs within the 36 month 

(now 38 month) transition period. 

Response: In the context of this 

regulation, any more standards and 

conditions (in addition to the 7 finalized 

in this rule) would be subject to notice 

and public comment. Consequently, 

States would have an opportunity to 

provide CMS with feedback. 

Comment: One commenter stated 

strong objections to the transition period 

for existing development projects and 

established MMIS applications for the 

submission of an IAPD to achieve CMS’ 

proposed new MMIS standards. The 

commenter believed that this time 

limitation is extremely burdensome to 

States at a time when resources are 

already strapped. The commenter 

believed the development of an IAPD 

will require a planning period and this 

will be occurring at the same time that 

States are overhauling their eligibility 

and determination systems. Further, the 

commenter believed that States are 

already struggling to meet the HIPAA 

5010 and the ICD–10 mandates. The 

State staff, contractors, and vendors 

conducting the work on these mandates 

are the same ones who would be 

involved in the planning necessary to 

submit an IAPD and they would be the 

same ones implementing the changes to 

the MMIS. The commenter believed the 

rule requires adherence to standards 

that don’t exist and from the State’s 

perspective the MMIS requirements 

represent an unfunded mandate. The 

commenter expressed concern that the 

requirement to ‘‘hurry up and meet’’ the 

new standards and conditions will turn 

current MMISs into ‘‘lame duck’’ 

systems. The commenter noted that 

with all States required to undertake 

major eligibility systems projects, 

implement 5010 and ICD–10, and 

already facing impossible budget 

constraints, now is not the time to 

mandate onerous new requirements that 

in many cases require replacement of 

perfectly workable MMIS systems. 

Response: In the January 16, 2009 

Federal Register, HHS published two 

final rules: The ASC X12 Version 5010, 

NCPDP Version D.0, NCPDP Version 3.0 

(74 FR 3296) and the ICD–10 code sets 

(74 FR 3328) were published by HHS on 

January 16, 2009 in 2 separate final 

rules. These rules are available at 

www.regulations.gov. In NCPDP 

Version D.0, NCPDP Version 3.0, HHS 

adopted ASC X12 Version 5010 and 

NCPDP Version D.0 for the HIPAA 

transactions that currently require the 

use of the ASC X12 Version 4010/4010A 

and NCPDP Version 5.1 standards. In 

that rule, HHS also adopts a new 

standard for Medicaid subrogation for 

pharmacy claims transactions, known as 

NCPDP Version 3.0. For Version 5010 

and Version D.0, the compliance date 

for all covered entities is January 1, 

2012. This gives the industry enough 

time to test the standards internally, to 

ensure that systems have been 

appropriately updated, and then to test 

between trading partners before the 

compliance date. The compliance date 

for the Medicaid subrogation standard is 

also January 1, 2012, except for small 

health plans, which have until January 

1, 2013 to come into compliance. 

In ICD–10 code sets final rule, HHS 

modified the standard medical data 

code sets for coding diagnoses and 

inpatient hospital procedures by 

concurrently adopting the International 

Classification of Diseases, 10th 

Revision, Clinical Modification (ICD– 

10–CM) for diagnosis coding and the 

International Classification of Diseases, 

10th Revision, Procedural Coding 

System (ICD–10–PCS) for inpatient 

hospital procedure coding. These new 

code sets replace the current 

International Classification, 9th 

Revision, Clinical Modification, 

Volumes 1 and 2 and the International 

Classification, 9th Revision, Clinical 

Modification, Volume 3 for diagnosis 

and procedure codes respectively. The 

implementation date for ICD–10–CM 

and ICD–10–PCS is October 1, 2013 for 

all covered entities. Thus, we believe 

there has been ample time and ample 

guidance to States so that they can move 

towards compliance with these 

requirements. 

We disagree that the new standards 

and conditions and the timeframe for 

meeting them represent an ‘‘unfunded 

mandate.’’ We are not imposing any 

mandate on the State, but rather are 

creating standards which States will 

need to meet if they wish to receive an 

enhanced 90 or 75 percent FFP rate 

under the Act. States that do not wish 

to come up to these standards would 

continue to be eligible for a 50 percent 

FFP. 

Additionally, in considering the 

deadlines outlined in the Affordable 

Care Act for operation of the Exchanges 

and the requirement that Exchanges also 

determine Medicaid eligibility, we 

believe, and States have agreed, that the 

procurement process for projects of the 

size and scope required to meet the 

challenges of the Affordable Care Act 

can take several months to complete. 

Thus, we considered these challenges 

and determined it necessary to provide 

flexibility by instituting a transition 

period and by providing additional 

financial support, additional IT 

guidance, Federal technical assistance, 

and leadership so that States can design 

systems that can meet the requirements 

of the Affordable Care Act. 

Comment: One commenter questioned 

whether MMIS upgrades and 

modifications (as envisioned by a States 

IAPD) may be phased in over a period 

of years, so that by a certain end-date, 

the MMIS is fully compliant, or whether 

our final rule would require that the 

IAPD provide that the MMIS actually 

meet all standards and conditions by the 

end of the transition period. 

Response: We believe the commenter 

is referring to the 36-month (now 38- 

month) transition period that applies to 

current MMISs receiving 75 percent FFP 

for maintenance and operations. For this 

purpose, States will have up to 38 

months to submit an IAPD. This 

transition period ensures that new 

systems receiving Federal funding are 

eventually designed in a manner that 

results in the most efficient use of 

technology. In reviewing APDs, we will 

be considering individual State factors 

such as budget, schedule and risk, and 

we will be evaluating the State’s 

proposed timeline and pathway in an 

effort to ensure full compliance with the 

standards and conditions at the earliest 

opportunity. 

F. Comments Regarding CMS’ Strategy 

for Monitoring and Oversight, Including 

Performance Reviews 

Comment: One commenter asked 

CMS to elaborate on how frequently the 

agency will perform periodic reviews— 

such as would reviews occur every 6 

months, every year, or less frequently. 

Response: We are not, at this time, 

creating specific deadlines for the 

periodic reviews. As mentioned earlier, 

large systems transformations will be 

needed in order to accomplish the 


srobinson on DSKHWCL6B1PROD with RULES2
21964 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

requirements outlined in the Affordable 

Care Act. As such, we plan to work with 

States, and as systems are designed and 

developed, we will be conducting 

reviews on a continuous basis keeping 

in mind the January 1, 2014 and 

December 31, 2015 deadlines. We are 

making no further revisions to the rule 

as a result of this comment. 

Comment: A few commenters 

supported ‘‘the back-end review’’ of 

MMIS solutions, including certification 

and on-going performance monitoring. 

Many commenters requested to see 

more explicit details regarding 

oversight, frequency of reporting, record 

layout, and the specific performance 

metrics CMS will use to ensure ongoing 

successful performance. Other 

commenters suggested a ‘‘modernized’’ 

approach to the performance of these 

activities. Rather than basing the 

processes on the 30-year old traditional 

review of output, the commenters 

suggested focusing on whether ‘‘the 

implementation achieves the business 

goals that the funding was supposed to 

accomplish.’’ The commenters believed 

that aligning these reviews to the goals 

set forth in the approved planning 

documents will result in solutions that 

more closely align with program 

objectives and will result in substantial 

reductions in burdens for both State and 

CMS staff. 

Additionally, the commenters 

requested clarification on whether CMS 

is considering adopting a modular 

certification process in order to 

complement and align with the modular 

system development process. 

Response: We appreciate the support 

for conducting periodic reviews of 

MMISs. Our performance measures will 

tie directly to the standards and 

conditions that are being issued in this 

final rule, and will be communicated to 

States through subsequent documents. 

We intend to publish performance 

metrics in a Federal Register notice, and 

then allow a period for public 

comments. The performance results of 

States and systems will be the primary 

driver of the periodicity and intensity of 

any CMS reviews. We also intend to 

focus reviews on whole systems, 

modules or components, based on those 

results. 

Comment: Many commenters asked 

that CMS outline the expected 

timeframe for setting up the 

performance measures. Commenters 

believed that the timeframe could 

potentially impact the timeline for 

planning, design, and implementation 

of system enhancements for compliance. 

The commenters proposed an alignment 

of standards for ongoing review with 

standards used to evaluate States’ 

eligibility for enhanced funding, to 

ensure that proposed systems 

modifications lead to achieving 

standards established for ongoing 

monitoring. 

Response: As stated above, we intend 

to publish performance metrics in 

subsequent notices, with a request for 

comments. We will consult with States 

and others prior to publishing metrics. 

To guide States in their development 

activities, we will issue a series of 

documents in concert with or shortly 

after publication of this rule, including 

IT Guidance 2.0, sub-regulatory 

guidance on complying with the seven 

standards and conditions, and 

instructions and protocols for APD 

submission and review. MITA 3.0 

guidance will follow later this year. We 

emphasize to States that we expect to 

see a highly iterative and fluid approach 

to business process development, 

blueprinting, specifications, and 

development as we approach 

implementation of the coverage 

expansions and eligibility 

simplifications within the Affordable 

Care Act. We will give strong 

recognition of the iterative and 

collaborative approach and we intend to 

support Affordable Care Act 

implementation as we enforce the 

standards and conditions in this rule. 

G. Issues Related to Partial Systems 

Improvements or Modernizations 

Comment: One commenter 

recommended that the requirement for 

tracking ongoing progress should be 

eliminated for enhancement(s) made to 

address a specific requirement. These 

may be reviewed for compliance, once 

after implementation of enhancement, 

and subsequently any time changes are 

made that would impact the initial 

enhancement. 

Response: We disagree with the 

commenter. To receive enhanced 

funding, State systems must meet with 

the standards and conditions outlined 

in this rule. We expect that a key 

outcome of our technology investments 

is a much higher degree of interaction 

and interoperability in order to 

maximize value and minimize burden 

and costs on providers, beneficiaries, 

and States. Additionally, we wish to 

ensure that enhanced FFP is approved 

only when infrastructure and 

application projects maximize the 

extent to which they utilize current 

technology development and 

deployment practices and produce 

reliable business outputs and outcomes. 

Further, MITA principles also require 

ongoing improvement—such that the 

system continues to meet certain 

milestones. Thus, States making 

enhancements to address a specific 

requirement would, in accordance with 

MITA principles, have to continue to 

look to industry standards to ensure that 

the enhancement is evolving along with 

such standards. Tracking ongoing 

progress is critical to success. 

H. Specific Issues by Regulatory 

Provision 

Comment: One commenter noted that 

CMS has removed the authority in 

§ 433.110(a)(2)(iii) and § 433.130 to 

provide for waivers of conditions of 

approval, conditions of re-approval, and 

FFP reductions in certain 

circumstances. The commenter 

expressed concern that removal of the 

current waiver flexibility to take into 

account State-specific circumstances 

will increase the potential for loss of 

enhanced Federal match with 

catastrophic budget impact to States. 

Response: We agree with the 

commenter that language in sections 

433.110(a)(2)(iii) and 433.130 is 

removed. These sections implemented 

section 1903(r) of the Act which 

requires reductions in FFP due to a 

State under section 1903(a) of the Act if 

a State fails to meet certain deadlines for 

operating a mechanized claims 

processing and information retrieval 

systems or if the system fails to meet 

certain conditions of approval or reapproval. We determined it is necessary 

to delete the waiver authority in 

§ 433.110(a)(2)(iii) and § 433.130 since it 

is redundant and we noted in the 

preamble of the proposed rule to make 

conforming changes to 42 CFR part 433, 

subpart C in an effort to remove 

redundancy. We have, however, 

retained the authority in § 433.131 

which provides for waivers of an FFP 

reduction in certain circumstances if the 

State is unable to comply with the 

conditions of approval or of reapproval. 

Comment: One commenter requests 

that we clarify whether the intent of 

striking § 433.111(b)(3) includes 

deleting approved enhancements to 

mechanized systems, including claims 

processing and information retrieval 

systems, rather than merely removing 

the exclusion for eligibility 

determination systems. 

Response: To clarify the striking of 

§ 433.111(b)(3), we intended to 

specifically remove the language 

indicating that eligibility determination 

systems are not part of mechanized 

claims processing and information 

retrieval systems. However, in doing so, 

we realized that some may question our 

removal of the language in 

§ 433.111(b)(3) relating to 

enhancements; and since we agree with 

the commenter that enhancements are 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21965 

necessary to ensure that technology 

continues to improve, we are revising 

the regulation text in this final rule to 

include this language relating to 

enhancements. 

Comment: One commenter remarked 

that in § 433.112, we have linked 

paragraph (a) with paragraph (c) thus 

creating, in the commenter’s view, the 

elimination of the current opportunity 

for enhanced FFP at 90 percent for 

MMIS development and enhancements. 

The commenter believed that we have 

failed to recognize the true status of 

States’ claims processing systems and 

future evolution. 

Response: We disagree with the 

commenter. While States will continue 

to have an opportunity to receive 

enhanced FFP at 90 percent for most 

MMIS development and enhancements, 

assuming such systems meet the 

regulatory standards and conditions, 

§ 433.112(c) simply indicates the more 

limited rule for eligibility determination 

systems that funding at enhanced rates 

will not be available for the design, 

development, installation or 

enhancement of such State eligibility 

determination systems after December 

31, 2015. However, this deadline 

applies only to the eligibility 

component of MMIS, not the entire 

MMIS. 

Comment: One commenter is 

concerned that we have not clearly 

defined the regulatory requirements 

specified in § 433.112(b)(10), (11), and 

(13) through (16) and that these 

regulatory requirements lack explicit 

and nationally-recognized standards for 

measuring achievement. 

Response: In proposing the 7 

standards and conditions that States 

must meet in order to receive enhanced 

funding, we included information as to 

the importance of each of the standards 

and conditions. In addition, in some 

cases, we provided examples of how we 

will ensure that State systems meet the 

standards and conditions. For example, 

for the standard and condition that 

speaks to promoting sharing, leverage, 

and reuse of Medicaid technologies and 

systems within and among States, we 

specified that we would examine APDs 

to ensure that States make appropriate 

use and reuse of components and 

technologies available off the shelf or 

with minimal customization to 

maximize return on investment and 

minimize project risk. Further, we 

indicated in the proposed rule that we 

intend to issue further interpretations 

regarding each standard. In our 

preamble, we also provided an example 

of measurement; that is; we indicated 

that we would measure how a system 

meets requirements for providing 

notices to beneficiaries, claims, and 

applications and renewals, proper 

determinations, and experience with 

appeals, interoperability with 

Exchanges, as well as traditional 

systems standards such as availability 

and down time. Thus, while we have 

provided detailed information regarding 

the standards and conditions, we also 

recognize that future interpretations will 

be forthcoming. We intend to ensure 

that any such interpretations, as well as 

performance metrics, are developed 

with input from the State agencies. As 

stated above, for performance measures, 

we will publish such measures in a 

Federal Register notice and provide for 

a period of comment. 

Comment: One commenter requested 

that we reinstate the stepped down 

reduction in FFP that was outlined in 

§ 433.113 prior to our proposed rule and 

eliminate the 25 percent reduction 

proposed in § 433.119 should there be a 

decertification action. 

Response: We do not believe we have 

the authority to provide for the stepped 

down reductions in FFP as previously 

outlined in § 433.113. The specific 

authority to provide such stepped down 

reductions that previously existed in 

section 1903(r) of the Act was repealed 

by section 4753 of BBA. However, as 

explained elsewhere in preamble, we do 

have the authority to, on the basis of our 

review, determine that a system is no 

longer leading to more effective, 

efficient, or economical operation of the 

State plan, under section 1903(a)(3) of 

the Act, and therefore, to remove the 

enhanced FFP. 

Comment: One commenter asks CMS 

to reconsider the proposed limit on the 

opportunity for enhanced funding at 75 

percent for eligibility determination 

systems operation to only those systems 

approved prior to December 31, 2015. 

The commenter believed that the new 

standards and conditions listed in 

§ 433.112 coupled with the typical 

timeframes for design, development, 

and implementation make it unlikely 

that the majority of States will achieve 

approval by the specified date. 

Response: We disagree with the 

commenter. As stated elsewhere in this 

preamble, the Affordable Care Act 

requires that eligibility changes be in 

place by January 1, 2014, and we have 

already provided an additional 2 years 

beyond that date for States to meet the 

standards and conditions for enhanced 

funding for design, development, or 

installation. 

Comment: One commenter requested 

that CMS reinstate the criteria 

previously listed in § 433.120(b) 

indicating that any reductions in FFP 

would be tied to a reasoned 

determination that a system is failing to 

meet certification requirements in a 

significant manner. 

Response: First, we are clarifying that 

any deficiencies found as the result of 

future reviews would be subject to a 

period of corrective action before 

making a determination that enhanced 

FFP would be discontinued. 

Additionally, while we will be issuing 

future guidance regarding the specific 

performance review measurements, we 

do agree that it is likely that enhanced 

FFP would only be discontinued in 

situations where the system is failing to 

meet the standards and conditions in a 

significant manner. 

I. Issues Related to the Regulatory 

Impact Analysis, Including the Cost 

Estimates, and Information Collection 

Comment: One commenter stated that 

CMS underestimated States’ eligibility 

system replacement costs. The 

commenter pointed out that the impact 

analysis assumes that new systems, on 

average, would cost $50 million over 3 

years for each State and that assumption 

includes design, development, and 

implementation. The commenter 

indicated that one State’s plan to 

modernize/replace their Medicaid 

Eligibility System cost a total of $200 

million over the course of 4 years. 

Response: In the Regulatory Impact 

Analysis of the proposed rule, we 

outlined the uncertainty surrounding 

the assumptions and associated cost 

estimates relating to the expenditures 

for the necessary technology, 

innovation, and implementation 

requirements. This uncertainty not only 

included recognizing the difficulty 

surrounding the extent of the necessary 

technology advancements, but how 

these changes would affect State 

systems. We concluded that time, 

money, resources, and considerable 

effort would be necessary for States to 

make changes to their current 

technology. Our estimates also 

accounted for the additional uncertainty 

surrounding the rate of adoption for 

States to make necessary changes in the 

proposed rule. As a result of the 

uncertainty in our assumptions 

surrounding State behavior, including 

adoption rates and the associated costs 

for implementing new systems within 

the timeframe assessed, we presented 

our concluding aggregate cost estimates 

within a 25 percent lower and upper 

range. This allowed us to reflect a larger 

cost estimate range, so that both States 

throughout the lower to higher bands of 

expenditures may be reflected. 

In further substantiating the initial 

estimates, our experience regarding 

State costs for eligibility systems is 


srobinson on DSKHWCL6B1PROD with RULES2
21966 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

based on considerably larger integrated 

systems involving SNAP and ACF 

programs, of which Medicaid typically 

has a 30 to 45 percent share based on 

how States choose to allocate costs. 

Thus, we recognize that total system 

costs may be higher than the $50 

million (total computable Medicaid 

costs) originally estimated, but the 

specific Medicaid share of those costs 

reflects a portion of the total; that is, on 

average $50 million (total computable). 

The focus of our estimates for this rule 

is strictly Medicaid costs and not total 

system costs. Furthermore, we recognize 

larger States may have higher costs, 

while smaller States may experience 

lower costs. The $50 million estimate is 

our best effort to estimate the midpoint 

for the Medicaid-only costs, with the 

estimated majority of States 

experiencing costs somewhere within 

the 25 percent lower to upper cost range 

provided in the regulatory impact 

analysis. As a result, we are not making 

revisions to the Regulatory Impact 

Analysis or associated cost estimates as 

a result of this comment. 

Comment: One commenter noted that 

we indicate there are no additional 

information collection requirements; 

however, the commenter questioned the 

evolving certification requirements and 

asked if this means that additional 

information collection will be 

necessary. 

Response: We considered that 

additional data may be necessary in 

terms of the performance measurements 

and compliance with our standards and 

conditions. However, we believe this 

process will be part and parcel to the 

APD process; that is, we believe that 

States will submit information to us as 

part of the APDs. We indicated in our 

proposed rule that States already submit 

to us for review and approval APDs for 

funding for automated data processing 

in accordance with Federal regulations 

at 45 CFR Part 95, Subpart F. However, 

we agree with the commenter that any 

new APDs for Medicaid systems that 

perform eligibility and enrollment 

functions will need to address the 

requirements of this final rule. 

Consequently, we developed an 

expedited APD checklist specific to the 

purposes of this rule and submitted to 

OMB for review and approval the 

burden associated with the information 

collection. 

IV. Provisions of the Final Regulations 

After consideration of the comments 

reviewed and further analysis of specific 

issues, with a few modifications, we are 

adopting the provisions of the 

November 8, 2010 proposed rule as 

final. 

Specifically, we are finalizing the 

following provisions: 

A. Medicaid Eligibility Determinations 

In § 433.112, we have revised the 

definitions such that Medicaid 

eligibility determinations will be 

considered ‘‘claims’’ of eligibility and 

Medicaid eligibility determination 

systems are potentially eligible for the 

enhanced 90 and 75 percent FFP under 

section 1903(a)(3) of the Act. This final 

policy will apply only upon the 

effective date of this final rule. 

Additionally, enhanced FFP does not 

eliminate the responsibility of States to 

ensure compliance with cost allocation 

principles outlined in OMB Circular A– 

87. 

Further, enhanced FFP at the 90 

percent rate for design, development, 

installation, or enhancement of 

eligibility determination systems will be 

available for State expenditures only 

through calendar year (CY) 2015, even 

if work on approved APDs continues 

after 2015. Enhanced FFP at the 75 

percent rate to maintain and operate 

systems that previously qualified for 90 

percent FFP will be available after 2015 

if those systems continue to meet the 

requirements specified in this final rule. 

Additionally, enhanced funding at 75 

percent to maintain and operate systems 

meeting the standards and conditions is 

available prior to December 31, 2015, 

(but after the effective date of any final 

rule), in recognition of the fact that 

some States may have already invested 

in improvements that will allow 

systems to qualify without the need for 

additional enhanced development, 

design, installation or enhancement 

funding. For any State receiving 

enhanced FFP at 90 percent or 75 

percent prior to December 31, 2015, 

systems must continue to meet the 

requirements, standards and conditions 

specified in this rule in order to 

continue receiving 75 percent enhanced 

funding after December 31, 2015. 

We are limiting the timeframe for 

which enhanced 90 percent FFP is 

available for design, development, 

installation or enhancement of 

automated eligibility systems because 

we view the changes made by the 

Affordable Care Act for the new 

eligibility rules in Medicaid as requiring 

an immediate, substantial commitment 

to, and investment in, technologies. In 

order words, we expect that changes to 

State systems will be completed with 

the start of the new Affordable Care Act 

provisions and support the operation of 

Exchanges on January 1, 2014. However, 

we realize that States may need to make 

additional changes to State systems to 

provide for additional functionality in 

support of Medicaid eligibility rule 

modifications. Thus, we are providing 

for an additional 2 years of 90 percent 

enhanced FFP so that States’ systems 

would have additional time to ensure 

the peak performance of their systems. 

States would need to incur costs for 

goods and services furnished no later 

than December 31, 2015 to receive 90 

percent FFP for the design, 

development, installation or 

enhancement of an eligibility 

determination system. This would mean 

that if an amount has been obligated by 

December 31, 2015, but the good or 

service has not yet been furnished by 

that date, then such expenditure would 

not be eligible for enhanced FFP. 

Further, we are limiting the availability 

of 75 percent enhanced funding for 

maintenance and operations to those 

eligibility determination systems that 

have complied with the standards and 

conditions in this rule by December 31, 

2015. 

B. Standards and Conditions for 

Receiving Enhanced Funding 

Under sections 1903(a)(3)(A)(i) and 

1903(a)(3)(B) of the Act, we are 

delineating standards and conditions 

that must be met by States in order for 

their Medicaid technology investments 

(including traditional claims processing 

systems, as well as eligibility systems) 

to be eligible for the enhanced match. 

These authorities provide that the 

enhanced FFP of 90 percent is not 

available unless the Secretary 

determines that a system is ‘‘likely to 

provide more efficient, economical, and 

effective administration of the plan’’ as 

described in section 1903(a)(3)(A)(i) of 

the Act. Similarly, section 1903(a)(3)(B) 

of the Act specifies that enhanced FFP 

of 75 percent is not available for 

maintenance or operations unless the 

system is ‘‘of the type described in 

subparagraph (A)(i)’’ and is approved by 

the Secretary. 

We define MITA at § 433.111(c) and 

we build on the work of MITA by 

codifying that enhanced FFP (either at 

the 90 percent rate for design, 

development, installation or 

enhancement; or at the 75 percent rate 

for maintenance and operations) is only 

available when certain standards and 

conditions are met. Specifically, we 

articulate a set of standards and 

conditions that States must commit to in 

order to receive enhanced FFP: 

• Use of a modular, flexible approach 

to systems development, including the 

use of open interfaces and exposed 

application programming interfaces; the 

separation of business rules from core 

programming; and the availability of 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21967 

business rules in both human and 

machine readable formats. 

• Align to and advance increasingly 

in MITA maturity for business, 

architecture, and data. 

• Ensure alignment with, and 

incorporation of, industry standards: the 

Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

security, privacy and transaction 

standards; accessibility standards 

established under section 508 of the 

Rehabilitation Act, or standards that 

provide greater accessibility for 

individuals with disabilities, and 

compliance with Federal civil rights 

laws; standards adopted by the 

Secretary under section 1104 of the 

Affordable Care Act; and standards and 

protocols adopted by the Secretary 

under section 1561 of the Affordable 

Care Act. 

• Promote sharing, leverage, and 

reuse of Medicaid technologies and 

systems within and among States. 

• Support accurate and timely 

processing of claims (including claims 

of eligibility), adjudications, and 

effective communications with 

providers, beneficiaries, and the public. 

• Produce transaction data, reports, 

and performance information that 

would contribute to program evaluation, 

continuous improvement in business 

operations, and transparency and 

accountability. 

• Ensure seamless coordination and 

integration with the Exchange (whether 

run by the State or Federal government), 

and allow interoperability with health 

information exchanges, public health 

agencies, human services programs, and 

community organizations providing 

outreach and enrollment assistance 

services. 

To ensure that States have an 

opportunity to come into compliance 

with these requirements, the States 

currently receiving enhanced FFP for 

MMIS will have a period of transition to 

come into compliance with the 

standards and conditions listed above. 

Under our schedule, the following 

transition periods will apply: 

• For new MMIS development (new 

APDs requesting 90 percent FFP for 

design, development, installation, and 

enhancement): No transition period. 

• For MMIS development already 

underway (approved APDs providing 90 

percent enhanced FFP): 14-month 

transition period (beginning with the 

effective date of this final rule) in which 

to submit an updated Implementation 

APD (IAPD) detailing how systems will 

be modified to meet the required 

conditions and standards. 

• For maintenance and operations of 

MMIS currently receiving 75 percent 

FFP: 38-month transition period 

(beginning with the effective date of this 

final rule) in which to submit an IAPD 

with plans to upgrade or modify 

systems to meet the required conditions 

and standards. 

• Eligibility systems (currently 

receiving 50 percent for development 

and maintenance and operations): 

Because eligibility systems are not 

currently receiving enhanced funding, 

there is no transition period and no 

need for a transition period for new 

requests for enhanced funding for 

eligibility systems. Any APDs 

requesting enhanced funding for 

eligibility systems funding following the 

effective date of this regulation will 

have to meet the standards and 

conditions above. States with eligibility 

systems currently under development 

(approved APDs providing 50 percent 

FFP) can update their APDs to reflect 

how they will comply with these 

standards and conditions in order to 

begin receiving 90 percent FFP. 

Similarly, eligibility systems currently 

receiving 50 percent FFP for State 

expenditures will need to comply with 

our final standards and conditions to 

receive a 75-percent FFP. 

Our standards and conditions will be 

enforced through both front-end and 

back-end review processes. Front-end 

review will entail APD review and prior 

approval processes where States apply 

for enhanced match before entering into 

IT investment projects. Back-end 

reviews will entail certifications of the 

systems capabilities, as well as ongoing 

performance monitoring. 

C. Reviews and Performance Monitoring 

of MMISs 

In this final rule, we are also 

reinstituting periodic performance 

reviews of MMISs (including eligibility 

determination systems receiving 

enhanced funding). Our reviews will 

focus on performance measures we set 

to determine whether States are meeting 

the standards and conditions in this 

final rule. For example, we will measure 

how a system meets requirements for 

providing notices to beneficiaries, 

claims and applications intake and 

acceptance, efficient timely and 

accurate processing of claims, 

applications and renewals, proper 

determinations, and experience with 

appeals, interoperability with 

Exchanges, as well as traditional 

systems standards such as availability 

and down time. We expect to see such 

data automatically generated by the 

systems in which we invest, with 

standards and conditions established in 

consultation with States and 

stakeholders, and based on industry 

experience. 

Additionally, we will evaluate 

systems based upon their 

interoperability with other Federal and 

State health programs. Thus, in 

operating their systems, States will need 

to ensure that they consult documents 

articulating the Department’s strategy on 

interoperability, such as the Guidance 

for Exchange and Medicaid Information 

Technology Systems. 

Any failures or deficiencies will be 

the basis for investigation and 

opportunity for corrective action before 

making a determination that enhanced 

FFP will be discontinued. 

To reflect the passage of the BBA, we 

have modified § 433.119 through 

§ 433.121 to eliminate any reference to 

Systems Performance Reviews (SPRs) 

but, more importantly, to reflect the 

requirements for performance 

monitoring and review. 

D. Partial Systems Improvements or 

Modernizations 

As discussed in response to comment, 

as well as in the proposed rule, in 

referring to ‘‘system’’ or ‘‘technology,’’ we 

recognize that States will likely use a 

system of systems in support of MMIS 

functions. States submitting partial 

system updates will need to submit and 

have an approved roadmap for 

achieving full compliance with the 

standards and conditions in the 

regulation. We will track progress 

against an approved roadmap when 

determining if system updates meet the 

standards and conditions for the 

enhanced match. For enhancements 

intended to satisfy a specific 

requirement or to address a compliance 

issue, for example, ICD–10 or 

implementation of the National Correct 

Coding Initiative, our final policy is that 

States making enhancements to address 

a specific requirement would have to 

continue to make improvements and 

continue to look to industry standards 

to ensure that the enhancement is 

evolving along with such standards. 

E. Changes to Federal Regulations at 42 

CFR Part 433 Subpart C—Mechanized 

Claims Processing and Information 

Retrieval Systems 

We are deleting § 433.113 (referencing 

the need to have mechanized claims 

processing and information retrieval 

systems by a certain deadline, or face 

reduced Federal Medicaid funds as a 

consequence) and § 433.130 (referencing 

waiver provisions for qualifying States 

with a certain 1976 population and 

expenditures). We have also deleted 

various cross-references to these 

provisions. 


srobinson on DSKHWCL6B1PROD with RULES2
21968 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

We have also made conforming 

amendments to various provisions in 

part 433, subpart C to conform to our 

final policy that eligibility 

determination systems may now be 

considered part of mechanized claims 

processing and information retrieval 

systems. We have eliminated the 

statement in the current § 433.111(b)(3) 

that ‘‘Eligibility determination systems 

are not part of mechanized claims 

processing and information retrieval 

systems or enhancements to those 

systems.’’ In response to comments we 

have reinserted language in 

§ 433.111(b)(3) to include information 

regarding approved enhancements to 

mechanized systems, including claims 

processing and information retrieval 

systems. We have also eliminated the 

provision at § 433.112(c), which 

currently states that ‘‘eligibility 

determination systems are not part of 

mechanized claims processing and 

information retrieval systems and are 

not eligible for 75 percent FFP under 

this Subpart. These systems are also not 

eligible for 90 percent FFP for any APD 

approved after November 13, 1989.’’ We 

have replaced this with language 

making clear that 90 percent FFP for the 

design, development, installation, or 

enhancement of an eligibility 

determination system is available only 

before December 31, 2015, even if work 

on an approved APD continues after 

2015. In this final rule, we also are 

amending the regulation to make clear 

that States will need to incur costs for 

goods and services furnished no later 

than December 31, 2015 to receive 

90 percent FFP for the design, 

development, installation, or 

enhancement of an eligibility 

determination system. We are also 

codifying in this final rule that FFP at 

75 percent is not available for eligibility 

determination systems that do not meet 

the standards and conditions by 

December 31, 2015. 

States will be required to supply 

information and demonstrate 

consideration of the standards and 

conditions to CMS for review and 

approval and as part of the APD before 

we will grant approval of enhanced 

funding. We will scrutinize all 

investments and will decline to approve 

enhanced funding (resulting in 50 

percent FFP) that do not demonstrate 

careful consideration and application of 

these standards and conditions. 

V. Waiver of Delay in Effective Date 

Section 553(d) of the Administrative 

Procedure Act (APA) (5 U.S.C. 553(d)) 

ordinarily requires a 30-day delay in the 

effective date of final rules after the date 

of their publication. In addition, the 

Congressional Review Act at 5 U.S.C. 

801, requires a major rule to take effect 

no earlier than 60 days after the date the 

rule is published in the Federal 

Register. Both the 30- and 60-day delays 

in effective date can be waived, 

however, if an agency finds for good 

cause that the delay is impracticable, 

unnecessary, or contrary to the public 

interest, and the agency incorporates a 

statement of the findings and its reasons 

in the rule issued. 8 U.S.C. 808(2). 

We find that it is both unnecessary 

and contrary to the public interest to 

delay the effective date of this final rule. 

This rule is altering the definition of a 

mechanized claims processing and 

information retrieval system, such that 

the definition will now include 

automated eligibility determination 

systems. As a result, enhanced Federal 

funding should be available to States 

that seek to alter their systems, or that 

have already altered their systems, in a 

manner that meets all of our 

requirements. 

We believe it is in the public interest 

to immediately ensure the availability of 

such enhanced funding, so that States 

are able to begin the process of altering 

their systems as soon as possible. States 

will be required to have systems in 

place that comply with the Affordable 

Care Act by the beginning of 2014, and 

the sooner States are able to start relying 

on Federal funding to begin 

modernizing their systems, the more 

likely they will be able to meet these 

deadlines. In addition, at least a few 

States already have systems that would 

comply with all of our standards and 

conditions. Therefore, an immediate 

effective date would allow such States 

to receive funding immediately to 

support such modernization efforts. For 

these reasons, it would be contrary to 

the public interest to delay the 

availability of enhanced funding. 

In addition, given that States will 

have a period of time to come into 

compliance with the terms and 

conditions we have promulgated in this 

final rule, it is unnecessary to delay an 

effective date, as an immediate effective 

date will not require any State to 

immediately alter its systems. Rather, 

for eligibility determination systems, the 

rule simply conditions enhanced 

funding on States being in compliance 

with the terms and conditions of this 

final rule—but there is no immediate 

requirement that systems change. For 

current MMISs already receiving 

enhanced funding, the rule does impose 

new terms and conditions to continue 

the receipt of such enhanced funding, 

but a transition period is built in to 

allow States time to comply and this 

transition period has been extended by 

2 months to account for the immediate 

effective date in this final rule. 

For the above reasons, we find good 

cause, based on both public interest, 

and lack of necessity for a delayed 

effective date, to waive both the 30- and 

60-day delayed effective dates and to 

make this rule effective upon 

publication. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 

60-day notice in the Federal Register 

and solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

The changes specified in this final 

rule impose new reporting, 

recordkeeping or disclosure 

requirements for submission of APDs. 

Initially, we indicated that States 

already submit to us for review and 

approval APDs for funding for 

automated data processing in 

accordance with Federal regulations at 

45 CFR Part 95, Subpart F. We noted, 

however, in section III.I. of this final 

rule that we received one comment on 

the burden associated with this final 

rule. As a result of review of this 

comment and the development of a new 

expedited ADP checklist specific to the 

purposes of this final rule, we are 

seeking emergency review and approval 

from OMB in order for the expedited 

APD checklist to be available to States 

at the time this rule becomes effective. 

In addition, we are soliciting public 

comments on the information 

collections and associated burden 

contained in this final rule. 

An Expedited Eligibility and 

Enrollment (E&E)—APD checklist 

(CMS–10385; OMB number 0938–NEW) 

has been developed for States that 

participate in Early Innovator grants or 

Establishment grants to complete and 

submit to CMS for review and prior 

approval in order to receive enhanced 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21969 

federal funding for Medicaid 

Information Technology (IT) system(s) 

projects related to eligibility and 

enrollment functions. 

Specifically, this checklist: 

(1) Guides States in obtaining prior 

approval to secure 90 percent Federal 

financial participation (FFP) for the 

design, development, implementation 

(DDI), and/or enhancements of a 

system(s); and 75 percent FFP for 

maintenance and operations [42 CFR 

§ 433 Subpart C]. 

(2) Contains Seven Standards & 

Conditions that the State’s APD must 

meet. 

(3) Contains Federal requirements for 

both Planning and Implementation 

activities of an APD [45 CFR part 95 

subpart F (Revised October 28, 2010)]. 

(4) Streamlines the process for States 

by requiring fewer documents, as well 

as potentially shortening the review 

timeframe for CMS, and if applicable, 

other Agencies, of system projects 

related to the Affordable Care Act. 

Although Federal Regulations allow up 

to 60 days for APD approvals, our goal 

is to provide an approval within 30 

business days upon receipt. 

We estimate that there are 56 State 

Medicaid programs (including the 

District of Columbia and 5 territories) 

and that it will take approximately 5 

hours for each State program to 

complete the APD template with the 

requested information which in 

aggregate will take 280 total hours to 

complete one checklist, and 840 total 

hours to complete the anticipated 

average response of 3 per Medicaid 

program. We reviewed 2009 National 

Labor Statistics and speculate that the 

job role of Management Analyst (13– 

1111) with a mean hourly wage estimate 

rate of $40.70 would be completing the 

data for the template. Based on these 

estimates, the total cost to complete the 

APD template would be $2,279.20 (15 

hours × hourly rate of 40.70 = 610.50 × 

56 programs = $34,188.00). We 

acknowledge that there are uncertainties 

regarding these burden estimates. 

ESTIMATED ANNUAL REPORTING BURDEN REPORTING

[States] 

Section 

Estimated 

number of 

respondents 

Frequency of 

responses 

Average 

number of 

annual 

responses 

Average 

burden per 

response 

(hours) 

Annual 

burden hours 

States that participate in 

Early Innovator grants or 

Establishment grants 

complete expedited 

checklist.

42 CFR Part 433 Subpart C 

and 45 CFR Part 95 Subpart F.

56 3 168 5 840 

Total ............................. ............................................. 56 3 168 5 840 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access our Web site at 

http://www.cms.gov/ 

PaperworkReductionActof1995/PRAL/ 

list.asp#TopOfPage or e-mail your 

request, including your address, phone 

number, OMB number, and CMS 

document identifier, to 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office at 410–786– 

1326. 

In commenting on the information 

collections please reference the 

document identifier or OMB control 

number. To be assured consideration, 

comments and recommendations must 

be submitted in one of the following 

ways by June 20, 2011: 

1. Electronically. You may submit 

your comments electronically to http:// 

www.regulations.gov. Follow the 

instructions for ‘‘Comment or 

Submission’’ or ‘‘More Search Options’’ 

to find the information collection 

document(s) accepting comments. 

2. By regular mail. You may mail 

written comments to the following 

address: CMS, Office of Strategic 

Operations and Regulatory Affairs, 

Division of Regulations Development, 

Attention: Document Identifier/OMB 

Control Number, Room C4–26–05, 7500 

Security Boulevard, Baltimore, 

Maryland 21244–1850. 

VII. Regulatory Impact Analysis 

A. Statement of Need 

This regulation is important, since 

with the passage of the Affordable Care 

Act, we expect that changes to eligibility 

policies and business processes will 

need to be adopted. System 

transformations will be needed in most 

States to apply new rules to adjudicate 

eligibility for the program; enroll 

millions of newly eligible individuals 

through multiple channels; renew 

eligibility for existing enrollees; operate 

seamlessly with newly authorized 

Health Insurance Exchanges 

(‘‘Exchanges’’); participate in a system to 

verify information from applicants 

electronically; incorporate a streamlined 

application used to apply for multiple 

sources of coverage and financial 

assistance; and produce notices and 

communications to applicants and 

beneficiaries concerning the process, 

outcomes, and their rights to dispute or 

appeal. 

We wish to ensure that a key outcome 

of our technology investments is a much 

higher degree of interaction and 

interoperability in order to maximize 

value and minimize burden and costs 

on providers, beneficiaries, and States. 

Thus, we are committed to providing 90 

percent FFP for design, development, 

and installation of eligibility 

determination systems through CY 2015 

or 75 percent FFP for maintenance and 

operations of such systems that meet the 

new regulatory requirements. We have 

provided that States must commit to a 

set of standards and conditions to 

receive the enhanced FFP. This 

enhanced FFP reduces the financial 

burden on States to 10 percent of the 

costs compared to the 50 percent 

financial burden currently in place and 

ensures that States utilize current 

technology development and 

deployment practices and produce 

reliable business outputs and outcomes. 

B. Overall Impact 

The estimated costs of the Federalshare for Medicaid administration have 

been reflected in the FY 2012 

President’s Budget. 

We have examined the impact of this 

final rule as required by Executive 

Order 12866 (September 30, 1993, 

Regulatory Planning and Review), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (September 19, 1980; 

Pub. L. 96–354) (RFA), section 1102(b) 


srobinson on DSKHWCL6B1PROD with RULES2
21970 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

of the Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104–4), Executive 

Order 13132 on Federalism (August 4, 

1999), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for rules with economically 

significant effects ($100 million or more 

in any 1 year). This final rule is 

anticipated to have an annual effect on 

the economy of $100 million or more, 

making it an economically significant 

rule under the Executive Order 12866 

and hence a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a RIA that to the best 

of our ability presents the costs and 

benefits of this final rule. 

States will continue to receive the 

traditional 50 percent FFP for 

reasonable administrative expenditures 

for designing, developing, installing, or 

enhancing the Medicaid portion of their 

integrated eligibility determination 

systems. Similarly, States will continue 

to receive 50 percent FFP for 

expenditures associated with the 

maintenance and operation of such 

systems. 

This final rule, however, addresses 

the impact related to enhanced FFP for 

mechanized claims processing and 

information retrieval systems, including 

those that perform eligibility 

determination and enrollment activities, 

as well as the Medicaid portion of 

integrated eligibility determination 

systems that the Secretary determines 

are likely to provide more efficient, 

economical, and effective 

administration of the State plan. 

In projecting the impact to the Federal 

government and State Medicaid 

agencies, we considered how the 

standards and conditions on MMIS and 

the availability of enhanced match for 

State eligibility systems through CY 

2015 will impact State investments over 

the 10-year period of 2011 through 

2020. As discussed in section VI.C of 

this final rule, we considered the 

expected costs to the Federal 

government of providing the enhanced 

match rate, changes in State investments 

due to the application of standards and 

conditions on MMIS (including 

eligibility systems), and possible savings 

as a result of the use of more modern, 

reusable, and efficient technologies. 

C. Potential Savings 

We considered a number of ways in 

which application of the standards and 

conditions, including increased use of 

MITA, could result in savings; however, 

as no States have yet reached MITA 

maturity, it is difficult to predict the 

savings that may accrue over any certain 

timeframe. These areas include the 

following: 

(1) Modular technology solutions: As 

States, or groups of States, will begin to 

develop ‘‘modular’’ technology 

solutions, these solutions will be used 

by others through a ‘‘plug and play’’ 

approach, in which pieces of a new 

MMIS will not need to be reinvented 

from scratch every time, but rather, 

could be incorporated into the MMIS 

framework. We assume that savings 

associated with reusable technology 

could be achieved in both the 

development and operation of new 

systems. We expect that States will 

dispense with the need to engage in 

significant requirements analyses and 

the need to pay for new modules to be 

built when there are successful models 

around the country that they can draw 

down from a ‘‘technology bank’’ 

maintained by the Federal or State 

governments. 

(2) Increased use of industry 

standards and open source technologies: 

While HIPAA administrative transaction 

standards have existed for 5 to 7 years, 

use of more specific industry standards 

to build new systems will allow such 

systems to exchange information 

seamlessly—a major goal of the 

Affordable Care Act, and one that is the 

explicit purpose of the standards work 

envisioned within section 1561 of the 

Act. We also believe that more open 

source technology will encourage the 

development of software solutions that 

address the needs of a variety of diverse 

activities—such as eligibility, member 

enrollment, and pharmacy analysis of 

drug claims. Software that is sufficiently 

flexible to meet different needs and 

perform different functions could result 

in cost savings, as States are able to use 

the systems without making major 

adaptations to them. 

(3) Maintenance and operations: As 

States take up the changes in this final 

rule, the maintenance/operation costs of 

new systems should decrease. Less 

maintenance should be required than 

that necessary to reengineer special, 

highly customized systems every time 

there is a new regulatory or legal 

requirement. 

(4) Reengineering business processes, 

more Web-based solutions, serviceoriented architecture (SOA): Savings are 

likely to result from the modular design 

and operation of systems, combined 

with use of standardized business 

processes, as States are compelled to 

rethink and streamline processes as a 

result of greater reliance on technology. 

D. Calculation of MMIS Costs 

MMIS costs are estimated at 

approximately $10.0 billion over the 5- 

year budget window and $23.0 billion 

over the 10-year budget window. These 

costs represent only the Federal share. 

To calculate the impact of the 

regulation on MMIS costs, we assumed 

that new systems on average will cost 

$150 million over 3 years for each State 

($50 million total cost per year, or $45 

million Federal costs at 90 percent FFP 

per year). We have identified that ten 

States have sophisticated systems that 

are very close to meeting the 

implemented regulation standards. As a 

result, we assumed the remaining 41 

States will have approved APDs in place 

to replace or update their MMIS 

between FY 2011 and FY 2013 to 

comply with the new regulation 

standards and conditions. 

We assumed that the States 

modernizing earlier in the cycle will see 

increased development, design, and 

installation costs, whereas States 

moving later will see increased 

development, design, and installation 

savings as they are able to take 

advantage of efficiencies gained by the 

early adopter States. Specifically, for 

those States that update or build new 

systems in FY 2011 and FY 2012, we 

assumed a 10 percent annual cost 

increase to new MMIS systems for 

design, development, and installation. 

For those States that build new systems 

in FY 2013 and FY 2014, we assumed 

a 5 percent annual savings to new MMIS 

systems for design, development, and 

installation. While it is difficult to 

predict State behavior, we believe all 

States will comply with the standards 

and conditions in this regulation to 

receive the 90 percent FFP, and have 

assumed that for the purpose of these 

estimates. 

For maintenance, we assumed those 

States that have implemented the new 

regulation requirements would see a 20 

percent annual savings, and for 

operations, we assumed those States 

that have implemented the new 

regulation requirements would see a 5 

percent annual savings. 

Based on these assumptions, we 

estimate the net Federal budgetary 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21971 

impact on baseline MMIS costs from FY 

2011 through 2015 of implementing the 

new regulation is approximately $1.1 

billion, and the net Federal budgetary 

impact from FY 2011 through 2020 is 

approximately $557 million in savings. 

E. Calculation of Eligibility Systems 

Costs 

For eligibility systems, we applied the 

same methodology we used to calculate 

net Federal costs to MMIS under the 

new regulation. 

To meet the requirements of the 

Affordable Care Act, States would have 

to build new systems or modernize 

existing systems. Most States will add 

new functionalities to interface with the 

Exchanges and implement new 

adaptability standards and conditions 

(such as incorporation of new mandated 

eligibility categories). We assume 

baseline costs for development, design, 

and installation at 50 percent FFP for all 

States are approximately $815 million 

from FY 2011 through 2015 and $1.1 

billion from FY 2011 through 2020. 

Eligibility systems costs for 

maintenance and operations at 50 

percent for all States are approximately 

$1.2 billion from FY 2011 through 2015 

and $2.7 billion from FY 2011 through 

2020. These costs represent only the 

Federal share. 

To calculate the impact of the 

implemented regulation, we assumed 

that new systems on average will cost 

$50 million over 3 years for each State 

($16.7 million total cost per year, or $15 

million Federal costs at 90 percent FFP 

per year). We assumed that 25 States 

will replace their eligibility systems in 

FY 2011 through CY 2015. We assumed 

no States will build new systems past 

FY 2014 (beyond what is assumed in the 

baseline) due to the timing of the start 

of major coverage provisions in the 

Affordable Care Act, the length of time 

needed to build new systems 

(approximately 3 years), and the 

enhanced match ending after CY 2015. 

For maintenance, we assumed States 

that have implemented new systems 

meeting the required standards and 

conditions will see a 20 percent annual 

savings, and for operations, we assumed 

those States that have implemented the 

new systems would see a 5 percent 

annual savings. These assumptions are 

consistent with our approach for savings 

under MMIS in the regulation. 

The net Federal cost impact from FY 

2011 through 2015 of implementing our 

regulation on eligibility systems is 

approximately $2.2 billion, and the net 

Federal cost from FY 2011 through 2020 

is $2.9 billion. These costs represent 

only the Federal share. 

F. Total Net Cost Impact 

Combining the impact of the 

regulation, the total net Federal cost 

impact is approximately $3.3 billion for 

FY 2011 through 2015 and 

approximately $2.3 billion for FY 2011 

through 2020. We see lower costs over 

the 10-year budget window due to the 

increased savings to MMIS over time. 

Aligned with these Federal net costs, 

States will see a corresponding decrease 

in their net State share due to the 

enhanced Federal match for eligibility 

systems they will receive through CY 

2015 and the benefits accrued to their 

systems by putting in place the set of 

standards and conditions articulated in 

our regulation. Combining the impact of 

the regulation, the total net State budget 

impact is approximately $792.5 million 

in savings for FY 2011 through 2015 and 

approximately $1.9 billion in savings 

from for FY 2011 through 2020. Similar 

to the Federal budget impact, we expect 

to see higher savings achieved by States 

over the 10-year budget window due to 

the increased savings to MMIS over 

time. 

The projections in this analysis are 

subject to considerable uncertainty, as 

they reflect projected costs based on 

technology and innovation. While we 

believe that advancements in 

technology will likely have an impact 

on States’ systems, it is difficult to 

predict with certainty how significant 

the technology advancements may be 

and how they would affect State 

systems. For example, we have worked 

for many years developing the MITA 

maturity model. We believe that States 

should adopt the MITA framework as 

the basis for all MMIS replacements and 

major system upgrades related to the 

MMIS, and while we are requiring that 

States move to a MITA framework in 

order to receive enhanced funding, to 

date there are no States that have 

reached full MITA maturity. 

Consequently, having no States at full 

MITA maturity indicates that it takes 

time, money, and considerable effort for 

States to make changes to their current 

technology. 

Additional uncertainty exists because 

we are unsure of the rate of adoption for 

States to make the changes in this final 

rule. The enhanced FFP is available for 

approximately 5 years, from CY 2011 

through CY 2015, and States could 

upgrade or replace their systems at any 

point within the 5-year period. Further, 

States may simply choose to make 

moderate changes to existing systems, 

and even with the 90 and 75 percent 

enhanced FFP, such moderate changes 

could be less costly overall for States 

than replacing their systems. 

Additional uncertainty exists about 

the rate of State adoption since some 

States may consider the costs needed to 

move to a more advanced system to be 

too high to undertake such a project. 

Similarly, States may decide not to 

make changes due to implementation of 

performance requirements and the 

performance reviews. 

We acknowledge that there are 

uncertainties regarding our 

assumptions, including State behavior, 

and the associated cost estimates with 

respect to States implementing new 

systems within the timeframe assessed. 

However, we have offered our estimates 

with a 25 percent upper and lower range 

to capture such uncertainty in actual 

implementation outcomes. Due to a 

number of uncertainties in our 

assumptions, we believe a range of 

estimates better represents the net cost 

impact of this regulation. Tables 1 and 

2 represent a 25 percent range for these 

aggregate net costs to the Federal and 

State government, respectively. It is 

important to point out that we believe 

that systems transformation is necessary 

to meet the vision of the Affordable Care 

Act and consequently, these costs are 

necessary and will provide for efficient 

systems that in the end will provide for 

more efficient and effective 

administration of the State plan. The 

separate impacts to MMIS and eligibility 

systems are summarized below. 

TABLE 1—NET FEDERAL COST IMPACT

OF REGULATION

[Dollars in millions] * 

FY 2011–2020 

MMIS (excluding eligibility) ................... (417.4)–(695.7) 

Eligibility Systems ..... 2,154.6–3,591.0 

Total ................... 1,737.2–2,895.3 

* Numbers in parentheses represent savings 

to the Federal government. 


srobinson on DSKHWCL6B1PROD with RULES2
21972 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

TABLE 1.1—NET FEDERAL COST IMPACT OF REGULATION BY FISCAL YEAR

[Dollars in millions] * 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011– 

2020 

MMIS (excluding Eligibility) .............. 231.1 469.4 435.6 54.3 (83.0 ) (322.6 ) (329.0 ) (333.1 ) (337.4 ) (341.8 ) (556.6 ) 

Eligibility Systems ............................ 328.9 436.7 634.6 469.3 337.4 127.9 130.5 133.1 135.8 138.5 2,872.8 

Total .......................................... 560.0 906.1 1,070.2 523.6 254.4 (194.7 ) (198.5 ) (200.0 ) (201.6 ) (203.3 ) 2,316.2 

* Numbers in parentheses represent savings to the Federal government. 

TABLE 2—NET STATE COST IMPACT

OF REGULATION

[Dollars in Millions] * 

FY 2011–2020 

MMIS (excluding eligibility) ................... (170.6)–(284.4) 

TABLE 2—NET STATE COST IMPACT

OF REGULATION—Continued 

[Dollars in Millions] * 

FY 2011–2020 

Eligibility Systems ..... (1,255.4)–(2,092.3) 

TABLE 2—NET STATE COST IMPACT

OF REGULATION—Continued 

[Dollars in Millions] * 

FY 2011–2020 

Total ................... (1,426.0)–(2,376.7) 

* Numbers in parentheses represent savings 

to State governments. 

TABLE 2.1—NET STATE COST IMPACT OF REGULATION BY FISCAL YEAR

[Dollars in millions] * 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011–2020 

MMIS (excluding eligibility) ................... 25.7 52.2 48.4 1.3 (24.1 ) (61.6 ) (65.2 ) (66.6) (68.0) (69.5) (227.5) 

Eligibility Systems .... (285.6 ) (276.7 ) (258.0 ) (139.9 ) 64.3 (149.5 ) (152.5 ) (155.5) (158.6) (161.8) (1,673.8) 

Total .................. (259.9 ) (224.6 ) (209.6 ) (138.6 ) 40.2 (211.1 ) (217.7 ) (222.1) (226.6) (231.3) (1,901.3) 

* Numbers in parentheses represent savings to State governments. 

G. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

requires agencies to prepare a 

Regulatory Flexibility Analysis to 

describe and analyze the impact of final 

rule on small entities unless the 

Secretary can certify that the regulation 

will not have a significant impact on a 

substantial number of small entities. In 

the healthcare sector, Small Business 

Administration size standards define a 

small entity as one with between $7 

million and $34 million in annual 

revenues. For the purposes of the RFA, 

essentially all non-profit organizations 

are considered small entities, regardless 

of size. Individuals and States are not 

included in the definition of a small 

entity. 

Since this rule will affect States, 

which are not considered small entities, 

the Secretary has determined that this 

final rule will not have a significant 

economic impact on a substantial 

number of small entities. Therefore, we 

have not prepared a regulatory 

flexibility analysis. 

Additionally, section 1102(b) of the 

Act requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operation of a 

substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined 

that this rule will not have a significant 

impact on the operations of a substantial 

amount of small rural hospitals. There 

is no negative impact on the program or 

on small businesses. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule that may result in expenditures in 

any one year of $100 million in 1995 

dollars (updated annually for inflation), 

by State, local, or tribal governments, in 

the aggregate, or by the private sector. In 

2011, that threshold is approximately 

$136 million. This final rule does not 

mandate expenditures by the State 

governments, local governments, tribal 

governments, in the aggregate, or the 

private sector, of $136 million. This rule 

provides that States can receive 

enhanced FFP if States ensure that the 

mechanized claims processing and 

information retrieval systems (MMIS) 

including, for a limited time, those that 

perform eligibility determination and 

enrollment activities, as well as the 

Medicaid portion of integrated 

eligibility determination systems, meet 

with certain conditions including 

migrating to the MITA framework and 

meet certain performance requirements. 

This is a voluntary activity; that is, 

States can continue to receive the 

traditional 50 percent FFP match rate 

for reasonable administrative 

expenditures for the design, 

development, or enhancement and 

maintenance and operations to the 

Medicaid portion of integrated 

eligibility determination systems to 

make eligibility determinations for Title 

XIX of the Act. This final rule imposes 

no substantial mandates on States. The 

State role in determining Medicaid 

eligibility is dependent upon the 

population type; specifically, some 

populations such as the elderly, blind, 

and disabled are typically determined 

by the Medicaid State agency whereas 

other population types may have their 

Medicaid eligibility determined by cashassistance programs. Mechanized claims 

processing and information retrieval 

systems, including those that perform 

eligibility determination and enrollment 

activities and the Medicaid portion of 

integrated eligibility determination 

systems, at a minimum, will need to be 

updated. However, providing 90 percent 

FFP for design, development, and 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21973 

installation or 75 percent FFP for 

maintenance and operations of such 

systems reduces the financial burden on 

States to 10 percent of the costs 

compared to the 50 percent financial 

burden currently in place. Specifically, 

while this entails certain procedural 

responsibilities, these activities do not 

involve substantial State expense; 

providing 90 percent and 75 percent 

FFP reduces the total State outlay. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We wish to note again that this is a 

voluntary activity and as such this 

regulation does not mandate any direct 

costs on State or local governments. 

Consequently, the requirements of 

Executive Order 13132 are not 

applicable. 

H. Alternatives Considered 

We considered that an alternative to 

our final rule could be that we not 

provide enhanced match for a limited 

time for State systems builds and not 

provide Federal standards and 

conditions. In fact, States could 

continue to receive the traditional 50 

percent FFP for reasonable 

administrative expenditures for 

designing, developing, installing, or 

enhancing Medicaid eligibility 

determination systems. Similarly, States 

could continue to receive 50 percent 

FFP for expenditures associated with 

the maintenance and operation of such 

systems. 

However, States must continue to 

meet the requirements of Federal 

legislation. Since the Affordable Care 

Act significantly alters Medicaid 

eligibility and requires coordination 

with the Exchanges, it is imperative that 

States have the resources and systems to 

be able to meet this challenge. 

Therefore, we believe that if States 

were left to develop eligibility systems 

without Federal standards and 

conditions and without the benefit of 

enhanced match, States systems may 

not comport with our ultimate goal; that 

is, that design, development, 

implementation, and operation of IT 

and systems projects are in support of 

the Affordable Care Act. 

I. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in Table 3, we have 

prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this rule. This table 

provides our best estimate of the net 

costs decrease in Medicaid payments as 

a result of the changes presented in this 

rule. 

TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED NET COSTS, FROM FY 2011 TO FY 2020 

[In $millions] 

Category 

Transfers 

Year dollar Units discount rate 

Period covered 

2010 7% 3% 

Annualized Monetized Transfers .............. Primary Estimate .......................................... $311.31 $266.55 FYs 2011–2020 

Low Estimate ................................................ 233.48 199.91 FYs 2011–2020 

High Estimate ............................................... 389.14 333.19 FYs 2011–2020 

From ............................................................. Federal Government to State Governments 

Annualized Monetized Transfers .............. Primary Estimate .......................................... ¥$189.87 ¥$189.82 FYs 2011–2020 

Low Estimate ................................................ ¥142.40 ¥142.36 FYs 2011–2020 

High Estimate ............................................... ¥237.34 ¥237.28 FYs 2011–2020 

From ............................................................. State Governments to System Vendors, Integrators 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 433 

Administrative practice and 

procedure, Child support Claims, Grant 

programs—health, Medicaid, Reporting 

and recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 433—STATE FISCAL 

ADMINISTRATION 

■ 1. The authority citation for part 433 

continues to read as follows: 

Authority: Section 1102 of the Social 

Security Act, (42 U.S.C. 1302). 

Subpart C—Mechanized Claims 

Processing and Information Retrieval 

Systems 

■ 2. Section 433.110 is amended by 

revising paragraph (a)(2) to read as 

follows: 

§ 433.110 Basis, purpose, and 

applicability. 

(a) * * * 

(2) Section 1903(r) of the Act, which 

imposes certain standards and 

conditions on mechanized claims 

processing and information retrieval 

systems (including eligibility 

determination systems) in order for 

these systems to be eligible for Federal 

funding under section 1903(a) of the 

Act. 

* * * * * 

■ 3. Section 433.111 is amended by— 

■ A. Revising paragraph (b)(3). 

■ B. Adding paragraph (c). 

The revision and addition read as 

follows: 

§ 433.111 Definitions. 

* * * * * 

(b) * * * 

(3) Approved enhancements to the 

system. 

(c) ‘‘Medicaid Information Technology 

Architecture (MITA)’’ is defined at 

§ 495.302 of this chapter. 

■ 4. Section 433.112 is amending by– 

■ A. Revising paragraphs (a), (b)(2), and 

(c). 

■ B. Amending paragraph (b)(7) by 

removing the reference ‘‘45 CFR 74.171’’ 

and adding in its place, the reference 

‘‘45 CFR 74.27(a)’’. 

■ C. Adding paragraphs (b)(10) through 

(b)(16). 


srobinson on DSKHWCL6B1PROD with RULES2
21974 Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 

The revisions and additions read as 

follows: 

§ 433.112 FFP for design, development, 

installation or enhancement of mechanized 

claims processing and information retrieval 

systems. 

(a) Subject to paragraph (c) of this 

section, FFP is available at the 90 

percent rate in State expenditures for 

the design, development, installation, or 

enhancement of a mechanized claims 

processing and information retrieval 

system only if the APD is approved by 

CMS prior to the State’s expenditure of 

funds for these purposes. 

(b) * * * 

(2) The system meets the system 

requirements, standards and conditions, 

and performance standards in Part 11 of 

the State Medicaid Manual, as 

periodically amended. 

* * * * * 

(10) Use a modular, flexible approach 

to systems development, including the 

use of open interfaces and exposed 

application programming interfaces; the 

separation of business rules from core 

programming, available in both human 

and machine readable formats. 

(11) Align to, and advance 

increasingly, in MITA maturity for 

business, architecture, and data. 

(12) Ensure alignment with, and 

incorporation of, industry standards: 

The HIPAA privacy, security and 

transaction standards; accessibility 

standards established under section 508 

of the Rehabilitation Act, or standards 

that provide greater accessibility for 

individuals with disabilities, and 

compliance with Federal civil rights 

laws; standards adopted by the 

Secretary under section 1104 of the 

Affordable Care Act; and standards and 

protocols adopted by the Secretary 

under section 1561 of the Affordable 

Care Act. 

(13) Promote sharing, leverage, and 

reuse of Medicaid technologies and 

systems within and among States. 

(14) Support accurate and timely 

processing and adjudications/eligibility 

determinations and effective 

communications with providers, 

beneficiaries, and the public. 

(15) Produce transaction data, reports, 

and performance information that 

would contribute to program evaluation, 

continuous improvement in business 

operations, and transparency and 

accountability. 

(16) Ensure seamless coordination 

and integration with the Exchange, and 

allow interoperability with health 

information exchanges, public health 

agencies, human services programs, and 

community organizations providing 

outreach and enrollment assistance 

services. 

(c) FFP is available at 90 percent of a 

State’s expenditures for the design, 

development, installation, or 

enhancement of an eligibility 

determination system that meets the 

requirements of this subpart and only 

for costs incurred for goods and services 

provided on or after April 19, 2011 and 

on or before December 31, 2015. 

§ 433.113 [Removed] 

■ 5. Section 433.113 is removed. 

■ 6. Section 433.114 is amended by— 

■ A. Amending paragraph (a) by 

removing the reference ‘‘(h)’’ and by 

adding in its place the reference ‘‘(i)’’. 

■ B. Revising paragraph (b). 

The revision reads as follows: 

§ 433.114 Procedures for obtaining initial 

approval; notice of decision. 

* * * * * 

(b) If CMS disapproves the system, the 

notice will include all of the following 

information: 

(1) The findings of fact upon which 

the determination was made. 

(2) The procedures for appeal of the 

determination in the context of a 

reconsideration of the resulting 

disallowance to the Departmental 

Appeals Board. 

■ 7. Section 433.116 is amended by — 

■ A. Amending paragraph (a) by 

removing the phrase ‘‘Subject to 42 CFR 

433.113(c),’’ and by adding in its place 

‘‘Subject to paragraph (j) of this 

section,’’. 

■ B. Amending paragraph (b) by 

removing the reference ‘‘(h)’’ and by 

adding in its place the reference ‘‘(i)’’. 

■ C. Adding new paragraphs (i) and (j). 

The additions read as follows: 

§ 433.116 FFP for operation of mechanized 

claims processing and information retrieval 

systems. 

* * * * * 

(i) The standards and conditions of 

§ 433.112(b)(10) through (b)(16) of this 

subpart must be met. 

(j) Beginning and no earlier than, 

April 19, 2011, FFP is available at 75 

percent of a State’s expenditures for the 

operation of an eligibility determination 

system that meets the requirements of 

this subpart. FFP at 75 percent is not 

available for eligibility determination 

systems that do not meet the standards 

and conditions by December 31, 2015. 

§ 433.117 [Amended] 

■ 8. Section 433.117 is amended by— 

■ A. Amending paragraph (a) by 

removing the phrase ‘‘all conditions’’ 

and adding in its place the phrase ‘‘all 

standards and conditions’’. 

■ B. Amending paragraph (c)(2) by 

removing the reference ‘‘(h)’’ and adding 

in its place the reference ‘‘(j)’’. 

■ 9. Section 433.119 is amended by 

revising paragraphs (a) and (c) to read as 

follows: 

§ 433.119 Conditions for reapproval; 

notice of decision. 

(a) CMS periodically reviews each 

system operation initially approved 

under § 433.114 of this subpart and 

reapproves it for FFP at 75 percent of 

expenditures if the following standards 

and conditions are met: 

(1) The system meets the 

requirements of § 433.112(b)(1), (3), (4), 

(7) through (16) of this subpart. 

(2) The system meets the conditions 

of § 433.116 (d) through (j). 

(3) The system meets the standards, 

conditions, and performance standards 

for reapproval and the system 

requirements in part 11 of the State 

Medicaid Manual as periodically 

amended. 

(4) A State system must meet all of the 

requirements of this subpart within the 

appropriate period CMS determines 

should apply as required by § 433.123(b) 

of this subpart. 

* * * * * 

(c) After performing the review under 

paragraph (a) of this section, CMS will 

issue to the Medicaid agency a written 

notice informing the agency whether the 

system is reapproved or disapproved. If 

the system is disapproved, the notice 

will include the following information: 

(1) CMS’s decision to reduce FFP for 

system operations from 75 percent to 50 

percent of expenditures, beginning with 

the first day of the first calendar quarter 

after CMS issues the written notice to 

the State. 

(2) The findings of fact upon which 

the determination was made. 

(3) A statement that State claims in 

excess of the reduced FFP rate will be 

disallowed and that any such 

disallowance will be appealable to the 

Departmental Appeals Board. 

■ 10. Section 433.120 is amended by 

revising paragraph (b) to read as follows: 

§ 433.120 Procedures for reduction of FFP 

after reapproval review. 

* * * * * 

(b) CMS will reduce FFP in 

expenditures for system operations from 

75 percent to 50 percent. 

■ 11. Section 433.121 is amended by 

revising paragraph (a) to read as follows: 

§ 433.121 Reconsideration of the decision 

to reduce FFP after reapproval review. 

(a) The State Medicaid agency may 

appeal (to the Departmental Appeals 

Board under 45 CFR Part 16) a 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 76, No. 75 / Tuesday, April 19, 2011 / Rules and Regulations 21975 

disallowance concerning a reduction in 

FFP claimed for system operations 

caused by a disapproval of the State’s 

system. 

* * * * * 

§ 433.130 [Removed] 

■ 12. Section 433.130 is removed. 

■ 13. Section 433.131 is amended by 

adding a new paragraph (c) to read as 

follows: 

§ 433.131 Waiver for noncompliance with 

conditions of approval and reapproval. 

* * * * * 

(c) Waiver of deadline. In no case will 

CMS waive the December 31, 2015 

deadlines referenced in § 433.112(c) and 

§ 433.116(j). 

Authority: Catalog of Federal Domestic 

Assistance Program No. 93.778, Medical 

Assistance Program. 

Dated: March 16, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: April 12, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–9340 Filed 4–14–11; 11:15 am] 

BILLING CODE 4120–01–P 


srobinson on DSKHWCL6B1PROD with RULES2