Vol. 77 Tuesday, 

No. 215 November 6, 2012 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 438, 441 and 447 

Medicaid Program; Payments for Services Furnished by Certain Primary 

Care Physicians and Charges for Vaccine Administration Under the 

Vaccines for Children Program; Final Rule 


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66670 Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 438, 441, and 447 

[CMS–2370–F] 

RIN 0938–AQ63 

Medicaid Program; Payments for 

Services Furnished by Certain Primary 

Care Physicians and Charges for 

Vaccine Administration Under the 

Vaccines for Children Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements 

Medicaid payment for primary care 

services furnished by certain physicians 

in calendar years (CYs) 2013 and 2014 

at rates not less than the Medicare rates 

in effect in those CYs or, if greater, the 

payment rates that would be applicable 

in those CYs using the CY 2009 

Medicare physician fee schedule 

conversion factor. This minimum 

payment level applies to specified 

primary care services furnished by a 

physician with a specialty designation 

of family medicine, general internal 

medicine, or pediatric medicine, and 

also applies to services rendered by 

these provider types paid by Medicaid 

managed care plans contracted by states 

to provide the primary care services. It 

also provides for 100 percent federal 

financial participation (FFP) for any 

increase in payment above the amounts 

that would be due for these services 

under the provisions of the approved 

Medicaid state plan, as of July 1, 2009. 

In other words, there will not be any 

additional cost to states for payments 

above the amount required by the 2009 

rate methodology. In this final rule, we 

specify which services and types of 

physicians qualify for the minimum 

payment level in CYs 2013 and 2014, 

and the method for calculating the 

payment amount and any increase for 

which increased federal funding is due. 

In addition, this final rule will update 

the interim regional maximum fees that 

providers may charge for the 

administration of pediatric vaccines to 

federally vaccine-eligible children 

under the Pediatric Immunization 

Distribution Program, more commonly 

known as the Vaccines for Children 

(VFC) program. 

DATES: The provisions of this final rule 

are effective on January 1, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Mary Cieslicki, (410) 786–4576, or 

Linda Tavener, (410) 786–3838, for 

issues related to payments for primary 

care physicians. 

Mary Beth Hance, (410) 786–4299, for 

issues related to charges for the 

administration of pediatric vaccines. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose 

This final rule implements sections 

1902(a)(13), 1902(jj), 1905(dd) and 

1932(f) of the Social Security Act 

directing payment by state Medicaid 

agencies of at least the Medicare rates in 

effect in CYs 2013 and 2014 or, if 

higher, the rate using the CY 2009 

conversion factor (CF) for primary care 

services furnished by a physician with 

a specialty designation of family 

medicine, general internal medicine, or 

pediatric medicine. Also, this final rule 

implements the statutory payment 

provisions uniformly across all states 

and defines, for purposes of enhanced 

federal match, eligible primary care 

physicians, identifies eligible primary 

care services, and specifies how the 

increased payment should be 

calculated. Finally, this rule provides 

general guidelines for implementing the 

increased payment for primary care 

services delivered by managed care 

plans. 

This final rule also provides updates 

to vaccine rates that have not been 

updated since the VFC program was 

established in 1994. 

2. Summary of the Major Provisions 

a. Payments to Physicians for Primary 

Care Services 

This final rule will implement 

Medicaid payment for primary care 

services furnished by certain physicians 

in calendar years (CYs) 2013 and 2014 

at rates not less than the Medicare rates 

in effect in those CYs or, if greater, the 

payment rates that will be applicable in 

those CYs using the CY 2009 conversion 

factor (CF). It will also provide for a 100 

percent federal matching rate for any 

increase in payment above the amounts 

that were due for these services under 

the provisions of the state plan as of July 

1, 2009. In other words, there will not 

be any additional cost to states for 

payments above the amount required by 

the 2009 rate methodology. 

b. Vaccine Administration Under the 

Vaccines for Children (VFC) Program 

This final rule updates the regional 

maximum fees that providers may 

charge for the administration of 

pediatric vaccines to federally vaccineeligible children under the Pediatric 

Immunization Distribution Program, 

more commonly known as the Vaccines 

for Children (VFC) program. The 

formula used to determine the updated 

rates used the Medicare Economic Index 

(MEI) which is a price index used by 

CMS as part of the updates to Medicare 

physician payments. We believe the 

MEI is the best tool to update these rates 

because: (1) It reflects input price 

inflation faced by physicians inclusive 

of the time period when the national 

average was established in 1994; and (2) 

we believe that input prices associated 

with this specific type of physicianprovided service are consistent with 

overall input prices. The MEI was most 

recently updated at the end of 2011. 

3. Summary of the Costs and Benefits 

Provision description Total costs Total benefits 

Payments to Physicians 

for Primary Care 

Services.

The overall economic impact of this final rule is an estimated $5.600 

billion in CY 2013 and $5.745 billion in CY 2014 (in constant 2012 

dollars). In CY 2013, the federal cost for Medicaid and CHIP is approximately $5.835 billion with $235 million in state savings. In CY 

2014, the federal cost for Medicaid and CHIP is approximately 

$6.055 billion with $310 million in state savings. The associated 

impact of this final rule requiring states to reimburse specified physicians for vaccine administration at the lesser of the Medicare rate 

or the VFC regional maximum during CYs 2013 and 2014, is estimated at an additional $975 million in federal costs. Specifically, 

this reflects federal costs for CYs 2013 and 2014 of $495 million 

and $480 million, respectively.

The overall benefit of this rule is the expected 

increase in provider participation by primary 

care physicians resulting in better access to 

primary and preventive health services by 

Medicaid beneficiaries. 


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Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 66671 

Provision description Total costs Total benefits 

Increase in Vaccines for 

Children Program 

Maximum Administration Fee.

This rule updates the maximum rate that states could pay providers 

for the administration of vaccines under the VFC program in years 

after CY 2014. While states have the flexibility to raise their VFC 

ceilings up to the new regional maximum administration fee, they 

are not anticipated to do so in 2013 and 2014 because of the implementation of the primary care payment increase.

The overall benefit of this provision is that it 

gives states the ability to increase their 

VFC vaccine administration rates. We expect that this increase will help maintain 

provider participation in the VFC program. 

If all states were to increase their reimbursement rates to the updated maximum administration fee, it is estimated that the total 

economic impact would be $75 million per year. 

B. Background 

1. Payments to Physicians for Primary 

Care Services: Statutory and Regulatory 

Framework 

a. Improving Primary Care 

On March 23, 2010, the Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148) was enacted and on 

March 30, 2010, the Health Care and 

Education Reconciliation Act of 2010 

(HCERA) (Pub. L. 111–152) was enacted; 

together they are known as the 

Affordable Care Act. This final rule will 

implement sections 1902(a)(13), 

1902(jj), 1932(f), and 1905(dd) of the 

Social Security Act, as amended by the 

Affordable Care Act. Section 1902(a)(13) 

of the Act requires payment by state 

Medicaid agencies of at least the 

Medicare rates in effect in calendar 

years (CYs) 2013 and 2014 or, if higher, 

the rate that will be applicable using the 

CY 2009 Medicare conversion factor 

(CF), for primary care services furnished 

by a physician with a specialty 

designation of family medicine, general 

internal medicine, or pediatric 

medicine. 

Primary care for any population is 

critical to ensuring continuity of care, as 

well as to providing necessary 

preventive care, which improves overall 

health and can reduce health care costs. 

The availability of primary care is 

particularly important for Medicaid 

beneficiaries, to establish a regular 

source of care and to provide services to 

a group that is more prone to chronic 

health conditions that can be 

appropriately managed by primary care 

physicians. Primary care physicians 

provide services that are considered to 

be a core part of a state’s Medicaid 

benefit package. Additionally, these 

physicians can perform the vital 

function of coordinating care, including 

specialty care. 

As we move towards CY 2014 and the 

expansion of Medicaid eligibility, it is 

critical that a sufficient number of 

primary care physicians participate in 

the Medicaid program. Section 

1902(a)(13) of the Act is intended to 

encourage primary care physicians to 

participate in Medicaid by increasing 

payment rates in CYs 2013 and 2014. 

b. Medicaid Payment to Providers 

Section 1902(a)(30)(A) of the Act 

requires that Medicaid payments be 

consistent with efficiency, economy, 

and quality of care and be sufficient to 

enlist enough providers so that care and 

services are available under the plan at 

least to the extent that such care and 

services are available to the general 

population in the geographic area. In 

meeting these requirements, states have 

broad discretion in establishing and 

updating Medicaid service payment 

rates to primary care providers. For 

instance, many states reimburse based 

on the cost of providing the service, a 

review of the amount paid by 

commercial payers in the private 

market, or as a percentage of rates paid 

under the Medicare program for 

equivalent services. States may update 

rates based on specific trending factors 

such as the MEI or a Medicaid specific 

trend factor that incorporates a statedetermined inflation adjustment rate. 

Increasingly, states are providing a 

range of Medicaid services through 

managed care plans under contracts 

with managed care organizations 

(MCOs) and other organized delivery 

systems, such as prepaid inpatient 

health plans (PIHPs) and prepaid 

ambulatory health plans (PAHPs). 

According to the Medicaid and CHIP 

Payment and Access Commission 

(MACPAC), 49 million Medicaid 

beneficiaries receive services through 

some form of Medicaid managed care. 

The contract between the state and the 

managed care plan requires the plan to 

provide access to and make payments to 

primary care physicians using the funds 

the state pays to the managed care plan. 

Section 1902(a)(13)(C) of the Act 

requires that states pay a minimum 

payment amount for certain primary 

care services delivered by designated 

primary care physicians. Primary care 

services are defined in new section 

1902(jj) of the Act and include certain 

specified procedure codes for evaluation 

and management (E&M) services and 

certain vaccine administration codes. 

Under this provision, states must 

reimburse at least as much as the 

Medicare physician fee schedule 

(MPFS) rate in CYs 2013 and 2014 or, 

if greater, the payment rate that will 

apply using the CY 2009 Medicare CF. 

The directive for payment at the 

Medicare rate extends to primary care 

services paid on a fee-for-service (FFS) 

basis, as well as to those paid on a 

capitated or other basis by Medicaid 

managed care plans. This regulation 

will specify which services and 

physicians qualify for the increased 

payment amount in CYs 2013 and 2014, 

and the method for calculating that 

payment. 

Section 1905(dd) of the Act provides 

for higher FFP for the required increase 

in physician payment for services 

provided on a fee for service basis and 

through managed care arrangements. 

The FFP rate will be 100 percent for the 

difference between the Medicaid state 

plan rate in effect on July 1, 2009, and 

the amount required to be paid under 

section 1902(a)(13)(C) of the Act, or by 

application, under section 1932(f). That 

means that, unless a state has reduced 

its rates since 2009, it will be fully 

reimbursed for these increased 

payments by the federal government. 

One goal of this rule is to define the 

payment provisions further so that 

states may uniformly identify the rate 

differential. Specifically, we proposed a 

payment methodology that took into 

account potential changes in Medicare 

rates between CYs 2013 and 2014 and 

CY 2009 that is independent of the 

legislatively required payment 

reductions caused by Medicare’s 

sustainable growth rate mechanism. 

Furthermore, this final rule will address 

Medicare’s use of different fee schedules 

that take into account the site of service 

(for example, physician’s office, or 

outpatient department of a hospital) and 

geographical location of the provider. 

The Affordable Care Act amended 

section 1932(f) of the Act to clarify that 

states must incorporate the requirement 

for increased payment to primary care 

providers into contracts with managed 

care organizations. We proposed general 

guidelines for states to follow when 


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identifying the amounts by which MCOs 

must increase existing payments to 

primary care providers, and any 

additional capitation costs to the state 

attributable to such required increases 

in existing payments. We also proposed 

to extend this same treatment to PIHPs 

and PAHPs through regulations at part 

438, to the extent that primary care 

provider payments are made by these 

entities. 

We solicited comments on how best 

to implement through regulation the 

provision that managed care plans pay 

primary care providers at the Medicare 

rate for primary care services, consistent 

with those paid on a FFS basis. 

Additionally, we solicited comments 

from states and other stakeholders on 

the best way to adequately identify the 

increase in managed care capitation 

payments made by the state that is 

attributable to the increased provider 

payment, for the purpose of claiming 

100 percent FFP. We were particularly 

interested in ensuring that primary care 

physicians receive the benefit of the 

increased payment. Section 1932(f) of 

the Act, as amended by the Affordable 

Care Act, requires that the managed care 

contracts pay providers at the applicable 

Medicare rate levels. We proposed to 

review managed care contracts to ensure 

that this requirement is imposed on 

managed care plans by the state. We 

also proposed to require managed care 

plans to report to the state the payments 

made to physicians under this provision 

to justify any adjustments to the 

capitation rates paid by the state under 

the contract. In proposing this approach, 

we were mindful of balancing the need 

for adequate documentation of the 

payment with the administrative burden 

it places on states and managed care 

plans. We requested comment on these 

provisions and additional suggestions 

on how to ensure that managed care 

plans provide the necessary data to the 

state, as well as how to ensure and 

monitor that managed care plans 

appropriately pass on to physicians the 

portion of the increased capitation rate 

that is attributable to the primary care 

rate increase. 

This final rule also addresses 

identification of the rate differential 

eligible for 100 percent federal matching 

funds for vaccine administration, as set 

forth in section 1905(dd) of the Act. In 

2011, the vaccine administration billing 

codes were changed so it is not possible 

to track the Medicaid state plan rate in 

CY 2009 directly to the rates applicable 

in CYs 2013 and 2014. We requested 

comment on our proposal for imputing 

the CY 2009 rate. 

c. Medicare Payment to Primary Care 

Providers 

Medicare provides health insurance 

coverage to people who are aged 65 and 

over, people with disabilities or people 

who meet other special criteria, under 

title XVIII of the Act. For institutional 

care, such as hospital and nursing home 

care, Medicare makes payments to 

providers using prospective payment 

systems. Payment for physicians’ 

services under Medicare is based on the 

MPFS. The MPFS assigns relative value 

units (RVUs) for each procedure, as well 

as geographic practice cost indices 

(GPCIs) for geographic variations in 

payments, and a global CF, which 

converts relative value units (RVUs) into 

dollars. Individual fee schedule 

amounts for the MPFS are the product 

of the geographic adjustment, RVUs, 

and CF. Site of service (for example, 

physician office or outpatient hospital) 

is reflected as an adjustment to the 

RVUs. We generally issue the MPFS 

final rule for the subsequent calendar 

year on or before November 1st each 

year. The MPFS final rule includes the 

RVUs and CF for the upcoming calendar 

year, which permits the calculation of 

rates. Updates may occur throughout the 

year, but normally occur quarterly. 

2. Vaccine Administration Under the 

Vaccines for Children (VFC) Program 

The Omnibus Budget Reconciliation 

Act of 1993 (OBRA 1993), (Pub. L. 103– 

66), created the Vaccines for Children 

(VFC) Program, which became effective 

October 1, 1994. Section 13631 of OBRA 

1993 added section 1902(a)(62) to the 

Act to require that states provide for a 

program for the purchase and 

distribution of pediatric vaccines to 

program-registered providers for the 

immunization of vaccine-eligible 

children in accordance with section 

1928 of the Act. Section 1928 of the Act 

requires each state to establish a VFC 

Program (which may be administered by 

the state Department of Health) under 

which certain specified groups of 

children are entitled to receive qualified 

pediatric immunizations without charge 

for the cost of the vaccine. 

Under the VFC Program, a provider, 

in administering a qualified pediatric 

vaccine to a federally vaccine-eligible 

child, may not impose a charge for the 

cost of the vaccine. Section 

1928(c)(2)(C)(ii) of the Act allows a 

provider to impose a fee for the 

administration of a qualified pediatric 

vaccine as long as the fee, in the case 

of a federally vaccine-eligible child, 

does not exceed the costs of such 

administration (as determined by the 

Secretary based on actual regional costs 

for such administration). However, a 

provider may not deny administration 

of a qualified pediatric vaccine to a 

vaccine-eligible child due to the 

inability of the child’s parents or legal 

guardian to pay the administration fee. 

This regulation updates the 

administration fee for the first time 

since the VFC program began in 1994. 

We requested comments on the 

methodology used to calculate the 

administration fee update as well as the 

impact of the updated administration 

fee on uninsured and underinsured 

VFC-eligible children. 

II. Summary of Proposed Provisions 

and Analysis of and Response to Public 

Comments 

On May 11, 2012, we published a 

proposed rule (77 FR 27671) in the 

Federal Register entitled ‘‘Medicaid 

Program; Payments for Services 

Furnished by Certain Primary Care 

Physicians and Charges for Vaccine 

Administration under the Vaccines for 

Children Program.’’ 

We received a total of 171 comments 

from states, advocacy groups, health 

care providers, employers, health 

insurers, health care associations, as 

well as individual citizens. The 

comments ranged from general support 

for the proposed provisions to specific 

questions or comments regarding the 

proposed changes. 

The following are brief summaries of 

each proposed provision, summaries of 

the public comments received, and our 

responses to those public comments: 

General Comments 

Comment: Several commenters 

questioned whether the provisions of 

this rule apply to services paid under 

the Children’s Health Insurance 

Program (CHIP). CHIP programs can be 

structured as expansions of the state’s 

Medicaid program, as separate CHIP 

programs, or as a combination of a 

Medicaid expansion program and a 

separate CHIP program. 

Response: The statute applies to fee 

for service and managed care payments 

made for services provided to Medicaid 

beneficiaries. Therefore, this rule 

applies only to CHIP Medicaid 

expansion programs since beneficiaries 

in such programs are Medicaid-eligible. 

CHIP stand-alone programs are not 

eligible for 100 percent FFP and 

physicians providing services to 

children in those programs are not 

eligible for higher payment at the 

Medicare rate by operation of these 

rules. At state option, states may align 

their CHIP payment rates for primary 

care providers with these Medicaid 

payment provisions. 


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Comment: Many commenters 

suggested that the rule be modified to 

specifically require that states collect 

and report to CMS data that would help 

the Congress determine whether or not 

to extend the provision beyond 2014. 

Response: We agree and have revised 

§ 447.400(d) accordingly, as described 

below. 

Comment: Many commenters believe 

that the budget impact estimates 

underestimate the time and resources 

for states to undertake the significant 

coding and related systems work, 

conduct the necessary analyses and 

develop policies, implement the 

regulation as part of regular operations 

and maintain compliance with the 

regulation as proposed in the proposed 

rule. 

Response: We are sensitive to state 

concerns about the difficulty of 

implementing some of the provisions of 

the proposed rule and have modified 

this final rule to limit the administrative 

burden on states to the extent possible. 

We will also provide technical 

assistance to states as they implement 

the requirements of this rule to help 

minimize the administrative burden. 

Comment: Several commenters stated 

that the proposed rule is contrary to 

current state and federal efforts to 

incentivize the entire health care 

delivery system to move away from 

volume-based reimbursement and 

would force states to relinquish savings 

in Medicaid efficiencies that have 

already been put into place. One 

commenter disagreed with our 

determination that each individual 

service code must be reimbursed at the 

Medicare payment level and believed 

that states should be permitted to 

increase total payments in the aggregate, 

with flexibility to determine how those 

payments are distributed. The 

commenter recommended that, at a 

minimum, a value-based option for 

implementing the increase be added to 

the final rule. Several commenters 

suggested that the final rule permit 

states to develop methodologies to 

calculate the aggregate value of the 

primary care rate increase across all 

qualified providers and services and to 

use non fee for service payment 

mechanisms to deliver that aggregate 

increase equitably to eligible providers. 

Response: The statute requires that 

state plans provide for ‘‘payment for 

primary care services * * * at a rate not 

less than 100 percent of the payment 

rate that applies to such services and 

physicians under part B of title XVIII 

* * *’’ Since the Medicare payment 

rate reimburses services individually, 

we continue to believe that this 

language precludes aggregated payments 

not specific to the service and 

physician. However, this does not 

preclude states from creating incentive 

payments or penalties based on 

performance measures. While we 

believe the Congress intended the 

payment levels to rise to Medicare 

payments, there is no prohibition on 

states having incentives/penalties 

external to the rates under traditional 

fee-for-service or managed care delivery 

systems. 

Comment: One commenter asked 

about the applicability of the rule to 

services provided under section 1115 

demonstration waivers. 

Response: This final rule implements 

the statutory payment provisions 

uniformly across the states regardless of 

the authority under which a state’s 

Medicaid program operates. Specified 

primary care services delivered by 

eligible primary care physicians must be 

reimbursed at the enhanced rate. We 

intend to continue a dialogue with 

states with waivers through the 

implementation process. 

A. Payments to Physicians for Primary 

Care Services 

1. Primary Care Services Furnished by 

Physicians With Specified Specialty and 

Subspecialty (§ 447.400) 

a. Specified Specialties and 

Subspecialties 

Section 1902(a)(13)(C) of the Act 

specifies that physicians with a 

specialty designation of family 

medicine, general internal medicine, 

and pediatric medicine qualify as 

primary care providers for purposes of 

increased payment. We proposed that 

services provided by subspecialists 

within the primary care categories 

designated in the statute would also 

qualify for higher payment. These 

subspecialists would be recognized in 

accordance with the American Board of 

Medical Specialties (ABMS) 

designations. For example, a pediatric 

cardiologist would qualify for payment 

if he or she rendered one of the 

specified primary care services by virtue 

of that physician’s subspecialty within 

the qualifying specialty of pediatric 

medicine. Additionally, we proposed a 

method for states to use in identifying 

practitioners who may receive the 

increased payment. 

Under the proposed rule, states were 

required to establish a system to require 

physicians to identify to the Medicaid 

agency their specialty or subspecialty 

before an increased payment was made. 

For program integrity purposes, the state 

would be required to confirm the selfattestation of the physician before 

paying claims from that provider at the 

higher Medicare rate. We proposed that 

this be done either by verifying that the 

physician was Board certified in an 

eligible specialty or subspecialty or 

through a review of a physician’s 

practice characteristics. 

Specifically, for a physician who 

attested that he or she was an eligible 

primary care specialist or subspecialist 

but who was not Board certified 

(including those who are Board-eligible, 

but not certified), we required that a 

review of the physician’s billing history 

be performed by the Medicaid agency. 

We proposed that at least 60 percent of 

the codes billed by the physician for all 

of CY 2012 be for the E&M codes and 

vaccine administration codes specified 

in this regulation. For a new physician 

who enrolled during either CY 2013 or 

CY 2014 and who attested that he or she 

was within one of the eligible 

specialties or subspecialties and who 

was not Board certified we proposed 

that, following the end of the CY in 

which enrollment occurs, the state 

would review the physician’s billing 

history to confirm that 60 percent of 

codes billed during the CY of 

enrollment were for primary care 

services eligible for payment under 

sections 1902(a)(13)(C) and 1902(jj) of 

the Act. 

Comment: Most commenters 

supported the inclusion of 

subspecialists. However, some 

commenters requested that CMS permit 

payment for subspecialists recognized 

by Boards outside of the ABMS, 

pointing out that other Boards are just 

as relevant. In particular, commenters 

noted that osteopaths, who are 

recognized as physicians under 

Medicaid regulations, are licensed by 

their own specialty Board and are 

excluded under the provisions of the 

proposed rule. 

Response: We agree and have revised 

the rule to include physicians 

recognized by the American Board of 

Physician Specialties (ABPS) and the 

American Osteopathic Association 

(AOA), as well as the American Board 

of Medical Specialties. These are the 

major, nationally recognized physician 

Boards. 

Comment: Many commenters 

disagreed with the inclusion of 

subspecialists. The commenters stated 

that the proposed rule would create 

disincentives for delivery of primary 

care services in the most appropriate 

settings, and posed a ‘‘threat’’ with 

regard to states’ ability to meet the 

statutory requirements of section 

1902(a)(30) of the Act, which requires 

that payments under the state plan be 

consistent with economy, efficiency and 

quality of care. The commenters stated 


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that the proposal would add 44 

additional specialty designations to the 

list of physicians eligible to receive 

higher payments without a ‘‘rational’’ 

correlation to the subspecialists that do, 

or that might as a result of the 

temporary payment increase, deliver 

primary care. Commenters believed that 

this provision of the proposed rule 

would actually work against an 

expansion in true primary care. 

One commenter stated that states will 

not be able to sustain increased payment 

after 2014 because the proposed rule 

would result in payments that are so 

widely distributed across the delivery 

system as to make the impact of the 

increase extremely difficult to evaluate. 

This, in turn, would hamper states’ 

ability to demonstrate cost savings 

necessary to gain approval from their 

legislatures for continued higher 

payment. 

One commenter noted that CMS said 

it was particularly swayed by arguments 

that pediatric subspecialists provide 

primary care services in deciding to 

extend higher payment to all 

subspecialists. The commenter believes 

that the absence of a justification for 

including subspecialists does not lead to 

the conclusion that all subspecialists 

should be included. Rather, the decision 

to expand to other subspecialists should 

be based on an analysis of whether 

increasing payment rates is likely to 

improve access to primary care services 

for Medicaid beneficiaries. Since states 

are in the best position to make that 

assessment, the commenter urged CMS 

to permit states the flexibility to 

determine which approach best meets 

the needs of its beneficiaries. 

Several commenters were concerned 

that including subspecialists will add 

‘‘unwarranted’’ costs. The commenters 

encouraged CMS ‘‘to adhere more 

closely to the intent of the law and only 

qualify true primary care physicians for 

this increased payment.’’ Several stated 

that the regulation exceeds the authority 

granted in the Affordable Care Act, 

which they believed limits the 

categories of providers to physicians 

with specialty designations of family 

medicine, general internal medicine, or 

pediatric medicine. 

Response: We continue to believe that 

the statute supports inclusion of 

subspecialists related to the three 

specialty categories designated in the 

statute and disagree that extending 

payments to subspecialists will dilute 

the impact of the regulation on 

Medicaid beneficiary access to primary 

care or result in ‘‘unwarranted’’ costs. 

The American Academy of Pediatrics 

cited the importance of pediatric 

subspecialists, particularly 

neonatologists, as a source of primary 

care services. The Web site of the 

American Academy of Family 

Physicians notes that primary care 

services can be delivered outside an 

office setting and that physicians who 

are not trained in the primary care 

specialties of family medicine, general 

internal medicine or general pediatrics 

may sometimes provide patient care 

services that are usually delivered by 

primary care physicians. This rule only 

provides for higher payment to 

subspecialists to the degree that they 

actually furnish the E&M codes 

specified in the regulation and, 

consequently, will not result in costs 

that are for services that are not properly 

considered primary care. Therefore, we 

continue to believe that all 

subspecialists related to the three 

specialty categories designated in the 

statute should be eligible for higher 

payment to the extent that they provide 

covered E&M services. 

Comment: Other commenters 

indicated that the proposed rule, while 

properly recognizing E&M codes 

provided in emergency departments, 

unfairly excluded the majority of 

emergency physicians who are either 

not Board certified or are certified in 

emergency medicine. Other commenters 

urged that obstetricians and 

gynecologists (OB/GYNs) be included 

because of the important role they play 

in providing primary care to women. 

Response: The statute provides for 

higher payment of services furnished by 

‘‘a physician with a primary specialty 

designation of family medicine, general 

internal medicine or pediatric 

medicine.’’ Therefore, although we 

recognize the role that other specialty 

physicians play in providing primary 

care services, the authority does not 

exist to extend the payment to other 

categories of physicians, including OB/ 

GYNs. 

Comment: While some commenters 

strongly supported the proposed rule 

requirements that Medicaid agencies 

verify self-attestations with evidence of 

Board certification or practice history 

(60 percent of codes billed in a prior 

period were to be for E&M codes 

specified in the proposed rule), others 

cited both requirements as 

administratively burdensome and as 

requiring major and costly 

modifications to state processes and 

systems. They indicated that states have 

different enrollment and claims 

processing capacity and may not be able 

to identify all provider subspecialties or 

reimburse a different rate by 

subspecialty. Commenters suggested 

that states be permitted to use their 

existing enrollment processes, usually 

self-attestation alone, to identify which 

physicians qualify for payment, or to be 

permitted to use Medicare’s NPI 

designation, which is also based on selfattestation. One commenter suggested 

that self-attestation could be verified 

with a random audit by the Medicaid 

agency. 

Some commenters stated that 

permitting self-attestation to be verified 

with evidence of Board certification 

alone creates an inequity. This is 

because many traditional primary care 

providers who are not Board certified 

and do not reach the 60 percent 

threshold of E&M codes billed will be 

excluded from increased payment in 

favor of subspecialists who provide 

relatively few primary care services. 

One commenter disagreed with our 

decision to base the 60 percent claims 

verification threshold on the Medicare 

primary care incentive program 

threshold, stating that the Congress 

could have imposed a similar 

requirement on Medicaid, but did not. 

They do not believe it is appropriate to 

designate any threshold of claims 

verification. They also suggested 

permitting non-Board certified 

physicians to qualify if they completed 

an approved residency in any of the 

three designated primary care physician 

specialties. Other commenters suggested 

using allowed charges as the threshold 

to parallel the Medicare primary care 

payment or services paid, rather than 

billed, asserting that data on rejected 

claims is not readily available. 

One commenter suggested that states 

be permitted to define eligible 

physicians based on enrollment criteria 

for existing state primary care programs. 

Another commenter suggested that 

states be given flexibility to rely on 

methods that already exist within each 

state’s payment systems, such as 

requiring eligible providers to bill with 

a unique modifier. 

One commenter also asked that we 

clarify procedures for the identification 

of qualifying out-of-state providers, 

suggesting that the home state’s 

verification be used. 

Response: We agree that there is 

variation among states for provider 

enrollment procedures and Medicaid 

Management Information System 

(MMIS) capabilities. We acknowledge 

that many states have existing programs 

designed to increase the availability of 

primary care services and that those 

programs may differ from the provisions 

of the proposed rule. We also 

acknowledge that permitting selfattestation to be verified with evidence 

of Board certification alone creates an 

inequity in that Board certified 

physicians who provide few primary 


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care services will be eligible for higher 

payment while non-Board certified 

physicians who provide many primary 

care services but not enough to meet the 

60 percent threshold will be excluded. 

We continue to believe that there must 

be uniform, auditable standards for the 

identification of eligible physicians and 

that Board certification and claims 

history are appropriate standards. 

However, we acknowledge the concerns 

regarding the significant administrative 

burden of this requirement. Therefore, 

this rule removes the requirement that 

the State Medicaid agency verify the 

self-attestation of all physicians by 

confirming Board certification or an 

appropriate claims history. Instead, this 

rule requires that physicians self-attest 

that they are either Board certified in 

family medicine, general internal 

medicine, or pediatric medicine or a 

subspecialty within those specialties or 

that that sixty percent of all Medicaid 

services they bill, or provide in a 

managed care environment, are for the 

specified E&M and vaccine 

administration codes. This rule also 

clarifies that states may defer to the state 

where the physician’s practice is located 

with respect to a determination of a 

physician’s eligibility for higher 

payment. 

For the threshold itself, we often use 

Medicare program standards in 

developing policy for the Medicaid 

program, and we believe that it is 

appropriate to apply the 60 percent 

threshold applicable to the Medicare 

primary care incentive payment to the 

Medicaid payment as well. 

Comment: One commenter suggested 

that the proposed § 447.400(a) be 

amended to add a subsection to define 

what is meant by self-attestation of a 

specialty or subspecialty designation. 

Response: We believe that the 

meaning of self-attestation is generally 

understood in this context as both the 

states and managed care organizations 

credential providers. Therefore, we do 

not agree that an amendment to 

§ 447.400(a) is necessary. 

Comment: Commenters questioned 

whether the process for identifying 

eligible providers was the same across 

delivery systems and if states with 

MCOs, PIHPs or PAHPs could rely on 

the definition of primary care provider 

established through the managed care 

contract. Commenters suggested that the 

broad definition of primary care 

provider proposed by the proposed rule 

would reward providers that do not 

focus their practice on primary care. 

Response: We recognize that the 

definition of a primary care provider 

under existing managed care contracts 

may, in some instances, be more or less 

targeted than that proposed under this 

rule. The contract definition may also 

exceed the scope of those primary care 

physicians that qualify for this payment. 

However, section 1902(a)(13)(C) of the 

Act, as amended by the Affordable Care 

Act, specifies that physicians with a 

specialty designation of family 

medicine, general internal medicine, 

and pediatric medicine qualify as 

primary care providers for the purposes 

of the increased payment rate. The 

proposed rule clarified that qualified 

providers include subspecialists related 

to the three designated provider practice 

types. Therefore, we must require that 

the same approach apply to identifying 

eligible providers reimbursed under 

managed care delivery systems. 

Comment: A commenter noted that 

some physicians have more than one 

identifier and asked if separate 

information on both identifications 

would be necessary if the physician 

receives differing rates based on the 

identification number used. 

Response: This is an operational issue 

beyond the scope of this rule. 

Comment: A commenter suggested 

that non-contracted providers that 

deliver primary care services to 

managed care enrollees that have a 

permissible out-of-network encounter 

should not be eligible for payment at the 

Medicare rate. 

Response: We disagree. Section 

1932(f) of the Act, as amended by the 

Affordable Care Act, requires that 

managed care contracts pay designated 

providers for the provision of 

designated services at the Medicare rate. 

Further, there are no exceptions made in 

the statute to the minimum payment 

requirement for services provided out of 

network. If a Medicaid beneficiary 

receives eligible services out-of-network 

from a provider covered by this rule, the 

reimbursement rate must also align with 

the requirements stated herein. 

Comment: One commenter stated that 

not all subspecialists providing services 

through managed care delivery systems 

have the expertise to function as a 

primary care provider. 

Response: This rule does not create 

new requirements for primary care 

providers. Rather, it assures payment of 

the Medicare rate for services that the 

subspecialist bills within the E&M and 

vaccine administration code range 

specified in the rule. 

Comment: One commenter asked if 

the intent of the managed care payment 

is to include subspecialties such as 

otolaryngology, ophthalmology or 

urology and also stated that the payment 

should be limited to subspecialists that 

directly serve primary care needs. 

Response: The intent of the managed 

care payment is to reimburse at the 

Medicare rate only those primary care 

subspecialists and related subspecialists 

designated in this rule and only for the 

E&M and vaccine administration code 

range specified in the rule. 

Summary of Final Policy: This final 

rule provides for higher payment in 

both the fee for service and managed 

care settings to physicians practicing 

within the scope of practice of medicine 

or osteopathy with a specialty 

designation of family medicine, general 

internal medicine and pediatric 

medicine. It also provides for higher 

payment for subspecialists related to 

those specialty categories as recognized 

by the American Board of Medical 

Specialties, American Osteopathic 

Association and the American Board of 

Physician Specialties. Lists of 

specialists and subspecialists can be 

found at the respective Board Web sites 

which are: www.abms.org, 

www.osteopathic.org and www.abps.org. 

This rule removes the requirement that 

the state Medicaid agency verify the 

self-attestation of all physicians by 

confirming Board certification or an 

appropriate claims history. However, in 

the absence of an industry-wide 

definition of ‘‘primary care physician’’ 

we believe it is necessary to impose a 

uniform standard to identify such 

providers. Therefore, this rule requires 

that physicians self-attest that they are 

either Board certified in family 

medicine, general internal medicine, or 

pediatric medicine or a subspecialty 

related to those specialties or that 60 

sixty percent of all Medicaid services 

they bill, or provide in a managed care 

environment, are for the specified E&M 

and vaccine administration codes. 

State Medicaid agencies may pay 

physicians based on their selfattestation alone or in conjunction with 

any other provider enrollment 

requirements that currently exist in the 

state. However, if a state relies on selfattestation it must annually review a 

statistically valid sample of physicians 

who have self-attested that they are 

eligible primary care physicians to 

ensure that the physician is either Board 

certified in an eligible specialty or 

subspecialty or that 60 percent of claims 

either billed or paid are for eligible E&M 

codes. In the case of services provided 

through a managed care delivery 

system, states will be given flexibility in 

the manner in which they perform this 

verification. We expect states to work 

with the health plans to determine an 

appropriate verification methodology. 

We recognize that data may not be 

readily available on rejected claims, 

making services paid a more appropriate 


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threshold and either claims billed or 

claims paid can be used in the sample. 

This rule also clarifies that a state whose 

beneficiaries receive services from a 

physician in a neighboring state may 

accept the determination of eligibility 

for higher payment made by the 

physician’s home state in making higher 

payment under this rule. 

b. Services Furnished by a Specified 

Physician 

Section 1902(a)(13)(C) of the Act 

requires increased payment for 

‘‘primary care services furnished in CYs 

2013 and 2014 by a physician with a 

primary specialty designation of family 

medicine, general internal medicine, or 

pediatric medicine.’’ The proposed rule 

specified that the increased payment 

applies only for services under the 

‘‘physicians’ services’’ benefit at section 

1905(a)(5)(A) of the Act and in 

regulations at § 440.50. Increased 

payment would not be available for 

services provided by a physician 

delivering services under any other 

benefit under section 1905(a) of the Act 

such as, but not limited to, the Federally 

Qualified Health Center (FQHC) or 

Rural Health Clinics (RHC) benefits 

because, in those instances, payment is 

made on a facility basis and is not 

specific to the physician’s services. 

Section 1902(a)(13)(C) of the Act 

requires payment ‘‘for primary care 

services * * * furnished by a physician 

with a primary specialty designation of 

family medicine, general internal 

medicine, or pediatric medicine at a rate 

no less than 100 percent of the payment 

rate that applies to such services and 

physicians under Part B of Title XVIII.’’ 

We believe that the statute limits 

payment to physicians who, if Medicare 

providers, would be reimbursed using 

the MPFS. The MPFS is not used to 

reimburse physicians in settings such as 

FQHCs or RHCs. Therefore, we believe 

physicians delivering primary care 

services at FQHCs and RHCs are not 

eligible for increased payments under 

section 1902(a)(13) of the Act. 

Furthermore, we noted that the 

Medicaid statute already provides a 

payment methodology for FQHCs and 

RHCs that is designed to reimburse 

those providers at the appropriate rate. 

In specifying that payment is made for 

qualified primary care services under 

the physicians’ services benefit at 

§ 440.50, the increased payment for 

primary care services would be required 

for services furnished ‘‘by or under the 

personal supervision’’ of a physician 

who is one of the primary care specialty 

or subspecialty types designated in the 

regulation. In Medicaid, many primary 

care physician services are actually 

furnished under the personal 

supervision of a physician by 

nonphysician practitioners, such as 

nurse practitioners and physician 

assistants. Such services are usually 

billed under the supervising physician’s 

program enrollment number and are 

treated in both Medicare and Medicaid 

as services of the supervising physician. 

Consistent with that treatment, we 

proposed that primary care services be 

paid at the higher rates if properly billed 

under the provider number of a 

physician who is enrolled as one of the 

specified primary care specialists or 

subspecialists, regardless of whether 

furnished by the physician directly, or 

under the physician’s personal 

supervision. This would align with 

Medicaid’s longstanding practice in 

providing physician services, as well as 

Medicare’s Part B FFS payment 

methodology for professional services. 

Additionally, this policy would 

recognize the important role that non 

physician practitioners working under 

the supervision of physicians have in 

the delivery of primary care services. 

Comment: Most commenters 

supported the proposal to include 

practitioners working under the 

supervision of a physician, however 

they disagreed with the exclusion of 

those same practitioners when billing 

under their own Medicaid number. 

Numerous commenters urged CMS to 

include independently practicing 

certified nurse midwives, nurse 

practitioners, certified registered nurse 

anesthetists, clinical nurse specialists 

and other advanced practice nurses, as 

well as pharmacists, who often 

administer vaccines, as eligible 

practitioners on the grounds that they 

provide identical services to those 

provided by primary care physicians. 

Some commenters urged CMS to 

extend increased payment to FQHCs 

and RHCs, pointing out their important 

role in the provision of primary care 

services in underserved areas. Several 

urged that services provided by other 

types of clinics and Health Departments 

be included and asked whether services 

provided by public health providers in 

those settings were eligible if billed by 

an eligible physician using his own 

National Provider Identifier (NPI). One 

commenter asked how primary care 

services reimbursed as part of a nursing 

facility per diem rate and billed under 

the nursing facility’s Medicaid number 

would be reimbursed. 

Response: The statute provides for 

higher payments for ‘‘primary care 

services furnished * * * by physicians 

with a primary specialty designation of 

family medicine, general internal 

medicine or pediatric medicine * * *.’’ 

Therefore, consistent with the statute, 

services provided by pharmacists or 

independently practicing nonphysician 

practitioners not under the supervision 

of an eligible physician are excluded. In 

addition, we continue to believe that 

eligible services are those reimbursed on 

a physician fee schedule. Services 

provided in FQHCs, RHCs and clinics 

and Health Departments, to the extent 

that they are reimbursed on an 

encounter or visit rate, are not eligible 

for higher payment, nor are services 

provided in nursing facilities that are 

reimbursed as part of the per diem rate. 

Comment: A commenter noted that 

managed care contracts may require that 

FQHC and RHC services be paid at a 

level not less than that received by other 

providers under contract for the same 

scope of services, and that any increase 

to the FQHC or RHC service rate to 

account for enhanced payments to 

primary care providers under this rule 

should be eligible for 100 percent FFP. 

One commenter recommended that the 

final rule clarify that, if a state requires 

managed care organizations to increase 

payments to primary care providers in 

FQHCs, the state should make a 

corresponding adjustment in the plan’s 

capitation rate in a transparent and 

timely fashion. An additional comment 

was made that FQHCs and RHCs should 

be eligible for higher payment under 

this rule, thereby reducing the managed 

care ‘‘wrap around’’ required by the 

prospective payment system (PPS). 

Response: The increased payment for 

primary care services eligible for 100 

percent federal matching funds is 

implemented as a physician payment 

under section 1905(a)(5) of the Act. This 

means that services delivered by 

physicians under another Medicaid 

benefit at section 1905(a) of the Act, 

such as FQHC services, are not subject 

to the higher payment requirement or 

eligible for enhanced federal matching 

funds. Managed care contractual 

payment arrangements for FQHCs and 

RHCs are unaffected by and beyond the 

scope of this rule. 

Comment: One state asserted that the 

proposed rule unfairly treats 

comparable providers unequally based 

solely on their practice setting or 

enrollment status. That same 

commenter noted that precluding 

independently enrolled practitioners 

from receiving the enhanced 

reimbursement undermines the purpose 

of section 1902(kk) of the Act to 

improve data collection and program 

integrity by requiring ‘‘all rendering or 

referring physicians or other 

professionals to be enrolled under the 

state plan or under a waiver as a 

participating provider.’’ In order to 


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comply, the state has been requiring 

independent enrollment of 

nonphysician practitioners, where 

possible under state law. 

Many commenters expressed concern 

with the requirement that services be 

billed under the physician’s billing 

number. They indicated that many 

states have billing and oversight policies 

and procedures designed to elicit 

desirable policy goals or analyses, but 

which will also make it administratively 

difficult for nonphysician providers to 

receive the higher Medicare rate. They 

also stated that some states require 

certain nonphysician providers to 

obtain and bill under their own provider 

number, even when being supervised by 

a physician, and that the definition of a 

physician at § 440.50 does not specify 

that services must be billed under the 

physician’s number. Another 

commenter indicated that, in many 

situations, the billing entity is often a 

legal entity, not a practitioner. In the 

case of a group practice, the claim 

would most likely be billed under the 

practice number and not the physician’s 

number. 

Another commenter stressed that 

states have varying definitions of 

‘‘physician supervision’’ and suggested 

that CMS defer to state rules on this 

point. Commenters suggested that CMS 

permit various kinds of arrangements or 

agreements between physicians and 

independently billing nonphysician 

practitioners so that primary care 

services such as those provided by 

nurse practitioners and physician 

assistants at commercial emergency 

facilities could receive increased 

reimbursement. 

Response: We acknowledge the 

variation in billing practices and 

requirements among states. Therefore, 

this rule removes the requirement that 

services be billed under the physician’s 

billing number. We also acknowledge 

that states have varying requirements 

with regard to services provided under 

the supervision of a physician. 

However, by specifying in the statute 

that services be furnished by physicians, 

we believe that the Congress clearly 

intended that there be direct physician 

involvement in the services provided. 

Therefore, while deferring to state 

requirements, this rule assumes a 

relationship in which the physician has 

professional oversight or responsibility 

for the services provided by the 

practitioners under his or her 

supervision. This precludes the types of 

arrangements in which independent 

nurse managed clinics or other 

practitioners enter into arms-length 

arrangements with physicians for 

purposes of establishing a relationship 

that leads to higher payment of the 

practitioner services. 

Comment: CMS was asked to clarify 

in the final rule that services provided 

by all advanced practice clinicians, 

including nurse midwives, providing 

services under the supervision of a 

physician will be eligible for higher 

payment. 

Response: Eligible services provided 

by all advanced practice clinicians 

providing services within their state 

scope of practice under the supervision 

of an eligible physician will be eligible 

for higher payment. This includes those 

not specifically mentioned in the 

proposed rule, such as nurse midwives. 

Comment: CMS was asked to clarify 

whether services provided by advanced 

practice clinicians under the 

supervision of a physician will be billed 

at 100 percent of the Medicare 

physician rate, or the practitioner rate, 

since many states reimburse services 

provided by supervised nonphysician 

practitioners at a percentage of the 

physician fee schedule rate. 

Response: The statute provides for 

100 percent FFP on the difference 

between the Medicaid rates paid as of 

July 1, 2009 and the applicable 

Medicare rates in CYs 2013 and 2014. 

Therefore, if the state plan in 2009 

reimbursed services provided by 

nonphysician practitioners under the 

supervision of a physician at a 

percentage of the physician fee schedule 

rate, that same practice must be 

continued in CYs 2013 and 2014. If a 

state reimbursed all physician services 

at a single rate in 2009, it should 

continue to reimburse in that manner in 

CYs 2013 and 2014. 

Summary of Final Policy: This rule 

provides for higher payment for services 

provided by eligible physicians 

reimbursed pursuant to a physician fee 

schedule. Higher payment is not 

available for physicians who are 

reimbursed through a FQHC, RHC or 

health department/clinic encounter or 

visit rate or as part of a nursing facility 

per diem rate. 

This rule provides for higher payment 

for services provided under the personal 

supervision of eligible physicians by all 

advanced practice clinicians. In 

recognition of state efforts to enroll 

advanced practice clinicians in the 

Medicaid program and to require them 

to use their own Medicaid number, this 

rule removes the requirement that 

services be billed under the physician’s 

billing number. However, it requires 

that the physician have professional 

oversight or responsibility for the 

services provided by the practitioners 

under his or her supervision. This rule 

also provides that the state reimburse 

for services provided by advanced 

practice clinicians in 2013 and 2014 in 

the manner in which it reimbursed for 

those services as of July 1, 2009. If the 

state reimbursed for services actually 

rendered by supervised advanced 

practice clinicians at a percentage of the 

physician fee schedule rate, it should 

continue to do so in 2013 and 2014. 

c. Eligible Primary Care Services 

(§ 447.400(b)) 

We proposed that Healthcare 

Common Procedure Coding System 

(HCPCS) (E&M) codes 99201 through 

99499 and vaccine administration codes 

90460, 90461, 90471, 90472, 90473 and 

90474 or their successors will be eligible 

for higher payment and FFP. These 

codes are specified by the statute and 

include those primary care E&M codes 

not reimbursed by Medicare. 

Specifically, we proposed to include 

as primary care services the following 

E&M codes that are not reimbursed by 

Medicare: 

• New Patient/Initial Comprehensive 

Preventive Medicine—codes 99381 

through 99387; 

• Established Patient/Periodic 

Comprehensive Preventive Medicine— 

codes 99391 through 99397; 

• Counseling Risk Factor Reduction 

and Behavior Change Intervention— 

codes 99401 through 99404, 99408, 

99409, 99411, 99412, 99420 and 99429; 

• E&M/Non Face-to-Face physician 

Service—codes 99441 through 99444. 

Comment: Most commenters were 

supportive of the range of E&M codes 

identified for higher payment and of the 

inclusion of codes not reimbursed by 

Medicare. Two commenters suggested 

expanding the list of covered codes to 

include HCPCS ‘‘G’’ codes and two 

suggested permitting states to designate 

additional codes at their discretion. Two 

commenters suggested extending higher 

payment to all codes billed by a primary 

care pediatrician, pediatric 

subspecialist, or surgical specialist. 

Some commenters stated that some of 

the codes identified by CMS are not 

viewed by the industry as constituting 

primary care. These include the 

following: Hospital Observation Care 

and Inpatient Consultation codes for 

inpatient services provided by the nonadmitting physician (99217–99220, 

99224–99226, 99251–99255, 99231– 

99233); Consultations (99241–99245, 

99251–99255); Emergency Department 

Services (99281–99288); and Critical 

Care Services (99291–99292). 

Commenters stated that some are 

rendered in settings not known for 

primary care delivery such as intensive 

care units and emergency departments. 

They believe that inclusion of those 


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codes will encourage inappropriate 

utilization and result in increased 

health care costs overall. One 

commenter suggested limiting increased 

reimbursement to office-based services. 

However, other commenters 

commended the inclusion of these same 

codes. They stated that these settings 

often are the point of first contact for 

primary care due to new injuries or lack 

of timely access to primary care services 

in the community. 

Response: The statute identifies 

specific services according to HCPCS 

codes that will receive the increased 

payment. Accordingly, we are finalizing 

the list of codes specified in the 

proposed rule. 

Comment: One state indicated that it 

is still using local codes rather than the 

E&M codes identified in this rule and 

asked for confirmation that services 

billed using those codes will be eligible 

for higher payment. It was suggested 

that states be permitted to provide CMS 

with a crosswalk of those local codes to 

the E&M codes they represent. 

Response: We confirm that higher 

payment may be made for services 

billed using local codes. States will 

need to submit a crosswalk of those 

codes to the eligible E&M codes as part 

of the required implementing state plan 

amendment. However, this flexibility is 

limited to substitutes for covered E&M 

codes and does not extend to vaccine 

administration codes. 

Comment: A number of states 

indicated that they do not reimburse for 

all of the codes in the specified E&M 

range and asked that CMS clarify that 

they are not required to do so for 

purposes of this rule. Other commenters 

suggested that states be required to pay 

for all codes specified in the regulation. 

Several commenters stated that all of the 

E&M codes specified in section 1902(jj) 

of the Act are not necessarily included 

in managed care contracts and 

questioned whether reimbursement of 

all E&M codes was a requirement under 

this rule. 

One commenter stated that the 

definition of primary care services by 

CMS is broader than what is currently 

used by some MCOs and expressed 

concern that the rate adjustment will 

inadvertently fail to adjust for the scope 

in services. 

Response: This rule clarifies that 

states need not pay for codes within the 

specified range that are not otherwise 

reimbursable under their Medicaid 

program and that managed care 

contracts need not be amended to 

specifically require coverage of 

previously non-covered codes. To that 

end, we do not anticipate an impact on 

the scope of primary care services 

eligible for enhanced federal match 

under managed care delivery systems 

that would affect rate setting. 

Comment: A commenter asked 

whether CMS intends for providers to 

be reimbursed at a higher rate for 

services provided through managed care 

irrespective of actual billed charges or if 

MCOs are required to utilize the 

Medicaid fee schedule in payment of 

providers and services designated in the 

rule. 

Response: The statute requires 

providers to be reimbursed at the 

Medicare rate for primary care services 

when furnished by the qualified 

physicians and does not make 

exceptions for a situation where a 

provider may be charging less than the 

required amount. Therefore, no such 

exception is carved out for managed 

care payment. If a MCO reimburses a 

physician a fee schedule amount then 

the rate must be at least as much as the 

Medicare rate used for FFS payment. 

We intend to continue to work with the 

states regarding the identification of the 

2009 baseline rate for eligible services 

and the rate differential eligible for 100 

percent federal matching. 

Comment: A number of states asked if 

the 2009 base rate for a code not 

reimbursed by the state in 2009, but 

currently reimbursed, would be $0. This 

includes three codes (subsequent 

observation care) in the E&M code range 

which have been added since 2009. 

Response: For new codes added to the 

E&M code range since 2009, we confirm 

that the 2009 rate would be $0 and 100 

percent FFP will be available for the 

entire payment. This is also true for 

other codes within the range not 

reimbursed by the state in 2009 but 

subsequently added to the fee schedule 

as covered codes. However, we do not 

expect states to make modifications to 

their code sets in 2013 or 2014 solely for 

the purpose of maximizing FFP. We will 

require that the state plan amendment 

submitted by the state providing for 

reimbursement under this rule list not 

only the codes for which higher 

payment will be available in 2013 and 

2014 but that it specifically identify the 

codes which have been added since 

2009 as well. 

Comment: One commenter asked if 

states that reimburse the consultation 

codes reimbursed by Medicare in 2009 

but not covered in 2013 and 2014 still 

will receive the enhanced federal match 

for these codes. 

Response: States will receive 100 

percent FFP for the payment differential 

for the difference in payment made for 

codes in effect in 2013 and 2014 and the 

base year. In general, a state will receive 

enhanced match for any code that it 

reimbursed in the baseline period and 

in 2013 or 2014, even if the code is not 

reimbursed by Medicare. As stated 

earlier, we will develop Medicare-like 

rates in 2013 and 2014 for CPT codes 

not reimbursed by Medicare but 

recognized for reimbursement in the 

final rule. 

Comment: A comment was made 

regarding the baseline for payment to 

out-of-state providers, in particular, that 

states and managed care organizations 

should be allowed to use statewide or 

‘‘rest of state’’ rates to pay those 

providers for the provision of eligible 

primary care services. 

Response: In setting the requirement 

for managed care payment the statute 

does not make an exception to permit 

out of state providers to be reimbursed 

at less than the minimum amount. 

Therefore, managed care contracts must 

assure such providers receive the 

Medicare FFS rate. 

Comment: We received a number of 

comments about how states should be 

able to set the minimum payment in a 

managed care environment. Some 

commenters believed that payment 

should be consistent with the Medicare 

rate in the aggregate for the capitated 

group, while another urged us to permit 

states to implement a rate based on a 

multiple of the Medicare rate derived 

from using the state’s average Medicaid 

fee schedule versus the Medicare 

schedule for the state. Another 

commenter asked whether we expect 

MCOs, PIHPs or PAHPs to unbundle 

payments to be able to track individual 

services. 

Response: We do not specify in this 

rule how a state must meet the statutory 

requirement for payment at the 

Medicare rate under managed care 

delivery systems. Rather, the 

methodologies required under new 

§ 438.804(a)(1) will need to identify the 

2009 baseline rate and rate differential 

based on reasonable and documented 

data and assumptions available to the 

state. As stated throughout this rule, we 

will continue a dialogue with the states 

on these issues during the 

implementation process. 

Summary of Final Policy: This rule 

requires state Medicaid agencies to 

reimburse at the applicable 2013 or 

2014 Medicare rate for E&M codes 

99201 through 99499 to the extent that 

those codes are covered by the approved 

Medicaid state plan or included in a 

managed care contract. The 2009 base 

rate for codes not covered in 2009 but 

subsequently added will be $0. Services 

billed using local codes will be eligible 

for higher payment if the state Medicaid 

agency submits, as part of the required 

state plan amendment, a crosswalk of 


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those codes to the specified E&M codes. 

States will also be required to identify 

all codes in use and eligible for higher 

payment as well as those codes added 

since 2009 for which the base rate will 

be $0. States will be given flexibility in 

developing a methodology to identify 

the base payment under managed care 

delivery systems. 

2. Amount of Required Minimum 

Payments (§ 447.405) 

Section 1902(a)(13)(C) of the Act 

requires payment not less than the 

amount that applies under the MPFS in 

CYs 2013 and 2014 or, if greater, the 

payment rate that would be applicable 

if the 2009 CF were used to calculate the 

MPFS. 

a. Use of Fee Schedule Amount 

Applicable to the Geographic Location 

of Service 

We proposed that states use the MPFS 

rate applicable to the site of service and 

geographic location of the service at 

issue. The Medicare Part B rates vary by 

geographic location and site of service. 

For example, rates are higher for 

services provided in an office setting as 

opposed to the outpatient hospital 

setting. We proposed that states would 

be required to use the MPFS payment 

amounts applicable to the site of service 

and geographic location because we 

believed these are integral to the MPFS 

payment system. Individual fee 

schedule amounts for the MPFS are the 

product of the geographic adjustment, 

relative value units (RVUs), and 

conversion factor (CF) that converts 

adjusted RVUs into dollar amounts. Site 

of service is reflected as an adjustment 

to the RVUs used to set the rate. 

We proposed that states be required to 

use the MPFS as published by CMS. 

Medicare primary care incentive 

payments made under section 1833 of 

the Act, as amended by section 5501 of 

the Affordable Care Act, would not be 

included. Section 5501(a) of the 

Affordable Care Act amended the statute 

to provide for incentive payments for a 

subset of the codes covered by this 

regulation. The payments are not made 

as increases in fee schedule amounts 

and are not reflected in the MPFS. 

Overarching and Fee for Service 

Comments 

Comment: Most commenters strongly 

urged that states not be required to 

recognize Medicare place of service and 

geographic adjusters since Medicaid 

payment systems do not make these 

same adjustments. One commenter said 

that the use of geographic adjustments 

would perpetuate geographic inequities 

in payment that have resulted from the 

current method of specifying payment 

locales and for calculating geographic 

practice cost indices (GPCIs) in the 

Medicare program. As alternatives, 

commenters suggested that states be 

permitted or required to: use only one 

geographic or place of service schedule 

or to use weighted average rates; pay at 

the highest geographic rate in the state 

and; use a bench-mark statewide 

Medicare fee schedule or a national fee 

schedule set by CMS or otherwise 

determined by the state. 

Response: We have considered the 

comments and the suggestions in light 

of the clear intent of the statute to 

enhance Medicaid beneficiary access to 

care through higher physician 

payments. In the interests of 

administrative simplification, the final 

rule does not require that states make 

site of service adjustments. Many states 

have instituted measures designed to 

reduce inappropriate use by 

beneficiaries of emergency departments 

for non-emergent services. We believe 

that the higher payment for primary care 

services provided for in this rule will 

encourage physician participation and 

will improve beneficiary access to 

services provided in the community 

setting. Therefore, this rule provides 

that states may reimburse all codes at 

the Medicare office rate as an alternative 

to making site of service adjustments. 

For geographic adjustments, the final 

rule additionally permits states to either 

make all appropriate geographic 

adjustments made by Medicare, or to 

develop rates based on the mean over all 

counties for each of the E&M codes 

specified in this rule. In identifying this 

alternative, we balanced the desire on 

the part of states for administrative 

simplicity against the need to ensure 

that providers are reimbursed in 

accordance with the requirements of the 

statute. There are seventeen states that 

have multiple Medicare localities and of 

those seventeen, ten have only two 

localities. We reviewed various 

formulas utilizing the mean and median 

of rates. Our goal was to most closely 

match the rates that would be generated 

under the actual Medicare locality fee 

schedules. By using a single fee 

schedule based on the mean over all 

counties, the majority of states will see 

a reduction of less than two percent. 

States that will experience a larger 

impact can elect to use the actual 

Medicare locality adjusted fee schedule. 

The required state plan amendment for 

these changes must describe the 

methodology the state has chosen. 

Comment: A number of commenters 

asked that CMS clarify that the 

increased payment to physicians may be 

made as a lump sum payment rather 

than as an add-on to the rate, pointing 

out that Medicare’s primary care 

payment is paid as a lump sum on a 

quarterly basis. 

Response: The higher payments may 

be made as either add-ons to existing 

rates or as lump sum payments. To 

ensure that physicians receive the 

benefit of higher payments in a timely 

manner, lump sum payments should be 

made no less frequently than quarterly. 

Comment: One commenter stated that 

CMS needs to clarify the specific 

procedures and guidelines regarding 

how states and health plans should 

reprocess claims for supplemental 

payment to providers if the state 

chooses to provide increased payments 

retroactively. 

Response: Because MMIS capabilities 

and payment processes vary by state 

and between health plans, we are 

permitting flexibility in the specifics of 

how these tasks are accomplished. 

Comment: A number of commenters 

suggested that the MPFS be defined as 

including the primary care incentive 

payment authorized for the Medicare 

program by the statute (as amended by 

section 5501of the Affordable Care Act) 

to make up for the fact that 

pediatricians, in particular, do not 

receive payments under the Medicare 

primary care incentive program. These 

commenters disagreed with CMS’s 

interpretation that the statute precludes 

the inclusion of these payments. 

Response: As noted in the proposed 

rule, payments under section 5501 of 

the Affordable Care Act are not made as 

increases in fee schedule amounts and 

are not reflected in the MPFS. 

Therefore, this final rule requires that 

those payments be excluded when 

calculating the appropriated 2013 and 

2014 Medicare fee schedule rates. 

Comment: Many commenters asked 

that states be given flexibility to 

implement the program in phases, if 

necessary, and to make changes to rates 

retrospectively. They pointed out that 

the Medicare RVUs for the subsequent 

calendar year are not published until 

November, which does not give states 

enough time to incorporate the 

Medicare payment rates into fee 

schedules and contracts by January 1, 

2013. 

Response: We acknowledge that states 

will not have information on the final 

2013 Medicare RVUs and on final 

regulatory requirements for the primary 

care payments until late in 2012. 

However, we do not have the authority 

to permit states to implement higher 

payments ‘‘in phases’’. The statute 

requires that higher payment be made 

for services furnished on or after 

January 1, 2013. However, under 


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regulations at § 430.20, states have until 

March 31, 2013 to submit a State Plan 

Amendment (SPA) that is effective on 

January 1, 2013. Additionally, it is 

common practice for states changing 

reimbursement rates to make retroactive 

adjustments to claims after a SPA has 

been approved. This procedure provides 

additional time for states to make 

system changes to reflect this final rule 

and the November 2012 publication of 

the Medicare 2013 RVUs. 

Comment: One commenter stated that 

the final rule needs to clarify that the 

billing entity for the primary care 

provider must receive the higher 

payment. This comment was made in 

the context of salaried physicians 

working for a county provider. 

Response: If services delivered by the 

county employed physician are actually 

reimbursed under the Medicaid state 

plan as physician services rather than 

clinic services, then the physician must 

receive the increased payment. If, as a 

condition of employment, the physician 

agrees to accept a fixed salary amount 

then we expect an appropriate 

adjustment to the salary to reflect the 

increase in payment. We caution 

governmental providers that services of 

a physician may be delivered under a 

variety of Medicaid benefit categories 

and that services offered by a county 

run clinic, in general, do not qualify for 

the enhanced federal match. 

Comments Specific to Managed Care 

Comment: CMS received many 

comments on the minimum payment 

requirement, ranging from concern that 

primary care providers would not 

actually receive higher payment to 

concern that monitoring payment 

distribution would be unduly 

burdensome for MCOs, PIHPs and 

PAHPs. One commenter suggested that 

CMS consider a MCO, PIHP or PAHP’s 

obligation to have been met if the health 

plan’s contracts with provider groups 

allowed for the increased payment. 

Another commenter suggested that 

states should be required to enact 

contract amendments that allow full 

pass through of the rate increase to 

primary care providers and describe 

how the MCO, PIHP or PAHP will 

verify, in the aggregate, the delivery of 

primary care services at the average 

enhanced rate. 

Response: We recognize that states’ 

managed care contracts with MCOs, 

PIHPs, and PAHPs vary and that, as a 

consequence, provider agreements vary 

as well. We continue to require that 

qualified providers receive the higher 

payment but in deference to these 

varying arrangements, we do not specify 

how this requirement must be met. We 

emphasize that in order for states to gain 

CMS regional office approval of their 

managed care contracts they must 

demonstrate that the higher payment 

will actually be passed on for services 

furnished by the primary care 

physicians designated in statute. 

Comment: Some commenters urged 

CMS to provide flexibility to the states 

through their contracts with MCOs, 

PIHPs and PAHPs, to identify an 

appropriate and reasonable approach to 

passing through the increased payment 

when capitated amounts are inclusive of 

primary and specialty care services. 

Otherwise, tailoring each physician 

group increase will be administratively 

complex, costly, and contrary to the 

intent of the rule. Another commenter 

suggested that no administrative/ 

documentation of payment should be 

required for the following delivery 

arrangements: (1) Health plan with 

exclusive contract with a single medical 

group in a specific geographic area to 

provide or arrange for professional 

medical services for the enrollees of the 

plan; (2) delivery system where 

Medicaid enrollees are not 

distinguished from others in terms of 

access to the same providers and 

services; and (3) physicians are paid 

salaries and receive a capitation rate 

without regard to payment source. 

Response: We are sensitive to the 

issue of administrative burden and are 

providing flexibility to states with 

respect to the identification of the 

required payment in a managed care 

environment. As specified in § 438.804, 

the states shall receive approval of two 

methodologies, contract amendments, 

and rate certifications to implement this 

rule, and CMS will focus on the 

reasonableness and accuracy of the 

methods proposed by the state. 

Comment: One commenter stated that 

the rule needs to clearly specify that a 

plan must increase payment to 

physicians in a managed care 

environment to meet the minimum 

payment standard even if a state is not 

eligible for 100 percent FFP for some 

portion of the increase (as in the case 

where a state has reduced payment rates 

below 2009 levels). 

Response: We agree that this payment 

increase must take place regardless of 

whether some portion of the increase is 

not funded with 100 percent FFP. 

Comment: A commenter states that 

the proposed rule fails to ensure that 

CMS or primary care physicians can 

determine whether or not the minimum 

payment requirement has been met. We 

were urged to require state level 

transparency in the implementation of 

the primary care payment increase. 

Response: We understand that 

managed care payment is not 

necessarily transparent with respect to 

individual payment for certain services 

and require MCOs to supply encounter 

data to states. We expect that encounter 

data will be sufficient for the states to 

undertake verification activities. 

Additionally, MCOs, PIHPs and PAHPs 

are required by regulation and contract 

to ensure that eligible primary care 

providers receive the appropriate rate 

increase for primary care services 

rendered. 

Comment: A commenter suggested 

that CMS needs to consider holding 

harmless health plans if the practice 

with which the primary care provider is 

affiliated fails to pass along the 

increased reimbursement to the affected 

providers. 

Response: MCOs, PIHPs and PAHPs 

are required by regulation and contract 

to ensure that eligible primary care 

providers receive the appropriate rate 

increase for primary care services 

rendered. The structure of the health 

plan’s provider network does not 

mitigate this responsibility. 

Comment: One commenter indicated 

that, to the extent low income health 

pools (LIHPs) are included in the rule, 

a specific methodology would be 

required for PIHPs and MCOs to identify 

payment amounts. The data source for 

paid claims data would be from each 

individual LIHP because the LIHPs are 

not paid by a particular state’s fiscal 

intermediary. 

Response: We will not respond to 

state-specific comments in this rule, but 

will continue to work with states to 

address specific issues that may arise 

during the implementation process. 

Comment: A commenter stated that 

methodologies used to develop 

capitation rates to assure the minimum 

payment need not be grounded in E&M 

codes, but could be more broadly 

defined by primary care services as 

currently defined by the state for 

managed care. The approach outlined in 

the proposed rule is problematic for 

these reasons: most states do not use 

E&M codes as basis to develop and 

adjust cap rates; and, due to variations 

in MCO, PIHP and PAHP payment 

methods, such as partial capitation, and 

the relative completeness of data 

submitted by providers, states do not 

consistently receive data necessary to 

affirm that specific E&M services have 

been delivered at the Medicare FFS rate. 

The commenter suggested that an 

alternative approach would be to allow 

states to define a methodology to 

estimate: (1) Aggregate volume and 

baseline payment rate of primary care 

services expected to be delivered to all 


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managed care beneficiaries by PCPs; and 

(2) the differential aggregate payment 

associated with increasing payment up 

to average Medicare levels. This 

methodology, asserts the commenter, 

would allow for existing assumptions 

and methodologies states use to develop 

their capitation rates. States would pass 

through associated capitation 

adjustment on a per month basis to their 

MCOs, PIHPs and PAHPs and use the 

associated financial transaction 

information to provide the necessary 

CMS 64 documentation for federal 

match. 

Another commenter suggested the 

additional Medicare fee schedule 

payments be beyond the scope of the 

risk portion of the MCO, PIHP or PAHP 

contract. This would allow the amount 

claimed by the state at 100 percent FFP 

to be based on calculations made from 

retrospective review of encounter data. 

Response: We will consider these 

suggestions during our review of states’ 

rate setting documentation and MCO, 

PIHP and PAHP contracts. As stated 

throughout this rule, we are not 

prescribing a particular approach to 

delivering the enhanced payment to 

eligible primary care providers but the 

method must deliver an accurate service 

payment to eligible providers. However, 

where MCOs, PIHPs or PAHPs pay their 

contracted primary care providers on a 

fee-for-service basis, it is reasonable to 

expect that they will use the same 

approach to delivering the enhanced 

payment (that is, modifying their claims 

systems to reflect the 2013 and 2014 

Medicare rates for eligible E&M codes 

for eligible providers) as the state will 

use to pay its fee-for-service providers. 

Comment: A commenter stated that 

MCOs, PIHPs and PAHPs should not be 

required to make enhanced payments on 

a retroactive basis and observed that it 

is administratively complex to analyze 

service level claims to verify increased 

payment. Another commenter asked if 

there would be retroactive 

reconciliation when additional funding 

in the capitation rates differs from the 

actual cost of providing services. 

Response: We agree that meeting the 

minimum payment standard set in 

statute can be administratively 

burdensome but emphasize that states 

must assure that MCOs, PIHPs and 

PAHPs are reimbursing services 

provided through managed care at the 

Medicare rate for the specified primary 

care services. This will be accomplished 

through review and approval by the 

CMS regional offices of states’ managed 

care contracts. We believe the second 

commenter is asking about the effect on 

reconciliation when the actual cost of 

primary care services differs from the 

projected cost as expressed through the 

managed care rate. This question will be 

addressed on a case by case basis 

through our review of the managed care 

contracts and states’ methods for 

identifying the rate differential. 

Comment: A commenter stated that 

CMS should clarify that a mandatory 

payment rate does not equate to a 

mandatory payment and that health 

plans should retain the ability to deny 

claims for reasons unrelated to payment. 

Response: We agree that a provider 

should be reimbursed the mandatory 

payment rate only when he or she has 

delivered services in accordance with 

the managed care contract and Medicaid 

requirements. 

Comment: Some commenters believe 

that the proposed rule conflicts with 

§ 438.6(c)(3)(i) which requires that 

actuarially sound rates be based on 

utilization and cost data derived from 

the Medicaid population because the 

2009 cost data may not reflect the 

amount paid to the provider since MCO 

contracts are risk arrangements. 

Response: The rule is not in conflict 

with the regulation at § 438.6(c)(3)(i) 

because the state has flexibility within 

§ 438.6(c)(3) to use various sources of 

data to establish base costs and 

utilization trends including FFS data, 

MCO financial data or a combination of 

both. 

Summary of Final Policy: This final 

rule removes the proposed requirement 

that states make site of service and 

geographic adjustments in paying at the 

applicable 2013 and 2014 Medicare 

rates. In the interests of administrative 

simplification, states need not make site 

of service adjustments but may 

reimburse all codes at the Medicare 

office rate, as opposed to the facility 

rate. With respect to geographic 

adjustments, states must either make all 

appropriate geographic adjustments 

made by Medicare, or may develop a 

rate based on the mean over all counties 

for each of the E&M codes specified in 

this rule. The required state plan 

amendment for these changes must 

describe the methodology the state has 

chosen. These requirements apply to fee 

for service and managed care delivery 

systems. Payments may be made as 

adjustments to rates or, if on a lump 

sum basis, no less frequently than 

quarterly. The 2013 and 2014 Medicare 

‘‘rate’’ is defined as excluding payments 

made under section 5501 of the 

Affordable Care Act. Higher payment 

must be made for services provided on 

or after January 1, 2013, but existing 

state plan amendment procedures 

provide states with some flexibility in 

the timing of the payments. Flexibility 

in regard to timing of payment is 

extended to managed care delivery 

systems. 

b. Payment for Services Unique to 

Medicaid 

For services reimbursed by Medicaid 

but not Medicare, we proposed that 

payment would be made under a fee 

schedule developed by CMS and issued 

prior to the beginning of CYs 2013 and 

2014. We proposed that rates for nonMedicare reimbursed services would be 

established using the Medicare CF in 

effect in CYs 2013 and 2014 (or the CY 

2009 CF, if higher) and the RVUs 

recommended by the American Medical 

Association’s (AMA) Specialty Society 

Relative Value Update Committee (RUC) 

and published by CMS for CYs 2013 and 

2014. We solicited comments from 

states and others on the most 

appropriate way to set payment rates for 

services not reimbursed by Medicare. 

Comment: Most commenters strongly 

supported CMS’s proposed 

methodology for developing rates for 

codes not reimbursed by Medicare. One 

commenter suggested establishing rates 

for codes not reimbursed by Medicare 

using the same standards applied in 

Deficit Reduction Act of 2005 

benchmark state plans (for example, 

Federal Employee Health Benefit 

Payment rates, State Employee Health 

Benefit Coverage). 

Response: For purposes of uniformity 

and to lessen the administrative burden 

on states, this final rule specifies that 

we will develop the rates for E&M codes 

not reimbursed by Medicare. 

Comment: A commenter requested 

that CMS make the fee schedule 

available to the states at a minimum of 

five months prior to January 1, 2013. 

Response: We will develop this fee 

schedule and will make it publicly 

available. We are committed to making 

this information available as quickly as 

possible prior to January 1 of CYs 2013 

and 2014. We understand that states 

need this and all other information 

timely to be able to administer 

payments appropriately. 

Comment: One commenter urged that 

states be given the choice to use any 

Medicare conversion factor that has 

been in effect for at least three months. 

Response: The statute requires that 

states use the 2013 or 2014 Medicare 

rates or, if greater, the rate that would 

be applicable if the conversion factor for 

the year involved were the conversion 

factor for 2009. There is no flexibility 

with respect to this requirement. 

Summary of Final Policy: We will 

develop and publish rates for eligible 

E&M codes not reimbursed by Medicare. 

In determining the 2013 and 2014 rates, 

we will use the 2009 conversion factor, 


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if that factor in conjunction with the 

2013 and 2014 RVUs results in rates that 

are higher than if the 2013 and 2014 

conversion factors were used. The rates 

for Medicaid primary care services not 

reimbursed by Medicare must be 

incorporated into managed care 

contracts for those services covered by 

the contract. 

c. Updates to Medicare Part B Fee 

Schedule 

We recognized the potential for 

multiple updates to the MPFS in CYs 

2013 and 2014. Those rates are 

published by CMS on or before 

November 1st of the preceding calendar 

year, but are subject to periodic 

adjustments or updates throughout the 

calendar year. In addition, the Medicare 

Part B rates vary by geographic location 

and site of service. 

We proposed that states have the 

option of complying with the 

requirements of section 1902(a)(13)(C) 

of the Act by either adopting annual 

rates or by using a methodology to 

update rates to reflect changes made by 

Medicare during the year. That is, states 

could adopt the MPFS in effect at the 

beginning of CYs 2013 and 2014 (or, if 

the CY 2009 CF is higher, the CY 2013 

or CY 2014 RVUs multiplied by the CY 

2009 MPFS CF), and apply those rates 

throughout the applicable calendar year 

without adjustments or updates. Using 

this methodology, mid-year updates 

made to the MPFS during the respective 

calendar year would not be reflected in 

Medicaid payments. Alternatively, a 

state could elect to adjust Medicaid 

payments to reflect mid-year updates 

made to the MPFS, but the state’s 

methodology would have to specify the 

timing for such adjustments. 

Comment: Most commenters agreed 

that states should be given this 

flexibility. One commenter 

recommended that states be prohibited 

from changing rates throughout the year 

because this would cause confusion and 

undue burden to providers. Another 

commenter suggested that states should 

be required to use the fee schedule 

published in November of the preceding 

calendar year. One commenter 

suggested that states be required to 

update rates every 6 months, while 

another suggested that states be required 

to use any rate that had been in effect 

for at least 3 months. A number of 

commenters urged that states be 

required to make all adjustments as the 

Medicare fee schedule changes, pointing 

out that changes in the SGR after 

November could result in States using a 

lower fee schedule, thereby avoiding 

higher physician payments. 

Response: We are sensitive both to 

concerns that requiring that states make 

multiple changes would be an 

administrative burden and to concerns 

that changes in the SGR could result in 

lower payments. We believe that the 

statutory requirement to use the 2009 

Medicare conversion factor if it would 

result in higher Medicare rates in 2013 

and 2014 was intended to offset the 

potential negative impact of changes in 

the SGR. Therefore, this final rule 

permits states flexibility in determining 

whether to, and how often to, update 

rates to conform to changes in the 

MPFS. 

Summary of Final Policy: This final 

rule permits states flexibility in 

determining whether to, and how often 

to, update rates to conform to changes 

in the MPFS. This applies to fee for 

service and managed care payment. 

3. State Plan Requirements (§ 447.410) 

We proposed to require that states 

submit a SPA to reflect the fee schedule 

rate increases for eligible primary care 

physicians under section 1902(a)(13)(A) 

of the Act. The purpose of this 

requirement was to assure that when 

states make the increased 

reimbursement to physicians, they have 

state plan authority to do so and they 

have notified physicians of the change 

in reimbursement as required by federal 

regulations. 

Comment: Commenters agreed that 

states should be required to amend their 

state plans. Many commenters asked 

that CMS develop a SPA template or, if 

not, specify the contents of the required 

SPA (for example, assurances required, 

specificity regarding use of the MPFS, 

covered codes). 

Response: We will provide states with 

a SPA template. The template will 

require that states indicate: (1) Whether 

they will make site of service 

adjustments or reimburse all codes at 

the Medicare rate applicable to the 

office setting; (2) whether they will 

make all Medicare locality adjustments 

or develop a statewide rate per code that 

reflects the mean value over all counties 

of the Medicare rate; (3) identify the 

manner in which the state will make 

higher payment (that is, as a fee 

schedule or aggregate supplemental 

payment; and (4) describe the codes 

which will be paid by the state at the 

higher rates and the codes that have 

been added to the fee schedule since 

2009. If states do not use HIPAA 

compliant codes, the SPA must also 

provide a crosswalk to the covered E&M 

codes. 

Comment: Many commenters asked 

that CMS clarify that state plan rules at 

§ 447.256(c) apply, meaning that the 

SPA may be effective on the first day of 

the calendar quarter in which it is 

submitted, giving states until March 31, 

2013 to submit a SPA. 

Response: Yes, those requirements 

apply. 

Comment: A number of commenters 

asked that CMS permit states to submit 

SPAs that will automatically sunset 

higher payments made pursuant to this 

rule on December 31, 2014. 

Response: We will permit sunset 

dates. The state and CMS must ensure 

that, in cases where a sunset date is 

employed, the rates that the state will 

revert to after December 31, 2014 are 

clearly described in the plan and that 

public notice for the SPA makes it clear 

that higher payments will end as of that 

date. 

Comment: One commenter asked if 

states will be permitted to apply 

existing payment limitations, conditions 

and policies to the selected procedure 

codes. 

Response: All limitations, conditions 

and policies that applied to the code 

prior to January 1, 2013 can be applied 

to the code after that date. 

Comment: One commenter pointed 

out that CMS often takes 90 days or 

more to review and approve SPAs and 

asked whether the state should wait to 

implement the rate increase until the 

SPA is approved. 

Response: The statute requires that 

states make higher payments for 

services provided on or after January 1, 

2013. Our policy dictates that FFP is not 

available for services provided pursuant 

to an unapproved SPA. Therefore, as is 

the case with all rate changes, states can 

either make the higher payments to 

physicians and wait to submit claims for 

FFP until the SPA is approved, or can 

pay physicians at the 2012 Medicaid 

state plan rates and make supplemental 

payments once the SPA is approved. 

Comment: One commenter believes 

that public access to the SPA is 

important to ensuring provide 

participation and suggested amending 

the proposed state plan requirement at 

§ 447.410 to indicate that the state must 

make this information accessible to the 

public through a Web site or other 

reasonable means. 

Response: Public notice of changes in 

state plan methodologies in Medicaid is 

already required at § 447.205. In 

addition, copies of approved state plan 

amendments are available through state 

Medicaid agencies. 

Comment: Several commenters 

recommended that we require states to 

notify health plans and providers within 

a specified timeframe after approval of 

the SPA. One commenter stated that 

clarification is needed regarding 


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obligations and responsibilities for 

MCOs managing the Medicaid program 

in a state that does not yet have an 

approved SPA by January 1, 2013. 

Response: The SPA will describe 

methods and procedures relative to fee 

for service payments. The status of the 

SPA will not affect a state’s ability to 

negotiate with managed care 

organizations. Notification to MCOs and 

providers of changes necessitated by 

this rule will be handled through 

normal procedures and processes by the 

state. 

Summary of Final Policy: We will 

develop a SPA template for use by states 

in implementing the requirements of 

this final rule. SPAs should be 

submitted and will be reviewed in 

accordance with existing federal 

requirements at § 447.256 (and by 

reference § 430.20). States may apply 

existing payment limitations and 

policies to services paid pursuant to this 

rule. Managed care payment policies are 

not affected by this provision. 

4. Availability of Federal Financial 

Participation (FFP) (§ 447.415) 

Section 1905(dd) of the Act allows 

states to receive 100 percent FFP for 

expenditures equal to the difference 

between the Medicaid state plan rate for 

primary care services in effect on July 1, 

2009, and the Medicare rates in effect in 

CYs 2013 and 2014 or, if greater, the 

payment rate that would be applicable 

using the CY 2009 Medicare CF. To 

claim the enhanced federal match, states 

must make payments to specified 

physicians at the appropriate MPFS rate 

and must develop a method of 

identifying both the rate differential and 

eligible physicians for services 

reimbursed on an FFS for service basis 

and through managed care plans. States 

must be able to document the difference 

between the July 1, 2009 Medicaid rate 

and the applicable Medicare rate for 

specified providers that is claimable at 

the 100 percent matching rate. This 

requirement applies also to services 

provided to individuals eligible for both 

Medicaid and Medicare. This means 

that increased FFP will be available also 

for higher Medicaid payments for 

Medicare cost sharing for individuals 

who are eligible for both programs. 

Comment: A number of states 

indicated that they have lowered rates 

since July 1, 2009. Under the provisions 

of the proposed rule, they will not be 

eligible for 100 percent FFP for the 

difference between the 2009 rate and 

their current, lower, rates and asked for 

relief in the final rule. One commenter 

suggested that such states be permitted 

to ‘‘present the case to CMS for approval 

of 100 percent funding for the total 

increase when it can be shown that the 

state did not make such a decrease with 

any expectation or intent that it would 

be used to restore rates’’. 

Response: The statute provides for 

100 percent FFP for the difference 

between the July 1, 2009 Medicaid state 

plan rates and the appropriate 2013 and 

2014 Medicare rates. States that lowered 

physician rates after 2009 will receive 

FFP at the state’s regular FMAP rate for 

the difference between the lowered rates 

and the Medicaid rates in effect as of 

July 1, 2009. We have no authority to 

grant requests for exemptions from this 

requirement. 

Comment: One commenter asked that 

the final rule clarify that providers have 

no less than 12 months from the date of 

SPA approval to file a claim. That 

commenter also asked that the final rule 

confirm that the state will receive 100 

percent FFP for claims for services 

rendered during CYs 2013 and 2014 

even if they are adjudicated after 2014. 

Response: This rule does not change 

Medicaid timely claims submission and 

payment requirements. Section 447.45 

applies to all claims submitted under 

this rule, that is, 100 percent FFP will 

be available for services provided 

between January 1, 2013 and December 

31, 2014 that are processed in 

accordance with these requirements. 

Comment: Two commenters indicated 

that the rule does not address system 

changes that states will need to make. 

One commenter noted that states will 

not have time to submit Advanced 

Planning Documents (APDs) for CMS 

prior approval for enhanced FFP for 

those changes. The commenters 

requested that CMS grant retroactive 

‘‘prior approval’’ for such APDs. 

Response: We do not grant 

‘‘retroactive prior approvals’’ of APDs. 

However, we will work with states to 

promptly facilitate system changes 

necessitated by this final rule. 

Comment: One commenter suggested 

that CMS phase down the increased 

payment to primary care practitioners 

(PCPs) in the same manner as matching 

for the expansion populations under the 

Affordable Care Act. They believe that 

‘‘a precipitous drop in the PCP payment 

increase could create access issues’’. 

Response: The statute does not permit 

such a phase-down. 

Comment: One state asked how 

services eligible for both regular FFP 

and 100 percent FFP will be reported to 

CMS. 

Response: We will provide states with 

reporting instructions before the end of 

the first calendar quarter of 2013. This 

guidance will be provided for both fee 

for service and managed care delivery 

systems. 

Comment: One commenter wanted to 

know if primary care case management 

(PCCM) fees paid in either the baseline 

period or in 2013 and 2014 should be 

included in the calculation of the rate 

differential. 

Response: We clarify that PCCM 

payment is outside the calculation of 

the rate differential. 

Comment: A number of commenters 

asked if the 100 percent FFP is based on 

actual, documented expenditures or 

based on the actuarial per member per 

month (PMPM) assumptions built into 

adjusted capitation rates, including 

nonclaim components. 

Response: States can claim 100 

percent FFP based on the CMS 

approved methodology for identifying 

the rate differential. Depending on the 

best data available this may result in an 

imputed payment differential that is 

based on actual claims or actuarial 

assumptions. 

Comment: One commenter asked 

whether state and local taxes associated 

with the increased fee schedule would 

be eligible for the enhanced match. 

Response: Enhanced federal matching 

funds are available only for the 

difference in payment between the 

Medicaid state plan rate in effect July 1, 

2009 and the applicable Medicare rates 

in CYs 2013 and 2014. If the nonfederal 

share of the rate in effect during the 

baseline period was funded by state and 

local taxes then that portion of the 

payment would continue to be matched 

at the state’s regular FFP. This applies 

to FFS and managed care 

reimbursement. 

Comment: We received a request for 

clarification as to whether an increase in 

managed care premiums for the 

following non-claim related components 

would be eligible for 100 percent FFP: 

the Federal Health Insurer Fee, 

premium related taxes imposed by 

states, underwriting gain and 

administrative expenses. 

Response: We are clarifying that nonclaim related costs are excluded for 

purposes of 100 percent FFP. The 

statute narrowly defines the scope of the 

enhanced match to the differential 

between the Medicare rate and 2009 

baseline rate for the direct provision of 

specified primary care services 

delivered by eligible primary care 

providers. 

Summary of Final Policy: States will 

receive 100 percent FFP for the 

difference between the July 1, 2009 

Medicaid state plan rates and the 

appropriate CY 2013 and 2014 Medicare 

rates. States that lowered physician 

rates after 2009 will receive FFP at the 

state’s regular FFP rate for the difference 

between the lowered rates and the 


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Medicaid rate in effect as of July 1, 

2009. Medicaid timely claims 

submission and payment requirements 

at § 447.45 apply to all claims submitted 

under this rule, that is 100 percent FFP 

will be available for services provided 

between January 1, 2013 and December 

31, 2014 that are processed in 

accordance with these requirements. No 

phase-down of higher payments or FFP 

is permitted. Enhanced federal match is 

available for the payment differential in 

managed care. 

a. FFP in Payments for Individuals 

Eligible for Both Medicare and Medicaid 

When a service is provided to an 

individual who is eligible for Medicare 

and Medicaid, Medicare reimburses the 

physician 80 percent of its fee schedule 

rate while Medicaid covers the costsharing amounts. Currently, states have 

two options for such payments 

consistent with section 1902(n) of the 

Act. A state may pay the provider the 

full amount necessary to result in 

aggregate payment to the provider equal 

to the MPFS rate (the full Medicare cost 

sharing amount), or only the amount (if 

any) to result in aggregate payment 

equal to the state’s Medicaid rate. For 

example, under the second option, if the 

Medicare allowed amount is $100 and 

the Medicaid rate is $75, then Medicare 

pays 80 percent of the allowed amount, 

or $80, and there is no additional 

amount paid by Medicaid. Historically, 

most states have chosen to pay 

providers only up to the lower Medicaid 

rate. 

In CYs 2013 and 2014, the Medicaid 

rate for primary care services by the 

specified physicians will equal the 

Medicare rate. As a result, these 

physicians should receive payment up 

to the full Medicare rate for primary 

care services and 100 percent FFP will 

be available for the full amount of the 

Medicare cost sharing amount that 

exceeds the amount that would have 

been payable under the state plan in 

effect on July 1, 2009. 

Comment: Most commenters were 

supportive of these provisions of the 

rule. A number of commenters indicated 

that payment of crossover claims poses 

a significant administrative challenge 

because not all states’ enrollment and 

adjudication processes mirror 

Medicare’s and they may have limited 

ability to capture all details needed on 

crossover claims to limit payment by 

subspecialty. One commenter suggested 

that CMS require 100 percent of such 

claims to be paid by Medicare. Another 

commenter noted that the proposed rule 

does not require states to pay cost 

sharing amounts. 

Response: The Medicaid requirements 

applicable to claims for services for 

beneficiaries who are dually eligible for 

Medicaid and Medicare are not changed 

by this rule. States must comply with all 

requirements for payment of claims for 

services provided to Medicaid 

beneficiaries who are also eligible for 

Medicare. 

Comment: One commenter 

recommended that states that enter into 

Duals Special Needs Plans (DSNPs) be 

required to amend contracts to ensure 

that providers receive the enhanced 

rate. Currently, these contracts provide 

for $0 cost sharing as they are associated 

with the Medicaid rate. 

Response: DSNPs are Medicare 

managed care plans and are not subject 

to the requirements of this rule. 

However, states are responsible for 

ensuring that payments for Medicaid 

enrollees of DSNPs reflect the 

appropriate payment increase. 

Comment: One commenter 

recommended that CMS permit states to 

develop a methodology to identify what 

the difference in the capitation rate 

would be for crossover claims and to 

claim enhanced FFP for the difference, 

similar to the process proposed for 

managed care at § 438.804. 

Response: We agree that a state must 

have the ability to identify the 2009 

baseline rate for primary care services 

and the managed care rate differential 

eligible for 100 percent FFP. We will 

permit a state up to 3 months after 

January 1 of CY 2013 to submit the 

methodologies for our review and 

approval as specified in § 438. We 

expect this methodology to account for 

managed care payment for services 

delivered to all beneficiaries covered by 

Medicaid, including beneficiaries in 

CHIP Medicaid expansion programs and 

those beneficiaries also eligible for 

Medicare. 

Summary of Final Policy: This rule 

does not in any way negate the need for 

states to comply with all Medicaid 

requirements applicable to payment for 

services provided to Medicaid 

beneficiaries who are also dually 

eligible for Medicare. In managed care 

environments, states will be granted 

flexibility in determining the portion of 

the capitated payment that is related to 

such beneficiaries. However, the 

methodology must be approved by CMS. 

b. Identifying the July 1, 2009 Payment 

Rate 

For the purpose of identifying the 

differential between the Medicaid rate 

and the Medicare rate, we proposed to 

define the Medicaid ‘‘rate’’ under the 

approved Medicaid state plan as the 

final rate paid to a provider inclusive of 

all supplemental or increased payments 

paid to that provider. For example, 

many states currently pay physicians 

affiliated with academic medical centers 

the Medicaid state plan rate plus a 

supplemental amount that together 

equal the average amount paid by 

commercial third party payers. 

Therefore, in calculating the rate 

differential, these states would 

determine the CY 2009 rate inclusive of 

any supplemental payment. 

Comment: The majority of 

commenters requested that incentive 

payments, bonus payments and 

performance-based supplemental 

payments be excluded from the 

definition of the base payment. 

Response: Incentive payments, bonus 

payments and performance-based 

supplemental payments are only paid to 

those certain physicians who meet 

specified goals or criteria. They are not 

part of the statewide fee schedule rates 

and we agree that they should be 

excluded from the determination of the 

2009 base rate. 

Comment: Many commenters urged 

CMS to exclude other supplemental 

payments made on a lump sum basis 

from the definition of the base rate, 

pointing out the administrative burden 

of linking those payments to individual 

codes and eligible physicians. In 

practice, this would consist of the 

supplemental payments up to the 

average commercial rate made to 

physicians associated with academic 

medical centers. They stated that CMS 

excluded the Medicare primary care 

bonus payment, which is made as an 

aggregate payment, from the definition 

of the MPFS, and suggested that 

Medicaid supplemental payments made 

as lump sum payments be excluded 

from the 2009 base following the same 

logic. 

Response: We do not agree that 

volume-based payments such as those 

made up to the average commercial rate 

should be excluded from the 

determination of the 2009 base rate. The 

CMS-approved methodologies for 

determining those supplemental 

payments are calculated on a codespecific basis even when payments are 

aggregated and paid on a lump-sum 

basis. Since the code-specific 

calculation is performed before the SPA 

methodology is approved, states do have 

the data necessary to determine the rate 

for each code inclusive of the 

supplemental payment. In addition, the 

methodologies that have been approved 

for those payments provide that the base 

Medicaid payment in addition to the 

supplemental payment up to the ACR 

are equal to or significantly greater than 

Medicare rates. Were the supplemental 


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payments to be ignored, physicians in 

those settings would receive 

disproportionately high compensation 

with no additional impact on access. We 

do not believe that is in keeping with 

the intent of the statute. 

Comment: One commenter urged that 

CMS clarify how health plans should 

report to the state the supplemental and 

increased payment for individually 

billed codes made under the approved 

state plan in effect July 1, 2009. 

Otherwise, the state will not know what 

incentive payments were made to the 

impacted providers. 

Response: We understand that the 

commenter is asking how health plans 

should report ‘‘catch up’’ payments to 

providers for the increase in primary 

care payments to the Medicare rate as 

specified under this final rule. States 

should specify in encounter data 

reporting requirements how health 

plans should reflect those payments. 

Summary of Final Policy: This final 

rule defines the 2009 Medicaid base 

payment as excluding incentive, bonus 

and performance-based supplemental 

payments. Other volume-based 

payments, particularly those associated 

with academic medical centers, must be 

included in determining the 2009 base 

rate. This policy applies to fee for 

service and managed care payment. 

c. Federal Funding for Increased 

Payments for Vaccine Administration 

Prior to CY 2011 vaccine 

administration, billing codes did not 

permit additional vaccine 

administration payments for vaccines 

with more than one vaccine/toxoid 

component. All providers, including 

those participating in the VFC program, 

received one payment per vaccine 

regardless of the number of vaccine/ 

toxoid components. In the proposed 

rule, we clarified that qualifying 

physicians, excluding those 

participating in the VFC program, must 

receive additional payments during CYs 

2013 and 2014 for vaccines with 

multiple vaccine/toxoid components 

administered to Medicaid beneficiaries. 

Section 1928(c)(2)(ii) of the Act 

provides that administration fees for 

vaccines provided under the VFC 

program cannot exceed the cost of 

administration as determined by the 

Secretary for that program. An 

additional concern for VFC vaccines is 

that, under the terms of the VFC 

program, providers can still only bill a 

flat fee per vaccine given by injection or 

by intranasal or oral routes, regardless of 

the number of vaccines/toxoid 

components, and must use only code 

90460. This is consistent with section 

1928(c)(2)(C)(ii) which permits the 

provider to impose an administration 

fee based on the cost of administering a 

qualified pediatric vaccine, and does 

not authorize different fees based on the 

type of vaccine. To permit providers 

participating in the VFC program to 

benefit from the provisions of the 

Affordable Care Act, we proposed that 

States be required to reimburse VFC 

providers at the lesser of the 2013 and 

2014 Medicare rates or the maximum 

regional VFC amount in those years. 

States would qualify for 100 percent 

FFP for these increased reimbursements. 

In the proposed rule, we provided a 

formula for states to impute the 2009 

rates due to the coding change that took 

effect on January 1, 2011. In addition, 

we stated that qualifying providers who 

provide vaccines to children enrolled in 

Medicaid who receive vaccines through 

the VFC program cannot be paid for 

additional vaccine/toxoid components 

of a combination vaccine. 

Comment: A number of commenters 

disagreed with CMS’ proposal not to 

reimburse providers for additional 

vaccine/toxoid components of 

combination vaccines using code 90461. 

One commenter stated that this 

provision falls short of the statutory 

standard to the extent that it allows 

states to pay less than is required by the 

2011 component-based code 

methodology currently used by 

Medicare. Another commenter said that 

CMS should pay for the additional 

vaccine/toxoid components in 

combination vaccines because each 

vaccine/toxoid component protects 

against a different disease. Two 

commenters also expressed concern that 

proceeding with the proposed policy 

could result in a disincentive for 

providers to comply with optimal 

medical practice and result in more 

shots for children. 

Response: We agree with commenters 

in part. We agree that additional 

payment can be made for additional 

vaccine/toxoid components in 

combination vaccines using code 90461. 

But we disagree that this methodology 

is appropriate for vaccines furnished 

through the VFC program. While 

preparing the proposed rule, we 

considered a number of alternative 

approaches for enhanced payment for 

vaccine administration within the VFC 

program. This included paying an 

increased amount for administration of 

additional vaccine/toxoid components 

in combination vaccines using code 

90461. That approach was not selected 

in part because we believe that it was 

not the intent of the Affordable Care Act 

to supersede the VFC provision, which 

does not give CMS the authority to make 

multiple payments for a single vaccine 

administration. Therefore, we believe 

that the requirement that under VFC 

there cannot be multiple payments for a 

single vaccine applies to the Affordable 

Care Act. As such, we are not changing 

the policy in the final rule from what 

was published in the proposed rule, and 

providers will be reimbursed at the 

lesser of the 2013 and 2014 Medicare 

rates or the maximum regional VFC 

amounts in those years. In making this 

determination, we also considered that 

the payments at issue are not for the 

vaccine ingredients, but only for vaccine 

administration. We received no 

information that indicated that 

administration of multiple antigen 

vaccines was more costly than 

administration of single antigen 

vaccines. 

We are concerned by the comments 

that this policy could result in 

additional shots for children if 

providers were to use single component 

vaccines where a combination vaccine 

exists. Under the VFC statute at section 

1928(c)(2)(B)(i) of the Act, VFC 

providers are required to comply with 

the Advisory Committee for 

Immunization Practices (ACIP) schedule 

regarding the appropriate periodicity, 

dosage, and contraindications 

applicable to pediatric vaccines. It is 

important that vaccines are 

administered following the ACIP 

recommendations and that combination 

vaccines are used if recommended. If 

necessary, we will work with states to 

ensure that children receive appropriate 

vaccines and receive as few shots as are 

necessary following the ACIP schedule. 

As a practical matter, CDC orders and 

provides few single antigen vaccines 

through the VFC program when 

combined antigen drugs are available. In 

addition, section 1903(i)(15) of the Act 

provides that no payment shall be made 

‘‘with respect to any amount expended 

for a single-antigen vaccine and its 

administration in any case in which the 

administration of a combined-antigen 

vaccine was medically appropriate (as 

determined by the Secretary) * * *.’’ So 

we believe states will have some 

incentive to monitor and oversee the 

appropriate use of combined antigen 

vaccines. 

Comment: CMS received a comment 

asking if a state could have the 

flexibility to pay at the greater of the 

2013 and 2014 Medicare rates or the 

maximum regional VFC rates instead of 

the lesser of those two rates. CMS also 

received a number of comments 

expressing confusion as to whether this 

policy applies to qualified providers or 

to all VFC providers. 

Response: We adopted the lesser of 

the Medicare rates or the maximum 


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regional VFC amounts because the VFC 

statute prohibits payment above the 

regional maximum ceiling and because 

it is consistent with Medicare policy 

which limits provider payment to the 

lesser of the fee schedule amount or 

provider charges. Therefore states do 

not have the flexibility to pay at the 

greater of the two amounts instead of 

the lesser of the two. This policy is 

consistent with the larger intent of this 

provision of the Affordable Care Act to 

increase payments to primary care 

providers within the framework of the 

Medicare program. 

This policy applies only to qualified 

physicians. If a non-qualified physician 

provides a vaccine to a VFC-eligible 

child enrolled in Medicaid, the 

physician will be reimbursed for the 

administration fee at the rate in the 

corresponding state plan. 

Comment: Three states submitted 

comments expressing concern that the 

proposal not to recognize additional 

vaccine/toxoid components under the 

VFC program will create an 

administrative burden for States because 

providers would be paid at different 

rates. 

Response: Although the proposed 

policy will result in variable rates for 

providers, we do not believe there will 

be an administrative burden for states 

specific to the increased payments. It is 

correct that the policy to not recognize 

additional vaccine/toxoid components 

only applies to the VFC program. 

However, because only vaccines given 

to those under age 19 are eligible for 

payment for additional antigens, and all 

Medicaid enrollees under age 19 qualify 

for VFC, there will not be an 

administrative burden as there will not 

be any variation in payment rates. We 

expect that there will be few situations 

where a state would have to establish 

different payments to providers for 

administration fees for children enrolled 

in Medicaid, or where a payment would 

be made for code 90461. 

Comment: CMS received one 

comment that addressed the formula for 

imputing the 2009 rate for code 90460 

that was established because of the new 

codes that went into effect in 2011. 

Specifically, the commenter 

recommended that CMS revise the 

formula to instead use the payment rate 

for deleted code 90465 for the new code 

90460 and the payment rate for deleted 

code 90466 for new code 90461. The 

commenter suggested eliminating the 

reference to deleted codes 90467 and 

90468 because there is no crosswalk to 

these codes. 

Response: We agree that code 90465 

should be used to determine the 2009 

rate, and that codes 90467 and 90468 

should not be used. However, code 

90465 was only for children younger 

than 8 years of age and the new code 

90460 is for children through age 18. 

Therefore, states need to use claims 

volume for code 90465 and code 90471 

to impute the payment amount in the 

base period for the current code 90460. 

Code 90471 is also included because 

prior to January 1, 2011, code 90471 was 

used for children above age 8. This 

change is demonstrated in the following 

example: 

• 90465 = $10 × 0.70 service volume = 

$7.00 

• 90471 = $10 × 0.30 service volume = 

$3.00 

• Total cost equals $10.00 for the new, 

single code, 90460. 

Comment: Several commenters 

expressed concern that their state does 

not currently use the immunization 

administration code and instead uses 

the product code so that the state has 

vaccine-specific data. 

Response: This issue was discussed in 

the proposed rule. States that do not 

currently use the immunization 

administration code, or did not use it in 

2009, will need to identify the CY 2009 

payment for vaccine administration 

separate from the vaccine itself. We 

understand that using the product code 

provides vaccine specific data, however, 

since we will only issue additional 

payment based on the immunization 

administration code, all states will need 

to submit data using the correct codes. 

We will provide future assistance to 

states on ways to modify the 

immunization administration codes so 

that they can be used properly but still 

capture vaccine-specific information. 

Summary of Final Policy: This final 

rule defines the policy for additional 

payments for qualifying providers under 

the VFC program and how to establish 

the 2009 Medicaid rate for vaccine 

administration. Because the 

immunization administration codes 

changed in 2011, states will need to 

determine the payment amount from 

other codes based on service volume. 

The service volume of code 90465 and 

of the pediatric claims for code 90471 

will need to be imputed to determine 

the new payment amount for code 

90460. 

In addition, VFC providers will be 

reimbursed at the lesser of the 2013 and 

2014 Medicare rates or the maximum 

regional VFC amount in those years. 

5. Primary Care Service Payments Made 

by Managed Care Plans, and Enhanced 

Federal Match (§ 438.6 and § 438.804) 

We proposed to implement the 

managed care requirements through a 

state-by-state review of managed care 

contracts and applicable procedures. We 

will review managed care contracts to 

ensure that they— 

• Provide for payment at the 

minimum Medicare primary care 

payment levels; 

• Require that eligible physicians 

receive direct benefit of the payment 

increase for each of the primary care 

services specified in this rule. This 

requirement must be met regardless of 

whether a physician is salaried, or 

receives a fee for service or capitated 

payment. We emphasize that increased 

payment must correspond directly to 

the volume and payment amounts 

associated with the primary care 

services specified in this rule; 

• Require that all information needed 

to adequately document expenditures 

eligible for 100 percent FFP is reported 

by MCOs, PIHPs, and PAHPs to the 

states which, in turn, will report these 

data to CMS; and 

• Specify that states must receive 

from MCOs, PIHPs and PAHPs data on 

primary care services which qualify for 

payment under this rule. The managed 

care reporting requirements would 

ensure that states have data on 

increased provider payments necessary 

to justify any adjustments to the 

capitation rates paid by the state under 

the contract. 

We solicited comment on these 

provisions and additional suggestions 

on how to ensure that managed care 

plans provide the necessary data to the 

state, as well as how to ensure and 

monitor that managed care plans 

appropriately pass on to physicians the 

portion of the increased capitation rate 

that is attributable to the primary care 

rate increase. 

States have expressed concern about 

their ability to align capitated payment 

made as of July 1, 2009 to payment 

made for services provided in CYs 2013 

and 2014 for the purpose of claiming 

increased FFP. We recognize the 

particular challenges inherent in 

identifying the payment differential 

eligible for 100 percent FFP for primary 

care services provided by managed care 

plans because such payments are not 

necessarily linked to individual services 

and physicians. We believe that the 

most reasonable way to apply this 

provision for managed care rates is to do 

the following: 

Step I: Identify the proportion of total 

capitation linked to primary care. 

Step II: Identify the fee schedule 

amount incorporated into the actuarial 

model for primary care services 

represented by the proportion of 

payment for primary care services. Here, 

we assume the visit rate equals $25. 


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Step III: Determine the annualized 

cost built into the actuarial model for 

primary care. Here we assume 8 visits 

annually. $25 per visit rate × 8 visits 

annually = $200. 

Step IV: Determine the per visit cost 

discounted for volume. $200/12 = 

$16.67 per member per month. 

In this example, $16.67 equals the 

imputed amount of the monthly 

payment made on a fee for services basis 

for an individual primary care service. 

The state will compare this amount to 

the Medicare rate paid in CYs 2013 and 

2014 to determine the payment 

differential eligible for 100 percent 

federal matching funds. 

Specifically, we proposed that states 

would be required to submit the 

methodology they intend to use to 

identify the increment of the capitation 

payment attributable to increased 

provider rates to CMS for approval prior 

to the beginning of CY 2013. Further, we 

propose that, absent approval of its 

methodology from CMS, states would 

not be able to claim the enhanced 

Federal match for capitation payments 

to managed care plans. 

We solicited additional comments on 

how states might best meet these 

requirements. 

Comment: A number of commenters 

expressed concern about the short 

timeframe for implementing new 

managed care contracts, developing 

revised rate certifications, and 

identifying the rate differential eligible 

for 100 percent FFP, given the obstacles 

of obtaining historic claim and 

encounter data. 

Response: We are cognizant of the 

amount of planning and activity that 

must occur at the state, federal, health 

plan, and provider levels to implement 

the increase in primary care provider 

payments in CY 2013. Therefore, we 

will extend the deadline for CMS 

approval of all necessary documentation 

into CY 2013 in accordance with the 

following guidelines. States must 

submit the methodologies for 

identifying the 2009 baseline rate and 

the rate differential eligible for 100 

percent federal match to CMS no later 

than the end of the first quarter of CY 

2013. These requirements are specified 

in § 438.804 as modified from the 

proposed rule. Implementation of the 

increased payments for eligible primary 

care services to designated primary care 

providers is contingent upon CMS 

approval of the aforementioned 

methodologies, any necessary contract 

amendments, and certification of rates 

that take this rule into account. We will 

approve all required documents in a 

timely manner. In the interim, the state 

and contracting MCOs, PIHPs, and 

PAHPs have the option of issuing 

payment for primary care services in 

accordance with existing contracts for 

CY 2012 or under contracts executed 

under standard contracting schedules 

for CY 2013 that do not account for the 

increased payments. Once the state 

receives CMS approval of the 

methodology for calculating the primary 

care rate differential, certified rates, and 

contract amendments, the state will 

adjust their rates previously paid to the 

MCOs, PIHPs and PAHPs to reflect the 

enhanced payment. All eligible claims 

that were claimed and paid in CY 2013 

prior to CMS approval will be readjudicated and the MCO, PIHP or 

PAHP will direct the full amount of the 

enhanced payment to the eligible 

provider. The MCO, PIHP or PAHP must 

remit the enhanced payment to eligible 

primary care providers without any 

effort from the provider. We will review 

managed care contracts for this 

assurance. 

Comment: A commenter asked 

whether certification (of the rate) is 

needed if the methodology is to be 

submitted separate from the rate 

certification. 

Response: We anticipate that states 

will first receive CMS approval of the 

baseline and payment differential 

methodologies, and then receive 

concurrent approval of managed care 

contracts. Section 438.804(a)(1) requires 

that the states submit the methodologies 

for determining the 2009 baseline rate 

and the payment differential for CMS 

review no later than the end of the first 

quarter of CY 2013. Submission of the 

above-mentioned methodologies does 

not negate the requirements of 

§ 438.6(c). Again, we emphasize that 

contracts approved after January 1 must 

be effective for services provided on and 

after January 1 of CYs 2013 and 2014. 

We have awarded a technical assistance 

contract to a firm with actuarial 

expertise and experience with rate 

setting activities across the states to 

develop a framework for states in 

developing the methodologies required 

under this rule. Written guidance and 

informational calls will be made 

available before CY 2013. 

Comment: A commenter urged that 

health plans should be provided with 90 

days notice prior to the implementation 

of reimbursement changes. 

Response: Although we agree that 

states should notify health plans in a 

timely manner of changes in 

reimbursement, adding a federal 

notification requirement for the state to 

the health plan is beyond the scope of 

this rule and exceeds the normal and 

customary role of the federal 

government in the relationship between 

the state and the health plan. 

Comment: One commenter suggested 

that CMS should clarify that the 

managed care payment will be based on 

FFS or base utilization data used for rate 

setting. A commenter also noted that 

developing a reasonable estimate of the 

increased amount paid for primary care 

services was difficult due to lack of 

encounter data as of July 1, 2009. Other 

commenters requested guidance on how 

to develop the baseline 2009 rate for 

primary care services when populations 

may not have been enrolled in MCOs, 

PIHPs or PAHPs in 2009. Other 

commenters requested clarification as to 

whether the four-step process provided 

in the proposed rule for identifying the 

rate differential is a preferred approach. 

Response: We acknowledge the 

variance that exists among the states in 

terms of the types of encounter, claim 

and pricing information available from 

MCOs, PIHPs and PAHPs for rate setting 

purposes, and the complexity entailed 

in defining the baseline service rate for 

populations that may not have been in 

managed care delivery systems in 2009. 

We expect that, where feasible, the state 

will use the same methodology for feefor-service payments through MCOs that 

is provided for direct fee-for-service 

payments from the state. In cases where 

this is not possible, however, we do not 

prescribe a uniform approach to 

identifying the 2009 baseline but we 

have revised § 438.804(a) to add the new 

§ 438.804(a)(1)(i) to require states to 

submit the methodology for the 2009 

baseline rate in conjunction with the 

methodology used to identify the rate 

differential as specified in 

§ 438.804(a)(1)(ii). The four-step process 

outlined in the proposed rule is one 

suggested approach for states that would 

find it produces an accurate result based 

on reasonable and documented data and 

assumptions available. As stated 

throughout the rule, we will continue a 

dialogue with states on valid and 

reasonable approaches to defining the 

2009 baseline rate and identifying the 

rate differential required under 

§ 438.804(a)(1)(i) and (ii). We reserve the 

right to request and inspect the 

supporting data used by the state and 

actuaries to develop the methodologies 

required under § 438.804(a)(1)(i) and 

(ii). 

Comment: A commenter urged that 

CMS should not increase payments only 

to MCOs that had been paying for the 

Medicaid primary care services at less 

than the Medicare rates as this would 

result in rewarding low paying plans. 

Response: The statute applies equally 

across all eligible providers for all of the 

services specified in this rule. This may 


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66688 Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 

result in increased payment to MCOs, 

PIHPs and PAHPs that previously had 

reimbursed providers less than the 

Medicare rate. However, we expect that 

physicians—not the MCOs, PIHPs or 

PAHPs—will receive direct benefit of 

the higher payment. 

Comment: Several commenters 

requested general guidance if the 

enhanced payment to primary care 

providers should be disseminated on a 

retroactive or prospective basis and 

other commenters urged CMS to provide 

overall flexibility in this process. For 

example, the American Academy of 

Actuaries asked CMS to consider a 

number of approaches, including (1) an 

add-on payment to the PMPM based on 

a retrospective review of eligible 

primary care utilization; (2) full risk 

capitation; (3) prospective capitation 

with some type of risk sharing that 

incorporates retrospective reconciliation 

to the documented expenditures; and (4) 

non risk payment with retrospective 

reconciliation. Another commenter 

recommended that CMS impose a 

threshold for enhanced reimbursement 

that is based on encounter data 

submitted to the states’ MMIS. 

Response: We appreciate the amount 

of feedback and thoughtful suggestions 

received from our request for comment 

on how the enhanced payment is made 

to eligible primary care physicians. 

Because claims and payment processes 

vary by state and between health plans, 

we are permitting flexibility in the 

specifics of how these tasks are 

accomplished. Should a state obtain 

approval of the required methodologies, 

the MCO, PIHP or PAHP contract 

amendments, and rate certifications 

after January 1 of 2013 and 2014, the 

state will need to clarify to CMS how it 

will implement payment retroactively to 

the beginning of the year. We expect to 

address retroactive claims processing as 

part of CMS’s ongoing dialogue with the 

states. 

Comment: One commenter asked 

whether a state’s adherence to the 

documentation requirements specified 

in § 438.6(c)(4) were sufficient to meet 

the documentation requirements 

provided under the new 

§ 438.6(c)(5)(vi)(B). Additionally, 

another commenter queried whether the 

documentation requirement in 

§ 438.6(c)(5)(vi)(B) sufficiently 

described CMS’s oversight role to 

ensure that payments are made in 

accordance with this final rule. 

Response: The documentation 

requirement in the new 

§ 438.6(c)(5)(vi)(B) is more expansive, 

therefore, a state may not assume that it 

has met the new requirements by 

satisfying those of the existing managed 

care regulation. In deference to the wide 

variation in states’ current oversight and 

reporting mechanisms for health plans, 

we will permit states to specify the 

documentation needed from health 

plans to substantiate that the enhanced 

primary care rate was delivered to 

eligible primary care providers. The 

health plans must make such 

documentation available to the state for 

verification of payments made as well as 

make such documentation available for 

audit or reconciliation processes. 

However, in response to the comment 

about our oversight role, we have 

modified the language in 

§ 438.6(c)(5)(vi)(B) to require health 

plans to provide sufficient 

documentation so that the state and 

CMS can ensure that complaint 

payments have been made in 

accordance with this rule. 

Comment: One commenter noted that 

there is no explicit reference in the 

proposed rule to the data certification 

requirements at § 438.604. 

Response: We believe that a specific 

reference to the data certification 

requirements at § 438.604 is not 

warranted because those requirements 

are not being modified by this rule. 

Further, we believe that the 

documentation required under this 

section falls under the scope of 

§ 438.604. 

Comment: We received a number of 

comments expressing concern about the 

projected overall impact of this payment 

on the future of doing business under 

managed care delivery systems. One 

commenter stated that in CYs 2013 and 

2014 MCOs, PIHPs and PAHPs may find 

contracting with specialists more 

difficult when these providers receive 

less than the Medicare rate. Conversely, 

providers were concerned that MCOs, 

PIHPs and PAHPs would reduce 

payment for primary care services after 

the 2-year period and believed that 

states should be mindful of this. 

Response: We expect this rule to have 

positive effects on payment rates for 

primary care physicians serving 

Medicaid patients that will justify the 

operational changes required to 

implement the increased rates. 

Comment: A commenter stated that 

CMS oversight and enforcement of 

actuarial soundness policies should 

ensure that rate adjustment increase to 

plans do not result in an inappropriate 

decrease in other factors used in rate 

setting methodology. Plans must 

provide access to all information used to 

make adjustment for this provision. 

Response: We will exercise oversight 

and enforcement of appropriate policies 

through our review and approval of 

managed care contracts and certification 

of the actuarially sound rate. 

Comment: One commenter stressed 

that health plans must be given the right 

to appeal new health plan capitation 

rates to an unbiased third party if they 

believe they do not meet actuarial 

soundness requirement. 

Response: The ability to negotiate 

capitation rates remains between states 

and health plans and this rule does not 

affect any established process, or create 

a new process, for a health plan to 

appeal revised capitation rates devised 

for purposes of implementing this rule. 

Summary of Final Policy: We 

recognize the implementation 

challenges for identifying the 2009 

baseline rate and the payment 

differential eligible for 100 percent 

federal financial participation, as well 

as appropriate methods for delivering 

the payment to eligible providers 

contracted with MCOs, PIHPs and 

PAHPs. To that end, we have extended 

deadlines for states to submit the 

abovementioned methodologies as 

required by § 438.804(a)(1) into CY 2013 

and necessary contract amendments and 

rates may be approved by CMS within 

that CY. The regulations clearly provide 

that the state has the flexibility in 

determining the 2009 baseline rate and 

the rate differential to comply with this 

rule, but the approach taken must be 

based on reasonable and documented 

data sources available to the state to 

accurately define these amounts to the 

fullest extent possible. We will review 

and approve the methodologies and 

refer to these methodologies to approve 

MCO, PIHP and PAHP contract 

amendments and rates necessary to 

implement this rule. This rule does not 

require a specific method for the MCOs, 

PIHPs or PAHPs to make the enhanced 

payment for primary care services to 

eligible providers, but the approach 

taken must ensure that the eligible 

primary care provider receives the full 

benefit of the enhanced payment. In 

deference to the wide variation in states’ 

current oversight and reporting 

mechanisms for health plans, we will 

permit states to specify the 

documentation needed from health 

plans to substantiate that the enhanced 

primary care rate was delivered to 

eligible primary care providers. The 

health plans must make such 

documentation available to the state for 

verification of payments made as well as 

make such documentation available for 

audit or reconciliation processes. As 

stated throughout this rule, we will 

continue a dialogue with the states on 

implementation challenges that may 

arise. 


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Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 66689 

B. Vaccine Administration Under the 

Vaccines for Children (VFC) Program 

1. General Statement 

On May 11, 2012, we issued a 

proposed rule (77 FR 27671) in the 

Federal Register titled ‘‘Medicaid 

Program; Payments for Services 

Furnished by Certain Primary Care 

Physicians and Charges for Vaccine 

Administration under the Vaccines for 

Children Program’’. In that proposed 

rule, we specified that we would add 42 

CFR part 441 subpart K, § 441.500 

through § 441.515, to codify the 

requirements of the Vaccines for 

Children Program. However, on May 7, 

2011, we issued a final rule (77 FR 

26828) in the Federal Register titled 

‘‘Medicaid Program; Community First 

Choice Option’’, which codified subpart 

K, § 441.500 through § 441.590. 

Therefore, we are adding the provisions 

to codify the requirements of the 

Vaccines for Children Program as 

subpart L, § 441.600 through § 441.615. 

This final rule adds 42 CFR part 441 

subpart L to codify the requirements of 

the Vaccines for Children Program. CMS 

is finalizing the general requirements of 

the VFC program in this final rule at 

§ 441.610. Federally-purchased vaccines 

under the VFC Program are made 

available to children who are 18 years 

of age or younger and who are any of 

the following: 

• Eligible for Medicaid. 

• Not insured. 

• Not insured for the vaccine and 

who are administered pediatric vaccines 

by a federally-qualified health center 

(FQHC) or rural health clinic (RHC). 

• An Indian, as defined in section 4 

of the Indian Health Care Improvement 

Act. 

Under the VFC program, vaccines 

must be administered by programregistered providers. Section 1928(c) of 

the Act defines a program-registered 

provider as any health care provider 

that— 

• Is licensed or authorized to 

administer pediatric vaccines under the 

law of the state in which the 

administration occurs without regard to 

whether or not the provider is a 

Medicaid-participating provider. 

• Submits to the state an executed 

provider agreement in the form and 

manner specified by the Secretary. 

• Has not been found, by the 

Secretary or the state to have violated 

the provider agreement or other 

applicable requirements established by 

the Secretary or the state. 

Section 1928 of the Act requires each 

state to establish a VFC Program (which 

may be administered by the State 

Department of Health) and include this 

program in the state plan (§ 441.605) 

under which certain specified groups of 

children are entitled to receive qualified 

pediatric immunizations without charge 

for the cost of the vaccine. 

In the October 3, 1994 Federal 

Register, we published a notice with 

comment period entitled, ‘‘Charges for 

Vaccine Administration Under the 

Vaccines for Children (VFC) Program’’ 

(59 FR 50235) (hereinafter referred to as 

the ‘‘October 1994 VFC notice’’) that set 

forth, by state, the interim regional 

maximum charges for the VFC program. 

These charges represented the 

maximum amount that a provider in a 

state could charge for the administration 

of qualified pediatric vaccines to 

federally vaccine-eligible children 

under the VFC Program. This final rule 

updates those fees. 

In accordance with section 

1928(c)(2)(C)(ii) of the Act, § 441.615(e), 

we proposed that physicians 

participating in the VFC program can 

charge federally vaccine-eligible 

children who are not enrolled in 

Medicaid the maximum administration 

fee (if that fee reflects the provider’s cost 

of administration) regardless of whether 

the state has established a lower 

administration fee under the Medicaid 

program. 

Section 441.615(e) provides that there 

will be no federal Medicaid matching 

funds available for administration of 

vaccines to children not enrolled in the 

Medicaid program. A provider may only 

bill Medicaid for the administration of 

a vaccine if the child is enrolled in 

Medicaid. 

Of the 171 comments received in 

response to the proposed rule, 21 of 

them addressed the updated 

administration fee schedule in the VFC 

program. 

Comment: One comment questioned 

the codification of the VFC program and 

stated that this represented major 

changes in the VFC program. 

Response: The intent of this section of 

the final rule is not to create new 

requirements for states or to change any 

rules of the VFC program, but instead to 

codify existing rules and update the 

administration fee rates. All states 

currently have established pediatric 

vaccine distribution programs in place 

that meet the requirements of section 

1928 of the Act, and therefore, states are 

not required to change their existing 

state plan to reflect the codification of 

the VFC program. Submission of a new 

SPA is only necessary if the state 

chooses to change the amount that it 

pays Medicaid providers for the 

administration fee. 

Comment: Two commenters 

discussed the impact of the updated fee 

schedule on the uninsured and 

underinsured. The first commenter 

recommended that uninsured children 

be exempt from paying administration 

fees and the second recommended that 

VFC providers continue to have 

flexibility to provide VFC vaccines at no 

administrative cost or at reduced cost to 

uninsured children. 

Response: While we acknowledge the 

commenter’s concern, under section 

1928 of the Act, we do not have the 

authority to exempt uninsured children 

from administration fees. Providers 

continue to have the flexibility to 

determine the administration fee they 

will collect from families of uninsured 

and underinsured children, as long as 

the administration fee does not exceed 

the state’s regional maximum 

administration fee. However, section 

1928(c)(2)(C)(iii) of the Act provides 

that providers cannot deny 

administration of VFC vaccines to a 

vaccine-eligible child due to the 

inability to pay the administration fee. 

Comment: Several comments 

expressed support of the updated 

regional maximum administration fee 

schedule. None of the comments were 

critical of the updated fee schedule or 

the methodology used to update the fee 

schedule, or provided alternative 

suggestions. 

Response: Based on the support of the 

methodology used to update the fee 

schedule and the acknowledgement that 

an updated fee schedule is needed, we 

are finalizing the updated fee schedule 

as proposed. 

Comment: One commenter suggested 

that we link the regional maximum 

administration fee to the Medicare 

Economic Index, and publish the fee 

schedule annually. 

Response: The purpose of this final 

rule is to update the fee schedule, which 

has not been updated since 1994. 

Comment: Two commenters suggested 

that CMS consider establishing a 

minimum payment rate for providers. 

Response: The establishment of a 

minimum payment level for VFC 

providers goes beyond the scope of what 

was included in the proposed rule. 

Comment: Multiple commenters 

questioned whether states will continue 

to have the authority to set their 

payment rates under the Medicaid 

program at a rate that is lower than the 

State’s regional maximum 

administration fee. 

Response: Updating the fee schedule 

will not impact states’ ability to 

establish payment rates under the VFC 

program. States continue to have the 

flexibility to establish their payment 

rate for the VFC program at any level 

that does not exceed the newly updated 


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66690 Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 

regional maximum administration fee. If 

a state wishes to change its payment 

rate, it needs to submit a SPA to CMS. 

Much of the confusion related to state 

flexibility to establish payment rates is 

due to the requirements in the primary 

care payment increase section of this 

rule which requires that qualifying 

providers are paid at the lesser of the 

Medicare rate or the updated state 

regional maximum administration fee in 

2013 and 2014. While states do 

maintain the flexibility to set the 

reimbursement rate for the VFC 

program, qualifying primary care 

providers who administer vaccines to 

children enrolled in Medicaid under the 

VFC program are required to be paid at 

the lesser of the Medicare rate or the 

updated State regional maximum 

administration fee for vaccine 

administration for those 2 years. 

Summary of Final Policy: We are 

finalizing the updated regional 

maximum VFC ceilings as proposed, as 

shown in Table 1. 

TABLE 1—REGIONAL MAXIMUM ADMINISTRATION FEE BY STATE

State 

Current regional maximum fee Updated regional maximum fee 

Alabama ................................................................................................................................................................... $14.26 $19.79 

Alaska ...................................................................................................................................................................... 17.54 27.44 

Arizona ..................................................................................................................................................................... 15.43 21.33 

Arkansas .................................................................................................................................................................. 13.30 19.54 

California .................................................................................................................................................................. 17.55 26.03 

Colorado .................................................................................................................................................................. 14.74 21.68 

Connecticut .............................................................................................................................................................. 16.56 23.41 

Delaware .................................................................................................................................................................. 16.55 22.07 

District of Columbia ................................................................................................................................................. 15.13 24.48 

Florida ...................................................................................................................................................................... 16.06 24.01 

Georgia .................................................................................................................................................................... 14.81 21.93 

Guam ....................................................................................................................................................................... ........................ 23.11 

Hawaii ...................................................................................................................................................................... 15.71 23.11 

Idaho ........................................................................................................................................................................ 14.34 20.13 

Illinois ....................................................................................................................................................................... 16.79 23.87 

Indiana ..................................................................................................................................................................... 14.47 20.32 

Iowa ......................................................................................................................................................................... 14.58 19.68 

Kansas ..................................................................................................................................................................... 14.80 20.26 

Kentucky .................................................................................................................................................................. 14.17 19.93 

Louisiana .................................................................................................................................................................. 15.22 21.30 

Maine ....................................................................................................................................................................... 14.37 21.58 

Maryland .................................................................................................................................................................. 15.49 23.28 

Massachusetts ......................................................................................................................................................... 15.78 23.29 

Michigan ................................................................................................................................................................... 16.75 23.03 

Minnesota ................................................................................................................................................................ 14.69 21.22 

Mississippi ................................................................................................................................................................ 13.92 19.79 

Missouri .................................................................................................................................................................... 15.07 21.53 

Montana ................................................................................................................................................................... 14.13 21.32 

Nebraska .................................................................................................................................................................. 13.58 19.82 

Nevada ..................................................................................................................................................................... 16.13 22.57 

New Hampshire ....................................................................................................................................................... 14.51 22.02 

New Jersey .............................................................................................................................................................. 16.34 24.23 

New Mexico ............................................................................................................................................................. 14.28 20.80 

New York ................................................................................................................................................................. 17.85 25.10 

North Carolina .......................................................................................................................................................... 13.71 20.45 

North Dakota ............................................................................................................................................................ 13.90 20.99 

Ohio ......................................................................................................................................................................... 14.67 21.25 

Oklahoma ................................................................................................................................................................. 13.89 19.58 

Oregon ..................................................................................................................................................................... 15.19 21.96 

Pennsylvania ............................................................................................................................................................ 15.76 23.14 

Puerto Rico .............................................................................................................................................................. 12.24 16.80 

Rhode Island ............................................................................................................................................................ 14.93 22.69 

South Carolina ......................................................................................................................................................... 13.62 20.16 

South Dakota ........................................................................................................................................................... 13.56 20.73 

Tennessee ............................................................................................................................................................... 13.70 20.00 

Texas ....................................................................................................................................................................... 14.85 22.06 

Utah ......................................................................................................................................................................... 14.52 20.72 

Vermont ................................................................................................................................................................... 13.86 21.22 

Virginia ..................................................................................................................................................................... 14.71 21.24 

Virgin Islands ........................................................................................................................................................... 15.09 21.81 

Washington .............................................................................................................................................................. 15.60 23.44 

West Virginia ............................................................................................................................................................ 14.49 19.85 

Wisconsin ................................................................................................................................................................. 15.02 20.83 

Wyoming .................................................................................................................................................................. 14.31 21.72 


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Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 66691 

III. Provisions of the Final Regulations 

This final rule incorporates many of 

the provisions of the proposed rule. 

Those provisions of this final rule that 

differ from the proposed rule are as 

follows: 

• Section 438.6(c)(5)(vi)(B) has been 

modified to clarify our oversight role by 

requiring health plans to provide 

sufficient documentation so that both 

the state and CMS can ensure that 

complaint payments have been made in 

accordance with this rule. 

• Section 438.804(a)(1) has been 

changed from a description of the 2009 

baseline rate to a general statement of 

the two methodologies the states are 

required to submit to CMS for review 

and approval to implement the payment 

increase to primary care providers. 

• Section 438.804(a)(1)(i) replaces the 

description of the 2009 baseline 

payment as provided in § 438.804(a)(1) 

in the proposed rule to clarify that the 

states must submit a valid and 

reasonable methodology for identifying 

the provider payments that would have 

been made by the MCO, PHIP or PAHP 

for specified primary care services 

furnished as of July 1, 2009. This change 

is in recognition of the varying sources 

of data available to the states and the 

challenges associated with determining 

the rate for primary care services in 

2009 for populations that have 

transitioned from fee-for-service to 

managed care delivery systems after 

2009. We will need to review and 

approve the methodology for 

determining the 2009 baseline rate for 

specified primary care services to 

ensure that the data sources used are 

reasonable, reliable, and accurate to the 

fullest extent possible. 

• Section 438.804(a)(1)(ii) replaces 

the description of the methodology to 

identify the rate differential between the 

amount paid as of July 1, 2009 for 

specified primary care services and the 

rate required under this rule. This 

requirement was designated as 

§ 438.804(a)(2) under the proposed rule. 

The reference to ‘‘managed care 

provider’’ was removed and replaced 

with ‘‘MCO, PIHP or PAHP’’ for 

consistency with 42 CFR part 438. 

• Section 438.804(a)(3) has been 

revised and redesignated as 

§ 438.804(a)(2) to indicate that the 

methodology for identifying the 2009 

baseline rate and the differential in 

payment between the provider 

payments that would have been made 

by the MCO, PIHP or PAHP on July 1, 

2009 and the amount needed to comply 

with the contractual requirement under 

§ 438.6(c)(5)(vi) must be submitted to 

CMS for approval by the end of the first 

quarter of CY 2013. This is in 

recognition of the amount of planning 

and activity that must occur at the state, 

federal, health plan and provider levels 

to implement the increase in primary 

care provider payments in CY 2013. 

• A new § 438.804(a)(3) has been 

added to clarify that the methodologies 

required under the section will be used 

by CMS in reviewing necessary MCO, 

PIHP and PAHP contract amendments 

and rates to implement the enhanced 

payment to primary care providers 

under this rule. 

• Section 447.400(a) has been revised 

to permit recognition of physician 

specialties and subspecialties by the 

American Board of Physician 

Specialties (ABPS) and the American 

Osteopathic Association (AOA) as well 

as the American Board of Medical 

Specialties, which was the only Board 

referenced in the proposed rule. This 

change recognizes the fact that these 

three Boards are the three nationally 

recognized physician certification 

Boards. 

• Section 447.400(a)(2) has been 

revised to require physicians to selfattest that they are appropriately Board 

certified or that 60 percent of their 

Medicaid claims are for eligible E&M 

codes. This lessens the burden on State 

Medicaid agencies which, under the 

provisions of the proposed rule, were 

required to use these measures to verify 

the eligibility for higher payment of all 

physicians who self-attested to 

eligibility. 

• A new § 447.400(b) has been added, 

specifying that, at the end of CY 2013 

and CY 2014, the Medicaid agency must 

review a statistically valid sample of 

physicians who received higher 

payments to verify they met the 

requirements for such payment. Section 

447.400(3) has been deleted because 

Medicaid agencies need no longer verify 

the self-attested eligibility of the 

physician. 

• A new § 447.400(d) has been added 

to require that states collect and report 

to CMS data on the impact of the higher 

rates on physician participation. That 

data will assist Congress in determining 

determine whether or not to extend the 

provisions of this rule beyond the end 

of CY 2014. 

• Section 447.405(a)(1) has been 

revised to require Medicaid agencies to 

pay eligible providers in CYs 2013 and 

2014 at the Medicare part B fee schedule 

rate that is applicable either to the 

specific site of service or to the office 

setting. States must also either make all 

Medicare locality adjustments or may 

pay a statewide rate per E&M code 

based on the mean Medicare rate across 

counties. The final rule makes these 

changes in recognition of the 

administrative burden to states 

associated with the need to make all site 

of service and geographic adjustments. 

• Section 447.410 has been revised to 

add a new requirement that Medicaid 

agencies identify in the required state 

plan the eligible codes that will be paid 

at the Medicare rate in CYs 2013 and 

2014 that were not paid under the state 

plan as of July 1, 2009. This is to assist 

in ensuring that eligible codes are not 

added solely for purposes of receiving 

100 percent FFP. This section also 

requires that the state plan specify the 

methodology the state will use to 

identify the 2013 and 2014 Medicare 

rates. 

• Section 447.415(b) has been revised 

to specify that, in calculating the 2009 

Medicaid base rate, incentive, bonus 

and performance-based payments may 

be excluded. This is because these 

payments are not part of statewide fee 

schedule rates, but are paid only to 

physicians who meet specific goals or 

criteria. However, volume based 

payments, such as those made up to the 

average commercial rate, must be 

included since those payments, even 

when paid as aggregate payments, are 

based on code-specific calculations. 

• Section 447.410(d) has been revised 

to clarify that bundled payments 

exclude encounter and per diem rates. 

This clarifies that physician services 

provided at sites such as clinics or 

nursing homes which are reimbursed as 

part of the encounter or NF per diem 

and not under a physician fee schedule 

are not eligible for higher payment. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. To fairly evaluate whether an 

information collection should be 

approved by OMB, section 3506(c)(2)(A) 

of the Paperwork Reduction Act of 1995 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 


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66692 Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 

To derive average costs, we used data 

from the U.S. Bureau of Labor Statistics 

for all salary estimates. The salary 

estimates include the cost of fringe 

benefits, calculated at approximately 35 

percent of salary, which is based on the 

Bureau’s June 2011 Employer Costs for 

Employee Compensation report. 

In our May 11, 2012, proposed rule, 

we solicited public comment on each of 

the section 3506(c)(2)(A)-required issues 

for the following information collection 

requirements (ICRs). PRA-related 

comments were received as indicated 

below. 

A. ICRs Regarding Contract 

Requirements (§ 438.6) 

In § 438.6(c)(3)(v) and (c)(5)(vi), states 

are required to modify managed care 

contracts and accompanying capitation 

rates through which MCOs, PIHPs or 

PAHPs will comply with the 

requirements of the Affordable Care Act. 

There is a one-time burden to the state 

for amending such contracts for the 

following provisions: (1) To assure that 

the level of payment is consistent with 

42 CFR part 447, subpart G; (2) to assure 

that the specified physicians (whether 

directly or through a capitated 

arrangement) receive an amount at least 

equal to the amount set for and required 

under part 447; and (3) to assure that the 

state receives sufficient documentation 

regarding those adjusted payments. 

The one-time burden associated with 

the requirements under § 438.6(c)(3)(v) 

and (c)(5)(vi) is the time and effort it 

would take each of the 37 state 

Medicaid programs with MCOs, PIHPs 

or PAHPs and the District of Columbia 

(38 total respondents) to amend an 

average of three managed care contracts. 

The associated requirements and burden 

estimates have been approved by OMB 

under OCN 0938–0920. Section 

438.6(c)(3)(v) and (c)(5)(vi) would not 

impose any new or revised reporting or 

recordkeeping requirements and, 

therefore, does not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). 

The burden estimates approved under 

OCN 0938–0920 take into account the 

number of modifications required to 

managed care contracts by the states on 

an annual basis due to changes in 

federal law and the operations of a 

state’s Medicaid program. As the 

amount of activity that would require 

contract modifications may vary across 

the states, the approved burden 

estimates accommodate that variation. 

Therefore, the one-time contract 

modification required by this rule fits 

within the existing estimates. 

B. ICRs Regarding Primary Care 

Provider Payment Increases 

(§ 438.804(a)(1) and (2)) 

In § 438.804(a)(1) and (2), states are 

required to submit the methodologies 

they intend to use to develop a baseline 

for primary care service payments in 

2009 as well as the differential between 

that baseline and the CY 2013 and 2014 

rate to CMS for review and approval no 

later than the end of the first quarter of 

CY 2013. Further, we indicate that we 

will use those approved methodologies 

to review and approve managed care 

contracts and rates that are compliant 

with this provision. 

The burden associated with the 

requirements under § 438.804(a)(1) and 

(2) is the time and effort it would take 

each of the 37 state Medicaid programs 

and the District of Columbia (38 total 

respondents with managed care delivery 

systems) to develop both methodologies, 

as well as managed care capitation rates 

which reflect the increased payments to 

implement this section. We received 

comments maintaining that the 

proposed rule had significantly 

underestimated the costs of 

implementing this provision in a 

managed care delivery system. In 

response, we are revising the burden 

estimates that were set out in the 

proposed rule. The task of developing 

both methodologies will involve a onetime effort on the part of financial, legal 

and management staff, as well as 

significant contractual actuarial 

resources. Most of the 38 states use 

contracted actuarial firms to develop 

managed care capitation methodologies 

and rates. Since the development of the 

2009 baseline and CYs 2013–2014 rate 

differentials require actuarial analysis, 

we have estimated those contractual 

costs. Once the methodologies are 

developed by each respondent’s 

contracted actuary, each respondent 

will need to review and approve them 

prior to submission to CMS. 

We estimate that it will take 

approximately 100 hours of contractual 

actuarial services per respondent at a 

cost of $5,398 to complete the data and 

actuarial analysis to develop these 

methodologies at a total cost of $205,124 

(38 × $5,398). It will also take 10 hours 

per respondent at a cost of $482.86 to 

review and validate these 

methodologies in order to submit them 

to CMS at a total cost of $18,348.68 (38 

× $482.86). In deriving these figures, we 

used the following hourly labor rates 

and estimated the time to complete this 

task: $53.98/hr and 100 hours for 

contracted actuarial staff; $49.07/hr and 

2 hours for legal staff to review the 

methodology for compliance with the 

statute ($98.14); and $48.09/hr and 8 

hours for managerial staff to review and 

submit these methodologies to CMS 

($384.72). The total one-time burden 

amounts to $223,473 ($205,124 + 

$18,349). 

C. ICRs Regarding General 

Requirements—Provider Agreements 

(§ 441.605(b)) 

This requirement is exempt from the 

PRA since we expect to receive fewer 

than 10 submissions (annually) from 

providers, if any. The requirement that 

providers must have provider 

agreements in place in order to 

participate in the VFC program has been 

in effect since the program was 

implemented in 1994. The provision in 

this regulation is merely codifying the 

requirement and no further action is 

necessary in regard to providers who are 

currently participating in the VFC 

program. 

D. ICRs Regarding Administrative Fee 

Requirements (§ 441.615(d)) 

This requirement is exempt from the 

PRA since we expect to receive fewer 

than 10 submissions (annually) from 

states. The requirement that a state 

submit a state plan was a requirement 

when the VFC program was first 

established in 1994, and all states 

submitted state plans at that time. A 

state now only submits a state plan 

amendment related to the VFC program 

when it makes a change to the state’s 

administration fee. In 2011, only two 

states submitted state plans that made 

changes to the state’s administration fee 

under the VFC program. Even with the 

publication of the updated fee schedule, 

we do not anticipate that many states 

will make changes to their 

administration fee. 

E. ICRs Regarding Primary Care Services 

Furnished by Physicians With a 

Specified Specialty or Subspeciality 

(§ 447.400(a), (b), and (d)) 

In § 447.400(a), physicians are 

required to self-attest that they are 

Board certified in an eligible specialty 

or subspecialty or that 60 percent of the 

claims that they submit are for eligible 

E&M codes. In § 447.400(b), at the end 

of CY 2013 and CY 2014, the state must 

review a statistically valid sample of 

physicians who received higher 

payments to verify that they meet the 

one requirement to which they attested. 

The burden associated with the 

requirements under § 447.400(a) and (b) 

is the time and effort it will take each 

of the 50 Medicaid Programs and the 

District of Columbia (51 total 

respondents) to establish a protocol for 

physician self-attestation and to conduct 


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and review a statistically valid sample 

of ‘‘eligible’’ physicians once in each of 

CYs 2013 and 2014. In the proposed 

rule we estimated that it would take 0.5 

hours to determine whether a physician 

may receive payment under the 

Affordable Care Act. In this final rule, 

we assess the burden based on MSIS 

data from the fourth quarters of FY 2008 

and 2009 which showed an average of 

2,245 physicians per state who currently 

bill, but whose eligibility for increased 

payment would need to be verified by 

the Medicaid agency. We increased this 

number by 10 percent to account for 

participation by new physicians for a 

total of 2,470 physicians. The reported 

burden, which relies on a review of each 

physician qualifications, represents 

CMS’s best estimate of the cost to 

sample data on physicians who selfattested. We relied on the data reported 

above in the absence of information 

about how each state plans to 

implement its sampling methodology. 

We used the following hourly labor 

rates and estimated the time to complete 

each task: 0.5 hours for a state’s 

Medicaid office and support staff 

working in the medical billing area to 

retrieve and assess claims for an 

individual physician; or 0.5 hours for 

administrative staff to review the Board 

certification status of a physician. Costs 

associated with these staff are reported 

at a cost of $14.12 for each half-hour 

derived from $28.24/hr each and 2,470 

physicians for an estimated cost of 

$34,876.40 per state ($14.12/hr × 2,470 

responses/state) or $1,778,696.40 total 

($34,876.40 × 51 states). 

While proposed in the proposed rule, 

this final rule removes the provision 

that would have required states to verify 

the self-attestations of all physicians by 

confirming Board certification or an 

appropriate claims history. In this final 

rule, states must annually sample (in a 

statistically valid manner) the 

physicians who receive higher payment 

to ensure that they are either Board 

certified or that 60 percent of the codes 

they bill to Medicaid are those codes 

identified in this rule. We are not able 

to estimate this burden with greater 

precision due to lack of data about the 

varying methods states will use to fulfill 

this requirement (see discussion under 

preamble section A. Payments to 

Physicians for Primary Care Services; 1. 

Primary Care Services Furnished by 

Physicians with Specified Specialty and 

Subspecialty (§ 447.400); a. Specified 

Specialties and Subspecialties). 

Therefore, we are not modifying our 

estimate of the impact of this section of 

the rule. 

In § 447.400(d) the state is required to 

submit to CMS the information relating 

to participation by physicians as well as 

the E&M codes. The form and timeframe 

for such submission has yet to be 

determined by CMS. 

F. ICRs Regarding State Plan 

Requirements (§ 447.410) 

In § 447.410, states will be required to 

submit a SPA to reflect the fee schedule 

rate increases for eligible primary care 

physicians under section 1902(a)(13)(C) 

of the Act. They will also be required to 

submit a SPA that reflects the payment 

increase for vaccine administration. The 

purpose of this requirement is to assure 

that when states make the increased 

reimbursement to providers, they have 

state plan authority to do so and they 

have notified providers of the change in 

reimbursement as required by federal 

regulations. In accordance with 

§ 447.205, public notification prior to 

the effective date of a SPA must be 

made whenever a state proposes a 

change to its methods and standards for 

setting payment rates for services. 

Consequently, the notification burden is 

included in the following estimate. 

The burden associated with the onetime requirement under § 447.410 is the 

time and effort it would take each of the 

50 state Medicaid programs and the 

District of Columbia (51 total 

respondents) to modify the Medicaid 

state plan to reflect payment consistent 

with the requirements in section 

1902(a)(13)(C) of the Act. This will 

require the review, preparation, 

approval, and submission of a CMSprovided SPA template. We estimate 

that it will take state staff working 48 

hours to complete all of the tasks 

associated with the review, preparation, 

approval, and submission of the SPA 

template. The estimated cost is 

$1,606.95 per state ($35.71/hr × 45 hr) 

or $81,954.45 total ($1606.95 × 51) for 

tasks completed by non-management 

staff working on SPA preparation. We 

estimate that this task will also require 

3 hour for state-employed legal staff at 

$49.07/hr or $147.21 (per response) for 

a total of $7,507.71 ($147.21 × 51). The 

combined total for cost associated with 

SPA preparation, including non legal 

and legal staff employed by the state, is 

$89,462.16 ($81,954.45 + $7,507.71). 

The ongoing burden for states is the 

determination of the updated fee for 

service rate in CY 2014. We estimate 

that it will take state staff working 20 

hours to set the new rate in accordance 

with the approved state plan 

amendment for this payment. The 

estimated cost is $607.07 ($35.71/hr × 

17 hr) per state or $30,960.57 total 

($607.07 × 51) for tasks completed by 

non-management staff working on SPA 

preparation. We estimate that this task 

will also require 3 hours for stateemployed legal staff at $49.07/hr or 

$147.21 (per response) for a total of 

$7,507.71 ($147.21 × 51). The combined 

total for cost associated with SPA 

preparation, including non legal and 

legal staff employed by the state, is 

$38,468.28 ($30,960.57 + $7,507.71). 

G. Summary of Annual Requirements 

and Burden Estimates 

TABLE 2—ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS AND ASSOCIATED BURDEN ESTIMATES 1

Regulation 

section(s) 

OMB 

Control No. Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Labor cost of 

reporting 

($) 

Total cost 

($) 

(rounded) 

§ 438.804(a)(1) and 

(2).

0938–1170 38 38 (total) ............... 110 4,180 ..................... 223,472.68 ............... 223,473 

§ 447.400(a) and (b) 0938–1170 51 2,470 (per state) or 

125,970 (total).

.50 1,235 (per state) or 

62,985 (total).

34,876.40 (per state) 

or 1,778,696.4 

(total).

1,778,696 

§ 447.410 (SPA 

amendments).

0938–1148 51 51 (total) ............... 48 2,448 ..................... 89,462.16 ................ 89,462 

§ 447.410 (amending 

FFS rate).

0938–1148 51 51 (total) ............... 20 1,020 ..................... 38,468.28 ................. 38,468 

Total .................. .................... ...................... ............................... .................. 70,633 ................... 2,130,099.52 ............ 2,130,100 

1There are no capital or maintenance costs incurred by any of the collections. Therefore, the capitol cost column has been omitted from the 

table. 


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H. Submission of PRA-Related 

Comments 

We have submitted a copy of this final 

rule to OMB for its review of the rule’s 

information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access our Web site at 

http://www.cms.hhs.gov/ 

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office at 410–786– 

1326. 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please 

submit your comments to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Attention: CMS Desk Officer, (CMS– 

2370–F) Fax: (202) 395–6974; or Email: 

OIRA_submission@omb.eop.gov. 

V. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 (September 30, 1993, 

Regulatory Planning and Review), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (September 19, 1980; 

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

of the Social Security Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (March 22, 1995; Pub. L. 104– 

4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated an ‘‘economically’’ 

significant rule, under section 3(f)(1) of 

Executive Order 12866. Accordingly, we 

have prepared a Regulatory Impact 

Analysis (RIA) that, to the best of our 

ability, presents the costs and benefits of 

the rulemaking. We solicited comment 

on the RIA analysis provided. In 

accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. This rule does not contain 

mandates that will impose spending 

costs on state governments in the 

aggregate of $139 million. The cost for 

increasing payment for primary care 

services in CYs 2013 and 2014 will be 

borne by the federal government, which 

will provide 100 percent matching 

funds equal to the difference between 

the Medicaid state plan rate in effect 

July 1, 2009 and the Medicare rate 

implemented in CY 2013 and 2014, or 

the rate using the CY 2009 CF, if higher. 

The Affordable Care Act requires higher 

payment to physicians for primary care 

services but does not impose increased 

costs on states. For the provisions 

associated with the charges for vaccine 

administration under the VFC program, 

the proposals will have no 

consequential effect on state, local, or 

tribal governments or on the private 

sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on state and local 

governments, preempts state law, or 

otherwise has Federalism implications. 

As indicated, this final rule will not 

have a substantial effect on state and 

local governments. 

B. Statement of Need 

This final rule will implement 

provisions of the Affordable Care Act 

that require payment by state Medicaid 

agencies of at least the Medicare rates in 

effect in CYs 2013 and 2014 or, if 

higher, the rate using the CY 2009 CF 

for primary care services furnished by a 

physician with a specialty designation 

of family medicine, general internal 

medicine, or pediatric medicine. Also, 

this final rule will implement the 

statutory payment provisions uniformly 

across all states, defines, for purposes of 

enhanced federal match, eligible 

primary care physicians, identifies 

eligible primary care services, and 

specifies how the increased payment 

should be calculated. Finally, this rule 

provides general guidelines for 

implementing the increased payment for 

primary care services delivered by 

managed care plans. 

C. Overall Impact 

The aggregate economic impact of this 

final rule is an estimated $5.600 billion 

in CY 2013 and $5.745 billion in CY 

2014 (measured in constant 2012 

dollars). In CY 2013, the federal cost is 

approximately $5.835 billion with $235 

million in state savings. In CY 2014, the 

federal cost is approximately $6.055 

billion with $310 million in state 

savings. The state savings are derived 

from the projected increases in 

reimbursement rates expected to occur 

between 2009 and 2013 through 2014, 

in the absence of the Affordable Care 

Act, which will now be paid for by the 

federal government. Absent the 

legislation, the projected increases in 

the reimbursement rates would be split 

between the federal government and 

states. This aggregate economic impact 

estimate includes the requirement that 

states reimburse specified physicians for 

vaccine administration at the lesser of 

the Medicare rate or the VFC regional 

maximum during CYs 2013 and 2014, 

which is estimated at $975 million in 

federal costs. The federal costs for 

funding that increase, in State payments 

during CYs 2013 and 2014, are 

estimated at $495 million and $480 

million, respectively. This also includes 

the impact on Medicaid-expansion CHIP 

expenditures; total CHIP expenditures 

are estimated to increase by $145 

million in CY 2013 and again in CY 

2014, reflecting an increase in federal 

CHIP expenditures of $155 million and 

a decrease in state CHIP expenditures of 

$10 million in each year. 

Overall, there is a net increase of $165 

million in the impact estimates of the 

final rule versus the proposed rule. This 

includes a $290 million increase in the 

estimates due to the inclusion of the 

costs associated with the primary care 

payment increase for enrollees in the 

Medicaid-expansion CHIP plans. 

Furthermore, this impact is partially 

offset by a decrease of $130 million as 

a result of the additional flexibility 

provided to states to determine the 

scope of the geographic adjustment to 

the MPFS. Lastly, there is a $5 million 

increase in the cost estimate for vaccine 

administration related to VFC provided 

in the final rule versus the proposed 

rule. 

Differences in the estimates provided 

in the final rule, versus those in the 

proposed rule, are mainly attributable to 

the inclusion of the Medicaid-expansion 

CHIP expenditures, as well as changes 

to the policy that allow states to either 

use the Medicare physician payment 

locality factors to determine the rates or 


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to develop a methodology to calculate 

mean or median Medicare rates to use 

statewide. The impacts presented in the 

proposed rule assume that states would 

pay primary care physician service rates 

that included the different Medicare 

locality factors. 

Overall, the estimated economic 

impacts are a result of this final rule 

providing states the ability to increase 

payment for primary care services 

without incurring additional costs (with 

the exception of states that did or would 

have reduced primary care physician 

service reimbursement rates in their 

Medicaid programs between 2009 and 

2014). We anticipate higher payment 

will result in greater participation by 

primary care physicians, including 

primary care subspecialists, in Medicaid 

thereby helping to promote overall 

access to care. At this time it is not 

known whether states will be willing or 

have the ability to sustain this level of 

payment to providers beyond CY 2014. 

D. Detailed Economic Analysis 

1. Anticipated Effects on Medicaid 

Recipients 

We anticipate this final rule will have 

a positive effect on Medicaid 

beneficiaries by increasing the 

availability of services through financial 

incentives to primary care physicians. 

The exact number of beneficiaries that 

will benefit is not known, however, we 

believe it will be substantial because 

this rule directly affects payment for a 

type of service which is a key 

component of the Medicaid program. 

Additionally, we believe primary care 

physicians will be encouraged to accept 

more Medicaid beneficiaries into their 

practices as a result of increased 

payment. 

We believe that this provision of the 

regulation will positively affect the 

availability of vaccination services as 

well. Currently, approximately 5 states 

reimburse the regional maximum for 

vaccine administration set by the VFC 

program. This final rule will require 

states to reimburse specified physicians 

for vaccine administration at the lesser 

of the Medicare rate or the VFC regional 

maximum during CYs 2013 and 2014. 

Finally, this rule will positively affect 

people who are dually eligible for 

benefits under the Medicare and 

Medicaid programs by increasing 

payment to physicians who serve this 

population. Specifically, Medicaid will 

pay higher amounts to providers. We 

anticipate that increased payment will 

promote greater access to primary care 

services for dually eligible beneficiaries. 

2. Anticipated Effects on Other 

Providers 

We anticipate this final rule will 

increase physician participation in 

Medicaid as most states reimburse 

physicians at well below the Medicare 

rates. Recently, as states have 

experienced budgetary constraints, they 

have sought to address this by reducing 

payments to providers, including 

physicians. This final rule will ensure 

that in CYs 2013 and 2014, physicians 

receive the higher Medicare rate for the 

specified primary care services. 

In addition, this final rule will impact 

states and providers who provide 

immunizations under the Medicaid 

program because it will require that 

such providers be reimbursed at the 

lesser of the 2013 or 2014 Medicare rate 

or the Regional Maximum VFC 

Administration Fee in CYs 2013 and 

2014. This rule also raises the maximum 

rate that states could pay providers for 

the administration of vaccines under the 

VFC program in subsequent years. The 

updated Regional Maximum 

Administration Fees included in this 

final rule are the maximum amounts 

that a state could choose to reimburse a 

provider for the administration of a 

vaccine under the VFC program after the 

provisions of the primary care payment 

increase expire at the end of CY 2014. 

States have the flexibility to set the rate 

that they will reimburse providers, and 

can therefore choose to set it at the 

state’s regional maximum fee or at any 

other amount below the regional 

maximum amount. It is not expected 

that all states will choose to implement 

the increase. 

The impact of this final rule on the 

federal government is therefore 

connected to states’ decisions as to 

whether to increase the amount that 

they pay providers for the 

administration of vaccines after CY 

2014. That is, if no states choose to 

increase the administration fee for 

providers, there will be no additional 

costs incurred by the federal 

government. 

The same is true for states. There will 

be no impact of this final rule on a state 

unless the state chooses to increase the 

amount that it reimburses providers for 

the administration of vaccines under the 

VFC program. It is estimated that if all 

states were to reimburse providers at the 

maximum administration fee, the total 

cost to states and the federal 

government would be $75 million. Of 

this, the federal share is estimated to be 

$45 million. 

Children enrolled in the VFC program 

who are Medicaid eligible will not incur 

any additional costs as a result of this 

final rule as there are no out-of-pocket 

expenses related to the VFC program for 

Medicaid eligible children. 

Families of children who are enrolled 

in the VFC program because they are 

either uninsured or do not have 

insurance that covers vaccines will be 

impacted by this regulation. Uninsured 

and underinsured individuals receiving 

vaccines through the VFC program will 

continue to pay a single administration 

fee for any vaccine provided. The 

provider will also receive a single 

administration fee for any vaccine 

provided, regardless of the number of 

vaccine/toxoid components, and will 

not receive the Medicare administration 

rate for those services. Providers can bill 

the families of those children at the 

state’s regional maximum rate for the 

administration of a vaccine. As a result, 

if the updated rates were to become 

effective, those families could be billed 

at the published rate for that state. 

However, section 1928(c)(2)(B)(iii) of 

the Social Security Act says that ‘‘[t]he 

provider will not deny administration of 

a qualified pediatric vaccine to a 

vaccine-eligible child due to the 

inability of the child’s parent to pay an 

administration fee.’’ 

Therefore, providers will benefit from 

the regulation as they can charge and 

receive the state’s regional maximum 

rate for their patients who are enrolled 

in the VFC program because they are 

either uninsured or do not have 

insurance that covers immunizations. A 

provider will not receive an increased 

administration fee for Medicaid-eligible 

children unless a state chose to increase 

the amount that it pays providers under 

the Medicaid program. 

3. Anticipated Effects on the Medicaid 

Program Expenditures 

Table 3 provides estimates of the 

anticipated Medicaid program 

expenditures associated with increasing 

payment for primary care services. 

CMS’s Office of the Actuary (OACT) 

developed estimates for the impact of 

this section of the Affordable Care Act, 

which were initially published in April 

2010, (https://www.cms.gov/ 

ActuarialStudies/downloads/ 

PPACA_2010-04-22.pdf). Initially, 

projections of Medicaid spending on 

primary care physician services by FFS 

Medicaid and Medicaid managed care 

plans were created. For this, OACT 

developed assumptions of (1) what 

share of Medicaid physician spending 

was for primary care and (2) what share 

of managed care spending was for 

physician services, relying on several 

studies on physician service utilization 

and expenditures. OACT then projected 

spending for 2013 and 2014 based on 


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the projections of Medicaid physician 

spending in the President’s Fiscal Year 

2013 Budget. (The original estimates 

that appeared in the April 2010 

estimates were based off of the 

President’s Fiscal Year 2010 Budget 

Mid-Session Review.) To determine the 

impact of using Medicare physician 

payment rates for Medicaid payments, 

OACT compared the ratio of Medicaid 

rates to Medicare rates, based on a study 

of Medicare and Medicaid physician 

payment rates across all states. Finally, 

OACT projected growth in Medicaid 

physician payments and the rates 

prescribed by the Affordable Care Act, 

based on Medicare payment rates; these 

estimates were revised to incorporate 

the actual CY 2011 CF (75 FR 73169). 

OACT assumed that the volume of 

physician services covered by Medicaid 

would increase by 5 percent in managed 

care plans and by 10 percent in fee-forservice programs over 2013 and 2014 as 

a result of higher payments and 

expected increases in physician 

participation in Medicaid. Additionally, 

these changes were estimated to result 

in a slight decrease in projected state 

spending as future projected Medicaid 

payment rate increases would be 

covered by increased federal matching 

funds in 2013 and 2014. The studies 

and data sources used for developing 

these estimates included: S. Zuckerman, 

‘‘Trends in Medicaid Physician Fees, 

2003–2008,’’ Health Affairs, 28 April 

2009; the American Medical 

Association; the Medical Group 

Management Association; and the 

Bureau of Labor Statistics. 

As a result of the changes to the 

policy that allows states to either use 

the Medicare physician payment 

locality factors to determine the rates or 

to develop a methodology to calculate 

the mean over all counties for each E&M 

code to use statewide, the estimates 

have been revised since the proposed 

rule. The estimates in the proposed rule 

reflect the expected impacts of the rule 

assuming that states would pay primary 

care physician service rates that 

included the different Medicare locality 

factors. As states now have the option 

to develop a methodology using a mean 

over all counties based on the different 

locality payment rates within a state, the 

estimates have changed to reflect the 

different options states might use. 

OACT has reviewed several possible 

methods states might consider using to 

determine the mean rates. The states’ 

decisions to use the rate based on the 

Medicare locality rate or the mean rate 

measured over all counties may result in 

impacts ranging from $11.185 billion 

over CY 2013 and CY 2014 to $11.495 

billion over the two years. It is assumed 

for the purposes of this rule that the 

expected cost would be equal to the 

median of this range, as no assumptions 

have been made for which states (with 

multiple Medicare physician payment 

localities) would choose each 

methodology. 

TABLE 3—FEDERAL AND STATE MEDICAID AND CHIP IMPACTS FOR PAYMENT INCREASES TO PRIMARY CARE PROVIDERS

DURING CALENDAR YEARS 2013 THROUGH 2014 (MILLIONS OF 2012 DOLLARS) 

CY 2013 CY 2014 

Federal Share* ......................................................................................................................................................... $5,835 $6,055 

State Share .............................................................................................................................................................. ¥235 ¥310 

Total ......................................................................................................................................................................... 5,600 5,745 

(* Federal cost estimates reflect the additional $495 million and $480 million in CYs 2013 and 2014, respectively, as a result of states reimbursing specified physicians for vaccine administration at the lesser of the Medicare rate or the VFC regional maximum.) 

The Medicare payment rates used in 

this estimate were the actual 2009 MPFS 

and the current statute projections of the 

CYs 2013 and 2014 MPFS. 

In addition, it should be noted that 

these estimates are based on the current 

statute which includes a significant 

projected reduction to payment rates in 

the CY 2013 MPFS under the 

Sustainable Growth Rate (SGR) formula. 

Every year since 2003, the Congress has 

passed legislation overriding projected 

cuts that otherwise would have resulted 

from the SGR formula. Furthermore, it 

is possible that the Congress may enact 

legislation that averts the currently 

projected reduction in MPFS rates for 

2013 which would affect the CYs 2013, 

and 2014 rates that are being used to 

estimate the payment impacts in this 

rule. Consequently, if the Congress 

enacts legislation resulting in increased 

payment rates to replace the payment 

rate reduction called for under the SGR 

formula in CYs 2013, and 2014, and in 

turn the CYs 2013 or 2014 rates exceed 

the rates calculated using the CY 2009 

CF, then this would result in higher 

costs for the CYs 2013 and 2014 

Medicaid physician payments presented 

in this rule. Additionally, other changes 

to the CF in these years may also affect 

the costs of this section. Therefore, 

currently it is not possible to accurately 

estimate the impact of these potential 

future changes, since definitive action, 

if any, by the Congress regarding the 

MPFS CF is unknown. 

Other changes made in the final rule 

increase the uncertainty regarding these 

estimates. In the final rule, states are no 

longer required to verify the selfattestation of all physicians that they are 

eligible for the higher payment rates. As 

a result, the review of a sample of the 

self-attesting physicians may find some 

physicians who are ineligible. To the 

extent that more physicians may selfattest as being eligible than would have 

been determined eligible by the state, 

there may be additional costs; the 

potential additional costs have not been 

quantified here. 

It is important to note that, consistent 

with the proposed rule, these estimates 

do not include any impact related to the 

impact of the expansion of Medicaid 

eligibility beginning in 2014 as provided 

by the Affordable Care Act. It is 

expected that the costs related to this 

rule would be even greater in 2014 than 

those listed in Table 3, as Medicaid 

enrollment increases with the new 

eligibility standards, as well as with 

efforts to simplify Medicaid enrollment 

and outreach efforts to enroll people in 

Medicaid, CHIP, and the Health 

Insurance Exchanges. As these new 

enrollees utilize primary care physician 

services that would be eligible for 

higher reimbursement rates, there 

would be additional costs related to this 

rule. These costs would dependent 

upon several factors, including: The 

number of new enrollees in 2014; the 

amount of primary care physician 

services the new enrollees utilize; the 

extent to which new enrollees 

participate in managed care Medicaid 

plans or in fee-for-service Medicaid; and 

the number of new enrollees in each 

state, as the impacts vary widely across 

the states. Furthermore, the cost would 

be highly dependent on which states 

elect to expand Medicaid eligibility in 

2014, which is not known at this time. 

We further emphasize the uncertainties 


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associated with this estimate, especially 

regarding the participation of states in 

the Medicaid eligibility expansion. 

4. Anticipated Effects on States 

The federal government will provide 

100 percent matching funds for the 

difference between the Medicaid state 

plan rate in effect July 1, 2009 and the 

Medicare rate in CYs 2013 and 2014 or 

the rate using the CY 2009 Medicare CF, 

if higher. Therefore, we believe this 

final rule will result in a positive effect 

on states, since it reduces their 

expenditures for primary care services. 

State savings are estimated at $235 

million and $310 million in CYs 2013 

and 2014, respectively. However, for 

Medicaid state plan rates below the 

2009 level, states will be required to 

reimburse the non-federal share of that 

portion, so as to return to the 2009 level 

of payment. We are unable to accurately 

quantify the impact of this effect on 

states, since there is not a precise 

relationship between any of the 

Medicaid state plan rates and the 

Medicare rates. 

5. Anticipated Effects on Small Entities 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organization, and small 

governmental jurisdictions. The great 

majority of hospitals and most other 

health care providers and suppliers are 

small entities, either by being nonprofit 

organizations or by meeting the SBA 

definition of a small business and 

having revenues of less than $7.0 

million to $34.5 million in any 1 year. 

(For details, see the Small Business 

Administration’s Table of Size 

Standards at http://www.sba.gov/sites/ 

default/files/files/ 

Size_Standards_Table.pdf). For 

purposes of the RFA, approximately 95 

percent of physicians are considered to 

be small entities. Individuals and states 

are not included in the definition of a 

small entity. 

We anticipate that this regulation will 

primarily impact individual physicians 

and state Medicaid agencies. This final 

rule requires states to increase payment 

for primary care services without 

incurring additional state cost. As 

previously noted, we anticipate that this 

higher payment will impact physicians 

by encouraging greater participation by 

primary care physicians, including 

primary care subspecialists, in 

Medicaid, thereby helping to promote 

overall access to care. Therefore, the 

Secretary has determined that this final 

rule will not have a significant impact 

on a substantial number of small 

entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This rule will not 

have a significant impact on small rural 

hospitals because it only affects 

physicians. We are not preparing an 

analysis for section 1102(b) of the Act 

because the Secretary has determined 

that none of the provisions in this final 

rule will have a significant impact on 

the operations of a substantial number 

of small rural hospitals. 

E. Alternatives Considered 

This section provides an overview of 

the issues addressed in the final rule 

and the regulatory alternatives 

considered. In identifying the issues and 

developing alternatives, we consulted 

with states and other interested 

stakeholders such as primary care 

specialists and policy makers. We 

solicited comment on the assumptions 

and analyses presented in the 

Alternatives Considered section. 

Detailed analysis on the alternatives 

considered to the provisions in the final 

rule is provided in the responses to 

comments in section II. 

1. Eligible Providers 

The statute specifies that increased 

payment may be made for primary care 

services furnished by a physician with 

a primary specialty designation of 

family medicine, general internal 

medicine or pediatric medicine. In the 

proposed rule, we included related 

subspecialists and used Board 

certification or subspecialty recognition 

by the American Board of Medical 

Specialties (ABMS) and a supporting 

history of codes billed in the absence of 

Board certification as a means of 

identifying eligible primary care 

physicians. We considered permitting 

physicians to qualify for payment based 

solely on self-attestation. The final rule 

CMS continues to recognize 

subspecialists related to the primary 

care specialists specified in the statute 

as eligible for this payment. We accept 

Board certification by the ABMS, 

American Osteopathic Association and 

ABPS. We permit payment based on 

self-attestation alone but, to promote 

program integrity, we are requiring that 

states, at the end of each of CYs 2013 

and 2014, review a statistically valid 

sample of providers who received 

higher payment to verify that they either 

were appropriately Board certified or 

that 60 percent of their claims during 

that period were for the identified E&M 

codes. Comments on this aspect of the 

final rule and our responses may be 

found in section II.A.1.a. 

2. Payment Made Under the Physician 

Benefit as a Physician Service 

This rule clarifies physician services 

to mean any service delivered under the 

physician services benefit at 

1905(a)(5)(A) of the Act. First, we 

considered whether the statute limited 

increased payment to services provided 

only by physicians. In the Medicaid 

program, a significant proportion of 

primary care services are actually 

rendered by advance practice nurses, 

and other types of independently 

practicing nonphysicians. We recognize 

the importance of these nonphysician 

practitioners in the provision of primary 

care services in many states. However, 

section 1902(a)(13)(C) of the Act limits 

eligibility for higher payment to services 

provided by physicians. Next we 

considered whether the statute limited 

increased payment to services provided 

directly by physicians. Medicaid 

regulations at § 440.50 define 

‘‘physician services’’ as services 

provided by or under the personal 

supervision of a physician. Therefore, 

we concluded that, in light of the 

important role of these practitioners in 

delivering primary care to Medicaid 

beneficiaries and the regulatory 

definition of a ‘‘physician service,’’ 

those services delivered under the 

personal supervision of a specified 

primary care physician could qualify for 

the increased payment. This meant that 

specified primary care services rendered 

by nonphysicians such as advanced 

practice nurses and other nonphysician 

professionals qualified for payment 

when billed under the Medicaid 

enrollment number of any designated 

primary care specialist or subspecialist. 

Due to the limited data available, we 

are unable to accurately estimate the 

impacts representing the inclusion of 

services provided by practitioners under 

the supervision of a physician. All such 

services are billed under the supervising 

physician’s billing number and are 

reported as physician services to CMS 

making it impossible to determine the 

impact of this proposal. 

In the final rule, higher payment is 

still limited to the qualified physicians 

and advanced practice professionals 

practicing under their personal 

supervision. However, services no 


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longer need to be billed under the 

physician’s billing number, as long as 

the physician has professional 

responsibility for the services provided. 

The comments we received on this topic 

and CMS responses are found in section 

II.A.1.b. 

We also considered whether services 

provided by physicians in settings such 

as FQHCs, RHCs, or clinics would be 

eligible for increased payment. In 

Medicaid ‘‘physician services’’ is a 

distinct benefit from other benefits such 

as the FQHC, RHC or clinic benefits. We 

estimated that the inclusion of services 

provided by physicians in settings such 

as FQHCs, RHCs, or clinics for increased 

payment would result in an aggregate 

federal cost of approximately $755 

million for CYs 2013 and 2014. In the 

final rule, we continue to believe that 

only those services reimbursed pursuant 

to a physician fee schedule and through 

the Medicaid state plan as a physician 

service are eligible for higher payment. 

In section II.A.1.b. we provide more 

detail about comments and our 

responses. 

3. Eligible E&M Services 

The statute requires enhanced 

payment for E&M services/codes. The 

proposed rule specified the E&M Codes 

eligible for the increased payment. They 

include all primary care E&M codes, 

including some codes not recognized for 

payment by Medicare. Because the 

statute requires payment at the 

Medicare rate, we considered not 

extending the requirement for increased 

payment to codes not reimbursed by 

Medicare. However, many of those 

codes represent services provided to 

children. While Medicare covers 

relatively few children, payments for 

services provided to children constitute 

a larger proportion of Medicaid 

expenditures. We therefore included 

these additional codes because they 

represent core primary care services that 

are important to the Medicaid program. 

We estimated that approximately 6 to 

7 percent of all expenditures on services 

eligible for the increased payment rates 

are for services not covered by 

Medicare. Furthermore, we believed 

that a corresponding amount of the 

federal costs associated with this final 

regulation would be related to these 

services, reflecting an impact range of 

$655 million to $765 million over CY 

2013 and 2014. As a result, the final rule 

specifies that all E&M codes identified 

in the proposed rule are eligible for 

higher payment. Rates for codes not 

reimbursed by Medicare will be 

developed by us based on a calculation 

of the CF and RVUs that are published 

by us. Comments and alternatives 

considered regarding this section of the 

rule are presented in section II.A.2.b. 

4. Eligible Vaccine Administration 

Services 

The statute specifies payment at the 

CY 2013 and 2014 Medicare rate for 

certain vaccine administration billing 

codes or their successor codes. A state 

may receive 100 percent FFP for the 

difference between the Medicaid rate as 

of July 1, 2009 and the Medicare rates 

in CYs 2013 and 2014 or the rate using 

the CY 2009 CF, if higher. In 2011, the 

coding structure for vaccine 

administration changed such that two 

codes replaced four of the specified 

codes. Moreover, the four deleted codes 

represented vaccine administrations by 

various routes (for example, intranasal 

vs. injectable) to children under 8. 

However, new code 90460 represents 

the initial vaccine/toxoid administered 

through all routes to children through 

age 18 while code 90461 represents 

payment for additional vaccines/toxoids 

administered. This rule finalizes a 

method for imputing a vaccine 

administration rate in 2009 for code 

90460. The 2009 rate would equal the 

average payment amount weighted by 

volume of codes 90465 and 90471. The 

2009 value for code 90461 would be $0, 

since there was no payment for 

additional vaccines/toxoids prior to 

2011. We received one comment on this 

proposed methodology, which led to a 

revision of the formula. 

In 2009, approximately 20 states used 

a bundled rate to reimburse vaccines 

and vaccine administration, 

complicating the identification of the 

rate differential. This rule clarifies that, 

for any bundled rate payments such as 

this, states must correctly identify the 

rate differential for the included 

primary care service only (in this case, 

vaccine administration). We added this 

provision in the interest of promoting 

program payment integrity but defer to 

the states to develop a methodology. 

Also, providers administering vaccines 

under the VFC program will be 

reimbursed the lesser of the Medicare 

rates in 2013 or 2014 or the Regional 

Maximum Administration Fee per 

vaccine. This final rule does not change 

the statutory requirement in section 

1928(c)(2)(C) of the Act that a qualified 

physician administering a vaccine 

obtained from the VFC program is 

limited under the VFC provider 

agreement to charging an amount for 

vaccine administration that is no more 

than the VFC maximum allowable 

charge. A more detailed analysis of the 

alternatives considered for increased 

payments for vaccine administration 

under the VFC program is discussed in 

the response to comments in section 

II.A.4.c. 

5. Method of Payment 

Section 1902(a)(13)(C) of the Act 

requires payment in CYs 2013 and 2014 

of the current Medicare rate, unless the 

rate set using the CY 2009 CF was 

higher. Historically, Medicare has 

issued multiple updates to its MPFS 

within a single year. This rule continues 

to permit states to either adopt the 

MPFS in effect at the beginning of CYs 

2013 and 2014 or the rate using the CY 

2009 CF, if higher, or a methodology to 

update rates to reflect changes made by 

Medicare during the year. It permits 

states to either make site of service 

adjustments or pay at the Medicare 

office rate. It requires states to either 

make all Medicare locality adjustments 

or to pay a statewide median rate over 

all counties. A discussion of the 

alternatives considered and comments 

received can be found in sections 

II.A.2.a. and c. 

6. VFC Administration Fee Increase 

We considered a number of options 

when determining to update the average 

national administration charge portion 

of the formula used to calculate the VFC 

administration fee. These options 

included using the Medicare Economic 

Index (MEI), Consumer Price Index 

(CPI) or the Gross Domestic Product 

Deflator. We determined the best option 

is to utilize the MEI, which is a price 

index used by CMS to update Medicare 

physician payments. The MEI reflects 

input price inflation experienced by 

physicians inclusive of the time period 

when the national average was 

established in 1994. Therefore, we 

believe that input prices associated with 

this specific type of physician-provided 

service are consistent with overall input 

prices. 

The economic impact associated with 

updates to the regional maximum 

charges for the VFC program is 

estimated at $75 million per year. The 

federal cost of this total is 

approximately $45 million per year. 

These estimates assume that every state 

will increase its reimbursement rate to 

the new VFC maximum fee. 

7. Implementation of Payment Provision 

in Managed Care Delivery System 

Section 1932(f) of the Act requires the 

application of the provisions of section 

1902(a)(13) of the Act to managed care 

organization contracts and payments. 

The complexity of such an application 

was reviewed in several different 

areas—the varied scope of primary care 

providers that operate within managed 

care plans; identifying both the 2009 


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baseline payments for affected primary 

care services to managed care 

organizations as well as the amount of 

managed care capitation payments that 

would be eligible for 100 percent federal 

match; and the documentation that 

states must collect from managed care 

plans to verify that the Medicare rate is 

paid to eligible providers in CY 2013 

and 2014. 

The final rule require states to submit 

to us two methodologies, one for 

determining the 2009 baseline and the 

other for identifying that proportion of 

managed care capitation rates that 

represents the difference between the 

2009 baseline rates and the applicable 

CY 2013 and 2014 Medicare rates. Both 

methodologies must be valid and 

reasonable and must acknowledge and 

accommodate each state’s current ratesetting framework. 

Finally, we considered specifying the 

documentation that states must collect 

from managed care plans to ensure that 

primary care providers are the 

beneficiaries of these increased payment 

rates. However, in deference to the wide 

variation in states’ current oversight and 

reporting mechanisms for MCOs, PIHPs, 

and PAHPs, the final rule requires states 

to specify the documentation needed 

from health plans to substantiate that 

primary care payment increases were 

made to eligible providers by the 

managed care plan. 

F. Accounting Statement and Table 

As required by OMB’s Circular A–4 

(available at http://www.whitehouse.

gov/omb//circulars_a004_a-4/), in Table 

4 we have prepared an accounting 

statement illustrating the classification 

of the federal and state Medicaid and 

CHIP impacts for the payment increases 

to primary care providers and VFC, as 

a result of the provisions in the final 

rule. 

TABLE 4—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES FOR FEDERAL AND STATE MEDICAID

AND CHIP IMPACTS FOR PAYMENT INCREASES TO PRIMARY CARE PROVIDERS AND VFC DURING CALENDAR YEARS

2013 THROUGH 2014 

[Millions of 2012 dollars] 

Category Transfers 

Annualized monetized transfers Discount rate Period covered 

0% 7% 3% CYs 2013–2014. 

Primary Estimate ...................................................................... $5,945 $5,941 $5,943 

From/To Federal Government to Medicaid Providers 

Category Transfers 

Annualized monetized transfers Discount rate Period covered 

0% 7% 3% CYs 2013–2014. 

Primary Estimate ...................................................................... ¥$273 ¥$271 ¥$272 

From/To .................................................................................... State Governments to Medicaid Providers 

In accordance with the provisions of 

Executive Order 12866, this final 

regulation was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 438 

Grant programs-health, Medicaid, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 441 

Aged, Family planning, Grant 

programs-health, Infants and children, 

Medicaid, Penalties, Reporting and 

recordkeeping requirements. 

42 CFR Part 447 

Accounting, Administrative practice 

and procedure, Drugs, Grant programshealth, Health facilities, Health 

professions, Medicaid, Reporting and 

recordkeeping requirements, Rural 

areas. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 438—MANAGED CARE 

■ 1. The authority citation for part 438 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

■ 2. Section 438.6 is amended by adding 

new paragraphs (c)(3)(v) and (c)(5)(vi) to 

read as follows: 

§ 438.6 Contract requirements. 

* * * * * 

(c) * * * 

(3) * * * 

(v) For rates covering CYs 2013 and 

2014, complying with minimum 

payment for physician services under 

paragraph (c)(5)(vi) of this section, and 

part 447, subpart G, of this chapter. 

* * * * * 

(5) * * * 

(vi) For CYs 2013 and 2014, and 

payments to an MCO, PIHP or PAHP for 

primary care services furnished to 

enrollees under part 447, subpart G, of 

this chapter, the contract must require 

that the MCO, PIHP or PAHP meet the 

following requirements: 

(A) Make payments to those specified 

physicians (whether directly or through 

a capitated arrangement) at least equal 

to the amounts set forth and required 

under part 447, subpart G, of this 

chapter. 

(B) Provide documentation to the 

state, sufficient to enable the state and 

CMS to ensure that provider payments 

increase as required by paragraph 

(c)(5)(vi)(A) of this section. 

* * * * * 

■ 3. Section 438.804 is added to read as 

follows: 

§ 438.804 Primary care provider payment 

increases. 

(a) For MCO, PIHP or PAHP contracts 

that cover calendar years 2013 and 

2014, FFP is available at an enhanced 

rate of 100 percent for the portion of the 

expenditures for capitation payments 

made under those contracts to comply 


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with the contractual requirement under 

§ 438.6(c)(5)(vi) only if the following 

requirements are met: 

(1) The state must submit to CMS the 

following methodologies for review and 

approval. 

(i) The state develops a reasonable 

methodology, based on rational and 

documented data and assumptions, for 

identifying the provider payments that 

would have been made by MCO, PIHP 

or PAHP for specified primary care 

services furnished as of July 1, 2009. 

This methodology can take into 

consideration the availability of data, 

and the costs and burden of 

administering the method, but should 

produce a reliable and accurate result to 

the fullest extent possible. 

(ii) The state develops a reasonable 

methodology, based on rational and 

documented data and assumptions, for 

identifying the differential in payment 

between the provider payments that 

would have been made by the MCO, 

PIHP or PAHP on July 1, 2009 and the 

amount needed to comply with the 

contractual requirement under 

§ 438.6(c)(5)(vi). This methodology can 

take into consideration the availability 

of data, and the costs and burden of 

administering the method, but should 

produce a reliable and accurate result to 

the fullest extent possible. 

(2) The state must submit the 

methodologies in paragraphs (a)(1)(i) 

and (ii) of this section to CMS for review 

no later than the end of the first quarter 

of CY 2013. 

(3) CMS will use the approved 

methodologies required under this 

section in the review and approval of 

MCO, PIHP or PAHP contracts and rates 

consistent with § 438.6(a). 

(b) [Reserved] 

PART 441—SERVICES: 

REQUIREMENTS AND LIMITS 

APPLICABLE TO SPECIFIC SERVICES 

■ 4. The authority citation of part 441 is 

revised to read as follows: 

Authority: Secs. 1102, 1902, and 1928 of 

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

■ 5. Subpart L is added to read as 

follows: 

Subpart L—Vaccines for Children Program 

Sec. 

441.600 Basis and purpose. 

441.605 General requirements. 

441.610 State plan requirements. 

441.615 Administration fee requirements. 

Subpart L—Vaccines for Children 

Program 

§ 441.600 Basis and purpose. 

This subpart implements sections 

1902(a)(62) and 1928 of the Act by 

requiring states to provide for a program 

for the purchase and distribution of 

pediatric vaccines to program-registered 

providers for the immunization of 

vaccine-eligible children. 

§ 441.605 General requirements. 

(a) Federally-purchased vaccines 

under the VFC Program are made 

available to children who are 18 years 

of age or younger and who are any of 

the following: 

(1) Eligible for Medicaid. 

(2) Not insured. 

(3) Not insured with respect to the 

vaccine and who are administered 

pediatric vaccines by a federally 

qualified health center (FQHC) or rural 

health clinic. 

(4) An Indian, as defined in section 4 

of the Indian Health Care Improvement 

Act. 

(b) Under the VFC program, vaccines 

must be administered by programregistered providers. Section 1928(c) of 

the Act defines a program-registered 

provider as any health care provider 

that meets the following requirements: 

(1) Is licensed or authorized to 

administer pediatric vaccines under the 

law of the state in which the 

administration occurs without regard to 

whether or not the provider is a 

Medicaid-participating provider. 

(2) Submits to the state an executed 

provider agreement in the form and 

manner specified by the Secretary. 

(3) Has not been found, by the 

Secretary or the state to have violated 

the provider agreement or other 

applicable requirements established by 

the Secretary or the state. 

§ 441.610 State plan requirements. 

A state plan must provide that the 

Medicaid agency meets the 

requirements of this part. 

§ 441.615 Administration fee requirements. 

(a) Under the VFC Program, a 

provider who administers a qualified 

pediatric vaccine to a federally vaccineeligible child, may not impose a charge 

for the cost of the vaccine. 

(1) A provider can impose a fee for the 

administration of a qualified pediatric 

vaccine as long as the fee does not 

exceed the costs of the administration 

(as determined by the Secretary based 

on actual regional costs for the 

administration). 

(2) A provider may not deny 

administration of a qualified pediatric 

vaccine to a vaccine-eligible child due 

to the inability of the child’s parents or 

legal guardian to pay the administration 

fee. 

(b) The Secretary must publish each 

State’s regional maximum charge for the 

VFC program, which represents the 

maximum amount that a provider in a 

state could charge for the administration 

of qualified pediatric vaccines to 

federally vaccine-eligible children 

under the VFC program. 

(c) An interim formula has been 

established for the calculation of a 

state’s regional maximum 

administration fee. That formula is as 

follows: National charge data × updated 

geographic adjustment factors (GAFs) = 

maximum VFC fee. 

(d) The State Medicaid Agency must 

submit a state plan amendment that 

identifies the amount that the state will 

pay providers for the administration of 

a qualified pediatric vaccine to a 

Medicaid-eligible child under the VFC 

program. The amount identified by the 

state cannot exceed the state’s regional 

maximum administration fee. 

(e) Physicians participating in the 

VFC program can charge federally 

vaccine-eligible children who are not 

enrolled in Medicaid the maximum 

administration fee (if that fee reflects the 

provider’s cost of administration) 

regardless of whether the state has 

established a lower administration fee 

under the Medicaid program. However, 

there would be no federal Medicaid 

matching funds available for the 

administration since these children are 

not eligible for Medicaid. 

PART 447—PAYMENTS FOR 

SERVICES 

■ 6. The authority citation for part 447 

continues to read as follows: 

Authority: Section 1102 of the Social 

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

■ 7. Subpart G is added to read as 

follows: 

Subpart G—Payments for Primary Care 

Services Furnished by Physicians 

Sec. 

447.400 Primary care services furnished by 

physicians with a specified specialty or 

subspecialty. 

447.405 Amount of required minimum 

payments. 

447.410 State plan requirements. 

447.415 Availability of Federal financial 

participation (FFP). 

Subpart G—Payments for Primary Care 

Services Furnished by Physicians 

§ 447.400 Primary care services furnished 

by physicians with a specified specialty or 

subspecialty. 

(a) States pay for services furnished 

by a physician as defined in § 440.50 of 

this chapter, or under the personal 

supervision of a physician who selfattests to a specialty designation of 

family medicine, general internal 

medicine or pediatric medicine or a 


erowe on DSK2VPTVN1PROD with 
Federal Register / Vol. 77, No. 215 / Tuesday, November 6, 2012 / Rules and Regulations 66701 

subspecialty recognized by the 

American Board of Medical Specialties 

(ABMS), the American Board of 

Physician Specialties (ABPS) or the 

American Osteopathic Association 

(AOA). A physician self-attests that he/ 

she: 

(1) Is Board certified with such a 

specialty or subspecialty and/or 

(2) Has furnished evaluation and 

management services and vaccine 

administration services under codes 

described in paragraph (b) of this 

section that equal at least 60 percent of 

the Medicaid codes he or she has billed 

during the most recently completed CY 

or, for newly eligible physicians, the 

prior month. 

(b) At the end of CY 2013 and 2014 

the Medicaid agency must review a 

statistically valid sample of physicians 

who received higher payments to verify 

that they meet the requirements of 

paragraph (a)(1) or (2) of this section. 

(c) Primary care services designated in 

the Healthcare Common Procedure 

Coding System (HCPCS) are as follows: 

(1) Evaluation and Management 

(E&M) codes 99201 through 99499. 

(2) Current Procedural Terminology 

(CPT) vaccine administration codes 

90460, 90461, 90471, 90472, 90473 and 

90474, or their successor codes. 

(d)(1) The state must submit to CMS, 

in such form and at such time as CMS 

specifies, information relating to 

participation by physicians described in 

paragraph (a) of this section and the 

utilization of E&M codes described in 

paragraph (c) of this section (whether 

furnished by or under the supervision of 

a physician described in paragraph (a)) 

of this section for the following peri— 

s— 

(i) As of July 1, 2009, and 

(ii) CY 2013 

(2) As soon as practicable after 

receipt, CMS will post this information 

on www.Medicaid.gov. 

§ 447.405 Amount of required minimum 

payments. 

(a) For CYs 2013 and 2014, a state 

must pay for physician services 

described in § 447.400 based on: 

(1) The Medicare Part B fee schedule 

rate that is applicable to the specific site 

of service or, at the state’s option, the 

office setting and is also adjusted for 

either the specific geographic location of 

the service or reflects the mean over all 

counties of the rate for each E&M code. 

If there is no applicable rate, the rate 

specified in a fee schedule established 

and announced by CMS (that is, the 

product of multiplying the Medicare CF 

in effect at the beginning of CYs 2013 or 

2014 (or the CY 2009 CF, if higher) and 

the CY 2013 and 2014 relative value 

units (RVUs). 

(2) The provider’s actual billed charge 

for the service. 

(b) For vaccines provided under the 

Vaccines for Children Program in CYs 

2013 and 2014, a State must pay the 

lesser of: 

(1) The Regional Maximum 

Administration Fee; or, 

(2) The Medicare fee schedule rate in 

CY 2013 or 2014 (or, if higher, the rate 

using the 2009 conversion factor and the 

2013 and 2014 RVUs) for code 90460. 

§ 447.410 State plan requirements. 

The state must amend its state plan to 

reflect the increase in fee schedule 

payments in CYs 2013 and 2014 unless, 

for each of the billing codes eligible for 

payment, the state currently reimburses 

at least as much as the higher of the CY 

2013 and CY 2014 Medicare rate or the 

rate that would be derived using the CY 

2009 conversion factor and the CY 2013 

and 2014 Medicare relative value units 

(RVUs). The amendment must: 

(a) Identify all eligible codes that the 

state will reimburse at the Medicare rate 

in CYs 2013 and 2014. 

(b) Identify all codes that were not 

reimbursed under the Medicaid program 

as of July 1, 2009. 

(c) Specify either that the state will 

make all adjustments applicable to the 

specific site of service or, at the state’s 

option, the office setting and will also 

either adjust for the specific geographic 

location of the service or pay rates that 

reflect the mean over all counties of the 

rate for each E&M code. The state must 

specify the formula that the state will 

use to determine the mean rate for each 

E&M code. 

§ 447.415 Availability of Federal financial 

participation (FFP). 

(a) For primary care services 

furnished by physicians specified in 

§ 447.400, FFP will be available at the 

rate of 100 percent for the amount by 

which the payment required to comply 

with § 447.405 exceeds the Medicaid 

payment that would have been made 

under the approved state plan in effect 

on July 1, 2009. 

(b) For purposes of calculating the 

payment that would have been made 

under the approved State plan in effect 

on July 1, 2009, the state must exclude 

incentive, bonus, and performancebased payments but must include 

supplemental payments for which the 

approved methodology is linked to 

volume and payment for specific codes. 

(c) For vaccine administration, the 

state must impute the payment that 

would have been made for code 90460 

under the approved Medicaid state plan. 

The imputed rate for July 1, 2009, for 

code 90460 equals the payment rates for 

codes 90465 and 90471 weighted by 

service volume. 

(d) For any payment made under a 

bundled rate methodology, including 

bundled rates for vaccines and vaccine 

administration, the amount directly 

attributable to the applicable primary 

care service must be isolated for 

purposes of determining the availability 

of the 100 percent FFP rate. Bundled 

rates, for purposes of this provision, do 

not include encounter and per diem 

rates. 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.778, Medical 

Assistance Program). 

Dated: September 12, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: October 2, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–26507 Filed 11–1–12; 4:15 pm] 

BILLING CODE 4120–01–P 


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