11678 Federal Register / Vol. 77, No. 38 / Monday, February 27, 2012 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 431 

[CMS–2325–F] 

RIN 0938–AQ46 

Medicaid Program; Review and 

Approval Process for Section 1115 

Demonstrations 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule will implement 

provisions of section 10201(i) of the 

Patient Protection and Affordable Care 

Act of 2010 that set forth transparency 

and public notice procedures for 

experimental, pilot, and demonstration 

projects approved under section 1115 of 

the Social Security Act relating to 

Medicaid and the Children’s Health 

Insurance Program (CHIP). This final 

rule will increase the degree to which 

information about Medicaid and CHIP 

demonstration applications and 

approved demonstration projects is 

publicly available and promote greater 

transparency in the review and approval 

of demonstrations. It will also codify 

existing statutory requirements 

pertaining to seeking advice from Indian 

health care providers and urban Indian 

organizations for section 1115 

demonstration projects, and for the first 

time impose as regulatory requirements 

tribal consultation standards that were 

previously only published as guidance 

documents. 

DATES: These regulations are effective 

on April 27, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Steven Rubio, (410) 786–1782; or Jessica 

Schubel, (410) 786–3032. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Section 1115 Demonstrations 

1. Overview 

Section 1115 of the Social Security 

Act (the Act) allows the Secretary of the 

Department of Health and Human 

Services (the Secretary) to waive 

selected provisions of section 1902 of 

the Act for experimental, pilot, or 

demonstration projects 

(demonstrations), and to provide 

Federal Financial Participation (FFP) for 

demonstration costs which would not 

otherwise be considered as expenditures 

under the Medicaid State plan, when 

the Secretary finds that the 

demonstrations are likely to assist in 

promoting the objectives of Medicaid. 

Section 2107(e) of the Act states that the 

waiver authorities in section 1115 of the 

Act apply to the Children’s Health 

Insurance Program (CHIP) in title XXI of 

the Act in the same manner as they 

apply to the Medicaid program in title 

XIX of the Act. 

States have used section 1115 

demonstrations for different reasons. 

Some States have tested new 

approaches to providing coverage or 

improving the scope or quality of 

benefits in ways that would not 

otherwise be permitted under the 

statute. For example, some States have 

used section 1115 demonstrations to 

expand eligibility to individuals who 

would not otherwise qualify for 

benefits, or to establish innovative 

service delivery systems. Other 

demonstrations have constrained 

eligibility or benefits in ways not 

otherwise permitted by statute. For 

example, some demonstrations have 

provided for a more limited set of 

benefits than the statute requires for a 

specified population, implemented costsharing at levels that exceed statutory 

requirements, or included enrollment 

limits. Some demonstrations have 

involved financing approaches that are 

not contemplated in titles XIX or XXI of 

the Act. 

As such, demonstrations can have a 

significant and varied impact on 

beneficiaries, providers, States, Tribes 

and local governments. They can also 

influence policy making at the State, 

Tribal and Federal level, by introducing 

new approaches that can be a model for 

other States and lead to programmatic 

changes nationwide. In light of the 

impact demonstration projects can have, 

the Congress has determined that the 

process by which States apply for and 

the Federal government reviews 

demonstrations should assure public 

input. From time to time that process 

has come under criticism. In recent 

years, the Congress, the Government 

Accountability Office (GAO), and the 

stakeholders representing a range of 

interests affected by the Medicaid and 

CHIP programs have raised concerns 

regarding the need for greater 

transparency in the submission, review, 

and approval of demonstration 

applications. 

2. Prior Guidance Related to Public 

Notice 

In the September 17, 2010 Federal 

Register (75 FR 56946), we published 

the ‘‘Review and Approval Process for 

Section 1115 Medicaid Demonstrations’’ 

proposed rule. In the September 17, 

2010 proposed rule, we detailed the 

prior guidance that we have provided 

including the September 27, 1994 

Federal Register notice entitled 

‘‘Medicaid Programs; Demonstration 

Proposals Pursuant to Section 1115(a) of 

the Social Security Act; Policies and 

Procedures’’(59 FR 49249) that provided 

general principles and guidelines 

governing demonstration projects and 

provided for a public notice process that 

was designed to ensure that interested 

parties would have an opportunity to 

provide input into the design and 

review of a State demonstration 

application. 

In 2002, we issued a letter to State 

Medicaid directors, State Medicaid 

Director Letter (SMDL) #02–007, to 

encourage States to facilitate public 

participation in the development of 

demonstration applications in an effort 

to ensure adherence to the public notice 

procedures outlined in the September 

27, 1994 Federal Register notice. 

In 2002, the GAO issued a report 

entitled ‘‘Medicaid and SCHIP—Recent 

HHS Approvals of Demonstration 

Waiver Projects Raise Concerns,’’ 

finding that HHS had not consistently 

followed its September 27, 1994 Federal 

Register notice process. GAO 

specifically noted that, since 1998, HHS 

had not complied with the Federal 

Register notice procedures. GAO 

recommended that the HHS Secretary 

provide for a public process that, at a 

minimum, included publishing notices 

of demonstrations in the Federal 

Register and a 30-day comment period. 

In a subsequent 2007 report entitled 

‘‘Medicaid Demonstration Waivers: Lack 

of Opportunity for Public Input during 

the Federal Approval Process Still a 

Concern,’’ the GAO examined 

demonstration projects in two States 

and found that HHS did not provide 

opportunity for public input at the 

Federal level during the Federal review 

process. It determined that the States 

that submitted the demonstration 

applications made efforts to obtain 

public input to comply with HHS’ 

September 27, 1994 Federal Register 

notice, but that stakeholders in those 

States reported lacking access to 

information during the Federal review 

process about parts of the demonstration 

applications that had a significant 

impact on beneficiaries or having 

inadequate time to review and comment 

on the applications. GAO reiterated its 

longstanding concerns about the lack of 

public input into section 1115 

demonstrations and restated its 

recommendation for a process that 

assures public input. 

In a January 21, 2009 Memorandum to 

the Heads of Executive Departments and 

Agencies, President Obama established 


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the Federal government’s commitment 

to transparency, participation, and 

collaboration. Noting that public input 

can promote efficiency, effectiveness, 

and accountability in government, the 

President committed Federal agencies to 

disseminating information quickly and 

accessibly, and to ensure increased 

opportunities for the public to 

participate in policymaking. The 

Memorandum required each Federal 

agency to establish an Open 

Government plan, and on April 7, 2010, 

HHS announced its plan to achieve 

transparency, participation, and 

collaboration. HHS is committed to 

timely and responsive administration of 

the Medicaid and CHIP programs and 

seeks to assure transparency, input, and 

collaboration, while also being mindful 

of the need to avoid duplicative 

processes and unnecessary 

administrative burdens and delays. 

In May 2010, we met with more than 

20 representatives of stakeholder 

organizations including organizations 

advocating on behalf of the elderly, 

people with disabilities and other low 

income populations, as well as 

organizations representing health care 

providers regarding transparency in the 

demonstration approval process. We 

also held a listening session open to 

officials from all 50 States, the District 

of Columbia, and U.S. Territories. 

3. Guidance Related to Tribal 

Consultation and Seeking Advice From 

Indian Health Care Providers and Urban 

Indian Organizations 

To foster greater notice and a 

meaningful opportunity for input, in 

2000, the Administration issued 

Executive Order 13175 regarding 

‘‘Consultation and Coordination with 

Indian and Tribal governments.’’ This 

Executive Order applies to the programs 

operated by the Federal government 

and, since States administer Medicaid 

and CHIP, we have issued guidance to 

States to conduct consultation with 

Tribes prior to implementing 1115 

demonstration or 1915 waiver requests. 

Executive Order 13175 mandated the 

establishment of regular and meaningful 

consultation and collaboration with 

tribal officials in the development of 

Federal policies that have ‘‘tribal 

implications,’’ which are defined as 

policies or actions ‘‘with substantial 

direct effects on one or more Indian 

tribes, on the relationship between the 

Federal Government and Indian tribes, 

or on the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes.’’ On 

November 5, 2009, President Obama 

issued a Memorandum for the Heads of 

Executive Departments and Agencies 

reiterating the importance of Executive 

Order 13175 and requiring a detailed 

plan for compliance with its provisions. 

In July 2001, we issued a letter to 

State Medicaid Directors (SMDL #01– 

024) that provided direction to States to 

allow federally-recognized Tribes to 

participate in the planning and 

development of Medicaid and CHIP 

demonstration applications and 

extensions through a consultation 

process. The guidance encouraged 

States to provide information to tribal 

governments at least 60 days prior to 

implementation and to provide 30 days 

for tribes to comment on a State’s 

planned demonstration request. The 

letter also articulated principles of 

consultation, such as respect for the 

sovereign rights of Tribes. In this final 

rule, we establish consultation 

procedures that allow States to meet 

simultaneously both the new statutory 

requirements pertaining to Indian health 

care providers and urban Indian 

organizations, as well as the new 

statutory requirements that pertain to 

the public at large under the Affordable 

Care Act. 

4. Changes Made by the Recovery Act 

and the Affordable Care Act 

Section 5006 of the American 

Recovery and Reinvestment Act of 2009 

(Recovery Act) (Pub. L. 111–5, enacted 

on February 17, 2009), among other 

protections for Indian beneficiaries in 

Medicaid and CHIP, required States to 

seek advice from Indian health 

programs and urban Indian health 

organizations concerning Medicaid and 

CHIP policies before submitting a 

Medicaid or CHIP State plan 

amendment, demonstration request or 

application that would directly affect 

Indian health programs and urban 

Indian health organizations. This 

provision was effective July 1, 2009, and 

was summarized in a letter to State 

Medicaid Directors dated January 22, 

2010 (SMDL # 10–001). 

Section 10201(i) of the Patient 

Protection and Affordable Care Act of 

2010 (Pub. L 111–148, enacted March 

23, 2010) (the Affordable Care Act) 

amended section 1115 of the Act by 

adding a new subsection (d) to require 

the Secretary to issue regulations that 

would ensure the public has adequate 

opportunities to provide meaningful 

input into the development of State 

demonstration projects, as well as in the 

Federal review and approval of State 

demonstration applications and 

renewals. The Affordable Care Act also 

requires periodic evaluations and 

implementation reports to ensure that 

information on the outcomes of 

demonstration projects is available to 

the public. 

Specifically, new section 1115(d) of 

the Act provides that these procedural 

requirements must include review 

standards pertaining to the goals of 

demonstration programs, the impact of 

the demonstration project on costs and 

coverage, and the plans of the State to 

ensure that the demonstration will 

comply with applicable requirements 

specified in title XIX and XXI of the Act. 

The statute requires the establishment of 

a process to provide for public notice 

and comment on the State level and at 

the Federal level once an application for 

a demonstration is received by the 

Secretary. These public notice and 

comment processes are meant to ensure 

a meaningful level of public input. The 

statute also requires the Secretary to 

implement reporting requirements for 

States with approved demonstrations, 

and to establish a process for the 

periodic evaluation of demonstration 

projects. Under section 1115(d)(3) of the 

Act, the Secretary is required to report 

annually to the Congress on actions 

taken for applications for demonstration 

projects. 

In the September 17, 2010 proposed 

rule, we proposed to implement section 

1115(d) of the Act to ensure 

transparency at each stage of the 

demonstration development and review 

process without interfering with the 

timely submission and review of 

demonstration proposals. We also 

proposed to codify the requirements of 

section 5006 of the Recovery Act that 

apply to demonstrations. 

5. Findings Related to Section 1115 

Demonstration Evaluations 

We recognize the importance of 

public availability and understanding of 

information about the impact and 

operations of health insurance and 

health insurance programs, including 

Medicaid and CHIP. Because 

demonstration projects are approved to 

pilot or experiment with new 

approaches, it is particularly important 

to evaluate such projects and to share 

lessons learned. Demonstration 

evaluations can document policies that 

succeed or fail and the degree to which 

they do so informs decisions about the 

demonstration at issue, as well as the 

policy efforts of other States and at the 

Federal level. In particular, evaluations 

of the impact of demonstration program 

features that depart from the statutory 

requirements can inform future 

decisions with regard to new 

approaches to coverage and care. 

More public involvement, 

understanding, and access to 

demonstration project evaluations will 


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11680 Federal Register / Vol. 77, No. 38 / Monday, February 27, 2012 / Rules and Regulations 

also provide greater understanding of 

demonstration effectiveness, and 

compliance. Public involvement can 

benefit all aspects of the evaluation 

process, including the process for 

submission of evaluation designs, 

approval of demonstration evaluations, 

and the submission of evaluation 

reports. Therefore, we are, as part of this 

transparency rule, codifying our existing 

policies to ensure greater transparency, 

communication, and collaboration in 

the evaluation aspect of the section 1115 

demonstration process. 

II. Summary of the Provisions of the 

Proposed Rule and Analysis of and 

Responses to Public Comments 

The September 17, 2010 proposed 

rule addressed the Affordable Care Act 

provisions requiring transparency in the 

process of developing and approving 

demonstrations. We received a total of 

33 timely comments on the September 

17, 2010 (75 FR 56946) proposed rule. 

A. Basis and Purpose (§ 431.400) 

To incorporate the policies and 

implement the statutory provisions 

described above, we proposed to add a 

new subpart G under 42 CFR part 431 

to implement the provisions of section 

1115(d) of the Act, as amended by 

section 10201 of the Affordable Care 

Act. Subpart G includes guidance 

related to the development of 

demonstration applications, public 

notice for States and the Department, 

monitoring, compliance, evaluation of 

demonstration projects, and the 

submission of reports to the Secretary. 

We did not receive any comments 

opposing this new subpart, see no other 

reason to change our proposed 

additions, and therefore, we are 

finalizing these provisions subject to the 

changes described below. 

B. Definitions (§ 431.404) 

In § 431.404, we define the terms 

‘‘demonstration,’’ ‘‘Indian health 

program,’’ ‘‘public notice,’’ and ‘‘section 

1332 waiver’’ that are used in new 

subpart G under 42 CFR part 431. 

We received the following comment 

concerning the proposed Definitions: 

Comment: One commenter requested 

that CMS include the definition of 

‘‘Indian Health Program’’ under the 

Indian Health Care Improvement Act 

(IHCIA). 

Response: We have included the 

IHCIA definition of ‘‘Indian Health 

Program’’ in the final rule. 

C. State Public Notice Process 

(§ 431.408) 

We recognize that demonstrations can 

have a significant impact on 

beneficiaries, providers, and States. 

Demonstrations can also influence 

policy making at the State and Federal 

level, by testing new approaches that 

can be models for programmatic 

changes nationwide or in other States. 

For these reasons and under section 

10201(i) of the Affordable Care Act, in 

§ 431.408, we proposed to establish a 

process that promotes transparency, 

facilitates public involvement and 

input, and encourages sound decisionmaking as demonstration applications 

are designed at the State level. We are 

also mindful that States have developed 

their own State-specific procedures for 

public involvement in policy and 

program decision-making. Furthermore, 

Medicaid is a jointly administered 

Federal/State program. Accordingly, we 

have attempted to craft our 

requirements in ways that assure 

achievement of these statutory 

objectives while minimizing 

administrative burden. 

We received the following comments 

concerning the proposed State public 

notice and comment period. 

1. State Public Notice and Comment 

Period 

Comment: While several commenters 

expressed support for the 30-day public 

notice period before the section 1115 

demonstration application is submitted 

to CMS, many commenters stated that 

the period should be expanded to 45 or 

60 days. One commenter suggested as 

an alternative providing a 60-day 

comment period for new demonstration 

applications and a 30-day comment 

period for extensions of existing 

demonstrations. 

Response: One of the goals of this 

regulation is to balance the need for 

transparency with the need for timely 

development, review, and approval of 

demonstrations. While we appreciate 

the commenters’ suggestions regarding 

the length of the State comment period, 

we believe that 30 days strikes an 

appropriate balance between providing 

for increased transparency and ensuring 

timely submission of demonstration 

applications. In addition, we note that 

the Administrative Procedure Act has 

for many decades used 30 days as the 

normal minimum length for comments 

on proposed Federal rules. Moreover, 

our standards are minimums and States 

may exceed them at their discretion. 

Comment: One commenter expressed 

concern that 20 days is not enough time 

for States to hold hearings and then 

analyze and incorporate the comments 

raised at the hearing into the 

demonstration application. 

Response: The timeframes included in 

the final rule are the minimum 

timeframes that the State must follow. 

Our intention was to provide the State 

with as much flexibility as possible 

during the public notice process while 

maintaining our goal of increased 

transparency and timely procession of 

applications. 

Comment: One commenter was 

concerned as to how States should 

discuss differing opinions between a 

local chapter and the National chapter 

of a stakeholder association in the 

document of consultation activities 

under § 431.408(b). 

Response: The State should include a 

summary of all comments aired in the 

consultation process, and may describe 

this type of situation in its report 

addressing the key issues raised in that 

process and how it took those comments 

into consideration, including comment 

on both sides of the issue, when 

finalizing its application. Neither 

Federal nor State governments are 

bound to follow public comments, but 

simply to consider them before making 

final decisions. 

Comment: One commenter requested 

that the State produce a summary report 

on comments it received and how the 

comments influenced the content of the 

application, if at all. 

Response: The information that the 

commenter wanted in a summary report 

was included in the proposed rule as 

part of the application submitted to 

CMS at § 431.412(a)(1)(viii). Since this 

application is publicly available, the 

commenter will have access to this 

information and an additional required 

report is unnecessary. 

2. Statement of Public Notice and State 

Public Input Procedures 

Comment: One commenter 

recommended that CMS revise the 

regulation to bring it into compliance 

with the cost-sharing provisions of the 

Medicaid Act, as amended by the Deficit 

Reduction Act (DRA) of 2005. 

Response: This comment is beyond 

the scope of this rulemaking document, 

and therefore, we are not addressing it 

in this final rule. 

Comment: One commenter 

recommended that CMS require the 

State to publish its public notice in both 

the State Register and local newspapers. 

Response: By requiring the 

demonstration application and hearing 

notice to be posted on the main page of 

the State’s Web site, we believe it is 

unnecessary to also require notice in 

both the State Administrative Register 

and newspapers with significant 

circulation. We have accordingly 

retained State discretion to choose 

either its Administrative Register or 

newspaper (or both) as vehicles to 


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provide public notice in addition to 

requiring notice on the main page of the 

State’s Web site. We have also required 

States to use additional approaches, 

such as electronic mailing lists to 

provide public notice. Of course, it is 

likely that news media, other media, 

and advocacy organizations will use 

their own means to spread this 

information. 

Comment: One commenter 

recommended that CMS require States 

to seek input from providers; similar to 

the tribal consultation requirement. 

Response: While we understand the 

commenter’s concern, we did not revise 

the language in this rule to require 

States to seek input from providers 

similar to the manner in which they 

conduct tribal consultation. There are 

specific requirements to seek advice 

from Indian health providers and urban 

Indian organizations outlined in the 

statute, and therefore, this rule needs to 

meet the statutory ARRA protections. 

Other providers will have an 

opportunity to offer their views in the 

process for public input along with 

other interested parties. The purpose of 

the public comment process is to 

provide all stakeholders an ample 

opportunity to comment. 

Comment: Many commenters 

recommended that States be required to 

include a list of waiver and expenditure 

authorities in their applications, and 

requested that this list be included in 

the State’s public notice as well. 

Response: We are accepting this 

recommendation but we note that the 

public notice will not be considered 

deficient if the waivers and expenditure 

authorities granted to facilitate the 

demonstration are different than those 

the State contemplates. The actual 

waivers and expenditure authorities 

awarded will be based on CMS analysis 

of the waivers and expenditure 

authorities that are actually needed to 

accomplish demonstration objectives. 

Comment: One commenter requested 

that CMS clarify that the financial 

analysis of changes to the demonstration 

requested by the State is for renewal 

applications only. 

Response: We agree with this 

comment, and have included language 

to this effect in the final rule. The 

distinction was clear in the proposed 

§ 431.412 and we have revised the final 

rule at § 431.408 to be consistent. 

Comment: One commenter noted that 

it is unclear in the regulation whether 

the entire public notice document, that 

is, all the elements prescribed in 

§ 431.408(a)(1), must be published, or 

whether it can be an abbreviated notice 

referencing a Web site where the full 

document can be found. 

Response: We have revised the 

language in § 431.408(a)(2)(ii) to clarify 

that the public notice document 

published in either the State’s 

Administrative Record or significant 

newspapers may be abbreviated, that is, 

the notice may include a summary of 

the elements found in § 431.408(a)(1) for 

purposes of publication; however, the 

abbreviated notice must provide an 

active link to a Web site where the 

public notice may be viewed in its 

entirety. 

Comment: Several commenters noted 

that public input would be more 

meaningful if it occurred before the 

State completed the process of drafting 

a complete demonstration application, 

and recommended that CMS allow the 

State to not post a complete application. 

The commenters noted that the 30-day 

Federal comment period would provide 

a full opportunity for public comment 

on the complete application once it had 

been submitted to CMS. 

Response: While we appreciate the 

commenter’s concern about ensuring the 

public has the opportunity to provide 

input on a proposed demonstration 

project, we believe that the public must 

have a specific proposal to respond to 

to provide meaningful input. We have 

outlined the required application 

content in § 431.412(a)(1). The State 

may also post a draft application that 

contains sufficient information for the 

public to provide meaningful input. To 

provide a full opportunity for public 

review, there must be at least a 30-day 

period for public input before the draft 

application is submitted to CMS. This 

opportunity for input prior to 

submission of an application to CMS 

allows the public to participate in the 

State’s process for developing the 

application. That opportunity is 

separate from the opportunity for public 

comment on the final application under 

consideration in the Federal review 

process. 

Comment: One commenter requested 

that CMS require the State to provide 

summaries of quality data that do not 

contain patient information and that are 

detailed enough to allow for public 

analysis and comment, as well as to 

provide information on historical 

expenditures. 

Response: The information requested 

by the commenter is already included in 

the regulations at § 431.428(a)(4). We do 

not believe it is necessary to include 

this information in the public notice 

requirement. 

Comment: One commenter requested 

that the State include specific FederallyQualified Health Center (FQHC) related 

waivers, and the rationale and 

justification for such waivers in the 

public notice. 

Response: FQHCs play a critical role 

in serving Medicaid beneficiaries. We 

are accommodating the commenter’s 

concern in the revision discussed above 

requiring the State to identify specific 

waiver and expenditure authorities, as 

well as requiring a broad program 

description. We believe this information 

is sufficient to initiate a dialogue 

between the State and interested FQHCs 

on the rationale and justification for the 

State’s proposal. 

Comment: One commenter suggested 

that CMS include language in 

§ 431.408(a)(1)(iii) expressly referring to 

a time period of at least 30 days for the 

submission of comments. 

Response: We agree with this 

comment, and have included such 

language in the final rule. 

Comment: One commenter 

recommended that Medicaid providers 

affected by the proposed demonstration 

be required to post information in a 

conspicuous location so that affected 

individuals would have an opportunity 

to comment. 

Response: While we appreciate the 

commenter’s desire to involve the 

provider community, we believe this 

suggestion would cause an undue 

administrative burden on providers. 

Comment: One commenter requested 

that CMS require the State to include a 

link to CMS’ Web site on the Web page 

containing information on the 

demonstration application. 

Response: We agree with this 

comment, and have included such a 

requirement in the final rule. 

3. Language Requirements 

Comment: Several commenters 

requested further guidance on how CMS 

plans to ensure that beneficiaries with 

limited English proficiency will be able 

to access published information 

regarding the proposed demonstration. 

One commenter recommended that 

CMS utilize the Department of Health 

and Human Services’ Limited English 

Proficiency (LEP) guidance in selecting 

languages for translations of published 

information. 

Response: States are subject to various 

civil rights requirements regarding 

communication, for both language and 

disability. These include Title VI of the 

Civil Rights Act of 1964, Section 504 of 

the Rehabilitation Act, and the 

Americans with Disabilities Act. There 

are regulations under each of these 

statutes and, in the case of Title VI, 

detailed guidance published by the 

Department of Health and Human 

Services regarding services to 

individuals with Limited English 


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11682 Federal Register / Vol. 77, No. 38 / Monday, February 27, 2012 / Rules and Regulations 

Proficiency. We agree with the 

commenter that this guidance 

establishes reasonable practices that 

States are expected to follow. 

Comment: One commenter requested 

that CMS clarify that all documents 

posted to both the State and CMS Web 

sites be accessible to individuals with 

disabilities. 

Response: As stated above, there are 

long-standing regulations in place that 

govern State practices not only for the 

activities addressed by this regulation, 

but also for all programs and activities 

performed by States and other recipients 

of Federal financial assistance and, in 

the case of the Americans with 

Disabilities Act, State programs and 

services regardless of Federal financial 

assistance. States are responsible for 

compliance and knowing their 

responsibilities as it relates to 

accessibility of information and 

documents for individuals with 

disabilities. Other Federal agencies (the 

HHS Office for Civil Rights and the 

Department of Justice) are responsible 

for any necessary clarification and 

enforcement. 

4. Electronic Mailing List 

Comment: One commenter requested 

clarification that the electronic mailing 

lists’ purpose is to provide notification 

that a demonstration application is 

available for public review and 

comment. 

Response: The electronic mailing 

lists’ purpose is to provide notification 

that a demonstration application is 

available for public comment. 

Comment: Several commenters 

expressed concern regarding how an 

interested party could sign up for the 

electronic mailing list at the State and 

Federal levels, as well as how the State 

and CMS would ensure notification to 

all interested parties, including 

Medicaid and CHIP beneficiaries. 

Response: The use of such services 

will depend on State decisions. It is 

usual practice for links for, or 

instructions on how to, register for 

electronic mailing lists to be included, 

in appropriate places, on State Web sites 

so that individuals and advocacy groups 

may easily register for the electronic 

mailing lists. We will establish 

notification procedures on our Web site 

and other venues such as press 

notifications, as appropriate. 

Comment: One commenter requested 

that the State explain how the electronic 

mailing list would work while another 

commenter suggested that the State’s 

Web site provide a way for interested 

persons to be added to a mailing list. 

Another commenter expressed concern 

that the requirement to publish a notice 

in the newspaper of widest circulation 

(in each city or county with a 

population of 50,000 or more) appears 

to be optional if the State uses an 

electronic mailing list to notify 

interested parties. The commenter 

stated that many people with lowincomes and/or disabilities do not have 

access to email. 

Response: We have revised 

§ 431.408(a)(2)(ii) to clarify that the 

State must publish its public notice in 

the newspaper of widest circulation in 

each region of the State that contains a 

city with a population of 100,000 or 

more or in the State’s Register, and that 

it must also utilize a mechanism such as 

an electronic mailing list to notify 

interested parties. It is important to 

ensure that the public notice is not 

entirely Web-based because there are 

individuals who may have limited 

access to, or facility with, Web-based 

information. On the other hand, there 

are large numbers of persons who use 

the Internet who do not subscribe to 

newspapers. We understand that any of 

these mechanisms are not necessarily 

going to reach all consumers and 

encourage the State, providers and 

advocacy groups to appropriately 

transmit the information to affected 

consumers. 

Comment: One commenter 

recommended that the State’s primary 

care association be automatically 

included in CMS’ electronic mailing 

list. 

Response: As we discuss below, we 

intend to automatically include all 

interested national organizations in the 

Federal electronic mailing list for the 

Federal public notice process. We 

would also like to clarify that regional, 

State and local organizations may 

request to be included on the 

notification mechanism at any time. 

5. Public Hearings 

Comment: While several commenters 

expressed support for the public 

hearings, the commenters requested that 

CMS clarify language to ensure the 

public has an opportunity to speak at 

the hearings. 

Response: We agree with this 

comment, and have included language 

at § 431.408(a)(3). 

Comment: One commenter expressed 

concern that two public hearings may 

not be adequate for larger States, and 

recommended that CMS require four 

public hearings with the option of 

waiving two hearings for smaller States. 

Response: We appreciate, and agree 

with, the commenter’s concern that all 

interested parties across the State are 

afforded the same opportunity to 

provide input on a proposed 

demonstration project. In lieu of adding 

two additional public hearings, 

however, we have revised the language 

in the rule to require the State to utilize 

technology, that is, telephonic and/or 

Web conferencing capabilities, to ensure 

statewide access to the public hearing, 

including in rural areas of the State. 

States remain free, of course, to conduct 

additional hearings, decisions that we 

expect will vary widely depending on 

geography, law, and customary practice 

in each State. 

Comment: One commenter requested 

that CMS clarify what constitutes two 

public hearings, that is, the commenter 

questioned if the hearings have to be 

held in separate locations, separate 

dates and times, and if the State utilizes 

teleconferencing. Another commenter 

requested that CMS require the State to 

teleconference the hearing to at least 

five separate locations. 

Response: We have included 

clarifying language in this final rule 

outlining that the two public hearings 

must be held on different dates and in 

different locations, and that the State 

must utilize telephonic and/or Web 

conferencing capabilities that normally 

provide essentially unlimited 

geographic access. While we agree that 

interested parties in rural portions of a 

State should be afforded the opportunity 

to provide meaningful input on a 

proposed demonstration project, we will 

not prescribe the number of locations to 

which the State must teleconference the 

hearing if for some reason it is infeasible 

to cover the entire State. 

Comment: One commenter 

recommended that CMS require the 

State to ensure that the State’s primary 

care association and at least two FQHCs 

have the opportunity to speak. 

Response: While we understand the 

commenter’s concern that the State’s 

primary care association and FQHCs 

have the opportunity to speak, we 

believe that any interested party should 

be afforded the opportunity to provide 

comments on the demonstration. We 

have also clarified in § 431.408(a)(3) that 

the public must have an opportunity to 

speak and provide meaningful input at 

the public hearings. 

6. Tribal Consultation 

Comment: While we received general 

support for tribal consultation, one 

commenter stated that it is not clear 

what CMS means by ‘‘publication’’ 

when requiring States to conduct tribal 

consultation at least 60 days prior to 

‘‘publication’’ or submission of an 

application. The commenter also noted 

that the inclusion of both ‘‘publication’’ 

and submission is confusing. If 

‘‘publication’’ refers to the date of State 


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public notice, then the reference to the 

‘‘submission’’ date is unnecessary 

because submission will occur after the 

public notice. 

Response: We agree with the 

commenter’s concern, and have clarified 

the language in § 431.408(b)(1) to read 

‘‘submission’’ rather than ‘‘publication 

or submission of an application.’’ 

Comment: One commenter requested 

that CMS define acceptable consultation 

activities. 

Response: We have clarified the 

language in § 431.408(b)(2) by including 

a reference to SMDL # 01–024 which 

outlines acceptable tribal consultation 

activities. We also believe that States 

and tribes can determine how best to 

conduct such consultation, if they enter 

into agreements acceptable to both the 

State and the tribes. We think it likely 

that details will vary not only from State 

to State (reflecting the huge diversity 

among States as to tribal and Indian 

health presence), but also from 

demonstration to demonstration. We 

note that States are required in their 

applications to present information on 

their consultations, on issues raised, 

and on State decisions as to what to 

propose to CMS. We can and will reject 

applications that fail to provide 

appropriate consultation. 

Comment: One commenter requested 

that CMS define ‘‘direct impact,’’ and 

another commenter requested that CMS 

change ‘‘direct impact’’ to ‘‘direct 

effect,’’ as well as include a definition 

for ‘‘direct effect.’’ 

Response: We have changed ‘‘direct 

impact’’ to ‘‘direct effect’’ in 

§ 431.408(b)(1) to be more consistent 

with the language specified in section 

5006(e) of ARRA. We also acknowledge 

that States may work with tribes, Indian 

health providers and urban Indian 

organizations to define direct effect in a 

manner that meets the needs of all the 

parties when they have entered into a 

formal consultation policy with tribes or 

when they have defined direct effect in 

the State plan which outlines the 

process for seeking advice from Indian 

health providers and urban Indian 

organizations in the State. 

D. Application Procedures 

In reviewing section 1115 

demonstration applications, CMS 

requests information from States to 

determine the nature, scope, and impact 

of the demonstration request. In this 

rule, we are requiring application 

components consistent with current 

practice both for new demonstrations 

and for the extension of an existing 

demonstration, in an effort to make the 

application process consistent and 

transparent. 

Under § 431.412(a), we define when a 

State request for a new demonstration 

will be considered complete for the 

purposes of initiating the Federal review 

process described below. 

Section 431.412(b) describes the 

application procedures that States must 

follow when submitting an application 

for a new demonstration or a request to 

extend an existing demonstration under 

section 1115 of the Act. This provision 

establishes a process for the State to 

submit an application, and for CMS to 

confirm that the application is 

complete, which in turn initiates the 

Federal comment and decision-making 

period. We developed these procedures 

because they represent a standardized 

approach that will be helpful to States, 

stakeholders, and CMS in the review of 

section 1115 demonstrations. While it is 

not a requirement for an initial section 

1115 demonstration request, we strongly 

encourage that the Governor submit the 

demonstration request to the Secretary. 

Generally, demonstrations may be 

extended up to 3 years under sections 

1115(a), 1115(e), and 1115(f) of the Act; 

however, section 1915(h), as amended 

by section 2601 of the Affordable Care 

Act, allows section 1115 demonstrations 

to be extended up to 5 years at the 

Secretary’s discretion if the 

demonstration provides medical 

assistance to dually eligible 

beneficiaries. As sections 1115(e) and (f) 

of the Act provide for a substantially 

streamlined Federal review process, the 

timeframes constrain Federal review of 

the demonstration and consequently the 

time under which CMS can consider 

public input. In § 431.412(c), at least 30 

days prior to a State’s submission of a 

request for review under those sections, 

the State will issue public notice of its 

intent to seek an extension under those 

sections and receive public comment on 

the proposed extension of the 

demonstration for at least 30 days. In 

addition, the State must provide a 

written summary to CMS of the issues 

raised in the public comment period 

and how the State considered those 

issues when developing the 

demonstration extension application. 

The application prerequisites for the 

extension of a demonstration, codify 

current practice guidelines employed by 

CMS in the review of an existing section 

1115 demonstration, which are 

consistent with the required timeframes 

in section 1115(e) and 1115 (f) of the 

Act. In § 431.412(c), a demonstration 

extension request will be considered 

only if it is submitted no later than 12 

months prior to the expiration date of 

the demonstration when requesting an 

extension under section 1115(e) of the 

Act or 6 months (or in some cases 

longer) when requesting an extension 

under a section 1115(a) or (f) of the Act. 

In § 431.412(c), a demonstration 

extension request or phase out plan will 

be sent from the Governor of the State 

to the Secretary of HHS, as required by 

the statute, to extend a demonstration 

under sections 1115(e) and (f) of the 

Act. However, if an extension 

application includes substantial changes 

to the existing demonstration, CMS 

may, at our discretion, treat the 

application as an application for a new 

demonstration. 

We received the following comments 

on the proposed application procedures. 

1. Concept Paper 

Comment: One commenter requested 

that the language outlined in the 

background section regarding the 

submission of a pre-application concept 

paper to CMS be included in the final 

rule. 

Response: We agree with this 

comment, and have included language 

in the final rule. 

Comment: One commenter requested 

further guidance regarding the process 

of submitting to CMS a pre-application 

concept paper and/or conferring with 

CMS about intent to seek a 

demonstration prior to submitting a 

completed application. 

Response: The purpose of a concept 

paper is to engage both the State and 

CMS in early dialogue on a potential 

demonstration project. We will not be 

issuing further guidance on this topic as 

our intent is not to be prescriptive on 

the process. 

2. Application Templates 

Comment: One commenter requested 

that CMS develop and provide standard 

demonstration applications for States to 

use. 

Response: We appreciate the 

commenter’s suggestion, and may 

consider it outside of the content of 

rulemaking. 

3. Application Content—Initial 

Demonstration Applications 

Comment: While several commenters 

were in support of the proposed 

application content, several other 

commenters requested that the 

demonstration applications should 

include demographic information on the 

demonstration population, as well as 

information on how the demonstration 

population will be impacted, 

particularly if the demonstration 

population is comprised of vulnerable 

or medically-underserved individuals. 

One commenter suggested that CMS 

require the State to provide details on 

how it will mitigate adverse health 


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consequences, including outreach and 

education efforts to assist the vulnerable 

and medically-underserved populations 

in obtaining services and to raise 

awareness. 

Response: The State is required to 

include a description of how current or 

new beneficiaries will be impacted by 

the demonstration, as well to describe 

how the individuals will be impacted by 

the various programmatic features of the 

demonstration in its public notice as 

outlined in § 431.408(a)(1)(i)(A) and (B). 

Comment: One commenter requested 

that demonstration applications 

proposing to reduce eligibility or 

benefits should contain explanations of 

the benefit/eligibility limit(s), the 

number of people affected and 

consequences of the reduction. 

Response: We believe that we have 

already addressed the commenter’s 

concern in § 431.412(a)(1)(ii) of this 

final rule. 

Comment: Regarding the inclusion of 

financial data, one commenter requested 

that States determine per capita cost per 

value and how the demonstration would 

change the total costs and revenues for 

the State’s Medicaid program. 

Response: To support analysis needed 

to establish budget neutrality, we 

require States to submit historical 

Medicaid expenditure data for all 

populations that will be affected by a 

proposed demonstration. In most cases, 

States must show on the basis of 

reasonable with- and without-waiver 

cost projections that the proposed 

demonstration will not cost the Federal 

government more than the program 

could have cost in the demonstration’s 

absence. Once the demonstration is 

operational, we require States to report 

their actual expenditures, which are 

tracked and compared to the withoutwaiver estimates (which may be 

adjusted to account for caseload 

changes), to ensure that the 

demonstration remains budget neutral. 

Any Federal funding received by the 

State in excess of the without-waiver 

estimate must be returned to CMS. 

Comment: One commenter requested 

that the State describe specific FQHC 

related waivers, the rationale and 

justification for such waivers, if/why 

such waivers are necessary for the 

project to achieve its goal, how the 

demonstration would be adversely 

affected if the FQHC waiver was not 

approved, the financial impact on the 

FQHCs and their ability to provide 

services, and the written responses and 

testimony provided by FQHCs during 

the State public notice process. 

Response: FQHCs play a critical role 

in serving Medicaid beneficiaries. We 

believe that the current language in the 

regulation addresses the commenter’s 

request by requiring the State to include 

information in its application related to 

the specific expenditure and waiver 

authorities it is requesting, a narrative 

description of the proposed project, and 

identification of key issues, such as 

those discussed by the commenter, 

raised during the State’s public 

comment period. 

4. Application Submission—Initial 

Demonstration Applications 

Comment: One commenter requested 

that the date of electronic submission be 

deemed as the official submission date. 

Response: The official submission 

date is the date in which the State’s 

application was received by the 

Secretary. We have revised the language 

in the final rule incorporating this 

change. 

5. Application Procedures—Initial 

Demonstration Applications 

Comment: One commenter requested 

clarification regarding when CMS 

would use its discretion to direct an 

additional 30-day public comment 

period. 

Response: Each demonstration 

application is unique, and as such, we 

cannot provide specifics on when we 

would require an additional 30-day 

period. We would decide this on a caseby-case basis, but intend to only direct 

an additional 30-day period when the 

State has made significant changes to 

the demonstration relative to the 

proposal it provided for public input 

prior to submitting it to CMS. 

Comment: One commenter noted that 

the application procedures section 

addressed new demonstration 

applications and extensions, and 

requested clarification on which notice 

and comment requirements apply to 

renewals of existing demonstration 

projects. 

Response: We use ‘‘renewal of an 

existing demonstration’’ and ‘‘extension 

of an existing demonstration’’ 

interchangeably. In order to prevent 

additional confusion, we have revised 

the language in the final rule to make it 

more consistent, by using the word 

‘‘extension’’ rather than ‘‘renewal.’’ 

6. Application Content—Demonstration 

Extension Requests 

Comment: One commenter stated that 

the implementation date of a 

demonstration program is subject to the 

Federal approval date of the 

Demonstration and of an information 

system’s Advance Planning Document 

(APD). The commenter requested that 

CMS use the implementation date rather 

than the approval date when requiring 

a demonstration extension request. 

Response: While we appreciate the 

commenter’s suggestion, APDs are not 

generally associated with section 1115 

demonstrations. Approval dates and 

implementation dates sometimes differ 

because a State may need Federal 

approval before moving forward with 

steps toward implementation. 

Generally, when the implementation 

date is different from the approval date, 

the Special Terms and Conditions will 

indicate the implementation date. For 

demonstration extensions, an APD 

would be less likely because the State 

has already implemented the 

demonstration. The extension, and the 

timing for the extension application 

request, would need to date from the 

expiration of the prior approval period, 

to avoid a gap in approved operation. 

Comment: One commenter expressed 

concern that important issues would not 

be included in the State’s report of key 

issues raised during the public comment 

period. The commenter recommended 

that CMS delete the word ‘‘key’’ as it is 

subjective. 

Response: We have revised the 

language by deleting the word ‘‘key’’ in 

§ 431.412(a)(1) and § 431.412(c)(2). 

Comment: One commenter requested 

greater flexibility when providing the 

summaries of various quality reports to 

prevent the submission of irrelevant 

reports. 

Response: We are committed to 

ensuring that Medicaid beneficiaries 

receive quality care, and as such, 

believe the current quality reporting 

requirements reflect our commitment to 

quality care. 

Comment: One commenter requested 

that States include their 416 EPSDT/ 

CHIP reports when submitting their 

demonstration extension requests. 

Response: We agree with the 

commenter, and have revised the 

language in the final rule. 

7. Application Submission— 

Demonstration Extension Requests 

Comment: Several commenters 

requested clarification regarding the 

availability of short-term extensions of 

existing demonstrations, even if 

initiated less than 12 months prior to 

the expiration of an existing 

demonstration. One of these 

commenters suggested adding language 

authorizing the Secretary to consider 

extension requests during the period 

when a successor demonstration project 

is under review. 

Response: We agree with the 

commenters, and have incorporated 

clarifying language into this final rule. 


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Comment: Several commenters 

expressed concern over the requirement 

for States to submit demonstration 

extension requests 12 months prior to 

expiration. One commenter suggested 

that this timeframe be reduced to 6 

months. 

Response: While we understand the 

commenter’s concern over the 

timeframe, the 12-month requirement is 

currently included in the Special Terms 

and Conditions (STCs) in the majority of 

the existing demonstrations. The 12- 

month period gives both the State and 

CMS adequate time for review. 

However, we have amended our 

regulatory language to allow States to 

submit an extension request 6 months 

prior to the expiration of a 

demonstration when requesting an 

extension under section 1115(a) or (f) of 

the Act when the Special Terms and 

conditions do not impose a longer 

requirement. 

Comment: One commenter requested 

that CMS incorporate language to allow 

the submitting party of a demonstration 

extension to include a Governor’s 

designee. 

Response: We need to have an 

assurance that the demonstration is 

fully supported by State law and State 

executive authority. As a result, it is our 

current policy to require the State 

Governor to submit all new 

demonstration applications and 

demonstration extension requests. 

8. Demonstration Approval 

Comment: One commenter requested 

that CMS provide an explanation as to 

the considerations and conclusions 

reached by CMS that resulted in the 

agency granting waivers relating to 

FQHCs and particularly the conclusions 

reached by CMS as to the impact such 

waivers would have on the viability of 

the FQHCs and their continuing 

capacity to serve Medicaid beneficiaries. 

Response: While we understand the 

commenter’s concern regarding the 

granting of waivers impacting FQHCs, 

each individual section 1115 

demonstration is the product of 

extensive discussion between the State 

and CMS about the particular 

circumstances of the State. We expect 

the public comments will inform these 

discussions, but do not believe it is 

feasible to explain considerations 

regarding conclusions reached with 

respect to a particular component of a 

demonstration. 

9. Stakeholder Involvement 

Comment: One commenter proposed 

language for CMS to add to ensure 

States include a description of current 

or anticipated mechanisms for 

stakeholder involvement beyond the 

comment periods outlined in the rule. 

Response: While we appreciate the 

commenter’s suggestion to require 

States to include how they will continue 

stakeholder involvement in the 

demonstration project, we believe the 

new post-implementation public forum, 

as well as already established forums 

such as Medical Care Advisory 

Committees (MCAC) that are required 

for each State to advise the Medicaid 

agency according to § 431.12, provide 

sufficient level of stakeholder 

involvement. We encourage States to 

use these and any additional steps they 

find most useful to ensure stakeholder 

involvement. 

E. Federal Public Notice and Approval 

Process (§ 431.416) 

We proposed timeframes and action 

steps to communicate to States and 

concerned stakeholders the current 

status and sequential steps in the 

demonstration review process. This 

approach standardizes and improves 

transparency in the section 1115 

demonstration review process. In 

addition, by clearly communicating this 

process, we will minimize confusion 

around the demonstration review 

process, satisfy key stakeholders’ need 

for information and improve 

communication at the Federal level. 

In § 431.416(a), within 15 days of 

receipt of a complete demonstration 

application for a new demonstration 

project or an extension of an existing 

demonstration project, we proposed we 

would send the State a written notice. 

In § 431.416(b)(2), we proposed to 

create and solicit subscription to an 

electronic mailing list for the 

widespread distribution of information 

to individuals and organizations 

interested in demonstration 

applications. 

Under § 431.416(d), we proposed to 

publish all comments electronically. We 

will review and consider all comments, 

but will not provide written responses 

to public comments. 

Under § 431.416(e), we proposed to 

not render a final decision on a 

demonstration application until at least 

45 days after notice of receipt of a 

completed application. 

Under § 431.416(f), we proposed to 

maintain, and publish on our Web site, 

an administrative record. 

To ensure that States and the Federal 

Government are able to respond quickly 

to emergencies and unanticipated 

disasters, in § 431.416(g) we proposed to 

provide a good cause exception to 

bypass, in whole or in part, the Federal 

and State notice and comment processes 

to expedite a decision on a proposed 

demonstration application or renewal. 

We received the following comments 

concerning the Federal public notice 

and approval process: 

1. Federal Receipt of Demonstration 

Application 

Comment: One commenter 

recommends that CMS publish the 

notification of receipt of a State’s 

application to its Web site within the 

same 15-day timeframe in which the 

State will be notified of receipt for the 

public to have access to the information 

at approximately the same time as the 

State. 

Response: We agree with this 

comment, and have revised the language 

in this final rule. 

2. Federal Review of Demonstration 

Applications 

Comment: Many commenters 

expressed support for the 45-day 

Federal review timeframe; however, 

some commenters sought clarification 

regarding a maximum Federal review 

timeframe and asked whether CMS had 

a defined process to extend waivers 

pending review. 

Response: Although CMS endeavors 

to review demonstration requests 

expeditiously, given the complex and 

individual nature of each demonstration 

application, we do not have a maximum 

allowed timeframe for review. We 

intend to continue our current practice 

of providing temporary extensions of 

existing demonstrations should 

additional time be required to renew an 

existing demonstration. 

3. Federal Public Comment Period and 

Process 

Comment: One commenter requested 

clarification on CMS’ intended use of 

any public comment it receives on a 

State’s demonstration application, and 

whether CMS will make that public 

comment available to the State prior to 

publishing those comments on the Web 

site. 

Response: We intend to use the 

Federal comment period to allow the 

public the opportunity to provide 

meaningful input on a State’s 

demonstration application, as well as to 

ensure that the State has addressed all 

public comments raised during its 

public notice period. We will not 

provide the State with advance notice of 

the comments prior to publishing them 

on our Web site. 

Comment: Several commenters 

believed that the Federal comment 

period should be longer than 30 days. 

Some commenters suggested expanding 

the period to 45 or 60 days while other 


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commenters suggested that CMS 

increase the comment period on an 

individual basis. 

Response: One of the goals of this 

regulation is to balance the need for 

transparency with the need for timely 

review and approval. While we 

appreciate the commenters’ suggestions 

regarding the length of the Federal 

comment period, we believe that 30 

days strikes the appropriate balance 

between transparency and timeliness. 

The public may submit comments after 

the Federal comment period has ended; 

however, we cannot assure that late 

comments will be considered in the 

Federal review process. We encourage 

the public to ensure all comments are 

submitted during the Federal comment 

period to ensure that we have an 

opportunity to review such comments 

before we render a final decision on a 

State’s demonstration application. We 

will not render a final decision until 45 

days after receipt of a State’s 

demonstration application, and will 

attempt to ensure that comments 

submitted after the Federal comment 

period had ended are considered in the 

final decision. 

Comment: One commenter 

recommended that CMS publish the 

State’s plan for accepting public 

comments at the same time that the 

application and associated concept 

papers, that is, the start of the Federal 

comment period, is published. 

Response: The State’s application will 

already include the public comments 

received during its public comment 

period and how the State took those 

comments into consideration at the start 

of the Federal comment period. 

Comment: Many commenters 

acknowledged that CMS would not be 

able to provide an individualized 

written response to each comment; 

however, they requested that CMS 

provide a summary report of the public 

comments received and how they have 

been addressed. One commenter urged 

CMS to reconsider its position of not 

responding to individual comments. 

Another commenter requested that CMS 

provide written response to public 

comments relating to waivers of FQHC 

service and payment protections. 

Response: We will post on the CMS 

Web site page for the application a list 

of the issues raised during the Federal 

public notice process as outlined in 

§ 431.416(c)(2). We may include a 

summary report of frequently raised 

issues in our regular status updates. 

Comment: One commenter requested 

that providers have direct access to CMS 

during the Federal public comment 

period. 

Response: While we understand the 

commenter’s concern that providers 

have the opportunity to provide written 

comments to CMS, we believe that the 

Federal public comment period outlined 

in this rule affords all interested parties 

the same opportunity to provide 

comments. We currently meet with 

interested parties regarding a State’s 

demonstration application, and expect 

to continue to do so to the extent we 

deem appropriate and feasible. The 

Federal Government’s own rulemaking 

procedures under the Administrative 

Procedure Act emphasize written 

comments for many reasons, among 

them the value of written comments in 

allowing the sharing of commenters’ 

precise views and rationale for those 

views among the various officials 

involved in various stages of review, the 

value of a written record, and the 

desirability of members of the public 

having access to the views of all other 

commenters. 

4. Public Disclosure 

Comment: Several commenters 

requested that when CMS publishes 

updates on State submissions that it 

posts all materials that the State has 

submitted as part of the application 

process. One commenter recommended 

that CMS clarify that it will post this 

information on a regular basis, and that 

the information will include 

submissions that are pending or have 

been rejected and not limited to those 

that have been approved. 

Response: We are committed to 

promoting greater transparency during 

the demonstration review process, and 

will post the demonstration application 

per § 431.416(b), as well as status 

updates on all submissions on a regular 

basis. 

Comment: One commenter proposed 

draft language to ensure that CMS post 

copies of requests from CMS to the State 

for additional information and the 

State’s responses to those requests, 

along with timeframes for the public to 

comment, as well as draft STCs. 

Response: While we are committed to 

promoting greater transparency during 

the demonstration review process, we 

also need to protect frank and candid 

discussions between the State and CMS. 

While a demonstration application is 

under review, we believe that 

publication of these discussions would 

inhibit the free flow of information. As 

detailed under § 431.416(f), we will 

maintain, and publish on our public 

Web site, an administrative record that 

will include sufficient documentation to 

address substantive issues relating to 

the approval. 

Comment: One commenter requested 

that CMS clarify that all documents 

posted to both the State and CMS Web 

sites be accessible to individuals with 

disabilities. 

Response: Individuals with 

disabilities will have access to 

demonstration materials. The Federal 

Government’s Web sites are subject to 

specific accessibility responsibilities 

and practices dictated by section 508 of 

the Rehabilitation Act. States are subject 

to other statutes, including section 504 

of the Rehabilitation Act, the Americans 

with Disabilities Act, and in many cases 

State-specific statutes. Clarification of 

those statutes, if needed, is the 

responsibility of the agencies that 

administer those statutes. We are 

committed to ensuring that individuals 

with disabilities have access to 

demonstration materials, and believe 

that the current language in the final 

rule accomplishes this goal. We intend 

to issue specific guidance on electronic 

formats that will be accessible to 

individuals with disabilities. 

Comment: One commenter requested 

that the State include a link to the CMS 

Web site on its Web site. 

Response: We agree with this 

comment, and have revised this final 

rule accordingly. 

5. Administrative Record 

Comment: Several commenters 

requested that we include, at a 

minimum, the following information in 

the administrative record: State’s 

application; public comments received 

during the Federal comment period and 

CMS’ responses; and specific 

requirements related to the approved 

demonstration, such as implementation 

reviews, complaints, documents 

regarding suspensions or terminations, 

and evaluations on how the 

demonstration is impacting 

beneficiaries. One commenter requested 

that all information regarding the 

demonstration be posted as the 

administrative record given that it can 

be obtained through a Freedom of 

Information Act request. Another 

commenter suggested that we amend the 

proposed language to require the 

inclusion of evidence that the Secretary 

properly considered and accounted for 

the impact of the demonstration project 

on the human participants. 

Response: We appreciate the 

commenters’ suggestions regarding the 

content of the administrative record, 

and we believe we have set forth 

documentation that should 

comprehensively set forth the basis, 

purpose, and conditions for the 

approved demonstration. Regarding the 

impact of a demonstration project on 


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human participants, relevant regulations 

at 45 CFR 46.101(b)(5) contain an 

exemption for research and 

demonstration projects that are 

approved by agency heads, and are 

designed to study, evaluate, or 

otherwise examine: a public benefit or 

service programs; procedures for 

obtaining benefits or services under 

those programs; possible changes in or 

alternatives to those programs or 

procedures; or possible changes in 

methods or levels of payment for 

benefits or services under those 

programs. We believe most, if not all, 

section 1115 demonstration projects 

will fit within this exception. Entities 

that may receive Medicaid funding 

under section 1115 demonstration 

projects will still have to review 

whether the human subject protection 

regulations are applicable to them. For 

example, while a State might not be 

subject to these regulations when 

conducting a demonstration to pay for 

services furnished through clinical 

trials, a research institution conducting 

such trials may be subject to these 

regulations. 

Comment: One commenter requested 

clarification that the administrative 

record will be publicly accessible on 

CMS’ Web site. 

Response: Yes, the administrative 

record will be publicly available on our 

Web site. We have revised the 

regulatory language to clarify our intent. 

6. Disaster Exemption 

Comment: Many commenters 

requested that CMS limit the public 

notice exception to natural or man-made 

disasters such as earthquakes, floods, or 

terrorist attacks or a public health 

disaster and not extend beyond these 

events. One commenter suggested that 

CMS post an explanation of the reasons 

for the exception on the CMS Web site, 

along with a timeline for accepting 

public comments on emergency 

measures. 

Response: We have revised the 

language in the final rule to clarify that 

the public notice exemption applies 

only to natural disasters, public health 

emergencies, or other emergency threats 

to human lives. Should we approve a 

State’s disaster exemption request, we 

will post the approval letter on our Web 

site within 15 days of approval and the 

revised timeline for public comment, if 

applicable. 

Comment: Several commenters 

requested that CMS incorporate 

proposed language excluding 

demonstration applications seeking to 

restrict eligibility and/or reduce benefits 

or increase cost-sharing for beneficiaries 

from a disaster exception. 

Response: We understand the 

commenters’ concern on this issue; 

however, the purpose in providing an 

exception to public notice during a 

disaster is to enable the State to move 

nimbly during the response period. In 

most disaster cases, we grant authorities 

to States allowing them to expedite 

processes to ensure coverage to 

populations impacted by the disaster. 

We expect that in such cases States will 

seek to maintain or expand affordable 

coverage for affected populations. 

Comment: Several commenters 

requested that CMS provide greater 

flexibility when providing exceptions to 

address legislative activities and the 

State legislature’s schedule. One 

commenter expressed concern at 

potentially having to repeat the public 

notice process when the nature of the 

demonstration changes as a result of 

legislative action. 

Response: We understand that 

demonstration projects may be impacted 

by legislative changes; however, we 

believe the language in the final rule 

provides States flexibility in the public 

notice process should a change occur. 

Changes that do not substantially 

change the nature and scope of the 

demonstration project will not cause the 

State to repost the application for 

additional public comment. We may, at 

our discretion, require the State to 

repost for an additional 30-day public 

comment period should the revised 

demonstration application contain 

substantial changes to the initial 

application. We believe that the 

additional 30-day comment period is 

necessary if the State takes action to 

substantially delay the approval 

process. 

F. Monitoring and Compliance 

(§ 431.420) 

As section 1115 demonstrations have 

a significant impact on beneficiaries, 

States and the Federal government, we 

are establishing processes and 

methodologies to assure we have 

adequate and appropriate information 

regarding the effectiveness of section 

1115 demonstrations. Under 

§ 431.420(a), we proposed that States 

must comply with all applicable Federal 

laws, regulations, policy statements and 

Departmental guidance unless a law or 

regulation has specifically been waived 

or determined not applicable under the 

demonstration. Under section 1115 CMS 

has no authority to waive requirements 

that are not contained in parts of the 

Social Security Act specifically 

enumerated in that section, or otherwise 

delegated to CMS for this purpose. For 

example, CMS has no authority to 

exempt a State from laws or regulations 

administered by another Federal 

Department or agency. We have 

reworded the language to clarify this 

and to emphasize the limited scope of 

section 1115 demonstrations. 

Under § 431.420(b), as part of the 

special terms and conditions of any 

demonstration project, we proposed that 

States will conduct periodic reviews 

related to the implementation of the 

demonstration. 

Under § 431.420(c), we proposed that 

States will publish the date, time, and 

location of the public forum in a 

prominent location on the State’s public 

Web site at least 30 days prior to the 

date of the planned public forum. 

Under § 431.420(d), we proposed to 

affirm the Secretary’s right to suspend 

or terminate a demonstration, in whole 

or in part, any time before the date of 

expiration, whenever it determines that 

the State has materially failed to comply 

with the terms of the demonstration 

project. 

In § 431.420(f), should we undertake 

an independent evaluation of any 

component of the demonstration, we 

proposed the State must cooperate fully 

with CMS or the independent evaluator 

selected by CMS. The State must submit 

all necessary data and information to 

CMS or the independent evaluator. 

We received the following comments 

concerning monitoring and compliance: 

1. Implementation Reviews 

Comment: One commenter requested 

additional detail concerning the 

implementation review, that is, what the 

review should entail, how such a review 

is to be conducted and reported, etc. 

Response: The State must comply 

with the implementation review 

requirement as outlined in the 

demonstration’s STCs. 

Comment: One commenter noted that 

the regulation does not address 

quarterly reports, and asked if the 

implementation reviews replaced these 

reports. 

Response: States will be required to 

comply with requirements, such as the 

submission of quarterly reports, found 

in their STCs. Implementation reviews 

will not replace these requirements. 

2. Complaints 

Comment: One commenter asked if 

complaints will be shared with the State 

or if the State would be given the 

opportunity to respond to such 

complaints. The commenter 

recommended that CMS share all 

complaints received with the State as 

outlined in § 431.420(b)(2). 

Response: We believe it is in the best 

interests of States, the Federal 

government, providers and beneficiaries 


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to share such complaints with the State 

to ensure that any appropriate corrective 

action occurs. As such, we have revised 

the language in the final rule to reflect 

this. 

Comment: One commenter proposed 

language to the monitoring and 

compliance section clarifying that CMS 

will publish information on its Web site 

explaining how to file a complaint and 

that documented complaints will be 

reviewed by CMS. 

Response: While it is current practice 

for complaints to be submitted, 

reviewed and responded to by the 

Regional Office which works most 

closely with the State in question, we 

are committed to ensuring that all 

documented complaints are reviewed 

and responded to by CMS. We will 

provide guidance on our Web site on 

how the public can file complaints with 

CMS. 

3. Post Award Public Forum 

Comment: While many commenters 

expressed support for the post award 

public forum, the commenters requested 

that CMS clarify language to ensure the 

public has opportunity to speak at the 

post award public forum. 

Response: We agree with this 

comment, and have included language 

in the final rule. 

Comment: One commenter stated that 

the post-award public forum is onerous, 

particularly in combination with the 

periodic implementation review 

requirement, and recommended that 

CMS allow States to utilize forums 

already established to receive comments 

from the public regarding the Medicaid 

programs. 

Response: We believe that the postaward public forum is important in 

accomplishing greater transparency, 

ensuring meaningful public input into 

the implementation process, and is an 

important aspect of the evaluation 

component established by the law. The 

final rule allows the State to use already 

established forums to comply with this 

requirement. 

Comment: One commenter noted that 

the proposed rule is inconsistent with 

the Medical Care Advisory Committee 

(MCAC) regulations at § 431.12 which 

requires each State to have a MCAC and 

to assure that the MCAC has the 

opportunity to participate in policy 

development. As such, the commenter 

recommended that CMS remove the 

optional use of the State’s MCAC in 

§ 431.408(a)(3) and § 431.420(c), and 

require the State to include its MCAC in 

the development of the State’s 

demonstration application. 

Response: We disagree with the 

commenter. We believe that it is more 

appropriate to give the State the choice 

of venue in holding the public forum. 

States have different ways in which they 

structure and organize their oversight 

and advisory structures. In some States, 

the MCAC meetings are not open to the 

public but other types of panels are 

open to public comment. This 

regulation does not in any way limit the 

MCAC’s role in policy development. 

Comment: One commenter expressed 

concern that 6 months may not be 

enough time to see the impact and 

outcomes of a demonstration, and 

recommended that CMS require the 

forum to be held 12 months after 

implementation rather than 6 months. 

Response: Our intent in requiring the 

forum within 6 months of 

implementation is to allow the public to 

provide initial feedback on 

implementation. This is beneficial to 

both the State and the beneficiaries as 

it will allow the State to address any 

problems associated with the initial 

implementation of the demonstration. 

Comment: One commenter requested 

that CMS require States to summarize 

the comments imparted at the forum 

and immediately submit the summary 

for CMS review. 

Response: We believe that the current 

requirement is sufficient and 

accomplishes our goal of balancing 

transparency with minimal 

administrative burden to the State. We 

have revised language in § 431.420(c) 

requiring the State to provide a 

summary of the forum in the quarterly 

report associated with the quarter in 

which the forum was held, as well as in 

the State’s annual report. 

4. General 

Comment: While we did receive 

several comments supporting the 

monitoring and compliance provisions 

of this rule, we also received several 

comments requesting the deletion of 

§ 431.420(a)(2) as it conflicts with 

§ 431.420(d). 

Response: We agree with this 

comment, and have revised the language 

in the final regulation. 

Comment: One commenter requested 

that CMS define ‘‘interpretive policy 

statement’’ and ‘‘interpretive guidance’’ 

as specified in § 431.420(a)(1). 

Response: These terms have the same 

meaning, and we are revising the rule to 

use only the term ‘‘interpretive 

guidance’’ to refer to HHS or CMS 

guidance on the Federal interpretation 

of applicable Federal laws and 

regulations that have been 

communicated to the State through CMS 

manuals, letters to State Medicaid 

Directors, or other communications 

giving State notice of the Federal 

interpretation. 

Comments: One commenter requested 

that a State receive advance notification 

of monitoring and compliance issues, 

with a chance for the State to appeal any 

finds for noncompliance, termination, 

or suspension. 

Response: We will promptly notify 

the State of any monitoring and 

compliance issues. To the extent that 

there are consequences for the State, 

and available appeal processes, the 

special terms and conditions will 

describe those details. 

Comment: A few commenters 

requested that CMS clarify that 

demonstrations may be terminated only 

if the State fails to materially comply 

with the agreed upon terms and 

conditions. 

Response: We have clarified the 

language in the rule to provide that the 

Secretary may suspend or terminate a 

demonstration if the State fails to 

materially comply with the agreed upon 

terms and conditions. We also added 

language clarifying that the Secretary 

may also withdraw waivers or 

expenditure authorities based on a 

finding that the demonstration project is 

not likely to achieve the statutory 

purposes. The terms and conditions for 

the demonstration will detail any notice 

and appeal rights for the State for a 

termination, suspension or withdrawal 

of waivers or expenditure authorities. 

G. Evaluation Requirements (§ 431.424) 

In § 431.424(a), we proposed that the 

Secretary may use a broad range of 

evaluation strategies developed by 

States but subject to Secretarial approval 

in the application of evaluation 

techniques for measuring the 

effectiveness and usefulness of 

demonstration projects as models that 

help shape health care delivery and 

policy. 

In § 431.424(b), we proposed the 

criteria that should be included in 

demonstration evaluations. 

In § 431.424(c), we proposed that 

States submit and receive CMS approval 

of a design for an evaluation of the 

demonstration (or extension) and 

publish to the State’s public Web site 

the draft demonstration evaluation 

design within 30 days of CMS approval. 

In § 431.424(d), in the event the State 

submits a request to extend the 

demonstration beyond the current 

approval period under the authority of 

sections 1115(a), (e), or (f) of the Act, we 

proposed that the State shall include an 

interim evaluation report as part of the 

State’s request for each subsequent 

renewal. State evaluations must be 


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published on the State’s public Web site 

within 30 days of submission to CMS. 

In § 431.424(e), we proposed that 

States will publish the approved 

demonstration evaluation design on the 

State’s public Web site within 30 days 

of CMS approval. 

In § 431.424(f) regarding Federal 

evaluations, we proposed that States 

must comply with all requirements set 

forth in this subpart. 

In § 431.424(g), we proposed that we 

will post, or provide a link to the State’s 

public Web site, all evaluation 

materials, including research and data 

collection, on our Web site for purposes 

of sharing findings with the public 

within 30 days of receipt of materials. 

We received the following comments 

on the evaluation requirements. 

1. Evaluation Design Plan 

Comment: Several commenters 

suggested that the evaluation design 

plan could be strengthened by 

incorporating some of the components 

referenced in the section governing 

annual reports. In particular, the 

commenters stated that the evaluation 

designs should evaluate how the 

demonstration impacts the outcome of 

care, quality of care, cost of care, and 

access to care for demonstration 

populations, where appropriate. 

Response: While we appreciate the 

commenters’ suggestion, we believe that 

the State should have flexibility, subject 

to CMS approval, in determining which 

indicators that it would like to evaluate 

when designing the demonstration’s 

evaluation plan in light of the different 

kinds of demonstrations that are 

approved. Additionally, we believe that 

the indicators mentioned in the 

commenters’ suggestion are inherent to 

an evaluation design plan. 

Comment: Several commenters 

requested that language protecting 

beneficiaries’ privacy be included in 

§ 431.424(a)(2). 

Response: We agree with this 

comment, and have included language 

in the final rule. We note that existing 

Federal statutes, most notably the 

Privacy Act and HIPAA, prevent 

disclosure of protected personal 

information. In addition, the release, 

disclosure, or use of personal 

information is governed by the 

requirements 42 CFR 431, subpart F. 

Comment: Due to the fact that some 

information required in the evaluation 

section is contingent upon the selection 

of potential contractors, one commenter 

requested that the evaluation 

information be submitted to CMS at a 

conceptual level including as much 

information as is available with more 

detailed information following selection 

of the contracting entity. The 

commenter recommended that an 

exemption allowance be considered for 

demonstration projects that will be 

implemented by contracted staff. 

Response: We understand the 

commenter’s concern, and it is current 

practice to allow States to revise their 

evaluation design plans once a 

contractor has been selected, if 

necessary. We do not believe such a 

procedure is inconsistent with the 

proposed regulations, and thus we are 

not making any revisions to these final 

regulations. On the issue of the 

‘‘exemption allowance,’’ we do not see 

any basis for a broad exemption from 

evaluation requirements. 

2. General 

Comment: Given the fact that data 

necessary to fully evaluate a 

demonstration may not be available 

until well after the demonstration ends, 

one commenter questioned if CMS 

would consider extending the 

evaluation’s due date beyond the waiver 

expiration in such cases. 

Response: It is our practice to include 

language in the STCs requiring the State 

to submit an evaluation 120 days after 

the expiration of the demonstration. We 

will decide on a case-by-case basis to 

extend this timeframe should a State 

need additional time to comply. 

Comment: One commenter expressed 

concern over the difficulty in isolating 

the effects of the demonstration from 

other changes occurring in the State at 

the same time, and would need to 

exclude some demonstration 

participants from the ‘‘other changes.’’ 

The commenter believed that this would 

result in a more complicated evaluation 

design that would be difficult and 

expensive to implement, and requested 

that the evaluation requirement be 

deleted from the final rule. 

Response: The purpose of a 

demonstration is to test new approaches 

to coverage, delivering care, improving 

quality, etc. Evaluation is required to 

measure the effectiveness and 

usefulness of the demonstration as a 

model to help shape health care 

delivery and policy. 

Comment: One commenter requested 

that data collection comply with the 

Office of Management and Budget’s 

(OMB) 1997 revised standards for the 

collection of race and ethnicity data. 

Response: We will ensure that data 

collected during the evaluation of the 

demonstration project complies with 

OMB’s 1997 revised standards for the 

collection of race and ethnicity data, as 

appropriate. As a technical matter, these 

standards apply only to data collection 

by the Federal government itself, and of 

course they can only be used when 

feasible, which is not always the case in 

research and evaluation activities, such 

as studies using medical or 

administrative records that do not use 

the OMB categories. 

Comment: One commenter stated that 

while it is helpful for the public to 

comment on the evaluation parameters, 

CMS should require the State to provide 

opportunity for public review and 

comment on the State’s evaluation 

design. 

Response: The public is afforded the 

opportunity to comment on the 

evaluation design plan as the State must 

publish its application on its Web site 

or a demonstration specific Web page as 

outlined in § 431.412(a)(2)(i). The 

evaluation design plan is a required 

component of the State’s application. 

Comment: One commenter requested 

that CMS include a deadline for 

publishing the evaluation design and 

reports on both the State and CMS Web 

sites. 

Response: We agree with this 

comment, and have included language 

in the final rule. 

H. Reporting Requirements (§ 431.428) 

In order for CMS to effectively 

monitor the implementation of a 

demonstration, we proposed that States 

will submit an annual report, as 

described in § 431.428(a). 

In § 431.428(b), we proposed that 

States will submit a draft annual report 

to CMS no later than 90 days after the 

end of each demonstration year. Within 

60 days of receipt of comments from 

CMS, the State will submit a final 

annual report for the demonstration year 

to CMS. The draft and final annual 

reports are to be published on the 

State’s public Web site. 

We received the following comments 

concerning annual reporting: 

1. Annual Reports 

Comment: One commenter requested 

that we clarify the ‘‘grievances and 

appeals’’ component of the annual 

report. The commenter requested 

clarification of what information is 

required under the ‘‘grievances and 

appeals’’ component, and whether the 

reference is intended to mean appeals 

under 42 CFR part 431, subpart E and/ 

or 42 CFR part 438, subpart F relating 

to the waivers and expenditure 

authorities granted as part of the 

demonstration project. 

Response: The State should provide a 

summary of the types of grievances and 

appeals, and include any trends 

discovered, the resolution of the 

grievances and appeals, and any actions 


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taken, or to be taken, to prevent other 

occurrences. 

Comment: Several commenters 

requested clarification regarding CMS’ 

intent to require the State to publish 

draft annual reports on its Web site. One 

commenter recommended that CMS 

remove this requirement from the final 

regulation, and only require the State to 

publish a final annual report. 

Response: The overarching goal of 

this regulation is to increase the degree 

to which information about section 1115 

demonstrations is publicly available. By 

requiring the State to publish the draft 

annual report on its Web site, we 

believe this requirement is in line with 

the goal of this final rule. 

Comment: One commenter expressed 

concern over conducting annual 

beneficiary satisfaction surveys as they 

are costly and time consuming. The 

commenter requested that CMS consider 

biannual member satisfaction surveys. 

Response: While we did not 

specifically request an annual 

beneficiary satisfaction survey, we have 

clarified the language regarding this 

requirement. An annual survey is not 

required. 

Comment: Many commenters 

recommended that CMS post the State’s 

annual report on its Web site. 

Response: The State’s annual report 

will be included in the administrative 

record as outlined in § 431.416(f). We 

will also provide a link to the State’s 

public Web site to assure public access 

to the State’s annual report. 

Comment: One commenter requested 

that CMS specify a timeframe for it to 

provide comments on the annual report. 

Response: Given the complex and 

individual nature of each demonstration 

application, we do not have a specified 

timeframe for review. 

Comment: One commenter expressed 

concern about the lack of flexibility for 

annual recordkeeping and reporting, as 

well as the discrepancies in timeframes 

between existing STCs and this rule. 

Response: We have revised the 

language to clarify that States may also 

follow the timeframes for submitting 

their annual reports as specified in their 

STCs. 

Comment: One commenter requested 

that CMS remove quality as a distinct 

requirement in the annual report. 

Response: We are committed to 

ensuring that Medicaid beneficiaries 

receive quality care, and as such, 

believe the current quality reporting 

requirements are in line with our 

commitment to quality care. 

I. General Comments 

1. Demonstration Amendments 

Comment: Several of the commenters 

requested clarification on whether the 

regulation would apply to section 1115 

demonstration amendments. One 

commenter suggested that if the 

regulation did apply to amendments, 

CMS should establish a threshold for 

the types of changes that would require 

public notice. 

Response: This regulation and the 

statutory changes that it implements, do 

not address section 1115 demonstration 

amendments. We will provide further 

guidance in a separate issuance on 

when a State must solicit public input 

on demonstration amendments, 

including whether a demonstration 

amendment would result in a new 

demonstration project. 

Comment: One commenter 

recommended that CMS require 

advance notice and opportunity for 

public comment if the State proposes 

substantive changes to an approved 

waiver demonstration. 

Response: While we appreciate the 

commenter’s concern for additional 

public notice on demonstration 

amendments, this regulation does not 

apply to section 1115 demonstration 

amendments. 

2. American Recovery and Reinvestment 

Act (ARRA) 

Comment: The commenter requested 

additional regulatory action to codify 

section 5006(e) of ARRA for all 

Medicaid and CHIP policy changes. 

Response: We have addressed the 

requirements in section 5006(e) of 

ARRA to seek advice from Indian health 

providers and urban Indian 

organizations for section 1115 

demonstrations, but the overall 

implementation of consultation 

requirements is beyond the scope of this 

rulemaking document, and therefore, we 

are not addressing it in this final rule. 

Regardless, the ARRA provides States 

appropriate flexibility in the methods 

they choose to use, as is appropriate 

given the wide array of situations among 

the States where there are Federallyrecognized tribes, Indian health 

providers, or urban Indian 

organizations. 

3. Current CMS Web Site 

Comment: Several commenters 

requested that CMS provide the public 

with more information on its Web site 

about section 1115 demonstrations that 

are currently being considered for 

extensions and new section 1115 

demonstrations that have been 

submitted. 

Response: We appreciate the 

commenters’ suggestion, and are 

reviewing our current Web site 

operating procedures to ensure we meet 

the requirements of the regulation. 

4. Operational Protocols 

Comment: One commenter expressed 

concern that the public will not be able 

to comment on operational protocols as 

these are sometimes used to make 

significant changes to the 

demonstration. The commenter 

requested that CMS provide the public 

opportunity to comment on these 

protocols should it allow states to make 

changes to the demonstration through 

the submission of these protocols. 

Response: We no longer require States 

to submit operational protocols; it is our 

current practice to include all 

operational requirements in the special 

terms and conditions upon which 

approval of the demonstration project is 

contingent. Therefore, this comment is 

beyond the scope of this rulemaking. 

5. General/Unrelated 

Comment: While several commenters 

expressed support for the proposed 

regulation, several others expressed 

concern that the regulation would be too 

cumbersome by requiring additional 

staff time and resources, which are 

under considerable strain due to current 

State fiscal pressures. 

Response: One of the goals of this 

regulation is to balance the need for 

transparency with respect to 

administrative burden. While we 

understand the commenters’ concerns 

regarding the additional staff time and 

resources, we believe that this 

regulation strikes an appropriate 

balance between transparency and 

administrative burden by providing the 

State with flexibility in the manner in 

which it publishes its public notice, as 

well as the venues it selects to hold the 

public hearings. In addition, by making 

public documents available on the Web, 

States and the Federal Government are 

likely to have fewer requests for public 

documents, and therefore, can expect a 

reduction in staff time devoted to such 

activities. 

Comment: One commenter 

recommended that CMS grandfather 

operational section 1115 demonstrations 

that were in place prior to the issuance 

of these regulations, and only require 

them to comply with the new regulation 

upon renewal. 

Response: We intend to apply the 

procedural requirements in these 

regulations to extensions of current 

operational section 1115 

demonstrations, and would not require 

States with current operational 1115 


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demonstrations to meet public process 

requirements prior to the next 

extension. 

Comment: Several commenters 

provided instances where there were 

typographical or referencing errors in 

the proposed rule. 

Response: We agree with these 

comments, and have made the 

appropriate changes to the final rule. 

Comment: One commenter urged that 

CMS apply the principles of this 

regulation to Medicare demonstrations. 

Response: This comment is beyond 

the scope of this rulemaking document, 

and therefore, we are not addressing it 

in this final rule. 

Comment: One commenter 

recommended that the Department of 

Health and Human Services should 

align procedures for public notice and 

comment as required by the section 

1332(a)(4)(B) of the Affordable Care Act. 

Response: Section 1332(a)(5) of the 

Affordable Care Act requires 

coordination of the application process 

for demonstration projects under that 

section with the existing application 

process under section 1115 (and certain 

other waiver authorities). 

Comment: One commenter urged that 

CMS apply the principles of this 

regulation to State Plan Amendment 

approvals. 

Response: This comment is beyond 

both the scope of this rulemaking 

document and statute, and therefore, we 

are not addressing in this final rule. 

Moreover, the review of State plan 

amendments is entirely different than 

the review of a proposed demonstration. 

Approval of State plan amendments that 

comply with the regulatory framework 

is non-discretionary and there is a 

regulatory timeframe for federal review. 

In contrast, approval of section 1115 

demonstration projects, including the 

timeframe, is discretionary with the 

Secretary. 

III. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule. Those provisions of this 

final rule that differ from the proposed 

rule are as follows: 

A. Coordination With Section 1332 

Waivers (§ 431.402) 

We have deleted this provision from 

the final rule, but we plan to work 

closely with the States considering 

submitting multiple waivers to promote 

coordination across them to meet a 

State’s specific circumstances and 

minimize administrative complexity 

while ensuring that the integrity of the 

review and approval processes is 

maintained. 

B. Definitions (§ 431.404) 

We have added the definition of 

‘‘Indian Health Program’’ to make it 

consistent with the definition found in 

the Indian Health Care Improvement 

Act. 

C. State Public Notice Process 

(§ 431.408) 

We have amended § 431.408(a)(1)(i) to 

clarify that a demonstration application 

or extension request contains sufficient 

level of detail to ensure meaningful 

input from the public. 

We have further clarified in 

§ 431.408(a)(1)(i)(C) that a financial 

analysis of changes to the demonstration 

must be included in a demonstration 

extension request. 

We have added § 431.408(a)(1)(i)(E) 

requiring the State to include in its 

public notice specific waiver and 

expenditure authorities that the State 

believes to be necessary to authorize the 

demonstration. 

We have amended § 431.408(a)(1)(iii) 

clarifying that comments need only be 

accepted by the State within a minimum 

30-day time period. 

We have amended § 431.408(a)(2)(i) 

requiring the State to include a link to 

relevant Medicaid demonstration 

page(s) on the CMS Web site on its Web 

site, and have clarified language that the 

State may publish an abbreviated notice 

in a newspaper or the State’s Register. 

We have clarified in § 431.408(a)(2)(ii) 

that the State must also publish an 

abbreviated public notice which must 

include a summary description of the 

demonstration, the location and times of 

the two public hearings, and an active 

link to the full public notice document 

on the State’s Web site in either the 

State’s Administrative Record or 

significant newspaper. We have 

amended language requiring the State to 

publish its notice in the newspaper of 

widest circulation in each city with a 

population of 100,000 or more. We have 

added § 431.408(a)(2)(iii) requiring the 

State to utilize a mechanism, such as an 

electronic mailing list, to notify 

interested parties of a demonstration 

application in addition to publishing an 

abbreviated public notice in either the 

State’s Administrative Record or 

significant newspapers. 

We have amended § 431.408(a)(3) to 

clarify that the two public hearings must 

be held on separate dates and at 

separate locations, and must provide the 

public throughout the State an 

opportunity to provide comments. We 

further clarify that the State must use 

telephonic and/or Web conference 

capabilities for at least one public 

hearing to ensure statewide accessibility 

to the hearing unless it can document 

that it has met this requirement. 

We have added a technical 

amendment to § 431.408(a)(3)(i) revising 

the CFR citation that governs the 

Medical Care Advisory Committee to 

read ‘‘§ 431.12.’’ 

We have amended language in 

§ 431.408(b)(1) to clarify that, for a new 

demonstration project, or an extension 

of an existing demonstration, that has or 

would have a direct effect on tribes, 

Indians, Indian health programs, or 

urban Indian health organizations, the 

State must undertake a consultation 

process with Tribes and seek advice 

from affected Indian health providers 

and urban Indian health organizations 

that includes advance notice of the 

application with the anticipated effect 

on tribes and Indian health providers, 

and an opportunity for input in a 

timeframe that allows adequate time for 

State consideration of any issues raised. 

This process should be consistent with 

the guidance set forth in the State 

Medicaid Director Letter dated July 17, 

2001 (#01–024) unless the State has a 

different established policy with the 

tribes and/or a different process for 

seeking advice from the Indian health 

providers and urban Indian 

organizations any State process under 

its approved Medicaid State plan. 

We have revised, in § 431.408(b)(3), 

the term ‘‘a renewal of a previously 

approved demonstration project’’ to 

read ‘‘an extension of an existing 

demonstration project.’’ 

D. Application Procedures (§ 431.412) 

We have amended language in 

§ 431.412(a)(1)(viii) deleting the word 

‘‘key’’ as well as clarifying that the State 

must provide written evidence on how 

it considered public comments when 

developing the demonstration 

application. 

To ensure flexibility, we have deleted 

specific reference to ‘‘Section 508 of the 

American with Disabilities Act’’ and 

substituted language requiring that State 

submissions be in formats that are 

accessible to individuals with 

disabilities. 

We have added a new § 431.412(a)(3) 

to clarify that this section does not 

preclude a State from submitting a preapplication concept paper to CMS or 

from conferring with CMS about its 

intent to seek a demonstration prior to 

submitting a completed application. 

We have amended § 431.412(b)(1) to 

clarify that we will include the date in 

which the Secretary received the State’s 

demonstration application in the 

written notice informing the State 

receipt of the submitted application. 


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We have amended § 431.412(c) to 

clarify that States must submit an 

extension request 12 months prior to the 

expiration date of a demonstration when 

requesting an extension under section 

1115(e) of the Act or 6 months prior to 

the expiration date of a demonstration 

when requesting an extension under 

section 1115(a) or (f) of the Act, unless 

a longer time frame is specified in the 

Special Terms and Conditions for the 

original demonstration. 

We have revised § 431.412(c)(2)(iv) to 

include the CMS 416 EPSDT/CHIP 

report as an example of other 

documentation regarding access to care, 

in its extension request. 

We have revised § 431.412(c)(2)(vii) 

deleting the word ‘‘key’’ as well as 

clarifying that the State must provide 

written evidence on how it considered 

public comments when developing the 

demonstration application. 

We have added a new § 431.412(c)(4) 

clarifying that the Secretary may extend 

an existing demonstration project on a 

temporary basis for the period during 

which a successor demonstration is 

under review, without regard to the date 

when the application was submitted. 

E. Federal Public Notice and Approval 

Process (§ 431.416) 

We have amended § 431.416(a)(i) to 

clarify that we will include the State’s 

official demonstration application 

submission date received by the 

Secretary in the written notice 

informing the State of receipt of the 

submitted application. We will also 

publish the written notice on our Web 

site within the 15-day timeframe. 

We have amended § 431.416(d) to 

clarify that we will publish all written 

comments. 

We have amended § 431.416(f)(2) to 

clarify that we will publish the 

administrative record on our Web site, 

or provide a link to the State’s public 

Web site to ensure public access to all 

demonstration documents. 

We have added another 

administrative record element in the 

new paragraph § 431.416(f)(1)(ii) to 

include the State’s disaster exception 

request, the CMS’ response letter, and 

revised public notice timeline, if 

applicable. 

We have clarified in 

§ 431.416(f)(1)(iii) that written public 

comments will be included in the 

administrative record. 

We have added another 

administrative record element in 

§ 431.416(f)(1)(vi) to include any written 

request(s) for additional information 

that CMS sends to the State. 

We have clarified in § 431.416(f)(1)(v) 

that if an application is approved, the 

final State response to written CMS 

requests for additional information will 

be included in the administrative 

record. 

We have added § 431.416(f)(1)(vi) to 

include the disapproval letter sent to the 

State should its application be denied. 

We added in § 431.416(f)(1)(vii) the 

phrase ‘‘as applicable.’’ 

We have clarified § 431.416(f)(1)(viii) 

to include specific requirements related 

to the approved and agreed upon terms 

and conditions, such as implementation 

reviews, evaluation design, quarterly 

progress reports, annual reports, and 

interim and/or final evaluation reports. 

We have added another 

administrative record element in 

§ 431.416(f)(1)(ix) to include any 

applicable notices of the 

demonstration’s suspension or 

termination. 

We have added § 431.416 paragraph 

(f)(2) to clarify that we will provide a 

link to the State’s public Web site to 

ensure the public has access to all 

demonstration related documentation. 

We have revised, in § 431.416(g), the 

term ‘‘demonstration renewal’’ to read 

‘‘demonstration extension request.’’ We 

have also deleted the term ‘‘economic’’ 

from § 431.416(g). 

We have revised § 431.416(g)(i) to 

read ‘‘The State acted in good faith, and 

in a diligent, timely, and prudent 

manner.’’ 

F. Monitoring and Compliance 

(§ 431.420) 

We have amended § 431.420(a)(1) to 

delete ‘‘policy statement’’ and change 

‘‘policy’’ to ‘‘guidance.’’ 

We have amended § 431.420(a)(2) to 

clarify that the States must comply with 

the terms and conditions set forth by the 

Secretary, and to make the paragraph 

more consistent with § 431.420(d). 

We have added § 431.420(b)(3) 

clarifying that we will promptly share 

with the State complaints that it has 

received, and that we will notify the 

State of any applicable monitoring and 

compliance issues. 

We have amended § 431.420(c) to 

clarify that the public forum must allow 

the public an opportunity to provide 

comments, as well as to require the 

State to include a summary report of the 

public forum in the quarterly report 

associated with the quarter in which the 

forum was held. We also clarify that the 

public forum must be held within 6 

months after the demonstration’s 

implementation date. 

We have amended § 431.420(c)(1)(i) 

revising the CFR citation that governs 

the Medical Care Advisory Committee 

to read § 431.12. 

We have amended § 431.420(d) to 

clarify that the Secretary may suspend 

or terminate a demonstration, and that 

the Secretary may also withdraw 

waivers or expenditures authorities 

based on a finding that demonstration 

project is not likely to achieve the 

statutory purposes. 

G. Evaluation Requirements (§ 431.424) 

We have revised § 431.424(b)(2) 

requiring the State to ensure that the 

evaluation process protects beneficiary 

privacy. 

We have amended § 431.424(c)(1) 

requiring the State to publish its 

evaluation design plan on its Web site 

within 30 days of CMS approval. 

We have amended § 431.424(d) 

requiring the State to publish its 

evaluations on its Web site within 30 

days of submission to CMS. 

We have clarified in § 431.424(g) that 

we will post all evaluation materials, or 

provide a link to the State’s public Web 

site, within 30 days of receipt. 

H. Reporting Requirements (§ 431.428) 

We have amended § 431.428(a)(2) to 

include that any issues and/or 

complaints made by beneficiaries must 

be included in the annual report. 

We have amended § 431.428(a)(5) to 

clarify that the results of beneficiary 

satisfaction survey, if conducted during 

the reporting year, should be included 

in the annual report. 

We have amended § 431.428(b) 

requiring the State to publish its draft 

annual report on its public Web site 

within 30 days of submission to CMS. 

We have amended § 431.428(b)(2) 

requiring the State to publish its final 

annual report on its Web site within 

30 days of approval by CMS. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

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 


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affected public, including automated 

collection techniques. 

A. ICRs Regarding State Public Notice 

Process (§ 431.408) 

Section 431.408 provides for a State to 

provide a public notice and comment 

period regarding applications for a 

demonstration project, or an extension 

of an existing demonstration project the 

State intends to submit to CMS for 

review and consideration. Section 

431.408(a)(1) specifies that prior to 

submitting an application to CMS for a 

new demonstration project, or an 

extension of an existing demonstration 

project, the State must provide public 

notice, and a comment period for at 

least 30 days. The public notice must 

address the information requirements 

listed at § 431.408(a)(1)(i) through (iv). 

The burden estimate associated with 

this requirement is the time and effort 

necessary to develop and publish notice 

with a comment period that complies 

with the aforementioned information 

requirements. We estimate that, on 

average, each of the 15 States submitting 

applications for new demonstration 

projects, and extension of a previously 

approved demonstration project will 

require 80 hours to comply with the 

requirements in this section. The 

estimated annual burden associated 

with this section is 1200 hours at a cost 

of $120,000. 

Section 431.408(a)(2) provides that 

States establish and maintain a readily 

identifiable link to a demonstration Web 

page on the public Web site of the State 

agency responsible for making 

applications for demonstrations, and 

provide a link to the appropriate 

demonstration Web page on the CMS 

Web site. The State public notice must 

appear in a prominent location on the 

demonstration Web page of the State’s 

public Web site throughout the entire 

review process; and the public notice 

must appear in at least one of the 

publications listed in § 431.408(a)(2)(i) 

and (ii). 

The burden associated with this is the 

time and effort necessary to develop a 

notice and to publish it both on the Web 

site for State agency responsible for 

submitting demonstration applications 

and in at least one of the publications 

listed in § 431.408(a)(2)(i) and (ii). 

While these requirements are subject to 

the PRA, we believe we addressed the 

burden estimates in our discussion of 

§ 431.408(a)(1). 

Section 431.408(a)(3) requires that at 

least 20 days prior to submitting an 

application for new demonstration 

projects, or an extension of a previously 

approved demonstration project to CMS 

for review, the State must have 

conducted at least two public hearings 

regarding the State’s demonstration 

application using at least two of the 

following public forums contained in 

this section. The two public hearings 

must be held on separate dates and in 

separate locations, and must afford the 

public an opportunity to provide 

comments. Additionally, the State must 

utilize teleconferencing or Web 

capabilities for at least one of the public 

hearings to ensure statewide 

accessibility. The burden associated 

with this is the time and effort necessary 

for a State to conduct at least two public 

hearings 20 days prior to submitting an 

application for a demonstration. While 

this requirement is subject to the PRA, 

we believe the associated burden is 

exempt under 5 CFR 1320.3(h)(4). Facts 

or opinions submitted in response to 

general solicitations of comments from 

the public, published in the Federal 

Register or other publications, 

regardless of the form or format thereof, 

provided that no person is required to 

supply specific information pertaining 

to the commenter, other than that 

necessary for self-identification, as a 

condition of the agency’s full 

consideration of the comment are not 

subject to the PRA. 

Section 431.408(b) requires States 

with Federally-recognized Indian tribes, 

Indian health programs, urban Indian 

health organizations or all three of the 

aforementioned entities, to consult with 

the Indian tribes, and seek advice from 

Indian Health programs and urban 

Indian health organizations in the State, 

before submitting a demonstration 

application that has direct effects on 

Indians and/or these entities and 

organizations. Section 431.408(b)(2) 

specifies that consultation activities 

must be conducted in a manner 

consistent with the State Medicaid 

Director Letter #01–024 regarding 

consultation with tribes and the 

approved State Plan Amendments for 

seeking advice from Indian health 

providers and urban Indian 

organizations. Section 431.408(b)(3) 

further specifies that when there is a 

direct effect on Indians, Indian tribes, 

Indian health providers or urban Indian 

organizations, the State must submit 

evidence to CMS that these 

requirements have been met. Section 

431.408(b)(4) explains that 

documentation of the State’s 

consultation activities must be included 

in the demonstration application, which 

must describe the notification process, 

the entities they sought advice from or 

consulted with, the date and location of 

these consultation or how advice was 

sought, issues raised, and the potential 

resolution for such issues. 

The burden associated with the 

requirements in this section is both the 

time and effort necessary for a State to 

seek advice and/or conduct its tribal 

consultations and the time and effort 

necessary to notify CMS of the State’s 

compliance with § 431.408(b). We 

estimate that this requirement applies to 

37 States but that no more than, on 

average, 15 States would be subject to 

this requirement in a given year. We 

further estimate that it will take each 

State a total of 40 hours to both conduct 

its tribal consultations, and seek advice 

from Indian health programs and urban 

Indian health organizations prior to 

submitting an application for a new 

demonstration project, or an extension 

of an existing demonstration project and 

to submit the aforementioned evidence 

to CMS. The estimated annual burden 

associated with these requirements is 

600 hours at a cost of $60,000. 

B. ICRs Regarding Application 

Procedures (§ 431.412) 

Section 431.412(a) discusses the 

application process for Medicaid 

demonstration projects. A State’s 

application for approval of a new 

demonstration project or an extension of 

an existing demonstration project must 

be submitted to CMS as both printed 

and electronic documents. Electronic 

documents should be in formats 

accessible to individuals with 

disabilities. Section 431.412(b) further 

explains that applications for the initial 

approval of a demonstration will not be 

considered complete if they do not 

comply with the requirements 

contained at § 431.412(b) and § 431.408. 

The burden associated with the 

requirements in § 431.412 is the time 

and effort necessary for a State to 

develop and submit a complete initial 

application for a demonstration. We 

estimate that we will receive, on 

average, five applications annually. 

Similarly we estimate that it will take 

400 hours for a State to develop and 

submit a complete demonstration 

application. The total estimated annual 

burden associated with the 

requirements in § 431.412(b) is 2000 

hours at a cost of $200,000. 

Section 431.412(c) specifies that a 

State must submit a request to extend an 

existing demonstration under section 

1115(e) of the Act at least 12 months 

prior to the expiration date of the 

demonstration or 6 months prior to the 

expiration date of the demonstration 

when requesting an extension under 

section 1115(a) or (f) of the Act, unless 

a longer time frame is specified in the 

Special Terms and Conditions for the 


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original demonstration. An extension 

application, including an extension for 

the purpose of phasing out a 

demonstration, must be sent from the 

Governor of the State to the Secretary. 

Section 431.412(c)(2) further specifies 

that an application to extend an existing 

demonstration will be considered 

complete when the State provides the 

required information listed at 

§ 431.412(c)(2)(i) through (vii). The 

burden associated with the 

requirements in § 431.412(c) is the time 

and effort necessary for a State to 

develop and submit a demonstration 

extension application. CMS estimates 

that, on average, 10 States will apply for 

extensions annually. We further 

estimate that it will take each State 

approximately 320 hours to develop and 

submit a demonstration extension 

application. The total estimated annual 

burden is 3200 hours at a cost of 

$320,000. 

C. ICRs Regarding Monitoring and 

Compliance (§ 431.420) 

According to Section 431.420(b), 

States will periodically perform reviews 

of the implementation of the 

demonstration. We estimate that it will 

take each State 80 hours annually to 

periodically review the demonstration’s 

implementation. We also estimate that, 

on average, 15 States must comply with 

this requirement. The total estimated 

annual burden associated with this 

requirement is 1200 hours at a cost of 

$120,000. 

Section 431.420(c) states that at least 

6 months after the implementation date 

of the demonstration and annually 

thereafter, the State must hold a public 

forum to solicit comments on the 

progress of a demonstration project. 

Section 431.420(c)(3)(i) through (iii) 

further specifies that the public forum to 

solicit feedback on the progress of a 

demonstration project, must occur at a 

Medical Care Advisory Committee, or a 

commission, or other similar process, 

where meetings are open to members of 

the public, and would afford an 

interested party the opportunity to learn 

about and comment on the 

demonstration’s progress. Additionally, 

as stated in § 431.420(c)(3)(iii), the State 

must publish the date, time, and 

location of the public forum in a 

prominent location on the State’s public 

Web site, at least 30 days prior to the 

date of the planned public forum. 

The burden associated with these 

provisions includes the time and effort 

necessary to conduct public meeting 

and the time and effort necessary for a 

State to publish the date, time, and 

location of the public forum in a 

prominent location on the State’s public 

Web site, at least 30 days prior to the 

date of the planned public forum. While 

these requirements are subject to the 

PRA, we believe the associated burden 

is exempt from the PRA. As discussed 

previously in this final rule, facts or 

opinions submitted in response to 

general solicitations of comments from 

the public, published in the Federal 

Register or other publications, 

regardless of the form or format thereof, 

provided that no person is required to 

supply specific information pertaining 

to the commenter, other than that 

necessary for self-identification, as a 

condition of the agency’s full 

consideration of the comment are not 

subject to the PRA. Therefore, the 

burden associated with the annual 

public hearing requirement is exempt. 

Similarly, we believe the time and effort 

necessary to a State to publish the date, 

time, and location of the public forum 

in a prominent location on the State’s 

public Web site is a burden that would 

be incurred in the course of usual and 

customary State business practices and 

is therefore exempt from the PRA under 

5 CFR 1320.3(b)(3). 

D. ICRs Regarding Evaluation 

Requirements (§ 431.424) 

As required in § 431.424(c)(1), 

simultaneous to receiving CMS’ 

approval of a new demonstration 

project, or a extension of a previously 

existing demonstration project, the State 

must receive CMS approval of a design 

for an evaluation of the demonstration 

project and publish this document to 

the State’s public Web site within 30 

days of submission to CMS. The draft 

evaluation must include information 

established in § 431.424(c)(2). The 

burden associated with this requirement 

is the time and effort necessary to 

design an evaluation for a new 

demonstration. We estimate that it will 

take each State 160 hours to develop an 

evaluation. Similarly, we estimate that, 

on average, 15 States must comply with 

this requirement. We further estimate 

that the total estimated annual burden 

associated with this requirement is 

2,400 hours at a cost of $240,000. 

Section 431.424(d) specifies that in 

the event that the State requests to 

extend the demonstration beyond the 

current approval period under the 

authority of section 1115(a), (e), or (f) of 

the Act, the State must submit an 

interim evaluation report as part of the 

State’s request for a subsequent 

extension of the demonstration. The 

burden associated with this is the time 

and effort necessary for a State to 

develop and submit an interim 

evaluation report. We estimate that each 

State will take 160 hours to comply with 

this requirement. Similarly, we estimate 

that, on average, 10 States must comply 

with this requirement. We further 

estimate that the total estimated annual 

burden associated with this requirement 

is 1,600 hours at a cost of $160,000. 

Section 431.424(e) established that 

States will publish CMS-approved 

demonstration evaluation designs on 

their State public Web site within 30 

days of CMS approval. We estimate that 

it will take 70 hours for each State to 

comply with this disclosure process. We 

further estimate that, on average, 15 

States must comply with this provision. 

We further estimate that the total 

estimated annual burden associated 

with this requirement is 1,050 hours at 

a cost of $105,000. 

E. ICRs Regarding Reporting 

Requirements (§ 431.428) 

Section 431.428 establishes that States 

will submit annual reports to CMS 

documenting the information listed in 

§ 431.428(a) (1) through (11). As part of 

the submission process, § 431.428(b) 

requires States to submit draft annual 

reports to CMS no later than 90 days 

after the end of each demonstration 

year. The burden associated with this 

reporting requirement is the time and 

effort necessary to submit draft annual 

reports to CMS. We estimate that, on 

average, 15 States must comply with 

this. We estimate that it will take 40 

hours for each State to comply with this 

reporting requirement. We further 

estimate that the total estimated annual 

burden associated with this requirement 

is 600 hours at a cost of $60,000. 

In § 431.428(b)(1) establishes that 

within 60 days of receipt of comments 

from CMS, the State must submit to 

CMS the final annual report for the 

demonstration year. While this 

requirement is subject to the PRA, we 

believe the associated burden is exempt 

under 5 CFR 1320.3(h)(9). Facts or 

opinions obtained or solicited through 

non-standardized follow-up questions 

designed to clarify responses to 

approved collections of information are 

not subject to the PRA. 

Section § 431.428(b)(2) states that the 

draft and final annual reports must be 

published on the State’s public Web site 

within 30 days of submission and 

approval to CMS, respectively. The 

burden associated with this is the time 

and effort it takes for a State to post the 

aforementioned information on the 

State’s public Web site. We estimate 

that, on average, each of the 15 States 

will require 4 hours to comply with this 

requirement. The total estimated annual 

burden associated with this requirement 

is 60 hours at a cost of $6,000. 


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Federal Register / Vol. 77, No. 38 / Monday, February 27, 2012 / Rules and Regulations 11695 

TABLE 1—ESTIMATED ANNUAL RECORDKEEPING AND REPORTING BURDEN

Regulation section(s) OMB 

Control No. Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($) 

Total labor 

cost of 

reporting 

($) 

Total capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

§ 431.408(a)(1) ..................... 0938–New .. 15 1 80 1,200 100 120,000 0 120,000 

§ 431.408(b) .......................... 0938–New .. 15 1 40 600 100 60,000 0 60,000 

§ 431.412(a) & (b) ................. 0938–New .. 5 1 400 2,000 100 200,000 0 200,000 

§ 431.412(c) .......................... 0938–New .. 10 1 320 3,200 100 320,000 0 320,000 

§ 431.420 .............................. 0938–New .. 15 1 80 1,200 100 120,000 0 120,000 

§ 431.424(c) .......................... 0938–New .. 15 1 160 2,400 100 240,000 0 240,000 

§ 431.424(d) .......................... 0938–New .. 10 1 160 1,600 100 160,000 0 160,000 

§ 431.424(e) .......................... 0938–New .. 15 1 70 1,050 100 105,000 0 105,000 

§ 431.428(b) .......................... 0938–New .. 15 1 40 600 100 60,000 0 60,000 

§ 431.428(b)(2) ..................... 0938–New .. 15 1 4 60 100 6,000 0 6,000 

Total ............................... .................... 130 10 .................... 13,910 .................... 1,391,000 ...................... 1,391,000 

If you comment on these information 

collection and recordkeeping 

requirements, please submit your 

comments to the Office of Information 

and Regulatory Affairs, Office of 

Management and Budget, Attention: 

CMS Desk Officer, [CMS–2325–F], Fax: 

(202) 395–6974; or Email: 

OIRA_submission@omb.eop.gov. 

V. Regulatory Impact Statement 

A. Statement of Need 

Under Executive Order 12866 (58 FR 

51735), a Federal agency should publish 

only such regulations as are required by 

law, are necessary to interpret the law, 

or are made necessary by compelling 

need. This final rule implements 

statutorily required provisions of 

section 10201(i) of the Affordable Care 

Act, and of section 5006 of the 

American Recovery and Investment Act. 

This final rule will increase the degree 

to which information about Medicaid 

and CHIP demonstration applications 

and approved demonstration projects is 

publicly available and promote greater 

transparency in the review and approval 

of demonstrations. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

13563 on Improving Regulation and 

Regulatory Review (January 18, 2011), 

Executive Order 12866 on Regulatory 

Planning and Review (September 1993), 

the Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4), Executive Order 

13132 on Federalism (August 4, 1999), 

and the Congressional Review Act (5 

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

Executive Orders 13563 and 12866 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). We believe that the total costs 

of this rule, including information 

collection costs, will be at least several 

million dollars annually, but are 

unlikely to exceed ten million dollars 

annually. Therefore, this rule does not 

reach the economic threshold and thus 

is not considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief for small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Individuals 

and States are not included in the 

definition of a small entity. We are not 

preparing an analysis for the RFA 

because we have determined, and the 

Secretary certifies, that this final rule 

will not have a significant impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis, if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

Core-Based Statistical Area (for 

Medicaid) and outside of a Metropolitan 

Statistical Area (for Medicare) and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this final 

rule will not have a significant impact 

on the operations of a substantial 

number of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. Because this rule does not 

mandate State participation in using 

section 1115 demonstrations, there is no 

obligation for the State to make any 

change to their existing programs. As a 

result, there is no mandate for the State. 

Therefore, we estimate this rule will not 

mandate expenditures in the threshold 

amount of $136 million in any 1 year. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This rule will not have a substantial 

direct effect on State or local 

governments, preempt States, or 

otherwise have a Federalism 

implication. We have sought in this rule 

to respect State’s own processes for 

notifying the public of important policy 

changes and for obtaining public 

comment. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid, Privacy, Reporting 

and recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 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). 


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■ 2. Subpart G is added to part 431 to 

read as follows: 

Subpart G—Section 1115 Demonstrations 

Sec. 

431.400 Basis and purpose. 

431.404 Definitions. 

431.408 State public notice process. 

431.412 Application procedures. 

431.416 Federal public notice and approval 

process. 

431.420 Monitoring and compliance. 

431.424 Evaluation requirements. 

431.428 Reporting requirements. 

Subpart G—Section 1115 

Demonstrations 

§ 431.400 Basis and purpose. 

(a) Basis. This subpart implements 

provisions in section 1115(d) of the Act, 

which requires all of the following: 

(1) The establishment of application 

requirements for Medicaid and CHIP 

demonstration projects that provide for: 

(i) A process for public notice and 

comment at the State level, including 

public hearings, sufficient to ensure a 

meaningful level of public input and 

that does not impose requirements that 

are in addition to, or duplicative of, 

requirements imposed under the 

Administrative Procedure Act, or 

requirements that are unreasonable or 

unnecessarily burdensome with respect 

to State compliance. 

(ii) Requirements relating to all of the 

following: 

(A) The goals of the program to be 

implemented or renewed under the 

demonstration project. 

(B) Expected State and Federal costs 

and coverage projections of the State 

demonstration project. 

(C) Specific plans of the State to 

ensure the demonstration project will be 

in compliance with titles XIX or XXI of 

the Act. 

(2) A process for public notice and 

comment after a demonstration 

application is received by the Secretary 

that is sufficient to ensure a meaningful 

level of public input. 

(3) A process for the submission of 

reports to the Secretary by a State 

relating to the implementation of a 

demonstration project. 

(4) Periodic evaluation of 

demonstration projects by the Secretary. 

(b) Purpose. This subpart sets forth a 

process for application and review of 

Medicaid and CHIP demonstration 

projects that provides for transparency 

and public participation. 

§ 431.404 Definitions. 

For the purposes of this subpart: 

Demonstration means any 

experimental, pilot, or demonstration 

project which the Secretary approves 

under the authority of section 1115 of 

the Act because, in the judgment of the 

Secretary, it is likely to assist in 

promoting the statutory objectives of the 

Medicaid or CHIP program. 

Indian Health Program means a 

program as defined at section 4(12) of 

the Indian Health Care Improvement 

Act, (Pub. L. 94–437). 

Public notice means a notice issued 

by a government agency or legislative 

body that contains sufficient detail to 

notify the public at large of a proposed 

action, consistent with the provisions of 

§ 431.408 of this subpart. 

§ 431.408 State public notice process. 

(a) General. A State must provide at 

least a 30-day public notice and 

comment period regarding applications 

for a demonstration project, or an 

extension of an existing demonstration 

project that the State intends to submit 

to CMS for review and consideration. 

(1) Public notice and comment period. 

Prior to submitting an application to 

CMS for a new demonstration project or 

an extension of a previously approved 

demonstration project, the State must 

provide at least a 30-day public notice 

and comment period, and the public 

notice shall include all of the following 

information: 

(i) A comprehensive description of 

the demonstration application or 

extension to be submitted to CMS that 

contains a sufficient level of detail to 

ensure meaningful input from the 

public, including: 

(A) The program description, goals, 

and objectives to be implemented or 

extended under the demonstration 

project, including a description of the 

current or new beneficiaries who will be 

impacted by the demonstration. 

(B) To the extent applicable, the 

proposed health care delivery system 

and the eligibility requirements, benefit 

coverage and cost sharing (premiums, 

co-payments, and deductibles) required 

of individuals that will be impacted by 

the demonstration, and how such 

provisions vary from the State’s current 

program features. 

(C) An estimate of the expected 

increase or decrease in annual 

enrollment, and in annual aggregate 

expenditures, including historic 

enrollment or budgetary data, if 

applicable. This includes a financial 

analysis of any changes to the 

demonstration requested by the State in 

its extension request. 

(D) The hypothesis and evaluation 

parameters of the demonstration. 

(E) The specific waiver and 

expenditure authorities that the State 

believes to be necessary to authorize the 

demonstration. 

(ii) The locations and Internet address 

where copies of the demonstration 

application are available for public 

review and comment. 

(iii) Postal and Internet email 

addresses where written comments may 

be sent and reviewed by the public, and 

the minimum 30-day time period in 

which comments will be accepted. 

(iv) The location, date, and time of at 

least two public hearings convened by 

the State to seek public input on the 

demonstration application. 

(2) Statement of public notice and 

public input procedures. (i) The State 

shall publish its public notice process, 

public input process, planned hearings, 

the demonstration application(s), and a 

link to the relevant Medicaid 

demonstration page(s) on the CMS Web 

site in a prominent location on either 

the main page of the public Web site of 

the State agency responsible for making 

applications for demonstrations or on a 

demonstration-specific Web page that is 

linked in a readily identifiable way to 

the main page of the State agency’s Web 

site. The State must maintain and keep 

current the public Web site throughout 

the entire public comment and review 

process. 

(ii) The State shall also publish an 

abbreviated public notice which must 

include a summary description of the 

demonstration, the location and times of 

the two or more public hearings, and an 

active link to the full public notice 

document on the State’s Web site in the 

State’s administrative record in 

accordance with the State’s 

Administrative Procedure Act, provided 

that such notice is provided at least 30 

days prior to the submission of the 

demonstration application to CMS or in 

the newspapers of widest circulation in 

each city with a population of 100,000, 

or more, provided that such notice is 

provided at least 30 days prior to the 

submission of the demonstration 

application to CMS, or both. 

(iii) The State must also utilize 

additional mechanisms, such as an 

electronic mailing list, to notify 

interested parties of the demonstration 

application(s). 

(3) Public hearings. At least 20 days 

prior to submitting an application for a 

new demonstration project or extension 

of an existing demonstration project to 

CMS for review, the State must have 

conducted at least two public hearings, 

on separate dates and at separate 

locations, regarding the State’s 

demonstration application at which 

members of the public throughout the 

State have an opportunity to provide 

comments. The State must use 

telephonic and/or Web conference 

capabilities for at least one of the two 


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required public hearings to ensure 

statewide accessibility to the public 

hearing unless it can document it has 

afforded the public throughout the State 

the opportunity to provide comment, 

such as holding the two public hearings 

in geographically distinct areas of the 

State. The State must use at least two of 

the following public forums: 

(i) The Medical Care Advisory 

Committee that operates in accordance 

with § 431.12 of this subpart; or 

(ii) A commission or other similar 

process, where meetings are open to 

members of the public; or 

(iii) A State legislative process, which 

would afford an interested party the 

opportunity to learn about the contents 

of the demonstration application, and to 

comment on its contents; or 

(iv) Any other similar process for 

public input that would afford an 

interested party the opportunity to learn 

about the contents of the demonstration 

application, and to comment on its 

contents. 

(b) Tribal consultation and seeking 

advice from Indian health providers and 

urban Indian organizations. A State 

with Federally-recognized Indian tribes, 

Indian health programs, and/or urban 

Indian health organizations shall 

include a process to consult with the 

Indian tribes, and seek advice from 

Indian Health programs and urban 

Indian health organizations in the State, 

prior to submission of an application to 

CMS for a new demonstration project, or 

an extension of a previously approved 

demonstration project, that has or 

would have a direct effect on Indians, 

tribes, on Indian health programs, or on 

urban Indian health organizations. 

(1) For initial applications and 

applications extending existing 

demonstration projects that have a 

direct effect on Indians, tribes, Indian 

health programs, and urban Indian 

health organizations in the State, the 

State must demonstrate that it has 

conducted consultation activities with 

tribes and sought advice from Indian 

health programs and urban Indian 

health organizations prior to submission 

of such application. 

(2) Consultation with Federallyrecognized Indian tribes and solicitation 

of advice from affected Indian health 

providers and urban Indian 

organizations must be conducted in 

accordance with the consultation 

process outlined in the July 17, 2001 

letter or the State’s formal tribal 

consultation agreement or process and 

the process for seeking advice from 

Indian Health providers must be 

conducted as outlined in the State’s 

approved Medicaid State Plan. 

(3) Documentation of the State’s 

consultation activities must be included 

in the demonstration application, which 

must describe the notification process, 

the entities involved in the 

consultation(s), the date(s) and 

location(s) of the consultation(s), issues 

raised, and the potential resolution for 

such issues. 

§ 431.412 Application procedures. 

(a) Initial demonstration application 

content. (1) Applications for initial 

approval of a demonstration will not be 

considered complete unless they 

comply with the public notice process 

set forth in § 431.408(a) of this subpart, 

and include the following: 

(i) A comprehensive program 

description of the demonstration, 

including the goals and objectives to be 

implemented under the demonstration 

project. 

(ii) A description of the proposed 

health care delivery system, eligibility 

requirements, benefit coverage and cost 

sharing (premiums, copayments, and 

deductibles) required of individuals 

who will be impacted by the 

demonstration to the extent such 

provisions would vary from the State’s 

current program features and the 

requirements of the Act. 

(iii) An estimate of the expected 

increase or decrease in annual 

enrollment, and in annual aggregate 

expenditures, including historic 

enrollment or budgetary data, if 

applicable. 

(iv) Current enrollment data, if 

applicable, and enrollment projections 

expected over the term of the 

demonstration for each category of 

beneficiary whose health care coverage 

is impacted by the demonstration. 

(v) Other program features that the 

demonstration would modify in the 

State’s Medicaid and CHIP programs. 

(vi) The specific waiver and 

expenditure authorities that the State 

believes to be necessary to authorize the 

demonstration. 

(vii) The research hypotheses that are 

related to the demonstration’s proposed 

changes, goals, and objectives, a plan for 

testing the hypotheses in the context of 

an evaluation, and, if a quantitative 

evaluation design is feasible, the 

identification of appropriate evaluation 

indicators. 

(viii) Written documentation of the 

State’s compliance with the public 

notice requirements set forth in 

§ 431.408 of this subpart, with a report 

of the issues raised by the public during 

the comment period, which shall be no 

less than 30 days, and how the State 

considered those comments when 

developing the demonstration 

application. 

(2) CMS may request, or the State may 

propose application modifications, as 

well as additional information to aid in 

the review of the application. If an 

application modification substantially 

changes the original demonstration 

design, CMS may, at its discretion, 

direct an additional 30-day public 

comment period. 

(3) This section does not preclude a 

State from submitting to CMS a preapplication concept paper or from 

conferring with CMS about its intent to 

seek a demonstration prior to submitting 

a completed application. 

(b) Demonstration application 

procedures. A State application for 

approval of a new demonstration project 

or an extension of an existing 

demonstration project must be 

submitted to CMS as both printed and 

electronic documents. Electronic 

documents must be submitted in a 

format that will be accessible to 

individuals with disabilities. 

(1) Consistent with § 431.416(a) of this 

subpart, within 15 days of receipt of a 

complete application, CMS will send 

the State a written notice informing the 

State of receipt of the submitted 

application, the date in which the 

Secretary received the State’s 

demonstration application and the start 

date of the 30-day Federal public notice 

process set forth in § 431.416 of this 

subpart. The written notice— 

(i) Is provided for purposes of 

initiating the Federal-level public 

comment period and does not preclude 

a determination that, based on further 

review, further information is required 

to supplement or support the 

application, or that the application 

cannot be approved because a required 

element is missing or insufficient. 

(ii) Does not prevent a State from 

modifying its application or submitting 

any supplementary information it 

determines necessary to support CMS’ 

review of its application. 

(2) Within 15 days of receipt of a 

demonstration application that CMS 

determines is incomplete, CMS will 

send the State a written notice of the 

elements missing from the application. 

(3) CMS will publish on its Web site 

at regular intervals the status of all State 

submissions, including information 

received from the State while the State 

works with CMS to meet the 

demonstration application process set 

forth in this section. 

(c) Demonstration extension request. 

A request to extend an existing 

demonstration under sections 1115(a), 

(e), and (f) of the Act will be considered 

only if it is submitted at least 12 months 


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prior to the expiration date of the 

demonstration when requesting an 

extension under section 1115(e) of the 

Act or 6 months prior to the expiration 

date of the demonstration when 

requesting an extension under section 

1115(a) or (f) of the Act, unless a longer 

time frame is specified in the Special 

Terms and Conditions for the original 

demonstration. An extension 

application, including an extension for 

the purpose of phasing out a 

demonstration, must be sent from the 

Governor of the State to the Secretary. 

(1) Changes to existing demonstration. 

If an extension application includes 

substantial changes to the existing 

demonstration, CMS may, at its 

discretion, treat the application as an 

application for a new demonstration. 

(2) Demonstration extension 

application. An application to extend an 

existing demonstration will be 

considered complete, for purposes of 

initiating the Federal-level public notice 

period, when the State provides the 

following: 

(i) A historical narrative summary of 

the demonstration project, which 

includes the objectives set forth at the 

time the demonstration was approved, 

evidence of how these objectives have 

or have not been met, and the future 

goals of the program. 

(ii) If changes are requested, a 

narrative of the changes being requested 

along with the objective of the change 

and the desired outcomes. 

(iii) A list and programmatic 

description of the waivers and 

expenditure authorities that are being 

requested for the extension period, or a 

statement that the State is requesting the 

same waiver and expenditure 

authorities as those approved in the 

current demonstration. 

(iv) Summaries of External Quality 

Review Organization (EQRO) reports, 

managed care organization (MCO) and 

State quality assurance monitoring, and 

any other documentation of the quality 

of and access to care provided under the 

demonstration, such as the CMS Form 

416 EPSDT/CHIP report. 

(v) Financial data demonstrating the 

State’s historical and projected 

expenditures for the requested period of 

the extension, as well as cumulatively 

over the lifetime of the demonstration. 

This includes a financial analysis of 

changes to the demonstration requested 

by the State. 

(vi) An evaluation report of the 

demonstration, inclusive of evaluation 

activities and findings to date, plans for 

evaluation activities during the 

extension period, and if changes are 

requested, identification of research 

hypotheses related to the changes and 

an evaluation design for addressing the 

proposed revisions. 

(vii) Documentation of the State’s 

compliance with the public notice 

process set forth in § 431.408 of this 

subpart, including the post-award 

public input process described in 

§ 431.420(c) of this subpart, with a 

report of the issues raised by the public 

during the comment period and how the 

State considered the comments when 

developing the demonstration extension 

application. 

(3) CMS may request, or the State may 

propose application modifications, as 

well as additional information to aid in 

the review of an application to extend 

a demonstration. If an application 

modification substantially changes the 

original demonstration design, CMS 

may, at its discretion, direct an 

additional 30-day public comment 

period. 

(4) Upon application from the State, 

the Secretary may extend existing 

demonstration projects on a temporary 

basis for the period during which a 

successor demonstration is under 

review, without regard to the date when 

the application was submitted. 

(d) Approvals. Approval of a new 

demonstration or a demonstration 

extension will generally be prospective 

only and Federal Financial Participation 

(FFP) will not be available for changes 

to the demonstration that have not been 

approved by CMS. 

§ 431.416 Federal public notice and 

approval process. 

(a) General. Within 15 days of receipt 

of a complete application from the State 

for a new demonstration project or an 

extension of a previously approved 

demonstration project, CMS will: 

(1) Send the State a written notice 

informing the State of receipt of the 

demonstration application, the date in 

which the Secretary received the State’s 

demonstration application, the start 

dates of the 30-day Federal public 

notice process, and the end date of the 

45-day minimum Federal decisionmaking period. 

(2) Publish the written notice 

acknowledging receipt of the State’s 

completed application on its Web site 

within the same 15-day timeframe. 

(b) Public comment period. Upon 

notifying a State of a completed 

application, CMS will solicit public 

comment regarding such demonstration 

application for 30 days by doing the 

following: 

(1) Publishing the following on the 

CMS Web site: 

(i) The written notice of CMS receipt 

of the State’s complete demonstration 

application. 

(ii) Demonstration applications, 

including supporting information 

submitted by the State as part of the 

complete application, and associated 

concept papers, as applicable. 

(iii) The proposed effective date of the 

demonstration. 

(iv) Addresses to which inquiries and 

comments from the public may be 

directed to CMS by mail or email. 

(2) Notifying interested parties 

through a mechanism, such an 

electronic mailing list, that CMS will 

create for this purpose. 

(c) Public disclosure. CMS will 

publish on its Web site, at regular 

intervals, appropriate information, 

which may include, but is not limited 

to the following: 

(1) Relevant status update(s); 

(2) A listing of the issues raised 

through the public notice process. 

(d) Publishing of comments. (1) CMS 

will publish written comments 

electronically through its Web site or an 

alternative Web site. 

(2) CMS will review and consider all 

comments received by the deadline, but 

will not provide written responses to 

public comments. While comments may 

be submitted after the deadline, CMS 

cannot assure that these comments will 

be considered. 

(e) Approval of a demonstration 

application. (1) CMS will not render a 

final decision on a demonstration 

application until at least 45 days after 

notice of receipt of a completed 

application, to receive and consider 

public comments. 

(2) CMS may expedite this process 

under the exception to the normal 

public notice process provisions in 

§ 431.416(g) of this subpart. 

(f) Administrative record. (1) CMS 

will maintain, and publish on its public 

Web site, an administrative record that 

may include, but is not limited to the 

following: 

(i) The demonstration application 

from the State. 

(ii) The State’s disaster exemption 

request and CMS’ response, if 

applicable. 

(iii) Written public comments sent to 

the CMS and any CMS responses. 

(iv) If an application is approved, the 

final special terms and conditions, 

waivers, expenditure authorities, and 

award letter sent to the State. 

(v) If an application is denied, the 

disapproval letter sent to the State. 

(vi) The State acceptance letter, as 

applicable. 

(vii) Specific requirements related to 

the approved and agreed upon terms 

and conditions, such as implementation 

reviews, evaluation design, quarterly 

progress reports, annual reports, and 

interim and/or final evaluation reports. 


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(viii) Notice of the demonstration’s 

suspension or termination, if applicable. 

(2) To ensure that the public has 

access to all documentation related to 

the demonstration project, including the 

aforementioned items, we will also 

provide a link to the State’s public Web 

site. 

(g) Exemption from the normal public 

notice process. (1) CMS may waive, in 

whole or in part, the Federal and State 

public notice procedures to expedite a 

decision on a proposed demonstration 

or demonstration extension request that 

addresses a natural disaster, public 

health emergency, or other sudden 

emergency threats to human lives. 

(2) The Secretary may exempt a State 

from the normal public notice process 

or the required time constraints 

imposed in this section or § 431.408(a) 

of this subpart when the State 

demonstrates to CMS the existence of 

unforeseen circumstances resulting from 

a natural disaster, public health 

emergency, or other sudden emergency 

that directly threatens human lives that 

warrant an exception to the normal 

public notice process. 

(i) The State is expected to discharge 

its basic responsibilities in submitting 

demonstration applications to the 

Secretary as required in § 431.412 of this 

subpart. 

(ii) Such applications will be posted 

on the CMS Web site. 

(3) A State must establish (or meet) all 

of the following criteria to obtain such 

an exemption from the normal public 

notice process requirements: 

(i) The State acted in good faith, and 

in a diligent, timely, and prudent 

manner. 

(ii) The circumstances constitute an 

emergency and could not have been 

reasonably foreseen. 

(iii) Delay would undermine or 

compromise the purpose of the 

demonstration and be contrary to the 

interests of beneficiaries. 

(4) CMS will publish on its Web site 

any disaster exemption determinations 

within 15 days of approval, as well as 

the revised timeline for public comment 

or post-award processes, if applicable. 

§ 431.420 Monitoring and compliance. 

(a) General. (1) Any provision of the 

Social Security Act that is not expressly 

waived by CMS in its approval of the 

demonstration project are not waived, 

and States may not stop compliance 

with any of these provisions not 

expressly waived. Waivers may be 

limited in scope to the extent necessary 

to achieve a particular purpose or to the 

extent of a particular regulatory 

requirement implementing the statutory 

provision. 

(2) States must comply with the terms 

and conditions of the agreement 

between the Secretary and the State to 

implement a State demonstration 

project. 

(b) Implementation reviews. (1) The 

terms and conditions will provide that 

the State will perform periodic reviews 

of the implementation of the 

demonstration. 

(2) CMS will review documented 

complaints that a State is failing to 

comply with requirements specified in 

the special terms and conditions and 

implementing waivers of any approved 

demonstration. 

(3) CMS will promptly share with the 

State complaints that CMS has received 

and will also provide notification of any 

applicable monitoring and compliance 

issues. 

(c) Post award. Within 6 months after 

the implementation date of the 

demonstration and annually thereafter, 

the State must hold a public forum— 

(1) To solicit comments on the 

progress of a demonstration project. 

(2) At which members of the public 

have an opportunity to provide 

comments and in such time as to 

include a summary of the forum in the 

quarterly report associated with the 

quarter in which the forum was held, as 

well as in its annual report to CMS. 

(3) The public forum to solicit 

feedback on the progress of a 

demonstration project must occur using 

one of the following: 

(i) A Medical Care Advisory 

Committee that operates in accordance 

with § 431.412 of this subpart. 

(ii) A commission or other similar 

process, where meetings are open to 

members of the public, and would 

afford an interested party the 

opportunity to learn about the 

demonstration’s progress. 

(iii) The State must publish the date, 

time, and location of the public forum 

in a prominent location on the State’s 

public Web site, at least 30 days prior 

to the date of the planned public forum. 

(4) [Reserved] 

(d) Terminations and suspensions. (1) 

The Secretary may suspend or terminate 

a demonstration in whole or in part, any 

time before the date of expiration, 

whenever it determines that the State 

has materially failed to comply with the 

terms of the demonstration project. 

(2) The Secretary may also withdraw 

waivers or expenditure authorities 

based on a finding that the 

demonstration project is not likely to 

achieve the statutory purposes. 

(3) The terms and conditions for the 

demonstration will detail any notice 

and appeal rights for the State for a 

termination, suspension or withdrawal 

of waivers or expenditure authorities. 

(e) Closeout costs. When a 

demonstration is terminated, 

suspended, or if waivers or expenditure 

authority are withdrawn, Federal 

funding is limited to normal closeout 

costs associated with an orderly 

termination of the demonstration or 

expenditure authority, including service 

costs during any approved transition 

period, and administrative costs of 

disenrolling participants. 

(f) Federal evaluators. (1) The State 

must fully cooperate with CMS or an 

independent evaluator selected by CMS 

to undertake an independent evaluation 

of any component of the demonstration. 

(2) The State must submit all 

requested data and information to CMS 

or the independent evaluator. 

§ 431.424 Evaluation requirements. 

(a) General. States are permitted and 

encouraged to use a range of appropriate 

evaluation strategies (including 

experimental and other quantitative and 

qualitative designs) in the application of 

evaluation techniques with the approval 

of CMS. 

(b) Demonstration evaluations. 

Demonstration evaluations will include 

the following: 

(1) Quantitative research methods. 

(i) These methods involve the empirical 

investigation of the impact of key 

programmatic features of the 

demonstration. 

(ii) CMS will consider alternative 

evaluation designs when quantitative 

designs are technically infeasible or not 

well suited to the change made by the 

demonstration. 

(2) Approaches that minimize 

beneficiary impact. The evaluation 

process must minimize burden on 

beneficiaries and protect their privacy 

in terms of implementing and operating 

the policy approach to be demonstrated 

while ensuring the impact of the 

demonstration is measured. 

(c) Evaluation design plan. (1) The 

State will submit and receive CMS 

approval of a design for an evaluation of 

the demonstration project and publish 

this document to the State’s public Web 

site within 30 days of CMS approval. 

(2) The draft demonstration 

evaluation design must include all of 

the following: 

(i) A discussion of the demonstration 

hypotheses that are being tested 

including monitoring and reporting on 

the progress towards the expected 

outcomes. 

(ii) The data that will be utilized and 

the baseline value for each measure. 

(iii) The methods of data collection. 

(iv) A description of how the effects 

of the demonstration will be isolated 


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from those other changes occurring in 

the State at the same time through the 

use of comparison or control groups to 

identify the impact of significant aspects 

of the demonstration. 

(v) A proposed date by which a final 

report on findings from evaluation 

activities conducted under the 

evaluation plan must be submitted to 

CMS. 

(vi) Any other information pertinent 

to the State’s research on the policy 

operations of the demonstration 

operations. 

(d) Evaluations for demonstration 

extensions. (1) In the event that the State 

requests to extend the demonstration 

beyond the current approval period 

under the authority of section 1115(a), 

(e), or (f) of the Act, the State must 

submit an interim evaluation report as 

part of the State’s request for a 

subsequent renewal of the 

demonstration. 

(2) State evaluations must be 

published on the State’s public Web site 

within 30 days of submission to CMS. 

(e) Approved evaluation designs. The 

State must publish the CMS-approved 

demonstration evaluation design on the 

State’s public Web site within 30 days 

of CMS approval. 

(f) Federal evaluations. The State 

must comply with all requirements set 

forth in this subpart. 

(g) Federal public notice. CMS will 

post, or provide a link to the State’s 

public Web site, all evaluation 

materials, including research and data 

collection, on its Web site for purposes 

of sharing findings with the public 

within 30 days of receipt of materials. 

§ 431.428 Reporting requirements. 

(a) Annual reports. The State must 

submit an annual report to CMS 

documenting all of the following: 

(1) Any policy or administrative 

difficulties in the operation of the 

demonstration. 

(2) The status of the health care 

delivery system under the 

demonstration with respect to issues 

and/or complaints identified by 

beneficiaries. 

(3) The impact of the demonstration 

in providing insurance coverage to 

beneficiaries and uninsured 

populations. 

(4) Outcomes of care, quality of care, 

cost of care and access to care for 

demonstration populations. 

(5) The results of beneficiary 

satisfaction surveys, if conducted during 

the reporting year, grievances and 

appeals. 

(6) The existence or results of any 

audits, investigations or lawsuits that 

impact the demonstration. 

(7) The financial performance of the 

demonstration. 

(8) The status of the evaluation and 

information regarding progress in 

achieving demonstration evaluation 

criteria. 

(9) Any State legislative developments 

that may impact the demonstration. 

(10) The results/impact of any 

demonstration programmatic area 

defined by CMS that is unique to the 

demonstration design or evaluation 

hypothesis. 

(11) A summary of the annual postaward public forum, including all 

public comments received regarding the 

progress of the demonstration project. 

(b) Submitting and publishing annual 

reports. States must submit a draft 

annual report to CMS no later than 90 

days after the end of each demonstration 

year, or as specified in the 

demonstration’s STCs. The State must 

publish its draft annual report on its 

public Web site within 30 days of 

submission to CMS. 

(1) Within 60 days of receipt of 

comments from CMS, the State must 

submit to CMS the final annual report 

for the demonstration year. 

(2) The final annual report is to be 

published on the State’s public Web site 

within 30 days of approval by CMS. 

Authority: Catalog of Federal Domestic 

Assistance Program No. 93.778, Medical 

Assistance Program. 

Dated: March 9, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: July 15, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–4354 Filed 2–22–12; 11:15 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF THE TREASURY 

31 CFR Part 33 

RIN 1505–AC30 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 155 

[CMS–9987–F] 

RIN 0938–AQ75 

Application, Review, and Reporting 

Process for Waivers for State 

Innovation 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS; 

Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: This final rule sets forth a 

procedural framework for submission 

and review of initial applications for a 

Waiver for State Innovation described in 

section 1332 of the Patient Protection 

and the Affordable Care Act including 

processes to ensure opportunities for 

public input in the development of such 

applications by States and in the 

Federal review of the applications. 

DATES: These regulations are effective 

on April 27, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Department of the Treasury: Cameron 

Arterton, (202) 622–0044. 

Centers for Medicare & Medicaid 

Services: Ben Walker, (301) 492–4430. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary: 

A. Purpose of the Regulatory Action 

Section 1332(a)(4)(B) of the Patient 

Protection and Affordable Care Act (the 

Affordable Care Act) (Pub. L. 111–148, 

enacted on March 23, 2010), requires 

the Secretary of Health and Human 

Services (HHS) and the Secretary of the 

Treasury (the Secretaries) to issue 

regulations regarding procedures for 

Waivers for State Innovation under 

section 1332 of the Affordable Care Act. 

On March 14, 2011, the Secretaries 

published proposed rules to satisfy this 

requirement. This finalizes those 

proposed rules. 

B. Summary of the Major Provisions of 

the Regulatory Action in Question 

These final rules make a small 

number of changes to the proposed rules 

based on comments received from the 

public. We have removed a requirement 

for applications to be submitted in 

printed format, to reduce administrative 

burden. We have clarified that evidence 

of the State public notice and comment 

must include, ‘‘a description of the key 

issues raised * * *’’ during such 

period, to provide the Secretaries with 

a summary of public consultation to 

date. We have added a provision to 

specify that States must submit waiver 

applications sufficiently in advance of 

the requested effective date to ensure 

that an appropriate amount of time is 

available for implementation if the 

waiver is approved. We have also added 

a provision to specify that a complete 

application must include an 

implementation timeline, to facilitate an 

analysis by States and the Secretaries 

regarding the feasibility of the proposed 

implementation schedule. We have also 

clarified that a State does not have to 

enact a new law in support of a section 

1332 waiver if the State already has a 


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