56946 Federal Register / Vol. 75, No. 180 / Friday, September 17, 2010 / Proposed Rules 

approval of Georgia’s attainment date 

extension request for the Atlanta Area 

for the 1997 8-hour ozone NAAQS. 

IV. Proposed Actions 

EPA is proposing to approve Georgia’s 

June 9, 2010, request for EPA to grant 

a one-year extension (from June 15, 

2010, to June 15, 2011) of the Atlanta 

Area attainment date for the 1997 8- 

hour ozone NAAQS because EPA 

believes that Georgia has met the 

statutory requirements for such an 

extension. EPA’s belief is based on its 

preliminary determination that the state 

is in compliance of the requirements 

and commitments associated with the 

EPA-approved implementation plan, 

and on the belief that the 4th highest 

daily 8-hour ozone average 

concentration for 2009 for the Atlanta 

Area is below the 1997 8-hour ozone 

NAAQS as required by the CAA. As 

provided in 40 CFR 51.907, if EPA 

finalizes this action, it will extend, by 

one year, the deadline by which the 

Atlanta Area must attain the 1997 8- 

hour ozone NAAQS. It will also extend 

the timeframe by which EPA must make 

an attainment determination for the 

area. EPA notes that this proposed 

action only relates to the initial oneyear extension. As noted in Section 

181(a)(5) of the CAA, areas may qualify 

for up to 2 one-year extensions. If 

requested at a future date, EPA will 

make a determination of the 

appropriateness of a second one-year 

extension for the Atlanta Area for the 

1997 8-hour ozone NAAQS in a separate 

rulemaking. 

V. Statutory and Executive Order 

Reviews 

Under the CAA, the Administrator is 

required to approve SIP submissions 

and requests that comply with the 

provisions of the Act and applicable 

Federal regulations. 42 U.S.C. 7410(k); 

40 CFR 52.02(a). Thus, in reviewing the 

state’s request for an extension of the 

1997 8-hour ozone NAAQS attainment 

date for the Atlanta Area, EPA’s role is 

to approve the state’s request, provided 

that it meets the criteria of the CAA. 

Accordingly, this proposed action 

merely approves a state request for an 

extension of the 1997 8-hour ozone 

NAAQS attainment date as meeting 

Federal requirements and does not 

impose additional requirements beyond 

those imposed by state law. For that 

reason, this proposed action: 

• Is not a ‘‘significant regulatory 

action’’ subject to review by the Office 

of Management and Budget under 

Executive Order 12866 (58 FR 51735, 

October 4, 1993); 

• Does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act (44 

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

• Is certified as not having a 

significant economic impact on a 

substantial number of small entities 

under the Regulatory Flexibility Act (5 

U.S.C. 601 et seq.); 

• Does not contain any unfunded 

mandate or significantly or uniquely 

affect small governments, as described 

in the Unfunded Mandates Reform Act 

of 1995 (Pub.L.104–4); 

• Does not have Federalism 

implications as specified in Executive 

Order 13132 (64 FR 43255, August 10, 

1999); 

• Is not an economically significant 

regulatory action based on health or 

safety risks subject to Executive Order 

13045 (62 FR 19885, April 23, 1997); 

• Is not a significant regulatory action 

subject to Executive Order 13211 (66 FR 

28355, May 22, 2001); 

• Is not subject to requirements of 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) because 

application of those requirements would 

be inconsistent with the CAA; and 

• Does not provide EPA with the 

discretionary authority to address, as 

appropriate, disproportionate human 

health or environmental effects, using 

practicable and legally permissible 

methods, under Executive Order 12898 

(59 FR 7629, February 16, 1994). 

In addition, this proposed rule does not 

have tribal implications as specified by 

Executive Order 13175 (65 FR 67249, 

November 9, 2000), because the SIP is 

not approved to apply in Indian country 

located in the state, and EPA notes that 

it will not impose substantial direct 

costs on tribal governments or preempt 

tribal law. 

List of Subjects in 40 CFR Part 81 

Environmental protection, Air 

pollution control, National parks, 

Wilderness areas. 

Authority: 42 U.S.C. 7401 et seq. 

Dated: September 3, 2010. 

A. Stanley Meiburg, 

Acting Regional Administrator, Region 4. 

[FR Doc. 2010–23317 Filed 9–16–10; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 431 

[CMS–2325–P] 

RIN 0938–AQ46 

Medicaid Program; Review and 

Approval Process for Section 1115 

Demonstrations 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement provisions of section 

10201(i) of the Patient Protection and 

Affordable Care Act of 2010 (Affordable 

Care Act) that set forth transparency and 

public notice procedures for 

experimental, pilot, and demonstration 

projects approved under section 1115 of 

the Social Security Act relating to 

Medicaid and the Children’s Health 

Insurance Program (CHIP). This 

proposed rule would increase the degree 

to which information about Medicaid 

and CHIP demonstration applications 

and approved demonstration projects 

are publicly available and promote 

greater transparency in the review and 

approval of demonstrations. It would 

also codify existing statutory 

requirements pertaining to tribal 

consultation for section 1115 

demonstration projects. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on November 16, 2010. 

ADDRESSES: In commenting, please refer 

to file code CMS–2325–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2325–P, P.O. Box 8016, Baltimore, 

MD 21244–8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 


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following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2325–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: a. For delivery in 

Washington, DC—Centers for Medicare 

& Medicaid Services, Department of 

Health and Human Services, Room 445– 

G, Hubert H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the Hubert 

H. Humphrey Building is not readily 

available to persons without Federal 

government identification, commenters are 

encouraged to leave their comments in the 

CMS drop slots located in the main lobby of 

the building. A stamp-in clock is available for 

persons wishing to retain a proof of filing by 

stamping in and retaining an extra copy of 

the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period and, 

thus, may not be considered timely. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Steven Rubio, (410) 786–1782, or 

Yolanda Reese, (410) 786–9898. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Acronyms 

To assist the reader, the following is 

a list of the terms to which we refer by 

acronym in this proposed rule. 

The Act—The Social Security Act 

The Affordable Care Act—The Patient 

Protection and Affordable Care Act of 2010 

(Pub. L. 111–148) 

CHIP—The Children’s Health Insurance 

Program 

CMS—The Centers for Medicare & Medicaid 

Services 

EQRO—External Quality Review 

Organization 

FFP—Federal Financial Participation 

GAO—Government Accountability Office 

HHS—The Department of Health and Human 

Services 

MCO—Managed Care Organization 

The Recovery Act—The American Recovery 

and Reinvestment Act of 2009 (Pub. L. 

111–5) 

SMDL—State Medicaid Directors’ Letter 

Title XIX—Grants to States for Medical 

Assistance Programs of the Social Security 

Act. 

Title XXI—State Children’s Health Insurance 

Program of the Social Security Act. 

I. Background 

A. Section 1115 Demonstrations 

1. Overview 

Section 1115 of the Social Security 

Act (the Act) allows the Secretary of the 

Department of Health and Human 

Services (the Secretary) to waive 

selected provisions of section 1902 of 

the Act for experimental, pilot, or 

demonstration projects 

(demonstrations), and to provide 

Federal Financial Participation (FFP) for 

demonstration costs which would not 

otherwise be considered as expenditures 

under the Medicaid State plan, when 

the Secretary finds that the 

demonstrations are likely to assist in 

promoting the objectives of Medicaid. 

Section 2107(e) of the Act states that the 

waiver authorities in section 1115 apply 

to the Children’s Health Insurance 

Program (CHIP) in title XXI of the Act 

in the same manner as they apply to the 

Medicaid program in title XIX of the 

Act. 

States have used section 1115 

demonstrations for different reasons. 

Some States have tested new 

approaches to provide coverage or 

improve the scope or quality of benefits 

in ways that would not otherwise be 

permitted under the statute. For 

example, some States have used section 

1115 demonstrations to expand 

eligibility to individuals who would not 

otherwise qualify for benefits, or to 

establish innovative service delivery 

systems. Other demonstrations have 

constrained eligibility or benefits in 

ways not otherwise permitted by law. 

For example, some demonstrations have 

provided for a more limited set of 

benefits than the statute requires, for a 

specified population, implemented costsharing at levels that exceed statutory 

requirements, or included enrollment 

limits. Some demonstrations have 

involved financing approaches that are 

not contemplated in title XIX or XXI. 

As such, demonstrations can have a 

significant and varied impact on 

beneficiaries, providers, as well as 

States and local governments. They can 

also influence policy making at the State 

and Federal level, by introducing new 

approaches that can be a model for other 

States and lead to programmatic 

changes nationwide. In light of the 

impact demonstration projects can have, 

the Congress has determined that the 

process by which States apply for and 

the Federal Government reviews 

demonstrations should assure public 

input. From time to time that process 

has come under criticism. In recent 

years, the Congress, the Government 

Accountability Office (GAO), and the 

stakeholders representing a range of 

interests affected by the Medicaid and 

CHIP programs have raised concerns 

regarding the need for greater 

transparency in the submission, review, 

and approval of demonstration 

applications. 

2. Prior Guidance Related to Public 

Notice 

Over time, efforts were made to assure 

meaningful public involvement in the 

development and review of State 

demonstration projects. In the 

September 27, 1994 Federal Register on 

(59 FR 49249), the Department of Health 

and Human Services (HHS) published a 

notice that provided general principles 

and guidelines governing demonstration 

projects and provided for a public 

notice process that was designed to 

ensure that interested parties would 

have an opportunity to provide input 

into the design and review of a State 

demonstration application. 

The September 27, 1994 Federal 

Register notice listed examples of 

potential approaches States could use to 

solicit public comments, such as the 

State legislative process and hearings 


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conducted by State commissions, and it 

established a process for public input at 

the Federal level, including providing 

notice to interested parties when the 

Federal government receives a 

demonstration request. The September 

27, 1994 Federal Register notice also 

established timeframes for the Federal 

government to receive and review 

public comments before acting on a 

State demonstration request. 

In 2002, we issued a letter to State 

Medicaid directors, State Medicaid 

Director Letter (SMDL) #02–007, to 

encourage States to facilitate public 

participation in the development of 

demonstration applications in an effort 

to ensure adherence to the public notice 

procedures outlined in the September 

27, 1994 Federal Register notice. 

The 2002 SMDL (#02–007) did not 

address the Federal level of review. 

Over the years some aspects of the 

Federal demonstration review process 

described in the September 27, 1994 

Federal Register notice were 

abandoned. In 2002, the GAO issued a 

report entitled ‘‘Medicaid and SCHIP— 

Recent HHS Approvals of 

Demonstration Waiver Projects Raise 

Concerns,’’ finding that HHS had not 

consistently followed its September 27, 

1994 Federal Register notice process. 

GAO specifically found that, since 1998, 

HHS had not complied with the Federal 

notice procedures. GAO recommended 

that the HHS Secretary provide for a 

public process that, at a minimum, 

included publishing notices of 

demonstrations in the Federal Register 

and a 30-day comment period. 

In a subsequent 2007 report entitled 

‘‘Medicaid Demonstration Waivers: Lack 

of Opportunity for Public Input during 

the Federal Approval Process Still a 

Concern,’’ the GAO examined 

demonstration projects in two States 

and found that HHS did not provide 

opportunity for public input at the 

Federal level during the Federal review 

process. It determined that the States 

that submitted the demonstration 

applications made efforts to obtain 

public input to comply with HHS’ 

September 27, 1994 Federal Register 

notice, but that stakeholders in those 

States reported lacking access to 

information during the Federal review 

process about parts of the demonstration 

applications that had a significant 

impact on beneficiaries or having 

inadequate time to review and comment 

on the applications. GAO reiterated its 

longstanding concerns about the lack of 

public input into section 1115 

demonstrations and restated its 

recommendation for a process that 

assures public input. 

As we were considering potential 

processes and procedures for this 

proposed rule, we reviewed these GAO 

findings, various legislative proposals, 

and we conducted a listening session 

with stakeholders and States. In May 

2010, we met with more than 20 

representatives of stakeholder 

organizations including organizations 

advocating on behalf of the elderly, 

people with disabilities and other low 

income populations, as well as 

organizations representing health care 

providers regarding transparency in the 

demonstration approval process. We 

also held a listening session open to 

officials from all 50 States, the District 

of Columbia, and U.S. Territories. 

The stakeholder representatives 

generally expressed the need for better 

opportunities for the public to provide 

meaningful input into the development 

of State demonstration applications and 

the Federal review and approval 

process. These advocates expressed 

concern that the policies employed in 

demonstrations have far-reaching 

impact, and can happen with little 

meaningful stakeholder input into 

policy development at the Federal and 

State levels unlike the legislative and 

rulemaking processes, which have 

established mechanisms that assure 

some degree of transparency. They also 

expressed the view that since 

demonstrations allow States to ‘‘not 

comply’’ with requirements that the 

Congress put into law, the need for 

meaningful public input into these 

demonstrations is great. States agreed 

that public input is important although 

were concerned that any new 

requirements established under the new 

law could be administratively 

burdensome, and potentially 

duplicative of existing State policies 

and procedures. Some States reported 

that their existing public notice 

requirements and State legislative 

processes were strong and sufficient to 

ensure meaningful public input at the 

State level. 

Recently, the Federal government has 

made a broad commitment to 

transparency and public input, and this 

commitment informs the Secretary’s 

approaches to ensuring transparency in 

this proposed rule. In a January 21, 2009 

Memorandum to the Heads of Executive 

Departments and Agencies, President 

Obama established the Federal 

government’s commitment to 

transparency, participation, and 

collaboration. Noting that public input 

can promote efficiency, effectiveness, 

and accountability in government, the 

President committed Federal agencies to 

disseminating information quickly and 

accessibly, and to ensure increased 

opportunities for the public to 

participate in policymaking. The 

Memorandum required each Federal 

agency to establish an Open 

Government plan, and on April 7, 2010, 

HHS announced its plan to achieve 

transparency, participation, and 

collaboration. HHS is committed to 

timely and responsive administration of 

the Medicaid and CHIP programs and 

seeks to assure transparency, input, and 

collaboration, while also being mindful 

of the need to avoid duplicative 

processes and unnecessary 

administrative burdens and delays. 

3. Guidance Related to Tribal 

Consultation 

Over time, a different but related set 

of concerns has emerged about the need 

to ensure that Indian and Tribal 

governments be assured input into 

policies that impact Tribal governments, 

organizations, and Native Americans. In 

order to foster greater notice and a 

meaningful opportunity for input, in 

2000, the Administration issued 

Executive Order 13175 regarding 

‘‘Consultation and Coordination with 

Indian and Tribal governments.’’ 

Executive Order 13175 mandated the 

establishment of regular and meaningful 

consultation and collaboration with 

tribal officials in the development of 

Federal policies that have tribal 

implications. On November 5, 2009, 

President Obama issued a Memorandum 

for the Heads of Executive Departments 

and Agencies reiterating the importance 

of Executive Order 13175 and requiring 

a detailed plan for compliance with its 

provisions. 

In July 2001, we issued a letter to 

State Medicaid Directors (SMDL #01– 

024) that required States, to allow 

federally-recognized Tribes to 

participate in the planning and 

development of Medicaid and CHIP 

demonstration applications and 

extensions through a consultation 

process. The guidance required at least 

60 days notice to federally-recognized 

Tribes before submission of a State’s 

intent to submit a demonstration 

application or the extension of a 

previously approved section 1915 and/ 

or 1115 waiver. 

4. Changes Made by the Recovery Act 

and the Affordable Care Act 

Section 5006 of the American 

Recovery and Reinvestment Act of 2009 

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

on February 17, 2009), among other 

protections for Indian beneficiaries in 

Medicaid and CHIP, required States to 

seek advice from Indian health 

programs and urban Indian 

organizations concerning Medicaid and 


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CHIP policies before submitting a 

Medicaid or CHIP State plan 

amendment, demonstration request or 

application that would directly affect 

Indian health programs and Indian 

beneficiaries. This provision was 

effective July 1, 2009, and was 

summarized in a letter to State Medicaid 

Directors dated January 22, 2010 (SMDL 

#10–001). 

Section 10201(i) of the Patient 

Protection and Affordable Care Act of 

2010 (Pub. L. 111–148, enacted March 

23, 2010) (the Affordable Care Act) 

amended section 1115 of the Act by 

adding a new subsection (d) to require 

the Secretary to issue regulations within 

180 days of enactment that would 

ensure the public has adequate 

opportunities to provide meaningful 

input into the development of State 

demonstration projects, as well as in the 

Federal review and approval of State 

demonstration applications and 

renewals. The Affordable Care Act also 

requires periodic evaluations and 

implementation reports to ensure that 

information on the outcomes of 

demonstration projects is available to 

the public. 

Specifically, new section 1115(d) of 

the Act provides that these procedural 

requirements must include review 

standards pertaining to the goals of 

demonstration programs, the impact of 

the demonstration project on costs and 

coverage, and the plans of the State to 

ensure that the demonstration will 

comply with applicable title XIX and 

XXI of the Act. The law requires the 

establishment of a process to provide for 

public notice and comment on the State 

level and at the Federal level once an 

application for a demonstration is 

received by the Secretary. These public 

notice and comment processes are 

meant to ensure a meaningful level of 

public input. The statute also requires 

the Secretary to implement reporting 

requirements for States with approved 

demonstrations, and to establish a 

process for the periodic evaluation of 

demonstration projects. Under section 

1115(d)(3) of the Act, the Secretary is 

required to report annually to the 

Congress on actions taken with respect 

to applications for demonstration 

projects. 

In this proposed rule, we seek to 

implement section 1115(d) of the Act to 

ensure transparency at each stage of the 

demonstration development and review 

process without interfering with the 

timely review of demonstration 

proposals. This rule will also codify the 

requirements of section 5006 of the 

Recovery Act that apply to 

demonstrations. 

5. Findings Related to Section 1115 

Demonstration Evaluations 

We recognize the importance of 

public availability and understanding of 

information about the impact and 

operations of health insurance and 

health insurance programs, including 

Medicaid and CHIP. Because 

demonstration projects are approved to 

pilot or experiment with new 

approaches, it is particularly important 

to evaluate such projects and to share 

lessons learned. Demonstration 

evaluations can document policies that 

succeed or fail and the degree to which 

they do so informs decisions about the 

demonstration at issue, as well as the 

policy efforts of other States and at the 

Federal level. In particular, evaluations 

of the impact of demonstration program 

features that depart from the statutory 

requirements can inform the Secretary’s 

future decisions with regard to new 

approaches to coverage and care. 

More public involvement, 

understanding, and access to 

demonstration project evaluations will 

also provide greater understanding of 

demonstration effectiveness, and 

compliance. Public involvement can 

benefit all aspects of the evaluation 

process, including the process for 

submission of evaluation designs, 

approval of demonstration evaluations, 

and the submission of evaluation 

reports. Therefore, we are, as part of this 

transparency rule, codifying our existing 

policies to ensure greater transparency, 

communication, and collaboration in 

the evaluation aspect of the section 1115 

demonstration process. 

II. Provisions of the Proposed Rule 

This proposed rule would address the 

Affordable Care Act provisions 

requiring transparency in the process of 

developing and approving 

demonstrations. Consistent with the 

intention of these provisions, which is 

to ensure transparency and meaningful 

public input, we are soliciting public 

comments on this proposed rule’s 

impact on beneficiaries, providers, and 

States, and as well as in the 

administrative processes, the 

timeframes described within the rule 

and the projected impact in sound 

policymaking at the State and Federal 

levels. At the end of this comment 

period, we will review the comments 

and take the comments into 

consideration before we issue a 

subsequent final rule. In the processes 

and timeframes that we propose in this 

rule, we have tried to ensure that the 

public has a full opportunity to provide 

meaningful input into the development 

and review of section 1115 Medicaid 

and CHIP demonstrations consistent 

with the law while not impeding the 

process of developing, reviewing, 

approving, and implementing 

demonstrations. We welcome public 

comment on the balance this rule strikes 

between ensuring input and minimizing 

unnecessary administrative burden or 

delay, as well as the extent to which the 

rule ensures meaningful public 

comment at the State and Federal levels. 

We note that the procedures set forth 

in this proposed rule include 

procedures for submitting, publishing, 

and issuing public notices, applications, 

annual reports and other documents. In 

many cases, these procedures would 

allow for electronic documents, either 

as an alternative or a supplement to a 

printed document. Electronic 

documents should comply with all 

applicable civil rights requirements 

related to accessibility, including the 

requirements under section 508 of the 

Americans with Disabilities Act. 

Compliance with these requirements is 

necessary both to ensure accessibility by 

the public and to ensure accessibility by 

Federal employees who need to review 

the documents. 

In developing this rule, CMS 

reviewed prior guidance we issued 

regarding transparency in the waiver 

process, including the September 27, 

1994 Federal Register notice, and 

legislative proposals, including those 

that were proposed during the 

legislative process that resulted in the 

Affordable Care Act. These past 

guidance and proposals informed the 

development of the time requirements 

relating to the public comment period 

for new demonstrations and extending 

demonstrations; notifying organizations 

of the receipt of demonstration 

applications; acknowledging, if feasible, 

comments made; and refraining from 

approving or disapproving applications 

until public comments could be 

considered. In addition, as part of the 

task of establishing rules for the 

submission and review of 

demonstration proposals, we are 

codifying many of our existing 

processes to help create a more 

consistent demonstration submission 

and review process for States and to 

clarify for States, the Federal 

government, and the public when the 

public notice and input requirements 

take effect. 

A. Section 1115 Demonstrations 

(Subpart G) 

1. Basis and Purpose (§ 431.400) 

To incorporate the policies and 

implement the statutory provisions 

described above, we propose adding a 


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new subpart G under 42 CFR part 431 

to implement the provisions of section 

1115(d) of the Act, as amended by 

section 10201 of the Affordable Care 

Act. Subpart G includes guidance 

related to the development of 

demonstration applications, public 

notice for States and the Department, 

monitoring, compliance, evaluation of 

demonstration projects, and the 

submission of reports to the Secretary. 

2. Coordination with Section 1332 

Waivers (§ 431.402) 

Section 1332(a(5) of the Affordable 

Care Act requires the Secretary to 

develop a process for coordinating and 

consolidating the State waiver processes 

applicable under the provisions of 

section 1332 of the Affordable Care 

Act(as set forth in 45 CFR part 155), and 

the existing waiver processes applicable 

under titles XIX and XXI of the Social 

Security Act, and any other Federal law 

relating to the provision of health care 

items or services. Section 1332(a)(5) 

further requires the process developed 

by the Secretary to permit a State to 

submit a single application for a waiver 

under any and all of such provisions. 

The State waiver application processes 

applicable under section 1332 of the 

Affordable Care Act will be published in 

a separate rulemaking document. We 

have consulted with the Department in 

developing the demonstration 

application processes in this proposed 

rule and we will work to ensure that our 

final procedures are coordinated with 

section 1332 waiver application 

requirements. 

3. Definitions (§ 431.404) 

We are proposing to define the 

following terms as they are used in our 

current section 1115 demonstration 

review practices. In new § 431.404, we 

define the terms ‘‘demonstration,’’ 

‘‘public notice,’’ and ‘‘section 1332 

waiver’’ that are used in new subpart G 

under 42 CFR part 431. 

4. State Public Notice Process 

(§ 431.408) 

We recognize that demonstrations can 

have a significant impact on 

beneficiaries, providers, and States. 

Demonstrations can also influence 

policy making at the State and Federal 

level, by testing new approaches that 

can be models for programmatic 

changes nationwide or in other States. 

For these reasons, in § 431.408, we 

propose a process that promotes 

transparency, facilitates public 

involvement and input, and encourages 

sound decision-making as 

demonstration applications are designed 

at the State level. 

In order to facilitate public 

involvement in the development of 

section 1115 demonstration 

applications, we propose in 

§ 431.408(a)(1) that States issue a public 

notice with a comment period of at least 

30 days prior to the State’s submission 

of a new demonstration application or 

an application for an extension of an 

existing demonstration to CMS for 

review. Because meaningful input 

requires notice of the nature of the 

demonstration application or extension, 

we propose that the notice must include 

the following: 

• A summary program description, 

including the goals and objectives to be 

implemented or extended under the 

demonstration project. 

• The proposed health care delivery 

system and the eligibility requirements, 

benefit coverage, and cost sharing (for 

example, premiums, copayments, and 

deductibles) required of or available to 

individuals that will be impacted by the 

demonstration, and how the provisions 

vary from the State’s current program 

features. 

• An estimate of the expected 

increase or decrease in annual aggregate 

expenditures by population group 

impacted by the demonstration. 

• An estimate of historic coverage 

data, as well as coverage projections 

expected over the term of the 

demonstration for each category of 

beneficiary whose health care coverage 

is impacted by the demonstration. 

• The hypothesis and evaluation 

parameters of the demonstration. 

• The locations and Internet address 

of where copies of the demonstration 

application will be available for public 

review and comment. 

• Postal and Internet email addresses 

where written comments may be sent 

and reviewed by the public, and the 

timeframe during which comments will 

be accepted. 

• The location, date, and time of at 

least two public hearings convened by 

the State to seek public input on the 

demonstration application. 

The September 27, 1994 Federal 

Register notice (59 FR 49249) provided 

general principles and guidelines 

governing demonstration projects, as 

well as a public notice process designed 

to ensure that interested parties have an 

opportunity to provide input on State 

demonstration applications. In proposed 

§ 431.408(a)(2)(i), we have expanded the 

methods for States to provide public 

notice that were first outlined in the 

September 27, 1994 Federal Register 

notice. We propose requiring the State 

to publish its public notice process, its 

public input process, planned hearings, 

and demonstration application(s) either 

on a main page of the public web site 

of the State agency responsible for 

making applications for demonstrations 

or on a demonstration-specific web page 

that is linked in a readily identifiable 

way to the main page of the State 

agency’s web site. Public notice shall 

also be provided in at least one of the 

following publications: 

• The State’s Administrative Record 

in accordance with the State’s 

Administrative Procedure Act, provided 

that such notice is provided at least 30 

days prior to the submission of the 

demonstration application to CMS; or 

• The newspaper of widest 

circulation in each city or county with 

a population of 50,000 or more, 

provided that such notice is provided at 

least 30 days prior to the demonstration 

application’s submission to CMS. 

If the State utilizes a mechanism, such 

as an electronic mailing list, to notify 

interested parties of the demonstration 

application(s), the State may dispense 

with the notice procedures in 

§ 431.408(a)(2)(i)(A) and (B). 

In § 431.408(a)(3), consistent with the 

provisions of the Affordable Care Act, 

we propose that States would hold at 

least two public hearings regarding the 

State’s demonstration application. 

These hearings must occur at least 20 

days prior to the State’s submission of 

a demonstration application to CMS for 

review. A State would have broad 

discretion to select the types of public 

forums it would rely on, choosing at 

least two of the following public forums: 

• The Medical Care Advisory 

Committee that operates in accordance 

with § 431.408; or 

• A commission or other similar 

process, where meetings are open to 

members of the public; or 

• A State legislative process, which 

would afford an interested party the 

opportunity to learn about the contents 

of the demonstration application, and to 

comment on its contents; or 

• Any other similar process for public 

input that would afford an interested 

party the opportunity to learn about the 

contents of the demonstration 

application, and to comment on its 

contents. 

For the purposes of developing a 

coordinated process that is consistent 

with the provisions of section 5006(e) of 

the Recovery Act regarding tribal 

consultation at § 431.408(b), we define 

State consultation activities to include a 

consultation to solicit advice from the 

Indian Tribes, Indian health programs, 

and Urban Indian Organizations prior to 

the publication and submission of any 

application, or extension of a 

demonstration when it has a direct 

impact on Indians, Indian health 


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providers or Urban Indian 

Organizations. 

Under § 431.408(b)(1), we propose 

that States with federally-recognized 

Indian tribes, Indian health programs, 

and/or urban Indian organizations, must 

include with their demonstration 

applications (for a new or renewed 

demonstration) evidence to CMS that 

the tribes and Indian health programs 

and Urban Indian Organizations in the 

State were notified in writing of the 

State’s intent to submit a request for a 

new demonstration or extension, at least 

60 days prior to the anticipated 

submission date of the demonstration 

application. This 60-day notice is not 

new and is consistent with previous 

guidance on this matter. 

Under § 431.408(b)(2), we propose 

that consultation activities will be 

conducted in a manner consistent with 

the State approved consultation process 

outlined in the State’s Medicaid State 

Plan. 

Under § 431.408(b)(4), we propose 

that documentation of the State’s 

consultation activities should be part of 

the application for any demonstration 

submitted to CMS for review and 

consideration, and must include issues 

raised and the potential resolution of 

such issues. 

We welcome comments on the 

requirements proposed in this section of 

the rule. Specifically, we are interested 

in receiving comments regarding 

activities that would provide the public 

opportunities to provide meaningful 

input into the development of State 

demonstration applications while 

ensuring that the demonstration process 

can move forward in a timely and 

efficient manner. 

5. Application Procedures: Initial 

Demonstration Applications Content 

(§ 431.412(a)) 

In reviewing section 1115 

demonstration applications, CMS 

requests information from States in 

order to determine the nature, scope, 

and impact of the demonstration 

request. In this rule, we propose 

application components consistent with 

current practice both for new 

demonstrations and for the extension of 

an existing demonstration, in an effort 

to make the application process 

consistent and transparent. 

Under § 431.412(a), we define when a 

State request for a new demonstration 

would be considered complete for the 

purposes of initiating the Federal review 

process described below. A request 

would be complete, for this purpose, 

when the State has submitted to CMS 

the following information: 

• A demonstration program 

description, and goals and objectives 

that will be implemented under the 

demonstration project. 

• The description of the proposed 

health care delivery system, eligibility 

requirements, benefit coverage, and cost 

sharing (for example, premiums, 

copayments, and deductibles) required 

of individuals that will be impacted by 

the demonstration. 

• An estimate of the expected 

increase or decrease in annual aggregate 

expenditures by population group 

impacted by the demonstration. If 

available, include historic data for these 

populations. 

• An estimate of historic coverage 

and enrollment data (as appropriate) 

and estimated projections expected over 

the term of the demonstration for each 

category of beneficiary whose health 

care coverage is impacted by the 

demonstration. 

• Other demonstration program 

features that require the State to not 

follow the provisions of the Medicaid 

and CHIP programs. 

• The type of waivers and 

expenditure authorities that the State 

believes to be necessary to authorize the 

demonstration. 

• The research hypothesis or 

hypotheses that are related to the 

demonstration’s proposed changes, 

goals, and objectives, a plan for testing 

the hypotheses in the context of an 

evaluation, and, if a quantitative 

evaluation design is feasible, the 

identification of appropriate evaluation 

indicators. 

• Written evidence of the State’s 

compliance with the public notice 

requirements set forth in § 431.408, with 

a report of key issues raised by the 

public during the comment period, 

which shall be no less than 30 days, and 

how the State took those comments into 

consideration when developing the 

demonstration application. 

We also propose that after a request 

for a new demonstration or renewal of 

existing demonstration is considered 

complete, CMS may request, or the State 

may propose application modifications, 

as well as additional information to aid 

in the application review. If an 

application modification substantially 

changes the original demonstration 

design, CMS may, at its discretion, 

direct an additional 30 day public 

comment period. We also clarify that 

nothing in this proposed rule precludes 

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

conferring with CMS about its intent to 

seek a demonstration prior to submitting 

a completed application. 

6. Application Procedures: 

Demonstration Applications 

(§ 431.412(b)) 

We propose adding § 431.412(b) to 

describe the application procedures that 

States must follow when submitting an 

application for a new demonstration or 

a request to extend an existing 

demonstration under section 1115 of the 

Act. This provision establishes a process 

for the State to submit an application, 

and for CMS to confirm that the 

application is complete, which in turn 

initiates the Federal comment and 

decision-making period. We developed 

these procedures because they represent 

a standardized approach that would be 

helpful to States, stakeholders, and CMS 

in the review of section 1115 

demonstrations. We invite comments on 

the components of this application 

process. 

Under § 431.412(b)(1), we propose to 

formally notify the State in writing 

within 15 days of receipt of a complete 

application for a new demonstration 

project or extension of an existing 

demonstration project. This notice 

triggers the start of the 30-day Federal 

public comment period. We chose these 

timeframes and action steps to 

effectively communicate to States the 

current status and sequential steps in 

the demonstration review process. We 

clarify that this notice of a ‘‘complete’’ 

application process is based on a 

preliminary review for the purpose of 

beginning the public comment period at 

the Federal level. It does not preclude 

CMS requests for additional or 

supplemental information, that would 

support or inform a final decision on the 

application, and it also does not prevent 

the State from supplying any additional 

information that it determines would 

aid CMS’ review of its application. The 

notice simply represents a 

determination that the application is 

sufficient for the Federal review to 

commence. 

In order to inform the State and the 

public of the status of the demonstration 

or proposed activity, under 

§ 431.412(b)(2), we propose to provide 

the State a written notice within 15 days 

of receipt of a demonstration 

application that CMS determines is 

incomplete. In such notice, CMS will 

identify the elements missing from the 

application. 

Under § 431.412(b)(3), we propose to 

publish on our web site at regular 

intervals the status of all State 

submissions, including information 

received from the State while CMS 

works with the State to meet the 

demonstration application process set 

forth in this section. 


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7. Application Procedures: 

Demonstration Extension Request 

(§ 431.412(c)) 

Generally, demonstrations may be 

extended up to 3 years under sections 

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

As sections 1115(e) and (f) of the Act 

provide for a substantially streamlined 

Federal review process, the timeframes 

constrain Federal review of the 

demonstration and consequently the 

time under which CMS can consider 

public input. In § 431.412(c), we 

propose that, at least 30 days prior to a 

State’s submission of a request for 

review under those sections, the State 

issue public notice of its intent to seek 

an extension under those sections and 

receive public comment on the 

proposed extension of the 

demonstration for at least 30 days. In 

addition, we propose that the State must 

provide a written summary to CMS of 

the key issues raised in the public 

comment period and how the State 

considered those issues when 

developing the demonstration extension 

application. 

The application prerequisites for the 

extension of a demonstration, codify 

current practice guidelines employed by 

CMS in the review of an existing section 

1115 demonstration, which are 

consistent with the required timeframes 

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

Act. In § 431.412(c), we propose that a 

demonstration extension request will be 

considered only if it is submitted no 

later than 12 months prior to the 

expiration date of the demonstration. 

In § 431.412(c), we propose that a 

demonstration extension request or 

phase out plan be sent from the 

Governor of the State to the Secretary of 

HHS, as required by the statute, to 

extend a demonstration under sections 

1115(e) and (f) of the Act. However, if 

an extension application includes 

substantial changes to the existing 

demonstration, CMS may, at its 

discretion, treat the application as an 

application for a new demonstration. 

To ensure an appropriate review of 

request to extend existing 

demonstrations and to provide 

information to the public for purposes 

of public comment, we propose a list of 

information States should provide CMS 

to facilitate public comment on and, 

CMS review of section 1115 

demonstration extensions. In 

§ 431.412(c)(2), we propose that a 

demonstration extension application 

submitted by the State will be 

considered complete by CMS when the 

State provides the following: 

• A historical narrative summary of 

the demonstration project identifying 

the objectives set forth at the time the 

demonstration was approved and 

evidence of how these objectives have 

or have not been met, as well as future 

goals of the demonstration. 

• If changes are requested, a narrative 

of the changes being requested along 

with the objective of the change and the 

desired outcomes. 

• The types of waivers and 

expenditure authorities that are being 

requested in the extension period, or a 

statement that the State is requesting the 

same waiver and expenditure 

authorities as those approved in the 

current demonstration, as applicable. 

• Summaries of External Quality 

Review Organization (EQRO) reports, 

managed care organization (MCO), and 

State quality assurance monitoring, and 

any other documentation of the quality 

of care provided under the 

demonstration. 

• Financial data demonstrating the 

historical, and projected expenditures 

for the requested period of the 

extension, as well as cumulatively over 

the lifetime of the demonstration. This 

includes a financial analysis of changes 

to the demonstration requested by the 

State. 

• An evaluation report of the 

demonstration inclusive of evaluation 

activities and findings to date, plans for 

evaluation activities during the 

extension period, and if changes are 

requested, identification of research 

hypotheses related to the changes and 

an evaluation design for addressing the 

proposed revisions. 

• Written evidence of the State’s 

compliance with the public notice 

process set forth in § 431.408, including 

the post-award public input process 

described in § 431.420(c) with a report 

of key issues raised by the public during 

the comment period and how the State 

took those comments into consideration 

when developing the demonstration 

extension application. 

We clarify that, while a request for an 

extension of a demonstration may 

preliminarily be considered ‘‘complete,’’ 

it does not preclude CMS requests for 

additional or supplemental information, 

to support or inform a final decision on 

the application, and it also does not 

prevent the State from supplying any 

additional information that it 

determines would aid CMS’ review of 

its application. If an application 

modification substantially changes the 

original demonstration design, CMS 

may, at its discretion, direct an 

additional 30-day public comment 

period. 

8. Federal Public Notice and Approval 

Process (§ 431.416) 

We chose the timeframes and action 

steps outlined in this subpart to 

effectively communicate to States and 

concerned stakeholders the current 

status and sequential steps in the 

demonstration review process. This 

approach would standardize and 

improve transparency in the section 

1115 demonstration review process. In 

addition, by clearly communicating this 

process, we are striving to minimize 

confusion around the demonstration 

review process, satisfy key stakeholders’ 

need for information and improve 

communication at the Federal level. 

In § 431.416(a), we propose that 

within 15 days of receipt of a complete 

demonstration application for a new 

demonstration project or an extension of 

an existing demonstration project, CMS 

will send the State a written notice 

informing the State of the following: 

• CMS’ receipt of the request. 

• The beginning of the 30-day Federal 

public notice process. 

Under § 431.416(b) we propose to 

solicit public comment for 

demonstration applications received for 

at least a 30-day period through a 

variety of mechanisms, specifically by: 

• Publishing demonstration 

applications and associated concept 

papers, if any, on the CMS Web site. 

• Publishing the written notice of 

receipt of the State’s request for CMS to 

review and consider the demonstration 

application. 

• Publishing the proposed effective 

date of the demonstration. 

• Publishing where inquiries and 

comments from the public may be 

directed to CMS via mail or e-mail. 

• Notifying interested parties through 

an electronic mailing list that CMS will 

create for this purpose and will be 

available to all interested parties. 

• Additional actions that may be 

warranted to comply with Federal 

policies regarding consultation with 

Indian tribes. 

Under § 431.416(b)(2), we propose to 

create and solicit subscription to an 

electronic mailing list for the 

widespread distribution of information 

to individuals and organizations 

interested in demonstration 

applications. 

For the purpose of advising interested 

stakeholders of the status of 

demonstrations under CMS review, 

CMS proposes to publish on its website 

at regular intervals appropriate 

information, which may include, but is 

not limited to the following: 

• Relevant status update(s). 

• A listing of the issues raised 

through the public notice process. 


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Under § 431.416(d), we propose to 

publish all comments electronically. We 

will review and consider all comments, 

but will not provide written responses 

to public comments. 

Under § 431.416(e), we propose not to 

render a final decision on a 

demonstration application until at least 

45 days after notice of receipt of a 

completed application. This 

accommodates the 30-day notice period, 

as well as time to review the comments 

without unduly prolonging the review 

period. Some demonstration 

applications are particularly complex 

and will require a longer review period. 

The timeframes here provide for the 

minimum review period except in the 

case of emergencies. 

Under § 431.416(f), we propose to 

maintain an administrative record 

which will generally consist of the 

following: 

• The demonstration application from 

the State. 

• Public comments (including 

Congressional comments) sent to the 

CMS and any CMS responses. 

• For an approved application, the 

final special terms and conditions, 

waivers, expenditure authorities, and 

award letter sent to the State. 

• The State’s acceptance letter. 

We invite comment on all aspects of 

the demonstration development and 

review process, including what 

elements of the administrative record 

should be posted after a decision has 

been made, and how CMS can balance 

the need for transparency and the need 

for an expeditious review process. 

To ensure that States and the Federal 

Government are able to respond quickly 

to emergencies and unanticipated 

disasters, § 431.416(g) proposes a good 

cause exception to bypass, in whole or 

in part, the Federal and State notice and 

comment processes in order to expedite 

a decision on a proposed demonstration 

application or renewal. 

For an exception to the normal public 

notice process to exist, there must be 

unforeseen circumstances beyond the 

State’s control that makes advance 

public notice impractical due to 

unusual circumstances the State could 

not reasonably foresee including, but 

not limited to, an emergent occurrence 

such as fire or earthquake or flood. 

The Secretary may grant the State an 

exception to the normal public notice 

process or from the timeliness 

requirement when the State 

demonstrates all of the following: 

• The State acted in good faith. 

• The State acted in a diligent, timely, 

and prudent manner. 

• The circumstances constitute an 

emergency and could not have been 

reasonably foreseen. 

• Delay would undermine or 

compromise the purpose of the 

demonstration and be contrary to the 

interests of the beneficiaries. 

9. Monitoring and Compliance 

(§ 431.420) 

As section 1115 demonstrations have 

a significant impact on beneficiaries, 

States and the Federal Government, we 

are proposing processes and 

methodologies to assure we have 

adequate and appropriate information 

regarding the effectiveness of section 

1115 demonstrations. Under 

§ 431.420(a), we propose that States 

must comply with all applicable Federal 

laws, regulations, policy statements and 

Departmental guidance unless a law or 

regulation has specifically been waived 

or determined not applicable under the 

demonstration. States must, within the 

timeframes specified in law, regulation, 

interpretive policy or guidance, come 

into compliance with any changes in 

Federal law, regulation, or interpretive 

policy affecting State demonstration 

projects, unless the provision being 

changed is expressly waived or 

identified as not applicable. States must 

comply with the terms and conditions 

of the agreement between the Secretary 

and the State to implement a State 

demonstration project or the 

demonstration will be suspended or 

terminated in whole or in part by the 

Secretary. 

Under proposed § 431.420(b), as part 

of the special terms and conditions of 

any demonstration project, States will 

conduct periodic evaluations related to 

the implementation of the 

demonstration. CMS would review, and 

when appropriate investigate, 

documented complaints that a State is 

failing to comply with requirements 

specified in the special terms and 

conditions and implementing waivers of 

any approved demonstration. 

Another manner in which we propose 

strengthening our public notice 

procedures first set forth in the 

September 27, 1994 Federal Register 

notice is the post-implementation 

public forums. To assure continued 

public input after the initial 6 months 

of the demonstration’s implementation, 

and annually thereafter, the States shall 

hold a public forum to solicit comments 

on the progress of the demonstration. 

The public forum must occur using 

either: 

• The Medical Care Advisory 

Committee that operates in accordance 

with § 431.408; or 

• A State legislative process, 

commission or other similar process, 

where meetings are open to members of 

the public, and would afford an 

interested party the opportunity to learn 

about the demonstration’s progress. 

Under § 431.420(c), we propose that 

States will publish the date, time, and 

location of the public forum in a 

prominent location on the State’s public 

Web site at least 30 days prior to the 

date of the planned public forum. 

Under § 431.420 (d), we affirm the 

Secretary’s right to suspend or terminate 

a demonstration, in whole or in part, 

any time before the date of expiration, 

whenever it determines that the State 

has materially failed to comply with the 

terms of the demonstration project. 

When a demonstration is terminated, 

suspended, or if waivers or expenditure 

authority are withdrawn, Federal 

funding is limited to normal closeout 

costs associated with an orderly 

termination of the demonstration or 

expenditure authority as described in 

Under § 431.420(e). 

Under § 431.420(f), should we 

undertake an independent evaluation of 

any component of the demonstration, 

we propose the State must cooperate 

fully with CMS or the independent 

evaluator selected by CMS. The State 

must submit all necessary data and 

information to CMS or the independent 

evaluator. 

10. Evaluation Requirements (§ 431.424) 

Under § 431.424(a), we propose that 

the Secretary may use a broad range of 

evaluation strategies developed by 

States but subject to Secretarial approval 

in the application of evaluation 

techniques for measuring the 

effectiveness and usefulness of 

demonstration projects as models that 

help shape health care delivery and 

policy. 

Under proposed § 431.424(b), 

demonstration evaluations will include 

the following criteria: 

• Quantitative Research Methods: 

Quantitative research methods that 

involve the systematic empirical 

investigation of quantitative properties 

and phenomena and their relationships, 

are the preferred approach for most 

demonstrations. CMS will consider 

alternative evaluation designs when 

quantitative designs are technically 

infeasible or not well suited to the 

change made by the demonstration. 

• Approaches that minimize 

Beneficiary Impact: The Secretary is 

issuing a requirement that the 

evaluation process must be as unintrusive as possible to the beneficiaries 

in terms of implementing and operating 

the policy approach to be demonstrated, 


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while ensuring that critical lessons are 

learned from the demonstration. 

Under § 431.424(c), we propose that 

States submit and receive CMS approval 

of a design for an evaluation of the 

demonstration (or extension) and 

publish to the State’s public web site the 

draft demonstration design. The draft 

evaluation design must include: 

• A discussion of the demonstration 

hypotheses that are being tested 

including monitoring and reporting on 

the progress towards the expected 

outcomes. 

• The data to be utilized and the 

baseline value for each measure. 

• The methods of data collection. 

• How the effects of the 

demonstration will be isolated from 

those other initiatives occurring in the 

State. 

• A proposed date by which a final 

report on findings from evaluation 

activities conducted under the 

evaluation plan must be submitted to 

CMS. 

• Any other information pertinent to 

the State’s summative or formative 

research via the demonstration 

operations. 

Under proposed § 431.424(d), in the 

event the State submits a request to 

extend the demonstration beyond the 

current approval period under the 

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

of the Act, the State should include an 

interim evaluation report as part of the 

State’s request for each subsequent 

renewal. 

Under § 431.424(e), we propose that 

States publish the approved 

demonstration evaluation design on the 

State’s public Web site. 

Under § 431.424(f) regarding Federal 

evaluations, we propose that States 

comply with all requirements set forth 

in this subpart. 

Under § 431.424 (g),we propose to 

post all evaluation materials, including 

research and data collection, on our 

Web site for purposes of sharing 

findings with the public. 

11. Reporting Requirements (§ 431.428) 

In order for CMS to effectively 

monitor the implementation of a 

demonstration, we propose States to 

submit an annual report, as described in 

§ 431.428(a), documenting the 

following: 

• Any policy or administrative 

difficulties in the operation of the 

demonstration. 

• The status of the health care 

delivery system under the 

demonstration. 

• The impact of the demonstration in 

providing insurance coverage to 

beneficiaries and uninsured 

populations. 

• Outcomes of care, quality of care, 

cost of care and access to care for 

demonstration populations. 

• The results of beneficiary 

satisfaction surveys grievances and 

appeals. 

• The results of any audits or lawsuits 

that impact the demonstration. 

• The financial performance of the 

demonstration. 

• The status of the evaluation and 

information regarding Progress in 

achieving demonstration evaluation 

criteria. 

• Any State legislative developments 

that impact the demonstration. 

• The results/impact of any 

demonstration programmatic area as 

defined by CMS that is unique to the 

demonstration design or evaluation 

hypothesis. 

• A summary of the annual postaward public forum, including all 

public comments received regarding the 

progress of the demonstration project. 

Under § 431.428(b), we propose States 

to submit a draft annual report to CMS 

no later than 90 days after the end of 

each demonstration year. Within 60 

days of receipt of comments from CMS, 

the State will submit a final annual 

report for the demonstration year to 

CMS. The draft and final annual reports 

are to be published on the State’s public 

Web site. 

Given the discretionary nature 

regarding demonstration approval, CMS 

is committed to relying on annual 

reports and other evaluations when 

making decisions on demonstration 

changes and renewals including 

information in such reports and whether 

the State has complied with reporting 

requirements. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

A. ICRs Regarding State Public Notice 

Process (§ 431.408) 

Section § 431.408 provides for a State 

to provide a public notice and comment 

period regarding applications for a 

demonstration project, or an extension 

of an existing demonstration project the 

State intends to submit to CMS for 

review and consideration. Section 

§ 431.408(a)(1) specifies that prior to 

submitting an application to CMS for a 

new demonstration project, or an 

extension of a previously approved 

demonstration project, the State must 

provide public notice, and a comment 

period for at least 30 days. The public 

notice must address the information 

requirements listed at § 431.408(a)(1)(i) 

through (iv). 

The burden estimate associated with 

this requirement is the time and effort 

necessary to develop and publish notice 

with a comment period that complies 

with the aforementioned information 

requirements. We estimate that, on 

average, each of the 15 States submitting 

applications for new demonstration 

projects, an extension of a previously 

approved demonstration project will 

require 40 hours to comply with the 

requirements in this section. The 

estimated annual burden associated 

with this section is 600 hours at a cost 

of $12,402.00. 

Section 431.408(a)(2) provides that 

States establish and maintain a readily 

identifiable link to a demonstration web 

page on the public Web site of the State 

agency responsible for making 

applications for demonstrations. The 

State public notice must appear in a 

prominent location on the 

demonstration web page of the State’s 

public web site throughout the entire 

review process; and the public notice 

must appear in at least one of the 

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

through (ii). 

The burden associated with this is the 

time and effort necessary to develop a 

notice and to publish it both on the web 

site for State agency responsible for 

submitting demonstration applications 

and in at least one of the publication 

listed at § 431.408(a)(2)(i) through (ii). 

While these requirements are subject to 

the PRA, we believe we addressed the 

burden estimates in our discussion of 

§ 431.408(a)(1). 

Section § 431.408(a)(3) requires that at 

least 20 days prior to submitting an 


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application for new demonstration 

projects, or an extension of a previously 

approved demonstration project to CMS 

for review, the State must have 

conducted at least two public hearings 

regarding the State’s demonstration 

application using at least two of the 

following public forums contained in 

this section. The burden associated with 

this is the time and effort necessary for 

a State to conduct at least two public 

hearings 20 days prior to submitting an 

application for a demonstration. While 

this requirement is subject to the PRA, 

we believe the associated burden is 

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

or opinions submitted in response to 

general solicitations of comments from 

the public, published in the Federal 

Register or other publications, 

regardless of the form or format thereof, 

provided that no person is required to 

supply specific information pertaining 

to the commenter, other than that 

necessary for self-identification, as a 

condition of the agency’s full 

consideration of the comment are not 

subject to the PRA. 

Section 431.408(b) requires States 

with federally recognized Indian tribes, 

Indian health programs, Urban Indian 

Organizations or all three of the 

aforementioned entities, to consult with 

the Indian tribes, Indian Health 

programs and Urban Indian 

Organizations in the State, before 

submitting a demonstration application. 

Section 431.408(b)(2) specifies that 

consultation activities must be 

conducted in a manner consistent with 

the State approved consultation process 

outlined in the State’s Medicaid State 

Plan. Section 431.408(b)(3) further 

specifies that the State must submit 

evidence to CMS that the Indian Tribes, 

Indian Health programs, and Urban 

Indian Organizations were notified in 

writing of the State’s intent to submit an 

application for a new demonstration 

project, or an extension of an existing 

demonstration project, at least 60 days 

prior to the anticipated submission date 

of the application. Section 431.408(b)(4) 

explains that documentation of the 

State’s consultation activities must be 

included in the demonstration 

application, such as, the date and 

location of the consultation and must 

include issues raised and the potential 

resolution for such issues. 

The burden associated with these is 

both the time and effort necessary for a 

State to conduct its tribal consultations 

and the time and effort necessary to 

notify CMS of the State’s compliance 

with § 431.408(b)(3). We estimate that 

this requirement applies to 37 States but 

that no more than, on average, 15 States 

would be subject to this requirement in 

a given year. We further estimate that it 

will take each State a total of 40 hours 

to both conduct its tribal consultations, 

notify the Indian Tribes in writing of its 

intent to submit an application for a 

new demonstration project, or an 

extension of an existing demonstration 

project and to submit the 

aforementioned evidence to CMS. The 

estimated annual burden associated 

with these requirements is 600 hours at 

a cost of $12,402.00. 

B. ICRs Regarding Application 

Procedures (§ 431.412) 

Section 431.412(a) discusses the 

application process for Medicaid 

demonstration projects. A State’s 

application for approval of a new 

demonstration project or an extension of 

an existing demonstration project must 

be submitted to CMS as both printed 

and electronic documents. Section 

§ 431.412(b) further explains that 

applications for the initial approval of a 

demonstration will not be considered 

complete if they do not comply with the 

requirements contained at § 431.412(b) 

and § 431.408. 

The burden associated with the 

requirements in § 431.412 is the time 

and effort necessary for a State to 

develop and submit a complete initial 

application for a demonstration. We 

estimate that we will receive, on 

average, 5 applications annually. 

Similarly we estimate that it will take 

200 hours for a State to develop and 

submit a complete demonstration 

application. The total estimated annual 

burden associated with the 

requirements in § 431.412(b) is 1000 

hours at a cost of $20,067.00. 

Section 431.412(c) specifies that a 

State must submit a request to extend an 

existing demonstration under sections 

1115(a), (e) and (f) of the Act at least 12 

months prior to the expiration date of 

the demonstration. An extension 

application, including an extension for 

the purpose of phasing out a 

demonstration, must be sent from the 

Governor of the State to the Secretary. 

Section 431.412(c)(2) further specifies 

that an application to extend an existing 

demonstration will be considered 

complete when the State provides the 

required information listed at 

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

burden associated with the 

requirements in § 431.412(c) is the time 

and effort necessary for a State to 

develop and submit a demonstration 

extension application. CMS estimates 

that, on average, 10 States will apply for 

extensions annually. We further 

estimate that it will take each State 

approximately 160 hours to develop and 

submit a demonstration extension 

application. The total estimated annual 

burden is 1600 hours at a cost of 

$33,072.00. 

C. ICRs Regarding Monitoring and 

Compliance (§ 431.420) 

According to Section 431.420(b), 

States will periodically perform reviews 

of the implementation of the 

demonstration. We estimate that it will 

take each State 40 hours annually to 

periodically review the demonstration’s 

implementation. We also estimate that, 

on average, 15 States must comply with 

this requirement. The total estimated 

annual burden associated with this 

requirement is 600 hours at a cost of 

$12,402.00. 

Section 431.420(c) states that at least 

6 months after the implementation date 

of the demonstration and annually 

thereafter, the State must hold a public 

forum to solicit comments on the 

progress of a demonstration project. 

Section 431.420(c)(1)(i) through (ii) 

further specifies that the public forum to 

solicit feedback on the progress of a 

demonstration project, must occur at a 

Medical Care Advisory Committee, or a 

commission, or other similar process, 

where meetings are open to members of 

the public, and would afford an 

interested party the opportunity to learn 

about and comment on the 

demonstration’s progress. Additionally, 

as stated in § 431.420(c)(1)(iii), the State 

must publish the date, time, and 

location of the public forum in a 

prominent location on the State’s public 

Web site, at least 30 days prior to the 

date of the planned public forum. The 

burden associated with these provisions 

includes the time and effort necessary to 

conduct public meeting and the time 

and effort necessary for a State to 

publish the date, time, and location of 

the public forum in a prominent 

location on the State’s public Web site, 

at least 30 days prior to the date of the 

planned public forum. While these 

requirements are subject to the PRA, we 

believe the associated burden is exempt 

from the PRA. As discussed previously 

in this proposed rule, facts or opinions 

submitted in response to general 

solicitations of comments from the 

public, published in the Federal 

Register or other publications, 

regardless of the form or format thereof, 

provided that no person is required to 

supply specific information pertaining 

to the commenter, other than that 

necessary for self-identification, as a 

condition of the agency’s full 

consideration of the comment are not 

subject to the PRA. Therefore, the 

burden associated with the annual 

public hearing requirement is exempt. 

Similarly, we believe the time and effort 


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necessary to a State to publish the date, 

time, and location of the public forum 

in a prominent location on the State’s 

public web site is a burden that would 

be incurred in the course of usual and 

customary State business practices and 

is therefore exempt from the PRA under 

5 CFR 1320.3(b)(3). 

D. ICRs Regarding Evaluation 

Requirements (§ 431.424) 

As required in § 431.424(c)(1), 

simultaneous to receiving CMS’ 

approval of a new demonstration 

project, or a extension of a previously 

existing demonstration project, the State 

must receive CMS approval of a design 

for an evaluation of the demonstration 

project and publish this document to 

the State’s public Web site. The draft 

evaluation must include information 

established in § 431.424(c) (2). The 

burden associated with this requirement 

is the time and effort necessary to 

design an evaluation for a new 

demonstration. We estimate that it will 

take each State 80 hours to develop an 

evaluation. Similarly, we estimate that, 

on average, 15 States must comply with 

this requirement. We further estimate 

that the total estimated annual burden 

associated with this requirement is 

1,200 hours at a cost of $24,804.00. 

Section 431.424(d) specifies that in 

the event that the State requests to 

extend the demonstration beyond the 

current approval period under the 

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

the Act, the State must submit an 

interim evaluation report as part of the 

State’s request for a subsequent renewal 

of the demonstration. The burden 

associated with this is the time and 

effort necessary for a State to develop 

and submit an interim evaluation report. 

We estimate that each State will take 80 

hours to comply with this requirement. 

Similarly, we estimate that, on average, 

10 States must comply with this 

requirement. We further estimate that 

the total estimated annual burden 

associated with this requirement is 800 

hours at a cost of $16,536.00. 

Section 431.424(e) established that 

States will publish CMS-approved 

demonstration evaluation designs on 

their State public Web site. We estimate 

that it will take 36 hours for each State 

to comply with this disclosure process. 

We further estimate that, on average, 15 

States must comply with this provision. 

We further estimate that the total 

estimated annual burden associated 

with this requirement is 540 hours at a 

cost of $11,161.80. 

E. ICRs Regarding Reporting 

Requirements (§ 431.428) 

Section 431.428 establishes that States 

will submit annual reports to CMS 

documenting the information listed in 

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

the submission process, § 431.428(b) 

requires States to submit draft annual 

reports to CMS no later than 90 days 

after the end of each demonstration 

year. The burden associated with this 

reporting requirement is the time and 

effort necessary to submit draft annual 

reports to CMS. We estimate that, on 

average, 15 States must comply with 

this. We estimate that it will take 24 

hours for each State to comply with this 

reporting requirement. We further 

estimate that the total estimated annual 

burden associated with this requirement 

is 360 hours at a cost of $7,441.20. 

In § 431.428(b)(1) establishes that 

within 60 days of receipt of comments 

from CMS, the State must submit to 

CMS the final annual report for the 

demonstration year. While this 

requirement is subject to the PRA, we 

believe the associated burden is exempt 

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

opinions obtained or solicited through 

non-standardized follow-up questions 

designed to clarify responses to 

approved collections of information are 

not subject to the PRA. 

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

draft and final annual reports must be 

published on the State’s public web site. 

The burden associated with the time 

and effort it takes for a State to post the 

aforementioned information on the 

State’s public Web site. We estimate 

that, on average, each of the 15 States 

will require 2 hours to comply with this 

requirement. The total estimated annual 

burden associated with this requirement 

is 30 hours at a cost of $620.10. 

TABLE 1—ESTIMATED ANNUAL RECORDKEEPING AND REPORTING BURDEN

Regulation section(s) OMB control no. 

Respondents Responses 

Burden per 

response 

(hours) 

Total annual burden 

(hours) 

Hourly 

labor cost 

of reporting 

($) 

Total labor 

cost of reporting 

($) 

Total capital/mainte- nance 

costs 

($) 

Total cost 

($) 

§ 431.408(a)(1) ............................................ 0938–New 15 1 40 600 20.67 12,402.00 0 12,402.00 

§ 431.408(b) ................................................ 0938–New 15 1 40 600 20.67 12,402.00 0 12,402.00 

§ 431.412(a) and (b) .................................... 0938–New 5 1 200 1000 20.67 20,067.00 0 20,067.00 

§ 431.412c ................................................... 0938–New 10 1 160 1600 20.67 33,072.00 0 33,072.00 

§ 431.420 ..................................................... 0938–New 15 1 40 600 20.67 12,402.00 0 12,402.00 

§ 431.424(c) ................................................. 0938–New 15 1 80 1,200 20.67 24,804.00 0 24,804.00 

§ 431.424(d) ................................................ 0938–New 10 1 80 800 20.67 16,536.00 0 16,536.00 

§ 431.424(e) ................................................ 0938–New 15 1 36 540 20.67 11,161.80 0 11,161.80 

§ 431.428(b) ................................................ 0938–New 15 1 24 360 20.67 7,441.20 0 7,441.20 

§ 431.428(b)(2) ............................................ 0938–New 15 1 2 30 20.67 620.10 0 620.10 

Total ..................................................... .................. 130 10 .................. 7,330 .................. 150,908.10 0 150,908.10 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, [CMS– 

2325–P]; 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Statement 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), the 


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Regulatory Flexibility Act (RFA) 

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

section 1102(b) of the Act, section 202 

of the Unfunded Mandates Reform Act 

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

13132 on Federalism (August 4, 1999), 

and the Congressional Review Act (5 

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

Executive Order 12866 directs 

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). A regulatory impact 

analysis (RIA) must be prepared for 

rules with economically significant 

effects of $100 million or more in any 

1 year. This proposed rule is estimated 

to have an overall economic impact of 

$113,726.90 annually. This rule does 

not reach the economic threshold and 

thus is not considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses, if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Individuals 

and States are not included in the 

definition of a small entity. We are not 

preparing an analysis for the RFA 

because we have determined, and the 

Secretary certifies, that this proposed 

rule would not have a significant impact 

on a substantial number of small 

entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis, if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

Core-Based Statistical Area (for 

Medicaid) and outside of a Metropolitan 

Statistical Area (for Medicare) and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2010, that 

threshold is approximately $135 

million. Because this rule does not 

mandate State participation in using 

section 1115 demonstrations, there is no 

obligation for the State to make any 

change to their existing programs. As a 

result, there is no mandate for the State. 

Therefore, we estimate this rule would 

not mandate expenditures in the 

threshold amount of $135 million in any 

1 year. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

As CMS was considering potential 

proposals to make in this proposed rule, 

CMS conducted a listening session in 

May 2010 with more than 20 

representatives of stakeholder 

organizations and also held a separate 

listening session open to officials from 

all 50 States, the District of Columbia 

and U.S. Territories. The stakeholder 

representatives expressed concern that 

the policies employed in 

demonstrations have far-reaching 

impact, yet can happen with little 

meaningful stakeholder input into 

policy development at the Federal and 

State levels. They also expressed the 

view that since demonstrations allow 

States to ‘‘not comply’’ with 

requirements that the Congress put into 

law, the need for meaningful public 

input into these demonstrations is great. 

States agreed that public input is 

important, and while some States 

expressed concern that new 

requirements established by CMS could 

be potentially burdensome, other States 

reported that their existing public notice 

requirements and existing State 

legislative processes were strong and 

sufficient enough to ensure meaningful 

public input at the State level. Since 

this regulation will not impose 

substantial direct costs on State or local 

governments, the requirements of 

Executive Order 13132 are not 

applicable. In accordance with the 

provisions of Executive Order 12866, 

this regulation was reviewed by the 

Office of Management and Budget. 

List of Subjects in 42 CFR Part 431 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services propose to amend 42 

CFR chapter IV as follows: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

2. Subpart G is added to part 431 to 

read as follows: 

Subpart G—Section 1115 Demonstrations 

Sec. 

431.400 Basis and purpose. 

431.402 Coordination with section 1332 

waivers. 

431.404 Definitions. 

431.408 State public notice process. 

431.412 Application procedures. 

431.416 Federal public notice and approval 

process. 

431.420 Monitoring and compliance. 

431.424 Evaluation requirements. 

431.428 Reporting requirements. 

Subpart G—Section 1115 

Demonstrations 

§ 431.400 Basis and purpose. 

(a) Basis. This subpart implements 

provisions in section 1115(d) of the Act, 

which requires all of the following: 

(1) The establishment of application 

requirements for Medicaid and CHIP 

demonstration projects that provide for: 

(i) A process for public notice and 

comment at the State level, including 

public hearings, sufficient to ensure a 

meaningful level of public input and 

that does not impose requirements that 

are in addition to, or duplicative of, 

requirements imposed under the 

Administrative Procedure Act, or 

requirements that are unreasonable or 

unnecessarily burdensome with respect 

to State compliance. 

(ii) Requirements relating to all of the 

following: 

(A) The goals of the program to be 

implemented or renewed under the 

demonstration project. 

(B) Expected State and Federal costs 

and coverage projections of the State 

demonstration project. 

(C) Specific plans of the State to 

ensure the demonstration project will be 

in compliance with title XIX or XXI. 

(2) A process for public notice and 

comment after a demonstration 

application is received by the Secretary 

that is sufficient to ensure a meaningful 

level of public input. 

(3) A process for the submission of 

reports to the Secretary by a State 

relating to the implementation of a 

demonstration project. 

(4) Periodic evaluation of 

demonstration projects by the Secretary. 

(b) Purpose. This subpart sets forth a 

process for application and review of 

Medicaid and CHIP demonstration 


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projects that provides for transparency 

and public participation. 

§ 431.402 Coordination with section 1332 

waivers. 

(a) States may apply jointly. States 

may submit a single application for 

waivers under section 1332 of the 

Affordable Care Act and demonstration 

projects under section 1115 of the Act 

that involve titles VIII, XIX, and XXI of 

the Act, provided that such application 

complies with the procedural 

requirements for section 1332 waivers, 

as described at 45 CFR part 155, and the 

procedural requirements described in 

this part. 

(b) [Reserved] 

§ 431.404 Definitions. 

For the purposes of this subpart: 

Demonstration means any 

experimental, pilot, or demonstration 

project which the Secretary approves 

under the authority of section 1115 of 

the Act because, in the judgment of the 

Secretary, it is likely to assist in 

promoting the statutory objectives of the 

Medicaid or CHIP program. 

Public notice means a notice issued 

by a government agency or legislative 

body that contains sufficient detail to 

notify the public at large of a proposed 

action, consistent with the provisions of 

§ 431.408. 

Section 1332 waiver means a Waiver 

for State Innovation under section 1332 

of the Affordable Care Act. 

§ 431.408 State public notice process. 

(a) General. A State must provide at 

least a 30 day public notice and 

comment period regarding applications 

for a demonstration project, or an 

extension of an existing demonstration 

project that the State intends to submit 

to CMS for review and consideration. 

(1) Public notice and comment period. 

Prior to submitting an application to 

CMS for a new demonstration project or 

an extension of a previously approved 

demonstration project, the State must 

provide at least a 30 day public notice 

and comment period, and the public 

notice shall include all of the following 

information: 

(i) A comprehensive description of 

the demonstration application to be 

submitted to CMS, including: 

(A) The program description, goals, 

and objectives to be implemented or 

extended under the demonstration 

project, including a description of the 

current or new beneficiaries who will be 

impacted by the demonstration. 

(B) To the extent applicable, the 

proposed health care delivery system 

and the eligibility requirements, benefit 

coverage and cost sharing (premiums, 

co-payments, and deductibles) required 

of individuals that will be impacted by 

the demonstration, and how such 

provisions vary from the State’s current 

program features. 

(C) An estimate of the expected 

increase or decrease in annual 

enrollment, and in annual aggregate 

expenditures, including historic 

enrollment or budgetary data, if 

applicable. This includes a financial 

analysis of changes to the demonstration 

requested by the State. 

(D) The hypothesis and evaluation 

parameters of the demonstration. 

(ii) The locations and Internet address 

of where copies of the demonstration 

application are available for public 

review and comment. 

(iii) Postal and Internet e-mail 

addresses where written comments may 

be sent and reviewed by the public, and 

the timeframe during which comments 

will be accepted. 

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

least two public hearings convened by 

the State to seek public input on the 

demonstration application. 

(2) Statement of public notice and 

public input procedures. 

(i) The State shall publish its public 

notice process, public input process, 

planned hearings, and the 

demonstration application(s) in a 

prominent location on either the main 

page of the public Web site of the State 

agency responsible for making 

applications for demonstrations or on a 

demonstration-specific web page that is 

linked in a readily identifiable way to 

the main page of the State agency’s Web 

site. The State must maintain and keep 

current the public Web site throughout 

the entire public comment and review 

process. The State shall also publish the 

public notice in at least one of the 

following publications: 

(A) The State’s administrative record 

in accordance with the State’s 

Administrative Procedure Act, provided 

that such notice is provided at least 30 

days prior to the submission of the 

demonstration application to CMS; or 

(B) The newspaper of widest 

circulation in each city or county with 

a population of 50,000 or more, 

provided that such notice is provided at 

least 30 days prior to the submission of 

the demonstration application to CMS. 

(ii) If the State utilizes a mechanism, 

such as an electronic mailing list, to 

notify interested parties of the 

demonstration application(s), the State 

may dispense with the notice 

procedures in paragraphs (a)(2)(ii)(A) 

and (B) of this section. 

(3) Public hearings. At least 20 days 

prior to submitting an application for a 

new demonstration project or extension 

of an existing demonstration project to 

CMS for review, the State must have 

conducted at least two public hearings 

regarding the State’s demonstration 

application using at least two of the 

following public forums: 

(i) The Medical Care Advisory 

Committee that operates in accordance 

with § 431.408; or 

(ii) A commission or other similar 

process, where meetings are open to 

members of the public; or 

(iii) A State legislative process, which 

would afford an interested party the 

opportunity to learn about the contents 

of the demonstration application, and to 

comment on its contents; or 

(iv) Any other similar process for 

public input that would afford an 

interested party the opportunity to learn 

about the contents of the demonstration 

application, and to comment on its 

contents. 

(b) Tribal consultation. A State with 

federally recognized Indian tribes, 

Indian health programs, and/or Urban 

Indian Organizations shall include a 

process to consult with the Indian 

tribes, Indian Health programs and 

Urban Indian Organizations in the State, 

prior to submission of an application to 

CMS for a new demonstration project or 

an extension of a previously approved 

demonstration project. 

(1) The consultation with the 

federally-recognized Indian tribes, 

Indian health programs and Urban 

Indian Organizations must occur 60 

days prior to the publication and 

submission of an application for a new 

demonstration project or a renewal for 

a previously approved demonstration 

project when it has a direct impact on 

Indians, Indian health providers or 

Urban Indian Organizations. 

(2) The consultation activities must be 

conducted in a manner consistent with 

the State approved consultation process 

outlined in the State’s Medicaid State 

Plan. 

(3) The State must include in its 

application evidence that the Indian 

Tribes and Indian Health programs and 

Urban Indian Organizations were 

notified in writing of the State’s intent 

to submit an application for a new 

demonstration project or a renewal of a 

previously approved demonstration 

project, at least 60 days prior to the 

anticipated submission date of the 

application. 

(4) Documentation of the State’s 

consultation activities must be included 

in the demonstration application, such 

as, the date and location of the 

consultation and must include issues 

raised and the potential resolution for 

such issues. 


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§ 431.412 Application procedures. 

(a) Initial demonstration applications 

content. 

(1) Applications for initial approval of 

a demonstration will not be considered 

complete unless they comply with the 

public notice process set forth in 

§ 431.408(a) of this part, and includes 

the following: 

(i) A comprehensive program 

description of the demonstration, 

including the goals and objectives to be 

implemented under the demonstration 

project. 

(ii) A description of the proposed 

health care delivery system, eligibility 

requirements, benefit coverage and cost 

sharing (premiums, co-payments, and 

deductibles) required of individuals that 

will be impacted by the demonstration 

to the extent such provisions would 

vary from the State’s current program 

features and the requirements of the 

Act. 

(iii) An estimate of the expected 

increase or decrease in annual 

enrollment, and in annual aggregate 

expenditures, including historic 

enrollment or budgetary data, if 

applicable. 

(iv) Current enrollment data, if 

applicable, and enrollment projections 

expected over the term of the 

demonstration for each category of 

beneficiary whose health care coverage 

is impacted by the demonstration. 

(v) Other program features that the 

demonstration would modify in the 

State’s Medicaid and CHIP programs. 

(vi) The type of waivers and 

expenditure authorities that the State 

believes to be necessary to authorize the 

demonstration. 

(vii) The research hypotheses that are 

related to the demonstration’s proposed 

changes, goals, and objectives, a plan for 

testing the hypotheses in the context of 

an evaluation, and, if a quantitative 

evaluation design is feasible, the 

identification of appropriate evaluation 

indicators. 

(viii) Written evidence of the State’s 

compliance with the public notice 

requirements set forth in § 431.408, with 

a report of the key issues raised by the 

public during the comment period, 

which shall be no less than 30 days, and 

whether and how the State considered 

those comments when developing the 

demonstration application. 

(2) CMS may request, or the State may 

propose application modifications, as 

well as additional information to aid in 

the review of the application. If an 

application modification substantially 

changes the original demonstration 

design, CMS may, at its discretion, 

direct an additional 30-day public 

comment period. 

(b) Demonstration applications 

procedures. A State application for 

approval of a new demonstration project 

or an extension of an existing 

demonstration project must be 

submitted to CMS as both printed and 

electronic documents. Electronic 

documents should comply with all 

applicable civil rights requirements 

related to accessibility, including the 

requirements under Section 508 of the 

Americans with Disabilities Act. 

(1) As per § 431.416(a), within 15 days 

of receipt of a complete application, 

CMS will send the State a written notice 

informing the State of receipt of the 

submitted application and the start date 

of the 30-day Federal public notice 

process set forth in § 431.416. Such 

notice is provided for purposes of 

initiating the Federal-level public 

comment period and does not preclude 

a determination that, based on further 

review, further information is required 

to supplement or support the 

application, or that the application 

cannot be approved because a required 

element is missing or insufficient. It also 

does not prevent a State from modifying 

its application or submitting any 

supplementary information it 

determines necessary to support CMS’ 

review of its application. 

(2) Within 15 days of receipt of a 

demonstration application that CMS 

determines is incomplete, CMS will 

send the State a written notice of the 

elements missing from the application. 

(3) CMS will publish on its Web site 

at regular intervals the status of all State 

submissions, including information 

received from the State while the State 

works with CMS to meet the 

demonstration application process set 

forth in this section. 

(c) Demonstration Extension Request. 

A request to extend an existing 

demonstration under sections 1115(a), 

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

only if it is submitted at least 12 months 

prior to the expiration date of the 

demonstration. An extension 

application, including an extension for 

the purpose of phasing out a 

demonstration, must be sent from the 

Governor of the State to the Secretary. 

(1) Changes to existing demonstration. 

If an extension application includes 

substantial changes to the existing 

demonstration, CMS may, at its 

discretion, treat the application as an 

application for a new demonstration. 

(2) Demonstration extension 

application. An application to extend an 

existing demonstration will be 

considered complete, for purposes of 

initiating the Federal-level public notice 

period, when the State provides the 

following: 

(i) A historical narrative summary of 

the demonstration project, which 

includes the objectives set forth at the 

time the demonstration was approved 

evidence of how these objectives have 

or have not been met, and the future 

goals of the program. 

(ii) If changes are requested, a 

narrative of the changes being requested 

along with the objective of the change 

and the desired outcomes. 

(iii) A list and programmatic 

description of the waivers and 

expenditure authorities that are being 

requested for the extension period, or a 

statement that the State is requesting the 

same waiver and expenditure 

authorities as those approved in the 

current demonstration. 

(iv) Summaries of External Quality 

Review Organization (EQRO) reports, 

managed care organization (MCO) and 

State quality assurance monitoring, and 

any other documentation of the quality 

of care provided under the 

demonstration. 

(v) Financial data demonstrating the 

State’s historical and projected 

expenditures for the requested period of 

the extension, as well as cumulatively 

over the lifetime of the demonstration. 

This includes a financial analysis of 

changes to the demonstration requested 

by the State. 

(vi) An evaluation report of the 

demonstration, inclusive of evaluation 

activities and findings to date, plans for 

evaluation activities during the 

extension period, and if changes are 

requested, identification of research 

hypotheses related to the changes and 

an evaluation design for addressing the 

proposed revisions. 

(vii) Written evidence of the State’s 

compliance with the public notice 

process set forth in § 431.408, including 

the post-award public input process 

described in § 431.420(c) of this part, 

with a report of the key issues raised by 

the public during the comment period 

and whether the State considered the 

comments when developing the 

demonstration extension application. 

(3) CMS may request, or the State may 

propose application modifications as 

well as additional information to aid in 

the review of an application to extend 

a demonstration. If an application 

modification substantially changes the 

original demonstration design, CMS 

may, at its discretion, direct an 

additional 30 day public comment 

period. 

(d) Approvals. Approval of a new 

demonstration or a demonstration 

extension will generally be prospective 

only and Federal Financial Participation 

(FFP) will not be available for changes 


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to the demonstration that have not been 

approved by CMS. 

§ 431.416 Federal public notice and 

approval process. 

(a) General. Within 15 days of receipt 

of a complete application from the State 

for a new demonstration project or an 

extension of a previously approved 

demonstration project, CMS will send 

the State a written notice informing the 

State of receipt of the demonstration 

application, the start dates of the 30-day 

Federal public notice process, and the 

end date of the 45-day minimum 

Federal decision-making period. 

(b) Public comment period. Upon 

notifying a State of a completed 

application, CMS will solicit public 

comment regarding such demonstration 

application for 30 days by doing the 

following: 

(1) Publishing the following on the 

CMS Web site: 

(i) The written notice of CMS receipt 

of the State’s complete demonstration 

application, if any. 

(ii) Demonstration applications, 

including supporting information 

submitted by the State as part of the 

complete application, and associated 

concept papers, as applicable. 

(iii) The proposed effective date of the 

demonstration. 

(iv) Addresses to which inquiries and 

comments from the public may be 

directed to CMS by mail or e-mail. 

(2) Notifying interested parties 

through an electronic mailing list that 

CMS will create for this purpose. 

(c) Public disclosure. CMS will 

publish on its Web site, at regular 

intervals, appropriate information, 

which may include, but is not limited 

to the following: 

(1) Relevant status update(s); 

(2) A listing of the issues raised 

through the public notice process. 

(d) Publishing of comments. CMS will 

publish all comments electronically. 

CMS will review and consider all such 

comments, but will not provide written 

responses to public comments. 

(e) Approval of a demonstration 

application. CMS will not render a final 

decision on a demonstration application 

until at least 45 days after notice of 

receipt of a completed application, in 

order to receive and consider public 

comments. However, CMS may expedite 

this process under the exception to the 

normal public notice process provisions 

in Section § 431.416(g). 

(f) Administrative record. CMS will 

maintain an administrative record that 

may include, but is not limited to the 

following: 

(1) The demonstration application 

from the State. 

(2) Public comments sent to the CMS 

and any CMS responses. 

(3) If an application is approved, the 

final special terms and conditions, 

waivers, expenditure authorities, and 

award letter sent to the State. 

(4) The State acceptance letter. 

(g) Exception to the normal public 

notice process. CMS may exercise its 

discretionary authority to bypass, in 

whole or in part, the Federal and State 

public notice procedures in order to 

expedite a decision on a proposed 

demonstration or demonstration 

renewal that addresses a natural, social, 

economic or similar disaster. 

(1) The Secretary may exempt a State 

from the normal public notice process 

or the required time constraints 

imposed in this section or paragraph (a) 

of § 431.408 when the State 

demonstrates to CMS there is the 

existence of unforeseen circumstances 

that warrant an exception to the normal 

public notice process. The State is 

expected to discharge its basic 

responsibilities in submitting 

demonstration applications to the 

Secretary as required in § 431.412 of this 

subpart. Such applications will be 

posted on the CMS Web site. 

(2) An exception from the normal 

public notice process exists when the 

Secretary finds that there are unforeseen 

circumstances beyond the State’s 

control that makes full compliance with 

the public notice and comment 

provision impractical, including, but 

not limited to, an emergent occurrence 

such as fire or earthquake or flood. 

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

of the following criteria to obtain an 

exception from the normal public notice 

process or the timeliness requirement 

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

(i) The State acted in good faith. 

(ii) The State acted in a diligent, 

timely, and prudent manner. 

(iii) The circumstances constitute an 

emergency and could not have been 

reasonably foreseen. 

(iv) Delay would undermine or 

compromise the purpose of the 

demonstration and be contrary to the 

interests of beneficiaries. 

§ 431.420 Monitoring and compliance. 

(a) General. (1) States must comply 

with all applicable Federal laws, 

regulations, interpretive policy 

statements and interpretive guidance 

unless expressly waived by the 

demonstration. States must, within the 

timeframes specified in law, regulation, 

policy or guidance, come into 

compliance with any changes in Federal 

law, regulation, or policy affecting State 

demonstration projects, unless the 

provision being changed is expressly 

waived or identified as not applicable. 

(2) States must comply with the terms 

and conditions of the agreement 

between the Secretary and the State to 

implement a State demonstration 

project or the demonstration will be 

suspended or terminated, in whole or in 

part, by the Secretary. 

(b) Implementation reviews. (1) The 

terms and conditions will provide that 

the State will perform periodic reviews 

of the implementation of the 

demonstration. 

(2) CMS will review documented 

complaints that a State is failing to 

comply with requirements specified in 

the special terms and conditions and 

implementing waivers of any approved 

demonstration. 

(c) Post award. Within at least 6 

months after the implementation date of 

the demonstration and annually 

thereafter, the State must hold a public 

forum to solicit comments on the 

progress of a demonstration project. The 

State must hold the public forum in 

such time as to include a summary of 

the forum in its annual report to CMS. 

(1) The public forum to solicit 

feedback on the progress of a 

demonstration project must occur using 

one of the following: 

(i) A Medical Care Advisory 

Committee that operates in accordance 

with § 431.408. 

(ii) A commission or other similar 

process, where meetings are open to 

members of the public, and would 

afford an interested party the 

opportunity to learn about the 

demonstration’s progress. 

(iii) The State must publish the date, 

time, and location of the public forum 

in a prominent location on the State’s 

public Web site, at least 30 days prior 

to the date of the planned public forum. 

(2) [Reserved] 

(d) Terminations and suspensions. 

The Secretary reserves the right to 

suspend or terminate a demonstration in 

whole or in part, any time before the 

date of expiration, whenever it 

determines that the State has materially 

failed to comply with the terms of the 

demonstration project. 

(e) Closeout costs. When a 

demonstration is terminated, 

suspended, or if waivers or expenditure 

authority are withdrawn, Federal 

funding is limited to normal closeout 

costs associated with an orderly 

termination of the demonstration or 

expenditure authority, including service 

costs during any approved transition 

period, and administrative costs of 

disenrolling participants. 

(f) Federal evaluators. (1) The State 

must fully cooperate with CMS or an 


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Federal Register / Vol. 75, No. 180 / Friday, September 17, 2010 / Proposed Rules 56961 

independent evaluator selected by CMS 

to undertake an independent evaluation 

of any component of the demonstration. 

(2) The State must submit all 

requested data and information to CMS 

or the independent evaluator. 

§ 431.424 Evaluation requirements. 

(a) General. States are permitted and 

encouraged to use a range of appropriate 

evaluation strategies (including true 

experimental, scientific, and qualitative 

designs) in the application of evaluation 

techniques with CMS’ approval. 

(b) Demonstration evaluations. 

Demonstration evaluations will include 

the following: 

(1) Quantitative research methods. (i) 

These methods involve the empirical 

investigation of the impact of key 

programmatic features of the 

demonstration. 

(ii) CMS will consider alternative 

evaluation designs when quantitative 

designs are technically infeasible or not 

well suited to the change made by the 

demonstration. 

(2) Approaches that minimize 

beneficiary impact. The evaluation 

process must minimize burden on 

beneficiaries in terms of implementing 

and operating the policy approach to be 

demonstrated while ensuring the impact 

of the demonstration is measured. 

(c) Evaluation design plan. (1) The 

State will submit and receive CMS 

approval of a design for an evaluation of 

the demonstration project and publish 

this document to the State’s public Web 

site. 

(2) The draft demonstration 

evaluation design must include all of 

the following: 

(i) A discussion of the demonstration 

hypotheses that are being tested 

including monitoring and reporting on 

the progress towards the expected 

outcomes. 

(ii) The data that will be utilized and 

the baseline value for each measure. 

(iii) The methods of data collection. 

(iv) How the effects of the 

demonstration will be isolated from 

those other changes occurring in the 

State at the same time through the use 

of comparison or control groups to 

identify the impact of significant aspects 

of the demonstration. 

(v) A proposed date by which a final 

report on findings from evaluation 

activities conducted under the 

evaluation plan must be submitted to 

CMS. 

(vi) Any other information pertinent 

to the State’s research on the policy 

operations of the demonstration 

operations. 

(d) Evaluations for demonstration 

extensions. In the event that the State 

requests to extend the demonstration 

beyond the current approval period 

under the authority of section 1115(a), 

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

submit an interim evaluation report as 

part of the State’s request for a 

subsequent renewal of the 

demonstration. State evaluations must 

be published on the state’s public Web 

site. 

(e) Approved evaluation designs. The 

State must publish the CMS-approved 

demonstration evaluation design on the 

State’s public Web site. 

(f) Federal evaluations. The State 

must comply with all requirements set 

forth in this subpart. 

(g) Federal public notice. CMS will 

post all evaluation materials, including 

research and data collection, on its Web 

site for purposes of sharing findings 

with the public. 

§ 431.428 Reporting requirements. 

(a) Annual reports. The State must 

submit an annual report to CMS 

documenting all of the following: 

(1) Any policy or administrative 

difficulties in the operation of the 

demonstration. 

(2) The status of the health care 

delivery system under the 

demonstration. 

(3) The impact of the demonstration 

in providing insurance coverage to 

beneficiaries and uninsured 

populations. 

(4) Outcomes of care, quality of care, 

cost of care and access to care for 

demonstration populations. 

(5) The results of beneficiary 

satisfaction surveys grievances and 

appeals. 

(6) The results of any audits or 

lawsuits that impact the demonstration. 

(7) The financial performance of the 

demonstration. 

(8) The status of the evaluation and 

information regarding progress in 

achieving demonstration evaluation 

criteria. 

(9) Any State legislative developments 

that impact the demonstration. 

(10) The results/impact of any 

demonstration programmatic area 

defined by CMS that is unique to the 

demonstration design or evaluation 

hypothesis. 

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

public comments received regarding the 

progress of the demonstration project. 

(b) Submitting and publishing annual 

reports. States must submit a draft 

annual report to CMS no later than 90 

days after the end of each demonstration 

year. 

(1) Within 60 days of receipt of 

comments from CMS, the State must 

submit to CMS the final annual report 

for the demonstration year. 

(2) The draft and final annual reports 

are to be published on the State’s public 

Web site. 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.778, Medical 

Assistance Program) 

Dated: August 16, 2010. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: September 9, 2010. 

Kathleen Sebelius, 

Secretary of Health and Human Services. 

[FR Doc. 2010–23357 Filed 9–16–10; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Chapter 2 

Defense Federal Acquisition 

Regulation Supplement; Material 

Inspection and Receiving Report 

(DFARS Case 2009–D023) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Proposed rule with request for 

comments. 

SUMMARY: DoD is issuing a proposed 

rule to update Defense Federal 

Acquisition Regulation Supplement 

(DFARS), Appendix F, Material 

Inspection and Receiving Report, to 

incorporate procedures for using the 

electronic Wide Area Workflow 

Receiving Report required for use in 

most contracts in lieu of the DD Form 

250, Material Inspection and Receiving 

Report, which is now used mostly on an 

exception basis. 

DATES: Comments on the proposed rule 

should be submitted in writing to the 

address shown below on or before 

November 16, 2010, to be considered in 

the formation of the final rule. 

ADDRESSES: Respondents may submit 

comments via the Internet at http:// 

www.regulations.gov. As an alternative, 

respondents may e-mail comments to 

dfars@osd.mil. Please cite DFARS Case 

2009–D023 in the subject line of emailed comments. 

Respondents that cannot submit 

comments using either of the above 

methods may submit comments to: 

Defense Acquisition Regulations 

System, OUSD(AT&L)DPAP/DARS, 

Attn: Ms. Mary Overstreet, 3060 Defense 

Pentagon, Room 3B855, Washington, DC 


wwoods2 on DSKDVH8Z91PROD with PROPOSALS-1