51148 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 431, 433, 435, and 457 

[CMS–2349–P] 

RIN 0938–AQ62 

Medicaid Program; Eligibility Changes 

Under the Affordable Care Act of 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement provisions of the Patient 

Protection and Affordable Care Act of 

2010 and the Health Care and Education 

Reconciliation Act of 2010 (collectively 

referred to as the Affordable Care Act). 

The Affordable Care Act expands access 

to health insurance through 

improvements in Medicaid, the 

establishment of Affordable Insurance 

Exchanges (‘‘Exchanges’’), and 

coordination between Medicaid, the 

Children’s Health Insurance Program 

(CHIP), and Exchanges. This proposed 

rule would implement sections of the 

Affordable Care Act related to Medicaid 

and CHIP eligibility, enrollment 

simplification, and coordination. 

In addition, this proposed rule also 

sets out the increased Federal Medical 

Assistance Percentage (FMAP) rates and 

the related conditions and requirements 

that will be available for State medical 

assistance expenditures relating to 

‘‘newly eligible’’ individuals and certain 

medical assistance expenditures in 

‘‘expansion States’’ beginning January 1, 

2014, including a proposal of three 

alternative methodologies to use for 

purposes of applying the appropriate 

FMAP for expenditures in accordance 

with section 2001 of the Affordable Care 

Act. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on October 31, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–2349–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2349–P, P.O. Box 8016, Baltimore, 

MD 21244–8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2349–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Sarah Delone, (410) 786–0615. 

Stephanie Kaminsky, (410) 786–4653. 

SUPPLEMENTARY INFORMATION: A detailed 

Preliminary Regulatory Impact Analysis 

associated with this proposed rule is 

available at http://www.cms.gov/ 

MedicaidEligibility/downloads/CMS2349-P-Preliminary

RegulatoryImpactAnalysis.pdf. A 

summary of the aforementioned analysis 

is included as part of this proposed rule. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 

8:30 a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Background 

A. Introduction 

B. Legislative Overview 

C. Overview of the Proposed Rule 

II. Provisions of the Proposed Rule 

A. Changes to Medicaid Eligibility 

1. Coverage for Individuals Age 19 or Older 

and Under Age 65 at or Below 133 

Percent FPL (§ 435.119) 

2. Individuals Above 133 Percent FPL 

(§ 435.218) 

3. Amendments to Part 435, Subparts A 

Through D 

a. Eligibility for Parents and Other 

Caretaker Relatives, Pregnant Women, 

and Children 

(1) Parents and Other Caretaker Relatives 

(§ 435.110) 

(2) Pregnant Women (§ 435.116) 

(3) Infants and Children Under Age 19 

(§ 435.118) 

b. Other Conforming Changes to Existing 

Regulations 

B. Financial Methodologies for 

Determining Medicaid Eligibility Based 

on MAGI Under the Affordable Care Act 

1. Point-in-Time Measurement of Income 

(Budget Periods) (§ 435.603(h)) 

2. Changes to Medicaid Financial Methods 

3. Provisions of Proposed Rule 

Implementing MAGI Methods 

a. Proposed Methods for Counting Income 

Based on MAGI (§ 435.603(e)) 

b. Proposed Rules for Determining 

Household Composition Under MAGI 

Based Methods (§ 435.603(f)) 

(1) Household Composition for Tax Filers 

(§ 435.603(f)(1)) and Their Tax 

Dependents (§ 435.603(f)(2)) 

(2) Household Composition for Non-Filers 

(§ 435.603(f)(3)) 

(3) Retention of Existing Financial Methods 

(§ 435.603(i)) 

C. Residency for Medicaid Eligibility 

Defined 


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1. Residency Definition for Adults (Age 21 

and Over) § 435.403(h)) 

2. Residency Definition for Children 

(Under Age 21) (§ 435.403(i)) 

D. Application and Enrollment Procedures 

for Medicaid 

1. Availability of Program Information 

(§ 435.905) 

2. Applications (§ 435.907) 

3. Assistance With Application and 

Redetermination (§ 435.908) 

E. MAGI Screen (§ 435.911) 

F. Coverage Month 

G. Verification of Income and Other 

Eligibility Criteria (§ 435.940 Through 

§ 435.956) 

1. Basis, Scope, and General Requirements 

(§ 435.940 and § 435.945) 

2. Verification of Financial Eligibility 

(§ 435.948) 

3. Verification of Information From Federal 

Agencies (§ 435.949) 

4. Use of Information and Request for 

Additional Information (§ 435.952) 

5. Verification of Other Non-Financial 

Information (§ 435.956) 

H. Periodic Redetermination of Medicaid 

Eligibility (§ 435.916) 

I. Coordination of Eligibility and 

Enrollment Among Insurance 

Affordability Programs—Medicaid 

Agency Responsibilities (§ 435.1200) 

1. Basic Responsibilities (§ 435.1200(c)) 

2. Internet Web Site (§ 435.1200(d)) 

3. Provision of Medical Assistance for 

Individuals Found Eligible for Medicaid 

by an Exchange (§ 435.1200(e)) 

4. Transfer of Applications From Other 

Insurance Affordability Programs to the 

State Medicaid Agency (§ 435.1200(f)) 

5. Evaluation of Eligibility for Other 

Insurance Affordability Programs 

(§ 435.1200(g)) 

J. Single State Agency (§ 431.10 and 

§ 431.11) 

K. Provisions of Proposed Regulation 

Implementing Application of MAGI to 

CHIP 

1. Definitions and Use of Terms (§ 457.10 

and § 457.301) 

2. State Plan Provisions (§ 457.305) 

3. Application of MAGI and Household 

Definition (§ 457.315) 

4. Other Eligibility Standards (§ 457.320) 

5. Clarifications Related to MAGI 

L. Residency for CHIP Eligibility 

(§ 457.320) 

M. CHIP Coordinated Eligibility and 

Enrollment Process 

1. Applications and Outreach Standards 

(§ 457.330, § 457.334, § 457.335 and 

§ 457.340) 

2. Determination of CHIP Eligibility and 

Coordination With Exchange and 

Medicaid (§ 457.348 and § 457.350) 

3. Periodic Redetermination of CHIP 

Eligibility (§ 457.343) and Coverage 

Months 

4. Verification of Eligibility (§ 457.380) 

5. Ministerial Changes (§ 457.80, § 457.300, 

§ 457.301, § 457.305, and § 457.353) 

N. Federal Medical Assistance Percentage 

(FMAP) for Newly Eligible Individuals 

and for Expansion States 

1. Availability of FMAP (§ 433.10(c)) 

a. Newly Eligible FMAP (§ 433.10(c)(6)) 

b. Expansion State FMAP (§ 433.10(c)(7) 

and § 433.10(c)(8)) 

(1) 2.2 Percentage Points Increase in FMAP 

(§ 433.10(c)(7)) 

(2) Expansion State FMAP (§ 433.10(c)(8)) 

2. Methodology (§ 433.206(a) and 

§ 433.206(b)) 

3. Alternative 1: 2009 Eligibility Standard 

Threshold 

4. Alternative 2: Statistically Valid 

Sampling Methodology (§ 433.210) 

5. Alternative 3: Use of a FMAP 

Methodology Based on Reliable Data 

Sources (§ 433.212) 

6. Additional Methodology Approaches 

III. Collection of Information Requirements 

IV. Response to Comments 

V. Summary of Preliminary Regulatory 

Impact Analysis 

Regulations Text 

Acronyms 

Because of the many organizations 

and terms to which we refer by acronym 

in this proposed rule, we are listing 

these acronyms and their corresponding 

terms in alphabetical order below: 

Act Social Security Act 

AFDC Aid to Families with Dependent 

Children 

BBA Balanced Budget Act of 1997 

CHIP Children’s Health Insurance Program 

CMS Centers for Medicare & Medicaid 

Services 

DHS Department of Homeland Security 

EITC Earned Income Tax Credit 

EPSDT Early and periodic screening, 

diagnosis, and treatment 

FFP Federal financial participation 

FMAP Federal medical assistance 

percentage 

FPL Federal poverty level 

HCERA Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted March 30, 2010) 

HHS [U.S.] Department of] Health and 

Human Services 

IRA Individual Retirement Account 

IRC Internal Revenue Code of 1986 

IRS Internal Revenue Service 

LEP Limited English Proficient 

MAGI Modified adjusted gross income 

MSA Medical Savings Account 

PRWORA Personal Responsibility and 

Work Opportunity Reconciliation Act of 

1996 

QI Qualifying Individuals 

QMB Qualified Medicare Beneficiaries 

SHO State Health Official 

SLMB Specified Low-Income Medicare 

Beneficiaries 

SMD State Medicaid Director 

SNAP Supplemental Nutrition Assistance 

Program 

SPA State Plan Amendment 

SSA Social Security Administration 

SSI Supplemental Security Income 

SSN Social Security number 

TANF Temporary Assistance for Needy 

Families 

I. Background 

A. Introduction 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148, enacted on 

March 23, 2010), was amended by the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted on March 30, 2010), and 

together these laws are referred to as the 

Affordable Care Act. In addition, section 

205 of the Medicare & Medicaid 

Extenders Act of 2010 (Pub. L. 111–309, 

enacted December 15, 2010) made 

technical corrections to the Social 

Security Act (the Act) to implement the 

Affordable Care Act. This proposed rule 

addresses changes to Medicaid and 

CHIP eligibility in the Affordable Care 

Act. 

Prior to the implementation of the 

Affordable Care Act in 2014, individuals 

who fall into certain ‘‘categories’’ or 

‘‘categorical groups’’ are eligible for 

Medicaid, including low-income 

children, pregnant women, parents and 

other caretaker relatives, seniors, and 

people with disabilities. Federal 

minimum income eligibility standards 

vary by category. All States currently 

cover pregnant women and children 

under age 6 at or below 133 percent of 

the Federal poverty level (FPL) (in some 

States the minimum eligibility level is 

185 percent FPL for pregnant women 

and children under one), and children 

age 6 through age 18 with family 

incomes at or below 100 percent of the 

FPL, though many States have 

implemented higher standards for 

pregnant women and children. The 

Federally specified minimum eligibility 

levels for parents, people with 

disabilities and the elderly are 

significantly lower, although States have 

the option to expand coverage to people 

within these categories at higher income 

levels. Prior to the Affordable Care Act, 

States could not cover non-disabled, 

non-elderly adults who do not have 

dependent children, regardless of their 

income level, except through a 

Medicaid demonstration under Section 

1115 of the Act. As a result of the 

varying Federal minimum standards 

and State options, eligibility for 

Medicaid is complicated and significant 

gaps continue to exist even among the 

lowest income Americans. 

The Affordable Care Act extends and 

simplifies Medicaid eligibility. Starting 

in calendar year (CY) 2014, it replaces 

the complex categorical groupings and 

limitations to provide Medicaid 

eligibility to all individuals under age 

65 with income at or below 133 percent 

FPL, provided that the individual meets 

certain non-financial eligibility criteria, 

such as citizenship or satisfactory 

immigration status. Children and, in 

some States, pregnant women will be 

eligible at income levels equal to or 

higher than the 133 percent level, 

depending on existing State-established 


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51150 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

income eligibility standards. In 

addition, States will have a new option 

to expand eligibility beyond the new 

simplified Federal minimums. 

In addition, starting January 1, 2014, 

eligibility for Medicaid for most 

individuals, as well as for CHIP, will be 

determined using methodologies that 

are based on modified adjusted gross 

income (MAGI), as defined in the 

Internal Revenue Code of 1986 (IRC). 

Per the Affordable Care Act, eligibility 

for advance payments of premium tax 

credits for the purchase of private 

coverage through the Exchange will use 

MAGI as it is defined in the IRC to 

determine eligibility as well. Medicaid, 

CHIP and the Exchanges will use 

common income methodologies and 

will align the rules and methodologies 

used to evaluate eligibility for most 

individuals under all three programs. 

The alignment of the methods for 

determining eligibility is one part of an 

overall system established by the 

Affordable Care Act that allows for realtime eligibility determinations of most 

applicants and allows for prompt 

enrollment of individuals in the 

‘‘insurance affordability program’’ for 

which they qualify. In this proposed 

rule, insurance affordability programs 

include Medicaid, CHIP, advance 

payments of premium tax credits and 

cost-sharing reductions through the 

Exchange, and any State-established 

Basic Health Program, if applicable. 

Individuals will not have to apply to 

multiple programs nor will they be sent 

from one program to another if they 

initially apply to a program for which 

they are not ultimately eligible. To 

achieve coordination, this proposed rule 

for Medicaid and CHIP eligibility is 

aligned with the applicable provisions 

in the proposed rule establishing the 

Exchanges published in the July 15, 

2011 Federal Register (76 FR 41866) 

(‘‘Patient Protection and Affordable Care 

Act; Establishment of Exchanges and 

Qualified Health Plans’’), as well as in 

the accompanying proposed rule 

published elsewhere in this Federal 

Register implementing the Affordable 

Care Act provisions related to the 

eligibility for advance payments of 

premium tax credits and cost-sharing 

reductions and enrollment in a qualified 

health plan through the Exchanges 

(referred to hereinafter as the ‘‘Exchange 

proposed rule’’) as well as the proposed 

rule developed by the Department of the 

Treasury regarding the health insurance 

premium assistance tax credit (‘‘the 

Treasury proposed rule’’), also 

published elsewhere in this Federal 

Register. 

Section 2001 of the Affordable Care 

Act ensures that States will receive an 

increased FMAP for all newly eligible 

individuals, defined as those who 

would not have been eligible in the 

State in December 2009. The FMAP for 

these newly eligible individuals will be 

100 percent for Calendar Year (CY) 

2014—2016, gradually declining to 90 

percent in 2020 where it remains 

indefinitely. In addition, some States 

that had expanded coverage to adults 

(parents and adults without children) 

prior to December 2009, referred to as 

‘‘expansion States,’’ shall also receive an 

increased FMAP that begins in 2014 

between the regular FMAP and the 

FMAP for newly eligible individuals 

and equalizing with the newly eligible 

FMAP in 2019 and beyond. The 

proposed rule sets forth the definitions 

of newly eligible individuals and 

expansion States as well as the 

applicable FMAPs beginning in 2014. 

While the new FMAPs provide 

significant new federal financial support 

for States, they could cause States 

significant burden to administer if 

States had to evaluate all applicants 

under the new simplified rules for 

purposes of determining eligibility and 

under their otherwise obsolete 

December 2009 eligibility rules for 

purposes of determining the appropriate 

FMAP. A dual system would be 

inefficient and likely lead to 

inaccuracies. To promote States’ ability 

to operate efficient and effective 

processes, this rule proposes three 

alternative approaches for determining 

the applicable FMAP. Based on the 

comments received through this 

proposed rule and the results of an 

upcoming CMS/HHS feasibility study, 

we expect to modify, narrow or combine 

the approaches available to States in the 

final rule. By establishing an alternative 

methodology or methodologies for use 

in the FMAP determination by a State, 

the proposed rule aims to ensure that it 

will not be necessary for a State to make 

an eligibility determination for every 

individual using two separate eligibility 

systems and thereby advancing efficient 

and effective operations for States, 

individuals, and the Federal 

government. 

Starting in 2014, individuals and 

small businesses will be able to 

purchase private health insurance 

through State-based competitive 

marketplaces called Affordable 

Insurance Exchanges. Exchanges will 

offer Americans competition, choice, 

and clout. Insurance companies will 

compete for business on a level playing 

field, driving down costs. Consumers 

will have a choice of health plans to fit 

their needs. And Exchanges will give 

individuals and small businesses the 

same purchasing clout as big businesses. 

The Departments of Health and Human 

Services, Labor, and the Treasury (the 

Departments) are issuing regulations 

implementing Exchanges in several 

phases. The first in this series was a 

Request for Comment relating to 

Exchanges, published in the August 3, 

2010 Federal Register (75 FR 45584). 

Second, Initial Guidance to States on 

Exchanges was published issued on 

November 18, 2010. Third, a proposed 

rule for the application, review, and 

reporting process for waivers for State 

innovation was published in the March 

14, 2011 Federal Register (76 FR 

13553). Fourth, two proposed 

regulations were published in the 

Federal Register on July 15, 2011 (76 FR 

41866 and 76 FR 41930) to implement 

components of the Exchange and health 

insurance premium stabilization 

policies in the Affordable Care Act. 

Fifth, a proposed regulation for the 

establishment of the Consumer 

Operated and Oriented Plan (CO–OP) 

Program under section 1322 of the 

Affordable Care Act was published in 

the Federal Register on July 20, 2011 

(76 FR 43237). Sixth, three proposed 

rules, including this one, are being 

published in the Federal Register on 

August 17, 2011 to provide guidance on 

the eligibility determination process 

related to enrollment in a qualified 

health plan, advance payments of the 

premium tax credit, cost-sharing 

reductions, Medicaid, and the 

Children’s Health Insurance Program 

(CHIP). 

B. Legislative Overview 

This proposed rule implements the 

Medicaid and CHIP eligibility and 

enrollment provisions of the Affordable 

Care Act including: 

• Section 1413, which directs the 

Secretary of HHS (the ‘‘Secretary’’) to 

establish a streamlined system for 

individuals to apply for and be enrolled 

in an insurance affordability program if 

eligible. 

• Section 1414, which directs the 

Secretary of Treasury, upon written 

request, to provide the Secretary with 

certain tax return information used in 

determining an individual’s eligibility 

for all insurance affordability programs. 

• Section 2001, which sets out the 

Medicaid eligibility changes and new 

optional coverage effective in CY 2014. 

• Section 2002, which references the 

determination of financial eligibility for 

Medicaid for certain populations. 

• Section 2101, which implements 

new eligibility standards for CHIP. 

• Section 2201, which simplifies and 

coordinates eligibility and enrollment 

system between all insurance 

affordability programs. 


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Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51151 

• Section 2001(a)(3), which added a 

new section 1905(y) of the Act, which 

provides for a significant increase in the 

FMAP for medical assistance 

expenditures for individuals determined 

eligible under the adult group in the 

State and who are considered to be 

‘‘newly eligible’’, as defined in section 

1905(y)(2)(A) of the Act. 

• Section 10201(c)(4), which added a 

new section 1905(z) to the Act. As 

discussed in section N of this rule, 

Section 1905(z) of the Act contains two 

provisions, which make available 

additional FMAP rates for the expansion 

States. 

In this rule, ‘‘CHIP’’ refers to a 

separate child health program operated 

by a State under title XXI and the 

regulations governing such programs at 

42 CFR part 457. 

C. Overview of the Proposed Rule 

The proposed amendments to 42 CFR 

parts 431, 435, and 457 in this rule 

propose the Federal policies and 

guidelines necessary to facilitate the 

creation of the eligibility and enrollment 

system established by the Affordable 

Care Act. Amendments to 42 CFR part 

435 subparts B and C are proposed to 

implement the statutory changes to 

Medicaid eligibility. We propose 

amendments to subpart A to add new or 

revised definitions. 

Amendments to 42 CFR part 435 

subpart G propose that, for most 

individuals, financial eligibility for 

Medicaid will be based on MAGI, to 

define the new MAGI-based financial 

methodologies, and to identify those 

individuals whose eligibility will not be 

based on MAGI. 

Proposed amendments to subpart J 

and the addition of a new subpart M 

provide Federal rules to promote the 

establishment by States of a seamless 

and coordinated system to determine 

eligibility of individuals seeking 

assistance and to enroll them in the 

appropriate insurance affordability 

program. We propose a new subpart M 

to delineate the responsibilities of the 

State Medicaid agency in the 

coordinated system of eligibility and 

enrollment established under the 

Affordable Care Act, and propose 

comparable amendments for CHIP at 42 

CFR part 457. 

We propose to amend 42 CFR part 433 

to add new provisions at § 433.10(c) to 

indicate the increases to the FMAPs as 

available to States under the Affordable 

Care Act. A number of provisions in the 

Affordable Care Act are not included in 

this proposed rule, but either have been 

or will be addressed in separate 

rulemaking or other guidance. In the 

April 19, 2011 Federal Register, we 

published the Federal Funding for 

Medicaid Eligibility Determination and 

Enrollment Activities final rule (76 FR 

21950) that provides details on 

enhanced Federal funding for Medicaid 

eligibility systems. 

We also intend to issue additional 

proposed rules on related matters such 

as appeals, notices, presumptive 

eligibility, eligibility for former foster 

care children, deletion of existing 

regulations that have been rendered 

obsolete, and eligibility policy in the 

territories. In addition, we intend to 

release a Request for Information (RFI) 

related to State conversion of current 

income standards to MAGI-equivalent 

standards per section 2002 of the 

Affordable Care Act as well as a RFI 

related to the State flexibility to 

establish basic health programs for lowincome individuals not eligible for 

Medicaid under section 1331 of the 

Affordable Care Act. 

II. Provisions of the Proposed Rule 

The following descriptions are 

structured to explain the provisions 

being proposed and do not necessarily 

follow the order of the regulation’s text. 

A. Changes to Medicaid Eligibility 

1. Coverage for Individuals Age 19 or 

Older and Under Age 65 at or Below 133 

Percent FPL (§ 435.119) 

Section 2001(a) of the Affordable Care 

Act adds a new section 

1902(a)(10)(A)(i)(VIII) of the Act 

(referred to as ‘‘the adult group’’), under 

which States will provide Medicaid 

coverage starting in CY 2014 to 

individuals under age 65 who are not 

otherwise mandatorily eligible for 

Medicaid under sections 

1902(a)(10)(A)(i)(I) through (VII) or (IX) 

of the Act and have household income, 

based on the new MAGI methods 

described in section II.B of this 

proposed rule, at or below 133 percent 

FPL. Although the Act specifies that this 

new group is for individuals under age 

65, individuals under age 19 are not 

included because such individuals with 

household income at or below 133 

percent FPL are covered in the 

eligibility groups under sections 

1902(a)(10)(A)(i)(IV), (VI), and (VII) of 

the Act. 

We propose to replace the current 

§ 435.119 (which addresses obsolete 

provisions for eligibility of qualified 

family members under section 

1902(a)(10)(A)(i)(V) of the Act for which 

the statutory authority ended on 

September 30, 1998), to establish this 

new eligibility group. 

Proposed § 435.119(a) and (b) set forth 

the policy, explained above. Reflected 

in proposed paragraph (b), financial 

eligibility for the adult group will be 

based on MAGI, as defined in section 

1902(e)(14) of the Act and implemented 

at proposed § 435.603; there is no 

resource test. 

Section 1902(a)(10)(A)(i)(VIII) of the 

Act specifies that individuals may be 

eligible for the adult group if they ‘‘are 

not described in a previous subclause 

of’’ section 1902(a)(10)(A)(i) of the Act. 

Under these proposed rules, an 

individual is not eligible under the new 

adult group if the individual is 

otherwise eligible under section 

1902(a)(10)(A)(i) of the Act and 42 CFR 

435 subpart B, but may be eligible for 

the adult group if the individual is 

described in but not eligible for 

Medicaid under another mandatory 

group. This will mean that an 

individual who is a recipient of 

Supplemental Security Income (SSI) 

benefits, and so potentially eligible 

under section 1902(a)(10)(A)(i)(II) of the 

Act, may be eligible for coverage under 

the adult group in a State that has 

elected in accordance with section 

1902(f) of the Act and § 435.121 to use 

more restrictive eligibility criteria for 

Medicaid than SSI. 

The new adult group will include 

parents as well as adults not living with 

children. It will also include individuals 

currently eligible under an optional 

coverage group (such as, for individuals 

with disabilities) who have household 

income, based on the new MAGI 

methods, at or below 133 percent of the 

FPL and otherwise meet the criteria for 

coverage under the new group. At 

proposed § 435.119(c), we codify section 

1902(k)(3) of the Act, which permits 

coverage of parents and other caretaker 

relatives under the new adult group 

only if their children under age 19 (or 

higher if the State has elected to cover 

children under age 20 or 21 under 

§ 435.222) are enrolled in Medicaid or 

‘‘other health insurance coverage.’’ In 

paragraph (c)(1), we propose to define 

‘‘other health insurance coverage’’ to 

mean minimum essential coverage, as 

defined in § 435.4 of this proposed rule. 

2. Individuals Above 133 Percent FPL 

(§ 435.218) 

Section 2001(e) of the Affordable Care 

Act adds a new section 

1902(a)(10)(A)(ii)(XX) of the Act, giving 

States the option starting in CY 2014 to 

provide Medicaid coverage to 

individuals under age 65 (including 

pregnant women and children) with 

income above 133 percent FPL. This 

new eligibility group provides a 

simplified mechanism for States to 

cover individuals whose income 

exceeds the State’s income standard for 


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51152 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

mandatory coverage (for example, 133 

percent FPL for the adult group). This 

option is an alternative to the use of 

income disregards under section 

1902(r)(2) or 1931(b)(2)(C) of the Act, 

which have been used in the past to 

expand eligibility, but which will no 

longer be available starting in 2014. 

We propose to add a new § 435.218 

establishing this optional eligibility 

group, which covers individuals who 

are under 65 years old; are not eligible 

for and enrolled in an eligibility group 

under section 1902(a)(10)(A)(i) of the 

Act and 42 CFR 435 subpart B or under 

section 1902(a)(10)(A)(ii) of the Act and 

42 CFR part 435 subpart C; and have 

household income based on MAGI that 

exceeds 133 percent of the FPL but does 

not exceed the optional income 

standard established by the State. The 

basis and basic eligibility criteria for 

this group are set forth in proposed 

§ 435.218(a) and (b)(1). 

Section 1902(a)(10)(A)(ii)(XX) of the 

Act specifies that individuals may be 

eligible under this category if they ‘‘are 

not described in or enrolled under a 

previous subclause of’’ section 

1902(a)(10)(A)(ii) of the Act. We 

interpret the language ‘‘described in or 

enrolled under’’ to mean eligible for 

another optional or mandatory group 

under section 1902(a)(10)(A) of the Act, 

and we propose at § 435.218(b)(1)(ii) 

and (iii) that this limitation applies only 

if the individual is eligible for or 

enrolled under another eligibility group 

that is covered by the State. 

To ease administrative burden on 

States and to make it easier for States to 

enroll eligible individuals under the 

simplest eligibility category, we also 

propose in § 435.218(b)(1)(ii) and (iii) 

that an individual who meets the 

eligibility criteria at § 435.218(b)(1)(i) 

and (iv) would be determined eligible 

under this group, unless the individual 

can be determined eligible under 

another eligibility group based on 

information available to the State from 

the application. A State is not required 

to make determinations regarding 

eligibility factors such as disability, 

level of care, or resources first in order 

to decide whether an individual would 

be eligible for another eligibility group, 

unless such determination can be made 

based only on the information provided 

on the application. However, as an 

exception to this, if an individual 

appears to be eligible as ‘‘medically 

needy’’ based on information provided, 

he or she could still be enrolled in this 

optional group. States would still have 

to determine eligibility under all 

possible categories if the individual is 

not eligible under this new optional 

group. 

Section 1902(a)(10)(A)(ii)(XX) of the 

Act provides that, to be eligible under 

this optional group, an individual’s 

income must ‘‘not exceed the highest 

income eligibility level established 

under the State plan or under a waiver 

of the plan[.]’’ We are interpreting the 

statute to give States flexibility in 

establishing the income standard for 

this group, provided such standard 

exceeds 133 percent FPL and is 

approved in the State plan. 

Section 1902(hh)(1) of the Act 

provides that States ‘‘may elect to 

phase-in’’ coverage for this optional 

group ‘‘based on the categorical group 

(including non-pregnant childless 

adults) or income, so long as the State 

does not extend such eligibility to 

individuals * * * with higher income 

before making individuals * * * with 

lower income eligible for medical 

assistance.’’ We propose that if a State 

wants to phase in coverage for this 

group, it submit a plan for Secretarial 

approval. 

Children are included in this new 

optional group for individuals above 

133 percent FPL if they are not already 

eligible for Medicaid. Therefore, if a 

State covers children above 133 percent 

FPL under a separate CHIP and adopts 

coverage under this new optional group, 

the State ultimately must shift coverage 

of children with income at or below the 

income standard from CHIP to Medicaid 

under this group. The State would still 

be able to claim enhanced FMAP under 

title XXI for such children. 

Section 1902(hh)(2) of the Act limits 

eligibility of parents and other caretaker 

relatives under the new optional group 

to individuals whose children have 

coverage in the same manner as 

eligibility is limited for parents and 

caretaker relatives under the new adult 

group per section 1902(k)(3) of the Act. 

At § 435.218(b)(2)(ii), we propose to 

implement this provision in the same 

manner as proposed for the new adult 

group at § 435.119(c). 

3. Amendments to Part 435, Subparts A 

Through D 

Determining Medicaid eligibility prior 

to the Affordable Care Act changes in 

CY 2014 is complicated due to a 

patchwork of multiple mandatory and 

optional eligibility groups for different 

‘‘categorical populations.’’ Many States 

cover 50, 60, or more distinct eligibility 

groups. Financial eligibility is 

determined using methodologies based 

on other programs, such as the SSI and 

the former AFDC programs, adding 

further complexity to the eligibility 

determination process. In this rule, 

consistent with the Affordable Care Act 

policies, we propose to streamline and 

simplify current regulations governing 

Medicaid eligibility for children, 

pregnant women, parents, and other 

caretaker relatives whose financial 

eligibility, beginning in CY 2014, will be 

based on MAGI. 

In response to the President’s request, 

outlined in Executive Order 13563, that 

agencies streamline and simplify 

Federal regulations, we propose to use 

the authority of section 1902(a)(19) of 

the Act, which provides ‘‘that eligibility 

* * * be determined * * * in a manner 

consistent with simplicity of 

administration and the best interests of 

recipients,’’ to simplify and consolidate 

certain existing mandatory and optional 

eligibility groups into three categories 

starting in CY 2014, to complement the 

new adult group: (1) Parents and 

caretaker relatives (new § 435.110); (2) 

pregnant women (new § 435.116); and 

(3) children (new § 435.118). 

As illustrated in Table 1, we are 

proposing to collapse existing Medicaid 

eligibility categories, with the goal of 

making the program significantly easier 

for States to administer and for the 

public to understand. In subsequent 

rulemaking, we will provide additional 

guidance on existing regulatory 

provisions that are effectively subsumed 

under the provisions contained in these 

proposed rules or have been rendered 

obsolete for other reasons. In proposing 

a simplified approach to eligibility for 

populations whose eligibility will be 

based on MAGI, it is our intent that 

eligibility for coverage will not change 

for any of the populations as a result of 

this proposal. We solicit comments on 

the implications of these proposed rules 

for individuals as well as States. Table 

1 shows how the mandatory and 

optional groups in current regulations 

(the column on the left) are moved into 

the new broader groups (parents, 

pregnant women, and children) under 

this proposed rule. 


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TABLE 1 

Social Security Act and Pre-ACA Regulations 

Medicaid Proposed Rule 

Parents/caretaker 

relatives (§ 435.110) 

Pregnant 

women 

(§ 435.116) 

Children 

< 19 

(§ 435.118) 

Mandatory Medicaid Eligibility Groups 

Low-income families—1902(a)(10)(A)(i)(I) and 1931 AFDC recipients—§ 435.110 ........ X X X 

Qualified Pregnant Women & Children < 19—1902(a)(10)(A)(i)(III)—§ 435.116 ............. .......................................... X X 

Poverty-level related pregnant women & infants—1902(a)(10)(A)(i)(IV)—No rule .......... .......................................... X X 

Poverty-level related children 1–5—1902(a)(10)(A)(i)(VI)—No rule ................................ .......................................... .................... X 

Poverty-level related children 6–18—1902(a)(10)(A)(i)(VII)—No rule ............................. .......................................... .................... X 

Optional Medicaid Eligibility Groups 

Families & children financially eligible for AFDC—1902(a)(10)(A)(ii)(I)—§ 435.210 ....... Keeps 435.210 for parents/caretaker relatives.X X 

Families & children who would be eligible for AFDC if not institutionalized— 

1902(a)(10)(A)(ii)(IV)—§ 435.211.

.......................................... X X 

Poverty-level related pregnant women & infants—1902(a)(10)(A)(ii)(IX)—No rule ......... .......................................... X X 

a. Eligibility for Parents and Other 

Caretaker Relatives, Pregnant Women, 

and Children 

(1) Parents and Other Caretaker 

Relatives (§ 435.110) 

We propose to delete in its entirety 

§ 435.110 for individuals receiving 

AFDC and to replace it with a new 

§ 435.110 for existing eligibility that is 

continuing under sections 

1902(a)(10)(A)(i)(I) and 1931(b) and (d) 

of the Act for parents and other 

caretaker relatives of dependent 

children (including pregnant women 

who are parents or caretaker relatives). 

These statutory provisions remain and 

are not superseded by the provisions of 

the Affordable Care Act establishing a 

new adult group for individuals not 

otherwise eligible under section 

1902(a)(10)(A)(i) of the Act. While the 

parent/caretaker relative category 

continues to apply, our proposed rules 

simplify this category considerably and 

provides States flexibility to set their 

income eligibility standard under this 

category within allowable Federal 

parameters. 

Under the proposed rule, each State 

will establish an income standard in its 

State plan for coverage of parents and 

other caretaker relatives under 

§ 435.110. The Federal minimum and 

maximum income standards for this 

group are set forth in sections 

1931(b)(2)(A) and 1931(b)(2)(B) of the 

Act. The minimum income standard for 

the new parent/caretaker relative group 

is a State’s AFDC income standards for 

a household of the applicable family 

size in effect as of May 1, 1988. The 

maximum income standard would be 

established as set forth below. The 

maximum income standard for the 

parent and other caretaker relative 

eligibility group would be the higher of: 

• The State’s effective income level 

(including any disregard of a block of 

income) for section 1931 families under 

the State plan or waiver of such plan as 

of March 23, 2010 or December 31, 

2013, if higher, converted to a MAGIequivalent income standard in 

accordance with guidance to be issued 

by the Secretary under section 

1902(e)(14)(A) and (E) of the Act (The 

conversion of current income standards 

to a MAGI-equivalent standard is 

discussed in section II.B.3.a of this 

proposed rule.); and 

• The State’s AFDC income standard 

in effect as of July 16, 1996, increased 

by no more than the percentage increase 

in the Consumer Price Index for all 

urban consumers since such date. 

If a State’s income standard for the 

parent/caretaker relative group is below 

133 percent FPL, parents and other 

caretaker relatives with income above 

that income standard and at or below 

133 percent FPL would qualify for 

Medicaid under the new adult group. 

The conversion of current income 

standards to a MAGI-equivalent 

standard is discussed in section II.B.3.a 

of this proposed rule. 

States currently have the option to 

cover parents and other caretaker 

relatives at income levels above the 

standard for families under section 1931 

of that Act. They can do so under the 

authority at section 1902(a)(10)(A)(ii)(I) 

of the Act and § 435.210 of the existing 

regulations. This option will continue 

under the Affordable Care Act for 

coverage of parents and other caretaker 

relatives who are not eligible for 

mandatory Medicaid coverage under 

§ 435.110 or the new adult group at 

proposed § 435.119. We note that 

parents and other caretaker relatives 

who are Medicare-eligible or elderly 

may be covered under § 435.110 and 

§ 435.210, even though they are 

excluded from coverage under the adult 

group at § 435.119. 

We are also proposing to simplify the 

income methods for determining 

eligibility under the new parent and 

other caretaker relative group. PreAffordable Care Act, section 1931 of the 

Act requires a two-step process in 

determining income eligibility: (1) The 

family must have gross income at or 

below 185 percent of the State’s 

consolidated standard of need under its 

AFDC program, in effect as of July 16, 

1996; and (2) the family’s net countable 

income after subtracting various income 

exclusions and disregards and expenses 

must be at or below the State’s AFDC 

payment standard or a higher income 

standard established by the State under 

section 1931 of the Act. Because each 

State’s net countable income standard 

converted to a MAGI-equivalent income 

standard will be lower than its current 

gross income standard, we propose to 

eliminate the 185 percent gross income 

test as unnecessary and, to simplify 

eligibility, base income eligibility in 

proposed § 435.110 only on the second 

prong of the income test, that is, the net 

countable income standard converted to 

a MAGI-equivalent income standard. 

Consistent with section 1931 of the 

Act, we propose Medicaid definitions of 

‘‘caretaker relative’’ and ‘‘dependent 

child’’ at § 435.4. A caretaker relative is 

defined as a parent or other relative 

(related by blood, adoption, or marriage) 

living with a dependent child for whom 

such individual is assuming primary 

responsibility. Per section 1931 of the 


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51154 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

Act, to be ‘‘dependent,’’ the child must 

be ‘‘deprived’’ of at least one parent’s 

support by reason of death, absence, or 

unemployment. Under the statute, a 

parent is considered to be unemployed 

if he or she is working less than 100 

hours per month. However, we propose 

to codify in this rule the flexibility given 

States in a final rule amending 45 CFR 

233.101 (63 FR 42270) and in a State 

Medicaid Director letter dated 

September 22, 1997 to eliminate the 

‘‘deprivation’’ requirement altogether 

(which most States have done) or to 

establish a higher number of working 

hours as the threshold for determining 

unemployment. 

In proposing this rule, we are 

retaining the minimum income 

standards specified in Federal statute 

for each eligibility group, while giving 

States flexibility to set new standards at 

a level that takes into account a State’s 

current rules regarding how income is 

counted. In all cases, the income 

standard would be applied to an 

individual’s MAGI-based household 

income. We considered whether or not 

States should convert the Federal 

minimum income standards prescribed 

in statute—for example, the minimum 

standard for pregnant women and 

children specified in section 1902(l) and 

for parents and other caretaker relatives 

in section 1931(b) of the Act—to a 

MAGI-equivalent minimum income 

standard based on the income 

exclusions and disregards currently 

used by the State. While doing so could 

result in maintaining eligibility for 

individuals who might otherwise lose 

Medicaid due to the elimination of 

income exclusions and disregards under 

MAGI, if a State were to reduce its 

income standard to the minimum 

permitted, it also would result in 

different minimum income eligibility 

standards being applied across States 

and reduce the amount of eligibility 

simplification that could be achieved. 

We, therefore, do not propose to require 

conversion of the Federal minimum 

income standards currently prescribed 

in statute to MAGI-equivalent standards. 

Furthermore, we do not believe that 

the impact on eligibility of the proposed 

policy will be significant. Eligibility 

standards for children must be 

maintained through September 2019, in 

accordance with the maintenance of 

effort provisions (MOE) in section 

1902(gg) of the Act, and when the MOE 

provision expires, eligibility for only a 

small number of children would be 

affected if a State were to drop coverage 

to the minimum level permitted. Parents 

and other caretaker relatives who could 

lose eligibility under section 1931 of the 

Act if a State were to reduce coverage 

to the minimum permitted under the 

statute would retain eligibility under the 

new adult group. Pregnant women 

would be affected if a State were to 

decrease its income standard to the 

statutory minimum level, as the MOE 

for pregnant women ends with the 

establishment of an Exchange in 2014 

and there is no other coverage group to 

which affected pregnant women would 

necessarily be transferred; instead, 

pregnant women affected by a State’s 

decision to reduce its Medicaid income 

standard for pregnant women to the 

minimum permitted under the Act 

would likely become eligible for 

advanced payments of the premium tax 

credit for enrollment through the 

Exchange. 

(2) Pregnant Women (§ 435.116) 

As is true for parents and caretaker 

relatives, the law retains eligibility 

based on pregnancy. To simplify the 

eligibility rules, we propose to replace 

the current § 435.116 for qualified 

pregnant women and qualified children 

under section 1902(a)(10)(A)(i)(III) of 

the Act with a new § 435.116 for 

pregnant women. In addition, under the 

authority of section 1902(a)(19) of the 

Act, we are consolidating many 

different eligibility categories for 

pregnant women and are proposing to 

include in the revised § 435.116 all 

mandatory and optional eligibility 

groups, except the medically needy, for 

which pregnancy status and income are 

the only factors of eligibility. The 

following sections of the Act are 

included under the proposed § 435.116: 

1931 (low-income families); 

1902(a)(10)(A)(i)(III) (qualified pregnant 

women); 1902(a)(10)(A)(i)(IV), 

1902(a)(10)(A)(ii)(IX), and 1902(l) 

(poverty-level related pregnant women); 

1902(a)(10)(A)(ii)(I) (pregnant women 

who meet AFDC financial eligibility 

criteria); and 1902(a)(10)(A)(ii)(IV) 

(institutionalized pregnant women). 

Under the proposed rule, paragraphs 

(a) through (c) set forth the basis and 

basic provisions for coverage of 

pregnant women under § 435.116. We 

propose at § 435.116(c) that each State 

will establish an income standard in its 

State plan for coverage of pregnant 

women. The minimum income standard 

is 133 percent FPL, unless a higher 

income standard, at or below 185 

percent FPL, was in effect for pregnant 

women on December 19, 1989 (section 

1902(l)(2)(A) of the Act). The maximum 

income standard is the higher of: 

• The highest effective income level 

(including any disregard of a block of 

income), converted to a MAGIequivalent income standard, in effect 

under the State plan or waiver of the 

State plan as of March 23, 2010 or 

December 31, 2013, if higher, for 

coverage of pregnant women under the 

sections of the Act identified above; and 

• 185 percent FPL. 

We are also codifying current law to 

add a definition of ‘‘pregnant woman’’ 

in § 435.4, incorporating the post 

partum period. 

While we propose to consolidate 

various eligibility categories for 

pregnant women, States continue to 

have flexibility under the statute to 

provide different benefits to certain 

pregnant women or to provide all 

pregnant women with full Medicaid 

coverage, as many States do today. 

Thus, under clause (V) in the matter 

following section 1902(a)(10)(G) of the 

Act, pregnant women eligible for 

Medicaid under sections 

1902(a)(10)(A)(i)(IV), 

1902(a)(10)(A)(ii)(IX), and 1902(l) of the 

Act are only covered for services related 

to pregnancy or to a condition which 

may complicate the pregnancy. In 

accordance with section 1902(a)(10)(B) 

of the Act, all other pregnant women 

eligible for coverage under the sections 

of the Act listed in § 435.116(a) are 

eligible for all services that the State 

covers under the State plan, regardless 

of whether the service is related to 

pregnancy or to a condition that may 

complicate pregnancy. 

However, States currently have the 

flexibility to provide full Medicaid 

coverage as pregnancy-related services 

for all pregnant women. Thus, we 

propose at § 435.116(d) that pregnant 

women are covered for full Medicaid 

coverage, unless a State elects to 

provide only the pregnancy-related 

services described at § 435.116(d)(3) for 

pregnant women whose income exceeds 

an income limit established by the State 

for full coverage. States have flexibility 

under existing regulations at 

§ 440.210(a)(2) to establish a policy that 

all services covered under the State plan 

are related to pregnancy or to a 

condition that may complicate 

pregnancy. Therefore, States will not 

have to establish an income limit for full 

coverage for pregnant women under 

§ 435.116(d)(4), but may elect to provide 

full coverage for all pregnant women. 

Reflected at proposed paragraph (d)(3), 

States also may elect to cover certain 

enhanced pregnancy-related services, as 

specified in § 440.250(p), for pregnant 

women only. 

(3) Infants and Children Under age 19 

(§ 435.118) 

Section 2001(a)(4) of the Affordable 

Care Act amends section 1902(l)(2)(C) of 

the Act to provide Medicaid to children 

ages 6 through 18 with household 

income at or below at least 133 percent 


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FPL. This amendment eliminates certain 

of the age-based differences in Federal 

Medicaid eligibility rules for children, 

which currently provide for a minimum 

income standard of 100 percent FPL for 

coverage of children ages 6 through 18 

(although many States have 

implemented optional coverage at 

higher levels), and means that all 

children and adults under age 65 with 

household income at or below 133 

percent FPL will be eligible for 

Medicaid. Section 205(b) of the 

Medicare and Medicaid Extenders Act 

of 2010 clarifies that this amendment is 

effective January 1, 2014. If some or all 

of these children are covered under a 

separate CHIP before this provision 

takes effect, these children will move to 

coverage under Medicaid. Such a 

change, however, will not affect States’ 

ability to claim enhanced FMAP under 

title XXI for these children. 

Currently, there are many different 

mandatory and optional eligibility 

categories for children. To simplify the 

eligibility rules, we propose to include 

under § 435.118 all mandatory and 

optional eligibility groups for which age 

under 19 and income are the only 

factors of eligibility. The following 

sections of the Act are included under 

proposed § 435.118: 1931 (low-income 

families); 1902(a)(10)(A)(i)(III) (qualified 

children who meet AFDC financial 

eligibility criteria); 1902(a)(10)(A)(i)(IV) 

and 1902(a)(10)(A)(ii)(IX) (infants); 

1902(a)(10)(A)(i)(VI) (children ages 1 

through 5); 1902(a)(10)(A)(i)(VII) 

(children ages 6 through 18); and 

1902(a)(10)(A)(ii)(IV) (institutionalized 

children). 

Proposed § 435.118(a) through (c) set 

forth the basis and eligibility criteria for 

children, as explained above. We 

propose in § 435.118(c) that each State 

will establish income standard(s) in its 

State plan for coverage of children by 

age group. There is no resource test. The 

minimum income standard for all age 

groups is 133 percent FPL, unless, for 

infants per section 1902(l)(2)(A) of the 

Act, a higher income standard, at or 

below 185 percent FPL, was in effect on 

December 19, 1989. The maximum 

income standard for each age group is 

the higher of: 

• The highest effective income level 

for the age group (including any 

disregard of a block of income)— 

converted to a MAGI-equivalent 

standard—in effect under the State plan 

or waiver as of March 23, 2010 or 

December 31, 2013; or 

• For infants, 185 percent FPL. 

A State may not otherwise increase its 

income standard above the levels 

specified because, effective January 1, 

2014, States may no longer apply new 

income disregards in determining 

eligibility for individuals whose 

eligibility is based on MAGI. Coverage 

at higher income levels can be 

implemented through adoption of the 

new optional group at proposed 

§ 435.218. 

The maintenance of effort (MOE) 

provisions of the Affordable Care Act at 

section 2001(b) maintain the minimum 

income standards for children at the 

levels in effect on March 23, 2010; these 

standards are maintained for children 

until September 30, 2019. These 

proposed regulations do not address the 

MOE provisions specified in sections 

1902(a)(74) and 1902(gg) of the Act, as 

added by section 2001(b) of the 

Affordable Care Act. As a condition of 

receiving Federal financial 

participation, States must comply with 

these provisions, which are being 

addressed through subregulatory 

guidance. 

Other Conforming Changes to Existing 

Regulations 

Revisions are proposed at § 435.4 to 

the definition of ‘‘families and children’’ 

to delete references to AFDC rules. 

Definitions are proposed for ‘‘agency,’’ 

‘‘caretaker relative,’’ ‘‘dependent child,’’ 

and ‘‘pregnant woman.’’ Definitions 

related to implementation of the 

Affordable Care Act are proposed for 

‘‘advance payments of the premium tax 

credit,’’ ‘‘Affordable Insurance Exchange 

(Exchange),’’ ‘‘effective income level,’’ 

‘‘electronic account,’’ ‘‘household 

income,’’ ‘‘insurance affordability 

program,’’ ‘‘MAGI-based income,’’ 

‘‘minimum essential coverage,’’ 

‘‘modified adjusted gross income 

(MAGI),’’ ‘‘secure electronic interface,’’ 

and ‘‘tax dependent’’. 

B. Financial Methodologies for 

Determining Medicaid Eligibility Based 

on MAGI Under the Affordable Care Act 

Section 2002 of the Affordable Care 

Act, as amended by section 1004 of the 

HCERA, creates a new section 

1902(e)(14) of the Act, which provides 

that effective January 1, 2014, financial 

eligibility for most individuals shall be 

based on MAGI and ‘‘household 

income,’’ as defined in section 36B(d)(2) 

of the IRC (hereinafter referred to as 

‘‘section 36B definitions’’). In this 

preamble, ‘‘MAGI-based methodologies’’ 

refers both to the rules governing the 

determination of the MAGI of an 

individual or a married couple filing a 

joint tax return, as well as to the 

determination of total household 

income. Similarly, reference to the 

determination of income eligibility 

‘‘based on MAGI’’ refers to 

determinations based on household 

income using MAGI-based 

methodologies. 

The adoption of MAGI-based 

methodologies to determine income 

represents a significant simplification 

for the Medicaid program, eligibility for 

which has historically been linked to 

programs providing cash assistance to 

low-income populations. We are 

considering permitting States to convert 

to MAGI-based methodologies prior to 

2014 through section 1115 

demonstrations. 

Proposed § 435.603 sets forth 

proposed methodologies to implement 

MAGI in determining Medicaid 

eligibility for affected individuals 

effective January 1, 2014. Our proposed 

methodologies codify the section 36B 

definitions of MAGI and household 

income, except in a very limited number 

of cases discussed below. At proposed 

§ 435.603(i), we identify those 

populations excepted under the 

Affordable Care Act from application of 

MAGI-based methodologies; for these 

populations pre-Affordable Care Act 

Medicaid financial methodologies— 

generally set forth in existing 

regulations at § 435.601 and § 435.602— 

will continue to apply. 

1. Point-in-Time Measurement of 

Income (Budget Periods) (§ 435.603(h)) 

Under pre-Affordable Care Act 

Medicaid rules, per section 

402(a)(13)(A) of former title IV–A of the 

Act, income eligibility for Medicaid is 

based on current income actually 

available to the individual in any given 

month. MAGI, as defined in section 36B 

of the IRC, is determined on the basis of 

annual income. The Affordable Care Act 

addresses this issue by adding section 

1902(e)(14)(H)(i) of the Act to provide 

that the use of MAGI in determining 

eligibility for Medicaid shall not be 

‘‘construed as affecting or limiting the 

application of the requirement under 

this title to determine an individual’s 

income as of the point in time at which 

an application for medical assistance is 

processed.’’ Moreover, section 

1902(a)(17) of the Act provides that 

States use eligibility standards and 

methodologies that are ‘‘reasonable,’’ 

‘‘consistent with the objectives of [the 

Act],’’ and take into account only such 

income as is ‘‘determined in accordance 

with standards prescribed by the 

Secretary, available to the applicant or 

recipient[.]’’ 

In this proposed rule, we refer to the 

‘‘point in time’’ rules referenced in the 

statute as the ‘‘budget period’’ (that is, 

monthly versus annual income) based 

upon which income eligibility is 

determined. At proposed 

§ 435.603(h)(3), we are retaining the 


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current flexibility afforded States to take 

into account future changes in income 

that can be reasonably anticipated (as 

may be the case with certain seasonal 

workers or someone with a signed 

employment contract or layoff notice). 

Such anticipated changes would be 

determined in accordance with the 

verification regulations at § 435.940 et 

seq. Uncertain changes in future income 

(for example, someone who is looking 

for, but has not secured, a job) may not 

be considered under the option reflected 

at proposed § 435.603(h)(3). Actual 

changes in income—including 

deviations from reasonably anticipated 

fluctuations in income—must still be 

reported to, and acted upon by, the 

agency in accordance with § 435.916(c) 

and (d). 

To promote flexibility, administrative 

simplification and continuity of 

coverage for beneficiaries already 

enrolled in Medicaid, we propose at 

§ 435.603(h)(2) to give States the 

additional flexibility, for individuals 

eligible for Medicaid based on MAGI, to 

maintain eligibility as long as annual 

income based on MAGI methods for the 

calendar year remains at or below the 

Medicaid income standard. This gives 

States the option to align with the 

annual eligibility period applied in the 

Exchanges and to minimize the extent to 

which individuals experiencing 

relatively small fluctuations in income 

bounce back and forth between 

programs. 

We believe that these flexibilities will 

help address some of the challenges that 

will arise due to the reliance on 

monthly income for purposes of 

eligibility for Medicaid versus annual 

income for purposes of eligibility for 

advance payments of premium tax 

credits. In particular, if a State does not 

opt to take into account a reasonably 

predictable drop in future income, 

someone with current monthly income 

above the Medicaid income standard, 

but projected annual income below 100 

percent FPL could be determined both 

ineligible for Medicaid (until their 

monthly income actually dropped) and 

for advance payments of the premium 

tax credit for enrollment through the 

Exchange (because, with very limited 

exceptions, individuals with income 

below 100 percent FPL are not eligible 

for advance payments of the premium 

tax credit). We solicit comments on how 

best to prevent a gap in coverage, 

including whether to ensure that State 

Medicaid agencies take into account a 

predictable future drop in income. 

2. Changes to Medicaid Financial 

Methods 

Under pre-Affordable Care Act 

Medicaid rules for families and 

children, essentially all money received, 

from whatever source, is counted as 

income in the month in which it is 

received, unless explicitly excluded or 

disregarded under the Act, disregarded 

at State option, or excluded under other 

Federal statutes. A ‘‘household’’ (for 

purposes of determining family size and 

whose income is counted) generally 

consists of parents and the children 

with whom they are living. Other nonlegally responsible relatives and 

unrelated individuals living together are 

not included, nor are spouses or parents 

living apart from the rest of the family, 

which means that the income of such 

individuals is not deemed available to 

the Medicaid applicant. Under preAffordable Care Act Medicaid rules, 

inclusion of stepparents in a stepchild’s 

household depends on State law 

relating to obligations to support 

stepchildren. A stepparent’s income is 

considered available to his or her 

spouse since spouses are legally 

responsible for each other. 

Section 36B of the IRC, and § 1.36B– 

1 of the IRS proposed premium tax 

credit rule, define ‘‘MAGI, ’’ ‘‘household 

income,’’ and ‘‘family size.’’ See also 

section 152 of the IRC and Internal 

Revenue Service (IRS) Publication 501 

regarding rules for claiming ‘‘qualifying 

children’’ and ‘‘qualifying relatives’’ as 

tax dependents. To be eligible to receive 

advance payments of a premium tax 

credit for the purchase of coverage 

through an Exchange, married couples 

generally must file jointly. 

As discussed in section II.I of this 

proposed rule, sections 1413 and 2201 

of the Affordable Care Act direct the 

creation of a seamless, simplified 

system of coordinated eligibility and 

enrollment between insurance 

affordability programs, and in most 

instances, section 36B definitions of 

‘‘MAGI’’ and ‘‘household income’’ are 

applied to Medicaid to promote 

seamless coordination. In some 

situations, the application of these new 

rules will have the impact of 

constraining Medicaid eligibility, but 

consistent with the statute, we have 

applied the 36B rules because of the 

impact on coordination. In a few limited 

situations in which the potential 

adverse impact of adopting the section 

36B definitions could be significant 

(albeit for a relatively small group of 

individuals), and the impact on 

coordination minimal, we propose, 

consistent with the statute, retention of 

current Medicaid rules. 

3. Provisions of Proposed Rule 

Implementing MAGI Methods 

Proposed § 435.603(a)(1) and (2) set 

forth the basis and scope of this section. 

At proposed § 435.603(a)(3), we 

implement section 1902(e)(14)(D)(v) of 

the Act, as added by section 2002(a) of 

the Affordable Care Act, which specifies 

that, in determining ongoing eligibility 

of individuals enrolled in the Medicaid 

program as of January 1, 2014, the 

financial methodologies based on MAGI 

shall not be applied until the next 

regularly-scheduled redetermination of 

eligibility after December 31, 2013 or 

March 31, 2014, whichever is later, if 

such individual otherwise would lose 

eligibility as a result of the shift to 

MAGI-based methodologies before such 

date. 

Consistent with the 36B definition, 

we propose in § 435.603(b) to define 

‘‘family size’’ as equal to the number of 

persons in the individual’s household 

(as defined in paragraph (f) of this 

section and discussed below); ‘‘tax 

dependent’’ is defined in proposed 

revisions to § 435.4, and cross 

referenced at proposed § 435.603(b), as 

an individual for whom another 

individual properly claims a deduction 

for a personal exemption under section 

151 of the IRC for a taxable year. 

Proposed § 435.603(c) sets forth the 

basic rule that, except for eligibility 

determinations exempt from MAGI 

methodologies, financial eligibility for 

Medicaid must be based on household 

income as defined in § 435.603(d). 

Consistent with the section 36B 

definition of household income, 

proposed § 435.603(d)(1) provides that, 

for purposes of determining Medicaid 

eligibility under § 435.603, ‘‘household 

income’’ is the sum of the income based 

on MAGI-based methods of every 

individual who is: (1) included in the 

individual’s household; and (2) required 

to file a tax return under section 6012 

of the IRC, except that, also consistent 

with section 36B definitions, the MAGIbased income of a child who files a tax 

return, but is not required to file, is not 

included in household income under 

proposed § 435.603(d)(2). The MAGIbased income of adults as well as 

children who are not included in the 

household of their parent(s) is always 

counted in determining the household 

income of the adult or such child as 

well as the household income of their 

spouse and children with whom they 

are living (if any). 

a. Proposed Methods for Counting 

Income Based on MAGI (§ 435.603(e)) 

In general, we propose income 

counting rules at § 435.603(e) that are 

the same as the section 36B definitions 


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to ensure streamlined eligibility rules 

and avoid coverage gaps. There are 

some differences in the treatment of 

several types of income under the IRC 

as compared to pre-Affordable Care Act 

Medicaid rules, in which the changes 

occasioned by the adoption of the 

section 36B definitions would have 

varying effects on the Medicaid 

eligibility of potential beneficiaries. 

Given the general directive to apply the 

section 36B definitions and the value of 

alignment, these proposed rules 

generally codify the section 36B rules 

and definitions. This is the case with 

respect to the treatment of child support 

payments, depreciation of business 

expenses, and capital gains and losses. 

Under this regulation as proposed, we 

also are applying the section 36B rules 

and definitions of Social Security 

benefits under title II of the Act. Such 

benefits count as income for the purpose 

of determining eligibility for Medicaid 

under pre-Affordable Care Act treatment 

of income, but certain amounts of Social 

Security benefits are not counted as 

income under the 36B definition of 

MAGI. The section 36B treatment of 

Social Security benefits may increase 

State Medicaid costs, as some 

individuals who receive Social Security 

benefits would gain Medicaid eligibility 

using the 36B definitions. The 

Administration is concerned about this 

unintended consequence and is 

exploring options to address it, 

including a modification of the section 

36B treatment of Social Security 

benefits through regulation. We seek 

comment on this issue, including how 

any modification of the proposed 

regulation may affect eligibility for 

premium tax credits for enrollment in a 

qualified health plan through the 

Exchange and how any potential gaps in 

coverage that may be created by such 

modification could be minimized. 

There are three types of income for 

which we propose to codify current 

Medicaid rules. We solicit comments on 

these proposed policies. 

The first is lump sum payments, 

which consist of non-recurring income 

received on a one-time-only basis (for 

example, insurance settlements, back 

pay, State tax refunds, inheritance, and 

retroactive benefit payments). Under 

section 36B definitions, taxable ‘‘lump 

sum’’ payments are included in 

computing MAGI in the year the lump 

sum is received. Currently in Medicaid, 

most States count lump sum payments 

as income in the month received and, 

for any amounts retained, as a resource 

in months following. Because of the 

statutory directive to consider point-intime (that is, current monthly) rather 

than annual income for determination of 

Medicaid eligibility, and the challenges 

in amortizing a lump sum payment over 

time to pay for coverage, we propose in 

§ 435.603(e)(1) to count lump sum 

payments of taxable income as income 

only in the month received. 

Second, certain types of educational 

scholarships and grants (for example, 

work-study arrangements and other 

situations in which the individual has 

to provide a service) are generally 

counted as taxable income under the 

IRC, but not counted as income under 

current Medicaid rules. To avoid lowincome students having to forgo either 

Medicaid or this education-related aid, 

we propose in § 435.603(e)(2) to retain 

the Medicaid rules for this type of 

income. 

Third, American Indian and Alaska 

Native (AI/AN) income is the subject of 

special treatment and protections in 

multiple provisions of titles XIX and 

XXI of the Act. Most recently, the 

Recovery Act added section 1902(ff) to 

the Act (applied also to CHIP through 

the addition of section 2107(e)(1)(c) of 

the Act) to broaden exemptions related 

to certain AI/AN financial interests to 

ensure that low-income AI/AN 

individuals have access to Medicaid. 

There are certain instances where the 

IRC and the section 36B definition of 

MAGI are identical to or more liberal 

than current Medicaid rules with regard 

to income exclusions for AI/AN 

populations, and therefore, are adopted 

in the proposed rule. However, there are 

several instances in which the IRC treats 

as taxable income distributions from AI/ 

AN trust properties, which are excluded 

from income for purposes of Medicaid 

and CHIP eligibility under the Recovery 

Act and other current law. In these 

instances, we propose at § 435.603(e) to 

codify current Medicaid treatment of 

AI/AN income, including distributions 

from Alaska Native corporations and 

settlement trusts; distributions from any 

property held in trust, or otherwise 

under the supervision of the Secretary 

of the Interior; distributions resulting 

from certain real property ownership 

interests; payments from other 

ownership interests or usage rights that 

support subsistence or a traditional 

lifestyle; and student financial 

assistance provided under the Bureau of 

Indian Affairs education programs. 

In addition, section 1902(B)(e)(14)(B) 

of the Act, codified at § 435.603(g), 

prohibits the continued use of any asset 

test or income or expense disregards for 

individuals whose financial eligibility is 

based on MAGI (other than a disregard 

of 5 percent of the FPL to be applied to 

every such individual under section 

1902(e)(14)(I) of the Act.) In order to 

account for the general elimination of 

income disregards and to ensure 

continued coverage at pre-Affordable 

Care Act levels, per section 

1902(e)(14)(A) and (E), States will 

convert current income standards for 

eligibility groups under which financial 

eligibility will be based on MAGI to a 

‘‘MAGI-equivalent’’ income standard. 

Separate guidance will be issued 

regarding the methodologies States may 

employ to determine such MAGIequivalent income standards. 

Application of the statutory across-theboard 5 percent disregard is reflected in 

proposed § 435.603(d)(1). 

Detailed guidance on the treatment of 

all types of income under the new 

MAGI-based methodologies will be 

provided in subregulatory guidance. 

b. Proposed Rules for Determining 

Household Composition Under MAGI– 

Based Methods (§ 435.603(f)) 

(1) Household Composition for Tax 

Filers (§ 435.603(f)(1)) and Their Tax 

Dependents (§ 435.603(f)(2)) 

Our proposed rules for household 

composition are divided into two 

categories: those for individuals filing 

taxes (§ 435.603(f)(1)) and their tax 

dependents (§ 435.603(f)(2)); and those 

for individuals who neither file a tax 

return nor are claimed as a tax 

dependent on someone else’s tax return, 

whom we refer to as ‘‘non-filers’’ 

(§ 435.603(f)(3)). 

After analyzing the differences 

between the section 36B definitions and 

current Medicaid rules, we believe that 

for most families, the section 36B 

definitions and current Medicaid rules 

yield the same household. However, 

there are a relatively small number of 

situations in which application of the 

section 36B definitions yields a different 

household than current Medicaid rules, 

including the following: 

(1) Families in which the parents 

claim as tax dependents children age 21 

or older. 

(2) Families in which the parents 

claim as tax dependents children living 

outside of the home. 

(3) Families with stepchildren/ 

stepparents (in States without a law 

requiring stepparents to support their 

stepchildren. 

(4) Families in which one or more 

children are required to file a tax return. 

(5) Families in which one member is 

supporting and claiming as a tax 

dependent extended family members or 

unrelated individuals, including 

children other than their own biological 

or adopted children. 

(6) Children claimed as a tax 

dependent by a non-custodial parent. 

(7) Pregnant women. 


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51158 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

(8) Married couples who do not file 

jointly. 

In the first four types of households 

identified, consistent with the general 

statutory directive to apply the section 

36B definitions to Medicaid, we are 

proposing at § 435.603(f)(1) to adopt the 

household composition rules embodied 

in the section 36B definitions. Doing so 

will result in some loss of Medicaid 

eligibility compared to pre-2014 

Medicaid rules. However, maintaining 

different rules for the insurance 

affordability programs for these 

household types would undermine 

simplicity and coordination, which 

benefits consumers and States alike, and 

add to States’ and potentially families’ 

administrative burden. 

For the fifth type of household 

identified (for example, a grandparent 

caring for a grandchild claimed as a tax 

dependent), the income of the claimed 

tax dependent is likely to be quite low, 

making them likely eligible for 

Medicaid based on their income alone. 

However, in such situations adoption of 

the section 36B definitions for 

household composition for determining 

the Medicaid eligibility of the tax 

dependent could significantly affect 

both the taxpayer and the relative or 

unrelated individual whom the taxpayer 

has no legal responsibility to support, 

putting such taxpayers in the position 

either of: (1) Forgoing a tax advantage 

(including, in some cases, an Earned 

Income Tax Credit) so as to enable the 

tax dependent to apply for Medicaid on 

his own; or (2) assuming financial 

responsibility for purchasing health care 

for such individual—a responsibility 

which they do not have under current 

law. Accordingly, we propose at 

§ 435.603(f)(2)(i) to codify current 

Medicaid rules in determining the 

eligibility of qualifying relatives claimed 

as tax dependents by another taxpayer. 

MAGI-based definitions would be used 

in determining household composition 

for purposes of the taxpayer’s eligibility, 

per proposed § 435.603(f)(1). It is also 

important to note that, reflected in 

proposed § 435.603(d)(3) and consistent 

with current Medicaid rules, actually 

available cash support provided by the 

non-legally responsible relative is 

counted as income to the claimed tax 

dependent. The purpose of retaining the 

Medicaid household rules as a backstop 

in these situations is to prevent the 

attribution of income from non-legally 

responsible relatives when that income 

is not in fact available to the tax 

dependent. We do not believe that this 

proposal would disrupt coordination or 

create a gap in coverage. 

Regarding households in which a 

child is claimed as a tax dependent by 

a non-custodial parent, we are 

proposing at § 435.603(f)(2)(iii) to apply 

rules based on pre-Affordable Care Act 

Medicaid principles of parents’ legal 

responsibility for the children with 

whom they are living. By applying the 

rules for non-filers in this situation, as 

proposed in these rules, these children 

would be treated as members of the 

custodial parent’s household for 

Medicaid eligibility purposes, and the 

income of the custodial parent (and 

other members of the custodial parent’s 

household required to file a tax return) 

would be counted in determining the 

child’s Medicaid eligibility. 

Alternatively, the child could enroll in 

coverage through the Exchange in the 

child’s State of residence as a member 

of the non-custodial parent’s household. 

(See discussion in section II.A.4 (b) of 

the preamble for the accompanying 

Exchange proposed rule.) We 

specifically solicit comments on the 

proposed handling of the household 

composition for these children. 

Under pre-2014 Medicaid rules, a 

pregnant woman is considered as a 

household of two for purposes of 

determining eligibility. States have the 

option to count a pregnant woman as 

two in determining the family size of 

other members of a pregnant woman’s 

household (for example, her spouse or 

other children). Under the section 36B 

definition of family size, pregnant 

women count as one person for 

purposes of eligibility for advance 

payments of the premium tax credit, but 

if the child is born by the end of the 

calendar year, the annual premium tax 

credit would be for two persons. 

Counting the pregnant woman as a 

household that will be comprised of two 

for Medicaid eligibility purposes 

essentially anticipates the change in 

household size that will occur after the 

birth. Applying the 36B definitions 

would result in some women being 

enrolled, with advance payments of the 

premium tax credit, in a qualified health 

plan through the Exchange who, after 

giving birth, will be eligible for 

Medicaid. Therefore, the proposed 

definition of family size in § 435.603(b) 

retains current Medicaid rules for 

pregnant women to promote continuity 

of coverage for the family and to ease 

State administrative burden. 

Married couples who file separately 

are not eligible for premium tax credits. 

However, there is no similar provision 

in title XIX of the Act with respect to 

Medicaid eligibility. Therefore, in such 

situations, we propose at § 435.603(f)(4) 

to codify current Medicaid rules to 

include each spouse in the household of 

the other and to count the MAGI-based 

income of each spouse required to file 

a tax return in determining the other’s 

household income, regardless of 

whether the couple files a joint tax 

return. We recognize that at times two 

legally married individuals may live 

apart. Therefore, consistent with current 

Medicaid rules, the proposed rule also 

limits the inclusion of spouses in each 

other’s household to those who are 

living together. 

In some cases, a child may be living 

with both parents, but the parents do 

not file, or are not married and therefore 

cannot file, a joint tax return. Consistent 

with current Medicaid principles of 

legal responsibility, we propose at 

§ 435.603(f)(2)(ii) to apply the proposed 

rules for non-filers in the case of 

children living with such parents, so 

that both parents, if living with the 

child, will be included in the child’s 

household and their income counted in 

determining the child’s eligibility. 

(2) Household Composition for NonFilers (§ 435.603(f)(3)) 

The IRC contains provisions regarding 

filing thresholds—ranging from $9,350 

in 2010 (86 percent FPL) for a single 

individual to $19,800 for a married 

couple filing jointly with one spouse 65 

or older (137 percent FPL)—below 

which individuals are not required to 

file. Individuals below these thresholds 

may file a tax return, but for non-filers, 

section 36B of the IRC does not 

specifically address household 

composition. 

To be eligible for a premium tax 

credit, spouses must file jointly and 

(except in cases of divorce or separation 

in which the non-custodial parent is 

permitted to claim a child) parents who 

file can claim their children under 19 

who are living with them (or under age 

24 if a full time student) as a qualifying 

child. See IRS Publication 501. The 

current Medicaid principle that parents 

are legally responsible for their children 

and that spouses are legally responsible 

for each other is consistent with section 

36B of the IRC. In the case of Medicaid, 

parents are assumed to be financially 

responsible for their children up to age 

21; this does not vary with the child’s 

student status. 

Under either section 36B of the IRC or 

pre-Affordable Care Act Medicaid rules, 

spouses living together are considered 

to be part of the same household for 

eligibility purposes, and proposed 

paragraph § 435.603(f)(3) similarly 

specifies that spouses living together be 

included in the same household. We 

considered several alternatives 

regarding when children who are living 

with their parent(s), but are not claimed 

as a tax dependent on such parent’s tax 


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return, should be included in the 

parent’s household. 

Applying pre-Affordable Care Act 

Medicaid rules making parents 

financially responsible for children who 

are under age 21 could result in a gap 

in coverage for children aged 19 and 20 

who are not in school and are not 

claimed as dependents on their parents’ 

tax return, but whose parents do file a 

tax return and have household income 

above the Medicaid income standard for 

19 and 20 year-olds. (Coverage for 19 

and 20-year olds, in most States, will be 

under the new group for adults with 

household income at or below 133 

percent FPL). On the other hand, 

adopting the IRC rule allowing parents 

to claim as a qualifying child their 

children only until age 19, unless a fulltime student, could result in an increase 

in Medicaid eligibility for 19 and 20- 

year olds who are not full-time students 

and are living with their parents, as 

compared to pre-Affordable Care Act 

Medicaid rules. Adopting the IRC rule 

with respect to adult children ages 21– 

23 who are full-time students could 

result in a decrease in Medicaid 

eligibility and an imposition of legal 

responsibility for certain adult children 

not consistent with current law. 

In balancing these considerations, we 

propose at § 435.603(f)(3), to treat 

spouses/parents (including stepparents) 

and all children (including stepchildren 

and stepsiblings) under age 19 or, if a 

full-time student, under age 21, who are 

living together, as members of the same 

household. This proposed policy will 

avoid the gap in coverage for 19 and 20 

year olds, discussed above, while 

limiting any unnecessary increase in 

Medicaid eligibility. Children who are 

not living with their parents, or who are 

over the specified age limit, would not 

be included in their parents’ household, 

and as with tax filing households, 

individuals other than a spouse, 

biological, adopted, or step-parent, child 

or sibling would not be included in the 

same Medicaid household under this 

proposed rule. We specifically solicit 

comments on the proposed rule for 

household composition of non-filers at 

§ 435.603(f)(3). 

(3) Retention of Existing Financial 

Methods (§ 435.603(i)) 

Section 1902(e)(14)(D) of the Act 

provides that the financial 

methodologies based on MAGI will not 

apply in certain situations. In those 

cases, eligibility will be determined 

using the rules in effect prior to the 

Affordable Care Act, codified in existing 

regulations at § 435.601 and § 435.602. 

Proposed § 435.603(i) sets out six 

exceptions: 

• Individuals eligible for Medicaid on 

a basis that does not require a 

determination of income by the 

Medicaid agency. This exception from 

use of MAGI-based methods includes, 

but is not limited to, individuals 

receiving or deemed to be receiving SSI, 

individuals receiving assistance under 

title IV–E of the Act, and individuals for 

whom the agency is relying on a finding 

of income made by an Express Lane 

Agency under section 1902(e)(13) of the 

Act. 

• Individuals who qualify for medical 

assistance on the basis of being blind or 

disabled. This exception applies only to 

those individuals for whom the 

determination of eligibility is made on 

the basis of being blind or disabled. 

Individuals who are blind or who have 

disabilities can also be covered under 

the new mandatory eligibility group for 

adults (codified at proposed § 435.119) 

with MAGI-based household income at 

or below 133 percent of FPL. To the 

extent that their income exceeds that 

level, current financial methodologies 

will be used to determine their 

eligibility for coverage on the basis of 

being blind or disabled under an 

optional eligibility group for blind or 

disabled individuals. 

In proposed § 435.603(i)(3), we 

identify the most common of the 

eligibility groups for blind and disabled 

individuals excepted from MAGI 

methods under the Act. We are not 

listing coverage provided to individuals 

receiving SSI in so-called ‘‘criteria 

States’’ because they are encompassed 

under proposed § 435.603(i)(1)(iii)(A). 

(These individuals are receiving SSI but 

the State does not have an agreement 

under section 1634 of the Act under 

which the Social Security 

Administration makes a determination 

of Medicaid eligibility for the State.) We 

also are not specifically identifying 

children under age 18 who were 

receiving SSI as of the date of enactment 

of the Personal Responsibility and Work 

Opportunity Reconciliation Act of 1996 

(PRWORA) (August 22, 1996), who 

would continue to receive SSI but for 

the enactment of section 211 of that Act 

and who are eligible for Medicaid in 

accordance with section 

1902(a)(10)(A)(i)(II) of the Act. While 

financial eligibility for continued 

coverage of these children will be 

excepted from MAGI, most, if not all, of 

the affected children will have reached 

age 18 as of January 1, 2014, the 

effective date for the transition to MAGIbased methods. We seek comment as to 

whether there might be children still 

eligible under this mandatory coverage 

group as of 2014, and therefore, whether 

they should be identified in these 

regulations. 

• Individuals age 65 or older are 

categorically excepted from MAGI 

methods under section 

1902(e)(14)(D)(i)(II) of the Act. We 

recognize that the exception of all 

elderly individuals from MAGI 

methodologies for all eligibility groups 

could result in States having to retain 

application of AFDC financial 

methodologies in a small number of 

cases in which an elderly individual is 

being evaluated for coverage on the 

basis of being a parent or caretaker 

relative, for which age is not a factor. 

We solicit comments on possible 

approaches we might adopt to avoid this 

result—for example, interpreting the 

exception to apply only in the case of 

elderly individuals when age is a 

condition of eligibility or of applying 

SSI methodologies (which will continue 

to be used for most MAGI-excepted 

groups) in determining the eligibility of 

elderly individuals for coverage as a 

caretaker relative. 

• Individuals whose eligibility is 

being determined on the basis of the 

need for long-term care services, 

including nursing facility services or a 

level of care equivalent to such services. 

Similar to the exceptions from MAGI for 

determinations based on being blind or 

disabled, we propose to apply this 

exception in the case of individuals 

whose eligibility is based on the need 

for or receipt of such services. 

Individuals otherwise eligible for 

Medicaid under an eligibility group to 

which MAGI-based methods apply (for 

example, children eligible under 

proposed § 435.118) will not be 

excepted from application of MAGIbased methods in determining ongoing 

eligibility under such group simply 

because they may need long-term care 

services. 

• Individuals eligible for assistance 

with Medicare cost sharing under 

section 1902(a)(10)(E) of the Act. We 

propose to interpret this exception to 

apply only to the determination of 

eligibility for Medicare cost sharing 

assistance. 

• Medically needy individuals 

eligible under section 1902(a)(10)(C) of 

the Act. This exception also applies 

only to the determination of eligibility 

for medically-needy coverage. 

Individuals who meet the eligibility 

criteria for coverage under another 

eligibility group—for example, the new 

adult group—are not excepted from 

application of MAGI-based methods for 

purposes of determining their eligibility 

for such other groups simply because 

they would qualify for coverage as a 


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51160 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

medically needy individual if not 

eligibility under such other group. 

Section 1902(e)(14)(D)(iii) of the Act 

provides that MAGI-based methods 

shall not be used in determining 

eligibility for Medicare Part D premium 

and cost sharing subsidies under section 

1860D–14 of the Act. Because such 

subsidies are not a form of Medicaid 

and determinations for Part D cost 

sharing subsidies are not performed 

under the authority of the Medicaid 

statute, we are not proposing to include 

regulations regarding this exception in 

these rules. 

C. Residency for Medicaid Eligibility 

Defined 

We propose to simplify Medicaid’s 

residency rules to promote achievement 

of the coordinated eligibility and 

enrollment system established under 

sections 1413 and 2201 of the 

Affordable Care Act and discussed in 

section II.I of this proposed rule. We 

propose to redesignate and revise 

paragraphs § 435.403(h) and § 435.403(i) 

to § 435.403(i) (rules for individuals 

under age 21) and (h) (rules for 

individuals age 21 and older), which set 

parameters for States to determine who 

is a State resident. These revisions are 

not significantly different than the 

current rules. We do not propose 

changes to our current regulations 

regarding individuals living in 

institutions, receiving Federal foster 

care or adoption assistance under title 

IV–E of the Act, or adults who do not 

have the capacity to state intent. Note 

that policies regarding verification of 

residency are proposed at § 435.956(c) 

and discussed in section II.H.5 of this 

proposed rule. 

1. Residency Definition for Adults (Age 

21 and Over) (§ 435.403(h)) 

We propose to strike the term 

‘‘permanently and for an indefinite 

period’’ from the definition for adults in 

redesignated § 435.403(h)(1) and (h)(4), 

and replace the term ‘‘remain’’ with 

‘‘reside.’’ An adult’s residency will be 

determined based upon where the 

individual is living and has intent to 

reside, including without a fixed 

address, or the State which the 

individual entered with a job 

commitment or seeking employment 

(whether or not currently employed). 

While proposing to remove the phrase 

‘‘permanently or for an indefinite 

period’’ and use the term ‘‘reside,’’ we 

are maintaining existing policy that an 

individual must intend to remain living 

in the State in which he or she is 

seeking coverage. Persons visiting a 

State for personal pleasure or purposes 

of obtaining medical care are not 

residents of the State visited. By 

removing the term ‘‘living’’ in the State 

or replacing the term ‘‘remain’’ with 

‘‘reside,’’ we do not intend to have any 

policy impact on State policy. Indeed, 

we note that section 1902(b)(2) of the 

Act refers to individuals who ‘‘reside in 

the State’’. We are removing the word 

‘‘living’’ from the definition in order to 

simplify the language. An individual 

must still maintain present intent to 

reside in the State being claimed as the 

State of residence; a State would not be 

required to recognize an intent to reside 

at some future point in time. We have 

retained the term ‘‘living’’ for 

individuals who do not have the 

capacity to state intent, as we are not 

modifying the regulations for that 

population. 

Our proposal to remove language 

regarding permanency and ‘‘an 

indefinite period’’ will help to facilitate 

coordination of eligibility 

determinations across and between 

programs and is also consistent with 

long-standing statutory requirements. 

Under section 1902(b)(2) of the Act, 

States may not exclude from coverage 

an individual who resides in the State 

‘‘regardless of whether or not the 

residence is maintained permanently or 

at a fixed address[.]’’ 

2. Residency Definition for Children 

(Under Age 21) (§ 435.403(i)) 

For individuals who are emancipated 

or married, we propose language to 

align the residency rules with the 

proposed definition for adults. 

Accordingly, at redesignated 

§ 435.403(i)(1), we propose to strike the 

term ‘‘permanently and for an indefinite 

period’’ and to replace the word 

‘‘remain’’ with ‘‘reside.’’ 

We propose in § 435.403(i)(2) to 

combine and consolidate two different 

definitions of residency currently set 

forth in paragraphs (h)(2) and (h)(3) for 

unemancipated individuals under age 

21: (1) those whose Medicaid eligibility 

is based on a disability and (2) those 

who are not disabled and not living in 

an institution or receiving foster care or 

adoption assistance under IV–E of the 

Act. We eliminate the cross-reference to 

the AFDC rules at 45 CFR 233.40 and for 

both groups of children we propose to 

apply a similar definition as that 

proposed for most adults, but without 

the ‘‘intent’’ component, as individuals 

under age 21 may not legally be able to 

express intent. Under the proposed rule, 

States may not determine residency of a 

child based solely on the residency of 

the parent. 

Our proposal will simplify State 

administration and make the rules 

clearer to the public. Our proposal to 

allow children to establish residency to 

the same extent as adults when a parent 

or caretaker is seeking or has confirmed 

employment is intended to ensure a 

consistent approach for migrant, 

seasonal workers and other families 

living in a State while employed or in 

search of employment. The proposed 

definition also allows flexibility for 

families in which children attend school 

in a State other than where the parents 

live; such children may be considered 

residents of the parents’ ‘‘home State,’’ 

if the parent expresses the requisite 

intent. However, we do not change 

States’ current flexibility to determine 

whether students ‘‘reside’’ in a State, as 

long as each individual has the 

opportunity to provide evidence of 

actual residence. The proposed rule 

excludes children who are visitors for 

pleasure or for purposes of obtaining 

medical care. Parents, caretakers, and 

persons acting responsibly on behalf of 

a child may attest to where the child 

resides, under new § 435.956(c). 

While we do not believe our proposed 

changes significantly affect Federal 

guidance on residency, we seek 

comments on the proposed 

modifications to § 435.403(h) and (i), 

particularly on the impact of this 

proposed rule on children eligible for 

Medicaid based on disability. We also 

seek comments on whether to change 

the current State residency policy with 

regard to individuals living in 

institutions and adults who do not have 

the capacity to express intent. 

D. Application and Enrollment 

Procedures for Medicaid 

1. Availability of Program Information 

(§ 435.905) 

Section 2201 of the Affordable Care 

Act adds a new section 1943(b)(1)(A) to 

the Act which directs States to develop 

procedures that enable individuals to 

apply for, renew, and enroll in coverage 

through an Internet Web site. Section 

1943(b)(4) directs States to establish a 

Web site (which must be linked to the 

Web site established by the Exchange 

operating in the State) that will allow 

individuals to obtain information 

regarding coverage under Medicaid and 

CHIP and compare such coverage to that 

available through the Exchange. Thus, 

we propose to amend § 435.905 to 

ensure that program information be 

made available electronically through a 

Web site in addition to providing 

information to applicants both orally 

and in writing. We propose to modify 

§ 435.905(b) to eliminate specific 

requirements regarding quantity and 

electronic availability of bulletins and 


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pamphlets, as we do not believe these 

are necessary in regulations. 

2. Applications (§ 435.907) 

To support States in developing a 

coordinated eligibility and enrollment 

system for all insurance affordability 

programs, section 1943(b)(3) and section 

1413 of the Affordable Care Act direct 

the Secretary to develop and provide 

States with a single, streamlined 

application. The single application, to 

be used for all insurance affordability 

programs and available through a 

variety of formats including on-line and 

phone applications, will build on the 

successes many States have had in 

developing simplified applications. 

Accordingly, we propose to amend 

current regulations at § 435.907 to 

reflect use of the new single, 

streamlined application. The Secretary 

will develop the data elements for the 

application in collaboration with States 

and consumer groups. As permitted in 

section 1413(b)(1)(B) of the Affordable 

Care Act, proposed § 435.907(b)(2) 

provides States the option to develop 

and use an alternative streamlined 

application, subject to review and 

approval by the Secretary. Under the 

law, those who are limited English 

proficient (LEP) and persons with 

disabilities must have equal access to 

health care and the benefits. We intend 

to address the readability and 

accessibility of applications, forms and 

other communications with applicants 

and beneficiaries in future guidance. 

In § 435.907(c), we propose two 

alternative approaches related to 

applications for individuals who may 

qualify for coverage on a basis other 

than MAGI. First, we propose that States 

may use supplemental forms to gather 

additional information, such as 

information pertaining to resources, 

needed to make an eligibility 

determination. This approach would 

permit anyone seeking coverage to begin 

by completing the same single, 

streamlined application as all other 

applicants. Second, we propose to 

permit States to develop and use an 

alternative single, streamlined 

application form designed specifically 

to capture information needed to 

determine eligibility for individuals 

whose eligibility is not determined 

based on MAGI. Under the statute and 

proposed 435.907(c), such supplemental 

and alternative forms are subject to the 

Secretary’s approval. We seek comment 

on both of the proposed approaches as 

well as other alternatives to ensure a 

simple application process. 

In § 435.907(d), we explain that the 

agency must establish procedures to 

allow persons seeking coverage to file 

an application through a variety of 

means including online, in person, over 

the phone and by mail. Applications 

may be submitted in person, but under 

this proposed rule, particularly in light 

of the seamless coordination process 

required for enrollment in Medicaid and 

the Exchange, in person interviews 

cannot be required for the individuals 

whose eligibility is based on MAGI. 

For individuals not seeking coverage 

for themselves (‘‘non-applicants’’), to 

ensure privacy we propose in 

§ 435.907(e)(1) to codify the longstanding policy against requiring such 

individuals to provide Social Security 

numbers (SSNs) or information 

regarding their citizenship, nationality, 

or immigration status. To promote 

enrollment of eligible applicants, States 

may request an SSN of a non-applicant 

on a voluntary basis. Proposed 

§ 435.907(e)(2) codifies existing policy 

grounded in Title VI of the Civil Rights 

Act of 1964, the Privacy Act, and 

Medicaid confidentiality provisions at 

section 1902(a)(7) of the Act to allow 

States to request an SSN of a nonapplicant only if: (1) Providing an SSN 

is voluntary; (2) use of a non-applicant’s 

SSN is limited to processing the 

applicant’s eligibility or for other 

functions necessary to the 

administration of the State’s plan; and 

(3) the State provides notice that 

provision of an SSN is voluntary and 

indicates how the SSN will be used. 

In support of the proposed rule, we 

note that sections 1411(g) and 1414(a)(2) 

of the Affordable Care Act specify that 

taxpayer information may only be used 

for eligibility determinations and other 

functions directly related to the 

administration of benefits. Section 

1902(a)(7) of the Act directs States to 

have safeguards that restrict the ‘‘use or 

disclosure of information concerning 

applicants and recipients only for 

purposes directly connected with the 

administration of the [State] plan 

* * *’’ Non-applicant information used 

to determine an applicant’s eligibility is 

considered to be information 

‘‘concerning’’ the applicant or recipient; 

thus, this information must be 

appropriately safeguarded. 

We propose to continue the current 

policy that Medicaid applicants and 

beneficiaries must provide an SSN, if 

the individual has one. Under our 

current regulations at § 435.910, if an 

individual does not have an SSN, the 

agency must assist the individual in 

obtaining one. For background and a 

detailed discussion of the current policy 

on the collection of SSNs, see the TriAgency Guidance issued in conjunction 

with the Administration for Children 

and Families and the Food Nutrition 

Service, in September 2000, at http:// 

www.hhs.gov/ocr/civilrights/resources/ 

specialtopics/tanf/triagencyletter.html. 

Section 1943(b)(1)(A) of the Act 

directs Medicaid agencies to permit 

enrollment and reenrollment in the 

State plan or under a waiver through 

electronic signature. Accordingly, we 

propose in § 435.907(f) that States must 

accept applications signed through the 

use of electronic signature techniques, 

including telephonically recorded 

signatures, as well as handwritten 

signatures transmitted by fax or other 

electronic means. This is consistent 

with current practice in most States. 

3. Assistance With Application and 

Redetermination (§ 435.908) 

Some of the individuals eligible for 

coverage in 2014 may need assistance 

with the application and renewal 

process. Therefore, we propose to 

amend current § 435.908(b) to ensure 

that the agency provides assistance 

through a variety of means to any 

individual seeking help with the 

application or redetermination process. 

This is consistent with current State 

practice and is in accordance with 

section 1902(a)(19) of the Act. 

We are proposing that States have 

flexibility to design the available 

assistance, while assuring that such 

assistance is provided in a manner 

accessible to individuals with 

disabilities and who are LEP. In 

addition, section 1943(b)(1)(F) of the 

Act directs States to conduct outreach to 

vulnerable and underserved populations 

eligible for Medicaid. Such outreach 

and assistance will be particularly 

important for those who are newly 

eligible, as well as for people with 

disabilities, underserved racial and 

ethnic minorities and other groups. We 

will provide technical assistance and 

subregulatory guidance to further 

address application and renewal 

assistance to meet the needs of the 

multiple populations served by the 

program. 

E. MAGI Screen (§ 435.911) 

This section of the preamble and the 

proposed rules at § 435.911 describe the 

process for applying a new simplified 

test for determining eligibility based on 

MAGI—which is facilitated by the 

simplified eligibility categories, 

including the new adult coverage group, 

discussed in section II.A of this 

proposed rule—as well as the steps 

States will take to ensure that 

individuals who do not meet the 

simplified test are evaluated for 

Medicaid eligibility on other bases and 

for potential eligibility for other 

insurance affordability programs. 


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51162 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

Proposed § 435.911(a) sets forth the 

statutory basis for this section. In 

proposed § 435.911(b) we set forth 

several pertinent definitions, including 

‘‘applicable modified adjusted gross 

income standard,’’ which will be at least 

133 percent FPL, but in some States may 

be higher for certain individuals, 

including parents or other caretaker 

relatives, pregnant women or children. 

Proposed § 435.911(c) describes the 

key steps in the proposed streamlined 

eligibility process. Under 

§ 435.911(c)(1), for every individual 

who has submitted an application and 

who meets the non-financial criteria for 

eligibility (or for whom the agency is 

providing a reasonable opportunity to 

provide documentation of citizenship or 

immigrations status in accordance with 

sections 1903(x), 1902(ee) and 1137(d) 

of the Act), the Medicaid agency would 

determine whether such individual has 

household income at or below the 

applicable MAGI standard. This means 

that States will not need to review 

whether an individual who meets the 

applicable MAGI standard (for example, 

133 percent FPL for the new adult 

group) is also eligible as a disabled or 

medically needy individual, both of 

which typically entail a more involved 

eligibility determination. 

For individuals with household 

income at or below the applicable MAGI 

standard, the agency would provide 

Medicaid benefits promptly and without 

undue delay. Benefits will be addressed 

in subsequent guidance. 

Some individuals with household 

income above the applicable MAGI 

standard may be eligible for Medicaid 

on another basis. In some States, for 

example, some individuals may be 

eligible based on disability or need for 

long-term care services, even if their 

income exceeds the applicable MAGI 

standard, and individuals eligible for 

Medicare may be eligible for assistance 

with Medicare premiums and cost 

sharing charges. In accordance with 

§ 435.911(c)(2), for each individual who 

is not eligible for Medicaid based on 

MAGI under § 435.911(c)(1), the 

Medicaid agency shall collect additional 

information, consistent with proposed 

§ 435.907(c), as may be needed to 

determine Medicaid eligibility on other 

such other bases. 

We note that the MAGI screen 

proposed for State Medicaid agencies is 

the same process as that at proposed 45 

CFR 155.305(c) of the Exchange 

Proposed Rule published elsewhere in 

this Federal Register; however, the 

Exchange will not be required to 

undertake Medicaid eligibility 

determinations based on factors other 

than MAGI. Under proposed 

§ 435.1200(e)(2) and the Exchange 

Proposed Rule at 45 CFR 155.345, the 

Medicaid agency will retain 

responsibility for making such 

determinations, although the State can 

establish procedures whereby the 

Exchange will undertake such other 

determinations in certain 

circumstances, consistent with 

regulations at § 431.10 and § 431.11, as 

revised in and discussed in section J of 

this proposed rule. 

Proposed § 435.911(c)(2)(iii) specifies 

that the agency must follow the policies 

of proposed § 435.1200(g) to assess 

individuals determined not eligible for 

Medicaid based on MAGI for potential 

eligibility for other insurance 

affordability programs and to facilitate 

seamless transfer of the individual’s 

electronic account to these other 

programs. Under proposed 

§ 435.1200(g)(2), evaluation of 

individuals for Medicaid eligibility 

based on blindness or disability in 

accordance with proposed 

§ 435.911(c)(2) should occur at that 

same time as evaluation for potential 

eligibility for premium tax credits for 

enrollment through the Exchange. 

We are not proposing specific 

timeliness standards for the 

determination of eligibility under 

proposed § 435.911. In collaboration 

with States, we will be developing 

performance standards and metrics for 

the streamlined and coordinated 

eligibility and enrollment system. These 

metrics will also support the standards 

and conditions described in the Federal 

Funding for Medicaid Eligibility 

Determination and Enrollment 

Activities final rule (76 FR 21950) 

published in the April 19, 2011 Federal 

Register. 

F. Coverage Month 

In proposed § 155.410 of the Exchange 

proposed rule, enrollment through the 

Exchange for individuals terminated 

from Medicaid can begin at the earliest 

on the 1st day of the month following 

the date the individual loses Medicaid 

and is determined eligible for 

enrollment through the Exchange. If the 

individual loses Medicaid eligibility 

and is determined eligible for 

enrollment through the Exchange after 

the 22nd day of the month, enrollment 

through the Exchange begins at the 

earliest on the first day of the second 

month following such date. To promote 

coordination with coverage through the 

Exchange, we are considering adding a 

provision to the regulations to extend 

Medicaid coverage until the end of the 

month that the appropriate termination 

notice period ends. Certain exceptions— 

such as the death of a beneficiary— 

would apply. This is the current 

practice in many States which now end 

Medicaid coverage at the end of a month 

for administrative convenience or to 

align with coverage offered by 

participating health plans paid on a per 

capita per month basis, as permitted 

under current regulations. We believe 

that providing coverage through the end 

of the month is similar to existing 

regulations at redesignated § 435.915(b), 

which allows States to make eligibility 

effective from the beginning of a month. 

We invite comments on this potential 

approach to coverage, its likely impact 

on maintaining continuous coverage, 

whether the costs of this approach 

outweigh the benefits, or whether we 

should retain the current policy that 

provides State flexibility to end 

coverage at any time during a month. 

G. Verification of Income and Other 

Eligibility Criteria (§ 435.940 Through 

§ 435.956) 

In this section, we discuss changes to 

42 CFR part 435 subpart J to make 

verification processes more efficient, 

modernized and coordinated with the 

Exchange. In general, the proposed rules 

maximize reliance on electronic data 

sources, shift certain verification 

responsibilities to the Federal 

government, and provide States 

flexibility in how and when they verify 

information needed to determine 

Medicaid eligibility. The proposed 

changes draw from successful State 

systems and are aligned with those 

proposed at § 155.315 and § 155.320 of 

the Exchange proposed rule. The major 

changes are: 

• In accordance with section 1413(c) 

of the Affordable Care Act, State 

Medicaid agencies will use a system 

established by the Secretary pursuant to 

her authority under sections 1411(c) and 

1413(c) of such Act, through which all 

insurance affordability programs can 

corroborate or verify certain information 

with other Federal agencies (for 

example, citizenship with the Social 

Security Administration (SSA), 

immigration status through the 

Department of Homeland Security 

(DHS), and income data from the IRS.) 

This system will reduce administrative 

burden on State Medicaid agencies and 

Exchanges. 

• Consistent with current policy, 

State Medicaid agencies may accept 

self-attestation of all eligibility criteria, 

with the exception of citizenship and 

immigration status. To ensure program 

integrity, States must comply with the 

requirements of section 1137 of the Act 

to request information from trusted data 

sources when useful to verifying 

financial eligibility. 


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Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51163 

• We propose that in verifying 

eligibility States will rely, to the 

maximum extent possible, on electronic 

data matches with trusted third party 

data sources. Additional information, 

including paper documentation, may be 

requested from individuals when 

information cannot be obtained through 

an electronic data source or is not 

‘‘reasonably compatible’’ with 

information provided by the individual. 

These changes align eligibility 

verification methods for Medicaid with 

those used for advance payments of 

premium tax credits and other 

insurance affordability programs. This 

proposal would apply to the specific 

financial and non-financial information 

referenced in these rules, as well as to 

any additional information the agency 

finds it necessary to verify in order to 

determine eligibility, regardless of 

whether that information is specifically 

referenced in the regulation. 

• A new section at § 435.956 relates 

to requests by the agency for 

information about non-financial 

eligibility factors. 

• Finally, we have deleted a number 

of prescriptive provisions that are in 

current regulations as to when or how 

often States must query certain data 

sources, or when certain State wage 

agencies must provide data to the State 

Medicaid agency. We do not believe that 

this level of specificity regarding State 

use of data sources is necessary, nor do 

we believe it is appropriate to include 

in Medicaid regulations requirements 

that bind other agencies, such as State 

wage agencies. 

These and other proposed revisions 

are discussed in more detail below. 

1. Basis, Scope, and General 

Requirements (§ 435.940 and § 435.945) 

At § 435.940, we add statutory 

citations to the basis and scope of the 

income and eligibility verification 

regulations to include, in addition to 

section 1137 of the Act, sections 

1902(a)(4), 1902(a)(19), 1903(r)(3) and 

1943 of the Act, as well as section 1413 

of the Affordable Care Act. 

At § 435.945(a), consistent with 42 

CFR part 455, we are specifying that 

nothing in this proposed rule shall 

prevent a State from acting to ensure 

program integrity. Program integrity is a 

top priority and should be considered in 

commenting on the proposed rule. 

Consistent with current policy, at 

§ 435.945(b), we add language to 

expressly permit States to accept 

attestation of information related to 

eligibility, including income, age, birth 

date and State residency, without 

requesting paper documentation. The 

exceptions to this provision are 

citizenship and immigration status, as 

these are subject to separate statutory 

requirements. States must continue to 

comply with the provisions of section 

1137 of the Act relating to income 

information in accordance with rules set 

out in this section. 

Redesignated § 435.945(c) directs the 

agency to request and use information 

in accordance with the appropriate 

sections of the regulations. We modify 

existing cross references to reflect other 

changes proposed and add cross 

references to the new § 435.949 and 

§ 435.956. In addition, we have deleted 

references in § 435.945(c) and 

throughout the regulation to verifying 

‘‘medical assistance payments,’’ 

‘‘amount of medical assistance 

payments’’ and ‘‘benefit amount’’ as the 

reference to the verification of 

‘‘eligibility’’ is sufficient. 

We removed the list of programs with 

which the State Medicaid agency must 

exchange information at § 435.945(d) 

and instead include a reference to those 

programs listed in 1137(b) of the Act, as 

well as the child support enforcement 

program under Part IV–D of the Act 

(which is also referenced in section 

1137) and SSA. Pursuant to sections 

1413 of the Affordable Care Act and 

1943 of the Social Security Act, we have 

added insurance affordability programs 

as programs with which the agency 

must exchange information. 

We have not changed the rules for 

reimbursement arrangements between 

agencies for data exchanges at 

redesignated § 435.945(e), except for an 

updated cross reference and citing to 

section 1137(a)(7) of the Act. 

Redesignated § 435.945(f) specifies 

that before a request for information 

from a third-party data source is 

initiated, an individual must receive 

notice of the information being 

requested and its use. Consistent with 

current State practice, we anticipate that 

this notice would be provided as part of 

the application process. We have 

deleted the current exception to this 

notice requirement when an 

individual’s eligibility has been 

determined by another agency because, 

under our revised rule, proper notice is 

required only when the agency itself 

will be requesting data from another 

agency or program. The reporting 

requirements at redesignated 

§ 435.945(g) remain unchanged; 

however the regulatory citations relating 

to MEQC and documentation have been 

updated. 

Existing § 435.945(g), regarding a 

State Wage Information Collection 

Agency (SWICA) that does not use the 

quarterly wages reported by employers 

under section 1137 of the Act, has been 

deleted, as we believe these 

requirements are not within the purview 

of the State Medicaid agency. 

Per section 1413(c) of the Affordable 

Care Act, we add a new § 435.945(h) 

(renumbering the next paragraph) to 

require that data exchanged 

electronically under this section must 

be sent and received via secure 

electronic interfaces which, as defined 

in proposed § 435.4, must be consistent 

with 42 CFR part 433. 

Redesignated § 435.945(i), pertaining 

to written agreements between agencies 

engaged in data exchanges, has been 

modified to eliminate specific 

requirements regarding the precise 

content of such agreements and the 

timing and frequency of data exchanges 

to provide States greater flexibility. This 

flexibility will facilitate coordination 

with Exchanges and other insurance 

affordability programs and allow States 

to take full advantage of the increased 

automation of electronic data matching 

enabled through the provision of 

enhanced Federal funding for the 

development and implementation of 

such systems available under 42 CFR 

part 433 subpart C. 

2. Verification of Financial Eligibility 

(§ 435.948) 

Under sections 1137 and 1902(a)(46) 

of the Act, certain Federally-funded, 

State-administered programs, including 

Medicaid, are required to conduct 

electronic data matches to obtain 

income information from the State 

quarterly wage reports and 

Unemployment Insurance Benefits, the 

IRS, and the SSA to verify financial 

eligibility for benefits, if such 

information may be useful in verifying 

eligibility for Medicaid, as determined 

by the Secretary. 

However, not all data sources are 

useful in all situations and under 

section 1137(a)(4)(C). The use of 

information identified in section 1137 of 

the Act ‘‘shall be targeted to those uses 

which are most likely to be productive 

in identifying and preventing 

ineligibility * * * and no State shall be 

required to use such information to 

verify the eligibility of all recipients.’’ In 

addition to the data sources specifically 

listed in section 1137 of the Act, many 

States also rely on other data matches, 

which they find useful to verify income. 

We believe that States are in the best 

position to determine the usefulness of 

the available data sources in specific 

cases. Therefore, we propose at 

§ 435.948(a) to delegate to the State 

Medicaid agency the discretion afforded 

to the Secretary of the HHS under 

section 1137(a)(2) of the Act to 

determine when the information 


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51164 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

identified in section 1137 of the Act is 

useful to verifying financial eligibility 

for an individual and must be requested. 

The sources of data which States much 

check, if useful, remain unchanged, 

except as follows: 

• For the reasons discussed above, 

specific references to the timing and/or 

frequency with which information must 

be requested are deleted; 

• Public Assistance Reporting 

Information System (PARIS) is added as 

a new data source given the requirement 

in 1903(r)(3) of the Act that all 

eligibility determination systems must 

conduct data matching through PARIS; 

• We eliminate reference to the 

former AFDC program; and 

• We replace reference to ‘‘Food 

Stamps’’ with ‘‘Supplemental Nutrition 

Assistance Program’’ to reflect the new 

name under the Food, Conservation and 

Energy Act of 2008. 

As noted above and discussed in more 

detail below in relation to proposed 

§ 435.949, the Secretary is required to 

establish a system through which all 

insurance affordability programs can 

verify certain information with other 

Federal agencies. At new § 435.948(b), 

we propose that, to the extent available, 

States must access needed information 

when available through the system 

established by the Secretary, consistent 

with sections 1943(b)(3) and 1902(a)(4) 

of the Act. 

At § 435.948(c)(1), we provide that 

information not available through the 

service established by the Secretary 

under § 435.949 may be obtained 

directly from the agency or program 

housing the information. At 

§ 435.948(c)(2), we retain the current 

policy in paragraph (c) of the existing 

regulations that information be 

requested by SSN, but clarify that, when 

an SSN is not available, the agency 

attempt to obtain needed information 

using other personally identifying 

information otherwise available in the 

individual’s account, as described in 

§ 435.4. Note that when an SSN is not 

available, the agency must assist the 

individual in obtaining a SSN in 

accordance with § 435.910. 

States may request and use alternate 

data sources, as permitted at proposed 

§ 435.948(d), subject to Secretarial 

approval. Such alternative sources 

should reduce administrative costs and 

burdens on individuals and States, 

maximize accuracy, and minimize 

delay. Also, we make explicit existing 

policy that use of any such alternative 

data source must meet applicable 

requirements relating to the 

confidentiality, disclosure, 

maintenance, or use of information. 

Finally, consistent with section 1413 of 

the Affordable Care Act, we add that the 

use of an alternative data source 

facilitate coordination between all other 

insurance affordability programs. 

3. Verification of Information From 

Federal Agencies (§ 435.949) 

Section 1413(c) of the Affordable Care 

Act directs the Secretary of HHS, in 

consultation with the Secretary of the 

Treasury, the Secretary of Homeland 

Security and the Commissioner of 

Social Security, to establish a system of 

verification, using secure electronic 

interfaces, through which all State 

health coverage programs can verify 

information needed to determine 

eligibility. Section 1411(c) of the 

Affordable Care Act specifically directs 

that the system enable electronic 

verification of household income and 

family size with the IRS, citizenship 

data with SSA, and immigration status 

with DHS. 

By enabling access to multiple 

Federal sources though a single inquiry, 

insurance affordability programs can 

receive prompt, reliable data through 

the same service, thereby alleviating 

multiple data inquiries that the State 

might otherwise have to make. Since all 

of the insurance affordability programs 

will rely on certain common sources 

(that is, SSA, DHS and IRS), once such 

information is gathered and evaluated 

by one program, reevaluation or reverification of data will not be 

necessary, and thus, not permitted by 

another program (unless an individual 

reports a change in circumstances). 

We propose at § 435.949(a) to specify 

the Federal agencies from which 

information will be available through 

the Secretary, including SSA, DHS and 

the IRS. We propose in § 435.949(b) 

that, if data included in § 435.949 is 

available through the Secretary, States 

would be required to obtain such data 

through the service established by the 

Secretary. Other applicable regulations, 

including those set forth at § 435.948, 

§ 435.956 and § 435.960, remain in 

effect for information, which cannot be 

requested through the Secretary. 

We propose § 435.949(c) to codify 

section 1413(c)(3) of the Affordable Care 

Act, which provides that the Secretary 

may modify the methods used in the 

verification system established if she 

determines that modifications would 

reduce the administrative costs and 

burdens on individuals or agencies; 

ensure accurate and timely verification; 

comply with applicable requirements 

for the confidentiality, disclosure, 

program integrity, and maintenance or 

use of the information, including the 

requirements of section 6103 of the IRC; 

and promote coordination among 

insurance affordability programs. 

Section 435.949(c) is proposed to be 

consistent and coordinated with 

§ 155.315 of the proposed Exchange 

rule. 

4. Use of Information and Requests for 

Additional Information (§ 435.952) 

We are proposing changes to 

§ 435.952, which describes the 

appropriate use of information. We are 

proposing to eliminate vague language 

at the end of § 435.952(a) regarding the 

requirement to independently verify 

information ‘‘* * * if determined 

appropriate by agency experience.’’ We 

expect processes to occur in real time 

wherever possible and we will be 

defining more detailed standards and 

other performance metrics, with State 

and stakeholder input, in subsequent 

Federal guidance. Accordingly, we also 

are proposing to delete the specific 

timeliness requirements contained in 

the current regulation at § 435.952(c), 

which now requires agency action 

within 45 days from the date new 

information is received. 

Under § 435.952(b), as revised, if 

information provided by an individual 

is reasonably compatible with 

information that the agency has 

obtained from other trusted sources, the 

agency must act on such information 

and may not request additional 

information from the individual. To 

establish an appropriate balance 

between reliance on electronic 

verification and paper documentation, 

we propose to establish a ‘‘reasonable 

compatibility’’ standard governing when 

additional information, including paper 

documentation, can be requested from 

applicants and beneficiaries. Under 

proposed § 435.952(c), no further 

information may be required from the 

individual unless the agency is unable 

to obtain information through electronic 

data matching or the information 

obtained is not reasonably compatible 

with that provided by the individual. In 

such cases, the agency may contact the 

individual and accept the individual’s 

explanation without further 

documentation, if reasonable, or the 

agency may request additional 

information, including paper 

documentation. ‘‘Reasonably 

compatible’’ does not necessarily mean 

an identical match for the data, only 

that the information is generally 

consistent. Since what is ‘‘reasonably 

compatible’’ may vary depending on the 

particular circumstances, we are 

proposing to provide States flexibility to 

apply this standard. Under § 435.948(d), 

if the individual fails to respond to a 

request for additional information 

permitted under the proposed rule, the 


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agency shall proceed to deny, terminate, 

or reduce Medicaid only after notice 

and appeal rights have been provided in 

accordance with part 431, subpart E. 

Sections 435.953 and 435.955 of the 

current regulations are deleted in the 

proposed rule. Provisions contained in 

§ 435.953(a) and § 435.955(a) through (c) 

and (f) are revised and incorporated into 

§ 435.948 and § 435.952, in accordance 

with the discussion above. We propose 

to remove the remaining requirements 

in § 435.953(b) through (d) (relating to 

detailed information the State must 

submit for the Secretary’s approval to 

exclude specific data requests) and the 

detailed requirements in § 435.955(a) 

and (d), (e) and (g) (relating to the 

additional provisions regarding 

information released by a Federal 

agency, including State reporting 

requirements and requests for a waiver 

from the Federal agency’s Data Integrity 

Board). We believe that the detailed 

nature of these provisions may 

unnecessarily hamper development of 

an efficient, modernized and 

coordinated system and that such 

details are best developed in 

collaboration with States and addressed 

through subregulatory guidance. 

5. Verification of Other Non-Financial 

Information (§ 435.956) 

We propose a new § 435.956 to 

address verifying non-financial 

information. As with financial 

information, to the extent non-financial 

information is available through the 

electronic service established by the 

Secretary, States would use that service 

under proposed § 435.949(b). 

Under the proposed rule, at 

§ 435.956(c), States may use attestation 

(including attestation of someone acting 

responsibly on behalf of the individual) 

or electronic data sources to determine 

State residency, in accordance with 

§ 435.945(b) and § 435.952. Under 

proposed § 435.956(c), documents that 

provide information regarding 

immigration status should be used as a 

source of evidence to verify satisfactory 

immigration status, but may not, by 

themselves, be used to demonstrate lack 

of residency. For example, a temporary 

or time-limited immigration status, such 

as Temporary Protected Status (TPS), 

does not necessarily establish that the 

individual is not a State resident 

because TPS is routinely renewed. The 

proposed rule relating to residency does 

not diminish States’ responsibility to 

ensure that only individuals with valid 

and satisfactory immigration status are 

determined eligible for and enrolled in 

Medicaid; if an individual has a 

temporary immigration status, the 

agency must ensure that the individual’s 

Medicaid eligibility is reviewed at the 

appropriate time. 

Proposed § 435.956(d) simply crossreferences current policy at § 435.910(f) 

and (g) regarding issuance and 

verification of SSNs. 

Current Federal rules regarding 

verification of pregnancy vary based on 

the woman’s eligibility category, but 

verification of pregnancy is not required 

in all cases under current rules. 

Verification (except by self-attestation) 

may not be required for pregnant 

women eligible for pregnancy related 

services under section 

1902(a)(10)(A)(i)(IV) or (ii)(IX) of the 

Act, but pregnant women must provide 

medical verification of pregnancy to be 

eligible for full Medicaid coverage as a 

qualified pregnant woman (with very 

low-income below the State’s former 

AFDC standard) under section 

1902(a)(10)(A)(i)(III) of the Act or under 

section 1931 of the Act, if medical 

verification was required under the 

State’s AFDC program in effect on July 

16, 1996. 

In light of the proposed regulations at 

§ 435.116, which combine these 

different eligibility categories to achieve 

greater simplicity in the program, we 

believe a verification rule for the 

combined group is needed. Thus, we are 

exercising the authority provided in 

section 1902(e)(14)(A)of the Act to 

propose application of the selfattestation verification rule under 

section 1902(a)(10)(A)(i)(IV) or (ii)(IX) of 

the Act in determining eligibility under 

§ 435.116. Although a change in federal 

guidelines, we do not believe that this 

will have significant practical impact for 

States, as we believe most pregnant 

women today are covered under the 

eligibility groups for which medical 

verification is already not required. 

Proposed § 435.956(e) reflects this 

policy, providing that the agency must 

rely on the woman’s attestation of 

pregnancy, unless the agency has other 

information (for example, claims 

history) that is not reasonably 

compatible with her attestation. To 

promote coordination of eligibility rules 

and procedures with the Exchange, we 

also propose at § 435.956(e) to codify 

the widespread State practice of 

accepting attestation of household 

composition unless the State has 

information which is not reasonably 

compatible with such attestation. 

In proposed § 435.956(f), in the 

situations when age is a factor of 

eligibility, States may apply the same 

proposed verification procedures and 

options, as are available for other 

eligibility criteria verification, in 

accordance with § 435.945(b) and 

§ 435.952. 

When agencies obtain information 

regarding residency, SSN, pregnancy, 

age, and birth date in accordance with 

paragraphs (c) through (f) that is not 

reasonably compatible with the 

information or attestation provided by 

an individual, they must take reasonable 

steps to reconcile discrepancies that 

would affect eligibility, following the 

process set out in § 435.952(c) and (d). 

H. Periodic Redetermination of 

Medicaid Eligibility (§ 435.916) 

Consistent with section 1943(b)(3) of 

the Act and sections 1413(a) and 

1413(c)(2) of the Affordable Care Act, 

which aim to ensure that individuals 

remain enrolled for as long as they meet 

eligibility standards, we propose to 

amend § 435.916 to establish simplified, 

data-driven renewal policies and 

procedures for individuals whose 

eligibility is based on MAGI, consistent 

with ensurance of program integrity. 

States are increasingly re-engineering 

their renewal processes, recognizing 

that the traditional process, which 

involves a new application and 

documentation, may be unnecessary 

and can be burdensome for families and 

agencies. In addition, many eligible 

beneficiaries lose coverage at renewal 

for procedural reasons, only to reapply, 

and to regain eligibility, soon after 

losing coverage. This churning on and 

off of coverage is administratively costly 

and burdensome for the agency, health 

plans, and consumers, and is disruptive 

to continuity of care and efforts to 

achieve quality and efficiency in the 

delivery of care. This rule proposes 

renewal procedures that are consistent 

with those that will operate for the 

premium tax credit and that mirror the 

practices many States have adopted as 

they have sought to simplify the 

enrollment process and promote 

continuity of coverage. 

Under current Federal policy, 

eligibility must be redetermined at least 

once every 12 months, and although 

States can have a shorter regular 

redetermination period, very few States 

do so today. According to a 2011 50- 

State survey by the Kaiser Family 

Foundation, all but two States currently 

have a 12-month renewal period for 

children and all but five also provide 

12-month renewal periods to parents. 

Consistent with this State trend and the 

annual redetermination procedures for 

individuals eligible for tax credits to 

purchase coverage through the 

Exchange at § 155.335 of the Exchange 

proposed rule, we propose at 

§ 435.916(a)(1) that States schedule 

regular redeterminations or renewals for 

beneficiaries whose eligibility is based 

on MAGI once every 12 months. 


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Consistent with current policy, 

eligibility should be redetermined more 

frequently if a beneficiary reports a 

change in circumstance that may affect 

continued eligibility, or the agency 

obtains information (for example, 

through a data match from other 

program records) that suggests the need 

for an eligibility review. States maintain 

authority and flexibility to establish 

procedures that ensure program 

integrity. 

In recent years, States also have 

increasingly adopted measures to 

streamline the renewal process, 

including the use of administrative, 

telephone and online renewals. 

Consistent with this State trend, under 

the proposed process at § 435.916(a), 

States would not need a renewal form 

from all individuals, further 

streamlining the process for individuals 

and States. Similar to the proposed 

verification processes at initial 

application, discussed in section II.H. of 

this proposed rule, the proposed 

renewal procedures maximize the use of 

current third-party data matching to 

verify continued eligibility. Thus, at 

§ 435.916(a)(2), we propose to codify the 

longstanding policy (see http:// 

www.cms.gov/smdl/downloads/ 

smd040700.pdf) that agencies renew 

eligibility for beneficiaries by first 

evaluating information available to the 

agency in the electronic account or from 

other reliable data sources. If the 

information available to the agency is 

sufficient to make a determination of 

continued eligibility, including 

information that establishes that the 

individual or family continues to reside 

in the State, coverage shall be renewed 

on the basis of this information and the 

agency would send the appropriate 

notice to the beneficiary without 

requiring any further action. This 

eliminates the need for and 

administrative burden of a renewal form 

or a signed returned notice and 

unnecessary requests for information 

already on hand. 

State experience with this type of 

renewal process shows that it reduces 

the number of eligible beneficiaries who 

lose coverage for procedural reasons 

while maintaining program integrity. 

Beneficiaries must correct any 

inaccurate information contained in the 

determination notice and would be 

permitted to do so through a variety of 

means, including online, in person, by 

telephone, or via mail. As noted below, 

if any information is missing or is not 

reasonably compatible with ongoing 

eligibility, the agency must take further 

action to complete the renewal process. 

If the agency cannot determine that 

the individual remains eligible through 

the process described above, we propose 

in § 435.916(a)(3) a process in which the 

agency would provide the individual 

with a pre-populated renewal form 

containing information that is relevant 

to the renewal and available to the 

agency. The agency would then provide 

the individual with a reasonable 

period—these rules propose at least 30 

days—to furnish necessary information 

and to correct any inaccurate 

information either in person, online, by 

telephone, and via mail. We seek 

comments on this proposed process. 

At § 435.916(a)(3)(ii), we propose that 

the agency verify the information 

reported by the beneficiary in 

accordance with § 435.945 through 

§ 435.956, as revised in these proposed 

rules, including, at State option, 

reliance on self-attestation consistent 

with those sections. In 

§ 435.916(a)(3)(iii), to avoid unnecessary 

reapplications for coverage, we also 

propose a reconsideration period for 

individuals who lose coverage for 

failure to return the renewal form. 

Individuals who return the form within 

a reasonable period after coverage is 

terminated would be redetermined 

without the need for a new application. 

We considered specifying a 90-day 

reconsideration period to align with the 

3-month retroactive assistance period 

provided under section 1902(a)(34) of 

the Act, but did not specify a particular 

length of time in this proposed rule. We 

seek comments on the use and length of 

a specified reconsideration period. 

Finally, consistent with section 1413 

of the Affordable Care Act, we propose 

at § 435.916(a)(4) that for beneficiaries 

no longer eligible for Medicaid, the 

agency assess the individual for 

eligibility in other insurance 

affordability programs and transmit the 

electronic account and other pertinent 

data to the appropriate program for a 

determination of eligibility in 

accordance with proposed 

§ 435.1200(g). 

We have not proposed amending the 

renewal procedures for beneficiaries 

eligible on a basis other than MAGI 

(reflected in current regulations at 

redesignated § 435.916(b)), but seek 

comment on extending the renewal 

procedures proposed in § 435.916(a) to 

such individuals. 

We propose to expand the standards 

under redesignated § 435.916(c) to 

include options for permitting all 

beneficiaries to report changes online, 

over the telephone, by mail or in person. 

Given the evolving reliance on methods 

for communication that go beyond the 

in-person interview, we solicit comment 

on whether more modernized 

procedures to report changes should be 

available to both the MAGI and MAGIexcepted populations. 

We note that we will be modifying the 

Payment Error Rate Measurement 

(PERM) and Medicaid Eligibility Quality 

Control (MEQC) regulations to ensure 

that both the PERM Medicaid eligibility 

review and MEQC processes take into 

account these rules and procedures, 

including the use of authoritative data 

sources in redetermining eligibility. We 

also note that any State expenditures 

(before the end of 2015) for system 

changes necessary to adopt these 

renewal procedures should be subject to 

the enhanced (90 percent) match as 

outlined in the Federal Funding for 

Medicaid Eligibility Determination and 

Enrollment Activities final rule 

published in the April 19, 2011 Federal 

Register (76 FR 21950), provided these 

systems meet the standards and 

conditions set forth in that rule. 

I. Coordination of Eligibility and 

Enrollment Among Insurance 

Affordability Programs—Medicaid 

Agency Responsibilities (§ 435.1200) 

We propose to add a new subpart M, 

Coordination between Medicaid and 

other insurance affordability programs, 

including a new § 435.1200 to delineate 

the State Medicaid agency’s 

responsibilities in effectuating such 

coordination. Proposed § 435.1200 also 

includes policies previously included in 

§ 431.636, Coordination of Medicaid 

with the State CHIP. Section 435.1200(a) 

and (b) set forth the basis for and 

definitions used in the proposed 

section. 

1. Basic Responsibilities (§ 435.1200(c)) 

Proposed § 435.1200(c) sets forth the 

basic responsibilities of the State 

Medicaid agency. Proposed 

§ 435.1200(c)(1) specifies that the 

Medicaid agency must participate in the 

coordinated eligibility and enrollment 

system described in section 1943 of the 

Act. As discussed, most individuals will 

be evaluated for eligibility in the 

Exchange, Medicaid, and CHIP using a 

coordinated set of rules and these 

programs will work together to ensure 

that eligible applicants are enrolled in 

the appropriate program, no matter 

where their application originates. For 

example, an individual who directly 

applies for and is determined ineligible 

for Medicaid would be immediately 

assessed for eligibility for advance 

payment of the premium tax credit and 

coverage through the Exchange. That 

individual would not need to file a new 

application in order to participate in 

Exchange coverage, if eligible. 

Integration among these programs will 

help to avoid duplication of costs, 


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processes, data, and effort on the part of 

both the State and the individual. 

We expect the use of a shared 

eligibility service to adjudicate 

placement for most individuals. The 

shared eligibility service would 

coordinate determination and renewal 

requirements for eligibility in each of 

the insurance affordability programs. It 

may include processes such as those 

used for collecting and verifying 

applicant information, including 

verification of citizenship and 

immigration status and certain income 

information as well as determining and 

renewing eligibility. Regardless of an 

applicant’s point of entry (directly 

online at home, with a navigator or 

community organization/assister, 

through the mail, or through a consumer 

assistance office established by the 

Exchange), this shared eligibility service 

would be used whenever the single 

streamlined application for enrollment, 

discussed in section II.E.2 of this 

proposed rule, is initiated or whenever 

a renewal occurs. 

We note that shared systems and the 

Medicaid functions they perform are 

eligible for enhanced Federal financial 

participation (FFP) of 90 percent for 

development (through December 31, 

2015) and 75 percent for operations (no 

time limit) if certain conditions and 

standards are met. For additional 

information, see the April 19, 2011 final 

rule establishing enhanced funding for 

Medicaid eligibility and enrollment 

activities. Such systems are subject to 

cost allocation principles, per OMB 

Circular A–87 and guidance from CMS. 

In addition, the entities and agencies 

performing functions on behalf of one 

another that involve the use or 

disclosure of an individual’s health 

information will be required to comply 

with the applicable business associate 

provisions of the Privacy and Security 

Rules under the Health Insurance 

Portability and Accountability Act of 

1996. 

Section 435.1200(c)(2) proposes that 

State Medicaid agencies enter into one 

or more agreements with the Exchange 

and other insurance affordability 

programs as necessary to ensure 

coordination of eligibility and 

enrollment, including coordination with 

a Basic Health Program if applicable. 

Details about the Basic Health Program 

will be included in forthcoming 

guidance. States may also use such 

agreements to coordinate related 

activities, such as health plan 

management. 

States may design these agreements in 

different ways that reflect their 

governance structures. We see three 

broad options. First, one or more of the 

entities (the Exchange, Medicaid or 

CHIP agencies) could enter into an 

agreement whereby some or all of the 

responsibilities of each entity are 

performed by one or more of the others. 

Second, a State could develop a fully 

integrated system whereby the 

responsibilities of all entities are 

performed by a single integrated entity. 

Third, each entity could fulfill its 

responsibilities and establish strong 

connections to ensure the seamless 

exchange of information and data. We 

solicit public comments on these 

different working relationships and the 

best mechanisms to facilitate States’ 

ability to coordinate eligibility and 

enrollment. 

We note that relationships between 

the State Medicaid program and other 

insurance affordability programs must 

be established in accordance with 

section 1902(a)(5) of the Act, which 

specifies that a single State agency will 

administer or supervise the 

administration of the Medicaid program. 

When the Exchange or other entity is 

performing delegated functions, it must 

at all times conduct such business 

consistent with the rules adopted by the 

Medicaid agency. This is further 

discussed in section II.J of this proposed 

rule. 

At § 435.1200(c)(3), we propose that 

the State Medicaid agency must certify 

criteria necessary for the Exchange to 

use in determining Medicaid eligibility 

based on MAGI. This includes the 

applicable Medicaid MAGI standard for 

parents and caretaker relatives, other 

adults, pregnant women, and children, 

as well as the criteria for determining 

satisfactory immigration status, in 

accordance with the Medicaid State 

plan. We invite public comment on 

other eligibility rules or criteria that 

should be certified by the Medicaid 

agency for Medicaid eligibility 

determinations made by the Exchange. 

MAGI methodologies and Medicaid 

eligibility based on the applicable MAGI 

standards are discussed in sections 

II.B.3 and II.E of this proposed rule. 

2. Internet Web Site (§ 435.1200(d)) 

Section 1943 of the Act says that no 

later than January 1, 2014, States shall 

establish an Internet Web site, linked to 

the Web sites of other insurance 

affordability programs, through which 

individuals may obtain information, 

apply for, and enroll in Medicaid. To 

accomplish this, States could, for 

example, create one enrollment Web site 

for information and enrollment in all 

insurance affordability programs, or 

they could establish a broad health care 

Web site that includes health insurance 

coverage, health care services and 

supports, and health education 

information from a broad array of 

entities. Additionally, a State could 

establish a Medicaid presence on an 

existing State Web site. This Web site 

must be coordinated with the Exchange 

Web site as described at § 155.205 of the 

Exchange proposed rule. 

Proposed § 435.1200(d) gives 

individuals the option to apply for or 

renew their eligibility for Medicaid 

online. A Web site that connects an 

individual directly into the Medicaid 

eligibility determination system is 

eligible for enhanced FFP under the 

April 2011 final rule establishing 

enhanced funding for Medicaid 

eligibility and enrollment activities, if 

the system in its totality, including the 

Web site, meets certain standards and 

conditions. Additional information on 

Web site specifications will be provided 

in forthcoming guidance. 

Because the Internet Web site may 

serve as the primary mechanism 

through which individuals 

communicate with the agency, it must 

be accessible to individuals with 

disabilities and persons who are limited 

English proficient (LEP). At 

§ 435.1200(d)(2) we propose that the 

agency must ensure accessibility of Web 

resources in accordance with the 

Americans with Disabilities Act and 

section 504 of the Rehabilitation Act, 

and must take reasonable steps to 

provide meaningful access for LEP 

persons. Accessibility needs of LEP 

persons may be met by providing 

language assistance services, such as 

translated information and ‘‘taglines’’ 

that inform LEP persons of the ability to 

talk to a multilingual staff person or an 

interpreter. 

Web sites, interactive kiosks, and 

other information systems would be 

viewed as being in compliance with 

section 504 if they meet or exceed 

section 508 standards, which ensure 

that Federal agencies’ electronic 

information technology is accessible to 

people with disabilities. The latest 

Section 508 guidelines issued by the US 

Access Board can be accessed at 

http://access-board.gov/sec508/ 

standards.htm, and W3C’s Web Content 

Accessibility Guidelines (WCAG) 2.0 

can be accessed at http://www.w3.org/ 

TR/WCAG20/. 

3. Provision of Medical Assistance for 

Individuals Found Eligible for Medicaid 

by an Exchange (§ 435.1200(e)) 

Consistent with sections 1413 and 

2201 of the Affordable Care Act, under 

the coordinated system proposed in 

these rules, if the Exchange finds that an 

individual is eligible for Medicaid, the 

State Medicaid agency must enroll the 


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individual without further 

determination of eligibility. This 

enrollment is subject to the rules 

established by the agency. We note that 

the State Medicaid agency has the 

responsibility to facilitate health plan 

selection for enrolled individuals, but 

may arrange with the Exchange to 

undertake this function. This could 

include providing the individual with 

available health plan options and 

transmitting enrollment transactions to 

the health plan, if applicable. 

As discussed in section II.B.3 of this 

proposed rule, for most individuals, 

eligibility for Medicaid would be 

determined based on MAGI. As 

described in the Exchange proposed 

rule, the scope of the final eligibility 

determinations made by the Exchanges 

is limited to those based on individuals 

having MAGI-based income at or below 

the applicable MAGI standard. Note that 

in certain circumstances the State may 

establish procedures whereby the 

Exchange will undertake Medicaid 

eligibility determinations on other 

bases. Individuals who are not eligible 

for Medicaid based on MAGI, would be 

screened, using information provided 

on the application, for potential 

Medicaid eligibility on other bases. As 

appropriate, their applications and other 

relevant information would be 

transmitted to the Medicaid agency for 

a full Medicaid eligibility 

determination. See section 155.345 of 

the Exchange proposed rule for 

additional information. Further, all 

applicants have the right to request and 

receive a full determination of eligibility 

on bases other than MAGI from the State 

Medicaid agency. 

Section 435.1200(e) describes the 

standards for the Medicaid agency to 

promptly and efficiently enroll 

individuals determined to be Medicaid 

eligible by the Exchange. To accomplish 

this, we propose that the agency 

establish procedures to receive, via 

secure electronic interface from the 

Exchange, the finding of Medicaid 

eligibility and the individual’s 

electronic account, including all 

application information. We recognize 

that an actual transfer of data may not 

occur, as the Medicaid agency and the 

Exchange may be utilizing a shared 

eligibility system. However, the legal 

responsibility for the electronic 

accounts and for further action, as 

appropriate, will transfer from the 

Exchange to the Medicaid agency. We 

expect processes to occur in real time 

whenever possible and, as noted earlier, 

we will be defining more detailed 

standards and other performance 

metrics, with State and stakeholder 

input, in subsequent Federal guidance. 

4. Transfer of Applications From Other 

Insurance Affordability Programs to the 

State Medicaid Agency (§ 435.1200(f)) 

To ensure a coordinated eligibility 

and enrollment process as directed by 

the Affordable Care Act and address 

existing coordination rules for separate 

CHIP and Medicaid agencies in section 

2102(b)(3)(B) of the Act, we propose a 

new § 435.1200(f). This provision 

includes and revises provisions 

previously covered under 

§ 431.636(b)(1) through (b)(3). Under 

proposed § 435.1200(f), the State 

Medicaid agency must adopt procedures 

to promptly determine the eligibility of 

individuals assessed as potentially 

Medicaid-eligible by other insurance 

affordability programs and, if eligible, to 

enroll them without delay. 

Under this proposal, individuals with 

household income below the applicable 

MAGI level who are assessed as 

potentially Medicaid eligible by another 

insurance affordability program would 

be quickly and easily enrolled in 

Medicaid. Because all insurance 

affordability programs will be utilizing 

a common process for MAGI-based 

eligibility determinations, an individual 

assessed by such a program as 

potentially Medicaid eligible based on 

MAGI should receive a seamless 

determination from the Medicaid 

agency, and no further action should be 

required of the applicant. For 

individuals with household income 

above the applicable MAGI standard, 

who are either assessed by an insurance 

affordability program as potentially 

eligible on a basis other than MAGI, or 

who request an eligibility determination 

on another basis, we propose that the 

Medicaid agency must conduct a full 

Medicaid eligibility determination in 

the same manner as if their application 

had been submitted directly to the 

agency. 

We propose that the Medicaid agency 

establish procedures to receive the 

electronic account of any individual 

determined potentially Medicaid 

eligible by another insurance 

affordability program, and to promptly 

and without undue delay conduct an 

eligibility determination in accordance 

with the provisions set forth in 

§ 435.911(c). The agency must not 

request any information already 

obtained, or duplicate any eligibility 

verifications already performed, by the 

other insurance affordability program 

and included in the individual’s 

electronic account. Once the Medicaid 

determination is complete, we propose 

that the agency notify the insurance 

affordability program of the 

determination of Medicaid eligibility or 

ineligibility. Issues related to the notices 

needed to effectuate coordinated 

eligibility will be addressed in future 

rulemaking. 

5. Evaluation of Eligibility for Other 

Insurance Affordability Programs 

(§ 435.1200(g)) 

Section 1943(b)(1)(C) of the Act 

directs States to ensure that any 

individual who applies for, but is 

determined ineligible for, Medicaid or 

CHIP is screened for eligibility for 

advance payment of the premium tax 

credit, cost sharing reductions, and 

enrollment in a qualified health plan 

offered through the Exchange. 

Therefore, in § 435.1200(g)(1), we 

propose that the Medicaid agency must 

assess potential eligibility for other 

insurance affordability programs when 

the agency determines that an 

individual is not eligible for Medicaid. 

While the Affordable Care Act does 

not provide express authority for 

Medicaid to make eligibility 

determinations for coverage through the 

Exchanges, sections 1943(b)(2) of the 

Act and 1413(d)(2) of the Affordable 

Care Act do permit the agency to enter 

into a contract with the Exchange to do 

so. Absent such an agreement, the 

agency must promptly transfer the 

electronic account of individuals 

screened as potentially eligible, via 

secure electronic interface, to the 

Exchange so that such individuals can 

receive an immediate eligibility 

determination and, if eligible, be 

enrolled without delay. This provision 

assumes that verification of any 

information required only for eligibility 

in the Exchange, such as access to 

affordable employer-sponsored 

insurance, will be completed by the 

applicable program once the applicant’s 

case is transferred. (Under current law 

and regulations, States also have the 

flexibility to have the State Medicaid 

agency administer some or all of the 

administrative functions for a separate 

CHIP, including the determination of 

eligibility for such program.) 

We further propose that the electronic 

account transferred include the 

determination of ineligibility made by 

the Medicaid agency as well as all 

information provided on the single 

streamlined application and, as 

appropriate, verified by the State 

Medicaid agency. We note again that an 

actual transfer of data may not be 

necessary, but legal responsibility for 

the case will transfer from Medicaid to 

the appropriate program. We also note 

that the Exchange cannot reverse a 

determination of Medicaid ineligibility 

made by the Medicaid agency. 


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In this and the Exchange proposed 

rule, we propose that individuals 

determined ineligible for Medicaid 

based on MAGI, for whom the Medicaid 

agency is evaluating eligibility on the 

basis of being blind or disabled, may 

enroll in other insurance affordability 

programs while a final Medicaid 

determination is pending. Once the 

Medicaid determination is completed, if 

the individual is Medicaid-eligible, such 

coverage would be terminated in favor 

of Medicaid, but if not Medicaideligible, coverage would continue 

through the other program. This avoids 

unnecessary delays in coverage for 

individuals whose Medicaid eligibility 

determination process may be lengthy, 

while avoiding any overlap in coverage 

for those eventually determined 

Medicaid eligible based on blindness or 

disability. Proposed § 435.1200(g)(2) 

reflects the Medicaid agency’s 

responsibilities in effectuating this 

policy. We note that proposed 26 CFR 

1.36B(2)(c)(2)(iii)(B) in the Treasury 

proposed rule specifies that if an 

individual receiving advance payments 

of the premium tax credit is approved 

for Medicaid coverage, the individual is 

treated for purposes of eligibility for 

such credit, as eligible for minimum 

essential coverage no earlier than the 

first day of the first calendar month after 

such coverage is approved; thus, an 

applicant who is being evaluated by the 

Medicaid agency for eligibility based on 

blindness or disability and who is 

provided with advance payments of the 

premium tax credit in the interim would 

not be liable to repay such advance 

payments upon retroactive approval of 

Medicaid during the period for which 

advance payments were paid. 

Since it would be inefficient and 

confusing to transfer and enroll 

individuals in other coverage, only to be 

disenrolled from such coverage days or 

even a few weeks later for enrollment in 

Medicaid, we propose to limit 

application of the policy described to 

individuals whom the Medicaid agency, 

in accordance with procedures in 

proposed § 435.911(c)(3), is evaluating 

for eligibility on the basis of being blind 

or disabled. 

J. Single State Agency (§ 431.10 and 

§ 431.11) 

As discussed in section II.I above, to 

ensure a fully coordinated eligibility 

determination and enrollment process, 

the Exchange proposed rule provides 

that Exchanges will make Medicaid 

eligibility determinations to effectuate 

Section 1943(b)(B). For numerous 

reasons, including the coordinated 

enrollment process, we anticipate that 

States will want to consider different 

ways to achieve integration across 

Exchanges, Medicaid agencies and 

CHIP. 

Under Medicaid’s ‘‘single State 

agency’’ requirement in section 

1902(a)(5) of the Act, as codified in 

§ 431.10 and § 431.11, States must 

identify a ‘‘single State agency to 

administer or to supervise the 

administration’’ of the Medicaid 

program (that is, the Medicaid agency). 

This ensures that there is a single point 

of responsibility and accountability for 

proper administration of the State 

Medicaid program, including for 

eligibility determinations. 

We note, however, that the statute at 

1902(a)(5) specifically permits and in 

some cases requires the single State 

agency to delegate the authority to make 

eligibility determinations to certain 

other agencies. Current regulations 

provide for such delegation of eligibility 

functions in § 431.10(c). The regulations 

at § 431.10(e) provide that, in delegating 

any single State agency functions, the 

Medicaid agency retain authority to 

exercise administrative discretion in the 

administration or supervision of the 

plan, and that if other State or local 

agencies perform services for the 

Medicaid agency, they must not have 

the authority to change or disapprove 

any administrative decision of the 

Medicaid agency, or otherwise 

substitute their judgment for that of the 

Medicaid agency in the application of 

policies, rules and regulations issued by 

the Medicaid agency. It is our 

understanding that the use of this 

delegation authority is widespread 

across the nation, and in some States, 

multiple State agencies separate and 

apart from the State Medicaid agency, as 

well as county agencies make Medicaid 

eligibility determinations on behalf of 

the single State agency and under its 

supervision. In all instances, the single 

State agency is responsible under the 

statute to set the rules for the program, 

and to ensure that the determinations 

made are consistent with the statute. 

Related section 1902(a)(4) of the Act 

requires a State plan to provide for 

certain methods of administration, 

including the establishment of 

personnel standards on a merit basis. 

We have historically advised States that 

public employees must make Medicaid 

eligibility determinations. This position 

has been based on the premise that 

certain activities in the eligibility 

determination process cannot be 

delegated to private entities because 

they involve discretion or value 

judgment that are inherently 

governmental in nature, and in such 

instances we have stated that State merit 

system employees must be utilized. In 

addition, there have been concerns 

about whether States that contract out 

their eligibility determination capacity 

would be able to effectively monitor and 

if necessary bring that capacity back ‘‘in 

house’’ if policy implementation issues 

arose. 

Section 1413(d)(2)(B) of the 

Affordable Care Act reaffirms the single 

State agency requirement by providing 

that nothing in the law ‘‘changes any 

requirement under Title XIX that 

eligibility for participation in a State’s 

Medicaid program must be determined 

by a public agency.’’ The proposed 

regulation is consistent with this 

provision. Simultaneously, we solicit 

comments on how these statutory 

provisions should apply in the context 

of Exchanges making Medicaid 

eligibility determinations and simpler, 

more uniform eligibility criteria. 

In this rule, we propose to allow 

Medicaid agencies to delegate eligibility 

determinations for individuals whose 

eligibility will be determined according 

to MAGI to Exchanges that are public 

agencies. Specifically, we propose to 

permit Exchanges that are public 

agencies to make Medicaid eligibility 

determinations as long as the single 

State Medicaid agency retains discretion 

in the administration or supervision of 

the plan. We note that if Exchanges are 

established as a non-governmental 

entity as allowed by the Affordable Care 

Act, the coordination provisions in the 

law may mean the co-location of 

Medicaid State workers at Exchanges or 

other accommodations to ensure 

coordination is accomplished. We 

solicit comment on approaches to 

accommodate the statutory option for a 

State to operate an Exchange through a 

private entity, including whether such 

entities should be permitted to conduct 

Medicaid eligibility determinations 

consistent with the law. 

In § 431.10(c)(1)(iii), we propose to 

permit Medicaid single State agencies to 

delegate their MAGI eligibility 

determination function to Exchanges 

operated by governmental entities, 

provided the single State agency 

remains solely responsible for setting 

eligibility policies and is accountable 

for ensuring the program operates 

consistently with such polices. In 

§ 431.10(c), we propose that the single 

State agency be responsible for ensuring 

that eligibility determinations are made 

consistent with its rules and that 

corrective actions are instituted as 

appropriate; that there is no conflict of 

interest by any agency delegated the 

responsibility to make determinations; 

that eligibility determinations are made 

in the best interest of beneficiaries; and 


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51170 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

that it guard against improper incentives 

or outcomes. 

We further propose to add new 

§ 435.10(d)(l) through (5), and a 

conforming change to the introductory 

text at § 431.10(d), to provide that 

agreements between single State 

agencies and agencies making 

determinations must state the quality 

control and oversight plans by the single 

State agency to review determinations 

made by agencies making Medicaid 

eligibility determinations; that the 

agencies making Medicaid eligibility 

determinations report to the single State 

agency; that confidentiality and security 

requirements in accordance with 

sections 1902(a)(7) and 1942 of the Act 

for all beneficiary data are met; and that 

all agencies making Medicaid eligibility 

determinations meet the requirements of 

1902(a)(4) relating to personnel 

standards. 

Finally, we would retain the 

requirement in § 431.10(e) that 

Medicaid agencies may not delegate the 

authority to exercise administrative 

discretion or issue policies and rules on 

program matters; that the authority must 

not be impaired if subject to review by 

other entities; and that other entities 

must not have the authority to change 

or disapprove any administrative 

decision of that agency, or otherwise 

substitute their judgment for that of the 

Medicaid agency for the application of 

policies, rules and regulations issued by 

the Medicaid agency. 

K. Provisions of Proposed Regulation 

Implementing Application of MAGI to 

CHIP 

Section 2101(d) of the Affordable Care 

Act revises section 2102(b)(1)(B) of the 

Act to ensure that, effective January 1, 

2014, that States base income eligibility 

for CHIP on MAGI and household 

income, as defined in section 36B of the 

IRC, consistent with section 1902(e)(14) 

of the Act. Below we outline proposed 

changes to existing sections (§ 457.10, 

§ 457.301, § 457.305 and § 457.320) of 

the CHIP regulations, as well as the 

addition of new § 457.315, to implement 

the CHIP MAGI components of the law. 

1. Definitions and Use of Terms 

(§ 457.10 and § 457.301) 

We propose a nomenclature change, 

replacing the term ‘‘family income’’ 

with ‘‘household income’’ wherever it 

appears in 42 CFR part 457, and adding 

a definition for ‘‘household income.’’ 

We propose to modify the term 

‘‘Medicaid applicable income level’’ to 

clarify that the 1997 Medicaid 

applicable income level used in CHIP 

will also be converted to a MAGIequivalent income level, consistent with 

guidance provided by the Secretary 

under sections 1902(e)(14)(A) and (E) of 

the Act. We are also adding other new 

terms related to the proposed 

regulations. 

2. State Plan Provisions (§ 457.305) 

Section 2102(a)(5) of the Act directs 

States to include a description of their 

income eligibility standards in their 

State plan. We propose to add a 

reference to the new § 457.315 on 

application of MAGI and household 

income. 

3. Application of MAGI and Household 

Definition (§ 457.315) 

Under section 2102(b)(1)(B)(v) of the 

Act, as added by section 2101(d)(1) of 

the Affordable Care Act, beginning 

January 1, 2014, States will use 

‘‘modified adjusted gross income’’ 

(MAGI) and ‘‘household income,’’ as 

those terms are defined in section 

36B(d)(2) of the IRC, to determine 

eligibility for CHIP, and for other 

purposes for which an income 

determination is needed, ‘‘consistent 

with section 1902(e)(14)’’ of the Act, 

which governs the application of MAGI 

and ‘‘household’’ income in Medicaid 

and which is implemented at proposed 

§ 435.603 of these rules. In addition, 

section 2107(e)(1)(F) of the Act, as 

added by section 2101(d)(2) of the 

Affordable Care Act, states that section 

1902(e)(14) be applied to CHIP ‘‘in the 

same manner’’ as it is applied to 

Medicaid. 

Currently, States use different 

methods for defining income and 

household composition under CHIP. 

Many States operate their programs 

through expansions of Medicaid 

coverage. Among States with separate 

CHIP programs, some follow Medicaid 

financial methodologies while others 

rely on different methods, including 

gross income tests. While we recognize 

that the statutory application of MAGI 

rules to CHIP represents a change for 

some States, doing so is consistent with 

broader goals of coordination across 

programs. The adoption of MAGI-based 

methodologies to determine income for 

CHIP represents a necessary alignment 

with other insurance affordability 

programs and is particularly important 

for families both because children will 

be moving among different programs as 

family circumstances changes and 

because CHIP-eligible children will 

often be in families where the parent is 

eligible for a premium tax credit 

through the Exchange. Because the 

statute provides that CHIP apply the 

new MAGI methodologies in the same 

manner as Medicaid, we propose at 

§ 457.315 that, in determining financial 

eligibility for CHIP, States use the 

methodologies for determining 

household composition and income as 

those proposed for Medicaid at 

§ 435.603(b)–(h), as well as the 

exception, codified at proposed 

§ 435.603(i)(1), to permit States to rely 

on a finding of income made by an 

Express Lane Agency in accordance 

with section 2107(e)(1)(E) of the Act. As 

discussed in section II.B. of this 

proposed rule, our proposed MAGIbased methods for determining 

Medicaid eligibility mirror the section 

36B definitions of MAGI and household 

income, except in a very limited number 

of situations. 

For a more detailed discussion of the 

proposed financial methodologies based 

on MAGI to be applied to both CHIP and 

Medicaid, see section II.B.1 and II.B.3 of 

this proposed rule. 

4. Other Eligibility Standards 

(§ 457.320) 

As discussed in section II.B.3.a and 

consistent with current practice in 

almost all State CHIPs, assets will no 

longer be considered in determining 

financial eligibility for Medicaid or 

CHIP. Section 457.320(a) lists the 

various eligibility standards States may 

adopt for one or more groups of 

children. We propose eliminating 

‘‘resources’’ and ‘‘disposition of 

resources’’ in conformance with the law. 

The Affordable Care Act also 

eliminates the use of income disregards 

other than a disregard of 5 percent of 

income specified under section 

1902(e)(14)(I) of the Act. This means 

that, as of 2014, States no longer will be 

able to raise their effective income 

standards for their CHIPs through the 

use of a ‘‘block of income’’ disregard. 

The maximum income standard will be 

the higher of 200 percent FPL, 50 

percentage points above the applicable 

Medicaid income level defined in 

section 2110(b)(4) of the Act and 

§ 457.301, and the effective income 

standard in effect in the State (taking 

into account any income disregards 

adopted) as of December 31, 2013, 

converted to a MAGI-equivalent income 

standard in accordance with section 

1902(e)(14)(A) and (E) of the Act. 

5. Clarifications Related to MAGI 

Nothing in this regulation affects 

existing rules regarding family size in 

States that take up the CHIP ‘‘unborn 

child option’’ (per the existing 

definition of child at § 457.10). In States 

that provide coverage under the option 

at § 457.10, the unborn child is counted 

in family size. 


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L. Residency for CHIP Eligibility 

(§ 457.320) 

CHIP regulations currently allow 

States the option to adopt eligibility 

standards related to residency. The 

following changes to the regulations 

governing residency standards for 

separate CHIPs are proposed to ensure 

coordination between all insurance 

affordability programs. Further 

discussion on the rationale behind the 

proposed changes can be found in 

section II.C of this proposed rule. 

We propose at § 457.320(d) to modify 

the definition of residency for noninstitutionalized children who are not 

wards of the State under CHIP to 

reference the Medicaid definition for 

children at proposed § 435.403(i). As 

under § 435.403(i), for purposes of CHIP 

eligibility, a child under the proposed 

rule is considered a resident of the State 

in which he or she resides (for example, 

with a parent or caretaker and including 

without a fixed address), or in which a 

parent or caretaker is employed or 

seeking employment, including seasonal 

workers. The provisions of the proposed 

rule are not intended to effect a 

significant change in policy, and are 

discussed in more detail in section 

II.C.2 of this proposed rule. The 

provision at § 435.403(m) of the 

Medicaid rule, involving situations in 

which two or more States dispute a 

child’s State of residence, is also 

applied under the proposed rule to 

CHIP; under that provision, physical 

location governs. 

M. CHIP Coordinated Eligibility and 

Enrollment Process 

Section 2101(e) of the Affordable Care 

Act adds section 2107(e)(1)(O) to the 

Act to apply to CHIP the same 

enrollment simplification standards 

described for Medicaid under the new 

section 1943 of the Act. These standards 

build on existing practices and 

provisions in section 2102(b)(3)(B) of 

the Act relating to coordinated 

eligibility and enrollment between 

Medicaid and CHIP. The regulatory 

amendments proposed correspond to 

proposed changes and additions to 

Medicaid at § 435.905 through 

§ 435.908, § 435.916, § 435.917, 

§ 435.940 through § 435.956, and 

§ 435.1200, discussed more fully at 

sections II.D, II.E, II.G, II.H, II.I, and II.K 

of this proposed rule. We seek 

comments for CHIP on the issues raised 

in these corresponding sections for 

Medicaid. 

1. Applications and Outreach Standards 

(§ 457.330, § 457.334, § 457.335 and 

§ 457.340) 

We propose revisions to § 457.330 

similar to those proposed for Medicaid 

at § 435.907 to implement the use of a 

single, streamlined application for all 

insurance affordability programs, which 

builds on the successful experience 

many States have had with joint 

Medicaid-CHIP applications. 

We propose adding § 457.335 and 

modifying § 457.340(a) to set forth 

standards for the availability of program 

information and application assistance, 

similar to those proposed for Medicaid 

at § 435.905 and at § 435.908, discussed 

in section II.E.3 of this proposed rule. 

We propose removing the mention of 

enrollment caps in § 457.340(a) to 

support the role of CHIP agencies in 

accepting the single streamlined 

application and screening for all 

insurance affordability programs 

regardless of whether CHIP enrollment 

is capped. To implement section 

1943(b)(4)of the Act, relating to the 

establishment of Web sites to facilitate 

application and enrollment in all 

insurance affordability programs, we 

propose adding § 457.335 similar to the 

rule proposed for Medicaid at 

§ 435.1200(d), discussed in section II.I. 

of this proposed rule. 

We propose to revise § 457.340(b) to 

specify that all CHIP agencies require 

applicants who have an SSN to provide 

it. We recognize that the Privacy Act 

makes it unlawful for States to deny 

benefits to an individual based upon 

that individual’s failure to disclose his 

or her Social Security number, unless 

such disclosure is required by Federal 

law or was part of a Federal, State or 

local system of records in operation 

before January 1, 1975. However, 

section 1414(a)(2) of the Affordable Care 

Act authorizes the Secretary to collect 

and use SSNs where necessary to 

administer the provisions of, and 

amendments made by, the Affordable 

Care Act. We believe such section 

provides the authority for the 

requirement of SSNs when applicants 

are using the coordinated system and 

streamlined application designed by the 

Secretary under section 1413 of the 

Affordable Care Act. However, similar 

to Medicaid, non-applicants cannot be 

required (but may be requested) to 

provide an SSN. Consistent with 

Medicaid regulations at § 435.910, the 

CHIP agency must not deny or delay 

services to an otherwise eligible 

applicant pending issuance or 

verification of an applicant’s SSN. 

We propose revisions to the effective 

date of eligibility in § 457.340(f) to 

ensure that the method adopted by the 

State for determining the effective date 

of coverage will provide for a 

coordinated transition of children 

between programs as family 

circumstances change, without gaps or 

overlaps in coverage. 

2. Determination of CHIP Eligibility and 

Coordination With Exchange and 

Medicaid (§ 457.348 and § 457.350) 

We propose to add new coordination 

rules at § 457.348 to mirror the rules for 

Medicaid agencies at proposed 

§ 435.1200(e) and (f), and to coordinate 

with the rules in 45 CFR § 155.345 of 

the Exchange proposed rule. Proposed 

§ 457.348(a) and (b) would ensure that 

State CHIP agencies promptly enroll 

individuals determined eligible for 

CHIP by the Exchange, without 

requiring additional information or 

making further determinations, and 

promptly determine the eligibility of 

(and, if eligible, enroll) individuals 

determined potentially eligible for CHIP 

by the State Medicaid agency. 

Consistent with current CHIP policy, 

proposed § 457.348(c) clarifies that 

CHIP agencies may enter into 

arrangements with the State Medicaid 

agency to accept that agency’s 

determinations of CHIP eligibility. 

We also propose revisions to 

regulations at § 457.350, which 

currently relate to the responsibilities of 

the CHIP agency to coordinate with 

Medicaid. The proposed revisions are 

consistent with those proposed for 

Medicaid agencies at § 435.1200(g), 

discussed in section II.I.5 of this 

preamble, and 45 CFR § 155.345 of the 

Exchange rule, discussed in section 

II.A.1 of the Exchange preamble. 

Two of the proposed revisions to 

§ 457.350 warrant particular mention. 

First, the standards at § 457.350, as 

revised, apply to all individuals who are 

included as applicants on the single 

application—for example, parents and 

other adults in the household. Second, 

at § 457.350(j), we propose that, for 

children who do not appear Medicaid 

eligible based on MAGI, but whom the 

CHIP agency identifies as potentially 

eligible for Medicaid on another basis, 

such as disability, the CHIP agency both 

transmit the application and all 

pertinent information to the Medicaid 

agency for a full Medicaid evaluation 

and continue to process the CHIP 

determination, enrolling the child, if 

eligible, in the program unless and until 

the child is determined eligible for 

Medicaid. This is consistent with the 

process proposed for the Exchange at 45 

CFR 155.345 in the Exchange proposed 

rule and with the responsibilities of the 


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51172 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

Medicaid agency at proposed 

§ 435.1200(f). 

We anticipate significant variation in 

how States choose to operationalize the 

coordination of CHIP with other 

insurance affordability programs, and 

we will work with States to achieve the 

high level of integration of processes, 

which will be needed to effectuate the 

coordination required and to avoid 

duplication of costs and reduce 

administrative burden on States, 

children, and their families. At 

proposed § 457.350(k), we note that 

CHIP agencies may enter into 

arrangements with the Exchange to 

make eligibility determinations for 

advanced premium tax credits in 

accordance with section 1943(b)(2) of 

the Act. 

3. Periodic Redetermination of CHIP 

Eligibility (§ 457.343) and Coverage 

Months 

Under sections 1943(b)(3) of the Act 

and sections 1413(a) and 1413(c)(2) of 

the Affordable Care Act, we propose to 

add new policies at § 457.343 to 

implement the data-driven renewal 

procedures for CHIP proposed for 

Medicaid at § 435.916. For a fuller 

discussion of the proposed renewal 

process, which we believe is consistent 

with current renewal processes in many 

States; see section II.G of this proposed 

rule. The proposed data-driven 

verification system is also consistent 

with the system proposed for the 

premium tax credit determinations 

conducted by the Exchange. 

In proposed 45 CFR § 155.410 of the 

Exchange proposed rule published on 

July 15, 2011, eligibility begins on the 

first day of the following month for all 

qualified health plan selections made by 

the 22nd of the previous month, and on 

the first day of the second following 

month for all qualified health plan 

selections made between the 23rd and 

last day of a given month. Similar to 

Medicaid, we are seeking comment on 

a provision that would continue CHIP 

coverage until the end of the month 

following the end of the appropriate 

termination notice period, subject to 

certain exceptions. This policy, which 

we believe is the policy currently in 

operation in most CHIPs, would prevent 

a gap in coverage for an individual or 

family moving from CHIP to the 

Exchange. Further discussion of this 

issue can be found at section II.G. of this 

proposed rule. 

4. Verification of Eligibility (§ 457.380) 

Consistent with the provisions of 

section 1413(c)(3)(A) of the Affordable 

Care Act (applicable to CHIP through 

sections 1943(b)(3) and 2107(e)(1)(O) of 

the Act), we propose revising § 457.380, 

based on section 1413 of the Affordable 

Care Act, relating to verification of 

eligibility for separate CHIPs consistent 

with the rules proposed for the 

Exchanges and Medicaid. Consistent 

verification procedures prevent gaps in 

coverage caused by different programs 

operating under different rules. 

To better align all insurance 

affordability programs, we reference 

specific verification methods for 

residency and income. Proposed 

§ 457.380(c) references proposed 

regulations for verification of residency 

for purposes of Medicaid eligibility at 

§ 435.956(c), which also align with 

proposed Exchange regulations at 45 

CFR 155.315(c). At proposed 

§ 457.380(d), we require separate CHIPs 

to verify income in accordance with 

proposed Medicaid regulations at 

§ 435.948, which are coordinated with 

proposed Exchange regulations at 45 

CFR 155.320. As described in 

§ 435.945(b) and § 435.948, States may 

continue to choose to accept selfdeclaration of income, but must also 

request information from third-party 

data sources in accordance with 

§ 435.948 and to continue to comply 

with program integrity requirements. 

States are not required under § 435.948 

to request third-party financial 

eligibility information that the State 

determines is not useful to verifying the 

financial eligibility of the applicant. For 

other eligibility criteria, we propose in 

§ 457.380(a) and (e) to continue to allow 

CHIPs to develop reasonable verification 

procedures, including reliance on selfdeclaration or attestation (except when 

verifying citizenship or immigration 

status). However, we explicitly provide 

that States accept self-attestation of 

pregnancy and household membership, 

as proposed for Medicaid in 

§ 435.956(e), unless the State has other 

information that is not reasonably 

compatible with the attestation. We also 

provide standards for verifying age and 

date of birth. 

The Affordable Care Act envisions a 

data-driven verification system in order 

to improve the application experience 

for families while maintaining strong 

program integrity. Mirroring standards 

being proposed for Medicaid at 

§ 435.952 and the Exchange at 45 CFR 

155.315, we propose adding § 457.380(f) 

to clarify that the State may only request 

additional information if it is not 

available electronically. Consistent with 

proposed Medicaid regulations at 

§ 435.948(b), we propose in § 457.380(g) 

that States must use the electronic 

service established by the Secretary 

under proposed § 435.949 if reliable 

electronic data needed for verification is 

available. In proposed § 457.380(h), we 

affirm that program integrity 

responsibilities for CHIP are not affected 

by this proposed regulation. 

Finally, we propose adding 

§ 457.380(i), similar to proposed 

§ 435.948(f) and § 435.949(c) of the 

Medicaid regulation, and to enable 

States, with approval from the 

Secretary, to modify the verification 

procedures used by its program. We 

solicit comments on alternative 

verification methods that may help 

improve coordination between CHIP 

and other insurance affordability 

programs. 

5. Ministerial Changes (§ 457.80, 

§ 457.300, § 457.301, § 457.305 and 

§ 457.353) 

We are also proposing a number of 

ministerial changes necessary to bring 

other sections of the current CHIP into 

conformance with the proposed changes 

and revisions described above, 

including revisions to § 457.80, 

§ 457.300, § 457.301, § 457.305 and 

§ 457.353. 

N. FMAP for Newly Eligible Individuals 

and for Expansion States 

The Affordable Care Act provides for 

a significant increase in the FMAP for 

medical assistance expenditures for 

individuals determined eligible under 

the adult group in the State and who are 

considered to be ‘‘newly eligible’’, as 

defined in section 1905(y)(2)(A) of the 

Act. The increased FMAP specified in 

section 1902(y)(1) of the Act is not 

available for the medical assistance 

expenditures for any individual who is 

not considered newly eligible. Under 

section 1905(y)(2) of the Act, an 

individual is newly eligible if the 

individual would not have otherwise 

been determined eligible for Medicaid 

under the eligibility provisions of the 

Medicaid State plan, demonstrations, or 

waivers in effect in the State as of 

December 1, 2009. 

1. Availability of FMAP (§ 433.10(c)) 

We propose to amend 42 CFR part 433 

to add new provisions at § 433.10(c) to 

indicate the increases to the FMAPs as 

available to States under the Affordable 

Care Act. The following describes these 

new FMAP provisions. 

a. Newly Eligible FMAP (§ 433.10(c)(6)) 

In § 433.10, we propose to add a new 

paragraph (c)(6) to indicate the 

increased FMAP rates available to States 

beginning January 1, 2014, for the 

medical assistance expenditures of 

individuals determined eligible under 

the adult group who are considered to 


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be newly eligible, as defined in section 

1905(y)(2)(A) of the Act. 

b. Expansion State FMAP (§ 433.10(c)(7) 

and § 433.10(c)(8)) 

In § 433.10, we propose to add new 

paragraphs (c)(7) and (8) to indicate the 

availability of additional FMAP rates for 

expansion States. 

(1) 2.2 Percentage Point Increase in 

FMAP (§ 433.10(c)(7)) 

Per section 1905(z)(1) of the Act, we 

propose to add § 433.10(c)(7) to indicate 

the availability of a general 2.2 

percentage point increase to the base 

FMAP of a State (as determined under 

section 1905(b) of the Act) for certain 

expansion States, as defined in section 

1905(z)(3) of the Act. The general 2.2 

percentage increase to the base FMAP is 

available only to a State that: (1) Meets 

the definition of expansion State; (2) 

does not qualify for any payments for 

the full increased FMAP for individuals 

who are newly eligible; and (3) has not 

been approved by the Federal 

government to use amounts of their DSH 

allotments for the costs of providing 

medical assistance or other health 

benefits coverage under a demonstration 

that was in effect on July 1, 2009. Only 

for States that meet these 3 conditions, 

the base FMAP would be increased by 

2.2 percentage points for all 

expenditures in CYs 2014 and 2015 (to 

which the base FMAP would apply). 

Since by definition, the base FMAP plus 

2.2 percentage points would only be 

available and applicable for 

expenditures for individuals who are 

not newly eligible, such general increase 

would be available for all individuals in 

such States. 

(2) Expansion State FMAP 

(§ 433.10(c)(8)) 

The increased FMAP discussed in 

section II.N.1.a. of this proposed rule is 

available for individuals in the adult 

group who are considered to be newly 

eligible. We propose to add 

§ 433.10(c)(8) to indicate an additional 

FMAP rate will be available for 

expansion States for the expenditures 

for certain nonpregnant childless adults 

who are determined eligible under the 

adult group, and who are not considered 

to be newly eligible, as defined in 

section 1905(y)(2)(A) of the Act. 

Beginning in CY 2014 and each year 

thereafter, the expansion State FMAP 

for medical assistance for individuals 

described in the adult group who are 

nonpregnant childless adults is equal to 

the base FMAP for the State increased 

by a certain percentage determined in 

accordance with a formula specified in 

section 1905(z) of the Act, as amended 

by the Affordable Care Act. This new 

expansion State FMAP is equal to the 

base FMAP plus a ‘‘transition 

percentage’’ multiplied by the difference 

between the Newly Eligible FMAP 

provided to States beginning in CY 2014 

and the expansion State’s base FMAP. 

The transition percentage is as follows: 

• 50 percent in CY 2014; 

• 60 percent in CY 2015; 

• 70 percent in CY 2016; 

• 80 percent in CY 2017; 

• 90 percent in CY 2018; and 

• 100 percent in CY 2019 and every 

year thereafter. 

The following illustrates how the 

expansion State’s FMAP would be 

calculated: 

Example. In CY 2019, assume the 

expansion State’s base FMAP is 60 

percent. In CY 2019 the Newly Eligible 

FMAP is 93 percent. Therefore, in this 

example, in CY 2019 the expansion 

State FMAP would be 93 percent, 

calculated as follows: 

E = F + (T × (N ¥ F)) 

E = Expansion State FMAP 

F = Expansion State’s Base FMAP 

T = Transition Percentage 

N = Newly Eligible FMAP 

93% = 60% + (100% × (93% ¥ 60%)) 

Beginning in 2020 both the expansion 

State FMAP and the newly eligible 

FMAP will be 90 percent. 

2. Methodology (§ 433.206(a) and 

§ 433.206(b)) 

One of the key steps in simplifying 

the eligibility determination process for 

individuals and States involves 

developing a methodology that ensures 

the Federal government will pay the 

appropriate FMAP rate for both ‘‘newly 

eligible’’ individuals as well as for 

expenditures that are subject to the 

expansion State FMAP rate. As 

discussed above, the Affordable Care 

Act provides for streamlined eligibility 

and enrollment policies and processes 

that are a departure from the more 

complex pre-Affordable Care Act 

Federal Medicaid eligibility policy, but 

the pre-Affordable Care Act rules retain 

relevance for the purposes of 

determining the appropriate FMAP rate 

for expenditures beginning in CY 2014. 

Although the new MAGI rules are used 

for purposes of determining eligibility 

for the adult group, the newly eligible 

FMAP is not available for all 

individuals whose eligibility will be 

determined using MAGI; rather the 

newly eligible FMAP is only available 

for those members of the adult group 

who are determined to be newly eligible 

as discussed in this regulation. In order 

for States to determine which 

beneficiaries are ‘‘newly eligible’’ and 

which are not, States must evaluate a 

large group of beneficiaries against the 

State’s pre-Affordable Care Act 

eligibility rules. To do so on a case-bycase basis would require States to 

operate two eligibility systems or 

processes—one simplified system for 

the purpose of determining eligibility, 

and another different and more complex 

system to assign the appropriate FMAP 

rate. The two sets of rules would, in 

turn, require Exchanges as well as State 

Medicaid agencies to collect from 

applicants information in excess of what 

is required for States to determine 

eligibility either for Medicaid or 

premium tax credits available through 

the Exchange. 

Running two distinct eligibility 

systems would pose challenges to 

applicants, States, and the Federal 

government. Applicants would have to 

report and verify income, assets, and 

deductions under pre-Affordable Care 

Act rules, even though that information 

would no longer be required to 

determine eligibility. Similarly, States 

and the Federal government would have 

to seek and verify information not 

needed for eligibility determinations, 

resulting in excess administrative 

burden and inefficiency, a result 

counter to the goals of the Affordable 

Care Act. 

Because a double eligibility system is 

burdensome and costly to States and the 

Federal government, a barrier to 

enrollment for eligible individuals and 

families, and would likely lead to 

inaccurate determinations, we have 

identified possible alternate approaches 

for determining the appropriate FMAP 

rate. Specifically, this proposed rule 

discusses the potential revision of 

regulatory provisions in part 433 to 

propose three alternative methodologies 

which States could use for claiming 

expenditures at the appropriate FMAPs: 

The regular FMAP, the newly eligible 

FMAP and the expansion State FMAP 

for individuals eligible for Medicaid 

beginning in CY 2014 under the 

provisions in sections 

1902(a)(10)(A)(i)(VIII) and 1905(y) and 

(z) of the Act as amended by the 

Affordable Care Act. The proposed rules 

would not permit FFP for the costs of 

maintaining dual eligibility systems for 

the adult group. HHS plans to test, with 

States, each of the proposed 

methodologies and possibly others 

suggested through the comment process. 

Once the rules are finalized, CMS will 

provide technical support to States as 

they adopt an identified methodology. 

In developing the proposed claiming 

methods, in consultation with States 

and subject matter experts, we 

identified and applied certain principles 


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to assure that each method will 

accurately reflect the application of the 

appropriate FMAP. These principles are 

also the criteria against which we will 

measure the feasibility of the 

approaches proposed in this proposed 

rule and others that may be proposed 

during the comment period. First, any 

methodology must provide as accurate 

and valid application of the applicable 

FMAPs to actual expenditures as 

possible in the determination of the 

appropriate amounts of Federal 

payments for such expenditures. The 

methodology must not include a 

systemic bias in favor of either the 

States or the Federal government. 

Second, any allowable methodology 

should minimize administrative 

burdens and costs to States, the Federal 

government, individuals, and the health 

care system. Third, any methodology 

must be developed and applied 

transparently by both the Federal 

government and States. Fourth, any 

method must take into consideration the 

practical programmatic and operational 

goals of the Medicaid program. Finally, 

in order to ensure that the States claim 

expenditures at the correct FMAP, any 

methodologies used by the States 

should include sufficient data to 

identify, associate and reconcile 

expenditures with the related eligibility 

group to which the FMAPS apply. With 

these principles in mind, we propose 

that States work in partnership with the 

Federal government on technical 

support and review as well as ongoing 

monitoring, verification, and adjustment 

by States and the Federal government. 

HHS plans to monitor State 

implementation and operations closely 

and could require adjustments and 

changes to processes as necessary to 

ensure that systems are implemented in 

an unbiased and accurate way. HHS is 

exploring mechanisms to verify 

methodology results, including on-site 

reviews, sampling and confirmation 

with outside data sources, which could 

identify issues resulting in improper 

levels of FMAP being claimed. HHS will 

define procedures as needed to ensure 

accurate reporting and verification of 

computations to determine the 

applicable FMAP potentially including 

enhanced monitoring and prospective or 

retrospective FMAP adjustments. States 

and the Federal government each have 

a strong interest in an accurate, 

simplified system, and we expect to 

undertake these efforts in full 

partnership with States. 

Given the principles discussed above, 

we are considering three main 

approaches to identifying newly eligible 

individuals for purposes of applying the 

correct FMAP rate in the development 

of States’ claims for Federal funding in 

Medicaid: (1) Using upper income and 

other thresholds across categorical 

eligibility groups, taking into account 

the December 2009 eligibility standards 

in effect under State plans, waivers or 

demonstrations and applicable 

disregards and adjustments, to 

approximate, in the aggregate, the 

December 2009 standards; (2) using a 

sampling methodology across 

individuals in the adult group and 

related Medicaid expenditures to make 

a statistically valid extrapolation of who 

is newly eligible and their related 

expenditures; or (3) using an 

extrapolation from available data 

sources to determine the proportion of 

individuals covered under the new 

adult group who would not have been 

eligible under the eligibility criteria in 

effect under the State plan or applicable 

waiver as of December 1, 2009, 

validating and adjusting the estimate, 

based on sampling or some other 

mechanism, going forward. We seek 

comment on these three approaches. 

At § 433.206(a), we propose that a 

State may opt to use any of the specified 

alternatives discussed below. As 

discussed further, these specific options 

may not ultimately be the methods 

available, as we expect to modify, 

narrow or combine the proposed 

approaches in the final rule depending 

upon public comment and testing for 

feasibility. We are specifically interested 

in input as to what other options should 

be considered, and whether it is 

advisable for States to choose from 

among different methods or for HHS to 

identify a single method that all States 

would use. 

If selection is available, we propose at 

§ 433.206(b) that a State provide notice 

to CMS of which methodology it plans 

to use at least two calendar years prior 

to the first day of the calendar year in 

which the State will use that particular 

method, except for 2014 as discussed 

below. For example, a State would 

provide notice to CMS of the 

methodology it plans to use for CY 2017 

no later than December 31, 2014. For the 

initial year (CY 2014), States would give 

notice to CMS no later than one year 

prior to the beginning of the calendar 

year, January 1, 2013. This allows States 

time to determine which method best 

meets their needs in that context and to 

make preparations for the systems and 

eligibility determination modifications 

needed for the initial years. We further 

propose that once a State selects a 

methodology, it must use that method 

for a 3-year period, at a minimum, 

subject to necessary monitoring and 

adjustment. This will allow stability in 

the process and allow for the provision 

of appropriate allocation of resources 

within the State and at the Federal level. 

We request comments on this minimum 

3-year period. 

As noted above, we are proposing to 

not provide the option of maintaining 

double eligibility systems and 

completing a determination for each 

individual under obsolete eligibility 

rules for purposes of determining the 

appropriate FMAP because we believe 

that this is neither necessary nor 

efficient. Rather, we propose to rely on 

one or more alternate methodologies. 

3. Alternative 1: 2009 Eligibility 

Standard Threshold 

The ‘‘threshold methodology’’ would 

allow States to use upper-income 

thresholds, as well as proxies for other 

eligibility criteria (such as assets or 

disability status) across categorical 

eligibility groups, taking into account 

the December 1, 2009 eligibility 

standards, to determine whether an 

individual is considered to be newly 

eligible for purposes of assigning a 

Federal matching rate. This 

methodology would use information the 

individual supplied on their 

application, and other appropriate data 

sources, subject to appropriate 

verification and documentation 

requirements, to assign the individual to 

one of the categories that the Affordable 

Care Act subsumed into the adult group, 

such as certain parents and caretaker 

relatives, 19 and 20 year olds, and 

childless adults, and to then apply 

simplified eligibility criteria based on 

the rules in effect December 1, 2009 to 

identify those who would have been 

eligible under the December 1, 2009 

criteria. This option requires States to 

apply the December 1, 2009 eligibility 

criteria, but in a simplified manner, to 

each Medicaid beneficiary who is 

included in the adult group. Based on 

the threshold combined with proxies, 

the individual would be determined to 

be newly eligible or an individual who 

would have been eligible based on the 

December 2009 eligibility standards. 

As previously noted, States will need 

to establish income eligibility 

thresholds for MAGI populations to be 

eligible for Medicaid under the State 

plan, demonstration or a waiver of the 

plan using MAGI that are not less than 

the effective income eligibility levels 

that applied under the State plan, 

demonstration or waiver on the date of 

enactment of the Act (‘‘income standard 

conversion’’). States using the threshold 

methodology similarly could convert 

the income standards in effect as of 

December 1, 2009 for other optional 

eligibility groups (for example, based on 


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disability) to MAGI-equivalent 

standards, against which the MAGIbased income of an individual eligible 

under the new adult group would be 

compared for the purpose of 

determining whether such individual 

would have been eligible under the 

optional group and thus is newly 

eligible or not. CMS will solicit State 

input and providing further guidance 

and technical support on the income 

standard conversion process. 

We propose that States employing this 

threshold methodology would also 

establish, subject to CMS approval, 

proxies of eligibility criteria in place 

prior to CY 2014 that are not related to 

income, such as disability status and 

asset value. For disability, for example, 

proxies could be based on receipt of 

SSDI, screening questions included in 

the application process (for example, 

‘‘Have you had an accident or illness 

serious enough that it has caused and is 

still causing you to miss work for an 

extended period of time?’’), retroactive 

claims review (to determine individuals 

with significant medical problems), 

some other method, or such methods in 

combination (for example, use of both a 

screening question and retrospective 

claims review). States would have to be 

clear with applicants that this 

information would not be used for an 

eligibility determination purposes. We 

are requesting comments on what 

methods or proxies could be used by 

States for disability status as well as 

whether there are any special 

considerations which must be 

considered in the identification or use 

of appropriate proxies for States that 

apply a more restrictive definition of 

disability than the SSI program. 

Although we are looking for proxies 

for disability determinations to 

determine whether to claim enhanced 

FMAP for an individual or not, we are 

also considering the possibility of using 

only actual disability determinations to 

ascertain the appropriate FMAP. Thus, 

if an individual underwent an actual 

disability determination and was found 

to be disabled, and met other criteria 

associated with a pre-Affordable Care 

Act optional eligibility category for the 

disabled such that he or she would have 

been eligible as disabled in December 

2009, that individual would not be 

newly eligible. This proposal would be 

feasible to the extent that it is 

reasonable to expect that individuals 

with disabilities have sufficient 

incentives to undergo disability 

determinations, most likely to obtain 

disability-related cash benefits, such 

that a proxy is not necessary. We are 

soliciting comments on whether 

adequate incentives do exist such that 

no additional proxies for a disability 

determination need be applied. 

For the reasons noted, we are also 

proposing that States using the 

threshold methodology identify 

thresholds or proxies for estimating 

whether individuals in the adult group 

meet any asset test that was applied to 

the applicant’s coverage category in 

December 2009. The State would also 

propose procedures for obtaining the 

information needed to compare the 

situation of individuals in the adult 

group to the proxy. For example a State 

might include a few simple questions 

during the application process to enable 

comparison against the proxy, for 

example, ‘‘Excluding your primary 

residence and automobile, are your 

assets, including any savings or 

checking accounts, stocks, bonds, or 

other liquid assets, greater than X 

dollars?’’ States could also use 

information on tax returns to obtain 

information about assets via interest or 

dividend income. We also are interested 

in comments regarding the feasibility of 

using the Asset Verification System 

(AVS), required for all States under 

section 1940 of the Act as a tool to 

obtain asset data on individuals in the 

adult group without asking for it 

directly. 

We also considered proposing that the 

threshold methodology be limited to an 

individual’s income and not the assets/ 

resources when comparing the 

individual against the December 2009 

eligibility criteria. This would allow 

States to not collect asset information no 

longer needed for eligibility purposes 

and it is consistent with analysis 

showing that only very small numbers 

of people with income in this range will 

have disqualifying assets. However, 

without evaluating assets, all 

individuals whose incomes are below 

the income threshold would not be 

newly eligible, even though it is 

possible that some would not have been 

eligible under the pre-Affordable Care 

Act rules. Thus, if assets are not 

considered there could be individuals 

who would be newly eligible, but for 

whom the State could not claim 

enhanced match. We believe this 

methodology has merit as we recognize 

there is a burden on States and to 

beneficiaries in including an asset proxy 

and that a significant portion of lowincome individuals do not have assets 

in excess of those thresholds. We invite 

comment on both approaches. 

In lieu of additional questions on an 

application for coverage asking about 

assets, we are also considering allowing 

States to develop an estimate based on 

actual data on the proportion of 

individuals applying for coverage who 

failed eligibility for a specific group in 

effect as of December 1, 2009 due to 

possession of assets exceeding the asset 

limit. For example, if the State had an 

optional disability group in December 

2009 with a resource test, and 15 

percent of applicants were denied 

coverage in that group because their 

assets exceeded the resource, the State 

could assume that 15 percent of the 

disabled individuals with incomes 

below the converted December 2009 

standard in the adult group would also 

fail the asset test. The State would 

therefore estimate the percentage of 

individuals who were disabled in the 

adult group would be newly eligible. 

We are interested in comments as to 

whether States have reliable data upon 

which this calculation could be made. 

We also propose that once an 

individual is determined to be either a 

newly eligible individual or an 

individual who would have been 

eligible under the December 2009 

standards for FMAP determination 

purposes, the determination would be 

applicable throughout the 12-month 

eligibility period after a person is 

determined eligible. Our proposal is 

based on the observation that changes in 

income occur in both directions and are 

not biased in one direction or the other. 

Our proposal is also based on the goal 

of achieving administrative simplicity, 

which can best be obtained through a 

single annual FMAP determination for 

an individual who remains enrolled in 

Medicaid, whether continuously 

enrolled or not, rather than requiring a 

State to potentially make many such 

determinations over the course of a year. 

Finally, we do not believe that States 

need to consider whether an individual 

would have been eligible under a spend 

down for a medically needy category 

under section 1902(a)(10)(C) of the Act 

in considering whether someone would 

have been eligible under standards in 

effect in December 2009. This is because 

we believe that there is inherent 

uncertainty in determining whether and 

when a spend down would have been 

met. An individual who is not yet 

‘‘medically needy’’ because he or she 

has not yet met the spenddown 

requirements would not be considered 

to be eligible for Medicaid under the 

December 2009 standards. However, if 

an individual does qualify by meeting 

the medically needy income standard 

without a spenddown, the State could 

not claim enhanced FMAP for that 

individual. 

The threshold methodology would 

require ongoing monitoring, 

verification, and adjustment. States 

using the threshold methodology would 

need to work with CMS to verify this 


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51176 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

methodology for a sample of cases 

within the first 2 years of use to test 

whether the threshold methodology is 

accurate and valid. We propose to 

undertake a periodic review, working 

collaboratively with States to evaluate 

the accuracy of the threshold 

methodologies and make adjustments to 

improve the accuracy of the threshold, 

as needed. We propose that adjustments 

to the methodology would be 

prospective only. Once a State has an 

approved methodology, that 

methodology would apply unless and 

until a review process indicated that 

adjustment was necessary. Finality and 

certainty are important for the operation 

of the program. 

4. Alternative 2: Statistically Valid 

Sampling Methodology (§ 433.210) 

At § 433.210, we are proposing the 

standards for States to use sampling to 

extrapolate the correct expenditures for 

which the State would receive the 

FMAP rate for newly eligible 

individuals established under the 

Affordable Care Act. Sampling is the 

statistical practice of selecting a random 

and unbiased subset of Medicaid 

eligible individuals and their related 

expenditures. We believe that a 

statistically valid sampling plan is a 

transparent, and widely accepted 

methodology of allocating costs. OMB 

Circular A–87 revised establishes 

principles and standards for 

determining costs for Federal awards 

carried out through grants, cost 

reimbursement contracts, and other 

agreements with State and local 

governments and Federally-recognized 

Indian tribal governments. We propose 

that States using this methodology 

would use a statistically valid sampling 

methodology meeting the requirements 

of OMB A–87. 

To ensure consistency, we propose to 

specify the additional standards States 

would need to use to perform a 

statistically valid sample of the 

population of individuals covered under 

the new eligibility group created by the 

Affordable Care Act, to determine the 

proportion that would not have been 

eligible based on the State’s December 

2009 eligibility standards, and therefore 

be newly eligible. We propose to specify 

standards within this regulation as well 

as in accompanying guidance relating to 

sample size and specifics of sampling 

techniques, etc. We believe this will 

allow HHS to work with States to refine 

specific sampling requirements and 

procedures as we gain experience over 

time. For example, we anticipate the 

sample size requirements may evolve as 

we gain experience with actual data 

becoming available and tested over 

time. We also believe that guidance on 

the inclusion of specific demonstrationrelated issues would be best provided 

through subregulatory guidance to allow 

better consideration of State-specific 

issues, as well as to provide an 

opportunity to refine the specific 

methodologies and requirements. 

For all individuals selected for the 

sample, the State would perform the 

equivalent of a full eligibility 

determination using the eligibility 

standards in place in that State as of 

December 2009. Each individual in the 

sample would be determined to be 

either a newly eligible individual or an 

individual who would have been 

eligible under the December 2009 

standards. We propose that States 

should submit their sampling plans to 

CMS with adequate time for review and 

approval in advance of implementation, 

preferably not later than the first day of 

the calendar year for which the State 

will implement that plan. 

We propose that the State would pull 

the claims for each selected individual 

to determine actual expenditures for the 

sample. The State would determine the 

proportion of actual expenditures in the 

sample that were for newly eligible 

individuals and extrapolate this 

proportion to the population sampled to 

determine the correct allocation of 

expenditures for which the State would 

make a claim at the FMAP rate for 

newly eligible individuals established 

under the Affordable Care Act. We 

believe this methodology would most 

accurately determine a weighted 

expenditure proportion from actual 

claims to apply to the adult group. 

We also considered using a 

methodology in which a per capita 

expenditure would be determined for 

the adult group. States would apply this 

per capita expenditure amount 

proportionately to determine the 

appropriate FMAP claiming. We believe 

this methodology may allow for greater 

ease of administration, but seek 

comment on whether this would reflect 

a fair allocation of expenditures to each 

distinct population. 

We propose that States would perform 

a statistically valid sample for the year 

in which the State is claiming. This 

sample would be based on the entire 

adult group population, from which the 

State would randomly select Medicaid 

eligible individuals on a monthly basis, 

in accordance with CMS’ sampling 

guidelines. Once individuals are 

determined in that month of review to 

be either a newly eligible individual or 

an individual who would have been 

eligible under the December 2009 

standards, the State would apply that 

eligibility determination throughout the 

entire year for the purpose of FMAP 

determination. Our proposal is based on 

the observation that switches occur in 

both directions and are not biased in 

one direction and the administrative 

simplicity that can be obtained through 

a single annual determination is 

preferred. 

The State would pull all medical 

expenditures for the prior 12 months for 

the individual. If the individual is 

enrolled exclusively in a managed care 

organization (MCO), for which the State 

makes a capitated monthly payment to 

an MCO, the State would consider the 

risk-adjusted monthly payment to the 

MCO as the full medical assistance 

expenditure for that individual for each 

month the individual is so enrolled. 

Otherwise, the medical expenditures for 

each individual are equal to the actual 

expenditures made to providers for 

items and services provided to that 

individual. It does not include any 

Medicaid supplemental payments that 

are not associated with medical 

assistance payments made for specific 

items and services provided to a specific 

individual. 

We propose that the State complete 

the sampling and related expenditure 

analysis no later than 2 years after the 

completion of the designated year. The 

State will retroactively apply the FMAP 

to the correct year and make any 

necessary prior period adjustments to 

the CMS–64 expenditure report to 

assure accurate Federal funding. We 

will work with States to meet the 

proposed time frame to ensure their 

ability to claim the enhanced funding. 

We propose that the State would 

claim based on the most recent data for 

the current year. We understand that the 

State will not have accurate data based 

on the actual year’s enrollment and 

expenditures until after the finish of 

that year. Therefore, we propose to 

allow States to make interim claims for 

the FMAP rate for newly eligible 

individuals established under the 

Affordable Care Act. These claims 

would be based on the most recent year 

for which a State has statistically valid 

data. For example, in CY 2020, if a State 

had a completed sample for CY 2018, 

but was finalizing its sample and related 

extrapolation for CY 2019, the State 

would use the data from the CY 2018 

sample and apply the FMAP according 

to the CY 2018 findings. Once the State 

completes the CY 2020 sample, it will 

retroactively adjust the CY 2020 

expenditures claimed on the CMS–64 to 

incorporate the actual data from 2020 

(the process for CYs 2014 and 2015 is 

discussed below). We solicit comment 

on this estimation and reconciliation 

process. 


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Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51177 

We propose that States will continue 

to sample on an annual basis for the first 

consecutive three years the State 

implements a sampling methodology. 

For all following years, we propose that 

the State would sample on a 3-year 

basis. 

For the initial years (CYs 2014 and 

2015), we propose to allow States to 

calculate and apply a reasonable 

estimate of the expenditures claimed at 

the Newly Eligible and expansion State 

FMAP rates established under the 

Affordable Care Act and make the 

retroactive adjustment described above 

based on CY 2014 data extrapolated 

using the State’s sampling methodology. 

We would allow States to create a 

reasonable estimate in one of two ways: 

(a) Based on a State’s statistically valid 

sample of low-income populations that 

reasonably approximates the expected 

Medicaid adult group; or (b) based on a 

HHS developed estimate of the 

proportion of newly eligibles and per 

capita expenditures for the projected 

newly eligibles that HHS would develop 

and test in collaboration with States by, 

for example, using a combination of 

Medical Expenditure Panel Survey 

(MEPS) and Medical Statistical 

Information System (MSIS) data, or 

other existing data sources. In the first 

option, we propose to allow States to 

calculate the projected per capita 

expenditures for the newly eligible 

population based on a sample of the 

low-income population of those 

individuals enrolled in and appearing to 

be potentially eligible for Medicaid as of 

CY 2014. The States would use the 

sampling methodology guidelines 

applied to the population of State 

residents (Medicaid enrollees and other 

low-income individuals) that 

approximated the expected Medicaid 

eligible adult group. We propose that 

States submit a sampling plan 

demonstrating compliance with OMB 

Circular A–87 and, other requirements 

specified within this rule and other 

CMS sampling guidance. The 

methodology must include not only a 

description of the population from 

which the sample will be pulled prior 

to CY 2014, but also how the chosen 

population approximates the adult 

group. States would complete the 

sample and expenditure extrapolation 

in accordance with a sampling plan 

prior to January 1, 2014. 

We propose that States use data from 

the sample to calculate the projected 

proportion of newly eligible 

individuals, as well as per capita 

expenditures for such individuals. The 

State would use MSIS data and 

Medicaid experience to estimate 

expenditures for the ‘‘would have been 

eligible’’ population. The State would 

use this information to determine the 

appropriate estimated expenditure 

proportions to claim at the respective 

FMAP rates for the initial years. 

We propose to allow Federal match 

based on the estimate until the actual 

data became available and sampled in 

accordance with the methodology 

established above. The State would 

make a retroactive claims adjustment on 

the CMS–64 based on the actual data 

from CY 2014. 

Alternatively, in the second option we 

propose to allow States to use a CMS 

established estimate of the proportion 

and per capita expenditures for the 

projected newly eligible for CY 2014 

based on currently available Statespecific data (for example using MEPS 

data, a combination of MEPS and MSIS 

data, or other existing data sources). We 

propose to establish the proportion of 

newly eligible individuals and per 

capita expenditure amounts that each 

State could use in estimating FMAP for 

the initial years. We would publish the 

estimates for State use for CY 2014 no 

later than January 1, 2013 to ensure 

States have sufficient time to 

incorporate the data and create 

reasonable estimates. 

We propose to provide Federal match 

based on the estimate until the actual 

data became available and sampled in 

accordance with the CMS-established 

sampling requirements established in 

this regulation and in future 

subregulatory guidance or validated in 

another way. If sampling were chosen as 

a validation method, we propose to 

require that States would implement a 

statistically valid sample methodology 

throughout CYs 2014 and 2015 to 

determine the correct proportion of 

newly eligibles and expenditures to 

claim at the 100 percent FMAP for CYs 

2014 and 2015, respectively. The State 

would make a retroactive adjustment 

based on the actual data from CY 2014. 

We consider this concept to be similar 

to an interim rate payment 

methodology. It allows for the State to 

receive the increased FMAP rate for a 

reasonable estimate of newly eligible 

individuals and settle to actual 

expenditures when the data is available. 

We are soliciting comments on this 

approach. 

5. Alternative 3: Use of a FMAP 

Methodology Based on Reliable Data 

Sources (§ 433.212) 

We are also proposing an option for 

States to use State specific estimates 

established by the Secretary using 

reliable data sources such as MEPS data 

or State MSIS data. This option is 

described in proposed § 433.212. 

Under this model, States would use 

the estimated proportions in claiming 

FFP for medical assistance expenditures 

for newly eligible individuals. Because 

the model and estimated proportions 

would be available prior to each year, 

the State would claim expenditures and 

draw down Federal funds in real time. 

There would be no need for a retroactive 

adjustment. Rather, the verification to 

actual claims beginning in CY 2016 

would apply to correcting for future 

years by adjusting the model. 

We have reviewed current Federal 

analytic models created for other 

purposes to determine if they could 

estimate the potential impact of 

eligibility changes in the Affordable 

Care Act. We believe these models may 

have merit and may be an appropriate 

starting point for creating estimates for 

payment purposes beginning CY 2014. 

We are also considering a model in 

which HHS develops an algorithm to 

determine, for each State, the 

appropriate percentages of Medicaid 

enrollees with a given set of 

characteristics (such as income, age, 

assets, family structure, disability 

status) who would be considered newly 

eligible or not newly eligible under the 

December 2009 eligibility rules for 

purposes or applying the related FMAP. 

The algorithm would estimate for 

example, that 90 percent of the adults 

with a child with income between 100 

percent and 110 percent of the FPL in 

a specific State would not have been 

eligible under the old rules. Then, the 

State would count the number of adult 

Medicaid enrollees in CY 2014 who had 

a child and whose income was between 

100 percent and 110 percent of FPL, and 

would receive the Newly Eligible FMAP 

for 90 percent of their expenditures, and 

the base FMAP for 10 percent. 

We propose to review, evaluate, and 

potentially expand upon existing 

models to develop an acceptable 

estimate to be the basis for determining 

FMAP. We are specifically interested in 

receiving comments on the data sources 

that should be considered for inclusion 

in the model. We believe MSIS and 

MEPS data likely to be the most useful 

and relevant data sources available 

consistently for all States. We propose 

to not limit the data sources we may 

choose to review and incorporate into a 

predictive model as long as the data 

sources are relevant, accurate and 

available in a timely manner to both the 

Federal government and the State. We 

believe the modeling process, as well as 

the data sources used to create the 

specific models must be fully tested, 

transparent and readily available to 

States. 


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We further propose that we would 

annually establish a model to 

reasonably predict in an unbiased way 

the appropriate proportion of 

expenditures (that is, State-specific 

rates) to determine the amount each 

State could claim using the ‘‘Newly 

Eligible’’ FMAP. We propose to solicit 

and integrate public input into the 

development of the final modeling 

estimate. The State-specific rates would 

be finalized and made public no later 

than October 1 of the year prior to the 

calendar year in which the State would 

implement the methodology. For CY 

2014, we would establish and publish 

the State-specific rates by October 1, 

2012. 

We solicit comments on the potential 

of creating accurate State specific 

estimates given the available data 

sources and the limitations of each. We 

also are requesting comments on other 

possible approaches to compensate for 

the potential limits on State-specific 

data to create robust accurate estimates 

at the State level. 

Beginning in CY 2016, we propose to 

integrate validation measures, such as 

statistically valid sampling 

methodologies, into the model to verify 

and assure the data accuracy. This 

verification of actual claims would 

apply to correcting for future years by 

adjusting the model. For example, we 

would work with selected States in each 

year to pull a random sample of 

Medicaid enrolled individuals in the 

adult group. We would then work with 

the State to apply the State’s December 

1, 2009 eligibility standards to 

determine the proportion of individuals 

that are newly eligible and the 

proportion that would have been 

eligible under the standards at that time. 

We would then determine actual 

expenditures for those individuals to 

determine the appropriate proportion of 

expenditures to be claimed at the Newly 

Eligible FMAP rate. We propose that 

such sampling methodology be 

transparent to States. We further 

propose to employ a public notice and 

comment process to assure the 

integration of State and other 

stakeholder concerns into a final 

verification system. 

6. Additional Methodology Approaches 

We are requesting comments and 

suggestions on hybrid approaches that 

incorporate all of the alternatives listed. 

We believe that the above-described 

alternatives could be combined, so as to 

achieve the benefits, while mitigating 

the downside of each. Thus, sampling 

could be used to verify and improve 

upon the accuracy of the estimates made 

under the threshold methodology or as 

stated above in the other data source 

methodology. While sampling might be 

necessary in the initial years, as 

confidence in the accuracy of the other 

method increased, sampling could be 

required on a less frequent basis (for 

example, once every 3 to 5 years), 

thereby diminishing the burden 

otherwise imposed by sampling, or we 

could see using the threshold 

methodology for simpler, more straightforward cases and sampling for more 

complicated ones. We invite comments 

on using a hybrid approach. 

In addition, regardless of which 

approach is ultimately employed, we 

intend to monitor the effects and impact 

of that method over time and make 

refinements as necessary. We are 

interested in assuring that the 

alternatives proposed are viable in the 

sense that States can implement them in 

a meaningful way. We solicit comments 

on how each method may be 

operationalized and what challenges or 

obstacles a State may face in doing so. 

We also seek comment on analytical 

approaches that CMS should consider 

using when comparing the relative 

feasibility, validity, and reliability of the 

methods proposed above. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

This proposed rule would implement 

provisions of the Affordable Care Act 

that expand access to health coverage 

through improvements in Medicaid and 

CHIP; ensure coordination between 

Medicaid, CHIP, and the new Affordable 

Insurance Exchanges (which are 

proposed in a separate NPRM under RIN 

0938–AR25); and simplify the 

enrollment and renewal processes. 

Taken together, the policies proposed in 

this rule would result in a reduction in 

burden for individuals applying for or 

receiving coverage, as well as for States. 

Although there are short-term burdens 

associated with implementation of this 

proposed rule, over time the Medicaid 

program would be made substantially 

easier for States to administer and for 

individuals to navigate by streamlining 

Medicaid eligibility, simplifying 

Medicaid and CHIP eligibility rules for 

most individuals, and creating a 

coordinated process that results in a 

seamless enrollment experience across 

Medicaid, CHIP, and the new affordable 

insurance Exchanges. 

At the same time, CMS is undertaking 

a number of business process, structural 

and system improvements designed to 

support modernized IT systems and 

streamline the manner in which it 

works with States and to minimize 

burdens in review and approval 

processes. A new reliance on automated 

information sources and data-sharing 

across agencies and programs will 

facilitate enrollment and renewal. In 

addition, the business process, 

structural and data system 

improvements underway at CMS are 

designed to create an environment 

where a significant proportion of the 

interactions between States and the 

Federal government can take place 

through a Web-based information portal. 

For example, we anticipate that CMS 

will have developed a Web-based 

system for States to submit the State 

plan amendments that will be needed to 

implement the Medicaid and CHIP 

programmatic modifications and that 

the system itself, for submission, 

review, and approval will be 

significantly more streamlined. It is not 

possible at this point to quantify the 

impact of these changes in terms of 

burden, but we believe that the 

estimates included in this collection of 

information discussion likely overstate 

the actual burden on States. The 

foundation for this is established 

through a final rule that enables States 

to receive a 90 percent Federal matching 

rate for design, development, 

installation or enhancement of 

eligibility determination systems 

through December 31, 2015, for those 

States meeting a series of specified 

standards and conditions. In addition, 

enhanced funding at a 75 percent 

Federal matching rate is available for 

States to maintain and operate their 

eligibility systems, subject to the 

conditions noted above. The estimates 

of the impact of these changes and the 

additional Federal support in this area 

are discussed in more detail in the final 

rule published on April 19, 2011 (76 FR 


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Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51179 

21950) entitled ‘‘Federal Funding for 

Medicaid Eligibility Determination and 

Enrollment Activities.’’ 

Information collection requirements 

(ICRs) are outlined below that involve 

Medicaid and CHIP eligibility 

determinations and enrollment. We are 

soliciting public comment on each of 

these issues for the following sections of 

the proposed rule that contain ICRs. We 

used data from the Bureau of Labor 

Statistics to derive average costs for all 

estimates of salary in establishing the 

information collection requirements. 

Salary estimates include the cost of 

fringe benefits, calculated at 35 percent 

of salary, which is based on the March 

2011 Employer Costs for Employee 

Compensation report by the U.S. Bureau 

of Labor Statistics. 

Finally, in calculating the estimates of 

burden on States, it was important to 

take into account the Federal 

government’s contribution to the cost of 

administering the Medicaid and CHIP 

programs. The Federal government 

provides funding based on a Federal 

Medical Assistance Percentage (FMAP) 

that is established for each State based 

on the per capita income in the State as 

compared to the national average. 

FMAPs range from a minimum of 50 

percent in States with higher per capita 

incomes to a maximum of 76.25 percent 

in States with lower per capita incomes. 

States receive an ‘‘enhanced’’ FMAP for 

administering their CHIP programs, 

ranging from 65 to 83 percent. All States 

receive a 50 percent FMAP for 

administration. As noted above, States 

also receive higher Federal matching 

rates for certain services and now for 

systems improvements or redesign, so 

the level of Federal funding provided to 

a State can be significantly higher. As 

such, in taking into account the Federal 

contribution to the costs of 

administering the Medicaid and CHIP 

programs for purposes of estimating 

State burden with respect to collection 

of information, we elected to use the 

higher end estimate that the States 

would contribute 50 percent of the 

costs, even though the burden will 

likely be much smaller. 

The following provisions will be 

addressed through separate PRA notices 

and comment processes: 

Medicaid and CHIP State Plans: 

§§ 431.10(c) and (d); 431.11(d); 

435.110(b); 435.116(b); 435.118(b); 

435.119(b); 435.218(b); 435.403(h) and 

(i); 435.603(a); 435.905(a) and (b); 

435.948(d); 435.949(c); 435.1200(c), (d), 

(e), (f), and (g); 457.80(c); 457.305(a) and 

(b); 457.310(b); 457.320(d); 457.340(a), 

(b), and (f); 457.343; 457.348(a), (b), (c), 

and (d); 457.350(a), (b), (c), (f), (g), and 

(j); 457.380(a), (c), (d), (e), (f), (g), (h), 

and (i); and 457.390; 

Choice of Methodology for 

Determining Expenditures Claimed at 

FMAP Rate for Newly Eligibles: 

§§ 433.206(b); 433.208(b); 433.210(a); 

and 433.212(a); 

Single, Streamlined Application: 

§§ 435.907 and 457.330; 

Collection of Applicant’s Social 

Security Number: §§ 435.907(e) and 

457.340(b); and 

Revisions to CHIP Annual Reporting 

Template System (CARTS): § 435.907(e), 

§ 457.353. 

A. ICRs Regarding Program Information 

(§§ 435.905 and 457.335) 

Amendments are proposed to 

§ 435.905 for Medicaid and § 457.335 for 

CHIP that would require Medicaid and 

CHIP State agencies to disclose program 

information to the public electronically. 

These provisions are necessary to 

ensure that Medicaid and CHIP program 

information is available on the Internet 

Web site where individuals and families 

can explore their coverage options and 

submit an application. 

In a review of State Web sites, we 

found that all 50 States and the District 

of Columbia have Web sites for 

Medicaid and CHIP and that nearly 

every State already provides the 

information specified in this proposed 

rule. We also found that all States offer 

access to their health insurance 

applications online. 

While these provisions are subject to 

the PRA, we believe that the 

requirement above is a usual and 

customary practice in keeping with the 

use of modern technology and, 

therefore, presents no new burden. 

States have always been required to 

assure that applicants, providers, other 

interested parties, and the general 

public have access to information about 

Medicaid and CHIP eligibility 

requirements, available Medicaid 

services, and the rights and 

responsibilities of applicants and 

beneficiaries. 

B. ICRs Regarding Verification 

(§§ 435.945, 435.948, 435.956, 457.350, 

and 457.380) 

The provisions propose guidelines for 

verification of certain factors for 

Medicaid and CHIP eligibility (for 

example, income, State residency, SSNs, 

and pregnancy status) and the sharing of 

data among agencies. These proposed 

amendments are necessary to facilitate 

the determination of eligibility with 

minimal paper documentation required 

from individuals. 

We expect that over the long-term, 

these guidelines will reduce burden on 

States and individuals. The State of 

Utah’s eFIND system provides an 

example of a successfully streamlined 

verification process. eFIND gathers data 

from more than 15 Federal and State 

sources including wage reporting, SSA, 

the SAVE system, and child support to 

verify Medicaid eligibility for applicants 

in real time. The State has estimated 

that eFIND has reduced the processing 

time for an eligibility determination 

from 17 minutes down to 3 minutes, 

saving the State $2.1 million in the first 

year. 

The specific burden associated with 

the written agreements for data sharing 

is the time and effort necessary for the 

State to modify existing agreements 

with applicable agencies for the 

collection of this information. We 

estimate that 53 State Medicaid agencies 

(the 50 States, the District of Columbia, 

Northern Mariana Islands, and 

American Samoa) will be subject to this 

requirement. We estimate it will take 

each State an average of 30 hours to 

modify agreements with the appropriate 

agencies. For the purpose of the cost 

burden, we estimate it will take a health 

policy analyst 20 hours, at $43 an hour, 

and a manager 10 hours, at $77 an hour, 

to complete the agreements. The 

estimated cost burden for each State is 

$1,630 [($43 × 20) + ($77 × 10)], for a 

total cost burden of $86,390 [$1,630 × 

53] and a total annual hour burden of 

1,590 hours [30 × 53]. Taking into 

account the Federal contribution to 

Medicaid and CHIP program 

administration, the estimated State 

share of these costs will be no more than 

$43,195 [$86,390 × 50 percent]. 

D. ICRs Regarding Renewal (§§ 435.916 

and 457.343) 

These provisions discuss the 

redetermination process for individuals 

whose eligibility is based on MAGI. 

These provisions are necessary to 

facilitate the accurate and efficient 

redetermination of Medicaid and CHIP 

eligibility. 

We estimate 53 Medicaid agencies 

(the 50 States, District of Columbia, 

Northern Mariana Islands, and 

American Samoa) and an additional 43 

CHIP agencies (States that have a 

separate or combination CHIP) will be 

subject to the provision above, for a total 

of 96 agencies. 

The burden associated with this 

requirement is the time and effort 

necessary for the State to develop and 

automate renewal notices and perform 

the revised recordkeeping related to 

redetermining eligibility. Individuals 

whose eligibility is based on MAGI 

would need to provide any additional 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
51180 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

information for the State to complete a 

redetermination of eligibility. 

Research has indicated that 33–50 

percent of people experience a change 

in circumstance that may impact their 

eligibility for coverage (Sommers and 

Rosenbaum, Health Affairs 2011). Based 

on this research we conservatively 

estimate that of the approximately 51 

million individuals enrolled in 

Medicaid and CHIP whose eligibility 

will be based on MAGI, half (25.5 

million individuals) will have their 

eligibility redetermined using the 

information already available to the 

agency. This approach greatly simplifies 

the renewal process and will ultimately 

reduce costs for States. 

For example, the State of Louisiana 

streamlined its renewal process through 

a combination of administrative 

renewal, ex-parte review and 

conducting renewals over the telephone 

in 2007. As a result, fewer than 10 

percent of families actually complete 

and submit a renewal form in order to 

remain enrolled in Medicaid or CHIP 

coverage. The State reports more than 

$18 million in savings each year due to 

these changes. 

We estimate that it will take each 

Medicaid and CHIP agency 16 hours 

annually to develop, automate and 

distribute the notice of eligibility 

determination based on use of existing 

information. For the purpose of the cost 

burden, we estimate it will take a health 

policy analyst 10 hours, at $43 an hour, 

and a senior manager 6 hours, at $77 an 

hour, to complete the notice. The 

estimated cost burden for each agency is 

$892 [(10 × $43) + (6 × $77)]. The total 

estimated cost burden is $85,632 [96 × 

$892], and the total annual hour burden 

is 1,536 hours [(10 + 6) × 96]. Taking 

into account the Federal contribution, 

the total estimated State costs would be 

$42,816 [$85,632 × 50 percent]. 

The remaining half of the individuals 

(25.5 million) will need to provide 

additional information to the State so 

that their eligibility can be renewed. 

The proposed process is much less 

burdensome than the processes 

currently in place in many States that 

require individuals to complete a new 

application at renewal. We estimate that 

it will take an individual 20 minutes to 

complete the proposed streamlined 

renewal process. The total annual hour 

burden is 8.5 million hours [(20 minutes 

× 25.5 million individuals)/60 minutes] 

for 25.5 million individuals. We note 

that the number of people who need to 

provide additional information may be 

smaller than our estimate, but we used 

a higher end estimate to account for the 

greatest potential impact on States and 

individuals. Some States that employ a 

simplified renewal approach similar to 

what is proposed in this rule are able to 

renew coverage for nearly 80 percent of 

beneficiaries without contacting the 

individual or family. 

States will keep records of each 

renewal that is processed in Medicaid 

and CHIP. The amount of time for 

recordkeeping will be the same for 

renewals based on information available 

to the agency and renewals that require 

additional information from 

individuals. We estimate that it will 

take the State agency 3 minutes (0.05 

hour) at a rate of $25 per hour for the 

average State eligibility worker to 

conduct the required recordkeeping for 

each of the 51 million renewals. The 

total estimated annual hour burden is 

2,550,000 hours or 26,562.5 hours per 

agency [2,550,000/96]. At a rate of $25 

per hour the total estimated cost burden 

for recordkeeping is $63,750,000 

[2,550,000 × $25] or $664,063 per 

agency [$63,750,000/96]. Taking into 

account the Federal contribution, the 

total estimated State share of the costs 

would be $31,875,000 [$63,750,000 × 50 

percent]. 

E. ICRs Regarding Web Sites (§ 435.1200 

and § 457.335) 

Sections 435.1200 and 457.335 

require Medicaid and separate CHIP 

agencies to have a Web site that 

performs the functions described in this 

proposed rule. 

We estimate that 53 Medicaid 

agencies and an additional 43 CHIP 

agencies (in States that have a separate 

or combination CHIP) would be subject 

to the provisions above. To achieve 

efficiency, we assume that States will 

develop only one Web site to perform 

the required functions. Therefore, we 

base our burden estimates on 50 States, 

the District of Columbia, the Northern 

Mariana Islands, and American Samoa 

(53 agencies) and do not include the 43 

separate CHIP programs. 

The burden associated with this ICR 

for information disclosure is the time 

and effort necessary for the State to 

develop and disclose information on the 

Web site, develop and automate the 

required notices, and transmit (report) 

the application data to the appropriate 

insurance affordability program. 

We know that all States have Web 

sites and printable applications online 

and that 19 States have some ability to 

enable individuals to renew their 

coverage online. We estimate that it will 

take each State an average of 320 hours 

to develop the additional functionality 

to meet the proposed requirements, 

including developing an online 

application, automating the renewal 

process and adding a health plan 

selection function. We estimate that it 

will take a health policy analyst 85 

hours (at $43 an hour), a senior manager 

50 hours (at $77 an hour), and various 

network/computer administrators or 

programmers 185 hours (at $54 an hour) 

to meet the reporting requirements for 

this subpart. We estimate the total cost 

burden for a State to be $17,495 [(85 × 

$43) + (50 × $77) + (185 × $54)] for a 

total estimated burden of $927,235 [53 

× $17,495] and a total annual hour 

burden of 16,960 hours for all 53 

entities [(85 + 50 + 185) × 53]. Taking 

into account the Federal contribution to 

Medicaid and CHIP systems 

development and administration efforts, 

we estimate that the total State share of 

costs would be $463,618 [$927,235 × 50 

percent] at most. States that elect to 

pursue these activities as part of a larger 

systems redesign effort would have 

significantly lower costs due to the 

availability of the 90 percent FMAP. 

We estimate that it will take each 

State entity 16 hours annually to 

develop and automate each of the two 

required notices (32 total hours). For the 

purpose of the cost burden, we estimate 

it will take a health policy analyst 

10 hours, at $43 an hour, and a senior 

manager 6 hours, at $77 an hour, to 

complete each notice. The estimated 

cost burden of two notices for each 

agency is $1,784 [$892 × 2]. The total 

estimated cost burden is $94,552 

[$1,784 × 53], and the total annual hour 

burden is 1,696 hours [16 × 2 × 53] for 

the notices. 

We estimate that it will take network/ 

computer administrators or 

programmers 150 hours (at $54 an hour) 

to transmit the application data of 

ineligible individuals to the appropriate 

insurance affordability program and 

meet this information reporting 

requirement for each State (53). The 

estimated cost burden for each agency is 

$8,100 [150 × $54]. The total estimated 

cost burden for 53 States is $429,300 [53 

× $8,100], and the total annual hour 

burden is 7,950 hours [150 × 53]. Taking 

into account the Federal contribution, 

the estimated total State share of costs 

would be $214,650 [$429,300 × 50 

percent]. 

The total estimated cost burden of the 

provisions described above is 

$1,451,087 [$927,235 + $94,552 + 

$429,300], and the total annual hour 

burden is 26,606 hours [16,960 + 1,696 

+ 7,950]. 

F. ICRs Regarding Medicaid Statement 

of Expenditures for the Medical 

Assistance Program (CMS–64) 

This action does not revise or impose 

any new information collection 

requirements or burden that would 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51181 

1OACT’s original estimates for the financial 

impact of the expansion of Medicaid eligibility 

under the Affordable Care Act are documented in 

an April 22, 2010 memorandum, ‘‘Estimated 

Financial Effects of the Patient Protection and 

Affordable Care Act, as Amended,’’ available at 

https://www.cms.gov/ActuarialStudies/downloads/ 

PPACA_2010-04-22.pdf. These estimates have been 

updated using later data, revised participation 

assumptions, and later information on policy 

decisions. 

2OACT’s estimates include approximately 2–3 

million individuals with primary health insurance 

coverage through employer-sponsored plans who 

would enroll in Medicaid for supplemental 

coverage. 

require additional OMB review of CMS– 

64. OMB has approved the burden and 

information collection requirements of 

CMS–64 under OMB control number 

0938–0067. 

TABLE 2—ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation 

section(s) Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Labor cost 

of reporting 

($) 

Total cost 

($) 

State share 

of costs 

($) 

§§ 435.945, 435.948, 

435.956, 457.350, 

and 457.380 ........... 53 1 30 1,590 1,630 86,390 43,195 

§§ 435.916 and 

457.343 ................... 96 1 16 1,536 892 85,632 42,816 

§§ 435.916 and 

457.343 ................... 25.5 million 1 .33 8.5 million ........................ ........................ ........................

§§ 435.916 and 

457.343 ................... 96 1 26,562 .5 1 2.55 million 664,063 63,750,000 31,875,000 

§§ 435.1200 and 

457.335 ................... 53 1 502 26,606 27,379 1,451,087 725,543 

Total .................... ........................ ........................ .......................... ........................ ........................ 65,373,100 32,686,555 

Notes: All proposed collections are new; therefore the OMB Control Number is omitted from the table. 

There are no capital or maintenance costs incurred by the proposed collections; therefore it is omitted from the table. Capital costs resulting 

from the development or improvement of new electronic systems were addressed in the Federal Funding for Medicaid Eligibility Determination 

and Enrollment Activities final rule (76 FR 21950). 

Labor Cost figures are indicated here on a per Respondent basis. 

The 1.4 average responses per Agency (that is, Respondent) are based on the total estimated number of agreements divided by the number 

of respondents. The number of actual agreements will vary by State based on the governance structure of the State’s Medicaid, CHIP, and Exchange programs. 

We have submitted a copy of this 

proposed rule to the 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 CMS’ Web site 

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 do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

(CMS–2349–P) Fax: (202) 395–6974; or 

E-mail: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Summary of Preliminary Regulatory 

Impact Analysis 

The summary analysis of benefits and 

costs included in this proposed rule is 

drawn from the detailed Preliminary 

Regulatory Impact Analysis (PRIA), 

available at http://www.cms.gov/

MedicaidEligibility/downloads/CMS2349-P-PreliminaryRegulatory

ImpactAnalysis.pdf. 

A. Introduction 

The Office of Management and Budget 

has determined that this rule is 

‘‘economically significant’’ for the 

purposes of Executive Order 12866. 

Therefore, we have prepared a PRIA that 

presents the costs and benefits of this 

rulemaking. 

B. Need for This Regulation 

This proposed rule would implement 

provisions of the Affordable Care Act 

related to Medicaid eligibility, 

enrollment and coordination with the 

Exchanges, CHIP, and other insurance 

affordability programs. It also addresses 

the current eligibility restrictions and 

barriers to enrollment in the Medicaid 

program which leave millions of lowincome Americans uninsured, and 

which contribute to poor health 

outcomes, financial stress, and high 

health care and administrative costs. In 

addition, this proposed rule sets out the 

increased Federal medical assistance 

percentage (FMAP) rates relating to 

‘‘newly eligible’’ individuals and certain 

medical assistance expenditures in 

expansion States’’ beginning January 1, 

2014. 

C. Summary of Costs and Benefits 

The preliminary impact analysis uses 

the estimates of the CMS Office of the 

Actuary (OACT) and the estimates 

prepared by the Congressional Budget 

Office (CBO) and the staff of the Joint 

Committee on Taxation. It provides both 

estimates to illustrate the uncertainty 

inherent in projections of future 

Medicaid financial operations. Analysis 

by OACT indicates that the proposed 

rule would result in an estimated 

additional 24 million newly eligible and 

currently eligible individuals enrolling 

in Medicaid by 2016.1 2 OACT notes that 

such estimates are uncertain, since they 

depend on future economic, 

demographic, and other factors that 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
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3CBO. Analysis of Major Health Care Legislation 

Enacted in March 2010. Statement of Douglas W. 

Elmendorf. March 30, 2011—http://www.cbo.gov/

ftpdocs/121xx/doc12119/03-30-;

HealthCareLegislation.pdf The CBO estimates 

exclude individuals with primary coverage through 

employer-sponsored plans who enroll in Medicaid 

for supplemental coverage. 

4CBO. Analysis of the Major Health Care 

Legislation Enacted in March 2010. Statement of 

Douglas W. Elmendorf. March 30, 2011—http:// 

www.cbo.gov/ftpdocs/121xx/doc12119/03-30-

HealthCareLegislation.pdf. 

5OACT estimates total gross additional State 

expenditures of approximately $80 billion for FYs 

2012 through 2021, offset by $35 billion in lower 

State costs as a result of the transitional FMAP for 

expansion States, for a net total increase of $45 

billion. For comparison, CBO estimates net 

additional State expenditures of about $60 million 

for the same time frame. 

6M. Buettgens et al., ‘‘Consider savings as well 

as costs: State governments would spend at least 

$90 billion less with the ACA than without it from 

2014 to 2019,’’ The Urban Institute, July 2011. 

Available at http://www.urban.org/uploadedpdf/ 

412361-consider-savings.pdf. 

7CBO’s specific take-up assumptions are not 

available. Researchers at the Urban Institute have 

approximated the participation rate assumed by 

CBO. The Kaiser Family Foundation has 

characterized this assumption as follows: ‘‘These 

results assume moderate levels of participation 

similar to current experience among those made 

newly eligible for coverage and little additional 

participation among those currently eligible. This 

scenario assumes 57 percent participation among 

the newly eligible uninsured and lower 

participation across other coverage groups.’’ J. 

Holohan and I. Headen, ‘‘Medicaid coverage and 

spending in health reform: National and State-byState results for adults at or below 133% FPL,’’ 

Kaiser Commission on Medicaid and the 

Uninsured, May 2010, available online at http://

www.kff.org/healthreform/upload/MedicaidCoverage-and-Spending-In-Health-ReformNational-and-State-By-State-Results-for-Adults-ator-Below-133-FPL.pdf. 

cannot be precisely determined in 

advance. Similarly, the actual behavior 

of individuals and the actual operation 

of the new enrollment processes and 

Affordable Insurance Exchanges will 

affect enrollment and costs. The 

Congressional Budget Office (CBO) has 

estimated a net increase of 16 million 

newly and previously eligible people 

enrolled in Medicaid and CHIP in 2016 

as a result of the new law as 

implemented through this regulation.3

Some of the difference between OACT 

and CBO’s projections can be explained 

by different participation rate 

assumptions, which are described 

further in the more detailed PRIA. 

Increased access to medical care and 

the simplified enrollment process 

proposed by this rule would benefit 

both newly eligible and currently 

eligible individuals by improving health 

outcomes and providing financial 

security. Additionally, the proposed 

rule would benefit States and providers 

by reducing uncompensated care costs, 

shifting spending on either State-funded 

health coverage or uncompensated care 

to the Federal government. Finally, the 

simplified Medicaid eligibility policies 

will over time reduce administrative 

burdens on State Medicaid agencies. 

We anticipate that the proposed rule 

would impose costs on a small number 

of currently eligible individuals who 

will become ineligible for Medicaid 

coverage under the new eligibility 

methodology. These individuals would 

bear the cost of purchasing subsidized 

insurance in the Exchanges, though 

these costs may be offset by premium 

tax credits. 

OACT estimates that Federal 

spending on Medicaid for newly and 

currently eligible individuals who 

enroll as a result of the changes made 

by the Affordable Care Act would 

increase by a total of $202 billion from 

2012 through 2016. Reflecting 

somewhat different participation 

assumptions and other projection 

factors, CBO estimates an increase in 

federal spending of $162 billion over the 

same period of time.4 OACT estimates 

that State expenditures on behalf of the 

additional individuals and families 

gaining Medicaid coverage as a result of 

the Affordable Care Act will total $2.7 

billion in FY 2014, $4.0 billion in FY 

2015, and $4.9 billion in FY 2016.5 For 

both OACT and CBO, these estimates do 

not consider offsetting savings to States 

that will result, to a varying degree 

depending on the State, from less 

uncompensated care, less need for Statefinanced health services and coverage 

programs, and greater efficiencies in the 

delivery of care. Indeed, an Urban 

Institute analysis estimates that the 

costs to States will be more fully offset 

by other effects of the legislation, for net 

savings to States of $92 to $129 billion 

from 2014 to 2019.6

D. Methods of Analysis 

OACT prepared its estimate using 

data on individuals and families, 

together with their income levels and 

insured status, from the Current 

Population Survey and the Medical 

Expenditure Panel Survey. In addition, 

they made assumptions as to the actions 

of individuals in response to the new 

coverage options under the Affordable 

Care Act and the operations of the new 

enrollment processes and the Affordable 

Insurance Exchanges. The estimated 

Medicaid coverage and financial effects 

are particularly sensitive to these latter 

assumptions. Among those eligible for 

Medicaid under the expanded eligibility 

criteria established by the Affordable 

Care Act, and who would not otherwise 

have health insurance, OACT assumed 

that 95 percent would enroll. This 

assumption, which is significantly 

higher than current enrollment 

percentages, reflects OACT’s 

consideration of the experience with 

health insurance reform in 

Massachusetts and its expectation that 

the streamlined enrollment process and 

enrollment assistance available to 

people through the Affordable Insurance 

Exchanges will be very effective in 

helping eligible individuals and families 

become enrolled. Although CBO used 

similar data and overall methodologies, 

and also anticipates that the streamlined 

enrollment process and Exchange 

enrollment assistance will improve 

applicants’ ability to become enrolled, 

CBO has included a significantly 

smaller from this factor than assumed 

by OACT.7

E. Regulatory Options Considered 

Alternative approaches to 

implementing the Medicaid eligibility, 

enrollment and coordination 

requirements in the Affordable Care Act 

were considered in developing this 

proposed rule. However, it was 

determined that these alternatives 

would have created substantial 

administrative burdens for States and 

individuals, and created gaps in 

coverage that would reduce the number 

of people with insurance. We welcome 

public comment regarding the potential 

economic effects of the proposed rule. 

F. Accounting Statement 

For full documentation and 

discussion of these estimated costs and 

benefits, see the detailed PRA, available 

at http://www.cms.gov/Medicaid

Eligibility/downloads/CMS-2349-PPreliminaryRegulatoryImpact

Analysis.pdf. 


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8 J. Holahan and I. Headen, ‘‘Medicaid coverage 

and spending in health reform: National and Stateby-State results for adults at or below 133% FPL,’’ 

Kaiser Commission on Medicaid and the 

Uninsured, May 2010, available online at http://

www.kff.org/healthreform/upload/MedicaidCoverage-and-Spending-in-Health-ReformNational-and-State-By-State-Results-for-Adults-ator-Below-133-FPL.pdf. 

TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED NET COSTS, FROM FY 2012 TO FY 2016 

[In millions] 

Category 

Transfers 

Year dollar Units discount rate 

Period covered 

2012 7% 3% 

Annualized Monetized Transfers from Federal Government to 

States on Behalf of Beneficiaries.

Primary Estimate ..................... $35,564 $37,324 FYs 2012–2016 

Annualized Monetized Transfers from States on Behalf of 

Beneficiaries.

Primary Estimate ..................... 2,131 2,235 FYs 2012–2016 

Annualized Monetized Transfers from Federal Government to 

States.

Primary Estimate ..................... 1,577 1,657 FYs 2012–2016 

Source: CMS Office of the Actuary. 

G. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

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 2011, that threshold is approximately 

$136 million. It is important to 

understand, however, that the UMRA 

does not address the total cost of a rule. 

Rather, it focuses on certain categories 

of cost, mainly costs resulting from (A) 

imposing enforceable duties on State, 

local, or tribal governments, or on the 

private sector, or (B) increasing the 

stringency of conditions in, or 

decreasing the funding of, State, local, 

or tribal governments under entitlement 

programs. 

We believe that States can take 

actions that will largely offset the 

increased medical assistance spending 

for newly enrolled persons. Because the 

net effects are uncertain and the overall 

costs significant, we have drafted the 

PRIA to meet the requirements for 

analysis imposed by UMRA, together 

with the rest of the preamble. The 

extensive consultation with States we 

describe later in this analysis was aimed 

at the requirements of both UMRA and 

Executive Order 13132 on Federalism. 

We invite comment on these issues from 

States and local governments as well as 

any other interested parties. 

1. State and Local Governments 

Our discussion of the potential 

expected impact on States is provided 

in the benefits, costs, and transfers 

section of the preliminary regulatory 

impact analysis. As noted previously, 

the Affordable Care Act requires States 

that participate in the Medicaid program 

to cover adults with incomes below 133 

percent of the Federal poverty level, and 

provides substantial new Federal 

support to nearly offset the costs of 

covering that population. 

2. Private Sector and Tribal 

Governments 

We do not believe this proposed rule 

would impose any unfunded mandates 

on the private sector. As we explain in 

more detail in the Regulatory Flexibility 

Act analysis, the provisions of the 

Affordable Care Act implemented by the 

proposed rule deal with eligibility and 

enrollment for the Medicaid and CHIP 

programs, and as such are directed 

toward State governments rather than 

toward the private sector. Since the 

proposed rule would impose no 

mandates on the private sector, we 

conclude that the cost of any possible 

unfunded mandates would not meet the 

threshold amounts discussed previously 

that would otherwise require an 

unfunded mandate analysis for the 

private sector. We also conclude that an 

unfunded mandate analysis also is not 

needed for tribal governments since the 

proposed rules would not impose 

mandates on tribal governments. 

H. Regulatory Flexibility Act (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities if a proposed rule would have 

a significant economic impact on a 

substantial number of small entities. 

Few of the entities that meet the 

definition of a small entity as that term 

is used in the RFA (for example, small 

businesses, nonprofit organization, and 

small governmental jurisdictions with a 

population of less than 50,000) would 

be impacted directly by this proposed 

rule. Individuals and States are not 

included in the definition of a small 

entity. There are some States in which 

counties or cities share in the costs of 

Medicaid. OACT has estimated that 

between 2014 and 2021 the Federal 

government would pay about 94 percent 

of the costs of benefits for new Medicaid 

enrollees with the States paying the 

remaining 6 percent. An Urban Institute 

and Kaiser Family Foundation study 

estimated that the Federal government 

will bear between 92 and 95 percent of 

the overall costs of the new coverage 

provided as a result of the Affordable 

Care Act, with the States shouldering 

the remaining five to eight percent of 

the costs.8 To the extent that States 

require counties to share in these costs, 

some small jurisdictions could be 

affected by the requirements of this 

proposed rule. However, nothing in this 

rule would constrain States from 

making changes to alleviate any adverse 

effects on small jurisdictions. The 

Department has no way of estimating 

the impact of this proposed rule on 

small jurisdictions and requests public 

comment on this issue. 

Because this proposed rule is focused 

on eligibility and enrollment in public 

programs, it does not contain provisions 

that would have a significant direct 

impact on hospitals, and other health 

care providers that are designated as 

small entities under the RFA. However, 

the provisions in this proposed rule may 

have a substantial, positive indirect 

effect on hospitals and other health care 

providers due to the substantial increase 

in the prevalence of health coverage 

among populations who are currently 

unable to pay for needed health care, 

leading to lower rates of uncompensated 

care at hospitals. Again, the Department 

cannot determine whether this proposed 

rule would have a significant economic 

impact on a substantial number of small 

entities, and we request public comment 

on this issue. 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a proposed rule may have a significant 

economic impact on the operations of a 

substantial number of small rural 


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51184 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

hospitals. This analysis must conform to 

the provisions of section 603. 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. We are not 

preparing an analysis for section 1102(b) 

of the Act because the Secretary has 

determined that this proposed rule 

would not have a direct economic 

impact on the operations of a substantial 

number of small rural hospitals. As 

indicated in the preceding discussion, 

there may be indirect positive effects 

from reductions in uncompensated care. 

I. Federalism 

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 

effects on States, preempts State law, or 

otherwise has Federalism implications. 

As discussed previously, the Affordable 

Care Act and this proposed rule have 

significant direct effects on States. 

The Affordable Care Act requires 

major changes in the Medicaid and 

CHIP programs, which would require 

changes in the way States operate their 

individual programs. While these 

changes are intended to benefit 

beneficiaries and enrollees by 

improving coordination between 

programs, they are also designed to 

reduce the administrative burden on 

States by simplifying and streamlining 

systems. 

We have consulted with States to 

receive input on how the various 

Affordable Care Act provisions codified 

in this proposed rule would affect 

States. We have participated in a 

number of conference calls and in 

person meetings with State officials in 

the months before and since the law was 

enacted. These discussions have 

enabled the States to share their 

thinking and questions about how the 

Medicaid changes in the legislation 

would be implemented. The conference 

calls also furnished opportunities for 

CMS to explore these implementation 

issues together with States and also 

provide information on an informal 

basis about implementation plans to the 

State Medicaid Directors, and for the 

Directors to comment informally on 

what they heard in the course of those 

conversations. 

We continue to engage in ongoing 

consultations with Medicaid and CHIP 

Technical Advisory Groups (TAGs), 

which have been in place for many 

years and serve as a staff level policy 

and technical exchange of information 

between CMS and the States. In 

particular, we have had discussions 

with the Eligibility TAG (E–TAG) and 

the Children’s Coverage TAG. 

The E–TAG is a group of State Medicaid 

officials with specific expertise in the 

field of eligibility policy under the 

Medicaid program. The Children’s 

Coverage TAG is a combination of 

Medicaid and CHIP officials that 

convene to discuss issues that affect 

children enrolled in those programs. 

Through consultations with these TAGs, 

we have been able to get input from 

States specific to issues surrounding the 

changes in eligibility groups and rules 

that will become effective in 2014. 

List of Subjects 

42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 433 

Administrative practice and 

procedure, Child support Claims, Grant 

programs—health, Medicaid, Reporting 

and recordkeeping requirements. 

42 CFR Part 435 

Aid to Families with Dependent 

Children, Grant programs—health, 

Medicaid, Reporting and recordkeeping 

requirements, Supplemental Security 

Income (SSI), Wages. 

42 CFR Part 457 

Administrative practice and 

procedure, Grant programs—health, 

Health insurance, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

Subpart A—Single State Agency 

2. Section 431.10 is amended by— 

A. Revising paragraph (b)(2)(ii) and 

the introductory text of paragraph (c)(1). 

B. Adding paragraphs (c)(1)(iii) and 

(c)(3). 

C. Revising paragraphs (d) and (e)(3). 

The revisions and additions read as 

follows: 

§ 431.10 Single State agency. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Make rules and regulations that it 

follows in administering the plan or that 

are binding upon State or other agencies 

that administer the plan. 

* * * * * 

(c) * * * 

(1) The plan must specify whether the 

entity that determines eligibility for 

families, adults, and for individuals 

under 21 is— 

* * * * * 

(iii) A government-operated Exchange 

established under sections 1311(b)(1) or 

1321(c)(1) of the Affordable Care Act 

(Pub. L. 111–148). 

* * * * * 

(3) The single State agency is 

responsible for assuring and enforcing 

that— 

(i) Eligibility determinations are made 

consistent with its rules and if there is 

a pattern of incorrect determinations 

that corrective actions are instituted 

and/or the delegation is terminated; 

(ii) There is no conflict of interest by 

any agency delegated the responsibility 

to make eligibility determinations; and 

(iii) Eligibility determinations will be 

made in the best interest of applicants 

and beneficiaries and that the single 

State agency will guard against 

improper incentives and/or outcomes. 

(d) Agreement with Federal or State 

and local agencies. The plan must 

provide for written agreements between 

the Medicaid agency and the Federal or 

other State or local agencies that 

determine eligibility for Medicaid, 

stating— 

(1) The relationships and respective 

responsibilities of the agencies; 

(2) The quality control and oversight 

plans by the single State agency to 

review determinations made by the 

delegee; 

(3) The reporting requirements from 

the delegee making Medicaid eligibility 

determinations to the single State 

agency. 

(4) The confidentiality and security 

requirements in accordance with 

sections 1902(a)(7) and 1942 of the Act 

for all applicant and beneficiary data; 

and 

(5) That merit protection principles 

are employed by the agency responsible 

for the Medicaid eligibility 

determination. 

(e) * * * 

(3) If other Federal, State or local 

agencies or offices perform services for 

the Medicaid agency, they must not 

have the authority to change or 

disapprove any administrative decision 

of, or otherwise substitute their 

judgment for that of, the Medicaid 

agency for the application of policies, 

rules and regulations issued by the 

Medicaid agency. 


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3. Section 431.11 is amended by 

revising paragraph (d) to read as 

follows: 

§ 431.11 Organization for administration. 

* * * * * 

(d) Eligibility determined by other 

agencies. If eligibility is determined by 

Federal or State agencies other than the 

Medicaid agency or by local agencies 

under the supervision of other State 

agencies, the plan must include a 

description of the staff designated by 

those other agencies and the functions 

they perform in carrying out their 

responsibilities. 

Subpart M—Relations With Other 

Agencies 

§ 431.636 [Removed] 

4. Remove § 431.636. 

PART 433—STATE FISCAL 

ADMINISTRATION 

5. The authority citation for part 433 

continues to read as follows: 

Authority: Section 1102 of the Social 

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

Subpart A—Federal Matching and 

General Administration Provisions 

6. Section 433.10 is amended by— 

A. In paragraph (a), removing the 

phrase ‘‘and 1905(b),’’ and adding in its 

place the phrase ‘‘1905(b), 1905(y), and 

1905(z)’’ 

B. Adding new paragraphs (c)(6), 

(c)(7), and (c)(8). 

The additions read as follows: 

§ 433.10 Rates of FFP for program 

services 

* * * * * 

(c) * * * 

(6)(i) Beginning January 1, 2014, 

under section 1905(y) of the Act, the 

FMAP for a State that is one of the 50 

States or the District of Columbia, for 

amounts expended by such State for 

medical assistance for newly eligible 

individuals, as defined in § 433.204 of 

this part, will be an increased FMAP 

equal to: 

(A) 100 percent, for calendar quarters 

in calendar years (CYs) 2014 through 

2016; 

(B) 95 percent, for calendar quarters 

in CY 2017; 

(C) 94 percent for calendar quarters in 

CY 2018; 

(D) 93 percent for calendar quarters in 

CY 2019; 

(E) 90 percent for calendar quarters in 

CY 2020; and 

(F) 90 percent for calendar quarters in 

all other CYs after 2020. 

(ii) The FMAP specified in paragraph 

(c)(6)(i) of this section will apply to 

amounts expended by a State for 

medical assistance for newly eligible 

individuals in accordance with the 

requirements of the methodology 

selected by the State under § 422.206 of 

this chapter. 

(7)(i) During the period January 1, 

2014 through December 31, 2015, under 

section 1905(z)(1) of the Act for a State 

described in paragraph (c)(7)(ii) of this 

section, the FMAP determined under 

paragraph (b) of this section will be 

increased by 2.2 percentage points. 

(ii) A State qualifies for the general 

increase in the FMAP under paragraph 

(c)(7)(i) of this section, if the State: 

(A) Is an expansion State, as described 

in paragraph (c)(8)(iii) of this section; 

(B) Does not qualify for any payments 

on the basis of the increased FMAP 

under paragraph (c)(6) of this section, as 

determined by the Secretary; and 

(C) Has not been approved by the 

Secretary to divert a portion of the 

Disproportionate Share Hospital 

Allotment for the State to the costs of 

providing medical assistance or other 

health benefits coverage under a 

demonstration that is in effect on July 1, 

2009. 

(iii) The increased FMAP under 

paragraph (c)(7)(i) of this section is 

available for amounts expended by the 

State for medical assistance for 

individuals that are not newly eligible 

as defined in § 433.204 of this part. 

(8)(i) Beginning January 1, 2014, 

under section 1905(z) of the Act, the 

FMAP for an expansion State defined in 

paragraph (c)(8)(iii) of this section, for 

amounts expended by such State for 

medical assistance for individuals 

described in section 

1902(a)(10)(A)(i)(VIII) of the Act who 

are not newly eligible as defined in 

§ 433.204 of this part and who are 

nonpregnant childless adults for whom 

the State may require enrollment in 

benchmark coverage under section 1937 

of the Act, will be determined in 

accordance with the following formula: 

F + (T × (N¥F)) 

F = The base FMAP for the State 

determined under paragraph (b) of 

this section, subject to paragraph 

(c)(7) of this section. 

T = The transition percentage specified 

in paragraph (c)(8)(ii) of this 

section. 

N = The Newly Eligible FMAP 

determined under paragraph (c)(6) 

of this section. 

(ii) For purposes of paragraph (c)(8)(i) 

of this section, the transition percentage 

is equal to: 

(A) 50 percent, for calendar quarters 

in CY 2014; 

(B) 60 percent, for calendar quarters 

in CY 2015; 

(C) 70 percent, for calendar quarters 

in CY 2016; 

(D) 80 percent, for calendar quarters 

in CY 2017; 

(E) 90 percent, for calendar quarters in 

CY 2018; and 

(F) 100 percent, for calendar quarters 

in CY 2019 and all subsequent calendar 

years. 

(iii) A State is an expansion State if, 

on the March 23, 2010, the State offered 

health benefits coverage Statewide to 

parents and nonpregnant, childless 

adults whose income is at least 100 

percent of the poverty line, that 

includes inpatient hospital services, is 

not dependent on access to employer 

coverage, employer contribution, or 

employment and is not limited to 

premium assistance, hospital-only 

benefits, a high deductible health plan, 

or alternative benefits under a 

demonstration program authorized 

under section 1938 of the Act. A State 

that offers health benefits coverage to 

only parents or only nonpregnant 

childless adults described in the 

preceding sentence will not be 

considered to be an expansion State. 

(iv) For amounts expended by an 

expansion State as defined in paragraph 

(c)(8)(iii) of this section for medical 

assistance for individuals described in 

section 1902(a)(10)(A)(i)(VIII) of the Act 

who are newly eligible as defined in 

§ 433.201, and who are non-pregnant 

childless adults for whom the State may 

require enrollment in benchmark 

coverage under section 1937 of the Act, 

the FMAP is as specified in paragraph 

(c)(6) of this section. 

7. Subpart E is added to part 433 to 

read as follows: 

Subpart E—Methodologies for Determining 

Federal Share of Medicaid Expenditures for 

Mandatory Group 

Sec. 

433.202 Scope. 

433.204 Definitions. 

433.206 Choice of methodology. 

433.208 Threshold methodology. 

433.210 Statistically-valid sampling 

methodology. 

433.212 CMS established FMAP proportion. 

Subpart E—Methodologies for 

Determining Federal Share of Medicaid 

Expenditures for Mandatory Group 

§ 433.202 Scope. 

This subpart sets forth the 

requirements and procedures under 

which States may claim for the higher 

Federal share of expenditures for newly 

eligible individuals specified in 

§ 433.204 of this subpart. 

§ 433.204 Definitions. 

As used in this subpart: 


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51186 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

Newly Eligible Individual means an 

individual eligible for Medicaid in 

accordance with the requirements of the 

new adult group and who would not 

have been eligible for Medicaid under 

the State’s eligibility standards and 

methodologies for the Medicaid State 

plan, waiver or demonstration programs 

in effect in the State as of December 1, 

2009. 

§ 433.206 Choice of methodology. 

(a) Beginning January 1, 2014, the 

State must determine the expenditures 

which may be claimed at the FMAP rate 

described in § 433.10 of this part using 

one of the following methods: 

(1) Applying eligibility thresholds and 

proxies in accordance with § 433.208 of 

this part; or 

(2) Conducting a statistically valid 

sample in accordance with § 433.210 of 

this part; or 

(3) Electing to utilize the CMS 

established FMAP proportion rate 

established in accordance with 

§ 433.212 of this part. 

(b) The State must provide to CMS for 

approval a methodology that provides 

the description of the method it will use 

to determine the appropriate FMAP 

claim for medical assistance 

expenditures for newly eligible 

individuals including all of the 

following requirements: 

(1) Except as provided in paragraph 

(b)(2) of this section, at least 2 years 

prior to the year in which the State will 

implement that method. 

(2) For CY 2014, the State must notify 

CMS of such method no later than 

December 31, 2012. 

(3) Changing claiming methodologies: 

(i) The State must use the chosen 

methodology for at least 3 consecutive 

years before changing to another 

methodology; 

(ii) The State must notify CMS of any 

change in methodology in accordance 

with paragraphs (b)(1) and (b)(2) of this 

section. 

(c) To implement each methodology— 

(1) The State must first determine 

those individuals eligible under section 

1902(a)(10)(A)(i)(VIII) of the Act. 

(2) The State may apply a CMS 

approved methodology only to 

expenditures for such individuals. 

(d) Nothing in this section impacts the 

timing or approval of an individual’s 

eligibility for Medicaid. 

§ 433.208 Threshold methodology. 

(a) Beginning January 1, 2014, States 

may elect to apply a CMS-approved 

State specific threshold methodology 

that meets all of the following 

requirements: 

(1) Incorporates State eligibility 

standards, including disregards and 

other adjustments that were in place as 

of December 1, 2009. 

(2) Incorporates any enrollment caps 

under section 1115 demonstration 

programs that were in place in the State 

on December 1, 2009. 

(3) Is applied to each individual 

applicant determined eligible for 

Medicaid under the adult group. 

(4) Is used to determine whether each 

individual is newly eligible so that the 

State may claim the FMAP described in 

§ 433.10(c) of this subpart for all 

expenditures for such individuals. 

(b) To implement the threshold 

methodology, the State must submit a 

methodology and receive CMS approval 

of such methodology prior to its 

application to new FMAP 

determinations. 

(1) Such methodology will specify 

how the State will determine the 

population within the adult group and 

describe in a format provided by CMS 

how it is approximating the December 1, 

2009 standards and methodologies, as 

well as how the State will apply the 

established criteria. 

(2) Subject to approval by CMS, a 

State may use criteria including but not 

limited to: 

(i) Self-declaration. 

(ii) Claims history. 

(iii) Receipt of Social Security 

Disability Income. 

(iv) Disability determination by SSA. 

(v) Information from the Asset 

Verification System established under 

the DRA. 

(vi) Information from tax returns. 

(vii) Application of a proportion 

derived from historical data of the 

actual proportion of individuals within 

specific eligibility groups that were 

ineligible for Medicaid due to assets or 

eligible for Medicaid due to disability 

status using the eligibility standards in 

place as of December 1, 2009. 

(viii) Other disability and asset data 

sources. 

(c) The threshold methodology must: 

(1) Not be biased in such a manner as 

to overestimate or over report 

individuals as newly eligible who were 

actually individuals who would have 

been eligible using the State’s December 

1, 2009 eligibility standards. 

(2) Provide an accurate estimation of 

which individuals would have been 

eligible in accordance with the 

December 1, 2009 eligibility standards 

to be used for the designated year, by 

incorporating simplified assessments of 

asset and disability requirements in 

place at that time. Once individuals are 

determined to be either a newly eligible 

individual or an individual who would 

have been eligible under the December 

2009 standards, the State would apply 

that eligibility determination throughout 

the entire year. 

(3) Be verified by, and adjusted 

prospectively to include results of, any 

evaluations conducted by CMS in 

conjunction with the State(s) of the 

accuracy of the threshold. 

§ 433.210 Statistically valid sampling 

methodology. 

(a)(1) A State choosing to implement 

a statistically-valid sampling 

methodology to determine the 

proportion of expenditures to which the 

FMAP specified in § 433.10(c) of this 

subpart will apply, must submit to CMS 

a methodology that details the sampling 

plan prior to making such claims which 

demonstrates compliance with the 

requirements established in this section 

as well as all additional requirements 

that CMS issues in subregulatory 

guidance. 

(2) The methodology with the 

sampling plan must be submitted to 

CMS on or before January 1 of the 

calendar year in which the State will 

claim expenditures using the sampling 

methodology. 

(3) The State may not implement the 

sampling methodology until CMS has 

reviewed and approved the State’s 

sampling plan. 

(b) A State must verify that its 

sampling plan follows all relevant 

requirements established in the most 

current OMB Circular A–87. 

(c) The State must implement the plan 

as specified in the CMS-approved 

sampling plan for the year in which it 

claims expenditures based on the 

sampling plan. 

(d) A State must draw a statistically 

valid sample from the population of 

Medicaid applicants who are eligible for 

Medicaid under the adult group. 

(e) The State must evaluate each 

individual randomly selected to be 

included in the sample to determine 

whether: 

(1) The individual is newly eligible; 

or 

(2) The individual would have been 

eligible under the standards in place to 

determine eligibility under the 

Medicaid State plan and/or 

demonstration program as of December 

1, 2009, including any enrollment caps 

under section 1115 demonstration 

programs that were in place in the State 

on December 1, 2009. 

(f) The State will attribute all actual 

medical assistance expenditures in that 

calendar year for each newly eligible 

individual in the sample and for each 

individual in the sample who would 

have been eligible under the December 

1, 2009 standards. The State will 

extrapolate and apply the proportion of 


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Medicaid expenditures attributed to the 

newly eligible in the sample to the 

expenditures of the population. 

(g) The State will consider the amount 

determined in accordance with 

paragraph (f) of this section to be the 

expenditures of the newly eligible 

individuals and receive the FMAP rate 

described in § 433.10(c) of this subpart 

for such expenditures when the State 

claims on the CMS–64. 

(h) The State may claim and receive 

the FMAP described in § 433.10(c) of 

this subpart for an estimated proportion 

on an interim basis as follows: 

(1) States may claim expenditures in 

current years based on an interim FMAP 

proportion determined by the most 

recent year for which data is available. 

(2) States must make a retroactive 

adjustment to claims on the CMS–64 for 

the current year once that expenditure 

information is finalized under the 

provisions of paragraph (f) of this 

section. 

(3)(i) Results of a statistically-valid 

sampling methodology for any given 

year must be finalized and applied, and 

adjustments to claims on the CMS–64 

must be made, within 2 years from the 

date of the actual expenditure. 

(ii) If the State does not have 

supporting documentation at the end of 

the second year following the year at 

issue, the State must make a decreasing 

adjustment on the CMS–64 to refund the 

higher FMAP rates, and such claims 

will be regarded as untimely under 45 

CFR 95.7 if resubmitted. 

(iii) A State must implement the 

statistically valid sampling methodology 

in accordance with this section on an 

annual basis for the initial 3 consecutive 

years. 

(A) States that have completed the 

requirements for 3 consecutive years, 

are required thereafter to verify using a 

sampling methodology in accordance 

with this section every 3 years. 

(B) Any State that meets the 

requirements of paragraph (h)(3)(iii)(A) 

of this section may retroactively apply 

results of the sample to the rates of the 

calendar year expenditures for the years 

prior to the sample up to the last year 

in which the State completed and 

applied the results of a sampling 

methodology. 

§ 433.212 CMS established FMAP 

proportion. 

(a) Beginning January 1, 2014, States 

may elect to apply a CMS determined 

proportion to medical assistance 

expenditures for individuals eligible for 

Medicaid in the adult group. 

(b) CMS will publish State-specific 

estimated FMAP proportions of 

eligibility under the December 2009 

eligibility criteria using data sources 

including, but not limited to MEPS and 

MSIS data. 

(c) CMS will meet all of the following 

requirements: 

(1) Solicit and incorporate comments 

on the development of rates. 

(2) Annually establish a model to 

predict in an unbiased way the 

appropriate proportion of expenditures 

for which each State would claim the 

FMAP rate described in § 433.10(c) of 

this subpart for newly eligible 

individuals taking into account any 

enrollment caps under demonstration 

programs that were in place in the State 

on December 1, 2009. 

(3) Publish the State-specific rates by 

October 1 of the preceding year. For CY 

2014, the model must be published no 

later than January 1, 2013. 

(4) Incorporate results from a 

validation methodology in accordance 

with § 433.212(e) of this subpart such as 

a statistically valid sampling of State 

data of actual individuals eligible for 

and enrolled in Medicaid in accordance 

with section 1902(a)(10)(A)(i)(VIII) of 

the Act. 

(5) Provide technical assistance to 

States on applying the rates established. 

(d) States will apply the CMS 

published State-specific proportion of 

expenditures attributed to the newly 

eligible to expenditures for all 

individuals eligible for and enrolled in 

Medicaid in accordance with section 

1902(a)(10)(A)(i)(VIII) of the Act. The 

State will consider the amount 

determined in accordance with this 

section to be the expenditures of the 

newly eligible individuals and receive 

the FMAP rate described in § 433.10(c) 

of this part for such expenditures when 

the State claims expenditures on the 

CMS–64. 

(e) Validation measures such as 

statistical sampling must be 

incorporated into the estimate: 

(1) On an annual basis beginning in 

CY 2016, to include expenditures 

related to CY 2014, and continue 

through CY 2021; 

(2) After CY 2021, validation will be 

completed, and results incorporated 

into the model, on a 3-year basis; 

(3) After CY 2030, validation will be 

completed, and results incorporated 

into the model, on a 5-year basis. 

PART 435—ELIGIBILITY IN THE 

STATES, DISTRICT OF COLUMBIA, 

THE NORTHERN MARIANA ISLANDS, 

AND AMERICAN SAMOA 

8. The authority citation for part 435 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

9a. Remove the term ‘‘family income’’ 

wherever it appears in part 435 and add 

in its place the term ‘‘household 

income.’’ 

Subpart A—General Provisions and 

Definitions 

9b. Section 435.4 is amended by— 

A. Adding the definitions of 

‘‘Advance payments of the premium tax 

credit,’’ ‘‘Affordable Insurance Exchange 

(Exchange),’’ ‘‘Agency,’’ ‘‘Caretaker 

relative,’’ ‘‘Dependent child,’’ ‘‘Effective 

income level,’’ ‘‘Electronic account,’’ 

‘‘Household income,’’ ‘‘Insurance 

affordability program,’’ ‘‘MAGI-based 

income,’’ ‘‘Minimum essential 

coverage,’’ ‘‘Modified adjusted gross 

income (MAGI),’’ ‘‘Pregnant woman,’’ 

‘‘Secure electronic interface,’’ and ‘‘Tax 

dependent’’ in alphabetical order. 

B. Revising the definition of ‘‘Families 

and children.’’ 

The revisions read as follows: 

§ 435.4 Definitions and use of terms. 

* * * * * 

Advance payments of the premium 

tax credit means payments of the tax 

credit specified in section 36B of the 

Internal Revenue Code of 1986, which 

provide premium assistance on an 

advance basis to support enrollment of 

an eligible individual in a qualified 

health plan through the Exchange. 

* * * * * 

Affordable Insurance Exchange 

(Exchange) means a governmental 

agency or non-profit entity that meets 

the applicable requirements and makes 

qualified health plans available to 

qualified individuals and qualified 

employers. Unless otherwise identified, 

this term refers to State Exchanges, 

regional Exchanges, subsidiary 

Exchanges, and a Federally-facilitated 

Exchange. 

Agency means a State Medicaid 

agency. 

* * * * * 

Caretaker relative means a relative of 

a dependent child by blood, adoption, 

or marriage with whom the child is 

living, who assumes primary 

responsibility for the child’s care (as 

may, but is not required to, be indicated 

by claiming the child as a tax dependent 

for Federal income tax purposes), 

including the child’s natural, adoptive, 

or step parent; another relative of the 

child based on blood (including those of 

half-blood), adoption, or marriage; and 

the spouse of such parent or relative, 

even after the marriage is terminated by 

death or divorce. 

* * * * * 

Dependent child means a child who is 

under the age of 18, or is age 18 and a 


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full-time student, and who is deprived 

of parental support by reason of the 

death, absence from the home, or 

unemployment of at least one parent, 

unless the State has elected in its State 

plan to eliminate such deprivation 

requirement. A parent is considered to 

be unemployed if he or she is working 

less than 100 hours per month, or such 

higher number of hours as the State may 

elect in its State plan. 

Effective income level means the 

income standard applicable under the 

State plan for an eligibility group, after 

taking into consideration any disregard 

of a block of income. 

Electronic account means an 

electronic file that includes all 

information collected and generated by 

the State regarding each individual’s 

Medicaid eligibility and enrollment, 

including all documentation required 

under § 435.913. 

Families and children means 

individuals whose eligibility for 

Medicaid is determined based on being 

a pregnant woman, a child younger than 

age 21, or a parent or other caretaker 

relative of a dependent child. It does not 

include individuals whose eligibility is 

based on other factors, such as 

blindness, disability, being aged (65 or 

more years old), or a need for long-term 

care services. 

Household income has the meaning 

provided in § 435.603(d). 

Insurance affordability program 

means: 

(1) A State Medicaid program under 

title XIX of the Act; 

(2) A State children’s health insurance 

program (CHIP) under title XXI of the 

Act; 

(3) A State basic health program 

established under section 1331 of the 

Affordable Care Act; 

(4) Coverage in a qualified health plan 

through the Exchange with advance 

payments of the premium tax credit 

established under section 36B of the 

Internal Revenue Code of 1986; or 

(5) Coverage in a qualified health plan 

through the Exchange with cost-sharing 

reductions established under section 

1402 of the Affordable Care Act. 

MAGI-based income has the meaning 

provided in § 435.603(e). 

* * * * * 

Minimum essential coverage means 

coverage defined in section 5000A(f) of 

subtitle D of the Internal Revenue Code 

of 1986, as added by section 1401 of the 

Affordable Care Act, and implementing 

regulations of such section issued by the 

Secretary of the Treasury. 

Modified adjusted gross income 

(MAGI) has the meaning provided in 

section 36B(d)(2) of the Internal 

Revenue Code of 1986. 

* * * * * 

Pregnant woman means a woman 

during pregnancy and the post partum 

period, which extends until the last day 

of the month in which a 60-day period, 

beginning on the date the pregnancy 

terminates, ends. 

Secure electronic interface means an 

interface which allows for the exchange 

of data between Medicaid and other 

insurance affordability programs and 

adheres to the requirements in part 433, 

subpart C of this chapter. 

* * * * * 

Tax dependent means an individual 

for whom another individual properly 

claims a deduction for a personal 

exemption under section 151 of the 

Internal Revenue Code of 1986 for a 

taxable year. 

Subpart B—Mandatory Coverage 

10. The heading for subpart B is 

revised as set forth above. 

11. Section 435.110 is revised to read 

as follows: 

§ 435.110 Parents and other caretaker 

relatives. 

(a) Basis. This section implements 

sections 1931(b) and (d) of the Act. 

(b) Scope. The agency must provide 

Medicaid to parents and other caretaker 

relatives, as defined in § 435.4, and if 

applicable the spouse of the parent or 

other caretaker relative, whose 

household income is at or below the 

income standard established by the 

agency in the State plan, in accordance 

with paragraph (c) of this section. 

(c) Income standard. The agency must 

establish in its State plan the income 

standard as follows: 

(1) The minimum income standard is 

a State’s AFDC income standard in 

effect as of May 1, 1988 for a household 

of the applicable family size. 

(2) The maximum income standard is 

the higher of— 

(i) The effective income level in effect 

for section 1931 low-income families 

under the Medicaid State plan or waiver 

of the State plan as of March 23, 2010 

or December 31, 2013, if higher, 

converted to a MAGI-equivalent 

standard in accordance with guidance 

issued by the Secretary under section 

1902(e)(14)(A) and (E) of the Act; or 

(ii) A State’s AFDC income standard 

in effect as of July 16, 1996 for a 

household of the applicable family size, 

increased by no more than the 

percentage increase in the Consumer 

Price Index for all urban consumers 

between July 16, 1996 and the effective 

date of such increase. 

12. Revise the undesignated center 

heading that is immediately before 

§ 435.116 to read as follows: 

Mandatory Coverage of Pregnant 

Women, Children Under 19, and 

Newborn Children 

13. Section 435.116 is revised to read 

as follows: 

§ 435.116 Pregnant women. 

(a) Basis. This section implements 

sections 1902(a)(10)(A)(i)(III) and (IV); 

1902(a)(10)(A)(ii)(I), (IV), and (IX); and 

1931(b) and (d) of the Act. 

(b) Scope. The agency must provide 

Medicaid to pregnant women whose 

household income is at or below the 

income standard established by the 

agency in its State plan, in accordance 

with paragraph (c) of this section. 

(c) Income standard. The agency must 

establish in its State plan the income 

standard as follows: 

(1) The minimum income standard is 

the higher of: 

(i) 133 percent FPL for a household of 

the applicable family size; or 

(ii) Such higher income standard up 

to 185 percent FPL, if any, as the State 

had established as of December 19, 1989 

for determining eligibility for pregnant 

women, or, as of July 1, 1989, had 

authorizing legislation to do so. 

(2) The maximum income standard is 

the higher of— 

(i) The highest effective income level 

in effect under the Medicaid State plan 

for coverage under the sections 

specified at paragraph (a) of this section, 

or waiver of the State plan covering 

pregnant women, as of March 23, 2010 

or December 31, 2013, if higher, 

converted to a MAGI-equivalent 

standard in accordance with guidance 

issued by the Secretary under section 

1902(e)(14)(A) and (E) of the Act; or 

(ii) 185 percent FPL. 

(d) Covered services. 

(1) Pregnant women are covered 

under this section for the full Medicaid 

coverage described in paragraph (d)(2) 

of this section, except that the agency 

may provide only pregnancy-related 

services described in paragraph (d)(3) of 

this section for pregnant women whose 

income exceeds the applicable income 

limit established by the agency in its 

State plan, in accordance with 

paragraph (d)(4) of this section. 

(2) Full Medicaid coverage— 

(i) Consists of all services which the 

State is required to cover under 

§ 440.210(a)(1) of this chapter and all 

services which it has opted to cover 

under § 440.225 of this chapter; and 

(ii) May include, at State option, 

enhanced pregnancy-related services in 

accordance with § 440.250(p) of this 

chapter. 


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(3) Pregnancy-related services— 

(i) Consist at least of services, as 

defined by the agency, related to 

pregnancy (including prenatal, delivery, 

postpartum, and family planning 

services) and other conditions which 

may complicate pregnancy; and 

(ii) May include, at State option, 

enhanced pregnancy-related services in 

accordance with § 440.250(p) of this 

chapter). 

(4) Applicable income limit for full 

Medicaid coverage of pregnant women. 

For purposes of paragraph (d)(1) of this 

section— 

(i) The minimum applicable income 

limit is the State’s AFDC income 

standard in effect as of May 1, 1988 for 

a household of the applicable family 

size. 

(ii) The maximum applicable income 

limit is the highest effective income 

level for coverage under section 

1902(a)(10)(A)(i)(III) of the Act or under 

section 1931(b) and (d) of the Act in 

effect under the Medicaid State plan or 

waiver of the State plan as of March 23, 

2010 or December 31, 2013, if higher, 

converted to a MAGI-equivalent 

standard. 

14. Section 435.118 is added to read 

as follows: 

§ 435.118 Infants and children under age 

19. 

(a) Basis. This section implements 

sections 1902(a)(10)(A)(i)(III), (IV), (VI), 

and (VII); 1902(a)(10)(A)(ii)(IV) and (IX); 

and 1931(b) and (d) of the Act. 

(b) Scope. The agency must provide 

Medicaid to children under age 19 

whose household income is at or below 

the income standard established by the 

agency in its State plan, in accordance 

with paragraph (c) of this section. 

(c) Income standard. 

(1) The minimum income standard is 

the higher of— 

(i) 133 percent FPL for a household of 

the applicable family size; or 

(ii) For infants under age 1, such 

higher income standard up to 185 

percent FPL, if any, as the State had 

established as of December 19, 1989 for 

determining eligibility for infants, or, as 

of July 1, 1989 had authorizing 

legislation to do so. 

(2) The maximum income standard 

for each of the age groups of infants 

under age 1, children age 1 through age 

5, and children age 6 through age 18 is 

the higher of— 

(i) 133 percent FPL; 

(ii) The highest effective income level 

for each age group in effect under the 

Medicaid State plan for coverage under 

the applicable sections of the Act listed 

at § 435.118(a), or waiver of the State 

plan covering such age group, as of 

March 23, 2010 or December 31, 2013, 

if higher, converted to a MAGIequivalent standard in accordance with 

guidance issued by the Secretary under 

section 1902(e)(14)(A) and (E) of the 

Act; or 

(iii) For infants under age 1, 185 

percent FPL. 

15. Revise the undesignated center 

heading that is before § 435.119 to read 

as follows: 

Mandatory Coverage for Individuals 

Age 19 through 64 

16. Section 435.119 is revised to read 

as follows: 

§ 435.119 Coverage for individuals age 19 

or older and under age 65 at or below 133 

percent FPL. 

(a) Basis. This section implements 

section 1902(a)(10)(A)(i)(VIII) of the Act. 

(b) Eligibility. The agency must 

provide Medicaid to individuals who: 

(1) Are age 19 or older and under age 

65; 

(2) Are not pregnant; 

(3) Are not entitled to or enrolled for 

Medicare benefits under part A or B of 

title XVIII of the Act; 

(4) Are not otherwise eligible for and 

enrolled for mandatory coverage under 

a State’s Medicaid State plan in 

accordance with subpart B of this part; 

and 

(5) Have household income that is at 

or below 133 percent FPL for a 

household of the applicable family size. 

(c) Coverage for dependent children. 

(1) A State may not provide Medicaid 

to a parent or other caretaker relative 

living with a dependent child if the 

child is under the age specified in 

paragraph (c)(2) of this section, unless 

such child is receiving benefits under 

Medicaid, the Children’s Health 

Insurance Program under subchapter D 

of this chapter, or otherwise is enrolled 

in other minimum essential coverage as 

defined in § 435.4 of this part. 

(2) For the purpose of paragraph (c)(1) 

of this section, the age specified is 

under age 19, unless the State had 

elected as of March 23, 2010 to provide 

Medicaid to individuals under age 20 or 

21 under § 435.222 of this part, in which 

case the age specified is such higher age. 

Subpart C—Options for Coverage 

17. The heading for subpart C is 

revised to read as set forth above. 

18. Section 435.218 is added to read 

as follows: 

§ 435.218 Individuals above 133 percent 

FPL. 

(a) Basis. This section implements 

section 1902(a)(10)(A)(ii)(XX) of the Act. 

(b) Eligibility. 

(1) Criteria. The agency may provide 

Medicaid to individuals who: 

(i) Are under age 65; 

(ii) Are not eligible for and enrolled 

for mandatory coverage under a State’s 

Medicaid State plan in accordance with 

subpart B of this part; 

(iii) Are not otherwise eligible for and 

enrolled for optional coverage under a 

State’s Medicaid State plan in 

accordance with subpart C of this part, 

based on information available to the 

State from the application filed by or on 

behalf of the individual; and 

(iv) Have household income that 

exceeds 133 percent FPL, but is at or 

below the income standard elected by 

the agency and approved in its 

Medicaid State plan, for a household of 

the applicable family size. 

(2) Limitations. 

(i) A State may not, except as 

permitted under an approved phase-in 

plan adopted in accordance with 

paragraph (b)(3) of this section, provide 

Medicaid to higher income individuals 

described in paragraph (b)(1) of this 

section without providing Medicaid to 

lower income individuals described in 

such paragraph. 

(ii) The limitation on coverage of 

parents and other caretaker relatives 

specified in § 435.119(c) also applies to 

coverage under this section. 

(3) Phase-in plan. A State may phase 

in coverage to all individuals described 

in paragraph (b)(1) of this section under 

a phase-in plan submitted in a State 

plan amendment to and approved by the 

Secretary. 

Subpart E—General Eligibility 

Requirements 

19. Section 435.403 is amended by— 

A. Redesignating paragraphs (h) and 

(i) as paragraphs (i) and (h), 

respectively. 

B. Revising newly redesignated 

paragraphs (h)(1) and (h)(4) 

C. Revising newly redesignated 

paragraphs (i)(1) and (i)(2). 

D. Removing newly redesignated 

paragraph (i)(3). 

E. Further redesignating newly 

redesignated paragraph (i)(4) as 

paragraph (i)(3). 

F. Amending paragraph (l)(2) by 

removing ‘‘paragraph (h)’’ and adding 

‘‘paragraph (i)’’ in its place. 

The revisions and addition read as 

follows: 

§ 435.403 State residence. 

* * * * * 

(h) Individuals age 21 and over. 

(1) For an individual not residing in 

an institution as defined in paragraph 

(b) of this section, the State of residence 

is the State where the individual— 

(i) Intends to reside, including 

without a fixed address or, if incapable 


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of stating intent, where the individual is 

living; or 

(ii) Has entered the State with a job 

commitment or seeking employment 

(whether or not currently employed). 

* * * * * 

(4) For any other institutionalized 

individual, the State of residence is the 

State where the individual intends to 

reside or, if incapable of stating intent, 

where the individual is living. 

(i) Individuals under age 21. 

(1) For an individual under age 21 

who is capable of indicating intent and 

who is emancipated from his or her 

parent or who is married, the State of 

residence is determined in accordance 

with paragraph (h)(1) of this section. 

(2) For an individual under age 21 not 

described in paragraph (i)(1) of this 

section, not living in an institution as 

defined in paragraph (b) of this section 

and not eligible for Medicaid based on 

receipt of assistance under title IV–E of 

the Act, as addressed in paragraph (g) of 

this section, the State of residence is the 

State: 

(i) Where the individual resides, 

including with a custodial parent or 

caretaker or without a fixed address; or 

(ii) Where the individual’s parent or 

caretaker has entered the State with a 

job commitment or seeking employment 

(whether or not currently employed). 

* * * * * 

Subpart G—General Financial 

Eligibility Requirements and Options 

20. Section 435.603 is added to read 

as follows: 

§ 435.603 Application of modified adjusted 

gross income (MAGI). 

(a) Basis, scope, and implementation. 

(1) This section implements section 

1902(e)(14) of the Act. 

(2) Effective January 1, 2014, the 

agency must apply the financial 

methodologies set forth in this section 

in determining the financial eligibility 

of all individuals for Medicaid, except 

for individuals identified in paragraph 

(i) of this section and as provided in 

paragraph (a)(3) of this section. 

(3) In the case of determining ongoing 

eligibility for beneficiaries determined 

eligible for Medicaid on or before 

December 31, 2013 and receiving 

Medicaid as of January 1, 2014, 

application of the financial 

methodologies set forth in this section 

must not be applied until March 31, 

2014 or the next regularly-scheduled 

redetermination of eligibility for such 

individual under § 435.916, whichever 

is later, if the individual otherwise 

would lose eligibility as a result of the 

application of these methodologies. 

(b) Definitions. For purposes of this 

section— 

Code means the Internal Revenue 

Code of 1986. 

Family size means the number of 

persons counted as members of an 

individual’s household. In the case of 

determining the family size of a 

pregnant woman, the pregnant woman 

is counted as 2 persons. In the case of 

determining the family size of other 

individuals who have a pregnant 

woman in their household, the pregnant 

woman is counted, at State option, as 

either 1 or 2 person(s). 

Tax dependent has the meaning 

provided in § 435.4 of this part. 

(c) Basic rule. Except as specified in 

paragraph (i) of this section, the agency 

must determine financial eligibility for 

Medicaid based on ‘‘household income’’ 

as defined in paragraph (d) of this 

section. 

(d) Household income. 

(1) Except as provided in paragraphs 

(d)(2) and (d)(3) of this section, 

household income is the sum of the 

MAGI-based income, as defined in 

paragraph (e) of this section, of every 

individual included in the individual’s 

household, minus an amount equivalent 

to 5 percentage points of the Federal 

poverty level for the applicable family 

size. 

(2) The MAGI-based income of an 

individual who is included in the 

household of his or her natural, adopted 

or step parent and is not required to file 

a tax return under section 6012 of the 

Code for the taxable year in which 

eligibility for Medicaid is being 

determined, is not included in 

household income whether or not the 

individual files a tax return. 

(3) In the case of individuals 

described in paragraph (f)(2)(i) of this 

section, household income also includes 

actually available cash support provided 

by the person claiming such individual 

as a tax dependent. 

(e) MAGI-based income. For the 

purposes of this section, MAGI-based 

income means income calculated using 

the same financial methodologies used 

to determine modified adjusted gross 

income as defined in section 

36B(d)(2)(B) of the Code, except that, 

notwithstanding the treatment of the 

following under the Code— 

(1) An amount received as a lump 

sum is counted as income only in the 

month received. 

(2) Scholarships or fellowship grants 

used for education purposes and not for 

living expenses are excluded from 

income. 

(3) American Indian/Alaska Native 

exceptions. The following are excluded 

from income: 

(i) Distributions from Alaska Native 

Corporations and Settlement Trusts; 

(ii) Distributions from any property 

held in trust, or that is subject to Federal 

restrictions, or otherwise under the 

supervision of the Secretary of the 

Interior. 

(iii) Distributions resulting from real 

property ownership interests related to 

natural resources and improvements— 

(A) Located on or near a reservation 

or within the most recent boundaries of 

a prior Federal reservation; or 

(B) Resulting from the exercise of 

Federally-protected rights relating to 

such real property ownership interests; 

(iv) Payments resulting from 

ownership interests in or usage rights to 

items that have unique religious, 

spiritual, traditional, or cultural 

significance or rights that support 

subsistence or a traditional lifestyle 

according to applicable Tribal Law or 

custom; 

(v) Student financial assistance 

provided under the Bureau of Indian 

Affairs education programs. 

(f) Household. 

(1) Basic rule for taxpayers not 

claimed as a tax dependent. In the case 

of an individual filing a tax return for 

the taxable year in which an initial 

determination or redetermination of 

eligibility is being made, and who is not 

claimed as a tax dependent by another 

taxpayer, the household consists of the 

taxpayer and all tax dependents. 

(2) Basic rule for individuals claimed 

as a tax dependent. In the case of an 

individual who is claimed as a tax 

dependent by another taxpayer, the 

household is the household of the 

taxpayer claiming such individual as a 

tax dependent, except that the 

household must be determined in 

accordance with paragraph (f)(3) of this 

section in the case of— 

(i) Individuals other than a spouse or 

a biological, adopted or step child who 

are claimed as a tax dependent by 

another taxpayer; 

(ii) Individuals under age 21 living 

with both parents, if the parents are not 

married; and 

(iii) Individuals under age 21 claimed 

as a tax dependent by a non-custodial 

parent. 

(3) Rules for individuals who neither 

file a tax return nor are claimed as a tax 

dependent. In the case of individuals 

who do not file a Federal tax return and 

are not claimed as a tax dependent, the 

household consists of the individual 

and, if living with the individual— 

(i) The individual’s spouse; 

(ii) The individual’s natural, adopted 

and step children under age 19 or, if 

such child is a full-time student, under 

age 21; and 


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(iii) In the case of individuals under 

age 19, or, in the case of full-time 

students, under age 21 the individual’s 

natural, adopted and step parents and 

adoptive and step siblings under age 19 

or, if such sibling is a full-time student, 

under age 21. 

(4) Married couples. In the case of a 

married couple living together, each 

spouse will be included in the 

household of the other spouse, 

regardless of whether they file a joint 

tax return under section 6013 of the 

Code or whether one spouse is claimed 

as a tax dependent by the other spouse. 

(g) No resource test or income 

disregards. In the case of individuals 

whose financial eligibility for Medicaid 

is determined in accordance with this 

section, the agency must not— 

(1) Apply any assets or resources test; 

or 

(2) Apply any income or expense 

disregards under sections 1902(r)(2) or 

1931(b)(2)(C), or otherwise under title 

XIX, of the Act. 

(h) Budget period. 

(1) Applicants and new enrollees. 

Financial eligibility for Medicaid for 

applicants and other individuals not 

receiving Medicaid benefits at the point 

at which eligibility for Medicaid is 

being determined must be based on 

current monthly household income and 

family size. 

(2) Current beneficiaries. For 

individuals who have been determined 

financially-eligible for Medicaid using 

the MAGI-based methods set forth in 

this section, a State may elect in its 

State plan to base financial eligibility 

either on current monthly household 

income and family size or projected 

annual household income for the 

current calendar year. 

(3) In determining current monthly or 

projected annual household income 

under paragraph (h)(1) or (h)(2) of this 

section, the agency may adopt a 

reasonable method to include a prorated 

portion of reasonably predictable future 

income, to account for a reasonably 

predictable decrease in future income, 

or both, as evidenced by a signed 

contract for employment, a clear history 

of predictable fluctuations in income, or 

other clear indicia of such future 

changes in income. Such future increase 

or decrease in income must be verified 

in the same manner as other income, in 

accordance with the income and 

eligibility verification requirements at 

§ 435.940 et seq., including by selfattestation if reasonably compatible 

with other electronic data obtained by 

the agency in accordance with such 

sections. 

(i) Eligibility Groups for which 

modified MAGI-based methods do not 

apply. The financial methodologies 

described in this section are not applied 

in determining the eligibility for 

individuals whose eligibility for 

Medicaid is being determined on the 

following bases or under the following 

eligibility groups. For individuals 

described in paragraphs (i)(3) through 

(i)(6) of this section, the agency must 

use the financial methods described in 

§ 435.601 and § 435.602 of this subpart. 

(1) Individuals whose eligibility for 

Medicaid does not require a 

determination of income by the State 

Medicaid agency, including, but not 

limited to, individuals deemed to be 

receiving Supplemental Security 

Income (SSI) benefits and eligible for 

Medicaid under § 435.120, individuals 

receiving SSI benefits and eligible for 

Medicaid under § 435.135, § 435.137 or 

§ 435.138 of this subpart and 

individuals for whom the State relies on 

a finding of income made by an Express 

Lane agency, in accordance with section 

1902(e)(13) of the Act. 

(2) Individuals who are age 65 or 

older. 

(3) Individuals whose eligibility is 

being determined on the basis of being 

blind or disabled, or on the basis of 

being treated as being blind or disabled, 

including, but not limited to, 

individuals eligible under § 435.121, 

§ 435.232 or § 435.234 of this part or 

under section 1902(e)(3) of the Act. 

(4) Individuals whose eligibility is 

being determined on the basis of the 

need for long-term care services, 

including nursing facility services or a 

level of care in any institution 

equivalent to such services; home and 

community-based services under 

section 1915 or under a demonstration 

under section 1115 of the Act; or 

services described in sections 1905(a)(7) 

or (24) or in sections 1905(a)(22) and 

1929 of the Act. 

(5) Individuals who are being 

evaluated for eligibility for Medicare 

cost sharing assistance under section 

1902(a)(10)(E) of the Act, but only for 

purposes of determining eligibility for 

such assistance. 

(6) Individuals who are being 

evaluated for coverage as medically 

needy under subparts D and I of this 

part. 

Subpart J—Eligibility in the States and 

District of Columbia Applications 

21. Section 435.905 is revised to read 

as follows: 

§ 435.905 Availability of program 

information. 

(a) The agency must furnish the 

following information in electronic and 

paper formats, and orally as appropriate, 

to all applicants and other individuals 

who request it: 

(1) The eligibility requirements; 

(2) Available Medicaid services; and 

(3) The rights and responsibilities of 

applicants and beneficiaries. 

(b) Such information must be 

provided in simple and understandable 

terms and in a manner that is accessible 

to persons who are Limited English 

Proficient (LEP) and individuals living 

with disabilities. 

22. Section 435.907 is revised to read 

as follows: 

§ 435.907 Application. 

(a) The agency must require an 

application from the applicant, an 

authorized representative, or someone 

acting responsibly for the applicant. 

(b) The application must be— 

(1) The single, streamlined 

application for all insurance 

affordability programs developed by the 

Secretary in accordance with section 

1413(b)(1)(A) of the Affordable Care Act; 

or 

(2) An alternative single, streamlined 

application for all insurance 

affordability programs developed by a 

State and approved by the Secretary in 

accordance with section 1413(b)(1)(B) of 

the Affordable Care Act. The alternative 

application must be no more 

burdensome than the single streamlined 

application described in paragraph 

(b)(1) of this section and ensure 

coordination across insurance 

affordability programs. 

(c) For individuals applying for 

coverage, or who may be eligible, on a 

basis other than the applicable modified 

adjusted gross income standard in 

accordance with § 435.911, the agency 

may use either the single, streamlined 

application and supplemental forms to 

collect additional information needed to 

determine eligibility on such other basis 

or an alternative application form 

approved by the Secretary. 

(d) The agency must establish 

procedures to enable an individual, or 

other authorized person acting on behalf 

of the individual, to submit an 

application— 

(1) Via the Internet Web site described 

in § 435.1200(d) of this part; 

(2) By telephone; 

(3) Via mail; 

(4) In person; or 

(5) Via facsimile. 

(e) Information related to nonapplicants. 

(1) The agency may not require an 

individual who is not applying for 

benefits for himself or herself (a ‘‘nonapplicant’’) to provide an SSN or 

information regarding such individual’s 

citizenship, nationality, or immigration 


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status on any application or 

supplemental form. 

(2) The agency may request that a 

household member who is a nonapplicant provide an SSN, only if— 

(i) Provision of the SSN to the agency 

is voluntary and the agency permits the 

completion of the application without 

such information; 

(ii) The SSN from a non-applicant is 

used to determine an applicant’s 

eligibility for Medicaid or for a purpose 

directly connected to the administration 

of the State plan; and 

(iii) The agency clearly notifies the 

non-applicant that the provision of an 

SSN is voluntary and informs the 

individual how the SSN will be used, at 

the time it is requested. 

(f) The initial application must be 

signed under penalty of perjury. 

Electronic, including telephonically 

recorded, signatures and handwritten 

signatures transmitted by fascimile or 

other electronic transmission must be 

accepted. 

23. Section 435.908 is revised to read 

as follows: 

§ 435.908 Assistance with application and 

redetermination. 

(a) The agency must allow 

individual(s) of the applicant or 

beneficiary’s choice to assist in the 

application process or during a 

redetermination of eligibility. 

(b) The agency must provide 

assistance to any individual seeking 

help with the application or 

redetermination process in person, over 

the telephone, and online, and in a 

manner that is accessible to individuals 

with disabilities and those who are 

limited English proficient. 

24. Redesignate § 435.911 through 

§ 435.914 as § 435.912 through § 435.915 

respectively. 

25. Add new § 435.911 to read as 

follows: 

§ 435.911 Determination of eligibility. 

(a) Statutory basis. This section 

implements sections 1902(a)(4), (a)(8), 

(a)(10)(A), (a)(19), and (e)(14) and 

section 1943 of the Act. 

(b)(1) Applicable modified adjusted 

gross income standard means 133 

percent of the Federal poverty level or, 

if higher— 

(i) In the case of parents and other 

caretaker relatives described in 

§ 435.110(b), the income standard 

established in accordance with 

§ 435.110(c); 

(ii) In the case of pregnant women, the 

income standard established in 

accordance with § 435.116(c); 

(iii) In the case of individuals under 

age 19, the income standard established 

in accordance with § 435.118(c); 

(iv) The income standard established 

under § 435.218(b)(1)(iv) of this part, if 

the State has elected to provide coverage 

under such section and, if applicable, 

coverage under the State’s phase-in plan 

has been implemented for the 

individual whose eligibility is being 

determined. 

(2) [Reserved] 

(c) For each individual who has 

submitted an application described 

§ 435.907 and who meets the nonfinancial requirements for eligibility (or 

for whom the agency is providing a 

reasonable opportunity to provide 

documentation of citizenship or 

immigration status, in accordance with 

sections 1903(x), 1902(ee) or 1137(d) of 

the Act), the State Medicaid Agency 

must comply with the following— 

(1) Eligibility determination for 

mandatory coverage on basis of 

modified adjusted gross income. For 

each such individual who is under age 

19, pregnant, or age 19 or older and 

under age 65 and not entitled to or 

enrolled for Medicare benefits under 

part A or B or title XVIII of the Act, and 

whose household income is at or below 

the applicable modified adjusted gross 

income standard, the agency must 

promptly and without undue delay 

furnish Medicaid benefits to such 

individual in accordance with parts 440 

and 441 of this chapter. 

(2) Eligibility on basis other than 

applicable modified adjusted gross 

income standard. For each such 

individual not determined eligible for 

Medicaid in accordance with paragraph 

(c)(1) of this section, the agency must 

collect additional information as 

needed, consistent with § 435.907(c), 

to— 

(i) Determine whether such individual 

is eligible for Medicaid on any other 

basis. 

(ii) Promptly and without undue 

delay furnish Medicaid to each such 

individual determined eligible, in 

accordance with parts 440 and 441 of 

this chapter; and 

(iii) Comply with the requirements set 

forth in § 435.1200(g). 

26. Section 435.916 is revised to read 

as follows: 

§ 435.916 Periodic redeterminations of 

Medicaid eligibility. 

(a) Redetermination of individuals 

whose Medicaid eligibility is based on 

modified adjusted gross income. 

(1) Except as provided in paragraph 

(d) of this section, the eligibility of 

Medicaid beneficiaries whose financial 

eligibility is based on the applicable 

modified adjusted gross income 

standard in accordance with 

§ 435.911(c)(1)must be redetermined 

once every 12 months. 

(2) The agency must make a 

redetermination of eligibility without 

requiring information from the 

individual if able to do so based on 

reliable information contained in the 

individual’s account or other more 

current information available to the 

agency, including but not limited to 

information accessed through any data 

bases accessed by the agency under 

§ 435.948, § 435.949 and § 435.956 of 

this part. 

(i) Individuals redetermined eligible 

on the basis of information available to 

the agency. 

(A) If the agency determines, on the 

basis of information available to the 

agency that the individual remains 

eligible for Medicaid, consistent with 

the requirements of this subpart and 

subpart E of part 431 the agency must 

notify the individual— 

(1) Of the eligibility determination, 

and basis therefore; and 

(2) That the individual must inform 

the agency, through any of the modes 

permitted for submission of applications 

under § 435.907(d) of this subpart, if any 

of the information contained in such 

notice is inaccurate. 

(B) Such individuals must not be 

required to sign and return the notice. 

(ii) Individuals not redetermined 

eligible on basis of information 

available to agency. If the agency cannot 

determine, on the basis of information 

available to it, that the individual 

remains eligible for Medicaid, or if it 

otherwise needs additional information 

to complete the redetermination, the 

agency must comply with the 

requirements in paragraph (a)(3) of this 

section. 

(3) Use of a pre-populated renewal 

form. For individuals not redetermined 

eligible under paragraph (a)(2) of this 

section, the agency must— 

(i) Provide the individual with— 

(A) A renewal form containing 

information available to the agency that 

is needed to renew eligibility, as 

specified by the Secretary; 

(B) At least 30 days from the date of 

the renewal form to respond and 

provide necessary information; 

(C) Notice of the agency’s decision 

concerning eligibility in accordance 

with this subpart and subpart E of part 

431 of this chapter; and 

(D) The ability to respond to the 

renewal form through any of the modes 

permitted for submission of applications 

under § 435.907(d), and if required, sign 

the renewal electronically. 

(ii) Verify any information provided 

by the beneficiary in accordance with 

§ 435.945 through § 435.956. 


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(iii) Reconsider in a timely manner 

the eligibility of an individual who is 

terminated for failure to respond to the 

renewal form, if the individual 

subsequently responds to the agency 

within a reasonable period after the date 

of termination without the need for the 

individual to file a new application. 

(4) Transmission of data on 

individuals no longer eligible for 

Medicaid. If an individual is determined 

ineligible for Medicaid, the agency must 

assess the individual for eligibility for 

other insurance affordability programs 

and transmit the electronic account and 

any relevant information used to make 

the eligibility determination to the 

appropriate program in accordance with 

the requirements set forth in 

§ 435.1200(g) of this part. 

(b) Redetermination of individuals 

whose Medicaid eligibility is determined 

on a basis other than modified adjusted 

gross income. The agency must 

redetermine the eligibility of Medicaid 

beneficiaries excepted from modified 

adjusted gross income under 

§ 435.603(i) of this part, for 

circumstances that may change, at least 

every 12 months. The agency may— 

(1) Consider blindness as continuing 

until the reviewing physician under 

§ 435.531 of this part determines that a 

beneficiary’s vision has improved 

beyond the definition of blindness 

contained in the plan; and 

(2) Consider disability as continuing 

until the review team, under § 435.541 

of this part, determines that a 

beneficiary’s disability no longer meets 

the definition of disability contained in 

the plan. 

(c) Procedures for reporting changes. 

The agency must have procedures 

designed to ensure that beneficiaries 

make timely and accurate reports of any 

change in circumstances that may affect 

their eligibility and that such changes 

may be reported in accordance with the 

modes required for submission of 

applications under § 435.907(d) of this 

subpart. 

(d) Agency action on information 

about changes. Consistent with the 

requirements of § 435.952 of this 

subpart— 

(1) The agency must promptly 

redetermine eligibility when it receives 

information about changes in a 

beneficiary’s circumstances that may 

affect his or her eligibility. 

(2) If the agency has information 

about anticipated changes in a 

beneficiary’s circumstances that may 

affect his or her eligibility, it must 

redetermine eligibility at the 

appropriate time based on such changes. 

27. Section 435.940 is revised to read 

as follows: 

§ 435.940 Basis and scope. 

The income and eligibility 

verification requirements set forth at 

§ 435.940 through § 435.960 of this 

subpart are based on sections 1137, 

1902(a)(4), 1902(a)(19), 1903(r)(3) and 

1943(b)(3) of the Act and section 1413 

of the Affordable Care Act. 

28. Section 435.945 is revised to read 

as follows: 

§ 435.945 General requirements. 

(a) Nothing in these regulations in this 

subpart should be construed as limiting 

the State’s program integrity measures 

or affecting the State’s obligation to 

ensure that only eligible individuals 

receive benefits, consistent with part 

455 of this subchapter. 

(b) Except with respect to citizenship 

and immigration status information, and 

subject to the verification requirements 

set forth in this subpart, the agency may 

accept attestation without requiring 

further paper documentation (either 

self-attestation by the applicant or 

beneficiary or by a parent, caretaker or 

other person acting responsibly on 

behalf of an applicant or beneficiary) of 

all information needed to determine the 

eligibility of an applicant or beneficiary 

for Medicaid. 

(c) The agency must request and use 

information relevant to verifying an 

individual’s eligibility for Medicaid in 

accordance with § 435.948 through 

§ 435.956 of this subpart. 

(d) The agency must furnish, in a 

timely manner, income and eligibility 

information needed for verifying 

eligibility for the following programs: 

(1) To other agencies in the State and 

other States and to the Federal programs 

both listed in § 435.948(a) of this 

subpart and identified in section 

1137(b) of the Act; 

(2) Other insurance affordability 

programs; 

(3) The child support enforcement 

program under part D of title IV of the 

Act; and 

(4) SSA for OASDI under title II and 

for SSI benefits under title XVI of the 

Act. 

(e) The agency must, as required 

under section 1137(a)(7) of the Act, and 

upon request, reimburse another agency 

listed in § 435.948(a) of this subpart or 

paragraph (d) of this section for 

reasonable costs incurred in furnishing 

information, including new 

developmental costs associated with 

furnishing the information to another 

agency. 

(f) Prior to requesting information for 

an applicant or beneficiary from another 

agency or program under this subpart, 

the agency must inform the individual 

that the agency will obtain and use 

information available to it under this 

subpart to verify income and eligibility 

or for other purposes directly connected 

to the administration of the State plan. 

(g) The agency must report 

information as prescribed by the 

Secretary for purposes of determining 

compliance with § 431.305, subpart P of 

part 431, § 435.910, § 435.913, and 

§ 435.940 through § 435.965 of this 

chapter and of evaluating the 

effectiveness of the income and 

eligibility verification system. 

(h) Information exchanged 

electronically between the State 

Medicaid agency and any other agency 

or program must be sent and received 

via secure electronic interfaces as 

defined in § 435.4 of this part. 

(i) The agency must execute written 

agreements with other agencies before 

releasing data to, or requesting data 

from, those agencies. Such agreements 

must provide for appropriate safeguards 

limiting the use and disclosure of 

information as required by Federal or 

State law or regulations. 

29. Section 435.948 is revised to read 

as follows: 

§ 435.948 Verifying financial information. 

(a) The agency must request 

information relating to financial 

eligibility from other agencies in the 

State and other States and Federal 

programs in accordance with this 

section. To the extent the agency 

determines such information is useful to 

verifying the financial eligibility of an 

individual, the agency must request: 

(1) Information related to wages, net 

earnings from self-employment, 

unearned income and resources from 

the State Wage Information Collection 

Agency (SWICA), the Internal Revenue 

Service, the Social Security 

Administration, the agencies 

administering the State unemployment 

compensation laws, the Stateadministered supplementary payment 

programs under section 1616(a) of the 

Act, and any State program 

administered under a plan approved 

under Titles I, X, XIV, or XVI of the Act; 

and 

(2) Information related to eligibility or 

enrollment from the Public Assistance 

Reporting Information System (PARIS), 

the Supplemental Nutrition Assistance 

Program, and other insurance 

affordability programs.(Note: all 

eligibility determination systems must 

conduct data matching through PARIS). 

(b) To the extent that the information 

identified in paragraph (a) is available 

through the electronic service 

established in accordance with 

§ 435.949 of this subpart, the agency 


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must obtain the information through 

such service. 

(c)(1) If the information identified in 

paragraph (a) of this section is not 

available through the electronic service 

established in accordance with 

§ 435.949 of this subpart, the agency 

may obtain the information directly 

from the appropriate agency or program 

consistent with the requirements in 

§ 435.945 of this subpart. 

(2) The agency must request the 

information by SSN, or if a SSN is not 

available, using other personally 

identifying information in the 

individual’s account, if possible. 

(d) Flexibility in information 

collection and verification. Subject to 

approval by the Secretary, the agency 

may request and use income 

information from a source or sources 

alternative to those listed in paragraph 

(a) of this section provided that such 

alternative source will reduce the 

administrative costs and burdens on 

individuals and States while 

maximizing accuracy, minimizing 

delay, meeting applicable requirements 

relating to the confidentiality, 

disclosure, maintenance, or use of 

information, and promoting 

coordination with other insurance 

affordability programs. 

30. Section 435.949 is added to read 

as follows: 

§ 435.949 Verification of information 

through an electronic service. 

(a) The Secretary will establish an 

electronic service through which States 

may verify certain information with, or 

obtain such information from, Federal 

agencies, including the Social Security 

Administration, the Department of 

Treasury, the Department of Homeland 

Security and any other Federal offices 

that maintain records containing 

information related to eligibility for 

Medicaid or other minimum essential 

coverage. 

(b) To the extent that information is 

available through the electronic service 

established by the Secretary, States must 

obtain the information through such 

service, subject to the requirements in 

subpart C of part 433 of this chapter. 

(c) The Secretary may provide for, or 

approve a request from a State to utilize, 

an alternative mechanism through 

which States may collect and verify 

such information, if the Secretary 

determines that such alternative 

mechanism meets the criteria set forth 

in § 435.948(d) of this subpart. 

31. Section 435.952 is revised to read 

as follows: 

§ 435.952 Use of information and requests 

of additional information from individuals. 

(a) The agency must promptly 

evaluate information received or 

obtained by it in accordance with 

regulations under § 435.940 through 

§ 435.960 of this subpart to determine 

whether such information may affect the 

eligibility of an individual or the 

benefits to which he or she is entitled. 

(b) If information provided by or on 

behalf of an individual (on the 

application or renewal form or 

otherwise) is reasonably compatible 

with information obtained by the agency 

in accordance with § 435.948, § 435.949 

or § 435.956 of this subpart, the agency 

must determine or redetermine 

eligibility based on such information. 

(c) An individual must not be 

required to provide additional 

information or documentation unless 

information needed by the agency in 

accordance with § 435.948, § 435.949 or 

§ 435.956 of this subpart cannot be 

obtained electronically or the 

information obtained electronically is 

not reasonably compatible with 

information provided by or on behalf of 

the individual. 

(1) In such cases, the agency may seek 

additional information, including a 

statement which reasonably explains 

the discrepancy or other additional 

information (including paper 

documentation), from the individual. 

(2) The agency must provide the 

individual a reasonable period to 

furnish such additional information. 

(d) The agency may not deny or 

terminate eligibility or reduce benefits 

for any individual on the basis of 

information received in accordance with 

regulations under § 435.940 through 

§ 435.960 of this subpart unless the 

agency has sought additional 

information from the individual in 

accordance with paragraph (c) of this 

section, and provided proper notice and 

hearing rights to the individual in 

accordance with this subpart and 

subpart E of part 431. 

§ 435.953 [Removed] 

32. Section 435.953 is removed. 

§ 435.955 [Removed] 

33. Section 435.955 is removed. 

34. Section 435.956 is added to read 

as follows: 

§ 435.956 Verification of other nonfinancial information. 

(a) [Reserved] 

(b) [Reserved] 

(c) State residency. 

(1) The agency may verify State 

residency in accordance with 

§ 435.945(b) of this subpart or through 

other reasonable verification procedures 

consistent with the requirements in 

§ 435.952 of this subpart. 

(2) A document that provides 

evidence of immigration status may not 

be used alone to determine State 

residency. 

(d) Social Security numbers. The 

agency must verify Social Ssecurity 

numbers (SSNs) in accordance with 

§ 435.910(f) and (g) of this subpart. 

(e) Pregnancy and household size. 

The agency must accept self-attestation 

of pregnancy and the individuals that 

comprise an individual’s household, as 

defined in 435.603(f), unless the state 

has information that is not reasonably 

compatible with such attestation, 

subject to the requirements of § 435.952 

of this subpart. 

(f) Age and date of birth. The agency 

may verify date of birth in accordance 

with § 435.945(b) of this subpart or 

through other reasonable verification 

procedures consistent with the 

requirements in § 435.952 of this 

subpart. 

35. Subpart M is added to read as 

follows: 

Subpart M—Coordination of Eligibility 

and Enrollment Between Medicaid, 

CHIP, Exchanges and Other Insurance 

Affordability Programs 

§ 435.1200 Medicaid agency 

responsibilities. 

(a) Statutory basis. This section 

implements sections 1943 and 

2102(b)(3)(B) and (c)(2) of the Act. 

(b) Definitions. As used in this 

subpart: 

Applicable modified adjusted gross 

income (MAGI) standard is defined as 

provided in § 435.911(b)(1) of this part. 

Application means the single 

streamlined application described in 

§ 435.907(b) submitted by or on behalf 

of an individual. 

Exchange is defined as provided in 

§ 435.4 of this part. 

Insurance Affordability Program is 

defined as provided in § 435.4 of this 

part. 

Secure electronic interface is defined 

as provided in § 435.4 of this part. 

(c) General requirements. The State 

Medicaid Agency must — 

(1) Participate in and comply with the 

coordinated eligibility and enrollment 

system described in section 1943 of the 

Act to ensure that the agency fulfills the 

responsibilities set forth in paragraphs 

(e) through (g) of this section in 

partnership with other insurance 

affordability programs. 

(2) Consistent with § 431.10(d) of this 

chapter, enter into one or more 

agreements with the Exchange and the 


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agencies administering other insurance 

affordability programs, as defined in 

§ 435.4 of this part, as are necessary to 

fulfill each of the requirements of this 

section. 

(3) In accordance with the Medicaid 

State plan, certify the criteria, including 

but not limited to applicable MAGI 

standards as defined in § 435.911(b) of 

this subpart and satisfactory 

immigration status, necessary for the 

Exchange to determine Medicaid 

eligibility. 

(d) Internet Web site. The State 

Medicaid agency must make available to 

current and prospective Medicaid 

applicants and beneficiaries a Web site 

that: 

(1) Supports applicant and beneficiary 

activities, including accessing 

information on the insurance 

affordability programs available in the 

State, applying for and renewing 

coverage, and other activities as 

appropriate; and 

(2) Is accessible to people with 

disabilities in accordance with the 

Americans with Disabilities Act and 

section 504 of the Rehabilitation Act 

and provides meaningful access for 

persons who are limited English 

proficient. 

(e) Provision of Medicaid for 

individuals found eligible for Medicaid 

by the Exchange. For each individual 

found eligible for Medicaid by the 

Exchange based on the applicable MAGI 

standard, the agency must establish 

procedures— 

(1) To receive, via secure electronic 

interface, the electronic account 

containing the finding of Medicaid 

eligibility, all information provided on 

the application, and any information 

obtained or verified by the Exchange in 

making such finding; and 

(2) To furnish Medicaid to the 

individual promptly and without undue 

delay in accordance with parts 440 and 

441 of this chapter, to the same extent 

and in the same manner as if such 

individual had been determined eligible 

for Medicaid by the agency. 

(f) Transfer of applications from other 

insurance affordability programs to the 

State Medicaid agency. The agency 

must adopt procedures to ensure that it 

promptly and without undue delay 

determines the Medicaid eligibility of 

individuals determined to be potentially 

eligible for Medicaid by other insurance 

affordability programs. The procedures 

must ensure that— 

(1) The agency accepts, via secure 

electronic interface, the electronic 

account for the individual screened as 

potentially Medicaid eligible, including 

all information provided on the 

application and any information 

obtained or verified by the insurance 

affordability program; 

(2) The agency may not request 

information or documentation from the 

individual that is already contained in 

the electronic account; 

(3) The agency determines the 

Medicaid eligibility of the individual, 

promptly and without undue delay, in 

accordance with § 435.911(c) of this part 

in the same manner as if the application 

had been submitted directly to, and 

processed by, the agency, except that 

the agency must not verify eligibility 

criteria already verified by the insurance 

affordability program. 

(4) The agency notifies the insurance 

affordability program of the final 

determination of the individual’s 

eligibility or ineligibility for Medicaid. 

(g) Evaluation of eligibility for the 

Exchanges and other insurance 

affordability programs. 

(1) Individuals determined not eligible 

for Medicaid. For individuals who 

submit an application which includes 

sufficient information to determine 

Medicaid eligibility, and whom the 

agency determines are not eligible for 

Medicaid, the agency must establish 

procedures to assess such individuals 

for potential eligibility for other 

insurance affordability programs and 

promptly and without undue delay 

transfer such individuals’ electronic 

accounts to any other program(s) for 

which they may be eligible. The 

electronic account must include all 

information provided on the application 

and any information obtained or 

verified by the agency, including the 

determination of Medicaid ineligibility. 

(2) Individuals undergoing a Medicaid 

eligibility determination on a basis other 

than MAGI. In the case of an individual 

with household income, as defined in 

§ 435.603(d) of this part, greater than the 

applicable MAGI standard and for 

whom the agency is determining 

eligibility on the basis of being blind or 

disabled, the agency must establish 

procedures to— 

(i) Assess the individual for potential 

eligibility for coverage under other 

insurance affordability programs and, 

promptly and without undue delay, 

provide the individual’s electronic 

account to any such program for which 

the individual may be eligible. The 

electronic account must be transmitted 

via secure electronic interface and must 

include all information provided on the 

application and any information 

obtained or verified by the agency, along 

with the determination that the 

individual is not Medicaid eligible on 

the basis of the applicable MAGI 

standard, but that a final determination 

of Medicaid eligibility is still pending; 

and 

(ii) Notify the appropriate insurance 

affordability program(s) of the agency’s 

final determination of eligibility or 

ineligibility. 

PART 457—ALLOTMENTS AND 

GRANTS TO STATES 

36a. The authority citation for part 

457 continues to read as follows: 

Authority: Section 1102 of the Social 

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

36b. In part 457, remove the term 

‘‘family income’’ wherever it appears 

and add in its place the term 

‘‘household income.’’ 

37. In part 457 remove ‘‘SCHIP’’ 

wherever it appears and add in its place 

‘‘CHIP.’’ 

Subpart A—Introduction; State Plans 

for Child Health Insurance Programs 

and Outreach Strategies 

38. Section § 457.10 is amended by— 

A. Removing the definition of 

‘‘Medicaid applicable income level.’’ 

B. Adding the following definitions in 

alphabetical order: ‘‘Affordable 

Insurance Exchange (Exchange),’’ 

‘‘Electronic account,’’ ‘‘Household 

income,’’ ‘‘Insurance affordability 

program,’’ ‘‘Secure electronic interface,’’ 

and ‘‘Single, streamlined application.’’ 

The additions read as follows: 

§ 457.10 Definitions and use of terms. 

* * * * * 

Affordable Insurance Exchange 

(Exchange) is defined as provided in 

§ 435.4 of this chapter. 

* * * * * 

Electronic account means an 

electronic file that includes all 

information collected and generated by 

the State regarding each individual’s 

CHIP eligibility and enrollment, 

including all documentation required 

under § 457.380 of this part. 

* * * * * 

Household income is defined as 

provided in § 435.603(d) of this chapter. 

Insurance affordability program is 

defined as provided in § 435.4 of this 

chapter. 

* * * * * 

Secure electronic interface is defined 

as provided in § 435.4 of this chapter. 

* * * * * 

Single, streamlined application means 

the single, streamlined application form 

that is used by the State in accordance 

with § 435.907(b) of this chapter and 45 

CFR 155.405 for individuals to apply for 

coverage for all insurance affordability 

programs. 

* * * * * 


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39. Section § 457.80 is amended by 

revising paragraph (c)(3) to read as 

follows: 

§ 457.80 Current State child health 

insurance coverage and coordination. 

* * * * * 

(c) * * * 

(3) Ensure coordination with other 

insurance affordability programs in the 

determination of eligibility and 

enrollment in coverage to ensure that 

there are no unnecessary gaps in 

coverage, including through use of the 

procedures described in § 457.305, 

§ 457.350 and § 457.353. 

Subpart C—State Plan Requirements: 

Eligibility, Screening, Applications, 

and Enrollment 

40. Section 457.300 is amended by— 

A. Republishing paragraph (a) 

introductory text. 

B. Adding paragraphs (a)(4) and (a)(5). 

C. Revising paragraph (c). 

The addition and revision reads as 

follows: 

§ 457.300 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

interprets and implements— 

* * * * * 

(4) Section 2107(e)(1)(O) of the Act, 

which relates to coordination of CHIP 

with the Exchanges and the State 

Medicaid agency. 

(5) Section 2107(e)(1)(F) of the Act, 

which relates to income determined 

based on modified adjusted gross 

income. 

* * * * * 

(c) Applicability. The requirements of 

this subpart apply to child health 

assistance provided under a separate 

child health program. Regulations 

relating to eligibility, screening, 

applications and enrollment that are 

applicable to a Medicaid expansion 

program are found at § 435.4, § 435.229, 

§ 435.905 through § 435.908, § 435.1102, 

§ 435.940 through § 435.958, § 435.1200, 

§ 436.3, § 436.229, and § 436.1102 of 

this chapter. 

41. Section 457.301 is amended by— 

A. Adding the definitions of ‘‘Family 

size’’ and ‘‘Medicaid applicable income 

level’’ in alphabetical order. 

B. Removing the definition of ‘‘Joint 

application.’’ 

The additions read as follows: 

§ 457.301 Definitions and use of terms. 

* * * * * 

Family size is defined as provided in 

§ 435.603(b) of this chapter.) 

Medicaid applicable income level 

means, for a child, the effective income 

level (expressed as a percentage of the 

Federal poverty level and converted to 

a modified adjusted gross income 

equivalent level in accordance with 

guidance issued by the Secretary under 

section 1902(e)(14)(A) and (E) of the 

Act) specified under the policies of the 

State plan under title XIX of the Act 

(including for these purposes, a section 

1115 waiver authorized by the Secretary 

or under the authority of section 

1902(r)(2) of the Act) as of March 31, 

1997 for the child to be eligible for 

Medicaid under either section 1902(l)(2) 

or 1905(n)(2) of the Act. 

* * * * * 

42. Section 457.305 is revised to read 

as follows: 

§ 457.305 State plan provisions. 

The State plan must include a 

description of— 

(a) The standards, consistent with 

§ 457.310 and § 457.320 of this subpart, 

and financial methodologies consistent 

with § 457.315 of this subpart used to 

determine the eligibility of children for 

coverage under the State plan. 

(b) The State’s policies governing 

enrollment and disenrollment; 

processes for screening applicants for 

and, if eligible, facilitating their 

enrollment in other insurance 

affordability programs; and processes 

for implementing waiting lists and 

enrollment caps (if any). 

43. Section 457.310 is amended by— 

A. Republishing paragraph (b) 

introductory text. 

B. Revising paragraphs (b)(1)(i), 

(b)(1)(ii), (b)(1)(iii) introductory text, 

and (b)(1)(iii)(B). 

C. Adding paragraph (b)(1)(iv). 

The revisions and addition read as 

follows: 

§ 457.310 Targeted low-income child. 

* * * * * 

(b) Standards. A targeted low-income 

child must meet the following 

standards: 

(1) * * * 

(i) Has a household income, as 

determined in accordance with 

§ 457.315, at or below 200 percent of the 

Federal poverty level for a family of the 

size involved; 

(ii) Resides in a State with no 

Medicaid applicable income level; 

(iii) Resides in a State that has a 

Medicaid applicable income level and 

has a household income that either— 

* * * * * 

(B) Does not exceed the income level 

specified for such child to be eligible for 

medical assistance under policies of the 

State plan under title XIX on June 1, 

1997; or 

(iv) Is not eligible for Medicaid as a 

result of the elimination of income 

disregards as specified under 

§ 435.603(g) of this chapter. 

* * * * * 

44. Section 457.315 is added to read 

as follows: 

§ 457.315 Application of modified adjusted 

gross income and household definition. 

Effective January 1, 2014, the CHIP 

agency shall apply the financial 

methodologies set forth in paragraphs 

(b) through (h) of § 435.603 of this 

chapter in determining the financial 

eligibility of all individuals for CHIP. 

The exception to application of such 

methods for individuals for whom the 

State relies on a finding of income made 

by an Express Lane agency at 

§ 435.603(i)(1) also applies. 

45. Section 457.320 is amended by— 

A. Removing paragraphs (a)(4) and 

(a)(6). 

B. Redesignating paragraphs (a)(5), 

(a)(7), (a)(8), (a)(9), and (a)(10) as 

paragraphs (a)(4), (a)(5), (a)(6), (a)(7), 

and (a)(8), respectively. 

C. Revising paragraph (d). 

D. Removing and reserving paragraph 

(e)(2). 

The revisions and additions read as 

follows: 

§ 457.320 Other eligibility standards. 

* * * * * 

(d) Residency. 

(1) Residency for a noninstitutionalized child who is not a 

ward of the State must be determined in 

accordance with § 435.403(i) of this 

chapter. 

(2) A State may not— 

(i) Impose a durational residency 

requirement; 

(ii) Preclude the following individuals 

from declaring residence in a State— 

(A) An institutionalized child who is 

not a ward of a State, if the State is the 

State of residence of the child’s 

custodial parent or caretaker at the time 

of placement; or 

(B) A child who is a ward of a State, 

regardless of where the child lives 

(3) In cases of disputed residency, the 

State must follow the process described 

in § 435.403(m) of this chapter. 

(e) * * * 

(2) [Reserved] 

46. Section 457.330 is added to read 

as follows: 

§ 457.330 Application. 

The State shall use the single, 

streamlined application used by the 

State in accordance with § 435.907(b) of 

this chapter, and otherwise comply with 

the provisions of such § 435.907 of this 

chapter, except that the terms of 

§ 435.907(c) of this chapter (relating to 

applicants seeking coverage on a basis 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
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other than modified adjusted gross 

income) do not apply. 

47. Section 457.335 is added to read 

as follows: 

§ 457.335 Availability of program 

information and Internet Web site. 

The terms of § 435.905 and 

§ 435.1200(d) of this chapter apply 

equally to the State in administering a 

separate CHIP. 

48. Section 457.340 is amended by 

revising the section heading and 

paragraphs (a), (b) and (f) to read as 

follows: 

§ 457.340 Application for and enrollment in 

CHIP. 

(a) Application assistance. A State 

must afford families an opportunity to 

apply for CHIP without delay and must 

provide assistance to families in 

understanding and completing 

applications and in obtaining any 

required documentation. Such 

assistance must be made available to 

applicants and enrollees in person, over 

the telephone, and online, and must be 

provided in a manner that is accessible 

to individuals living with disabilities 

and those who are limited English 

proficient. 

(b) Use of Social Security number. A 

State must require each individual 

applying for CHIP to provide a Social 

Security number (SSN) in accordance 

with § 435.910 and cannot require nonapplicants to provide an SSN consistent 

with the requirements at § 435.907(e) of 

this chapter. 

* * * * * 

(f) Effective date of eligibility. A State 

must specify a method for determining 

the effective date of eligibility for CHIP, 

which can be determined based on the 

date of application or through any other 

reasonable method that ensures 

coordinated transition of children 

between programs as family 

circumstances change and avoids gaps 

or overlaps in coverage. 

49. Section 457.343 is added to read 

as follows: 

§ 457.343 Periodic redetermination of CHIP 

eligibility. 

The redetermination procedures 

described in § 435.916 of this chapter 

apply equally to the State in 

administering a separate CHIP, except 

that the State shall verify information 

needed to renew CHIP eligibility in 

accordance with § 457.380 of this 

subpart, shall provide notice regarding 

the State’s determination of renewed 

eligibility or termination in accordance 

with § 457.340(e) of this subpart and 

shall comply with the requirements set 

forth in § 457.350 of this subpart for 

screening individuals for other 

insurance affordability programs and 

transmitting such individuals’ 

electronic account and other relevant 

information to the appropriate program. 

50. Section 457.348 is added to read 

as follows: 

§ 457.348 Determinations of Children’s 

Health Insurance Program eligibility from 

other applicable health coverage programs. 

(a) Exchange determinations of CHIP 

eligibility. 

(1) For each individual found eligible 

for CHIP by the Exchange based on the 

applicable MAGI standard, the State 

must establish procedures— 

(i) To receive, via secure electronic 

interface, the electronic account 

containing the finding of CHIP 

eligibility and all information provided 

on the application and/or verified by the 

Exchange which made such finding; and 

(ii) To furnish CHIP to the individual 

promptly and without undue delay in 

accordance with § 457.340 of this 

subpart, to the same extent and in the 

same manner as if such individual had 

been determined by the State to be 

eligible for CHIP in accordance with 

such section. 

(2) [Reserved]. 

(b) Screening for potential CHIP 

eligibility by other insurance 

affordability programs. The State must 

adopt procedures to ensure that it 

promptly and without undue delay 

determines the CHIP eligibility of 

individuals determined to be potentially 

eligible for CHIP, by other insurance 

affordability programs. The procedures 

must ensure that— 

(1) The State accepts, via secure 

electronic interface, the electronic 

account for the individual screened as 

potentially CHIP eligible, including all 

information provided on the application 

and any information obtained or 

verified by the insurance affordability 

program; 

(2) The State may not request 

information or documentation from the 

individual that is already contained in 

the electronic account; 

(3) The State determines the CHIP 

eligibility of the individual, promptly 

and without undue delay, in accordance 

with § 457.340 in the same manner as if 

the application had been submitted 

directly to, and processed by, the State, 

except that the State must not verify 

eligibility criteria already verified by the 

insurance affordability program. 

(4) The State notifies the insurance 

affordability program of the final 

determination of the individual’s 

eligibility or ineligibility for CHIP. 

(c) Option to accept CHIP eligibility 

determinations from the Medicaid 

agency. A State may accept 

determinations of CHIP eligibility made 

by another insurance affordability 

program in the same manner that it 

accepts Exchange determinations of 

CHIP eligibility under paragraph (a) of 

this section. 

(d) Certification of eligibility criteria. 

The State must certify for the Exchange 

the criteria necessary to determine CHIP 

eligibility, including but not limited to 

the income standard adopted for its 

separate CHIP program and the criteria 

related to satisfactory immigration 

status, as set forth in the State plan in 

accordance with § 457.305 of this part. 

51. Section 457.350 is amended by— 

A. Revising the section heading. 

B. Revising paragraphs (a), (b), (c), 

and (f). 

C. Removing and reserving paragraph 

(d). 

D. Adding paragraphs (i), (j), and (k). 

The additions and revisions read as 

follows: 

§ 457.350 Eligibility screening and 

enrollment in other insurance affordability 

programs. 

(a) State plan requirement. The State 

plan shall include a description of the 

coordinated eligibility and enrollment 

procedures used, at intake and any 

follow-up eligibility determination, 

including any periodic redetermination, 

to ensure that: 

(1) Only targeted low-income children 

are furnished CHIP coverage under the 

plan; and 

(2) Enrollment is facilitated for 

applicants found to be potentially 

eligible for other insurance affordability 

programs in accordance with this 

section. 

(b) Screening objectives. A State must 

identify any applicant, beneficiary, or 

other individual applying for coverage 

on the single, streamlined application 

who is potentially eligible for: 

(1) Medicaid on the basis of having 

household income at or below the 

applicable modified adjusted gross 

income standard, as defined in 

§ 435.911(b) of this chapter; 

(2) Medicaid on a basis other than 

having household income at or below 

the applicable modified adjusted gross 

income standard; or 

(3) Eligibility for other insurance 

affordability programs, including 

eligibility for advanced payments for 

premium tax credits based on having 

household income above the income 

standard in the State for CHIP or the 

applicable modified adjusted gross 

income standard in the State for 

Medicaid, as appropriate, or for 

enrollment in a qualified health plan 

through an Exchange without advanced 

payments for a premium tax credit. 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
51198 Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 

(c) Income eligibility test. To identify 

the individuals described in paragraphs 

(b)(1) and (b)(3) of this section, a State 

must apply the methodologies used to 

determine household income described 

in § 457.315 of this part. 

(d) [Reserved]. 

* * * * * 

(f) Applicants found potentially 

eligible for Medicaid based on modified 

adjusted gross income. If the screening 

process reveals that the applicant is 

potentially eligible for Medicaid based 

on modified adjusted gross income, the 

State must— 

(1) Promptly transmit the electronic 

account, and any other relevant 

information obtained through the 

application, to the Medicaid agency via 

secure electronic interface; and 

(2) Except as provided in § 457.355 of 

this subpart, find the applicant 

ineligible, provisionally ineligible, or 

suspend the applicant’s application for 

CHIP unless and until the Medicaid 

application for the applicant is denied; 

and 

(3) Determine or redetermine 

eligibility for CHIP, consistent with the 

timeliness standards established under 

§ 457.340(d) of this subpart, if— 

(i) The State is notified, in accordance 

with § 435.1200(f)(4) of this chapter that 

the applicant has been found ineligible 

for Medicaid; or 

(ii) The State is notified prior to the 

final Medicaid eligibility determination 

that the applicant’s circumstances have 

changed and another screening shows 

that the applicant is not likely to be 

eligible for Medicaid. 

* * * * * 

(i) Applicants found potentially 

eligible for other insurance affordability 

programs. If the screening process 

reveals that an applicant is not eligible 

for CHIP, is not screened as potentially 

eligible for Medicaid on the basis of 

modified adjusted gross income, and is 

potentially eligible for enrollment in a 

qualified health plan through the 

Exchange or other insurance 

affordability programs, the State must 

promptly transmit the electronic 

account, and other relevant information 

obtained through the application to the 

applicable program using secure 

electronic interfaces. 

(j) Applicants potentially eligible for 

Medicaid on a basis other than modified 

adjusted gross income. If, based on 

information obtained through the single, 

streamlined application, the applicant is 

not screened as potentially eligible for 

Medicaid on the basis of modified 

adjusted gross income but may be 

eligible for Medicaid on another basis, 

the State must— 

(1) Promptly transmit the electronic 

account, and any other relevant 

information obtained through the 

application to the Medicaid agency 

using secure electronic interfaces; and 

(2) Complete the determination of 

eligibility for CHIP in accordance with 

§ 457.340 of this subpart; and 

(3) Disenroll the beneficiary from 

CHIP if the State is notified in 

accordance with § 435.1200(f)(4) of this 

chapter that the applicant has been 

determined eligible for Medicaid. 

(k) A State may enter into an 

arrangement with the Exchange to make 

eligibility determinations for advanced 

premium tax credits in accordance with 

Section 1943(b)(2) of the Act. 

52. Section 457.353 is revised to read 

as follows: 

§ 457.353 Monitoring and evaluation of 

screening process. 

States must establish a mechanism 

and monitor to evaluate the screen and 

enroll process described at § 457.350 of 

this subpart to ensure that children who 

are: 

(a) Screened as potentially eligible for 

other insurance affordability programs 

are enrolled in such programs, if 

eligible; or 

(b) Determined ineligible for other 

insurance affordability programs are 

enrolled in CHIP, if eligible. 

53. Section 457.380 is revised to read 

as follows: 

§ 457.380 Eligibility verification. 

(a) General requirements. Except with 

respect to verification of citizenship and 

immigration status, and subject to the 

verification requirements set forth in 

paragraph (d) of this section, the State 

may accept attestation of all information 

needed to determine the eligibility of an 

applicant or beneficiary for CHIP. 

(b) [Reserved] 

(c) State Residents. If the State does 

not accept self-attestation of residency, 

the State must verify residency in 

accordance with § 435.956(c) of this 

chapter. 

(d) Income. The State must verify the 

income of an individual by using the 

data sources and following the 

standards and procedures for 

verification of financial eligibility 

described in § 435.945(b), § 435.948 and 

§ 435.952 of this chapter. 

(e) Verification of other factors of 

eligibility. For eligibility requirements 

not described in paragraphs (b), (c) or 

(d) of this section, a State may adopt 

reasonable verification procedures, 

except that the State must accept selfattestation of pregnancy and the 

individuals that comprise an 

individual’s household unless the state 

has information that is not reasonably 

compatible with such attestation. The 

State may verify date of birth in 

accordance with § 435.945(b) or through 

other reasonable verification procedures 

consistent with the requirements in 

§ 435.952. 

(f) Requesting information. 

(1) The State must use electronic 

sources of data, if available, before 

requesting additional information, 

including paper documentation, from an 

individual. 

(2) An individual shall not be 

required to provide additional 

information or documentation unless 

information needed by the State cannot 

be obtained electronically or 

information obtained electronically is 

not reasonably compatible with 

information provided by or on behalf of 

the individual. In such cases, the State 

may seek additional information, 

including a statement which reasonably 

explains the discrepancy and/or paper 

documentation, from the individual. 

The State must provide the individual a 

reasonable period to furnish such 

information. 

(g) Electronic service. To the extent 

that information sought under this 

section is available through the 

electronic service established by the 

Secretary at § 435.949 of this chapter, 

the State shall access the information 

through that service. 

(h) Interaction with program integrity 

requirements. Nothing in this section 

should be construed as limiting the 

State’s program integrity measures or 

affecting the State’s obligation to ensure 

that only eligible individuals receive 

benefits. 

(i) Flexibility in information collection 

and verification. Subject to approval by 

the Secretary, the State may modify the 

methods to be used for collection of 

information and verification of 

information as set forth in this section, 

provided that such alternative source 

will reduce the administrative costs and 

burdens on individuals and States while 

maximizing accuracy, minimizing 

delay, meeting applicable requirements 

relating to the confidentiality, 

disclosure, maintenance, or use of 

information, and promoting 

coordination with other insurance 

affordability programs. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 159 / Wednesday, August 17, 2011 / Proposed Rules 51199 

Dated: June 29, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: August 10, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–20756 Filed 8–12–11; 8:45 am] 

BILLING CODE 4120–01–P 


Emcdonald on DSK2BSOYB1PROD with PROPOSALS2