Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

IOWA HAS SHIFTED 

MEDICARE COST-SHARING 

FOR DUAL ELIGIBLES TO THE 

FEDERAL GOVERNMENT 

Brian P. Ritchie 

Acting Deputy Inspector General 

for Evaluation and Inspections 

April 2014 

OEI-07-13-00480 
 

EXECUTIVE SUMMARY: IOWA HAS SHIFTED MEDICARE COST-SHARING FOR DUAL 

ELIGIBLES TO THE FEDERAL GOVERNMENT 

OEI-07-13-00480 

WHY WE DID THIS STUDY 

Dually eligible beneficiaries (dual eligibles) are individuals eligible for both Medicare and Medicaid. For a 

certain type of dual eligibles—full-benefit dual eligibles—State Medicaid programs pay Medicare 

cost-sharing. Some of these payments are eligible for Federal Financial Participation (FFP). During an audit 

of the State of Iowa’s claims for FFP for its Medicare cost-sharing payments, the Office of Inspector General 

(OIG) found that Iowa had made State Supplementary Payments of $1 per beneficiary per month to a group 

of about 41,000 dual eligibles. By making these payments, the State spent approximately $500,000 and 

received $39 million in FFP. We sought to determine the extent to which other States might similarly be 

shifting costs to the Federal government. 

HOW WE DID THIS STUDY 

In addition to reviewing the information collected during the audit of Iowa’s claims, we conducted additional 

research regarding the law and regulations governing the availability of FFP for Medicare cost-sharing, and 

we reviewed the data available on dual eligibles, on their Medicare cost-sharing paid by State Medicaid 

programs, and on the eligibility of those payments for FFP. We also interviewed staff from the Centers for 

Medicare & Medicaid Services’ (CMS) Office of Financial Management to better understand how State 

Medicaid programs pay Medicare cost-sharing for dual eligibles and the data available on dual eligibles for 

whom States pay Medicare cost-sharing. 

WHAT WE FOUND 

Although they are not unlawful, Iowa’s $1 State Supplementary Payments were designed to maximize FFP. 

FFP has always been available for State Medicaid programs’ payments of Medicare Part B premiums made 

on behalf of beneficiaries who receive Federal and State income assistance. Iowa’s $1 payments are not 

intended as income assistance; instead, they were created for the express purpose of obtaining FFP for 

Medicare Part B premiums. The detailed Medicaid eligibility data necessary to evaluate whether other States 

have shifted costs in a manner similar to Iowa are not available for all States. States are not required to 

identify in the data they submit to CMS whether and why every dual eligible’s Part B premiums are eligible 

for FFP. Therefore, an evaluation determining the extent to which other States might similarly be shifting 

costs to the Federal Government is not feasible. 

WHAT WE RECOMMEND 

We recommend that CMS (1) seek a legislative change to prevent States from using State Supplementary 

Payments to shift Medicare Part B premium costs for full-benefit dual eligibles to the Federal Government 

and (2) require States to submit more detailed eligibility information. CMS neither concurred nor 

nonconcurred with our recommendations. In its comments, CMS suggested that since the basis for FFP for 

Part B premiums is the Social Security Administration’s (SSA) criteria for State Supplementary Payments, 

this report and its recommendations should be directed to SSA. CMS also suggested that SSA should—as an 

alternative to a legislative change—revise its regulatory criteria defining State Supplementary Payments to 

make them consistent with 42 CFR 435.232(b), which mandates guidelines for optional State Supplementary 

Payments. OIG has no authority to make recommendations to SSA; we continue to believe that CMS should 

seek a legislative change to address this issue. 
TABLE OF CONTENTS 

Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................6 

Findings........................................................................................................8 

Although not unlawful, Iowa’s $1 State Supplementary 

Payments were designed to maximize FFP .....................................8 

Detailed Medicaid eligibility data necessary to evaluate 

whether other States have shifted costs similarly to Iowa are 

not available for all States................................................................9 

Conclusion and Recommendations ............................................................10 

Agency Comments and Office of Inspector General 

Response ........................................................................................11
 

Appendix....................................................................................................12 

A: State Medicaid Programs Cost-Sharing by Type of Dual 

Eligible...........................................................................................12 

B: Agency Comments ...................................................................13 

Acknowledgments......................................................................................14 
 

 

 

 

OBJECTIVES 

1.	 To describe a cost-shifting strategy implemented by the State of Iowa 

in Federal fiscal year (FY) 2011. 

2.	 To determine the extent to which other States might similarly be 

shifting costs to the Federal Government. 

BACKGROUND 

Dually eligible beneficiaries (dual eligibles) are those individuals who are 

entitled to Medicare Part A and/or Part B and are eligible for some form of 

Medicaid benefits. State Medicaid programs pay Medicare premiums, 

deductibles, and coinsurance/copayments for certain types of dual 

eligibles.1 Some of these payments by the State on behalf of dual eligibles 

are mandated by Federal law, whereas others are optional. State Medicaid 

programs may collect Federal Financial Participation (FFP) for most, but 

not all, of these payments.2 

Dual Eligible Beneficiaries 

There are five basic categories of dual eligibles. (This report is concerned 

primarily with the fifth category, full-benefit dual eligibles.) Beneficiaries 

in each category are entitled to different Medicaid benefits or 

combinations of benefits, from payment of Medicare premiums, 

deductibles, and/or coinsurance/copayments, to full Medicaid coverage. 

Qualified Medicare Beneficiaries (QMBs). QMBs are persons who are 

entitled to Medicare Part A whose income does not exceed 100 percent of 

the Federal poverty level (FPL) and whose resources do not exceed three 

times the limit for Supplemental Security Income program (SSI) 

eligibility. They may or may not be eligible for full Medicaid benefits. 

State Medicaid programs must pay for QMBs’ Medicare Part A premiums, 

if any, and Medicare Part B premiums; States may collect FFP for these 

payments. 

Specified Low-Income Medicare Beneficiaries (SLMBs). SLMBs are 

persons who are entitled to Medicare Part A, have income greater than 

100 percent of the FPL but less than 120 percent of the FPL, and have 

resources that do not exceed three times the limit for SSI eligibility. They 

may or may not be eligible for full Medicaid benefits. State Medicaid 

1

 The discussion that follows concerning Medicaid payment of Medicare premiums, 

deductibles, and coinsurance is limited to Medicare fee-for-service (Part A and Part B), 

although State Medicaid programs also pay Medicare Advantage (Part C) premiums and 

copayments on behalf of certain types of dual eligibles. 

2

 FFP is the percentage of Medicaid expenditures that the Federal Government pays 

States. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 1 
 

 

 

 

programs must pay for SLMBs’ Medicare Part B premiums and may 

collect FFP for these payments. 

Qualified Disabled and Working Individuals (QDWIs). QDWIs are 

persons who lost their Medicare Part A benefits as a result of returning to 

work. They are eligible to purchase Medicare Part A benefits, have 

income that does not exceed 200 percent of FPL, have resources that do 

not exceed twice the limit for SSI eligibility, and are not otherwise eligible 

for Medicaid (i.e., they are not eligible for Medicaid payment for health 

care services). State Medicaid programs must pay for QDWIs’ Medicare 

Part A premiums and may collect FFP for these payments. 

Qualifying Individuals (QIs). QIs are persons who are entitled to 

Medicare Part A, have income of at least 120 percent of FPL but less than 

135 percent of FPL, have resources that do not exceed three times the limit 

for SSI eligibility, and are not otherwise eligible for Medicaid. State 

Medicaid programs must pay for QIs’ Medicare Part B premiums and may 

collect FFP for these payments. 

Full-Benefit Dual Eligibles (FBDEs). FBDEs are entitled to Medicare 

Part A and/or Part B and are eligible for full Medicaid benefits, either 

categorically or through optional coverage groups.3 They are not eligible 

for Medicaid as QMBs, SLMBs, QDWIs, or QIs. State Medicaid 

programs have the option to pay—but are not required to pay—Medicare 

Part B premiums on behalf of FBDEs. State Medicaid programs may 

collect FFP for such payments made on behalf of FBDEs who are actual 

or “deemed” recipients4 of cash assistance, including SSI, State 

Supplementary Payments, and Temporary Assistance for Needy Families 

(TANF).5 FFP is not available for Medicare Part B premiums paid on 

behalf of FBDEs who are not recipients of cash assistance. 

See Appendix A for a table summarizing the categories of dual eligibles 

and the Medicare cost-sharing that State Medicaid programs pay for these 

beneficiaries. 

3

 Examples of optional coverage groups include medically needy individuals or 

individuals with special income levels who are institutionalized or participating in 

home- and community-based waiver programs. 

4 Beneficiaries are deemed to be recipients of cash assistance pursuant to various 

provisions of the Social Security Act (the Act). For example, section 1619(b) of the Act 

states that an individual receiving SSI on the basis of disability or blindness may be 

deemed eligible for continued SSI recipient status and Medicaid when the individual’s 

earnings (alone or in combination with other income) make him/her ineligible for cash 

payments. Federal regulations at 42 CFR § 431.625(d)(2) summarize the various 

deeming provisions of the Act. 

5

 The Act, §§ 1903(a)(1) and 1905(a). 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 2 
 

 

 

 

Supplemental Security Income and State Supplementary 

Payments 

Established in 1972, SSI is a Federal income-supplement program funded 

by general tax revenues.6 The SSI program was meant to replace three 

State-operated, federally assisted welfare programs that then existed— 

Old-Age Assistance, Aid to the Blind, and Aid to the Permanently and 

Totally Disabled—with a new wholly Federal program of supplemental 

income.7 SSI continues to provide cash to meet basic needs for eligible 

aged, blind, and disabled individuals. The SSI program also allows States 

to provide supplements to Federal SSI payments to help individuals meet 

their needs.8 These supplements are called State Supplementary 

Payments. They can be made to SSI recipients (or those who would, but 

for their income, be eligible for SSI) as cash payments on a regular basis 

(at least quarterly) in an amount based on the need or income of an 

individual or couple.9 

There are two types of State Supplementary Payments: mandatory and 

optional. States are required to make certain mandatory payments to 

maintain their eligibility to participate in Medicaid.10 States may also opt 

to make payments to individuals whose needs are not met by their income 

and who (1) are receiving SSI payments or (2) would, but for their 

income, be eligible to receive SSI payments.11 Forty-four States currently 

make optional State Supplementary Payments to qualifying individuals; 

the amount each individual receives is determined by the State.12 

States that participate in State Supplementary Payments may either 

contract with the Social Security Administration (SSA) to administer the 

payments, in which case SSA is paid by the State to operate the program, 

or States may make State Supplementary Payments directly to qualifying 

6

 Social Security Amendments of 1972, P.L. No. 92-603, Title III (Oct. 30, 1972). 7

 Senate Report 92-1230, p. 75; Social Security Administration, 2011 Annual Report of
 

the SSI Program (Annual Report), § III. 8 Ibid., p. 277. 

9

 The Act § 1616(a); 20 CFR 416.2001(a). 

10 Social Security Administration, State Assistance Programs for SSI Recipients, 

January 2011—Guide to Reading the State Summaries, January 2011. Accessed at
 

http://www.ssa.gov/policy/docs/progdesc/ssi_st_asst/2011/guide.html on August 17, 

2012. 

11 To qualify for SSI, a person must be age 65 or older, blind, or disabled; be a 

U.S. citizen or national or one of certain categories of aliens; and have limited income 

and resources. States can choose to make State Supplementary Payments to individuals 

who would qualify for SSI except that their income is too high. Social Security 

Administration, Understanding Supplemental Security Income SSI Eligibility 

Requirements—2013 Edition. Accessed at http://www.ssa.gov/ssi/text-eligibilityussi.htm on September 17, 2013. 12 Ibid. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 3 
 

 

 

 

 

 

 

individuals. Because optional State Supplementary Payments are funded 

by State revenues, States have a great deal of flexibility in defining who 

receives these payments and the amounts paid. 

“Buy-In” Agreements 

Section 1843 of the Act allows a State Medicaid program to enter into an 

arrangement, known as a “buy-in” agreement, with the Centers for 

Medicare & Medicaid Services (CMS). A buy-in agreement is the 

mechanism by which a participating State Medicaid program can enroll 

dual eligibles in Medicare Part B and pay the monthly premiums on their 

behalf.13 To be eligible for enrollment in a Part B buy-in agreement, an 

individual must be eligible to receive Medicaid under the State’s plan, or 

be a QMB or an SLMB. 

Buy-in agreements are implemented through an automated exchange of 

data among the States, CMS, and SSA, which share responsibility for 

identifying eligible individuals and submitting data updates on those 

individuals.14 The participants in the data exchange use codes that group 

individuals into eligibility categories and identify which groups’ Part B 

premiums are eligible for FFP. CMS maintains a master enrollment file of 

Medicare eligibility information that includes updates from States and 

SSA.15 Table 1 shows the codes that States use to identify groups of dual 

eligibles in the monthly updates, and Table 2 shows the SSI status codes 

that CMS uses for adding or updating dual eligibles. 

Table 1: Buy-in Eligibility Codes 

Code* Eligibility Category 

A 

B 

C 

D 

L 

M 

P 

Z 

Aged recipient of Federal SSI payments 

Blind recipient of Federal SSI payments 

Entitled under Part A of Title IV 

Disabled recipient of Federal SSI payments 

Specified Low-Income Medicare Beneficiary (SLMB) 

Entitled to medical assistance only, noncash recipient 

Qualified Medicare Beneficiary (QMB) 

Deemed categorically needy 

*In addition to these federally defined codes, States can also define their own eligibility codes to 

identify additional eligibility categories. 

Source: CMS, State Buy-In Manual, Pub. 100-24, ch. 5, § 540, 2003. 

13 States also can pay Part A premiums on behalf of QMBs as part of a buy-in agreement.
 14 CMS, State Buy-In Manual, Pub. 24, ch. 4, § 400. CMS revised and transferred several
 

chapters of the State Buy-In Manual from the paper version (Pub. 24) to an Internet-only
 

version (Pub. 100-24). Other chapters remain in the paper version.
 15 Ibid. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 4 
 

 

 

 

 

 

 

Table 2: SSI Status Codes 

Code Eligibility Category 

C 

E 

M 

S 

Conditionally eligible for SSI 

Eligible for SSI and may or may not be receiving federally administered State 

supplementary payments 

Special SSI payment for individuals engaged in substantial gainful activity 

Eligible for SSI and is receiving federally administered State Supplementary 

Payments only 

Source: CMS, State Buy-In Manual, Pub. 100-24, ch. 5, § 530, 2003. 

Audit of Iowa Cost-Sharing Payments and Claims for FFP 

During an audit of Iowa’s claims for FPP for Medicare cost-sharing 

payments made through the State’s buy-in agreement in FY 2011, the 

Office of Inspector General (OIG) found that Iowa was making a State 

Supplementary Payment of $1 per beneficiary per month to a group of 

approximately 41,000 FBDEs.16, 17 OIG found that Iowa made such 

payments in FY 2011, paid Part B premiums on behalf of individuals 

receiving these payments, and received FFP for the premium payments. 

The recipients of these $1 payments were not receiving any other cash 

assistance. 

Policy documents collected for the audit show that Iowa implemented the 

$1 payments for the sole purpose of allowing the State to claim FFP on 

payments of Medicare Part B premiums for these FBDEs. These policy 

documents explicitly stated that the purpose of these payments is to 

provide a cash benefit to certain Medicaid recipients who do not qualify 

for other cash assistance benefits in order to allow the State to receive FFP 

for the Medicare premiums that would otherwise be paid with State 

funds.18 

The audit found that in FY 2011, Iowa may have spent a maximum of 

approximately $500,000 as a cumulative total of the $1 payments.19 In 

FY 2011, Iowa received an estimated $39 million in FFP for Part B 

premium payments for beneficiaries receiving the $1 payments. This 

16 Within OIG, audits are conducted by the Office of Audit Services. 17 In FY 2011, Iowa had a total of 77,874 dual eligibles. CMS, “Dual Eligible 

Enrollment as of July 1, 2011,” Medicaid Managed Care Enrollment Report: Summary 

Statistics as of July 1, 2011. 18 See Iowa Administrative Bulletin (IAB), Vol. 27, No. 5, p. 318 (Sept. 1, 2004); IAB, 

Vol. 28, No. 10, p. 749 (Nov. 9, 2005). 

19 This figure of $500,000 was calculated by multiplying the 41,481 FBDEs by their 

estimated State Supplementary Payments of $12 per year, for a result of $497,772. The 

actual amount that Iowa spent making the State Supplementary Payments may be less, if 

some of the FBDEs did not receive a payment in every month of FY 2011. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 5 
 

 

 

 

represents 60 percent of the $64.7 million that Iowa received in FFP for 

Medicaid payments of Part B premiums overall in FY 2011.20 

Iowa’s payments complied with Federal requirements; in October 2004, 

staff from SSA and CMS agreed that Iowa’s proposal to begin making the 

$1 payments was acceptable.21 Because Iowa’s $1 payments and claims 

for FFP based on those payments were legally appropriate, and because 

the objective of the audit was to identify inappropriate payments, OIG did 

not include these results in its audit report.22 Instead, OIG undertook an 

evaluation to determine the extent to which other States might similarly be 

shifting costs to the Federal Government. 

METHODOLOGY 

We reviewed the results of the OIG audit on Iowa’s claims for FFP for 

Medicare cost-sharing payments in FY 2011. We sought to design an 

evaluation to determine the extent to which States might be shifting 

Medicaid costs to the Federal Government by making small State 

Supplementary Payments. We researched the following areas: 

	 the types of Medicare cost-sharing that Medicaid can pay for dual 

eligibles; 

	 the data States are required to submit on the dual eligibles for 

whom they pay Medicare cost-sharing; and 

	 the safeguards surrounding State-reported data on dual eligibles 

and cost-sharing. 

We also interviewed staff from the CMS Office of Financial Management 

to better understand buy-in agreements and the data available on dual 

eligibles for whom States pay Medicare cost-sharing. 

20 We did not determine the extent to which, prior to FY 2011, Iowa had been making 

$1 State Supplementary Payments and receiving FFP for Part B premiums paid on behalf 

of those recipients. In its August 2004 letter to the regional commissioner for SSA, Iowa 

stated its intention to begin making the $1 State Supplementary Payments retroactive to 

October 1, 2003. 

21 In October 2004, Iowa received approval from SSA and CMS to begin making the 

$1 payments. A teleconference was held in December 2003, at which the Iowa 

Department of Human Services, SSA central and regional offices, and CMS staff all 

agreed that the payment amounts and eligibility criteria proposed were acceptable. Letter 

from Ramona Schuenmeyer, Acting Regional Commissioner, SSA, to Ann Wiebers, 

Division Administrator, Iowa Department of Human Services, dated October 5, 2004. 

22 OIG, Iowa Did Not Properly Pay Some Medicare Part A and Part B Deductibles and 

Coinsurance (A-07-12-03178), November 2012. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 6 
 

 

Standards 

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 7 
 

 

 

 

 

FINDINGS 

Although not unlawful, Iowa’s $1 State Supplementary

Payments were designed to maximize FFP 

When the SSI program was established in 1972,23 it was envisioned as a 

basic national “income maintenance program” for the aged, blind, and 

disabled,24 designed to ensure that these individuals would no longer have 

to subsist on incomes below the poverty level.25 The SSI program allows 

States to provide supplements to Federal SSI payments—State 

Supplementary Payments—to further help individuals meet their needs.26 

SSA’s 2011 Annual Report on the SSI program states: “In designing the 

SSI program, Congress recognized that States, in many instances, may 

want to provide a higher level of income maintenance than that provided 

by the Federal program.”27 

Section 1905(a) of the Act allows States that provide such income 

maintenance through State Supplementary Payments to FBDEs to claim 

FFP for Medicaid payments of Medicare Part B premiums made on behalf 

of those beneficiaries. However, if an FBDE does not receive cash 

assistance from the State, the State cannot claim FFP for Medicaid 

payments of Medicare Part B premiums made on that beneficiary’s behalf. 

Iowa has implemented a State Supplementary Payment for the express 

purpose of obtaining FFP for the State’s payment of Medicare Part B 

premiums already being paid by its Medicaid program; in FY 2011, Iowa 

obtained $39 million—an amount that otherwise would have been paid by 

the State—in FFP for beneficiaries receiving the $1 payments. Given that 

the payments amount to $12 per year per beneficiary, they have little effect 

on the income level of the recipients. The SSI program was intended to 

ensure that recipients would no longer have to subsist on incomes below 

the poverty level; however, these payments exist for the sole purpose of 

maximizing Iowa’s receipt of FFP. 

23 Social Security Amendments of 1972, P.L. NO. 92-603, Title III (Oct. 30, 1972). 24 Senate Report 92-1230, p. 384. 

25 House Committee on Ways and Means, 1996 Green Book, p. 258. 26 Ibid., p. 277. 27 Annual Report, § III. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 8 
 

 

Detailed Medicaid eligibility data necessary to evaluate 

whether other States have shifted costs similarly to 

Iowa are not available for all States 

In their data updates to CMS on individuals eligible for Medicaid 

payments of Medicare cost-sharing, States are not required to submit 

codes identifying why every dual eligible’s Part B premiums are eligible 

for FFP. There is no code in use by all States that specifically identifies 

beneficiaries receiving State Supplementary Payments, which is the 

population that would potentially be affected by Iowa’s cost-shifting 

strategy. In States in which SSA administers the State Supplementary 

Payment program, there are CMS data that identify beneficiaries receiving 

State Supplementary Payments. However, these data represent only a 

fraction of the dual eligible population that could receive State 

Supplementary Payments. To conduct a multi-State evaluation identifying 

the extent to which States are shifting the Part B premium costs for these 

beneficiaries to the Federal government would require detailed 

information on every dual eligible indicating why the State’s payments of 

Part B premiums were eligible for FFP. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 9 
 

 

 

CONCLUSION AND RECOMMENDATIONS 

The $1 State Supplementary Payments that Iowa made allowed the State 

to claim $39 million in FFP in FY 2011 that it would not otherwise have 

received. In essence, Iowa found a way to legally shift costs from the 

State to the Federal Government without a significant State contribution. 

Other States may be making similarly small State Supplementary 

Payments to accomplish similar cost-shifting. However, it is not possible 

to systematically evaluate the extent to which such cost-shifting occurs, as 

the necessary data are not available on a national basis. 

We recommend that CMS: 

Seek legislative change to prevent States from using State 

Supplementary Payments to shift Medicare Part B premium 

costs for FBDEs to the Federal Government 

A legislative change could prohibit State Supplementary Payments for the 

sole purpose of creating eligibility for FFP, thereby preventing States from 

shifting costs for Medicare Part B premiums to the Federal Government 

without a significant financial contribution from the State for the purpose 

of supplementing beneficiaries’ incomes. 

Require States to submit more detailed eligibility information 

CMS should require States to submit more detailed eligibility information 

through the data exchange that implements a buy-in agreement. This may 

include requiring those States without federally administered State 

Supplementary Payments to submit a code indicating which group of dual 

eligibles receives State Supplementary Payments. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 10 
 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its comments, CMS suggested that since the basis for FFP for Part B 

premiums is SSA’s criteria for State Supplementary Payments, this report 

and its recommendations should be directed to SSA. CMS also suggested 

that SSA should—as an alternative to a legislative change—revise its 

regulatory criteria defining State Supplementary Payments to make them 

consistent with 42 CFR 435.232(b), which mandates guidelines for 

optional State Supplementary Payment programs for States that extend 

Medicaid eligibility to program recipients. For the full text of CMS’s 

comments, please see Appendix B. 

OIG has no authority to make recommendations to SSA, which is not part 

of the Department of Health and Human Services. Furthermore, our 

finding about Iowa’s payment of a $1 State Supplementary Payment for 

the sole purpose of receiving FFP involves provisions of Title 19 of the 

Act, for which CMS has responsibility. Specifically, section 1905(a) of 

the Act allows States to receive FFP for the payment of Part B premiums 

on behalf of FBDEs who receive only State Supplementary Payments, and 

section 1905(j) of the Act defines State Supplementary Payments for this 

purpose. We reiterate our recommendation for CMS to seek a legislative 

change. CMS could accomplish this by proposing an amendment to 

sections 1905(a) and/or 1905(j) that would require States to satisfy certain 

additional criteria to receive FFP for payment of Part B premiums on 

behalf of FBDEs who receive only State Supplementary Payments. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 11 
 

APPENDIX A 

State Medicaid Programs Cost-Sharing by Type of Dual 

Eligible 

Category of Beneficiary 

Medicare 

Deductibles 

and 

Coinsurance 

Part A 

Premiums 

Part B 

Premiums 

Full-Benefit 

Dual 

Eligibles 

(FBDE) 

(there are 

two 

categories) 

Entitled to Medicare Part A and/or Part B; 

eligible for full Medicaid benefits; recipient 

(actual or deemed) of money assistance, 

including Social Security Income (SSI), 

State Supplementary Payments, and 

Temporary Assistance to Needy Families 

(TANF); not a Qualified Medicare 

Beneficiary (QMB), Specified Low-Income 

Medicare Beneficiary (SLMB), Qualified 

Disabled and Working Individual (QDWI), 

or Qualifying Individual (QI). 

Conditional* 

Federal 

Financial 

Participation 

(FFP) 

available 

Not 

allowed 

Optional 

FFP 

available 

All other FBDEs (i.e., not actual or 

deemed recipient of money assistance) 

Conditional* 

FFP available 

Not 

allowed 

Optional 

FFP not 

available 

QMB Only 

Entitled to Medicare Part A; income 

≤ 100 percent of Federal Poverty Level 

(FPL); resources ≤ 3x limit for SSI 

eligibility; not otherwise eligible for 

Medicaid 

Required** 

FFP available 

Required 

FFP 

available 

Required 

FFP 

available 

QMB Plus QMBs who are eligible for coverage of 

Medicaid services 

Required** 

FFP available 

Required 

FFP 

available 

Required 

FFP 

available 

SLMB Only 

Entitled to Medicare Part A; income 

> 100 percent of FPL, but < 120 percent of 

FPL; resources ≤ 3x limit for SSI eligibility; 

not otherwise eligible for Medicaid 

Not allowed Not 

allowed 

Required 

FFP 

available 

SLMB Plus SLMBs who are eligible for coverage of 

Medicaid services 

Conditional* 

FFP available 

Not 

allowed 

Required 

FFP 

available 

QDWI 

Lost Medicare Part A benefits due to 

return to work; eligible to purchase 

Medicare Part A; income ≤ 200 percent of 

FPL; resources ≤ 2x limit for SSI eligibility; 

not otherwise eligible for Medicaid 

Not allowed 

Required 

FFP 

available 

Not 

allowed 

QI 

Entitled to Medicare Part A; income 

≥ 120 percent of FPL, but < 135 percent of 

FPL; resources ≤ 3x limit for SSI eligibility; 

not otherwise eligible for Medicaid 

Not allowed Not 

allowed 

Required 

FFP 

available† 

* Medicaid pays Medicare deductibles and coinsurance insofar as it pays for Medicaid services to the 

extent that the Medicaid rate exceeds the Medicare rate. 

** A State may elect in its Plan not to pay Medicare deductibles and coinsurance when the Medicaid 

rate does not exceed the Medicare rate. 

†Federal Medicaid Assistance Percentage equals 100 percent. 

Source: Social Security Act, §§ 1902(a)(10)(E), 1903(a)(1), 1905(a), 1905(p)(1) and (3), 1905(s); 42 CFR § 431.625(d). 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 12 
APPENDIX 8 

Agency Comments 

DEPARTMF\.'T OF HEALTH & IJLMA~ SERVICFS 

Administrator 

WIISilir><;JIO", 0C 20201 

l>ATE: MAR 11 201~ 

TO: Daniel R. Lcvin,<m 

ln:<p<'Cl<'f Gen<:ral 

fROM: Maril):J1 ·! M ~·t£nn 

,.\Jminiqrnfilr 

S{ lllJECr: Ollie.: of lnspn·tor t il'nvml tOI(i 1 Drali R~.:port Iowa Has Shifted !vk'tlic.arc 

( \1st·Sharing t(>r Ilual l:1 igibks to the Feder ;tl (jovcmment (0EI·07-l3-0CI480) 

The Centers for '-1edicarc & Mcdtcaid "crv!C<"> 1 C'.ISJ ha' ren·ived and revic\\~d the drati report 

rc!ercnced abo\ c. We thank OJ< i l<•r 'baring this dtali rqxll1 wah u..<;. 

"!he rep<.m dir<·cts it~ recommcm!ati.>tb at CMS and n:comtnemls n statutO!)' change. However. as 

the report notes. the Social St~unt) Admini>tration i SSAJ mnfim1ed in 2003 that the $1 

supplement 'atbtll-clthc rclc\'ant SS,.\ criteria l()r st.!lc supplements, and as it is SSA criteria on 

"hich CMS bases its Federal Hn.ttr<.tall'articipatiorHi>r-l'art-B-premiums authority under 42 CFR 

4} 1.625<d), '"' bclic'c that th~ n:port 'hmdd be dm:ning its recommendations at SSA and the 

statute undcrl!llll: SSXs detcrnmut;on 

A separate McJ1caid rt·gulator: P''"""'n. .;2 CFR ·115.~ ;~~lh). mandates guidelines tlxopti{)nal 

>l:ltc supplementary pa:mmt pm~::r:um i<lf state' that t•:..tc-nd ..-~11.:-gorical Medicaid eligibility to 

program rec ipicms. 1 his prmisiPil pn>\ rd.:s a dirtl:r,·nt and mnre exacting definition of a state 

supplcmcnl!lry payment (e.g .. pa;. m~.·nt must be in an arnutlltll'qual to the ditlcrencc between the 

income standard for the supplement a11d :m indivtdual's wutH;tblc income, which contrn~ts with 

lo\va· s standard less SI payment prof~falll) It may be possihk' that harmoni:~.ation ofSSA 

regulator) criteria with 42 C.F.R ·lJ' 2.1.2tl:1). irbtcaJ of a 't.J!Uhll) amendment. may offer a 

solution to addrcs~ this situatlon. 

As always. C \IS appr<·ciatc> the ''PP<">rtllllll> to corHm<.'nt ''" thc>e reports. and v.c lo()k forward to 

v.orking with (JJ(i <ln this and ••th~• ''~uc' "'the lutc:n.: 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 13 
 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Brian T. Whitley, Regional 

Inspector General for Evaluation and Inspections in the Kansas City 

regional office. 

Michala Walker served as the team leader for this study. Other Office of 

Evaluation and Inspections staff from the Kansas City regional office who 

conducted the study include Teresa Dailey and Rae Hutchison. Central 

office staff who provided support include Heather Barton, 

Michael I. Joseph, and Christine Moritz. 

Iowa Has Shifted Medicare Cost-Sharing for Dual Eligibles to the Federal Government (OEI-07-13-00480) 14 
Office of Inspector General

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.