DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Part 438, 441, and 447 

[CMS-2370-F] 

RIN 0938-AQ63 

Medicaid Program; Payments for Services Furnished by Certain Primary Care Physicians 

and Charges for Vaccine Administration under the Vaccines for Children Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements Medicaid payment for primary care services furnished 

by certain physicians in calendar years (CYs) 2013 and 2014 at rates not less than the Medicare 

rates in effect in those CYs or, if greater, the payment rates that would be applicable in those 

CYs using the CY 2009 Medicare physician fee schedule conversion factor. This minimum 

payment level applies to specified primary care services furnished by a physician with a 

specialty designation of family medicine, general internal medicine, or pediatric medicine, and 

also applies to services rendered by these provider types paid by Medicaid managed care plans 

contracted by states to provide the primary care services. It also provides for 100 percent federal 

financial participation (FFP) for any increase in payment above the amounts that would be due 

for these services under the provisions of the approved Medicaid state plan, as of July 1, 2009. 

In other words, there will not be any additional cost to states for payments above the amount 

required by the 2009 rate methodology. In this final rule, we specify which services and types of 

physicians qualify for the minimum payment level in CYs 2013 and 2014, and the method for 

calculating the payment amount and any increase for which increased federal funding is due. 

 In addition, this final rule will update the interim regional maximum fees that providers 
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may charge for the administration of pediatric vaccines to federally vaccine-eligible children 

under the Pediatric Immunization Distribution Program, more commonly known as the Vaccines 

for Children (VFC) program.

DATES: The provisions of this final rule are effective on January 1, 2013. 

FOR FURTHER INFORMATION CONTACT:

Mary Cieslicki, (410) 786-4576, or Linda Tavener, (410) 786-3838, for issues related to 

payments for primary care physicians. 

Mary Beth Hance, (410)786-4299, for issues related to charges for the administration of 

pediatric vaccines. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Background 

A. Executive Summary

1. Purpose 

 This final rule implements sections 1902(a)(13), 1902(jj), 1905(dd) and 1932(f) of the 

Social Security Act directing payment by state Medicaid agencies of at least the Medicare rates 

in effect in CYs 2013 and 2014 or, if higher, the rate using the CY 2009 conversion factor (CF) 

for primary care services furnished by a physician with a specialty designation of family 

medicine, general internal medicine, or pediatric medicine. Also, this final rule implements the 

statutory payment provisions uniformly across all states and defines, for purposes of enhanced 

federal match, eligible primary care physicians, identifies eligible primary care services, and 

specifies how the increased payment should be calculated. Finally, this rule provides general 

guidelines for implementing the increased payment for primary care services delivered by 

managed care plans. 

This final rule also provides updates to vaccine rates that have not been updated 
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since the VFC program was established in 1994. 

2. Summary of the Major Provisions 

a. Payments to Physicians for Primary Care Services

This final rule will implement Medicaid payment for primary care services furnished 

by certain physicians in calendar years (CYs) 2013 and 2014 at rates not less than the 

Medicare rates in effect in those CYs or, if greater, the payment rates that will be applicable 

in those CYs using the CY 2009 conversion factor (CF). It will also provide for a 

100 percent federal matching rate for any increase in payment above the amounts that were 

due for these services under the provisions of the state plan as of July 1, 2009. In other 

words, there will not be any additional cost to states for payments above the amount 

required by the 2009 rate methodology. 

b. Vaccine Administration under the Vaccines for Children (VFC) Program

This final rule updates the regional maximum fees that providers may charge for the 

administration of pediatric vaccines to federally vaccine-eligible children under the 

Pediatric Immunization Distribution Program, more commonly known as the Vaccines for 

Children (VFC) program. The formula used to determine the updated rates used the 

Medicare Economic Index (MEI) which is a price index used by CMS as part of the updates 

to Medicare physician payments. We believe the MEI is the best tool to update these rates 

because: (1) it reflects input price inflation faced by physicians inclusive of the time period 

when the national average was established in 1994; and (2) we believe that input prices 

associated with this specific type of physician-provided service are consistent with overall 

input prices. The MEI was most recently updated at the end of 2011. 

3. Summary of the Costs and Benefits 

Provision Description Total Costs Total Benefits 
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Provision Description Total Costs Total Benefits 

Payments to Physicians for 

Primary Care Services 

The overall economic impact 

of this final rule is an 

estimated $5.600 billion in 

CY 2013 and $5.745 billion 

in CY 2014 (in constant 2012 

dollars). In CY 2013, the 

federal cost for Medicaid and 

CHIP is approximately 

$5.835 billion with $235 

million in state savings. In 

CY 2014, the federal cost for 

Medicaid and CHIP is 

approximately $6.055 billion 

with $310 million in state 

savings. The associated 

impact of this final rule 

requiring states to reimburse 

specified physicians for 

vaccine administration at the 

lesser of the Medicare rate or 

the VFC regional maximum 

during CYs 2013 and 2014, 

is estimated at an additional 

$975 million in federal costs. 

Specifically, this reflects 

federal costs for CYs 2013 

and 2014 of $495 million and 

$480 million, respectively. 

The overall benefit of this 

rule is the expected 

increase in provider 

participation by primary 

care physicians resulting 

in better access to primary 

and preventive health 

services by Medicaid 

beneficiaries. 
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Provision Description Total Costs Total Benefits 

Increase in Vaccines for 

Children Program 

Maximum Administration 

Fee 

This rule updates the 

maximum rate that states 

could pay providers for the 

administration of vaccines 

under the VFC program in 

years after CY 2014. While 

states have the flexibility to 

raise their VFC ceilings up to 

the new regional maximum 

administration fee, they are 

not anticipated to do so in 

2013 and 2014 because of the 

implementation of the 

primary care payment 

increase. 

If all states were to increase 

their reimbursement rates to 

the updated maximum 

administration fee, it is 

estimated that the total 

economic impact would be 

$75 million per year. 

The overall benefit of this 

provision is that it gives 

states the ability to 

increase their VFC vaccine 

administration rates. We 

expect that this increase 

will help maintain 

provider participation in 

the VFC program. 

B. Background

1. Payments to Physicians for Primary Care Services: Statutory and Regulatory Framework 

a. Improving Primary Care 

On March 23, 2010, the Patient Protection and Affordable Care Act (Pub. L. 111-148) 

was enacted and on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 

(HCERA) (Pub. L. 111-152) was enacted; together they are known as the Affordable Care Act. 

This final rule will implement sections 1902(a)(13), 1902(jj), 1932(f), and 1905(dd) of the Social 

Security Act, as amended by the Affordable Care Act. Section 1902(a)(13) of the Act requires 

payment by state Medicaid agencies of at least the Medicare rates in effect in calendar years 
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(CYs) 2013 and 2014 or, if higher, the rate that will be applicable using the CY 2009 Medicare 

conversion factor (CF), for primary care services furnished by a physician with a specialty 

designation of family medicine, general internal medicine, or pediatric medicine. 

Primary care for any population is critical to ensuring continuity of care, as well as to 

providing necessary preventive care, which improves overall health and can reduce health care 

costs. The availability of primary care is particularly important for Medicaid beneficiaries, to 

establish a regular source of care and to provide services to a group that is more prone to chronic 

health conditions that can be appropriately managed by primary care physicians. Primary care 

physicians provide services that are considered to be a core part of a state’s Medicaid benefit 

package. Additionally, these physicians can perform the vital function of coordinating care, 

including specialty care. 

As we move towards CY 2014 and the expansion of Medicaid eligibility, it is critical that 

a sufficient number of primary care physicians participate in the Medicaid program. Section 

1902(a)(13) of the Act is intended to encourage primary care physicians to participate in 

Medicaid by increasing payment rates in CYs 2013 and 2014. 

b. Medicaid Payment to Providers 

Section 1902(a)(30)(A) of the Act requires that Medicaid payments be consistent with 

efficiency, economy, and quality of care and be sufficient to enlist enough providers so that care 

and services are available under the plan at least to the extent that such care and services are 

available to the general population in the geographic area. In meeting these requirements, states 

have broad discretion in establishing and updating Medicaid service payment rates to primary 

care providers. For instance, many states reimburse based on the cost of providing the service, a 

review of the amount paid by commercial payers in the private market, or as a percentage of 

rates paid under the Medicare program for equivalent services. States may update rates based on 
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specific trending factors such as the MEI or a Medicaid specific trend factor that incorporates a 

state-determined inflation adjustment rate. Increasingly, states are providing a range of 

Medicaid services through managed care plans under contracts with managed care organizations 

(MCOs) and other organized delivery systems, such as prepaid inpatient health plans (PIHPs) 

and prepaid ambulatory health plans (PAHPs). According to the Medicaid and CHIP Payment 

and Access Commission (MACPAC), 49 million Medicaid beneficiaries receive services through 

some form of Medicaid managed care. The contract between the state and the managed care 

plan requires the plan to provide access to and make payments to primary care physicians using 

the funds the state pays to the managed care plan. 

Section 1902(a)(13)(C) of the Act requires that states pay a minimum payment amount 

for certain primary care services delivered by designated primary care physicians. Primary care 

services are defined in new section 1902(jj) of the Act and include certain specified procedure 

codes for evaluation and management (E&M) services and certain vaccine administration codes. 

Under this provision, states must reimburse at least as much as the Medicare physician fee 

schedule (MPFS) rate in CYs 2013 and 2014 or, if greater, the payment rate that will apply using 

the CY 2009 Medicare CF. The directive for payment at the Medicare rate extends to primary 

care services paid on a fee-for-service (FFS) basis, as well as to those paid on a capitated or 

other basis by Medicaid managed care plans. This regulation will specify which services and 

physicians qualify for the increased payment amount in CYs 2013 and 2014, and the method for 

calculating that payment. 

Section 1905(dd) of the Act provides for higher FFP for the required increase in 

physician payment for services provided on a fee for service basis and through managed care 

arrangements. The FFP rate will be 100 percent for the difference between the Medicaid state 

plan rate in effect on July 1, 2009, and the amount required to be paid under section 
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1902(a)(13)(C) of the Act, or by application, under section 1932(f). That means that, unless a 

state has reduced its rates since 2009, it will be fully reimbursed for these increased payments by 

the federal government. 

One goal of this rule is to define the payment provisions further so that states may 

uniformly identify the rate differential. Specifically, we proposed a payment methodology that 

took into account potential changes in Medicare rates between CYs 2013 and 2014 and CY 2009 

that is independent of the legislatively required payment reductions caused by Medicare’s 

sustainable growth rate mechanism. Furthermore, this final rule will address Medicare’s use of 

different fee schedules that take into account the site of service (for example, physician’s office, 

or outpatient department of a hospital) and geographical location of the provider. 

The Affordable Care Act amended section 1932(f) of the Act to clarify that states must 

incorporate the requirement for increased payment to primary care providers into contracts with 

managed care organizations. We proposed general guidelines for states to follow when 

identifying the amounts by which MCOs must increase existing payments to primary care 

providers, and any additional capitation costs to the state attributable to such required increases 

in existing payments. We also proposed to extend this same treatment to PIHPs and PAHPs 

through regulations at part 438, to the extent that primary care provider payments are made by 

these entities. 

We solicited comments on how best to implement through regulation the provision that 

managed care plans pay primary care providers at the Medicare rate for primary care services, 

consistent with those paid on a FFS basis. Additionally, we solicited comments from states and 

other stakeholders on the best way to adequately identify the increase in managed care capitation 

payments made by the state that is attributable to the increased provider payment, for the purpose 

of claiming 100 percent FFP. We were particularly interested in ensuring that primary care 
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physicians receive the benefit of the increased payment. Section 1932(f) of the Act, as amended 

by the Affordable Care Act, requires that the managed care contracts pay providers at the 

applicable Medicare rate levels. We proposed to review managed care contracts to ensure that 

this requirement is imposed on managed care plans by the state. We also proposed to require 

managed care plans to report to the state the payments made to physicians under this provision to 

justify any adjustments to the capitation rates paid by the state under the contract. In proposing 

this approach, we were mindful of balancing the need for adequate documentation of the 

payment with the administrative burden it places on states and managed care plans. We 

requested comment on these provisions and additional suggestions on how to ensure that 

managed care plans provide the necessary data to the state, as well as how to ensure and monitor 

that managed care plans appropriately pass on to physicians the portion of the increased 

capitation rate that is attributable to the primary care rate increase. 

This final rule also addresses identification of the rate differential eligible for 100 percent 

federal matching funds for vaccine administration, as set forth in section 1905(dd) of the Act. In 

2011, the vaccine administration billing codes were changed so it is not possible to track the 

Medicaid state plan rate in CY 2009 directly to the rates applicable in CYs 2013 and 2014. We 

requested comment on our proposal for imputing the CY 2009 rate. 

c. Medicare Payment to Primary Care Providers 

Medicare provides health insurance coverage to people who are aged 65 and over, people 

with disabilities or people who meet other special criteria, under title XVIII of the Act. For 

institutional care, such as hospital and nursing home care, Medicare makes payments to 

providers using prospective payment systems. Payment for physicians’ services under Medicare 

is based on the MPFS. The MPFS assigns relative value units (RVUs) for each procedure, as 

well as geographic practice cost indices (GPCIs) for geographic variations in payments, and a 
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global CF, which converts relative value units (RVUs) into dollars. Individual fee schedule 

amounts for the MPFS are the product of the geographic adjustment, RVUs, and CF. Site of 

service (for example, physician office or outpatient hospital) is reflected as an adjustment to the 

RVUs. We generally issue the MPFS final rule for the subsequent calendar year on or before 

November 1st each year. The MPFS final rule includes the RVUs and CF for the upcoming 

calendar year, which permits the calculation of rates. Updates may occur throughout the year, 

but normally occur quarterly. 

2. Vaccine Administration Under the Vaccines for Children (VFC) Program 

The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), (Pub. L. 103-66), 

created the Vaccines for Children (VFC) Program), which became effective October 1, 1994. 

Section 13631 of OBRA 1993 added section 1902(a)(62) to the Act to require that states provide 

for a program for the purchase and distribution of pediatric vaccines to program-registered 

providers for the immunization of vaccine-eligible children in accordance with section 1928 of 

the Act. Section 1928 of the Act requires each state to establish a VFC Program (which may be 

administered by the state Department of Health) under which certain specified groups of children 

are entitled to receive qualified pediatric immunizations without charge for the cost of the 

vaccine. 

Under the VFC Program, a provider, in administering a qualified pediatric vaccine to a 

federally vaccine-eligible child, may not impose a charge for the cost of the vaccine. Section 

1928(c)(2)(C)(ii) of the Act allows a provider to impose a fee for the administration of a 

qualified pediatric vaccine as long as the fee, in the case of a federally vaccine-eligible child, 

does not exceed the costs of such administration (as determined by the Secretary based on actual 

regional costs for such administration). However, a provider may not deny administration of a 
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qualified pediatric vaccine to a vaccine-eligible child due to the inability of the child's parents or 

legal guardian to pay the administration fee. 

This regulation updates the administration fee for the first time since the VFC program 

began in 1994. We requested comments on the methodology used to calculate the administration 

fee update as well as the impact of the updated administration fee on uninsured and underinsured 

VFC-eligible children. 

II. Summary of Proposed Provisions and Analysis of and Response to Public Comments 

 On May 11, 2012, we published a proposed rule (77 FR 27671) in the Federal Register 

entitled “Medicaid Program; Payments for Services Furnished by Certain Primary Care 

Physicians and Charges for Vaccine Administration under the Vaccines for Children Program.” 

 We received a total of 171 comments from states, advocacy groups, health care 

providers, employers, health insurers, health care associations, as well as individual citizens. 

The comments ranged from general support for the proposed provisions to specific questions or 

comments regarding the proposed changes. 

 The following are brief summaries of each proposed provision, summaries of the public 

comments received, and our responses to those public comments: 

General Comments 

Comment: Several commenters questioned whether the provisions of this rule apply to 

services paid under the Children’s Health Insurance Program (CHIP). CHIP programs can be 

structured as expansions of the state’s Medicaid program, as separate CHIP programs, or as a 

combination of a Medicaid expansion program and a separate CHIP program. 

 Response: The statute applies to fee for service and managed care payments made for 

services provided to Medicaid beneficiaries. Therefore, this rule applies only to CHIP Medicaid 

expansion programs since beneficiaries in such programs are Medicaid-eligible. CHIP stand-
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alone programs are not eligible for 100 percent FFP and physicians providing services to 

children in those programs are not eligible for higher payment at the Medicare rate by operation 

of these rules. At state option, states may align their CHIP payment rates for primary care 

providers with these Medicaid payment provisions. 

 Comment: Many commenters suggested that the rule be modified to specifically require 

that states collect and report to CMS data that would help the Congress determine whether or not 

to extend the provision beyond 2014. 

 Response: We agree and have revised §447.400(d) accordingly, as described below. 

 Comment: Many commenters believe that the budget impact estimates underestimate the 

time and resources for states to undertake the significant coding and related systems work, 

conduct the necessary analyses and develop policies, implement the regulation as part of regular 

operations and maintain compliance with the regulation as proposed in the proposed rule. 

 Response: We are sensitive to state concerns about the difficulty of implementing some 

of the provisions of the proposed rule and have modified this final rule to limit the administrative 

burden on states to the extent possible. We will also provide technical assistance to states as 

they implement the requirements of this rule to help minimize the administrative burden. 

 Comment: Several commenters stated that the proposed rule is contrary to current state 

and federal efforts to incentivize the entire health care delivery system to move away from 

volume-based reimbursement and would force states to relinquish savings in Medicaid 

efficiencies that have already been put into place. One commenter disagreed with our 

determination that each individual service code must be reimbursed at the Medicare payment 

level and believed that states should be permitted to increase total payments in the aggregate, 

with flexibility to determine how those payments are distributed. The commenter recommended 

that, at a minimum, a value-based option for implementing the increase be added to the final 
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rule. Several commenters suggested that the final rule permit states to develop methodologies to 

calculate the aggregate value of the primary care rate increase across all qualified providers and 

services and to use non fee for service payment mechanisms to deliver that aggregate increase 

equitably to eligible providers. 

 Response: The statute requires that state plans provide for “payment for primary care 

services...at a rate not less than 100 percent of the payment rate that applies to such services and 

physicians under part B of title XVIII...” Since the Medicare payment rate reimburses services 

individually, we continue to believe that this language precludes aggregated payments not 

specific to the service and physician. However, this does not preclude states from creating 

incentive payments or penalties based on performance measures. While we believe the Congress 

intended the payment levels to rise to Medicare payments, there is no prohibition on states 

having incentives/penalties external to the rates under traditional fee-for-service or managed care 

delivery systems. 

 Comment: One commenter asked about the applicability of the rule to services provided 

under section 1115 demonstration waivers. 

 Response: This final rule implements the statutory payment provisions uniformly across 

the states regardless of the authority under which a state’s Medicaid program operates. Specified 

primary care services delivered by eligible primary care physicians must be reimbursed at the 

enhanced rate. We intend to continue a dialogue with states with waivers through the 

implementation process. 

A. Payments to Physicians for Primary Care Services

1. Primary Care Services Furnished by Physicians with Specified Specialty and Subspecialty 

(§447.400) 

a. Specified Specialties and Subspecialties 
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Section 1902(a)(13)(C) of the Act specifies that physicians with a specialty designation 

of family medicine, general internal medicine, and pediatric medicine qualify as primary care 

providers for purposes of increased payment. We proposed that services provided by 

subspecialists within the primary care categories designated in the statute would also qualify for 

higher payment. These subspecialists would be recognized in accordance with the American 

Board of Medical Specialties (ABMS) designations. For example, a pediatric cardiologist would 

qualify for payment if he or she rendered one of the specified primary care services by virtue of 

that physician’s subspecialty within the qualifying specialty of pediatric medicine. Additionally, 

we proposed a method for states to use in identifying practitioners who may receive the 

increased payment. 

Under the proposed rule, states were required to establish a system to require physicians 

to identify to the Medicaid agency their specialty or subspecialty before an increased payment 

was made. For program integrity purposes, the state would be required to confirm the 

self-attestation of the physician before paying claims from that provider at the higher Medicare 

rate. We proposed that this be done either by verifying that the physician was Board certified in 

an eligible specialty or subspecialty or through a review of a physician’s practice characteristics. 

Specifically, for a physician who attested that he or she was an eligible primary care 

specialist or subspecialist but who was not Board certified (including those who are 

Board-eligible, but not certified), we required that a review of the physician’s billing history be 

performed by the Medicaid agency. We proposed that at least 60 percent of the codes billed by 

the physician for all of CY 2012 be for the E&M codes and vaccine administration codes 

specified in this regulation. For a new physician who enrolled during either CY 2013 or CY 

2014 and who attested that he or she was within one of the eligible specialties or subspecialties 

and who was not Board certified we proposed that, following the end of the CY in which 
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enrollment occurs, the state would review the physician’s billing history to confirm that 

60 percent of codes billed during the CY of enrollment were for primary care services eligible 

for payment under sections 1902(a)(13)(C) and 1902(jj) of the Act. 

Comment: Most commenters supported the inclusion of subspecialists. However, some 

commenters requested that CMS permit payment for subspecialists recognized by Boards outside 

of the ABMS, pointing out that other Boards are just as relevant. In particular, commenters 

noted that osteopaths, who are recognized as physicians under Medicaid regulations, are licensed 

by their own specialty Board and are excluded under the provisions of the proposed rule. 

Response: We agree and have revised the rule to include physicians recognized by the 

American Board of Physician Specialties (ABPS) and the American Osteopathic Association 

(AOA), as well as the American Board of Medical Specialties. These are the major, nationally 

recognized physician Boards. 

Comment: Many commenters disagreed with the inclusion of subspecialists. The 

commenters stated that the proposed rule would create disincentives for delivery of primary care 

services in the most appropriate settings, and posed a “threat” with regard to states’ ability to 

meet the statutory requirements of section 1902(a)(30) of the Act, which requires that payments 

under the state plan be consistent with economy, efficiency and quality of care. The commenters 

stated that the proposal would add 44 additional specialty designations to the list of physicians 

eligible to receive higher payments without a “rational” correlation to the subspecialists that do, 

or that might as a result of the temporary payment increase, deliver primary care. Commenters 

believed that this provision of the proposed rule would actually work against an expansion in 

true primary care. 

One commenter stated that states will not be able to sustain increased payment after 2014 

because the proposed rule would result in payments that are so widely distributed across the 
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delivery system as to make the impact of the increase extremely difficult to evaluate. This, in 

turn, would hamper states’ ability to demonstrate cost savings necessary to gain approval from 

their legislatures for continued higher payment. 

One commenter noted that CMS said it was particularly swayed by arguments that 

pediatric subspecialists provide primary care services in deciding to extend higher payment to all 

subspecialists. The commenter believes that the absence of a justification for including 

subspecialists does not lead to the conclusion that all subspecialists should be included. Rather, 

the decision to expand to other subspecialists should be based on an analysis of whether 

increasing payment rates is likely to improve access to primary care services for Medicaid 

beneficiaries. Since states are in the best position to make that assessment, the commenter urged 

CMS to permit states the flexibility to determine which approach best meets the needs of its 

beneficiaries. 

Several commenters were concerned that including subspecialists will add “unwarranted” 

costs. The commenters encouraged CMS “to adhere more closely to the intent of the law and 

only qualify true primary care physicians for this increased payment”. Several stated that the 

regulation exceeds the authority granted in the Affordable Care Act, which they believed limits 

the categories of providers to physicians with specialty designations of family medicine, general 

internal medicine, or pediatric medicine. 

Response: We continue to believe that the statute supports inclusion of subspecialists 

related to the three specialty categories designated in the statute and disagree that extending 

payments to subspecialists will dilute the impact of the regulation on Medicaid beneficiary 

access to primary care or result in “unwarranted” costs. The American Academy of Pediatrics 

cited the importance of pediatric subspecialists, particularly neonatologists, as a source of 

primary care services. The website of the American Academy of Family Physicians notes that 
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primary care services can be delivered outside an office setting and that physicians who are not 

trained in the primary care specialties of family medicine, general internal medicine or general 

pediatrics may sometimes provide patient care services that are usually delivered by primary 

care physicians. This rule only provides for higher payment to subspecialists to the degree that 

they actually furnish the E&M codes specified in the regulation and, consequently, will not 

result in costs that are for services that are not properly considered primary care. Therefore, we 

continue to believe that all subspecialists related to the three specialty categories designated in 

the statute should be eligible for higher payment to the extent that they provide covered E&M 

services. 

Comment: Other commenters indicated that the proposed rule, while properly 

recognizing E&M codes provided in emergency departments, unfairly excluded the majority of 

emergency physicians who are either not Board certified or are certified in emergency medicine. 

Other commenters urged that obstetricians and gynecologists (OB/GYNs) be included because of 

the important role they play in providing primary care to women. 

Response: The statute provides for higher payment of services furnished by “a physician 

with a primary specialty designation of family medicine, general internal medicine or pediatric 

medicine”. Therefore, although we recognize the role that other specialty physicians play in 

providing primary care services, the authority does not exist to extend the payment to other 

categories of physicians, including OB/GYNs. 

Comment: While some commenters strongly supported the proposed rule requirements 

that Medicaid agencies verify self-attestations with evidence of Board certification or practice 

history (60 percent of codes billed in a prior period were to be for E&M codes specified in the 

proposed rule), others cited both requirements as administratively burdensome and as requiring 

major and costly modifications to state processes and systems. They indicated that states have 
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different enrollment and claims processing capacity and may not be able to identify all provider 

subspecialties or reimburse a different rate by subspecialty. Commenters suggested that states be 

permitted to use their existing enrollment processes, usually self-attestation alone, to identify 

which physicians qualify for payment, or to be permitted to use Medicare’s NPI designation, 

which is also based on self-attestation. One commenter suggested that self-attestation could be 

verified with a random audit by the Medicaid agency. 

Some commenters stated that permitting self-attestation to be verified with evidence of 

Board certification alone creates an inequity. This is because many traditional primary care 

providers who are not Board certified and do not reach the 60 percent threshold of E&M codes 

billed will be excluded from increased payment in favor of subspecialists who provide relatively 

few primary care services. 

One commenter disagreed with our decision to base the 60 percent claims verification 

threshold on the Medicare primary care incentive program threshold, stating that the Congress 

could have imposed a similar requirement on Medicaid, but did not. They do not believe it is 

appropriate to designate any threshold of claims verification. They also suggested permitting 

non-Board certified physicians to qualify if they completed an approved residency in any of the 

three designated primary care physician specialties. Other commenters suggested using allowed 

charges as the threshold to parallel the Medicare primary care payment or services paid, rather 

than billed, asserting that data on rejected claims is not readily available. 

One commenter suggested that states be permitted to define eligible physicians based on 

enrollment criteria for existing state primary care programs. Another commenter suggested that 

states be given flexibility to rely on methods that already exist within each state’s payment 

systems, such as requiring eligible providers to bill with a unique modifier. 
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One commenter also asked that we clarify procedures for the identification of qualifying 

out-of-state providers, suggesting that the home state’s verification be used. 

Response: We agree that there is variation among states for provider enrollment 

procedures and Medicaid Management Information System (MMIS) capabilities. We 

acknowledge that many states have existing programs designed to increase the availability of 

primary care services and that those programs may differ from the provisions of the proposed 

rule. We also acknowledge that permitting self-attestation to be verified with evidence of Board 

certification alone creates an inequity in that Board certified physicians who provide few 

primary care services will be eligible for higher payment while non-Board certified physicians 

who provide many primary care services but not enough to meet the 60 percent threshold will be 

excluded. We continue to believe that there must be uniform, auditable standards for the 

identification of eligible physicians and that Board certification and claims history are 

appropriate standards. However, we acknowledge the concerns regarding the significant 

administrative burden of this requirement. Therefore, this rule removes the requirement that the 

State Medicaid agency verify the self-attestation of all physicians by confirming Board 

certification or an appropriate claims history. Instead, this rule requires that physicians selfattest that they are either Board certified in family medicine, general internal medicine, or 

pediatric medicine or a subspecialty within those specialties or that that sixty percent of all 

Medicaid services they bill, or provide in a managed care environment, are for the specified 

E&M and vaccine administration codes. This rule also clarifies that states may defer to the state 

where the physician’s practice is located with respect to a determination of a physician’s 

eligibility for higher payment. 
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For the threshold itself, we often use Medicare program standards in developing policy 

for the Medicaid program, and we believe that it is appropriate to apply the 60 percent threshold 

applicable to the Medicare primary care incentive payment to the Medicaid payment as well. 

Comment: One commenter suggested that the proposed §447.400(a) be amended to add 

a subsection to define what is meant by self-attestation of a specialty or subspecialty designation. 

Response: We believe that the meaning of self-attestation is generally understood in this 

context as both the states and managed care organizations credential providers. Therefore, we do 

not agree that an amendment to §447.400(a) is necessary. 

Comment: Commenters questioned whether the process for identifying eligible providers 

was the same across delivery systems and if states with MCOs, PIHPs or PAHPs could rely on 

the definition of primary care provider established through the managed care contract. 

Commenters suggested that the broad definition of primary care provider proposed by the 

proposed rule would reward providers that do not focus their practice on primary care. 

Response: We recognize that the definition of a primary care provider under existing 

managed care contracts may, in some instances, be more or less targeted than that proposed 

under this rule. The contract definition may also exceed the scope of those primary care 

physicians that qualify for this payment. However, section 1902(a)(13)(C) of the Act, as 

amended by the Affordable Care Act, specifies that physicians with a specialty designation of 

family medicine, general internal medicine, and pediatric medicine qualify as primary care 

providers for the purposes of the increased payment rate. The proposed rule clarified that 

qualified providers include subspecialists related to to the three designated provider practice 

types. Therefore, we must require that the same approach apply to identifying eligible providers 

reimbursed under managed care delivery systems. 
 21 

 

Comment: A commenter noted that some physicians have more than one identifier and 

asked if separate information on both identifications would be necessary if the physician receives 

differing rates based on the identification number used. 

Response: This is an operational issue beyond the scope of this rule. 

Comment: A commenter suggested that non-contracted providers that deliver primary 

care services to managed care enrollees that have a permissible out-of-network encounter should 

not be eligible for payment at the Medicare rate. 

Response: We disagree. Section 1932(f) of the Act, as amended by the Affordable Care 

Act, requires that managed care contracts pay designated providers for the provision of 

designated services at the Medicare rate. Further, there are no exceptions made in the statute to 

the minimum payment requirement for services provided out of network. If a Medicaid 

beneficiary receives eligible services out-of-network from a provider covered by this rule, the 

reimbursement rate must also align with the requirements stated herein. 

Comment: One commenter stated that not all subspecialists providing services through 

managed care delivery systems have the expertise to function as a primary care provider. 

Response: This rule does not create new requirements for primary care providers. 

Rather, it assures payment of the Medicare rate for services that the subspecialist bills within the 

E&M and vaccine administration code range specified in the rule. 

Comment: One commenter asked if the intent of the managed care payment is to include 

subspecialties such as otolaryngology, ophthalmology or urology and also stated that the 

payment should be limited to subspecialists that directly serve primary care needs. 

Response: The intent of the managed care payment is to reimburse at the Medicare rate 

only those primary care subspecialists and related subspecialists designated in this rule and only 

for the E&M and vaccine administration code range specified in the rule. 
 22 

 

Summary of Final Policy: This final rule provides for higher payment in both the fee for 

service and managed care settings to physicians practicing within the scope of practice of 

medicine or osteopathy with a specialty designation of family medicine, general internal 

medicine and pediatric medicine. It also provides for higher payment for subspecialists related 

to those specialty categories as recognized by the American Board of Medical Specialties, 

American Osteopathic Association and the American Board of Physician Specialties. Lists of 

specialists and subspecialists can be found at the respective Board websites which are: 

www.abms.org, www.osteopathic.org and www.abps.org. This rule removes the requirement that 

the state Medicaid agency verify the self-attestation of all physicians by confirming Board 

certification or an appropriate claims history. However, in the absence of an industry-wide 

definition of “primary care physician” we believe it is necessary to impose a uniform standard to 

identify such providers. Therefore, this rule requires that physicians self-attest that they are 

either Board certified in family medicine, general internal medicine, or pediatric medicine or a 

subspecialty related to those specialties or that 60 sixty percent of all Medicaid services they bill, 

or provide in a managed care environment, are for the specified E&M and vaccine administration 

codes. 

State Medicaid agencies may pay physicians based on their self-attestation alone or in 

conjunction with any other provider enrollment requirements that currently exist in the state. 

However, if a state relies on self-attestation it must annually review a statistically valid sample of 

physicians who have self-attested that they are eligible primary care physicians to ensure that the 

physician is either Board certified in an eligible specialty or subspecialty or that 60 percent of 

claims either billed or paid are for eligible E&M codes. In the case of services provided through 

a managed care delivery system, states will be given flexibility in the manner in which they 
 23 

 

perform this verification. We expect states to work with the health plans to determine an 

appropriate verification methodology. 

We recognize that data may not be readily available on rejected claims, making services 

paid a more appropriate threshold and either claims billed or claims paid can be used in the 

sample. This rule also clarifies that a state whose beneficiaries receive services from a physician 

in a neighboring state may accept the determination of eligibility for higher payment made by the 

physician’s home state in making higher payment under this rule 

b. Services Furnished by a Specified Physician 

Section 1902(a)(13)(C)of the Act requires increased payment for “primary care services 

furnished in CYs 2013 and 2014 by a physician with a primary specialty designation of family 

medicine, general internal medicine, or pediatric medicine.” The proposed rule specified that the 

increased payment applies only for services under the “physicians’ services” benefit at section 

1905(a)(5)(A) of the Act and in regulations at §440.50. Increased payment would not be 

available for services provided by a physician delivering services under any other benefit under 

section 1905(a) of the Act such as, but not limited to, the Federally Qualified Health Center 

(FQHC) or Rural Health Clinics (RHC) benefits because, in those instances, payment is made on 

a facility basis and is not specific to the physician’s services. Section 1902(a)(13)(C) of the Act 

requires payment “for primary care services... furnished by a physician with a primary specialty 

designation of family medicine, general internal medicine, or pediatric medicine at a rate no less 

than 100 percent of the payment rate that applies to such services and physicians under Part B of 

Title XVIII.” We believe that the statute limits payment to physicians who, if Medicare 

providers, would be reimbursed using the MPFS. The MPFS is not used to reimburse physicians 

in settings such as FQHCs or RHCs. Therefore, we believe physicians delivering primary care 

services at FQHCs and RHCs are not eligible for increased payments under section 1902(a)(13) 
 24 

 

of the Act. Furthermore, we noted that the Medicaid statute already provides a payment 

methodology for FQHCs and RHCs that is designed to reimburse those providers at the 

appropriate rate. 

In specifying that payment is made for qualified primary care services under the 

physicians’ services benefit at §440.50, the increased payment for primary care services would 

be required for services furnished “by or under the personal supervision” of a physician who is 

one of the primary care specialty or subspecialty types designated in the regulation. In 

Medicaid, many primary care physician services are actually furnished under the personal 

supervision of a physician by nonphysician practitioners, such as nurse practitioners and 

physician assistants. Such services are usually billed under the supervising physician’s program 

enrollment number and are treated in both Medicare and Medicaid as services of the supervising 

physician. Consistent with that treatment, we proposed that primary care services be paid at the 

higher rates if properly billed under the provider number of a physician who is enrolled as one of 

the specified primary care specialists or subspecialists, regardless of whether furnished by the 

physician directly, or under the physician’s personal supervision. This would align with 

Medicaid’s longstanding practice in providing physician services, as well as Medicare’s Part B 

FFS payment methodology for professional services. Additionally, this policy would recognize 

the important role that non physician practitioners working under the supervision of physicians 

have in the delivery of primary care services. 

 Comment: Most commenters supported the proposal to include practitioners working 

under the supervision of a physician, however they disagreed with the exclusion of those same 

practitioners when billing under their own Medicaid number. Numerous commenters urged 

CMS to include independently practicing certified nurse midwives, nurse practitioners, certified 

registered nurse anesthetists, clinical nurse specialists and other advanced practice nurses, as 
 25 

 

well as pharmacists, who often administer vaccines, as eligible practitioners on the grounds that 

they provide identical services to those provided by primary care physicians. 

 Some commenters urged CMS to extend increased payment to FQHCs and RHCs, 

pointing out their important role in the provision of primary care services in underserved areas. 

Several urged that services provided by other types of clinics and Health Departments be 

included and asked whether services provided by public health providers in those settings were 

eligible if billed by an eligible physician using his own National Provider Identifier (NPI). One 

commenter asked how primary care services reimbursed as part of a nursing facility per diem 

rate and billed under the nursing facility’s Medicaid number would be reimbursed. 

 Response: The statute provides for higher payments for “primary care services 

furnished... by physicians with a primary specialty designation of family medicine, general 

internal medicine or pediatric medicine....” Therefore, consistent with the statute, services 

provided by pharmacists or independently practicing nonphysician practitioners not under the 

supervision of an eligible physician are excluded. In addition, we continue to believe that 

eligible services are those reimbursed on a physician fee schedule. Services provided in FQHCs, 

RHCs and clinics and Health Departments, to the extent that they are reimbursed on an 

encounter or visit rate, are not eligible for higher payment, nor are services provided in nursing 

facilities that are reimbursed as part of the per diem rate. 

Comment: A commenter noted that managed care contracts may require that FQHC and 

RHC services be paid at a level not less than that received by other providers under contract for 

the same scope of services, and that any increase to the FQHC or RHC service rate to account for 

enhanced payments to primary care providers under this rule should be eligible for 100 percent 

FFP. One commenter recommended that the final rule clarify that, if a state requires managed 

care organizations to increase payments to primary care providers in FQHCs, the state should 
 26 

 

make a corresponding adjustment in the plan’s capitation rate in a transparent and timely 

fashion. An additional comment was made that FQHCs and RHCs should be eligible for higher 

payment under this rule, thereby reducing the managed care “wrap around” required by the 

prospective payment system (PPS). 

Response: The increased payment for primary care services eligible for 100 percent 

federal matching funds is implemented as a physician payment under section 1905(a)(5) of the 

Act. This means that services delivered by physicians under another Medicaid benefit at section 

1905(a) of the Act, such as FQHC services, are not subject to the higher payment requirement or 

eligible for enhanced federal matching funds. Managed care contractual payment arrangements 

for FQHCs and RHCs are unaffected by and beyond the scope of this rule. 

 Comment: One state asserted that the proposed rule unfairly treats comparable providers 

unequally based solely on their practice setting or enrollment status. That same commenter 

noted that precluding independently enrolled practitioners from receiving the enhanced 

reimbursement undermines the purpose of section 1902(kk) of the Act to improve data collection 

and program integrity by requiring “all rendering or referring physicians or other professionals to 

be enrolled under the state plan or under a waiver as a participating provider.” In order to 

comply, the state has been requiring independent enrollment of nonphysician practitioners, 

where possible under state law. 

 Many commenters expressed concern with the requirement that services be billed under 

the physician’s billing number. They indicated that many states have billing and oversight 

policies and procedures designed to elicit desirable policy goals or analyses, but which will also 

make it administratively difficult for nonphysician providers to receive the higher Medicare rate. 

They also stated that some states require certain nonphysician providers to obtain and bill under 

their own provider number, even when being supervised by a physician, and that the definition 
 27 

 

of a physician at §440.50 does not specify that services must be billed under the physician’s 

number. Another commenter indicated that, in many situations, the billing entity is often a legal 

entity, not a practitioner. In the case of a group practice, the claim would most likely be billed 

under the practice number and not the physician’s number. 

 Another commenter stressed that states have varying definitions of “physician 

supervision” and suggested that CMS defer to state rules on this point. Commenters suggested 

that CMS permit various kinds of arrangements or agreements between physicians and 

independently billing nonphysician practitioners so that primary care services such as those 

provided by nurse practitioners and physician assistants at commercial emergency facilities 

could receive increased reimbursement. 

 Response: We acknowledge the variation in billing practices and requirements among 

states. Therefore, this rule removes the requirement that services be billed under the physician’s 

billing number. We also acknowledge that states have varying requirements with regard to 

services provided under the supervision of a physician. However, by specifying in the statute 

that services be furnished by physicians, we believe that the Congress clearly intended that there 

be direct physician involvement in the services provided. Therefore, while deferring to state 

requirements, this rule assumes a relationship in which the physician has professional oversight 

or responsibility for the services provided by the practitioners under his or her supervision. This 

precludes the types of arrangements in which independent nurse managed clinics or other 

practitioners enter into arms-length arrangements with physicians for purposes of establishing a 

relationship that leads to higher payment of the practitioner services. 

 Comment: CMS was asked to clarify in the final rule that services provided by all 

advanced practice clinicians, including nurse midwives, providing services under the supervision 

of a physician will be eligible for higher payment. 
 28 

 

 Response: Eligible services provided by all advanced practice clinicians providing 

services within their state scope of practice under the supervision of an eligible physician will be 

eligible for higher payment. This includes those not specifically mentioned in the proposed rule, 

such as nurse midwives. 

 Comment: CMS was asked to clarify whether services provided by advanced practice 

clinicians under the supervision of a physician will be billed at 100 percent of the Medicare 

physician rate, or the practitioner rate, since many states reimburse services provided by 

supervised nonphysician practitioners at a percentage of the physician fee schedule rate. 

 Response: The statute provides for 100 percent FFP on the difference between the 

Medicaid rates paid as of July 1, 2009 and the applicable Medicare rates in CYs 2013 and 2014. 

Therefore, if the state plan in 2009 reimbursed services provided by nonphysician practitioners 

under the supervision of a physician at a percentage of the physician fee schedule rate, that same 

practice must be continued in CYs 2013 and 2014. If a state reimbursed all physician services at 

a single rate in 2009, it should continue to reimburse in that manner in CYs 2013 and 2014. 

 Summary of Final Policy: This rule provides for higher payment for services provided 

by eligible physicians reimbursed pursuant to a physician fee schedule. Higher payment is not 

available for physicians who are reimbursed through a FQHC, RHC or health department/clinic 

encounter or visit rate or as part of a nursing facility per diem rate. 

 This rule provides for higher payment for services provided under the personal 

supervision of eligible physicians by all advanced practice clinicians. In recognition of 

state efforts to enroll advanced practice clinicians in the Medicaid program and to require 

them to use their own Medicaid number, this rule removes the requirement that services 

be billed under the physician’s billing number. However, it requires that the physician 

have professional oversight or responsibility for the services provided by the practitioners 
 29 

 

under his or her supervision. This rule also provides that the state reimburse for services 

provided by advanced practice clinicians in 2013 and 2014 in the manner in which it 

reimbursed for those services as of July 1, 2009. If the state reimbursed for services 

actually rendered by supervised advanced practice clinicians at a percentage of the 

physician fee schedule rate, it should continue to do so in 2013 and 2014. 

c. Eligible Primary Care Services (§447.400(b)) 

We proposed that Healthcare Common Procedure Coding System (HCPCS) (E&M) 

codes 99201 through 99499 and vaccine administration codes 90460, 90461, 90471, 90472, 

90473 and 90474 or their successors will be eligible for higher payment and FFP. These codes 

are specified by the statute and include those primary care E&M codes not reimbursed by 

Medicare. 

Specifically, we proposed to include as primary care services the following E&M codes 

that are not reimbursed by Medicare: 

● New Patient/Initial Comprehensive Preventive Medicine--codes 99381 through 99387; 

● Established Patient/Periodic Comprehensive Preventive Medicine--codes 99391 

through 99397; 

● Counseling Risk Factor Reduction and Behavior Change Intervention--codes 99401 

through 99404, 99408, 99409, 99411, 99412, 99420 and 99429; 

● E&M/Non Face-to-Face physician Service--codes 99441 through 99444. 

 Comment: Most commenters were supportive of the range of E&M codes identified for 

higher payment and of the inclusion of codes not reimbursed by Medicare. Two commenters 

suggested expanding the list of covered codes to include HCPCS “G” codes and two suggested 

permitting states to designate additional codes at their discretion. Two commenters suggested 
 30 

 

extending higher payment to all codes billed by a primary care pediatrician, pediatric 

subspecialist, or surgical specialist. 

Some commenters stated that some of the codes identified by CMS are not viewed by the 

industry as constituting primary care. These include the following: Hospital Observation Care 

and Inpatient Consultation codes for inpatient services provided by the non-admitting physician 

(99217-99220, 99224-99226, 99251-99255, 99231-99233); Consultations (99241-99245, 99251-

99255); Emergency Department Services (99281-99288); and Critical Care Services (99291-

99292). Commenters stated that some are rendered in settings not known for primary care 

delivery such as intensive care units and emergency departments. They believe that inclusion of 

those codes will encourage inappropriate utilization and result in increased health care costs 

overall. One commenter suggested limiting increased reimbursement to office-based services. 

However, other commenters commended the inclusion of these same codes. They stated 

that these settings often are the point of first contact for primary care due to new injuries or lack 

of timely access to primary care services in the community. 

Response: The statute identifies specific services according to HCPCS codes that will 

receive the increased payment. Accordingly, we are finalizing the list of codes specified in the 

proposed rule. 

Comment: One state indicated that it is still using local codes rather than the E&M codes 

identified in this rule and asked for confirmation that services billed using those codes will be 

eligible for higher payment. It was suggested that states be permitted to provide CMS with a 

crosswalk of those local codes to the E&M codes they represent. 

Response: We confirm that higher payment may be made for services billed using local 

codes. States will need to submit a crosswalk of those codes to the eligible E&M codes as part 
 31 

 

of the required implementing state plan amendment. However, this flexibility is limited to 

substitutes for covered E&M codes and does not extend to vaccine administration codes. 

Comment: A number of states indicated that they do not reimburse for all of the codes in 

the specified E&M range and asked that CMS clarify that they are not required to do so for 

purposes of this rule. Other commenters suggested that states be required to pay for all codes 

specified in the regulation. Several commenters stated that all of the E&M codes specified in 

section 1902(jj) of the Act are not necessarily included in managed care contracts and questioned 

whether reimbursement of all E&M codes was a requirement under this rule. 

One commenter stated that the definition of primary care services by CMS is broader 

than what is currently used by some MCOs and expressed concern that the rate adjustment will 

inadvertently fail to adjust for the scope in services. 

Response: This rule clarifies that states need not pay for codes within the specified range 

that are not otherwise reimbursable under their Medicaid program and that managed care 

contracts need not be amended to specifically require coverage of previously non-covered codes. 

To that end, we do not anticipate an impact on the scope of primary care services eligible for 

enhanced federal match under managed care delivery systems that would affect rate setting. 

 Comment: A commenter asked whether CMS intends for providers to be reimbursed at a 

higher rate for services provided through managed care irrespective of actual billed charges or if 

MCOs are required to utilize the Medicaid fee schedule in payment of providers and services 

designated in the rule. 

 Response: The statute requires providers to be reimbursed at the Medicare rate for 

primary care services when furnished by the qualified physicians and does not make exceptions 

for a situation where a provider may be charging less than the required amount. Therefore, no 

such exception is carved out for managed care payment. If a MCO reimburses a physician a fee 
 32 

 

schedule amount then the rate must be at least as much as the Medicare rate used for FFS 

payment. We intend to continue to work with the states regarding the identification of the 2009 

baseline rate for eligible services and the rate differential eligible for 100 percent federal 

matching. 

Comment: A number of states asked if the 2009 base rate for a code not reimbursed by 

the state in 2009, but currently reimbursed, would be $0. This includes three codes (subsequent 

observation care) in the E&M code range which have been added since 2009. 

Response: For new codes added to the E&M code range since 2009, we confirm that the 

2009 rate would be $0 and 100 percent FFP will be available for the entire payment. This is also 

true for other codes within the range not reimbursed by the state in 2009 but subsequently added 

to the fee schedule as covered codes. However, we do not expect states to make modifications to 

their code sets in 2013 or 2014 solely for the purpose of maximizing FFP. We will require that 

the state plan amendment submitted by the state providing for reimbursement under this rule list 

not only the codes for which higher payment will be available in 2013 and 2014 but that it 

specifically identify the codes which have been added since 2009 as well. 

Comment: One commenter asked if states that reimburse the consultation codes 

reimbursed by Medicare in 2009 but not covered in 2013 and 2014 still will receive the enhanced 

federal match for these codes. 

Response: States will receive 100 percent FFP for the payment differential for the 

difference in payment made for codes in effect in 2013 and 2014 and the base year. In general, a 

state will receive enhanced match for any code that it reimbursed in the baseline period and in 

2013 or 2014, even if the code is not reimbursed by Medicare. As stated earlier, we will develop 

Medicare-like rates in 2013 and 2014 for CPT codes not reimbursed by Medicare but recognized 

for reimbursement in the final rule. 
 33 

 

Comment: A comment was made regarding the baseline for payment to out-of-state 

providers, in particular, that states and managed care organizations should be allowed to use 

statewide or “rest of state” rates to pay those providers for the provision of eligible primary care 

services. 

Response: In setting the requirement for managed care payment the statute does not 

make an exception to permit out of state providers to be reimbursed at less than the minimum 

amount. Therefore, managed care contracts must assure such providers receive the Medicare 

FFS rate. 

Comment: We received a number of comments about how states should be able to set the 

minimum payment in a managed care environment. Some commenters believed that payment 

should be consistent with the Medicare rate in the aggregate for the capitated group, while 

another urged us to permit states to implement a rate based on a multiple of the Medicare rate 

derived from using the state’s average Medicaid fee schedule versus the Medicare schedule for 

the state. Another commenter asked whether we expect MCOs, PIHPs or PAHPs to unbundle 

payments to be able to track individual services. 

Response: We do not specify in this rule how a state must meet the statutory requirement 

for payment at the Medicare rate under managed care delivery systems. Rather, the 

methodologies required under new §438.804(a)(1) will need to identify the 2009 baseline rate 

and rate differential based on reasonable and documented data and assumptions available to the 

state. As stated throughout this rule, we will continue a dialogue with the states on these issues 

during the implementation process. 

Summary of Final Policy: This rule requires state Medicaid agencies to reimburse at the 

applicable 2013 or 2014 Medicare rate for E&M codes 99201 through 99499 to the extent that 

those codes are covered by the approved Medicaid state plan or included in a managed care 
 34 

 

contract. The 2009 base rate for codes not covered in 2009 but subsequently added will be $0. 

Services billed using local codes will be eligible for higher payment if the state Medicaid agency 

submits, as part of the required state plan amendment, a crosswalk of those codes to the specified 

E&M codes. States will also be required to identify all codes in use and eligible for higher 

payment as well as those codes added since 2009 for which the base rate will be $0. States will 

be given flexibility in developing a methodology to identify the base payment under managed 

care delivery systems. 

2. Amount of Required Minimum Payments (§447.405) 

Section 1902(a)(13)(C) of the Act requires payment not less than the amount that applies 

under the MPFS in CYs 2013 and 2014 or, if greater, the payment rate that would be applicable 

if the 2009 CF were used to calculate the MPFS. 

a. Use of Fee Schedule Amount Applicable to the Geographic Location of Service 

We proposed that states use the MPFS rate applicable to the site of service and 

geographic location of the service at issue. The Medicare Part B rates vary by geographic 

location and site of service. For example, rates are higher for services provided in an office 

setting as opposed to the outpatient hospital setting. We proposed that states would be required 

to use the MPFS payment amounts applicable to the site of service and geographic location 

because we believed these are integral to the MPFS payment system. Individual fee schedule 

amounts for the MPFS are the product of the geographic adjustment, relative value units 

(RVUs), and conversion factor (CF) that converts adjusted RVUs into dollar amounts. Site of 

service is reflected as an adjustment to the RVUs used to set the rate. 

 We proposed that states be required to use the MPFS as published by CMS. Medicare 

primary care incentive payments made under section 1833 of the Act, as amended by section 

5501 of the Affordable Care Act, would not be included. Section 5501(a) of the Affordable Care 
 35 

 

Act amended the statute to provide for incentive payments for a subset of the codes covered by 

this regulation. The payments are not made as increases in fee schedule amounts and are not 

reflected in the MPFS. 

Overarching and Fee for Service Comments

 Comment: Most commenters strongly urged that states not be required to recognize 

Medicare place of service and geographic adjusters since Medicaid payment systems do not 

make these same adjustments. One commenter said that the use of geographic adjustments 

would perpetuate geographic inequities in payment that have resulted from the current method of 

specifying payment locales and for calculating geographic practice cost indices (GPCIs) in the 

Medicare program. As alternatives, commenters suggested that states be permitted or required 

to: use only one geographic or place of service schedule or to use weighted average rates; pay at 

the highest geographic rate in the state and; use a bench-mark statewide Medicare fee schedule 

or a national fee schedule set by CMS or otherwise determined by the state. 

 Response: We have considered the comments and the suggestions in light of the clear 

intent of the statute to enhance Medicaid beneficiary access to care through higher physician 

payments. In the interests of administrative simplification, the final rule does not require that 

states make site of service adjustments. Many states have instituted measures designed to reduce 

inappropriate use by beneficiaries of emergency departments for non-emergent services. We 

believe that the higher payment for primary care services provided for in this rule will encourage 

physician participation and will improve beneficiary access to services provided in the 

community setting. Therefore, this rule provides that states may reimburse all codes at the 

Medicare office rate as an alternative to making site of service adjustments. 

 For geographic adjustments, the final rule additionally permits states to either make all 

appropriate geographic adjustments made by Medicare, or to develop rates based on the mean 
 36 

 

over all counties for each of the E&M codes specified in this rule. In identifying this alternative, 

we balanced the desire on the part of states for administrative simplicity against the need to 

ensure that providers are reimbursed in accordance with the requirements of the statute. There 

are seventeen states that have multiple Medicare localities and of those seventeen, ten have only 

two localities. We reviewed various formulas utilizing the mean and median of rates. Our goal 

was to most closely match the rates that would be generated under the actual Medicare locality 

fee schedules. By using a single fee schedule based on the mean over all counties, the majority 

of states will see a reduction of less than two percent. States that will experience a larger impact 

can elect to use the actual Medicare locality adjusted fee schedule. The required state plan 

amendment for these changes must describe the methodology the state has chosen. 

 Comment: A number of commenters asked that CMS clarify that the increased payment 

to physicians may be made as a lump sum payment rather than as an add-on to the rate, pointing 

out that Medicare’s primary care payment is paid as a lump sum on a quarterly basis. 

 Response: The higher payments may be made as either add-ons to existing rates or as 

lump sum payments. To ensure that physicians receive the benefit of higher payments in a 

timely manner, lump sum payments should be made no less frequently than quarterly. 

 Comment: One commenter stated that CMS needs to clarify the specific procedures and 

guidelines regarding how states and health plans should reprocess claims for supplemental 

payment to providers if the state chooses to provide increased payments retroactively. 

Response: Because MMIS capabilities and payment processes vary by state and between 

health plans, we are permitting flexibility in the specifics of how these tasks are accomplished. 

 Comment: A number of commenters suggested that the MPFS be defined as including 

the primary care incentive payment authorized for the Medicare program by the statute (as 

amended by section 5501of the Affordable Care Act) to make up for the fact that pediatricians, 
 37 

 

in particular, do not receive payments under the Medicare primary care incentive program. 

These commenters disagreed with CMS’s interpretation that the statute precludes the inclusion 

of these payments. 

 Response: As noted in the proposed rule, payments under section 5501 of the Affordable 

Care Act are not made as increases in fee schedule amounts and are not reflected in the MPFS. 

Therefore, this final rule requires that those payments be excluded when calculating the 

appropriated 2013 and 2014 Medicare fee schedule rates. 

 Comment: Many commenters asked that states be given flexibility to implement the 

program in phases, if necessary, and to make changes to rates retrospectively. They pointed out 

that the Medicare RVUs for the subsequent calendar year are not published until November, 

which does not give states enough time to incorporate the Medicare payment rates into fee 

schedules and contracts by January 1, 2013. 

 Response: We acknowledge that states will not have information on the final 2013 

Medicare RVUs and on final regulatory requirements for the primary care payments until late in 

2012. However, we do not have the authority to permit states to implement higher payments “in 

phases”. The statute requires that higher payment be made for services furnished on or after 

January 1, 2013. However, under regulations at §430.20, states have until March 31, 2013 to 

submit a State Plan Amendment (SPA) that is effective on January 1, 2013. Additionally, it is 

common practice for states changing reimbursement rates to make retroactive adjustments to 

claims after a SPA has been approved. This procedure provides additional time for states to 

make system changes to reflect this final rule and the November 2012 publication of the 

Medicare 2013 RVUs. 
 38 

 

Comment: One commenter stated that the final rule needs to clarify that the billing entity 

for the primary care provider must receive the higher payment. This comment was made in the 

context of salaried physicians working for a county provider. 

Response: If services delivered by the county employed physician are actually 

reimbursed under the Medicaid state plan as physician services rather than clinic services, then 

the physician must receive the increased payment. If, as a condition of employment, the 

physician agrees to accept a fixed salary amount then we expect an appropriate adjustment to the 

salary to reflect the increase in payment. We caution governmental providers that services of a 

physician may be delivered under a variety of Medicaid benefit categories and that services 

offered by a county run clinic, in general, do not qualify for the enhanced federal match. 

Comments Specific to Managed Care 

Comment: CMS received many comments on the minimum payment requirement, 

ranging from concern that primary care providers would not actually receive higher payment to 

concern that monitoring payment distribution would be unduly burdensome for MCOs, PIHPs 

and PAHPs. One commenter suggested that CMS consider a MCO, PIHP or PAHP’s obligation 

to have been met if the health plan’s contracts with provider groups allowed for the increased 

payment. Another commenter suggested that states should be required to enact contract 

amendments that allow full pass through of the rate increase to primary care providers and 

describe how the MCO, PIHP or PAHP will verify, in the aggregate, the delivery of primary care 

services at the average enhanced rate. 

Response: We recognize that states’ managed care contracts with MCOs, PIHPs, and 

PAHPs vary and that, as a consequence, provider agreements vary as well. We continue to 

require that qualified providers receive the higher payment but in deference to these varying 

arrangements, we do not specify how this requirement must be met. We emphasize that in order 
 39 

 

for states to gain CMS regional office approval of their managed care contracts they must 

demonstrate that the higher payment will actually be passed on for services furnished by the 

primary care physicians designated in statute. 

Comment: Some commenters urged CMS to provide flexibility to the states through their 

contracts with MCOs, PIHPs and PAHPs, to identify an appropriate and reasonable approach to 

passing through the increased payment when capitated amounts are inclusive of primary and 

specialty care services. Otherwise, tailoring each physician group increase will be 

administratively complex, costly, and contrary to the intent of the rule. Another commenter 

suggested that no administrative/documentation of payment should be required for the following 

delivery arrangements: (1) Health plan with exclusive contract with a single medical group in a 

specific geographic area to provide or arrange for professional medical services for the enrollees 

of the plan; (2) delivery system where Medicaid enrollees are not distinguished from others in 

terms of access to the same providers and services; and (3) physicians are paid salaries and 

receive a capitation rate without regard to payment source. 

Response: We are sensitive to the issue of administrative burden and are providing 

flexibility to states with respect to the identification of the required payment in a managed care 

environment. As specified in §438.804, the states shall receive approval of two methodologies, 

contract amendments, and rate certifications to implement this rule, and CMS will focus on the 

reasonableness and accuracy of the methods proposed by the state.

Comment: One commenter stated that the rule needs to clearly specify that a plan must 

increase payment to physicians in a managed care environment to meet the minimum payment 

standard even if a state is not eligible for 100 percent FFP for some portion of the increase (as in 

the case where a state has reduced payment rates below 2009 levels). 

Response: We agree that this payment increase must take place regardless of whether 
 40 

 

some portion of the increase is not funded with 100 percent FFP. 

Comment: A commenter states that the proposed rule fails to ensure that CMS or 

primary care physicians can determine whether or not the minimum payment requirement has 

been met. We were urged to require state level transparency in the implementation of the 

primary care payment increase. 

Response: We understand that managed care payment is not necessarily transparent with 

respect to individual payment for certain services and require MCOs to supply encounter data to 

states. We expect that encounter data will be sufficient for the states to undertake verification 

activities. Additionally, MCOs, PIHPs and PAHPs are required by regulation and contract to 

ensure that eligible primary care providers receive the appropriate rate increase for primary care 

services rendered. 

Comment: A commenter suggested that CMS needs to consider holding harmless health 

plans if the practice with which the primary care provider is affiliated fails to pass along the 

increased reimbursement to the affected providers. 

Response: MCOs, PIHPs and PAHPs are required by regulation and contract to ensure 

that eligible primary care providers receive the appropriate rate increase for primary care 

services rendered. The structure of the health plan’s provider network does not mitigate this 

responsibility.

Comment: One commenter indicated that, to the extent low income health pools (LIHPs) 

are included in the rule, a specific methodology would be required for PIHPs and MCOs to 

identify payment amounts. The data source for paid claims data would be from each individual 

LIHP because the LIHPs are not paid by a particular state’s fiscal intermediary.

Response: We will not respond to state-specific comments in this rule, but will continue 

to work with states to address specific issues that may arise during the implementation process. 
 41 

 

Comment: A commenter stated that methodologies used to develop capitation rates to 

assure the minimum payment need not be grounded in E&M codes, but could be more broadly 

defined by primary care services as currently defined by the state for managed care. The 

approach outlined in the proposed rule is problematic for these reasons: most states do not use 

E&M codes as basis to develop and adjust cap rates; and, due to variations in MCO, PIHP and 

PAHP payment methods, such as partial capitation, and the relative completeness of data 

submitted by providers, states do not consistently receive data necessary to affirm that specific 

E&M services have been delivered at the Medicare FFS rate. The commenter suggested that an 

alternative approach would be to allow states to define a methodology to estimate: (1) aggregate 

volume and baseline payment rate of primary care services expected to be delivered to all 

managed care beneficiaries by PCPs; and (2) the differential aggregate payment associated with 

increasing payment up to average Medicare levels. This methodology, asserts the commenter, 

would allow for existing assumptions and methodologies states use to develop their capitation 

rates. States would pass through associated capitation adjustment on a per month basis to their 

MCOs, PIHPs and PAHPs and use the associated financial transaction information to provide the 

necessary CMS 64 documentation for federal match. 

Another commenter suggested the additional Medicare fee schedule payments be beyond 

the scope of the risk portion of the MCO, PIHP or PAHP contract. This would allow the amount 

claimed by the state at 100 percent FFP to be based on calculations made from retrospective 

review of encounter data. 

Response: We will consider these suggestions during our review of states’ rate setting 

documentation and MCO, PIHP and PAHP contracts. As stated throughout this rule, we are not 

prescribing a particular approach to delivering the enhanced payment to eligible primary care 

providers but the method must deliver an accurate service payment to eligible providers. 
 42 

 

However, where MCOs, PIHPs or PAHPs pay their contracted primary care providers on a feefor-service basis, it is reasonable to expect that they will use the same approach to delivering the 

enhanced payment (that is, modifying their claims systems to reflect the 2013 and 2014 

Medicare rates for eligible E&M codes for eligible providers) as the state will use to pay its feefor-service providers. 

Comment: A commenter stated that MCOs, PIHPs and PAHPs should not be required to 

make enhanced payments on a retroactive basis and observed that it is administratively complex 

to analyze service level claims to verify increased payment. Another commenter asked if there 

would be retroactive reconciliation when additional funding in the capitation rates differs from 

the actual cost of providing services. 

Response: We agree that meeting the minimum payment standard set in statute can be 

administratively burdensome but emphasize that states must assure that MCOs, PIHPs and 

PAHPs are reimbursing services provided through managed care at the Medicare rate for the 

specified primary care services. This will be accomplished through review and approval by the 

CMS regional offices of states’ managed care contracts. We believe the second commenter is 

asking about the effect on reconciliation when the actual cost of primary care services differs 

from the projected cost as expressed through the managed care rate. This question will be 

addressed on a case by case basis through our review of the managed care contracts and states’ 

methods for identifying the rate differential. 

 Comment: A commenter stated that CMS should clarify that a mandatory payment rate 

does not equate to a mandatory payment and that health plans should retain the ability to deny 

claims for reasons unrelated to payment. 
 43 

 

 Response: We agree that a provider should be reimbursed the mandatory payment rate 

only when he or she has delivered services in accordance with the managed care contract and 

Medicaid requirements. 

Comment: Some commenters believe that the proposed rule conflicts with 

§438.6(c)(3)(i) which requires that actuarially sound rates be based on utilization and cost data 

derived from the Medicaid population because the 2009 cost data may not reflect the amount 

paid to the provider since MCO contracts are risk arrangements. 

Response: The rule is not in conflict with the regulation at §438.6(c)(3)(i) because the 

state has flexibility within §438.6(c)(3) to use various sources of data to establish base costs and 

utilization trends including FFS data, MCO financial data or a combination of both. 

 Summary of Final Policy: This final rule removes the proposed requirement that states 

make site of service and geographic adjustments in paying at the applicable 2013 and 2014 

Medicare rates. In the interests of administrative simplification, states need not make site of 

service adjustments but may reimburse all codes at the Medicare office rate, as opposed to the 

facility rate. With respect to geographic adjustments, states must either make all appropriate 

geographic adjustments made by Medicare, or may develop a rate based on the mean over all 

counties for each of the E&M codes specified in this rule. The required state plan amendment 

for these changes must describe the methodology the state has chosen. These requirements apply 

to fee for service and managed care delivery systems. Payments may be made as adjustments to 

rates or, if on a lump sum basis, no less frequently than quarterly. The 2013 and 2014 Medicare 

“rate” is defined as excluding payments made under section 5501 of the Affordable Care Act. 

Higher payment must be made for services provided on or after January 1, 2013, but existing 

state plan amendment procedures provide states with some flexibility in the timing of the 
 44 

 

payments. Flexibility in regard to timing of payment is extended to managed care delivery 

systems. 

b. Payment for Services Unique to Medicaid 

For services reimbursed by Medicaid but not Medicare, we proposed that payment would 

be made under a fee schedule developed by CMS and issued prior to the beginning of CYs 2013 

and 2014. We proposed that rates for non-Medicare reimbursed services would be established 

using the Medicare CF in effect in CYs 2013 and 2014 (or the CY 2009 CF, if higher) and the 

RVUs recommended by the American Medical Association’s (AMA) Specialty Society Relative 

Value Update Committee (RUC) and published by CMS for CYs 2013 and 2014. We solicited 

comments from states and others on the most appropriate way to set payment rates for services 

not reimbursed by Medicare. 

 Comment: Most commenters strongly supported CMS’s proposed methodology for 

developing rates for codes not reimbursed by Medicare. One commenter suggested establishing 

rates for codes not reimbursed by Medicare using the same standards applied in Deficit 

Reduction Act of 2005 benchmark state plans (for example, Federal Employee Health Benefit 

Payment rates, State Employee Health Benefit Coverage). 

 Response: For purposes of uniformity and to lessen the administrative burden on states, 

this final rule specifies that we will develop the rates for E&M codes not reimbursed by 

Medicare. 

Comment: A commenter requested that CMS make the fee schedule available to the 

states at a minimum of five months prior to January 1, 2013. 

Response: We will develop this fee schedule and will make it publicly available. We are 

committed to making this information available as quickly as possible prior to January 1 of CYs 

2013 and 2014. We understand that states need this and all other information timely to be able 
 45 

 

to administer payments appropriately. 

 Comment: One commenter urged that states be given the choice to use any Medicare 

conversion factor that has been in effect for at least three months. 

 Response: The statute requires that states use the 2013 or 2014 Medicare rates or, if 

greater, the rate that would be applicable if the conversion factor for the year involved were the 

conversion factor for 2009. There is no flexibility with respect to this requirement. 

 Summary of Final Policy: We will develop and publish rates for eligible E&M codes not 

reimbursed by Medicare. In determining the 2013 and 2014 rates, we will use the 2009 

conversion factor, if that factor in conjunction with the 2013 and 2014 RVUs results in rates that 

are higher than if the 2013 and 2014 conversion factors were used. The rates for Medicaid 

primary care services not reimbursed by Medicare must be incorporated into managed care 

contracts for those services covered by the contract. 

c. Updates to Medicare Part B Fee Schedule 

We recognized the potential for multiple updates to the MPFS in CYs 2013 and 2014. 

Those rates are published by CMS on or before November 1st of the preceding calendar year, but 

are subject to periodic adjustments or updates throughout the calendar year. In addition, the 

Medicare Part B rates vary by geographic location and site of service. 

We proposed that states have the option of complying with the requirements of section 

1902(a)(13)(C) of the Act by either adopting annual rates or by using a methodology to update 

rates to reflect changes made by Medicare during the year. That is, states could adopt the MPFS 

in effect at the beginning of CYs 2013 and 2014 (or, if the CY 2009 CF is higher, the CY 2013 

or CY 2014 RVUs multiplied by the CY 2009 MPFS CF), and apply those rates throughout the 

applicable calendar year without adjustments or updates. Using this methodology, mid-year 

updates made to the MPFS during the respective calendar year would not be reflected in 
 46 

 

Medicaid payments. Alternatively, a state could elect to adjust Medicaid payments to reflect 

mid-year updates made to the MPFS, but the state’s methodology would have to specify the 

timing for such adjustments. 

 Comment: Most commenters agreed that states should be given this flexibility. 

One commenter recommended that states be prohibited from changing rates throughout 

the year because this would cause confusion and undue burden to providers. Another 

commenter suggested that states should be required to use the fee schedule published in 

November of the preceding calendar year. One commenter suggested that states be 

required to update rates every 6 months, while another suggested that states be required 

to use any rate that had been in effect for at least 3 months. A number of commenters 

urged that states be required to make all adjustments as the Medicare fee schedule 

changes, pointing out that changes in the SGR after November could result in States 

using a lower fee schedule, thereby avoiding higher physician payments. 

 Response: We are sensitive both to concerns that requiring that states make multiple 

changes would be an administrative burden and to concerns that changes in the SGR could result 

in lower payments. We believe that the statutory requirement to use the 2009 Medicare 

conversion factor if it would result in higher Medicare rates in 2013 and 2014 was intended to 

offset the potential negative impact of changes in the SGR. Therefore, this final rule permits 

states flexibility in determining whether to, and how often to, update rates to conform to changes 

in the MPFS. 

 Summary of Final Policy: This final rule permits states flexibility in determining 

whether to, and how often to, update rates to conform to changes in the MPFS. This applies to 

fee for service and managed care payment. 

3. State Plan Requirements (§447.410) 
 47 

 

We proposed to require that states submit a SPA to reflect the fee schedule rate increases 

for eligible primary care physicians under section 1902(a)(13)(A) of the Act. The purpose of 

this requirement was to assure that when states make the increased reimbursement to physicians, 

they have state plan authority to do so and they have notified physicians of the change in 

reimbursement as required by federal regulations. 

 Comment: Commenters agreed that states should be required to amend their state plans. 

Many commenters asked that CMS develop a SPA template or, if not, specify the contents of the 

required SPA (for example, assurances required, specificity regarding use of the MPFS, covered 

codes). 

 Response: We will provide states with a SPA template. The template will require that 

states indicate: (1) Whether they will make site of service adjustments or reimburse all codes at 

the Medicare rate applicable to the office setting; (2) whether they will make all Medicare 

locality adjustments or develop a statewide rate per code that reflects the mean value over all 

counties of the Medicare rate; (3) identify the manner in which the state will make higher 

payment (that is, as a fee schedule or aggregate supplemental payment; and (4) describe the 

codes which will be paid by the state at the higher rates and the codes that have been added to 

the fee schedule since 2009. If states do not use HIPAA compliant codes, the SPA must also 

provide a crosswalk to the covered E&M codes. 

 Comment: Many commenters asked that CMS clarify that state plan rules at §447.256(c) 

apply, meaning that the SPA may be effective on the first day of the calendar quarter in which it 

is submitted, giving states until March 31, 2013 to submit a SPA. 

 Response: Yes, those requirements apply. 

 Comment: A number of commenters asked that CMS permit states to submit SPAs that 

will automatically sunset higher payments made pursuant to this rule on December 31, 2014. 
 48 

 

 Response: We will permit sunset dates. The state and CMS must ensure that, in cases 

where a sunset date is employed, the rates that the state will revert to after December 31, 2014 

are clearly described in the plan and that public notice for the SPA makes it clear that higher 

payments will end as of that date. 

 Comment: One commenter asked if states will be permitted to apply existing payment 

limitations, conditions and policies to the selected procedure codes. 

 Response: All limitations, conditions and policies that applied to the code prior to 

January 1, 2013 can be applied to the code after that date. 

 Comment: One commenter pointed out that CMS often takes 90 days or more to review 

and approve SPAs and asked whether the state should wait to implement the rate increase until 

the SPA is approved. 

 Response: The statute requires that states make higher payments for services provided 

on or after January 1, 2013. Our policy dictates that FFP is not available for services provided 

pursuant to an unapproved SPA. Therefore, as is the case with all rate changes, states can either 

make the higher payments to physicians and wait to submit claims for FFP until the SPA is 

approved, or can pay physicians at the 2012 Medicaid state plan rates and make supplemental 

payments once the SPA is approved. 

 Comment: One commenter believes that public access to the SPA is important to 

ensuring provide participation and suggested amending the proposed state plan requirement at 

§447.410 to indicate that the state must make this information accessible to the public through a 

website or other reasonable means. 

 Response: Public notice of changes in state plan methodologies in Medicaid is already 

required at §447.205. In addition, copies of approved state plan amendments are available 

through state Medicaid agencies. 
 49 

 

 Comment: Several commenters recommended that we require states to notify health 

plans and providers within a specified timeframe after approval of the SPA. One commenter 

stated that clarification is needed regarding obligations and responsibilities for MCOs managing 

the Medicaid program in a state that does not yet have an approved SPA by January 1, 2013. 

Response: The SPA will describe methods and procedures relative to fee for service 

payments. The status of the SPA will not affect a state’s ability to negotiate with managed care 

organizations. Notification to MCOs and providers of changes necessitated by this rule will be 

handled through normal procedures and processes by the state. 

 Summary of Final Policy: We will develop a SPA template for use by states in 

implementing the requirements of this final rule. SPAs should be submitted and will be 

reviewed in accordance with existing federal requirements at §447.256 (and by reference 

§430.20). States may apply existing payment limitations and policies to services paid pursuant 

to this rule. Managed care payment policies are not affected by this provision. 

4. Availability of Federal Financial Participation (FFP) (§447.415) 

Section 1905(dd) of the Act allows states to receive 100 percent FFP for expenditures 

equal to the difference between the Medicaid state plan rate for primary care services in effect on 

July 1, 2009, and the Medicare rates in effect in CYs 2013 and 2014 or, if greater, the payment 

rate that would be applicable using the CY 2009 Medicare CF. To claim the enhanced federal 

match, states must make payments to specified physicians at the appropriate MPFS rate and must 

develop a method of identifying both the rate differential and eligible physicians for services 

reimbursed on an FFS for service basis and through managed care plans. States must be able to 

document the difference between the July 1, 2009 Medicaid rate and the applicable Medicare 

rate for specified providers that is claimable at the 100 percent matching rate. This requirement 

applies also to services provided to individuals eligible for both Medicaid and Medicare. This 
 50 

 

means that increased FFP will be available also for higher Medicaid payments for Medicare cost 

sharing for individuals who are eligible for both programs. 

 Comment: A number of states indicated that they have lowered rates since July 1, 2009. 

Under the provisions of the proposed rule, they will not be eligible for 100 percent FFP for the 

difference between the 2009 rate and their current, lower, rates and asked for relief in the final 

rule. One commenter suggested that such states be permitted to “present the case to CMS for 

approval of 100 percent funding for the total increase when it can be shown that the state did not 

make such a decrease with any expectation or intent that it would be used to restore rates”. 

 Response: The statute provides for 100 percent FFP for the difference between the 

July 1, 2009 Medicaid state plan rates and the appropriate 2013 and 2014 Medicare rates. States 

that lowered physician rates after 2009 will receive FFP at the state’s regular FMAP rate for the 

difference between the lowered rates and the Medicaid rates in effect as of July 1, 2009. We 

have no authority to grant requests for exemptions from this requirement. 

 Comment: One commenter asked that the final rule clarify that providers have no less 

than 12 months from the date of SPA approval to file a claim. That commenter also asked that 

the final rule confirm that the state will receive 100 percent FFP for claims for services rendered 

during CYs 2013 and 2014 even if they are adjudicated after 2014. 

 Response: This rule does not change Medicaid timely claims submission and payment 

requirements. Section 447.45 applies to all claims submitted under this rule, that is, 100 percent 

FFP will be available for services provided between January 1, 2013 and December 31, 2014 that 

are processed in accordance with these requirements. 

 Comment: Two commenters indicated that the rule does not address system changes that 

states will need to make. One commenter noted that states will not have time to submit 
 51 

 

Advanced Planning Documents (APDs) for CMS prior approval for enhanced FFP for those 

changes. The commenters requested that CMS grant retroactive “prior approval” for such APDs. 

 Response: We do not grant “retroactive prior approvals” of APDs. However, we will 

work with states to promptly facilitate system changes necessitated by this final rule. 

 Comment: One commenter suggested that CMS phase down the increased payment to 

primary care practitioners (PCPs) in the same manner as matching for the expansion populations 

under the Affordable Care Act. They believe that “a precipitous drop in the PCP payment 

increase could create access issues”. 

 Response: The statute does not permit such a phase-down. 

 Comment: One state asked how services eligible for both regular FFP and 100 percent 

FFP will be reported to CMS. 

 Response: We will provide states with reporting instructions before the end of the first 

calendar quarter of 2013. This guidance will be provided for both fee for service and managed 

care delivery systems. 

Comment: One commenter wanted to know if primary care case management (PCCM) 

fees paid in either the baseline period or in 2013 and 2014 should be included in the calculation 

of the rate differential. 

Response: We clarify that PCCM payment is outside the calculation of the rate 

differential. 

Comment: A number of commenters asked if the 100 percent FFP is based on actual, 

documented expenditures or based on the actuarial per member per month (PMPM) assumptions 

built into adjusted capitation rates, including nonclaim components. 
 52 

 

Response: States can claim 100 percent FFP based on the CMS approved methodology 

for identifying the rate differential. Depending on the best data available this may result in an 

imputed payment differential that is based on actual claims or actuarial assumptions. 

Comment: One commenter asked whether state and local taxes associated with the 

increased fee schedule would be eligible for the enhanced match. 

Response: Enhanced federal matching funds are available only for the difference in 

payment between the Medicaid state plan rate in effect July 1, 2009 and the applicable Medicare 

rates in CYs 2013 and 2014. If the nonfederal share of the rate in effect during the baseline 

period was funded by state and local taxes then that portion of the payment would continue to be 

matched at the state’s regular FFP. This applies to FFS and managed care reimbursement. 

Comment: We received a request for clarification as to whether an increase in managed 

care premiums for the following non-claim related components would be eligible for 100 percent 

FFP: the Federal Health Insurer Fee, premium related taxes imposed by states, underwriting 

gain and administrative expenses. 

Response: We are clarifying that non-claim related costs are excluded for purposes of 

100 percent FFP. The statute narrowly defines the scope of the enhanced match to the 

differential between the Medicare rate and 2009 baseline rate for the direct provision of specified 

primary care services delivered by eligible primary care providers. 

 Summary of Final Policy: States will receive 100 percent FFP for the difference between 

the July 1, 2009 Medicaid state plan rates and the appropriate CY 2013 and 2014 Medicare rates. 

States that lowered physician rates after 2009 will receive FFP at the state’s regular FFP rate for 

the difference between the lowered rates and the Medicaid rate in effect as of July1, 2009. 

Medicaid timely claims submission and payment requirements at §447.45 apply to all claims 

submitted under this rule, that is 100 percent FFP will be available for services provided between 
 53 

 

January 1, 2013 and December 31, 2014 that are processed in accordance with these 

requirements. No phase-down of higher payments or FFP is permitted. Enhanced federal match 

is available for the payment differential in managed care. 

a. FFP in Payments for Individuals Eligible for Both Medicare and Medicaid 

When a service is provided to an individual who is eligible for Medicare and Medicaid, 

Medicare reimburses the physician 80 percent of its fee schedule rate while Medicaid covers the 

cost-sharing amounts. Currently, states have two options for such payments consistent with 

section 1902(n) of the Act. A state may pay the provider the full amount necessary to result in 

aggregate payment to the provider equal to the MPFS rate (the full Medicare cost sharing 

amount), or only the amount (if any) to result in aggregate payment equal to the state’s Medicaid 

rate. For example, under the second option, if the Medicare allowed amount is $100 and the 

Medicaid rate is $75, then Medicare pays 80 percent of the allowed amount, or $80, and there is 

no additional amount paid by Medicaid. Historically, most states have chosen to pay providers 

only up to the lower Medicaid rate. 

In CYs 2013 and 2014, the Medicaid rate for primary care services by the specified 

physicians will equal the Medicare rate. As a result, these physicians should receive payment up 

to the full Medicare rate for primary care services and 100 percent FFP will be available for the 

full amount of the Medicare cost sharing amount that exceeds the amount that would have been 

payable under the state plan in effect on July 1, 2009. 

Comment: Most commenters were supportive of these provisions of the rule. A number 

of commenters indicated that payment of crossover claims poses a significant administrative 

challenge because not all states’ enrollment and adjudication processes mirror Medicare’s and 

they may have limited ability to capture all details needed on crossover claims to limit payment 

by subspecialty. One commenter suggested that CMS require 100 percent of such claims to be 
 54 

 

paid by Medicare. Another commenter noted that the proposed rule does not require states to 

pay cost sharing amounts. 

Response: The Medicaid requirements applicable to claims for services for beneficiaries 

who are dually eligible for Medicaid and Medicare are not changed by this rule. States must 

comply with all requirements for payment of claims for services provided to Medicaid 

beneficiaries who are also eligible for Medicare. 

Comment: One commenter recommended that states that enter into Duals Special Needs 

Plans (DSNPs) be required to amend contracts to ensure that providers receive the enhanced rate. 

Currently, these contracts provide for $0 cost sharing as they are associated with the Medicaid 

rate. 

Response: DSNPs are Medicare managed care plans and are not subject to the 

requirements of this rule. However, states are responsible for ensuring that payments for 

Medicaid enrollees of DSNPs reflect the appropriate payment increase. 

Comment: One commenter recommended that CMS permit states to develop a 

methodology to identify what the difference in the capitation rate would be for crossover claims 

and to claim enhanced FFP for the difference, similar to the process proposed for managed care 

at §438.804. 

Response: We agree that a state must have the ability to identify the 2009 baseline rate 

for primary care services and the managed care rate differential eligible for 100 percent FFP. 

We will permit a state up to 3 months after January 1 of CY 2013 to submit the methodologies 

for our review and approval as specified in §438. We expect this methodology to account for 

managed care payment for services delivered to all beneficiaries covered by Medicaid, including 

beneficiaries in CHIP Medicaid expansion programs and those beneficiaries also eligible for 

Medicare. 
 55 

 

 Summary of Final Policy: This rule does not in any way negate the need for states to 

comply with all Medicaid requirements applicable to payment for services provided to Medicaid 

beneficiaries who are also dually eligible for Medicare. In managed care environments, states 

will be granted flexibility in determining the portion of the capitated payment that is related to 

such beneficiaries. However, the methodology must be approved by CMS. 

b. Identifying the July 1, 2009 Payment Rate 

For the purpose of identifying the differential between the Medicaid rate and the 

Medicare rate, we proposed to define the Medicaid “rate” under the approved Medicaid state 

plan as the final rate paid to a provider inclusive of all supplemental or increased payments paid 

to that provider. For example, many states currently pay physicians affiliated with academic 

medical centers the Medicaid state plan rate plus a supplemental amount that together equal the 

average amount paid by commercial third party payers. Therefore, in calculating the rate 

differential, these states would determine the CY 2009 rate inclusive of any supplemental 

payment. 

Comment: The majority of commenters requested that incentive payments, bonus 

payments and performance-based supplemental payments be excluded from the definition of the 

base payment. 

Response: Incentive payments, bonus payments and performance-based supplemental 

payments are only paid to those certain physicians who meet specified goals or criteria. They 

are not part of the statewide fee schedule rates and we agree that they should be excluded from 

the determination of the 2009 base rate. 

 Comment: Many commenters urged CMS to exclude other supplemental payments made 

on a lump sum basis from the definition of the base rate, pointing out the administrative burden 

of linking those payments to individual codes and eligible physicians. In practice, this would 
 56 

 

consist of the supplemental payments up to the average commercial rate made to physicians 

associated with academic medical centers. They stated that CMS excluded the Medicare primary 

care bonus payment, which is made as an aggregate payment, from the definition of the MPFS, 

and suggested that Medicaid supplemental payments made as lump sum payments be excluded 

from the 2009 base following the same logic. 

 Response: We do not agree that volume-based payments such as those made up to the 

average commercial rate should be excluded from the determination of the 2009 base rate. The 

CMS-approved methodologies for determining those supplemental payments are calculated on a 

code-specific basis even when payments are aggregated and paid on a lump-sum basis. Since the 

code-specific calculation is performed before the SPA methodology is approved, states do have 

the data necessary to determine the rate for each code inclusive of the supplemental payment. In 

addition, the methodologies that have been approved for those payments provide that the base 

Medicaid payment in addition to the supplemental payment up to the ACR are equal to or 

significantly greater than Medicare rates. Were the supplemental payments to be ignored, 

physicians in those settings would receive disproportionately high compensation with no 

additional impact on access. We do not believe that is in keeping with the intent of the statute. 

Comment: One commenter urged that CMS clarify how health plans should report to the 

state the supplemental and increased payment for individually billed codes made under the 

approved state plan in effect July 1, 2009. Otherwise, the state will not know what incentive 

payments were made to the impacted providers. 

Response: We understand that the commenter is asking how health plans should report 

“catch up” payments to providers for the increase in primary care payments to the Medicare rate 

as specified under this final rule. States should specify in encounter data reporting requirements 

how health plans should reflect those payments. 
 57 

 

 Summary of Final Policy: This final rule defines the 2009 Medicaid base payment as 

excluding incentive, bonus and performance-based supplemental payments. Other volume-based 

payments, particularly those associated with academic medical centers, must be included in 

determining the 2009 base rate. This policy applies to fee for service and managed care 

payment. 

c. Federal Funding for Increased Payments for Vaccine Administration 

Prior to CY 2011 vaccine administration, billing codes did not permit additional vaccine 

administration payments for vaccines with more than one vaccine/toxoid component. All 

providers, including those participating in the VFC program, received one payment per vaccine 

regardless of the number of vaccine/toxoid components. In the proposed rule, we clarified that 

qualifying physicians, excluding those participating in the VFC program, must receive additional 

payments during CYs 2013 and 2014 for vaccines with multiple vaccine/toxoid components 

administered to Medicaid beneficiaries. 

Section 1928(c)(2)(ii) of the Act provides that administration fees for vaccines provided 

under the VFC program cannot exceed the cost of administration as determined by the Secretary 

for that program. An additional concern for VFC vaccines is that, under the terms of the VFC 

program, providers can still only bill a flat fee per vaccine given by injection or by intranasal or 

oral routes, regardless of the number of vaccines/toxoid components, and must use only code 

90460. This is consistent with section 1928(c)(2)(C)(ii) which permits the provider to impose an 

administration fee based on the cost of administering a qualified pediatric vaccine, and does not 

authorize different fees based on the type of vaccine. To permit providers participating in the 

VFC program to benefit from the provisions of the Affordable Care Act, we proposed that States 

be required to reimburse VFC providers at the lesser of the 2013 and 2014 Medicare rates or the 
 58 

 

maximum regional VFC amount in those years. States would qualify for 100 percent FFP for 

these increased reimbursements. 

In the proposed rule, we provided a formula for states to impute the 2009 rates due to the 

coding change that took effect on January 1, 2011. In addition, we stated that qualifying 

providers who provide vaccines to children enrolled in Medicaid who receive vaccines through 

the VFC program cannot be paid for additional vaccine/toxoid components of a combination 

vaccine. 

Comment: A number of commenters disagreed with CMS’ proposal not to reimburse 

providers for additional vaccine/toxoid components of combination vaccines using code 90461. 

One commenter stated that this provision falls short of the statutory standard to the extent that it 

allows states to pay less than is required by the 2011 component-based code methodology 

currently used by Medicare. Another commenter said that CMS should pay for the additional 

vaccine/toxoid components in combination vaccines because each vaccine/toxoid component 

protects against a different disease. Two commenters also expressed concern that proceeding 

with the proposed policy could result in a disincentive for providers to comply with optimal 

medical practice and result in more shots for children. 

Response: We agree with commenters in part. We agree that additional payment can be 

made for additional vaccine/toxoid components in combination vaccines using code 90461. But 

we disagree that this methodology is appropriate for vaccines furnished through the VFC 

program. While preparing the proposed rule, we considered a number of alternative approaches 

for enhanced payment for vaccine administration within the VFC program. This included paying 

an increased amount for administration of additional vaccine/toxoid components in combination 

vaccines using code 90461. That approach was not selected in part because we believe that it 

was not the intent of the Affordable Care Act to supersede the VFC provision, which does not 
 59 

 

give CMS the authority to make multiple payments for a single vaccine administration. 

Therefore, we believe that the requirement that under VFC there cannot be multiple payments for 

a single vaccine applies to the Affordable Care Act. As such, we are not changing the policy in 

the final rule from what was published in the proposed rule, and providers will be reimbursed at 

the lesser of the 2013 and 2014 Medicare rates or the maximum regional VFC amounts in those 

years. In making this determination, we also considered that the payments at issue are not for 

the vaccine ingredients, but only for vaccine administration. We received no information that 

indicated that administration of multiple antigen vaccines was more costly than administration of 

single antigen vaccines. 

We are concerned by the comments that this policy could result in additional shots for 

children if providers were to use single component vaccines where a combination vaccine exists. 

Under the VFC statute at section 1928(c)(2)(B)(i) of the Act, VFC providers are required to 

comply with the Advisory Committee for Immunization Practices (ACIP) schedule regarding the 

appropriate periodicity, dosage, and contraindications applicable to pediatric vaccines. It is 

important that vaccines are administered following the ACIP recommendations and that 

combination vaccines are used if recommended. If necessary, we will work with states to ensure 

that children receive appropriate vaccines and receive as few shots as are necessary following the 

ACIP schedule. As a practical matter, CDC orders and provides few single antigen vaccines 

through the VFC program when combined antigen drugs are available. In addition, section 

1903(i)(15) of the Act provides that no payment shall be made “with respect to any amount 

expended for a single-antigen vaccine and its administration in any case in which the 

administration of a combined-antigen vaccine was medically appropriate (as determined by the 

Secretary) . . .”. So we believe states will have some incentive to monitor and oversee the 

appropriate use of combined antigen vaccines. 
 60 

 

Comment: CMS received a comment asking if a state could have the flexibility to pay at 

the greater of the 2013 and 2014 Medicare rates or the maximum regional VFC rates instead of 

the lesser of those two rates. CMS also received a number of comments expressing confusion as 

to whether this policy applies to qualified providers or to all VFC providers. 

Response: We adopted the lesser of the Medicare rates or the maximum regional VFC 

amounts because the VFC statute prohibits payment above the regional maximum ceiling and 

because it is consistent with Medicare policy which limits provider payment to the lesser of the 

fee schedule amount or provider charges. Therefore states do not have the flexibility to pay at 

the greater of the two amounts instead of the lesser of the two. This policy is consistent with the 

larger intent of this provision of the Affordable Care Act to increase payments to primary care 

providers within the framework of the Medicare program. 

This policy applies only to qualified physicians. If a non-qualified physician provides a 

vaccine to a VFC-eligible child enrolled in Medicaid, the physician will be reimbursed for the 

administration fee at the rate in the corresponding state plan. 

Comment: Three states submitted comments expressing concern that the proposal not to 

recognize additional vaccine/toxoid components under the VFC program will create an 

administrative burden for States because providers would be paid at different rates. 

Response: Although the proposed policy will result in variable rates for providers, we do 

not believe there will be an administrative burden for states specific to the increased payments. 

It is correct that the policy to not recognize additional vaccine/toxoid components only applies to 

the VFC program. However, because only vaccines given to those under age 19 are eligible for 

payment for additional antigens, and all Medicaid enrollees under age 19 qualify for VFC, there 

will not be an administrative burden as there will not be any variation in payment rates. We 

expect that there will be few situations where a state would have to establish different payments 
 61 

 

to providers for administration fees for children enrolled in Medicaid, or where a payment would 

be made for code 90461. 

Comment: CMS received one comment that addressed the formula for imputing the 

2009 rate for code 90460 that was established because of the new codes that went into effect in 

2011. Specifically, the commenter recommended that CMS revise the formula to instead use the 

payment rate for deleted code 90465 for the new code 90460 and the payment rate for deleted 

code 90466 for new code 90461. The commenter suggested eliminating the reference to deleted 

codes 90467 and 90468 because there is no crosswalk to these codes. 

Response: We agree that code 90465 should be used to determine the 2009 rate, and that 

codes 90467 and 90468 should not be used. However, code 90465 was only for children 

younger than 8 years of age and the new code 90460 is for children through age 18. Therefore, 

states need to use claims volume for code 90465 and code 90471 to impute the payment amount 

in the base period for the current code 90460. Code 90471 is also included because prior to 

January 1, 2011, code 90471 was used for children above age 8. This change is demonstrated in 

the following example: 

• 90465 = $10 x 0.70 service volume = $7.00 

• 90471 = $10 x 0.30 service volume = $3.00 

• Total cost equals $10.00 for the new, single code, 90460. 

Comment: Several commenters expressed concern that their state does not currently use 

the immunization administration code and instead uses the product code so that the state has 

vaccine-specific data. 

Response: This issue was discussed in the proposed rule. States that do not currently use 

the immunization administration code, or did not use it in 2009, will need to identify the CY 

2009 payment for vaccine administration separate from the vaccine itself. We understand that 
 62 

 

using the product code provides vaccine specific data, however, since we will only issue 

additional payment based on the immunization administration code, all states will need to submit 

data using the correct codes. We will provide future assistance to states on ways to modify the 

immunization administration codes so that they can be used properly but still capture 

vaccine-specific information. 

Summary of Final Policy: This final rule defines the policy for additional payments for 

qualifying providers under the VFC program and how to establish the 2009 Medicaid rate for 

vaccine administration. Because the immunization administration codes changed in 2011, states 

will need to determine the payment amount from other codes based on service volume. The 

service volume of code 90465 and of the pediatric claims for code 90471 will need to be imputed 

to determine the new payment amount for code 90460. 

In addition, VFC providers will be reimbursed at the lesser of the 2013 and 2014 

Medicare rates or the maximum regional VFC amount in those years. 

5. Primary Care Service Payments Made by Managed Care Plans, and Enhanced Federal Match 

(§438.6 and §438.804) 

We proposed to implement the managed care requirements through a state-by-state 

review of managed care contracts and applicable procedures. We will review managed care 

contracts to ensure that they-- 

• Provide for payment at the minimum Medicare primary care payment levels; 

• Require that eligible physicians receive direct benefit of the payment increase for each 

of the primary care services specified in this rule. This requirement must be met regardless of 

whether a physician is salaried, or receives a fee for service or capitated payment. We 

emphasize that increased payment must correspond directly to the volume and payment amounts 

associated with the primary care services specified in this rule; 
 63 

 

• Require that all information needed to adequately document expenditures eligible for 

100 percent FFP is reported by MCOs, PIHPs, and PAHPs to the states which, in turn, will 

report these data to CMS; and 

• Specify that states must receive from MCOs, PIHPs and PAHPs data on primary care 

services which qualify for payment under this rule. The managed care reporting requirements 

would ensure that states have data on increased provider payments necessary to justify any 

adjustments to the capitation rates paid by the state under the contract. 

We solicited comment on these provisions and additional suggestions on how to ensure 

that managed care plans provide the necessary data to the state, as well as how to ensure and 

monitor that managed care plans appropriately pass on to physicians the portion of the increased 

capitation rate that is attributable to the primary care rate increase. 

States have expressed concern about their ability to align capitated payment made as of 

July 1, 2009 to payment made for services provided in CYs 2013 and 2014 for the purpose of 

claiming increased FFP. We recognize the particular challenges inherent in identifying the 

payment differential eligible for 100 percent FFP for primary care services provided by 

managed care plans because such payments are not necessarily linked to individual services and 

physicians. We believe that the most reasonable way to apply this provision for managed care 

rates is to do the following: 

Step I: Identify the proportion of total capitation linked to primary care. 

Step II: Identify the fee schedule amount incorporated into the actuarial model for 

primary care services represented by the proportion of payment for primary care services. Here, 

we assume the visit rate equals $25. 

Step III: Determine the annualized cost built into the actuarial model for primary care. 

Here we assume 8 visits annually. $25 per visit rate X 8 visits annually = $200 
 64 

 

Step IV: Determine the per visit cost discounted for volume. $200/12 = $16.67 per 

member per month. 

In this example, $16.67 equals the imputed amount of the monthly payment made on a 

fee for services basis for an individual primary care service. The state will compare this amount 

to the Medicare rate paid in CYs 2013 and 2014 to determine the payment differential eligible 

for 100 percent federal matching funds. 

Specifically, we proposed that states would be required to submit the methodology they 

intend to use to identify the increment of the capitation payment attributable to increased 

provider rates to CMS for approval prior to the beginning of CY 2013. Further, we propose that, 

absent approval of its methodology from CMS, states would not be able to claim the enhanced 

Federal match for capitation payments to managed care plans. 

We solicited additional comments on how states might best meet these requirements. 

Comment: A number of commenters expressed concern about the short timeframe for 

implementing new managed care contracts, developing revised rate certifications, and 

identifying the rate differential eligible for 100 percent FFP, given the obstacles of obtaining 

historic claim and encounter data. 

 Response: We are cognizant of the amount of planning and activity that must occur at 

the state, federal, health plan, and provider levels to implement the increase in primary care 

provider payments in CY 2013. Therefore, we will extend the deadline for CMS approval of all 

necessary documentation into CY 2013 in accordance with the following guidelines. States must 

submit the methodologies for identifying the 2009 baseline rate and the rate differential eligible 

for 100 percent federal match to CMS no later than the end of the first quarter of CY 2013. 

These requirements are specified in §438.804 as modified from the proposed rule. 

Implementation of the increased payments for eligible primary care services to designated 
 65 

 

primary care providers is contingent upon CMS approval of the aforementioned methodologies, 

any necessary contract amendments, and certification of rates that take this rule into account. 

We will approve all required documents in a timely manner. In the interim, the state and 

contracting MCOs, PIHPs, and PAHPs have the option of issuing payment for primary care 

services in accordance with existing contracts for CY 2012 or under contracts executed under 

standard contracting schedules for CY 2013 that do not account for the increased payments. 

Once the state receives CMS approval of the methodology for calculating the primary care rate 

differential, certified rates, and contract amendments, the state will adjust their rates previously 

paid to the MCOs, PIHPs and PAHPs to reflect the enhanced payment. All eligible claims that 

were claimed and paid in CY 2013 prior to CMS approval will be re-adjudicated and the MCO, 

PIHP or PAHP will direct the full amount of the enhanced payment to the eligible provider. The 

MCO, PIHP or PAHP must remit the enhanced payment to eligible primary care providers 

without any effort from the provider. We will review managed care contracts for this assurance. 

Comment: A commenter asked whether certification (of the rate) is needed if the 

methodology is to be submitted separate from the rate certification. 

Response: We anticipate that states will first receive CMS approval of the baseline and 

payment differential methodologies, and then receive concurrent approval of managed care 

contracts. Section 438.804(a)(1) requires that the states submit the methodologies for 

determining the 2009 baseline rate and the payment differential for CMS review no later than 

the end of the first quarter of CY 2013. Submission of the above-mentioned methodologies does 

not negate the requirements of §438.6(c). Again, we emphasize that contracts approved after 

January 1 must be effective for services provided on and after January 1 of CYs 2013 and 2014. 

We have awarded a technical assistance contract to a firm with actuarial expertise and 

experience with rate setting activities across the states to develop a framework for states in 
 66 

 

developing the methodologies required under this rule. Written guidance and informational calls 

will be made available before CY 2013. 

Comment: A commenter urged that health plans should be provided with 90 days notice 

prior to the implementation of reimbursement changes. 

 Response: Although we agree that states should notify health plans in a timely manner of 

changes in reimbursement, adding a federal notification requirement for the state to the health 

plan is beyond the scope of this rule and exceeds the normal and customary role of the federal 

government in the relationship between the state and the health plan. 

 Comment: One commenter suggested that CMS should clarify that the managed care 

payment will be based on FFS or base utilization data used for rate setting. A commenter also 

noted that developing a reasonable estimate of the increased amount paid for primary care 

services was difficult due to lack of encounter data as of July 1, 2009. Other commenters 

requested guidance on how to develop the baseline 2009 rate for primary care services when 

populations may not have been enrolled in MCOs, PIHPs or PAHPs in 2009. Other commenters 

requested clarification as to whether the four-step process provided in the proposed rule for 

identifying the rate differential is a preferred approach. 

 Response: We acknowledge the variance that exists among the states in terms of the 

types of encounter, claim and pricing information available from MCOs, PIHPs and PAHPs for 

rate setting purposes, and the complexity entailed in defining the baseline service rate for 

populations that may not have been in managed care delivery systems in 2009. We expect that, 

where feasible, the state will use the same methodology for fee-for-service payments through 

MCOs that is provided for direct fee-for-service payments from the state. In cases where this is 

not possible, however, we do not prescribe a uniform approach to identifying the 2009 baseline 

but we have revised §438.804(a) to add the new §438.804(a)(1)(i) to require states to submit the 
 67 

 

methodology for the 2009 baseline rate in conjunction with the methodology used to identify the 

rate differential as specified in §438.804(a)(1)(ii). The four-step process outlined in the 

proposed rule is one suggested approach for states that would find it produces an accurate result 

based on reasonable and documented data and assumptions available. As stated throughout the 

rule, we will continue a dialogue with states on valid and reasonable approaches to defining the 

2009 baseline rate and identifying the rate differential required under §438.804(a)(1)(i) and (ii). 

We reserve the right to request and inspect the supporting data used by the state and actuaries to 

develop the methodologies required under §438.804(a)(1)(i) and (ii). 

 Comment: A commenter urged that CMS should not increase payments only to MCOs 

that had been paying for the Medicaid primary care services at less than the Medicare rates as 

this would result in rewarding low paying plans. 

 Response: The statute applies equally across all eligible providers for all of the services 

specified in this rule. This may result in increased payment to MCOs, PIHPs and PAHPs that 

previously had reimbursed providers less than the Medicare rate. However, we expect that 

physicians – not the MCOs, PIHPs or PAHPs - will receive direct benefit of the higher payment. 

Comment: Several commenters requested general guidance if the enhanced payment to 

primary care providers should be disseminated on a retroactive or prospective basis and other 

commenters urged CMS to provide overall flexibility in this process. For example, the 

American Academy of Actuaries asked CMS to consider a number of approaches, including (1) 

an add-on payment to the PMPM based on a retrospective review of eligible primary care 

utilization; (2) full risk capitation; (3) prospective capitation with some type of risk sharing that 

incorporates retrospective reconciliation to the documented expenditures; and (4) non risk 

payment with retrospective reconciliation. Another commenter recommended that CMS impose 
 68 

 

a threshold for enhanced reimbursement that is based on encounter data submitted to the states’ 

MMIS. 

Response: We appreciate the amount of feedback and thoughtful suggestions received 

from our request for comment on how the enhanced payment is made to eligible primary care 

physicians. Because claims and payment processes vary by state and between health plans, we 

are permitting flexibility in the specifics of how these tasks are accomplished. Should a state 

obtain approval of the required methodologies, the MCO, PIHP or PAHP contract amendments, 

and rate certifications after January 1 of 2013 and 2014, the state will need to clarify to CMS 

how it will implement payment retroactively to the beginning of the year. We expect to address 

retroactive claims processing as part of CMS’s ongoing dialogue with the states. 

Comment: One commenter asked whether a state’s adherence to the documentation 

requirements specified in §438.6(c)(4) were sufficient to meet the documentation requirements 

provided under the new §438.6(c)(5)(vi)(B). Additionally, another commenter queried whether 

the documentation requirement in §438.6(c)(5)(vi)(B) sufficiently described CMS’s oversight 

role to ensure that payments are made in accordance with this final rule. 

Response: The documentation requirement in the new §438.6(c)(5)(vi)(B) is more 

expansive, therefore, a state may not assume that it has met the new requirements by satisfying 

those of the existing managed care regulation. In deference to the wide variation in states’ 

current oversight and reporting mechanisms for health plans, we will permit states to specify the 

documentation needed from health plans to substantiate that the enhanced primary care rate was 

delivered to eligible primary care providers. The health plans must make such documentation 

available to the state for verification of payments made as well as make such documentation 

available for audit or reconciliation processes. However, in response to the comment about our 

oversight role, we have modified the language in §438.6(c)(5)(vi)(B) to require health plans to 
 69 

 

provide sufficient documentation so that the state and CMS can ensure that complaint payments 

have been made in accordance with this rule. 

Comment: One commenter noted that there is no explicit reference in the proposed rule 

to the data certification requirements at §438.604. 

Response: We believe that a specific reference to the data certification requirements at 

§438.604 is not warranted because those requirements are not being modified by this rule. 

Further, we believe that the documentation required under this section falls under the scope of 

§438.604. 

Comment: We received a number of comments expressing concern about the projected 

overall impact of this payment on the future of doing business under managed care delivery 

systems. One commenter stated that in CYs 2013 and 2014 MCOs, PIHPs and PAHPs may find 

contracting with specialists more difficult when these providers receive less than the Medicare 

rate. Conversely, providers were concerned that MCOs, PIHPs and PAHPs would reduce 

payment for primary care services after the 2-year period and believed that states should be 

mindful of this. 

 Response: We expect this rule to have positive effects on payment rates for primary care 

physicians serving Medicaid patients that will justify the operational changes required to 

implement the increased rates. 

Comment: A commenter stated that CMS oversight and enforcement of actuarial 

soundness policies should ensure that rate adjustment increase to plans do not result in an 

inappropriate decrease in other factors used in rate setting methodology. Plans must provide 

access to all information used to make adjustment for this provision. 

Response: We will exercise oversight and enforcement of appropriate policies through 

our review and approval of managed care contracts and certification of the actuarially sound rate. 
 70 

 

Comment: One commenter stressed that health plans must be given the right to appeal 

new health plan capitation rates to an unbiased third party if they believe they do not meet 

actuarial soundness requirement. 

Response: The ability to negotiate capitation rates remains between states and health 

plans and this rule does not affect any established process, or create a new process, for a health 

plan to appeal revised capitation rates devised for purposes of implementing this rule. 

Summary of Final Policy: We recognize the implementation challenges for identifying 

the 2009 baseline rate and the payment differential eligible for 100 percent federal financial 

participation, as well as appropriate methods for delivering the payment to eligible providers 

contracted with MCOs, PIHPs and PAHPs. To that end, we have extended deadlines for states to 

submit the abovementioned methodologies as required by §438.804(a)(1) into CY 2013 and 

necessary contract amendments and rates may be approved by CMS within that CY. The 

regulations clearly provide that the state has the flexibility in determining the 2009 baseline rate 

and the rate differential to comply with this rule, but the approach taken must be based on 

reasonable and documented data sources available to the state to accurately define these amounts 

to the fullest extent possible. We will review and approve the methodologies and refer to these 

methodologies to approve MCO, PIHP and PAHP contract amendments and rates necessary to 

implement this rule. This rule does not require a specific method for the MCOs, PIHPs or 

PAHPs to make the enhanced payment for primary care services to eligible providers, but the 

approach taken must ensure that the eligible primary care provider receives the full benefit of the 

enhanced payment. In deference to the wide variation in states’ current oversight and reporting 

mechanisms for health plans, we will permit states to specify the documentation needed from 

health plans to substantiate that the enhanced primary care rate was delivered to eligible primary 

care providers. The health plans must make such documentation available to the state for 
 71 

 

verification of payments made as well as make such documentation available for audit or 

reconciliation processes. As stated throughout this rule, we will continue a dialogue with the 

states on implementation challenges that may arise. 

B. Vaccine Administration under the Vaccines for Children (VFC) Program

1. General Statement 

On May 11, 2012, we issued a proposed rule (77 FR 27671) in the Federal Register

titled “Medicaid Program; Payments for Services Furnished by Certain Primary Care Physicians 

and Charges for Vaccine Administration under the Vaccines for Children Program”. In that 

proposed rule, we specified that we would add 42 CFR part 441 subpart K, §441.500 through 

§441.515, to codify the requirements of the Vaccines for Children Program. However, on 

May 7, 2011, we issued a final rule (77 FR 26828) in the Federal Register titled “Medicaid 

Program; Community First Choice Option”, which codified subpart K, §441.500 through 

§441.590. Therefore, we are adding the provisions to codify the requirements of the Vaccines 

for Children Program as subpart L, §441.600 through §441.615. 

This final rule adds 42 CFR part 441 subpart L to codify the requirements of the 

Vaccines for Children Program. CMS is finalizing the general requirements of the VFC program 

in this final rule at §441.610. Federally-purchased vaccines under the VFC Program are made 

available to children who are 18 years of age or younger and who are any of the following: 

● Eligible for Medicaid. 

● Not insured. 

● Not insured for the vaccine and who are administered pediatric vaccines by a 

federally-qualified health center (FQHC) or rural health clinic (RHC). 

● An Indian, as defined in section 4 of the Indian Health Care Improvement Act. 
 72 

 

Under the VFC program, vaccines must be administered by program-registered 

providers. Section 1928(c) of the Act defines a program-registered provider as any health care 

provider that-- 

● Is licensed or authorized to administer pediatric vaccines under the law of the state in 

which the administration occurs without regard to whether or not the provider is a Medicaidparticipating provider. 

● Submits to the state an executed provider agreement in the form and manner specified 

by the Secretary. 

● Has not been found, by the Secretary or the state to have violated the provider 

agreement or other applicable requirements established by the Secretary or the state. 

Section 1928 of the Act requires each state to establish a VFC Program (which may be 

administered by the State Department of Health) and include this program in the state plan 

(§441.605) under which certain specified groups of children are entitled to receive qualified 

pediatric immunizations without charge for the cost of the vaccine. 

In the October 3, 1994 Federal Register, we published a notice with comment period 

entitled, “Charges for Vaccine Administration Under the Vaccines for Children (VFC) Program” 

(59 FR 50235) (hereinafter referred to as the “October 1994 VFC notice”) that set forth, by state, 

the interim regional maximum charges for the VFC program. These charges represented the 

maximum amount that a provider in a state could charge for the administration of qualified 

pediatric vaccines to federally vaccine-eligible children under the VFC Program. This final rule 

updates those fees. 

In accordance with section 1928(c)(2)(C)(ii) of the Act, §441.615(e), we proposed that 

physicians participating in the VFC program can charge federally vaccine-eligible children who 

are not enrolled in Medicaid the maximum administration fee (if that fee reflects the provider's 
 73 

 

cost of administration) regardless of whether the state has established a lower administration fee 

under the Medicaid program. 

 Section 441.615(e) provides that there will be no federal Medicaid matching funds 

available for administration of vaccines to children not enrolled in the Medicaid program. A 

provider may only bill Medicaid for the administration of a vaccine if the child is enrolled in 

Medicaid. 

 Of the 171 comments received in response to the proposed rule, 21 of them addressed the 

updated administration fee schedule in the VFC program. 

Comment: One comment questioned the codification of the VFC program and stated 

that this represented major changes in the VFC program. 

Response: The intent of this section of the final rule is not to create new requirements 

for states or to change any rules of the VFC program, but instead to codify existing rules and 

update the administration fee rates. All states currently have established pediatric vaccine 

distribution programs in place that meet the requirements of section 1928 of the Act, and 

therefore, states are not required to change their existing state plan to reflect the codification of 

the VFC program. Submission of a new SPA is only necessary if the state chooses to change the 

amount that it pays Medicaid providers for the administration fee. 

Comment: Two commenters discussed the impact of the updated fee schedule on the 

uninsured and underinsured. The first commenter recommended that uninsured children be 

exempt from paying administration fees and the second recommended that VFC providers 

continue to have flexibility to provide VFC vaccines at no administrative cost or at reduced cost 

to uninsured children. 

Response: While we acknowledge the commenter's concern, under section 1928 of the 

Act, we do not have the authority to exempt uninsured children from administration fees. 
 74 

 

Providers continue to have the flexibility to determine the administration fee they will collect 

from families of uninsured and underinsured children, as long as the administration fee does not 

exceed the state’s regional maximum administration fee. However, section 1928(c)(2)(C)(iii) of 

the Act provides that providers cannot deny administration of VFC vaccines to a vaccine-eligible 

child due to the inability to pay the administration fee. 

Comment: Several comments expressed support of the updated regional maximum 

administration fee schedule. None of the comments were critical of the updated fee schedule or 

the methodology used to update the fee schedule, or provided alternative suggestions. 

Response: Based on the support of the methodology used to update the fee schedule and 

the acknowledgement that an updated fee schedule is needed, we are finalizing the updated fee 

schedule as proposed. 

Comment: One commenter suggested that we link the regional maximum administration 

fee to the Medicare Economic Index, and publish the fee schedule annually. 

Response: The purpose of this final rule is to update the fee schedule, which has not 

been updated since 1994. 

Comment: Two commenters suggested that CMS consider establishing a minimum 

payment rate for providers. 

Response: The establishment of a minimum payment level for VFC providers goes 

beyond the scope of what was included in the proposed rule. 

Comment: Multiple commenters questioned whether states will continue to have the 

authority to set their payment rates under the Medicaid program at a rate that is lower than the 

State’s regional maximum administration fee. 

Response: Updating the fee schedule will not impact states’ ability to establish payment 

rates under the VFC program. States continue to have the flexibility to establish their payment 
 75 

 

rate for the VFC program at any level that does not exceed the newly updated regional maximum 

administration fee. If a state wishes to change its payment rate, it needs to submit a SPA to 

CMS. Much of the confusion related to state flexibility to establish payment rates is due to the 

requirements in the primary care payment increase section of this rule which requires that 

qualifying providers are paid at the lesser of the Medicare rate or the updated state regional 

maximum administration fee in 2013 and 2014. While states do maintain the flexibility to set the 

reimbursement rate for the VFC program, qualifying primary care providers who administer 

vaccines to children enrolled in Medicaid under the VFC program are required to be paid at the 

lesser of the Medicare rate or the updated State regional maximum administration fee for vaccine 

administration for those 2 years. 

Summary of Final Policy: We are finalizing the updated regional maximum VFC ceilings 

as proposed, as shown in Table 1. 

TABLE 1: Regional Maximum Administration Fee by State 

State 

Current Regional 

Maximum Fee 

Updated Regional 

Maximum Fee 

Alabama $14.26 $19.79 

Alaska $17.54 $27.44 

Arizona $15.43 $21.33 

Arkansas $13.30 $19.54 

California $17.55 $26.03 

Colorado $14.74 $21.68 

Connecticut $16.56 $23.41 

Delaware $16.55 $22.07 

District of Columbia $15.13 $24.48 

Florida $16.06 $24.01 

Georgia $14.81 $21.93 

Guam $23.11 

Hawaii $15.71 $23.11 

Idaho $14.34 $20.13 

Illinois $16.79 $23.87 

Indiana $14.47 $20.32 

Iowa $14.58 $19.68 

Kansas $14.80 $20.26 

Kentucky $14.17 $19.93 

Louisiana $15.22 $21.30 

Maine $14.37 $21.58 

Maryland $15.49 $23.28 

Massachusetts $15.78 $23.29 

Michigan $16.75 $23.03 
 76 

 

State 

Current Regional 

Maximum Fee 

Updated Regional 

Maximum Fee 

Minnesota $14.69 $21.22 

Mississippi $13.92 $19.79 

Missouri $15.07 $21.53 

Montana $14.13 $21.32 

Nebraska $13.58 $19.82 

Nevada $16.13 $22.57 

New Hampshire $14.51 $22.02 

New Jersey $16.34 $24.23 

New Mexico $14.28 $20.80 

New York $17.85 $25.10 

North Carolina $13.71 $20.45 

North Dakota $13.90 $20.99 

Ohio $14.67 $21.25 

Oklahoma $13.89 $19.58 

Oregon $15.19 $21.96 

Pennsylvania $15.76 $23.14 

Puerto Rico $12.24 $16.80 

Rhode Island $14.93 $22.69 

South Carolina $13.62 $20.16 

South Dakota $13.56 $20.73 

Tennessee $13.70 $20.00 

Texas $14.85 $22.06 

Utah $14.52 $20.72 

Vermont $13.86 $21.22 

Virginia $14.71 $21.24 

Virgin Islands $15.09 $21.81 

Washington $15.60 $23.44 

West Virginia $14.49 $19.85 

Wisconsin $15.02 $20.83 

Wyoming $14.31 $21.72 

 

III. Provisions of the Final Regulations

This final rule incorporates many of the provisions of the proposed rule. Those 

provisions of this final rule that differ from the proposed rule are as follows: 

● Section 438.6(c)(5)(vi)(B) has been modified to clarify our oversight role by requiring 

health plans to provide sufficient documentation so that both the state and CMS can ensure that 

complaint payments have been made in accordance with this rule. 

● Section 438.804(a)(1) has been changed from a description of the 2009 baseline rate to 

a general statement of the two methodologies the states are required to submit to CMS for review 

and approval to implement the payment increase to primary care providers. 
 77 

 

● Section 438.804(a)(1)(i) replaces the description of the 2009 baseline payment as 

provided in §438.804(a)(1) in the proposed rule to clarify that the states must submit a valid and 

reasonable methodology for identifying the provider payments that would have been made by the 

MCO, PHIP or PAHP for specified primary care services furnished as of July 1, 2009. This 

change is in recognition of the varying sources of data available to the states and the challenges 

associated with determining the rate for primary care services in 2009 for populations that have 

transitioned from fee-for-service to managed care delivery systems after 2009. We will need to 

review and approve the methodology for determining the 2009 baseline rate for specified 

primary care services to ensure that the data sources used are reasonable, reliable, and accurate 

to the fullest extent possible. 

● Section 438.804(a)(1)(ii) replaces the description of the methodology to identify the 

rate differential between the amount paid as of July 1, 2009 for specified primary care services 

and the rate required under this rule. This requirement was designated as §438.804(a)(2) under 

the proposed rule. The reference to “managed care provider” was removed and replaced with 

“MCO, PIHP or PAHP” for consistency with 42 CFR part 438. 

● Section 438.804(a)(3) has been revised and redesignated as §438.804(a)(2) to indicate 

that the methodology for identifying the 2009 baseline rate and the differential in payment 

between the provider payments that would have been made by the MCO, PIHP or PAHP on July 

1, 2009 and the amount needed to comply with the contractual requirement under 

§438.6(c)(5)(vi) must be submitted to CMS for approval by the end of the first quarter of CY 

2013. This is in recognition of the amount of planning and activity that must occur at the state, 

federal, health plan and provider levels to implement the increase in primary care provider 

payments in CY 2013. 
 78 

 

● A new §438.804(a)(3) has been added to clarify that the methodologies required under 

the section will be used by CMS in reviewing necessary MCO, PIHP and PAHP contract 

amendments and rates to implement the enhanced payment to primary care providers under this 

rule. 

● Section 447.400 (a) has been revised to permit recognition of physician specialties and 

subspecialties by the American Board of Physician Specialties (ABPS) and the American 

Osteopathic Association (AOA) as well as the American Board of Medical Specialties, which 

was the only Board referenced in the proposed rule. This change recognizes the fact that these 

three Boards are the three nationally recognized physician certification Boards. 

● Section 447.400(a)(2) has been revised to require physicians to self-attest that they are 

appropriately Board certified or that 60 percent of their Medicaid claims are for eligible E&M 

codes. This lessens the burden on State Medicaid agencies which, under the provisions of the 

proposed rule, were required to use these measures to verify the eligibility for higher payment of 

all physicians who self-attested to eligibility. 

● A new §447.400(b) has been added, specifying that, at the end of CY 2013 and CY 

2014, the Medicaid agency must review a statistically valid sample of physicians who received 

higher payments to verify they met the requirements for such payment. Section 447.400(3) has 

been deleted because Medicaid agencies need no longer verify the self-attested eligibility of the 

physician. 

● A new §447.400(d) has been added to require that states collect and report to CMS 

data on the impact of the higher rates on physician participation. That data will assist Congress 

in determining determine whether or not to extend the provisions of this rule beyond the end of 

CY 2014. 
 79 

 

● Section 447.405 (a) (1) has been revised to require Medicaid agencies to pay eligible 

providers in CYs 2013 and 2014 at the Medicare part B fee schedule rate that is applicable either 

to the specific site of service or to the office setting. States must also either make all Medicare 

locality adjustments or may pay a statewide rate per E&M code based on the mean Medicare rate 

across counties. The final rule makes these changes in recognition of the administrative burden 

to states associated with the need to make all site of service and geographic adjustments. 

● Section 447.410 has been revised to add a new requirement that Medicaid agencies 

identify in the required state plan the eligible codes that will be paid at the Medicare rate in CYs 

2013 and 2014 that were not paid under the state plan as of July 1, 2009. This is to assist in 

ensuring that eligible codes are not added solely for purposes of receiving 100 percent FFP. This 

section also requires that the state plan specify the methodology the state will use to identify the 

2013 and 2014 Medicare rates. 

● Section 447.415(b) has been revised to specify that, in calculating the 2009 Medicaid 

base rate, incentive, bonus and performance-based payments may be excluded. This is because 

these payments are not part of statewide fee schedule rates, but are paid only to physicians who 

meet specific goals or criteria. However, volume based payments, such as those made up to the 

average commercial rate, must be included since those payments, even when paid as aggregate 

payments, are based on code-specific calculations. 

● Section 447.410(d) has been revised to clarify that bundled payments exclude 

encounter and per diem rates. This clarifies that physician services provided at sites such as 

clinics or nursing homes which are reimbursed as part of the encounter or NF per diem and not 

under a physician fee schedule are not eligible for higher payment. 

IV. Collection of Information Requirements
 80 

 

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. 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. 

To derive average costs, we used data from the U.S. Bureau of Labor Statistics for all 

salary estimates. The salary estimates include the cost of fringe benefits, calculated at 

approximately 35 percent of salary, which is based on the Bureau’s June 2011 Employer Costs 

for Employee Compensation report. 

In our May 11, 2012, proposed rule, we solicited public comment on each of the section 

3506(c)(2)(A)-required issues for the following information collection requirements (ICRs). 

PRA-related comments were received as indicated below. 

A. ICRs Regarding Contract Requirements (§438.6)

In §438.6(c)(3)(v) and (c)(5)(vi), states are required to modify managed care contracts 

and accompanying capitation rates through which MCOs, PIHPs or PAHPs will comply with the 

requirements of the Affordable Care Act. There is a one-time burden to the state for amending 

such contracts for the following provisions: (1) To assure that the level of payment is consistent 
 81 

 

with 42 CFR part 447, subpart G; (2) to assure that the specified physicians (whether directly or 

through a capitated arrangement) receive an amount at least equal to the amount set for and 

required under part 447; and (3) to assure that the state receives sufficient documentation 

regarding those adjusted payments. 

The one-time burden associated with the requirements under §438.6(c)(3)(v) and 

(c)(5)(vi) is the time and effort it would take each of the 37 state Medicaid programs with 

MCOs, PIHPs or PAHPs and the District of Columbia (38 total respondents) to amend an 

average of three managed care contracts. The associated requirements and burden estimates 

have been approved by OMB under OCN 0938-0920. Section 438.6(c)(3)(v) and (c)(5)(vi) 

would not impose any new or revised reporting or recordkeeping requirements and, therefore, 

does not require additional OMB review under the authority of the Paperwork Reduction Act of 

1995 (44 U.S.C. 3501 et seq.). 

 The burden estimates approved under OCN 0938-0920 take into account the number of 

modifications required to managed care contracts by the states on an annual basis due to changes 

in federal law and the operations of a state’s Medicaid program. As the amount of activity that 

would require contract modifications may vary across the states, the approved burden estimates 

accommodate that variation. Therefore, the one-time contract modification required by this rule 

fits within the existing estimates. 

B. ICRs Regarding Primary Care Provider Payment Increases (§438.804(a)(1) and (2))

In §438.804(a)(1) and (2), states are required to submit the methodologies they intend to 

use to develop a baseline for primary care service payments in 2009 as well as the differential 

between that baseline and the CY 2013 and 2014 rate to CMS for review and approval no later 

than the end of the first quarter of CY 2013. Further, we indicate that we will use those 
 82 

 

approved methodologies to review and approve managed care contracts and rates that are 

compliant with this provision. 

The burden associated with the requirements under §438.804(a)(1) and (2) is the time and 

effort it would take each of the 37 state Medicaid programs and the District of Columbia (38 

total respondents with managed care delivery systems) to develop both methodologies, as well as 

managed care capitation rates which reflect the increased payments to implement this section. 

We received comments maintaining that the proposed rule had significantly underestimated the 

costs of implementing this provision in a managed care delivery system. In response, we are 

revising the burden estimates that were set out in the proposed rule. The task of developing both 

methodologies will involve a one-time effort on the part of financial, legal and management 

staff, as well as significant contractual actuarial resources. Most of the 38 states use contracted 

actuarial firms to develop managed care capitation methodologies and rates. Since the 

development of the 2009 baseline and CYs 2013-2014 rate differentials require actuarial 

analysis, we have estimated those contractual costs. Once the methodologies are developed by 

each respondent’s contracted actuary, each respondent will need to review and approve them 

prior to submission to CMS. 

We estimate that it will take approximately 100 hours of contractual actuarial services per 

respondent at a cost of $5,398 to complete the data and actuarial analysis to develop these 

methodologies at a total cost of $205,124 (38 x $5,398). It will also take 10 hours per 

respondent at a cost of $482.86 to review and validate these methodologies in order to submit 

them to CMS at a total cost of $18,348.68 (38 x $482.86). In deriving these figures, we used the 

following hourly labor rates and estimated the time to complete this task: $53.98/hr and 100 

hours for contracted actuarial staff; $49.07/hr and 2 hours for legal staff to review the 

methodology for compliance with the statute ($98.14); and $48.09/hr and 8 hours for managerial 
 83 

 

staff to review and submit these methodologies to CMS ($384.72). The total one-time burden 

amounts to $223,473 ($205,124 + $18,349). 

C. ICRs Regarding General Requirements - Provider Agreements (§441.605(b))

This requirement is exempt from the PRA since we expect to receive fewer than 10 

submissions (annually) from providers, if any. The requirement that providers must have 

provider agreements in place in order to participate in the VFC program has been in effect since 

the program was implemented in 1994. The provision in this regulation is merely codifying the 

requirement and no further action is necessary in regard to providers who are currently 

participating in the VFC program. 

D. ICRs Regarding Administrative Fee Requirements (§441.615(d))

 This requirement is exempt from the PRA since we expect to receive fewer than 10 

submissions (annually) from states. The requirement that a state submit a state plan was a 

requirement when the VFC program was first established in 1994, and all states submitted state 

plans at that time. A state now only submits a state plan amendment related to the VFC program 

when it makes a change to the state’s administration fee. In 2011, only two states submitted state 

plans that made changes to the state’s administration fee under the VFC program. Even with the 

publication of the updated fee schedule, we do not anticipate that many states will make changes 

to their administration fee. 

E. ICRs Regarding Primary Care Services Furnished by Physicians with a Specified Specialty or 

Subspeciality (§447.400(a), (b), and (d))

In §447.400(a), physicians are required to self-attest that they are Board certified in an 

eligible specialty or subspecialty or that 60 percent of the claims that they submit are for eligible 

E&M codes. In §447.400(b), at the end of CY 2013 and CY 2014, the state must review a 
 84 

 

statistically valid sample of physicians who received higher payments to verify that they meet 

the one requirement to which they attested. 

The burden associated with the requirements under §447.400(a) and (b) is the time and 

effort it will take each of the 50 Medicaid Programs and the District of Columbia (51 total 

respondents) to establish a protocol for physician self-attestation and to conduct and review a 

statistically valid sample of “eligible” physicians once in each of CYs 2013 and 2014. In the 

proposed rule we estimated that it would take 0.5 hours to determine whether a physician may 

receive payment under the Affordable Care Act. In this final rule, we assess the burden based on 

MSIS data from the fourth quarters of FY 2008 and 2009 which showed an average of 2,245 

physicians per state who currently bill, but whose eligibility for increased payment would need 

to be verified by the Medicaid agency. We increased this number by 10 percent to account for 

participation by new physicians for a total of 2,470 physicians. The reported burden, which 

relies on a review of each physician qualifications, represents CMS’s best estimate of the cost to 

sample data on physicians who self-attested. We relied on the data reported above in the absence 

of information about how each state plans to implement its sampling methodology. 

We used the following hourly labor rates and estimated the time to complete each task: 

0.5 hours for a state’s Medicaid office and support staff working in the medical billing area to 

retrieve and assess claims for an individual physician; or 0.5 hours for administrative staff to 

review the Board certification status of a physician. Costs associated with these staff are 

reported at a cost of $14.12 for each half-hour derived from $28.24/hr each and 2,470 physicians 

for an estimated cost of $34,876.40 per state ($14.12/hr x 2,470 responses/state) or 

$1,778,696.40 total ($34,876.40 x 51 states). 

While proposed in the proposed rule, this final rule removes the provision that would 

have required states to verify the self-attestations of all physicians by confirming Board 
 85 

 

certification or an appropriate claims history. In this final rule, states must annually sample (in a 

statistically valid manner) the physicians who receive higher payment to ensure that they are 

either Board certified or that 60 percent of the codes they bill to Medicaid are those codes 

identified in this rule. We are not able to estimate this burden with greater precision due to lack 

of data about the varying methods states will use to fulfill this requirement (see discussion under 

preamble section A. Payments to Physicians for Primary Care Services; 1. Primary Care 

Services Furnished by Physicians with Specified Specialty and Subspecialty (§447.400); a. 

Specified Specialties and Subspecialties). Therefore, we are not modifying our estimate of the 

impact of this section of the rule. 

In §447.400(d) the state is required to submit to CMS the information relating to 

participation by physicians as well as the E&M codes. The form and timeframe for such 

submission has yet to be determined by CMS. 

F. ICRs Regarding State Plan Requirements (§447.410)

In §447.410, states will be required to submit a SPA to reflect the fee schedule rate 

increases for eligible primary care physicians under section 1902(a)(13)(C) of the Act. They 

will also be required to submit a SPA that reflects the payment increase for vaccine 

administration. The purpose of this requirement is to assure that when states make the increased 

reimbursement to providers, they have state plan authority to do so and they have notified 

providers of the change in reimbursement as required by federal regulations. In accordance with 

§447.205, public notification prior to the effective date of a SPA must be made whenever a state 

proposes a change to its methods and standards for setting payment rates for services. 

Consequently, the notification burden is included in the following estimate. 

The burden associated with the one-time requirement under §447.410 is the time and 

effort it would take each of the 50 state Medicaid programs and the District of Columbia (51 
 86 

 

total respondents) to modify the Medicaid state plan to reflect payment consistent with the 

requirements in section 1902(a)(13)(C) of the Act. This will require the review, preparation, 

approval, and submission of a CMS-provided SPA template. We estimate that it will take state 

staff working 48 hours to complete all of the tasks associated with the review, preparation, 

approval, and submission of the SPA template. The estimated cost is $ $1,606.95 per state 

($35.71/hr x 45 hr) or $81,954.45 total ($1606.95 x 51) for tasks completed by non-management 

staff working on SPA preparation. We estimate that this task will also require 3 hour for stateemployed legal staff at $49.07/hr or $147.21 (per response) for a total of $7,507.71 ($147.21 x 

51). The combined total for cost associated with SPA preparation, including non legal and legal 

staff employed by the state, is $89,462.16 ($81,954.45 +$7,507.71). 

The ongoing burden for states is the determination of the updated fee for service rate in 

CY 2014. We estimate that it will take state staff working 20 hours to set the new rate in 

accordance with the approved state plan amendment for this payment. The estimated cost is 

$607.07 ($35.71/hr x 17 hr) per state or $30,960.57 total ($607.07 x 51) for tasks completed by 

non-management staff working on SPA preparation. We estimate that this task will also require 3 

hours for state-employed legal staff at $49.07/hr or $147.21 (per response) for a total of 

$7,507.71 ($147.21 x 51). The combined total for cost associated with SPA preparation, 

including non legal and legal staff employed by the state, is $38,468.28 ($30,960.57 

+$7,507.71). 

G. Summary of Annual Requirements and Burden Estimates
 87 

 

TABLE 2: Annual Recordkeeping and Reporting Requirements and Associated 

Burden Estimates1 

Regulation 

Section(s) 

OMB 

Control 

Number 

Respondents 

Response

s 

Burden 

per 

Response 

(hours) 

Total 

Annual 

Burden 

(hours)

Labor 

Cost of 

Reporting 

($) 

Total 

Cost ($) 

(rounded)

§438.804(a)(1

) and (2) 

0938-

1170 

38 38 (total) 110 4,180 223,472.68 223,473 

§447.400(a) 

and (b) 

0938-

1170 

51 2,470 (per 

state) or 

125,970 

(total) 

.50 1,235 

(per 

state) 

or 

62,985 

(total) 

34,876.40 

(per state) 

or 

1,778,696.

4 (total) 

1,778,696

§447.410 

(SPA 

amendments) 

0938-

1148

51 51 (total) 48 2,448 89,462.16 89,462 

§447.410 

(amending 

FFS rate) 

0938-

1148

51 51 (total) 20 1,020 38,468.28 38,468 

Total -- -- -- -- 70,633 2,130,099.

52 

2,130,100

1

There are no capital or maintenance costs incurred by any of the collections. Therefore, the capitol cost column has 

been omitted from the table. 

H. Submission of PRA-Related Comments

We have submitted a copy of this final rule to OMB for its review of the rule’s 

information collection and recordkeeping requirements. These requirements are not effective 

until they have been approved by the OMB. 

To obtain copies of the supporting statement and any related forms for the proposed 

paperwork collections referenced above, access our website at 

http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the Reports Clearance Office at 410–

786–1326. 

We invite public comments on these potential information collection requirements. If 

you comment on these information collection and recordkeeping requirements, please submit 

your comments to the Office of Information and Regulatory Affairs, Office of Management and 
 88 

 

Budget, Attention: CMS Desk Officer, (CMS–2370–F) Fax: (202) 395–6974; or E-mail: 

OIRA_submission@omb.eop.gov. 

V. Regulatory Impact Analysis 

A. Introduction

We have examined the impacts 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) of the Social Security 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. This rule has been designated an "economically" significant rule, under 

section 3(f)(1) of Executive Order 12866. Accordingly, we have prepared a Regulatory Impact 

Analysis (RIA) that, to the best of our ability, presents the costs and benefits of the rulemaking. 

We solicited comment on the RIA analysis provided. In accordance with the provisions of 

Executive Order 12866, this regulation was reviewed by the Office of Management and Budget. 

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that 

agencies assess anticipated costs and benefits before issuing any rule whose mandates require 

spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2012, 
 89 

 

that threshold is approximately $139 million. This rule does not contain mandates that will 

impose spending costs on state governments in the aggregate of $139 million. The cost for 

increasing payment for primary care services in CYs 2013 and 2014 will be borne by the federal 

government, which will provide 100 percent matching funds equal to the difference between the 

Medicaid state plan rate in effect July 1, 2009 and the Medicare rate implemented in CY 2013 

and 2014, or the rate using the CY 2009 CF, if higher. The Affordable Care Act requires higher 

payment to physicians for primary care services but does not impose increased costs on states. 

For the provisions associated with the charges for vaccine administration under the VFC 

program, the proposals will have no consequential effect on state, local, or tribal governments or 

on the private sector. 

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. As indicated, this final rule will not have a substantial effect on state 

and local governments. 

B. Statement of Need

This final rule will implement provisions of the Affordable Care Act that require payment 

by state Medicaid agencies of at least the Medicare rates in effect in CYs 2013 and 2014 or, if 

higher, the rate using the CY 2009 CF for primary care services furnished by a physician with a 

specialty designation of family medicine, general internal medicine, or pediatric medicine. Also, 

this final rule will implement the statutory payment provisions uniformly across all states, 

defines, for purposes of enhanced federal match, eligible primary care physicians, identifies 

eligible primary care services, and specifies how the increased payment should be calculated. 
 90 

 

Finally, this rule provides general guidelines for implementing the increased payment for 

primary care services delivered by managed care plans. 

C. Overall Impact

The aggregate economic impact of this final rule is an estimated $5.600 billion in CY 

2013 and $5.745 billion in CY 2014 (measured in constant 2012 dollars). In CY 2013, the 

federal cost is approximately $5.835 billion with $235 million in state savings. In CY 2014, the 

federal cost is approximately $6.055 billion with $310 million in state savings. The state savings 

are derived from the projected increases in reimbursement rates expected to occur between 2009 

and 2013 through 2014, in the absence of the Affordable Care Act, which will now be paid for 

by the federal government. Absent the legislation, the projected increases in the reimbursement 

rates would be split between the federal government and states. This aggregate economic impact 

estimate includes the requirement that states reimburse specified physicians for vaccine 

administration at the lesser of the Medicare rate or the VFC regional maximum during CYs 2013 

and 2014, which is estimated at $975 million in federal costs. The federal costs for funding that 

increase, in State payments during CYs 2013 and 2014, are estimated at $495 million and $480 

million, respectively. This also includes the impact on Medicaid-expansion CHIP expenditures; 

total CHIP expenditures are estimated to increase by $145 million in CY 2013 and again in CY 

2014, reflecting an increase in federal CHIP expenditures of $155 million and a decrease in state 

CHIP expenditures of $10 million in each year. 

Overall, there is a net increase of $165 million in the impact estimates of the final rule 

versus the proposed rule. This includes a $290 million increase in the estimates due to the 

inclusion of the costs associated with the primary care payment increase for enrollees in the 

Medicaid-expansion CHIP plans. Furthermore, this impact is partially offset by a decrease of 

$130 million as a result of the additional flexibility provided to states to determine the scope of 
 91 

 

the geographic adjustment to the MPFS. Lastly, there is a $5 million increase in the cost estimate 

for vaccine administration related to VFC provided in the final rule versus the proposed rule. 

Differences in the estimates provided in the final rule, versus those in the proposed rule, 

are mainly attributable to the inclusion of the Medicaid-expansion CHIP expenditures, as well as 

changes to the policy that allow states to either use the Medicare physician payment locality 

factors to determine the rates or to develop a methodology to calculate mean or median Medicare 

rates to use statewide. The impacts presented in the proposed rule assume that states would pay 

primary care physician service rates that included the different Medicare locality factors. 

Overall, the estimated economic impacts are a result of this final rule providing states the 

ability to increase payment for primary care services without incurring additional costs (with the 

exception of states that did or would have reduced primary care physician service reimbursement 

rates in their Medicaid programs between 2009 and 2014). We anticipate higher payment will 

result in greater participation by primary care physicians, including primary care subspecialists, 

in Medicaid thereby helping to promote overall access to care. At this time it is not known 

whether states will be willing or have the ability to sustain this level of payment to providers 

beyond CY 2014. 

D. Detailed Economic Analysis

1. Anticipated Effects on Medicaid Recipients 

We anticipate this final rule will have a positive effect on Medicaid beneficiaries by 

increasing the availability of services through financial incentives to primary care physicians. 

The exact number of beneficiaries that will benefit is not known, however, we believe it will be 

substantial because this rule directly affects payment for a type of service which is a key 

component of the Medicaid program. Additionally, we believe primary care physicians will be 
 92 

 

encouraged to accept more Medicaid beneficiaries into their practices as a result of increased 

payment. 

We believe that this provision of the regulation will positively affect the availability of 

vaccination services as well. Currently, approximately 5 states reimburse the regional maximum 

for vaccine administration set by the VFC program. This final rule will require states to 

reimburse specified physicians for vaccine administration at the lesser of the Medicare rate or the 

VFC regional maximum during CYs 2013 and 2014. 

Finally, this rule will positively affect people who are dually eligible for benefits under 

the Medicare and Medicaid programs by increasing payment to physicians who serve this 

population. Specifically, Medicaid will pay higher amounts to providers. We anticipate that 

increased payment will promote greater access to primary care services for dually eligible 

beneficiaries. 

2. Anticipated Effects on Other Providers 

We anticipate this final rule will increase physician participation in Medicaid as most 

states reimburse physicians at well below the Medicare rates. Recently, as states have 

experienced budgetary constraints, they have sought to address this by reducing payments to 

providers, including physicians. This final rule will ensure that in CYs 2013 and 2014, 

physicians receive the higher Medicare rate for the specified primary care services. 

In addition, this final rule will impact states and providers who provide immunizations 

under the Medicaid program because it will require that such providers be reimbursed at the 

lesser of the 2013 or 2014 Medicare rate or the Regional Maximum VFC Administration Fee in 

CYs 2013 and 2014. This rule also raises the maximum rate that states could pay providers for 

the administration of vaccines under the VFC program in subsequent years. The updated 

Regional Maximum Administration Fees included in this final rule are the maximum amounts 
 93 

 

that a state could choose to reimburse a provider for the administration of a vaccine under the 

VFC program after the provisions of the primary care payment increase expire at the end of CY 

2014. States have the flexibility to set the rate that they will reimburse providers, and can 

therefore choose to set it at the state’s regional maximum fee or at any other amount below the 

regional maximum amount. It is not expected that all states will choose to implement the 

increase. 

The impact of this final rule on the federal government is therefore connected to states’ 

decisions as to whether to increase the amount that they pay providers for the administration of 

vaccines after CY 2014. That is, if no states choose to increase the administration fee for 

providers, there will be no additional costs incurred by the federal government. 

The same is true for states. There will be no impact of this final rule on a state unless the 

state chooses to increase the amount that it reimburses providers for the administration of 

vaccines under the VFC program. It is estimated that if all states were to reimburse providers at 

the maximum administration fee, the total cost to states and the federal government would be 

$75 million. Of this, the federal share is estimated to be $45 million. 

Children enrolled in the VFC program who are Medicaid eligible will not incur any 

additional costs as a result of this final rule as there are no out-of-pocket expenses related to the 

VFC program for Medicaid eligible children. 

Families of children who are enrolled in the VFC program because they are either 

uninsured or do not have insurance that covers vaccines will be impacted by this regulation. 

Uninsured and underinsured individuals receiving vaccines through the VFC program will 

continue to pay a single administration fee for any vaccine provided. The provider will also 

receive a single administration fee for any vaccine provided, regardless of the number of 

vaccine/toxoid components, and will not receive the Medicare administration rate for those 
 94 

 

services. Providers can bill the families of those children at the state’s regional maximum rate 

for the administration of a vaccine. As a result, if the updated rates were to become effective, 

those families could be billed at the published rate for that state. However, section 

1928(c)(2)(B)(iii) of the Social Security Act says that “[t]he provider will not deny 

administration of a qualified pediatric vaccine to a vaccine-eligible child due to the inability of 

the child’s parent to pay an administration fee.” 

 Therefore, providers will benefit from the regulation as they can charge and receive the 

state’s regional maximum rate for their patients who are enrolled in the VFC program because 

they are either uninsured or do not have insurance that covers immunizations. A provider will 

not receive an increased administration fee for Medicaid-eligible children unless a state chose to 

increase the amount that it pays providers under the Medicaid program. 

3. Anticipated Effects on the Medicaid Program Expenditures 

Table 3 provides estimates of the anticipated Medicaid program expenditures associated 

with increasing payment for primary care services. CMS’s Office of the Actuary (OACT) 

developed estimates for the impact of this section of the Affordable Care Act, which were 

initially published in April 2010, 

(https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf). Initially, 

projections of Medicaid spending on primary care physician services by FFS Medicaid and 

Medicaid managed care plans were created. For this, OACT developed assumptions of (1) what 

share of Medicaid physician spending was for primary care and (2) what share of managed care 

spending was for physician services, relying on several studies on physician service utilization 

and expenditures. OACT then projected spending for 2013 and 2014 based on the projections of 

Medicaid physician spending in the President’s Fiscal Year 2013 Budget. (The original 

estimates that appeared in the April 2010 estimates were based off of the President’s Fiscal Year 
 95 

 

2010 Budget Mid-Session Review.) To determine the impact of using Medicare physician 

payment rates for Medicaid payments, OACT compared the ratio of Medicaid rates to Medicare 

rates, based on a study of Medicare and Medicaid physician payment rates across all states. 

Finally, OACT projected growth in Medicaid physician payments and the rates prescribed by the 

Affordable Care Act, based on Medicare payment rates; these estimates were revised to 

incorporate the actual CY 2011 CF (75 FR 73169). OACT assumed that the volume of physician 

services covered by Medicaid would increase by 5 percent in managed care plans and by 

10 percent in fee-for-service programs over 2013 and 2014 as a result of higher payments and 

expected increases in physician participation in Medicaid. Additionally, these changes were 

estimated to result in a slight decrease in projected state spending as future projected Medicaid 

payment rate increases would be covered by increased federal matching funds in 2013 and 2014. 

The studies and data sources used for developing these estimates included: S. Zuckerman, 

“Trends in Medicaid Physician Fees, 2003-2008,” Health Affairs, 28 April 2009; the American 

Medical Association; the Medical Group Management Association; and the Bureau of Labor 

Statistics. 

As a result of the changes to the policy that allows states to either use the Medicare 

physician payment locality factors to determine the rates or to develop a methodology to 

calculate the mean over all counties for each E&M code to use statewide, the estimates have 

been revised since the proposed rule. The estimates in the proposed rule reflect the expected 

impacts of the rule assuming that states would pay primary care physician service rates that 

included the different Medicare locality factors. As states now have the option to develop a 

methodology using a mean over all counties based on the different locality payment rates within 

a state, the estimates have changed to reflect the different options states might use. 
 96 

 

OACT has reviewed several possible methods states might consider using to determine 

the mean rates. The states’ decisions to use the rate based on the Medicare locality rate or the 

mean rate measured over all counties may result in impacts ranging from $11.185 billion over 

CY 2013 and CY 2014 to $11.495 billion over the two years. It is assumed for the purposes of 

this rule that the expected cost would be equal to the median of this range, as no assumptions 

have been made for which states (with multiple Medicare physician payment localities) would 

choose each methodology. 

TABLE 3: Federal and State Medicaid and CHIP Impacts for Payment Increases to 

Primary Care Providers during Calendar Years 2013 through 2014 (Millions of 2012 

dollars) 

CY 2013 CY 2014

Federal Share* $5,835 $6,055

State Share –$235 -$310

Total $5,600 $5,745

(* Federal cost estimates reflect the additional $495 million and $480 million in CYs 2013 and 

2014, respectively, as a result of states reimbursing specified physicians for vaccine 

administration at the lesser of the Medicare rate or the VFC regional maximum.) 

The Medicare payment rates used in this estimate were the actual 2009 MPFS and the 

current statute projections of the CYs 2013 and 2014 MPFS. 

In addition, it should be noted that these estimates are based on the current statute which 

includes a significant projected reduction to payment rates in the CY 2013 MPFS under the 

Sustainable Growth Rate (SGR) formula. Every year since 2003, the Congress has passed 

legislation overriding projected cuts that otherwise would have resulted from the SGR formula. 

Furthermore, it is possible that the Congress may enact legislation that averts the currently 

projected reduction in MPFS rates for 2013 which would affect the CYs 2013, and 2014 rates 

that are being used to estimate the payment impacts in this rule. Consequently, if the Congress 

enacts legislation resulting in increased payment rates to replace the payment rate reduction 
 97 

 

called for under the SGR formula in CYs 2013, and 2014, and in turn the CYs 2013 or 2014 rates 

exceed the rates calculated using the CY 2009 CF, then this would result in higher costs for the 

CYs 2013 and 2014 Medicaid physician payments presented in this rule. Additionally, other 

changes to the CF in these years may also affect the costs of this section. Therefore, currently it 

is not possible to accurately estimate the impact of these potential future changes, since 

definitive action, if any, by the Congress regarding the MPFS CF is unknown. 

Other changes made in the final rule increase the uncertainty regarding these estimates. 

In the final rule, states are no longer required to verify the self-attestation of all physicians that 

they are eligible for the higher payment rates. As a result, the review of a sample of the selfattesting physicians may find some physicians who are ineligible. To the extent that more 

physicians may self-attest as being eligible than would have been determined eligible by the 

state, there may be additional costs; the potential additional costs have not been quantified here. 

It is important to note that, consistent with the proposed rule, these estimates do not 

include any impact related to the impact of the expansion of Medicaid eligibility beginning in 

2014 as provided by the Affordable Care Act. It is expected that the costs related to this rule 

would be even greater in 2014 than those listed in Table 3, as Medicaid enrollment increases 

with the new eligibility standards, as well as with efforts to simplify Medicaid enrollment and 

outreach efforts to enroll people in Medicaid, CHIP, and the Health Insurance Exchanges. As 

these new enrollees utilize primary care physician services that would be eligible for higher 

reimbursement rates, there would be additional costs related to this rule. These costs would 

dependent upon several factors, including: the number of new enrollees in 2014; the amount of 

primary care physician services the new enrollees utilize; the extent to which new enrollees 

participate in managed care Medicaid plans or in fee-for-service Medicaid; and the number of 

new enrollees in each state, as the impacts vary widely across the states. Furthermore, the cost 
 98 

 

would be highly dependent on which states elect to expand Medicaid eligibility in 2014, which is 

not known at this time. We further emphasize the uncertainties associated with this estimate, 

especially regarding the participation of states in the Medicaid eligibility expansion. 

4. Anticipated Effects on States 

The federal government will provide 100 percent matching funds for the difference 

between the Medicaid state plan rate in effect July 1, 2009 and the Medicare rate in CYs 2013 

and 2014 or the rate using the CY 2009 Medicare CF, if higher. Therefore, we believe this final 

rule will result in a positive effect on states, since it reduces their expenditures for primary care 

services. State savings are estimated at $235 million and $310 million in CYs 2013 and 2014, 

respectively. However, for Medicaid state plan rates below the 2009 level, states will be 

required to reimburse the non-federal share of that portion, so as to return to the 2009 level of 

payment. We are unable to accurately quantify the impact of this effect on states, since there is 

not a precise relationship between any of the Medicaid state plan rates and the Medicare rates. 

5. Anticipated Effects on Small Entities 

The RFA requires agencies to analyze options for regulatory relief of small entities, if a 

rule has a significant impact on a substantial number of small entities. For purposes of the RFA, 

small entities include small businesses, nonprofit organization, and small governmental 

jurisdictions. The great majority of hospitals and most other health care providers and suppliers 

are small entities, either by being nonprofit organizations or by meeting the SBA definition of a 

small business and having revenues of less than $7.0 million to $34.5 million in any 1 year. (For 

details, see the Small Business Administration’s Table of Size Standards at

http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf). For purposes of the RFA, 

approximately 95 percent of physicians are considered to be small entities. Individuals and states 

are not included in the definition of a small entity. 
 99 

 

We anticipate that this regulation will primarily impact individual physicians and state 

Medicaid agencies. This final rule requires states to increase payment for primary care services 

without incurring additional state cost. As previously noted, we anticipate that this higher 

payment will impact physicians by encouraging greater participation by primary care physicians, 

including primary care subspecialists, in Medicaid, thereby helping to promote overall access to 

care. Therefore, the Secretary has determined that this final rule will not have a significant 

impact on a substantial number of small entities. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis 

if a rule may have a significant impact on the operations of a substantial number of small rural 

hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes 

of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside 

of a metropolitan statistical area and has fewer than 100 beds. This rule will not have a 

significant impact on small rural hospitals because it only affects physicians. We are not 

preparing an analysis for section 1102(b) of the Act because the Secretary has determined that 

none of the provisions in this final rule will have a significant impact on the operations of a 

substantial number of small rural hospitals. 

E. Alternatives Considered

This section provides an overview of the issues addressed in the final rule and the 

regulatory alternatives considered. In identifying the issues and developing alternatives, we 

consulted with states and other interested stakeholders such as primary care specialists and 

policy makers. We solicited comment on the assumptions and analyses presented in the 

Alternatives Considered section. Detailed analysis on the alternatives considered to the 

provisions in the final rule is provided in the responses to comments in section II. 

1. Eligible Providers 
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The statute specifies that increased payment may be made for primary care services 

furnished by a physician with a primary specialty designation of family medicine, general 

internal medicine or pediatric medicine. In the proposed rule, we included related subspecialists 

and used Board certification or subspecialty recognition by the American Board of Medical 

Specialties (ABMS) and a supporting history of codes billed in the absence of Board certification 

as a means of identifying eligible primary care physicians. We considered permitting physicians 

to qualify for payment based solely on self-attestation. The final rule CMS continues to 

recognize subspecialists related to the primary care specialists specified in the statute as eligible 

for this payment. We accept Board certification by the ABMS, American Osteopathic 

Association and ABPS. We permit payment based on self-attestation alone but, to promote 

program integrity, we are requiring that states, at the end of each of CYs 2013 and 2014, review 

a statistically valid sample of providers who received higher payment to verify that they either 

were appropriately Board certified or that 60 percent of their claims during that period were for 

the identified E&M codes. Comments on this aspect of the final rule and our responses may be 

found in section II.A.1.a. 

2. Payment Made Under the Physician Benefit as a Physician Service 

This rule clarifies physician services to mean any service delivered under the physician 

services benefit at 1905(a)(5)(A) of the Act. First, we considered whether the statute limited 

increased payment to services provided only by physicians. In the Medicaid program, a 

significant proportion of primary care services are actually rendered by advance practice nurses, 

and other types of independently practicing nonphysicians. We recognize the importance of 

these nonphysician practitioners in the provision of primary care services in many states. 

However, section 1902(a)(13)(C) of the Act limits eligibility for higher payment to services 

provided by physicians. Next we considered whether the statute limited increased payment to 
 101 

 

services provided directly by physicians. Medicaid regulations at §440.50 define “physician 

services” as services provided by or under the personal supervision of a physician. Therefore, 

we concluded that, in light of the important role of these practitioners in delivering primary care 

to Medicaid beneficiaries and the regulatory definition of a “physician service,” those services 

delivered under the personal supervision of a specified primary care physician could qualify for 

the increased payment. This meant that specified primary care services rendered by 

nonphysicians such as advanced practice nurses and other nonphysician professionals qualified 

for payment when billed under the Medicaid enrollment number of any designated primary care 

specialist or subspecialist. 

Due to the limited data available, we are unable to accurately estimate the impacts 

representing the inclusion of services provided by practitioners under the supervision of a 

physician. All such services are billed under the supervising physician’s billing number and are 

reported as physician services to CMS making it impossible to determine the impact of this 

proposal. 

In the final rule, higher payment is still limited to the qualified physicians and advanced 

practice professionals practicing under their personal supervision. However, services no longer 

need to be billed under the physician’s billing number, as long as the physician has professional 

responsibility for the services provided. The comments we received on this topic and CMS 

responses are found in section II.A.1.b.

 We also considered whether services provided by physicians in settings such as FQHCs, 

RHCs, or clinics would be eligible for increased payment. In Medicaid “physician services” is a 

distinct benefit from other benefits such as the FQHC, RHC or clinic benefits. We estimated that 

the inclusion of services provided by physicians in settings such as FQHCs, RHCs, or clinics for 

increased payment would result in an aggregate federal cost of approximately $755 million for 
 102 

 

CYs 2013 and 2014. In the final rule, we continue to believe that only those services 

reimbursed pursuant to a physician fee schedule and through the Medicaid state plan as a 

physician service are eligible for higher payment. In section II.A.1.b. we provide more detail 

about comments and our responses. 

3. Eligible E&M Services 

The statute requires enhanced payment for E&M services/codes. The proposed rule 

specified the E&M Codes eligible for the increased payment. They include all primary care 

E&M codes, including some codes not recognized for payment by Medicare. Because the statute 

requires payment at the Medicare rate, we considered not extending the requirement for 

increased payment to codes not reimbursed by Medicare. However, many of those codes 

represent services provided to children. While Medicare covers relatively few children, 

payments for services provided to children constitute a larger proportion of Medicaid 

expenditures. We therefore included these additional codes because they represent core primary 

care services that are important to the Medicaid program. 

We estimated that approximately 6 to 7 percent of all expenditures on services eligible 

for the increased payment rates are for services not covered by Medicare. Furthermore, we 

believed that a corresponding amount of the federal costs associated with this final regulation 

would be related to these services, reflecting an impact range of $655 million to $765 million 

over CY 2013 and 2014. As a result, the final rule specifies that all E&M codes identified in the 

proposed rule are eligible for higher payment. Rates for codes not reimbursed by Medicare will 

be developed by us based on a calculation of the CF and RVUs that are published by us. 

Comments and alternatives considered regarding this section of the rule are presented in section 

II.A.2.b. 

 4. Eligible Vaccine Administration Services 
 103 

 

The statute specifies payment at the CY 2013 and 2014 Medicare rate for certain vaccine 

administration billing codes or their successor codes. A state may receive 100 percent FFP for 

the difference between the Medicaid rate as of July 1, 2009 and the Medicare rates in CYs 2013 

and 2014 or the rate using the CY 2009 CF, if higher. In 2011, the coding structure for vaccine 

administration changed such that two codes replaced four of the specified codes. Moreover, the 

four deleted codes represented vaccine administrations by various routes (for example, intranasal 

vs. injectable) to children under 8. However, new code 90460 represents the initial 

vaccine/toxoid administered through all routes to children through age 18 while code 90461 

represents payment for additional vaccines/toxoids administered. This rule finalizes a method 

for imputing a vaccine administration rate in 2009 for code 90460. The 2009 rate would equal 

the average payment amount weighted by volume of codes 90465 and 90471. The 2009 value 

for code 90461 would be $0, since there was no payment for additional vaccines/toxoids prior to 

2011. We received one comment on this proposed methodology, which led to a revision of the 

formula. 

In 2009, approximately 20 states used a bundled rate to reimburse vaccines and vaccine 

administration, complicating the identification of the rate differential. This rule clarifies that, for 

any bundled rate payments such as this, states must correctly identify the rate differential for the 

included primary care service only (in this case, vaccine administration). We added this 

provision in the interest of promoting program payment integrity but defer to the states to 

develop a methodology. Also, providers administering vaccines under the VFC program will be 

reimbursed the lesser of the Medicare rates in 2013 or 2014 or the Regional Maximum 

Administration Fee per vaccine. This final rule does not change the statutory requirement in 

section 1928(c)(2)(C) of the Act that a qualified physician administering a vaccine obtained from 

the VFC program is limited under the VFC provider agreement to charging an amount for 
 104 

 

vaccine administration that is no more than the VFC maximum allowable charge. A more 

detailed analysis of the alternatives considered for increased payments for vaccine administration 

under the VFC program is discussed in the response to comments in section II.A.4.c. 

5. Method of Payment 

Section 1902(a)(13)(C) of the Act requires payment in CYs 2013 and 2014 of the current 

Medicare rate, unless the rate set using the CY 2009 CF was higher. Historically, Medicare has 

issued multiple updates to its MPFS within a single year. This rule continues to permit states to 

either adopt the MPFS in effect at the beginning of CYs 2013 and 2014 or the rate using the CY 

2009 CF, if higher, or a methodology to update rates to reflect changes made by Medicare during 

the year. It permits states to either make site of service adjustments or pay at the Medicare office 

rate. It requires states to either make all Medicare locality adjustments or to pay a statewide 

median rate over all counties. A discussion of the alternatives considered and comments 

received can be found in sections II.A.2.a. and c. 

6. VFC Administration Fee Increase 

 We considered a number of options when determining to update the average national 

administration charge portion of the formula used to calculate the VFC administration fee. 

These options included using the Medicare Economic Index (MEI), Consumer Price Index (CPI) 

or the Gross Domestic Product Deflator. We determined the best option is to utilize the MEI, 

which is a price index used by CMS to update Medicare physician payments. The MEI reflects 

input price inflation experienced by physicians inclusive of the time period when the national 

average was established in 1994. Therefore, we believe that input prices associated with this 

specific type of physician-provided service are consistent with overall input prices. 

The economic impact associated with updates to the regional maximum charges for the 

VFC program is estimated at $75 million per year. The federal cost of this total is approximately 
 105 

 

$45 million per year. These estimates assume that every state will increase its reimbursement 

rate to the new VFC maximum fee.

7. Implementation of Payment Provision in Managed Care Delivery System 

 Section 1932(f) of the Act requires the application of the provisions of section 

1902(a)(13) of the Act to managed care organization contracts and payments. The complexity of 

such an application was reviewed in several different areas – the varied scope of primary care 

providers that operate within managed care plans; identifying both the 2009 baseline payments 

for affected primary care services to managed care organizations as well as the amount of 

managed care capitation payments that would be eligible for 100 percent federal match; and the 

documentation that states must collect from managed care plans to verify that the Medicare rate 

is paid to eligible providers in CY 2013 and 2014. 

 The final rule require states to submit to us two methodologies, one for determining the 

2009 baseline and the other for identifying that proportion of managed care capitation rates that 

represents the difference between the 2009 baseline rates and the applicable CY 2013 and 2014 

Medicare rates. Both methodologies must be valid and reasonable and must acknowledge and 

accommodate each state’s current rate-setting framework. . 

Finally, we considered specifying the documentation that states must collect from 

managed care plans to ensure that primary care providers are the beneficiaries of these increased 

payment rates. However, in deference to the wide variation in states’ current oversight and 

reporting mechanisms for MCOs, PIHPs, and PAHPs, the final rule requires states to specify the 

documentation needed from health plans to substantiate that primary care payment increases 

were made to eligible providers by the managed care plan. 

F. Accounting Statement and Table
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As required by OMB’s Circular A-4 (available at 

http://www.whitehouse.gov/omb//circulars_a004_a-4/), in Table 4 we have prepared an 

accounting statement illustrating the classification of the federal and state Medicaid and CHIP 

impacts for the payment increases to primary care providers and VFC, as a result of the 

provisions in the final rule. 

TABLE 4: Accounting Statement: Classification of Estimated Expenditures for 

Federal and State Medicaid and CHIP Impacts for Payment Increases to Primary Care 

Providers and VFC during Calendar Years 2013 through 2014 (Millions of 2012 Dollars) 

Category Transfers 

Annualized 

Monetized 

Transfers 

 Discount Rate Period Covered

 0% 7% 3% 

 Primary 

Estimate ( $5,945 

$5,941 $5,943 

CYs 2013-2014

From/To Federal Government to Medicaid Providers. 

Category Transfers 

Annualized 

Monetized 

Transfers 

 Discount Rate Period Covered

0% 7% 3% 

Primary 

Estimate

-$273 -$271 -$272 

CYs 2013-2014

From/To State Governments to Medicaid Providers. 

In accordance with the provisions of Executive Order 12866, this final regulation was

reviewed by the Office of Management and Budget. 
 107 

 

List of Subjects 

42 CFR Part 438

Grant programs-health, Medicaid, Reporting and recordkeeping requirements. 

42 CFR Part 441

Aged, Family planning, Grant programs-health, Infants and children, Medicaid, 

Penalties, Reporting and recordkeeping requirements. 

42 CFR Part 447 

Accounting, Administrative practice and procedure, Drugs, Grant programs-health, 

Health facilities, Health professions, Medicaid, Reporting and recordkeeping requirements, 

Rural areas.
 108 

 

 For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services 

amends 42 CFR chapter IV as set forth below:

PART 438 — MANAGED CARE 

1. The authority citation for part 438 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

2. Section 438.6 is amended by adding new paragraphs (c)(3)(v) and (c)(5)(vi) to read as 

follows: 

§438.6 Contract requirements. 

* * * * * 

(c) * * * 

(3) * * * 

(v) For rates covering CYs 2013 and 2014, complying with minimum payment for 

physician services under paragraph (c)(5)(vi) of this section, and part 447, subpart G, of this 

chapter. 

* * * * * 

(5) * * * 

(vi) For CYs 2013 and 2014, and payments to an MCO, PIHP or PAHP for primary care 

services furnished to enrollees under part 447, subpart G, of this chapter, the contract must 

require that the MCO, PIHP or PAHP meet the following requirements: 

(A) Make payments to those specified physicians (whether directly or through a 

capitated arrangement) at least equal to the amounts set forth and required under part 447, 

subpart G, of this chapter. 

(B) Provide documentation to the state, sufficient to enable the state and CMS to ensure 

that provider payments increase as required by paragraph (c)(5)(vi)(A) of this section. 
 109 

 

* * * * * 

3. Section 438.804 is added to read as follows: 

§438.804 Primary care provider payment increases. 

(a) For MCO, PIHP or PAHP contracts that cover calendar years 2013 and 2014, FFP is 

available at an enhanced rate of 100 percent for the portion of the expenditures for capitation 

payments made under those contracts to comply with the contractual requirement under 

§438.6(c)(5)(vi) only if the following requirements are met: 

(1) The state must submit to CMS the following methodologies for review and approval. 

(i) The state develops a reasonable methodology, based on rational and documented data 

and assumptions, for identifying the provider payments that would have been made by MCO, 

PIHP or PAHP for specified primary care services furnished as of July 1, 2009. This 

methodology can take into consideration the availability of data, and the costs and burden of 

administering the method, but should produce a reliable and accurate result to the fullest extent 

possible. 

(ii) The state develops a reasonable methodology, based on rational and documented data 

and assumptions, for identifying the differential in payment between the provider payments that 

would have been made by the MCO, PIHP or PAHP on July 1, 2009 and the amount needed to 

comply with the contractual requirement under §438.6(c)(5)(vi). This methodology can take into 

consideration the availability of data, and the costs and burden of administering the method, but 

should produce a reliable and accurate result to the fullest extent possible. 

 (2) The state must submit the methodologies in paragraphs (a)(1)(i) and (ii) of this 

section to CMS for review no later than the end of the first quarter of CY 2013. 

(3) CMS will use the approved methodologies required under this section in the review 

and approval of MCO, PIHP or PAHP contracts and rates consistent with §438.6(a). 
 110 

 

(b) [Reserved] 

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC 

SERVICES 

4. The authority citation of part 441 is revised to read as follows: 

Authority: Secs. 1102, 1902, and 1928 of the Social Security Act (42 U.S.C. 1302). 

5. Subpart L is added to read as follows: 

Subpart L--Vaccines for Children Program 

Sec. 

441.600 Basis and purpose. 

441.605 General requirements. 

441.610 State plan requirements. 

441.615 Administration fee requirements. 

Subpart L--Vaccines for Children Program 

§441.600 Basis and purpose. 

This subpart implements sections 1902(a)(62) and 1928 of the Act by requiring states to 

provide for a program for the purchase and distribution of pediatric vaccines to programregistered providers for the immunization of vaccine-eligible children. 

§441.605 General requirements. 

(a) Federally-purchased vaccines under the VFC Program are made available to children 

who are 18 years of age or younger and who are any of the following: 

(1) Eligible for Medicaid. 

(2) Not insured. 

(3) Not insured with respect to the vaccine and who are administered pediatric vaccines 

by a federally qualified health center (FQHC) or rural health clinic. 
 111 

 

(4) An Indian, as defined in section 4 of the Indian Health Care Improvement Act. 

(b) Under the VFC program, vaccines must be administered by program-registered 

providers. Section 1928(c) of the Act defines a program-registered provider as any health care 

provider that meets the following requirements: 

(1) Is licensed or authorized to administer pediatric vaccines under the law of the state in 

which the administration occurs without regard to whether or not the provider is a Medicaidparticipating provider. 

(2) Submits to the state an executed provider agreement in the form and manner specified 

by the Secretary. 

(3) Has not been found, by the Secretary or the state to have violated the provider 

agreement or other applicable requirements established by the Secretary or the state. 

§441.610 State plan requirements. 

A state plan must provide that the Medicaid agency meets the requirements of this part. 

§441.615 Administration fee requirements. 

(a) Under the VFC Program, a provider who administers a qualified pediatric vaccine to a 

federally vaccine-eligible child, may not impose a charge for the cost of the vaccine. 

(1) A provider can impose a fee for the administration of a qualified pediatric vaccine as 

long as the fee does not exceed the costs of the administration (as determined by the Secretary 

based on actual regional costs for the administration). 

(2) A provider may not deny administration of a qualified pediatric vaccine to a vaccineeligible child due to the inability of the child's parents or legal guardian to pay the administration 

fee. 

(b) The Secretary must publish each State’s regional maximum charge for the VFC 

program, which represents the maximum amount that a provider in a state could charge for the 
 112 

 

administration of qualified pediatric vaccines to federally vaccine-eligible children under the 

VFC program. 

(c) An interim formula has been established for the calculation of a state’s regional 

maximum administration fee. That formula is as follows: National charge data x updated 

geographic adjustment factors (GAFs) = maximum VFC fee. 

(d) The State Medicaid Agency must submit a state plan amendment that identifies the 

amount that the state will pay providers for the administration of a qualified pediatric vaccine to 

a Medicaid-eligible child under the VFC program. The amount identified by the state cannot 

exceed the state’s regional maximum administration fee. 

(e) Physicians participating in the VFC program can charge federally vaccine-eligible 

children who are not enrolled in Medicaid the maximum administration fee (if that fee reflects 

the provider’s cost of administration) regardless of whether the state has established a lower 

administration fee under the Medicaid program. However, there would be no federal Medicaid 

matching funds available for the administration since these children are not eligible for 

Medicaid.

PART 447 – PAYMENTS FOR SERVICES 

6. The authority citation for part 447 continues to read as follows: 

Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302). 

7. Subpart G is added to read as follows: 

Subpart G – Payments for Primary Care Services Furnished by Physicians 

Sec. 

447.400 Primary care services furnished by physicians with a specified specialty or 

subspecialty. 

447.405 Amount of required minimum payments. 
 113 

 

447.410 State plan requirements. 

447.415 Availability of Federal financial participation (FFP). 

Subpart G – Payments for Primary Care Services Furnished by Physicians 

§447.400 Primary care services furnished by physicians with a specified specialty or 

subspecialty. 

(a) States pay for services furnished by a physician as defined in §440.50 of this chapter, 

or under the personal supervision of a physician who self-attests to a specialty designation of 

family medicine, general internal medicine or pediatric medicine or a subspecialty recognized by 

the American Board of Medical Specialties (ABMS), the American Board of Physician 

Specialties (ABPS) or the American Osteopathic Association (AOA). A physician self-attests 

that he/she: 

(1) Is Board certified with such a specialty or subspecialty and/or 

(2) Has furnished evaluation and management services and vaccine administration 

services under codes described in paragraph (b) of this section that equal at least 60 percent of 

the Medicaid codes he or she has billed during the most recently completed CY or, for newly 

eligible physicians, the prior month. 

 (b) At the end of CY 2013 and 2014 the Medicaid agency must review a statistically 

valid sample of physicians who received higher payments to verify that they meet the 

requirements of paragraph (a)(1) or (2) of this section. 

(c) Primary care services designated in the Healthcare Common Procedure Coding 

System (HCPCS) are as follows: 

(1) Evaluation and Management (E&M) codes 99201 through 99499. 

(2) Current Procedural Terminology (CPT) vaccine administration codes 90460, 90461, 

90471, 90472, 90473 and 90474, or their successor codes. 
 114 

 

(d)(1) The state must submit to CMS, in such form and at such time as CMS specifies, 

information relating to participation by physicians described in paragraph (a) of this section and 

the utilization of E&M codes described in paragraph (c) of this section (whether furnished by or 

under the supervision of a physician described in paragraph (a)) of this section for the following 

periods-- 

(i) As of July 1, 2009, and 

(ii) CY 2013 

(2) As soon as practicable after receipt, CMS will post this information on 

www.Medicaid.gov. 

§447.405 Amount of required minimum payments.

(a) For CYs 2013 and 2014, a state must pay for physician services described in 

§447.400 based on: 

(1) The Medicare Part B fee schedule rate that is applicable to the specific site of service 

or, at the state’s option, the office setting and is also adjusted for either the specific geographic 

location of the service or reflects the mean over all counties of the rate for each E&M code. If 

there is no applicable rate, the rate specified in a fee schedule established and announced by 

CMS (that is, the product of multiplying the Medicare CF in effect at the beginning of CYs 2013 

or 2014 (or the CY 2009 CF, if higher) and the CY 2013 and 2014 relative value units (RVUs). 

(2) The provider’s actual billed charge for the service. 

(b) For vaccines provided under the Vaccines for Children Program in CYs 2013 and 

2014, a State must pay the lesser of: 

(1) The Regional Maximum Administration Fee; or, 

(2) The Medicare fee schedule rate in CY 2013 or 2014 (or, if higher, the rate using the 

2009 conversion factor and the 2013 and 2014 RVUs) for code 90460. 
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§447.410 State plan requirements. 

The state must amend its state plan to reflect the increase in fee schedule payments in 

CYs 2013 and 2014 unless, for each of the billing codes eligible for payment, the state currently 

reimburses at least as much as the higher of the CY 2013 and CY 2014 Medicare rate or the rate 

that would be derived using the CY 2009 conversion factor and the CY 2013 and 2014 Medicare 

relative value units (RVUs). The amendment must: 

(a) Identify all eligible codes that the state will reimburse at the Medicare rate in CYs 

2013 and 2014. 

(b) Identify all codes that were not reimbursed under the Medicaid program as of 

July 1, 2009. 

(c) Specify either that the state will make all adjustments applicable to the specific site of 

service or, at the state’s option, the office setting and will also either adjust for the specific 

geographic location of the service or pay rates that reflect the mean over all counties of the rate 

for each E&M code. The state must specify the formula that the state will use to determine the 

mean rate for each E&M code. 

§447.415 Availability of Federal financial participation (FFP) 

(a) For primary care services furnished by physicians specified in §447.400, FFP will be 

available at the rate of 100 percent for the amount by which the payment required to comply with 

§447.405 exceeds the Medicaid payment that would have been made under the approved state 

plan in effect on July 1, 2009. 

(b) For purposes of calculating the payment that would have been made under the 

approved State plan in effect on July 1, 2009, the state must exclude incentive, bonus, and 

performance-based payments but must include supplemental payments for which the approved 

methodology is linked to volume and payment for specific codes. 
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(c) For vaccine administration, the state must impute the payment that would have been 

made for code 90460 under the approved Medicaid state plan. The imputed rate for July 1, 2009, 

for code 90460 equals the payment rates for codes 90465 and 90471 weighted by service 

volume. 

(d) For any payment made under a bundled rate methodology, including bundled rates 

for vaccines and vaccine administration, the amount directly attributable to the applicable 

primary care service must be isolated for purposes of determining the availability of the 

100 percent FFP rate. Bundled rates, for purposes of this provision, do not include encounter 

and per diem rates. 
Authority: (Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance 

Program) 

Dated: September 12, 2012. 

 _____________________________ 

Marilyn Tavenner, 

Acting Administrator, 

Centers for Medicare & Medicaid Services. 

Approved: October 2, 2012. 

 ___________________________________ 

Kathleen Sebelius, 

Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P 

[FR Doc. 2012-26507 Filed 11/01/2012 at 4:15 pm; Publication Date: 11/06/2012]