DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 431, 433, 435, and 457 [CMS-2349-P] RIN 0938-AQ62 Medicaid Program; Eligibility Changes under the Affordable Care Act of 2010 AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: This proposed rule would implement pr ovisions of the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act). The Affordable Care Act expands access to health insurance through improvements in Medicai d, the establishment of Affordable Insurance Exchanges (“Exchanges”), and coordination betw een Medicaid, the Children’s Health Insurance Program (CHIP), and Exchanges. This propos ed rule would implement sections of the Affordable Care Act related to Medicaid and CH IP eligibility, enrollment simplification, and coordination. In addition, this proposed rule also sets out the increased Federal Medical Assistance Percentage (FMAP) rates and the related conditions and requirements that will be available for State medical assistance expenditu res relating to “newly eligible” individuals and certain medical assistance expenditures in “expa nsion States” beginning January 1, 2014, including a proposal of three alternative methodologies to use for pur poses of applying the appropriate FMAP for expenditures in accordance with section 2001 of the Affordable Care Act.CMS-2349-P 2

DATES : To be assured consideration, comments mu st be received at one of the addresses provided below, no later than 5 p.m. on [ OFR--insert date 75 days afte r date of publication in the Federal Register]

. ADDRESSES: In commenting, please refer to file code CMS-2349-P. Because of staff and resource limitations, we ca nnot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically . You may submit electronic comments on this regulation to http://www.regulations.gov . Follow the "Submit a comment" instructions. 2. By regular mail . You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2349-P, P.O. Box 8016, Baltimore, MD 21244-8016. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail . You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2349-P, Mail Stop C4-26-05, 7500 Security Boulevard,CMS-2349-P 3
Baltimore, MD 21244-1850. 4. By hand or courier . Alternatively, you may delive r (by hand or courier) your written comments ONLY to the following addre sses prior to the close of the comment period: a. For delivery in Washington, DC-- Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201 (Because access to the interior of the Hube rt 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 stampin clock is available for persons wishing to reta in a proof of filing by st amping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and rece ived after the comment period.CMS-2349-P 4 For information on viewing public co mments, see the beginning of the "SUPPLEMENTARY INFORMATION" section. FOR FURTHER INFORMATION CONTACT: Sarah Delone, (410) 786-0615. Stephanie Kaminsky, (410) 786-4653. SUPPLEMENTARY INFORMATION: A detailed Preliminary Regulatory Impact Analys is associated with th is proposed rule is available at http://www.cms.gov/MedicaidEligib ility/downloads/CMS-2349-PPreliminaryRegulatoryImpactAnalysis.pdf

. A summary of the aforementioned analysis is included as part of this proposed rule. Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, includi ng any personally identif iable 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 si te as soon as possible after they have been received: http://www.regulations.go v. Follow the search instructi ons on that web site to view public comments. Comments received timely will also be av ailable for public inspection as they are received, generally beginning approximately 3 w eeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951. Table of Contents I. BackgroundCMS-2349-P 5

A. Introduction B. Legislative Overview C. Overview of the Proposed Rule II. Provisions of the Proposed Rule A. Changes to Medicaid Eligibility 1. Coverage for Individuals Age 19 or Olde r and Under Age 65 at or below 133 Percent FPL (§435.119) 2. Individuals Above 133 Percent FPL (§435.218) 3. Amendments to Part 435, Subparts A through D

a. Eligibility for Parents and Other Caretake r Relatives, Pregnant Women, and Children (1) Parents and Other Careta ker Relatives (§435.110) (2) Pregnant Women (§435.116) (3) Infants and Children Under Age 19 (§435.118) b. Other Conforming Changes to Existing Regulations B. Financial Methodologies for Determini ng Medicaid Eligibility Based on MAGI under the Affordable Care Act 1. Point-in-time Measurement of Income (budget periods) (§435.603(h)) 2. Changes to Medicaid Financial Methods 3. Provisions of Proposed Rule Implementing MAGI Methods a. Proposed Methods for Counting Income Based on MAGI (§435.603(e)) b. Proposed Rules for Determining Household Composition under MAGI Based Methods (§435.603(f)) (1) Household Composition for Tax Filers (§435.603(f)(1)) and their Tax DependentsCMS-2349-P 6 (§435.603(f)(2)) (2) Household Composition fo r Non-Filers (§435.603(f)(3)) (3) Retention of Existing Financial Methods (§435.603(i)) C. Residency for Medicaid Eligibility Defined 1. Residency Definition for A dults (age 21 and over) §435.403(h)) 2. Residency Definition for Ch ildren (under age 21) (§435.403(i)) D. Application and Enrollment Procedures for Medicaid 1. Availability of Program Information (§435.905) 2. Applications (§435.907) 3. Assistance with Applicati on and Redetermination (§435.908) E. MAGI Screen (§435.911) F. Coverage Month G. Verification of Income and Othe r Eligibility Criteri a (§435.940 through §435.956) 1. Basis, Scope, and General Requirements (§435.940 and §435.945) 2. Verification of Financial Eligibility (§435.948) 3. Verification of Information from Federal agencies (§435.949) 4. Use of Information and Request for Additional Information (§435.952) 5. Verification of Other Non-Financial Information (§435.956) H. Periodic Redetermination of Medicaid Eligibility (§435.916) I. Coordination of Eligibility and Enrollm ent among Insurance Affordability Programs – Medicaid Agency Responsibilities (§435.1200) 1. Basic Responsibilities (§435.1200(c)) 2. Internet Web site (§435.1200(d))CMS-2349-P 7

3. Provision of Medical Assist ance for Individuals found El igible for Medicaid by an Exchange (§435.1200(e)) 4. Transfer of Applications from other In surance Affordability Programs to the State Medicaid Agency (§435.1200(f)) 5. Evaluation of Eligibility for other Insurance Affordability Programs (§435.1200(g)) J. Single State Agency (§431.10 and §431.11) K. Provisions of Proposed Regulation Impl ementing Application of MAGI to CHIP 1. Definitions and Use of Terms (§457.10 and §457.301) 2. State Plan Provisions (§457.305) 3. Application of MAGI and Household Definition (§457.315) 4. Other Eligibility Standards (§457.320) 5. Clarifications Related to MAGI L. Residency for CHIP Eligibility (§457.320) M. CHIP Coordinated Eligibility and Enrollment Process 1. Applications and Outreach Standards (§457.330, §457.334, §457.335 and §457.340) 2. Determination of CHIP Eligibility and Coordination with Exchange and Medicaid (§457.348 and §457.350) 3. Periodic Redetermination of CHIP Elig ibility (§457.343) and Coverage Months 4. Verification of Eligibility (§457.380) 5. Ministerial Changes (§457.80, §457.300, §457.301, §457.305, and §457.353) N. Federal Medical Assistance Percentage (F MAP) for Newly Eligib le Individuals and for Expansion States 1. Availability of FMAP (§433.10(c))CMS-2349-P 8 a. Newly Eligible FMAP (§433.10(c)(6)) b. Expansion State FMAP (§433.10(c)(7) and §433.10(c)(8)) (1) 2.2 Percentage Points In crease in FMAP (§433.10(c)(7)) (2) Expansion State FMAP (§433.10(c)(8)) 2. Methodology (§433.206(a) and §433.206(b)) 3. Alternative 1: 2009 Elig ibility Standard Threshold 4. Alternative 2: Statistical ly Valid Sampling Methodology (§433.210) 5. Alternative 3: Use of a FMAP Methodology Based on Relia ble Data Sources (§433.212) 6. Additional Methodology Approaches. III. Collection of Information Requirements IV. Response to Comments V. Summary of Preliminary Regulatory Impact Analysis Regulations Text Acronyms Because of the many organizations and terms to which we refer by acronym in this proposed rule, we are listing these acronyms and their corr esponding terms in alphabetical order below: Act Social Security Act AFDC Aid to Families with Dependent Children BBA Balanced Budget Act of 1997 CHIP Children’s Health Insurance Program CMS Centers for Medicare & Medicaid Services DHS Department of Homeland SecurityCMS-2349-P 9

EITC Earned Income Tax Credit EPSDT Early and periodic screening, diagnosis, and treatment FFP Federal financial participation FMAP Federal medical assistance percentage FPL Federal poverty level HCERA Health Care and Education Reconc iliation Act of 2010 (Pub. L. 111-152, enacted March 30, 2010) HHS [U.S.] Department o f] Health and Human Services IRA Individual Retirement Account IRC Internal Revenue Code of 1986 IRS Internal Revenue Service LEP Limited English Proficient MAGI Modified adjusted gross income MSA Medical Savings Account PRWORA Personal Responsibility and Work Opportunity Reconci liation Act of 1996 QI Qualifying Individuals QMB Qualified Medicare Beneficiaries SHO State Health Official SLMB Specified Low-Income Medicare Beneficiaries SMD State Medicaid Director SNAP Supplemental Nutrition Assistance Program SPA State Plan Amendment SSA Social Security AdministrationCMS-2349-P 10 SSI Supplemental Security Income SSN Social Security number TANF Temporary Assistance for Needy Families I. Background A. Introduction The Patient Protection and Affordable Ca re Act (Pub. L. 111-148, enacted on March 23, 2010), was amended by the Health Care and Ed ucation Reconciliation Act of 2010 (Pub. L. 111- 152, enacted on March 30, 2010), and t ogether these laws are referred to as the Affordable Care Act. In addition, section 205 of the Medicare & Medicaid Extenders Act of 2010 (Pub. L. 111- 309, enacted December 15, 2010) made technical correc tions to the Social Security Act (the Act) to implement the Affordable Care Act. This pr oposed rule addresses changes to Medicaid and CHIP eligibility in the Affordable Care Act. Prior to the implementation of the Affordable Care Act in 2014, individuals who fall into certain “categories” or “categorical groups” ar e eligible for Medicaid, including low-income children, pregnant women, parents and other ca retaker relatives, seniors, and people with disabilities. Federal minimum income eligib ility standards vary by category. All States currently cover pregnant women an d children under age 6 at or be low 133 percent of the Federal poverty level (FPL) (in some St ates the minimum eligibility level is 185 percent FPL for pregnant women and children under one), and children age 6 through age 18 with family incomes at or below 100 percent of the FPL , though many States have implemented higher standards for pregnant women and children. The Federally-specified minimum eligibility levels for parents, people with disabili ties and the elderly ar e significantly lower, although States have the option to expand coverage to pe ople within these categories at higher income levels. Prior toCMS-2349-P 11
the Affordable Care Act, States could not cover non-disabled, non-elde rly adults who do not have dependent children, regardless of thei r income level, excep t through a Medicaid demonstration under Section 1115 of the Act. As a result of the varying Federal minimum standards and State options, eligibility for Medicaid is co mplicated and significant gaps continue to exist even among the lowest income Americans. The Affordable Care Act extends and simplifies Medicaid eligibility. Starting in calendar year (CY) 2014, it replaces th e complex categorical groupings and limitations to provide Medicaid eligibility to all individuals under ag e 65 with income at or below 133 percent FPL, provided that the individual meets certain non-financial eligibility cr iteria, such as citizenship or satisfactory immigration status. Children and, in some States, pregnant women will be eligible at income levels equal to or higher than the 133 percent level, depending on existing Stateestablished income eligibility standards. In addition, States will have a new option to expand eligibility beyond the new simplified Federal minimums. In addition, starting January 1, 2014, eligibility for Medicaid fo r most individuals, as well as for CHIP, will be determined using methodologies that are based on modified adjusted gross income (MAGI), as defined in the Internal Re venue Code of 1986 (IRC). Per the Affordable Care Act, eligibility for advance payments of premium tax credits for the purchase of private coverage through the Exchange will use MAGI as it is defined in the IRC to determine eligibility as well. Medicaid, CHIP and the Exchanges wi ll use common income methodologies and will align the rules and methodologies used to evaluate eligibility for most indi viduals under all three
programs. The alignment of the methods for determining el igibility is one part of an overall system established by the Affordable Care Act that allo ws for real-time eligibility determinations ofCMS-2349-P 12 most applicants and allows for prompt enrollmen t of individuals in the “insurance affordability program” for which they qualify. In this proposed rule, insurance affordability programs include Medicaid, CHIP, advance payments of premium tax credits and cost-sharing reductions through the Exchange, and any State-established Basic Health Program, if applicable. Individuals will not have to apply to multiple programs nor will they be sent from one program to another if they initially apply to a pr ogram for which they are not ultimately eligible. To achieve coordination, this proposed rule for Medi caid and CHIP eligibility is aligned with the applicable provisions in the proposed rule esta blishing the Exchanges pu blished in the July 15,
2011 Federal Register (76 FR 41866) (“Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Heal th Plans”), as well as in the accompanying proposed rule published elsewhere in this Federal Register implementing the Affordable Care Act provisions related to the eligibility for adva nce payments of premiu m tax credits and costsharing reductions and enrollment in a qualified health plan thr ough the Exchanges (referred to hereinafter as the “Exchange proposed rule”) as well as the proposed rule developed by the Department of the Treasury rega rding the health insurance premium assistance tax credit (“the Treasury proposed rule”), also published elsewhere in this Federal Register

. Section 2001 of the Affordable Care Act ensu res that States will receive an increased FMAP for all newly eligible individuals, defined as those who would not have been eligible in the State in December 2009. The FMAP for these newly eligible individu als will be 100 percent for Calendar Year (CY) 2014 – 2016, gradually dec lining to 90 percent in 2020 where it remains indefinitely. In addition, some St ates that had expanded coverage to adults (paren ts and adults without children) prior to Decembe r 2009, referred to as “expansion States,” shall also receive an increased FMAP that begins in 2014 betw een the regular FMAP and the FMAP for newlyCMS-2349-P 13 eligible individuals and equalizing with th e newly eligible FMAP in 2019 and beyond. The proposed rule sets forth the defini tions of newly eligible individua ls and expansion States as well as the applicable FMAPs beginning in 2014. While the new FMAPs provide significant new federal financial support for States, they could cause States significant burden to administer if States had to evaluate all applicants under the new simplified rules for pur poses of determining eligibil ity and under their otherwise obsolete December 2009 eligibility rules for purposes of determining the appropriate FMAP. A dual system would be inefficient and likely lead to inaccuracies. To promote States’ ability to operate efficient and effective processes, this rule proposes three alte rnative approaches for determining the applicable FMAP. Based on th e comments received through this proposed rule and the results of an upcoming CMS/HHS feasib ility study, we expect to modify, narrow or combine the approaches available to States in the final rule. By establishing an alternative methodology or methodologies for use in the FMAP determination by a State, the proposed rule aims to ensure that it will not be necessary fo r a State to make an eligibility determination for every individual using two separa te eligibility systems and th ereby advancing efficient and effective operations for States, indi viduals, and the Federal government. Starting in 2014, individuals and small businesse s will be able to purchase private health insurance through State-based compet itive marketplaces called Affo rdable Insurance Exchanges. Exchanges will offer Americans competition, c hoice, and clout. Insurance companies will compete for business on a level playing field, driv ing down costs. Consumers will have a choice of health plans to fit their needs. And Exchanges will give individuals and small businesses the same purchasing clout as big businesses. Th e Departments of Health and Human Services, Labor, and the Treasury (the Depa rtments) are issuing regulations implementing Exchanges inCMS-2349-P 14 several phases. The first in this series wa s a Request for Comment relating to Exchanges, published in the August 3, 2010 Federal Register (75 FR 45584). Second, Initial Guidance to States on Exchanges was published issued on Nove mber 18, 2010. Third, a proposed rule for the application, review, and reporting process for wa ivers for State innovation was published in the March 14, 2011 Federal Register (76 FR 13553). Fourth, two proposed regulations were published in the Federal Register on July 15, 2011 (76 FR 41866 and 76 FR 41930) to implement components of the Exchange and heal th insurance premium st abilization policies in the Affordable Care Act. Fifth, a proposed re gulation for the establis hment of the Consumer Operated and Oriented Plan (CO-OP) Program under section 1322 of the Affordable Care Act was published in the Federal Register on July 20, 2011 (76 FR 43237). Sixth, three proposed rules, including this one, are being published in the Federal Register on [OFR: Insert date of publication in the Federal Register] to provide guidance on the eligibility determination process related to enrollment in a qualified health plan, advance payments of the premium tax credit, cost-sharing reductions, Medicaid, and th e Children’s Health Insurance Program (CHIP). B. Legislative Overview This proposed rule implements the Medica id and CHIP eligibility and enrollment provisions of the Affordable Care Act including:

● Section 1413, which directs the Secretary of HHS (the “Secretar y”) to establish a streamlined system for individuals to apply for and be enrolled in an insurance affordability program if eligible.

● Section 1414, which directs the Secretary of Treasury, upon written request, to provide the Secretary with certain tax return information used in determining an individual’s eligibility for all insurance affordability programs.CMS-2349-P 15

● Section 2001, which sets out the Medicaid eligibility changes and new optional coverage effective in CY 2014.

● Section 2002, which references the determina tion of financial eligibility for Medicaid for certain populations.

● Section 2101, which implements new eligibility standards for CHIP.

● Section 2201, which simplifies and coordinates eligibility and enrollment system between all insurance affordability programs.

● Section 2001(a)(3), which added a new s ection 1905(y) of the Act, which provides for a significant increase in th e FMAP for medical assistance expenditures for individuals determined eligible under the adult group in the State and who are considered to be “newly eligible”, as defined in secti on 1905(y)(2)(A) of the Act.

● Section 10201(c)(4), which added a new sec tion 1905(z) to the Act. As discussed in section N of this rule, Section 1905(z) of the Act contains two pr ovisions, which make available additional FMAP rates for the expansion States. In this rule, “CHIP” refers to a separate child health program ope rated by a State under title XXI and the regulati ons governing such programs at 42 CFR part 457. C. Overview of the Proposed Rule The proposed amendments to 42 CFR parts 431, 435, and 457 in this rule propose the Federal policies and guidelines necessary to facilitate the creation of the eligibility and enrollment system established by the Affordable Care Act. Amendments to 42 CFR part 435 subparts B and C are proposed to implement the st atutory changes to Medi caid eligibility. We propose amendments to subpart A to add new or revised definitions.CMS-2349-P 16 Amendments to 42 CFR part 435 subpart G propo se that, for most individuals, financial eligibility for Medicaid will be based on MAGI, to define the new MAGI-based financial methodologies, and to identify those individuals whose elig ibility will not be based on MAGI. Proposed amendments to subpart J and the ad dition of a new subpart M provide Federal rules to promote the establishment by States of a seamless and coordinated system to determine eligibility of individuals seeki ng assistance and to enroll them in the appropriate insurance affordability program. We propose a new subpart M to delineate the respons ibilities of the State Medicaid agency in the coordina ted system of eligibility and en rollment established under the Affordable Care Act, and propose comparable amendments for CHIP at 42 CFR Part 457. We propose to amend 42 CFR part 433 to add new provisions at §433.10(c) to indicate the increases to the FMAPs as available to States under the Affordable Care Act. A number of provisions in the Affordable Care Act are not incl uded in this proposed rule , but either have been or will be addressed in separate rulemaking or other guidance. In the April 19, 2011 Federal Register, we published the Federal Funding for Medicaid Eligibility Determination and Enrollment Activities final rule (76 FR 21950) that provides deta ils on enhanced Federal funding for Medicaid eligibility systems. We also intend to issue additional proposed rules on related matters such as appeals, notices, presumptive eligibility, eligibility for fo rmer foster care children, deletion of existing regulations that have been rendere d obsolete, and eligibility policy in the territories. In addition, we intend to release a Request for Information (RFI) related to State conversion of current income standards to MAGI-equivalent standards pe r section 2002 of the Affordable Care Act as well as a RFI related to the State flexibility to establish basic health programs for low-income individuals not eligible for Medicaid under section 1331 of the Affordable Care Act.CMS-2349-P 17
II. Provisions of the Proposed Rule The following descriptions are structured to explain the provi sions being proposed and do not necessarily follow the order of the regulation’s text. A. Changes to Medicaid Eligibility 1. Coverage for Individuals Age 19 or Olde r and Under Age 65 at or Below 133 Percent FPL (§435.119) Section 2001(a) of the Affordable Care Act adds a new section 1902(a) (10)(A)(i)(VIII) of the Act (referred to as “the adult group”), under wh ich States will provide Medicaid coverage starting in CY 2014 to individuals under age 65 who are not otherw ise mandatorily eligible for Medicaid under sections 1902(a)(10)(A)(i)(I) through (VII) or (IX) of the Act and have household income, based on the new MAGI methods described in section II.B of this proposed rule, at or below 133 percent FPL. Although th e Act specifies that this new group is for individuals under age 65, indivi duals under age 19 are not included because such individuals with household income at or be low 133 percent FPL are covered in the eligibility groups under sections 1902(a)(10)(A)(i)(IV), (VI), and (VII) of the Act. We propose to replace the current §435.119 (which addresses obsolete provisions for eligibility of qualified family members under section 1902(a)(10)(A )(i)(V) of the Act for which the statutory authority ended on September 30, 1 998), to establish this new eligibility group. Proposed §435.119(a) and (b) set forth the policy, explained above. Reflected in proposed paragraph (b), financial eligibility for the adult group will be based on MAGI, as defined in section 1902(e)(14) of the Act and implemented at proposed §435.603; there is no resource test. Section 1902(a)(10)(A)(i)(VIII) of the Act specif ies that individuals may be eligible for the adult group if they “are not described in a previous subclause of” section 1902(a)(10)(A)(i)CMS-2349-P 18 of the Act. Under these proposed rules, an indi vidual is not eligible unde r the new adult group if the individual is otherwise eligible under section 1902(a)(10)(A)(i) of the Act and 42 CFR 435 subpart B, but may be eligible for the adult group if the individual is descri bed in but not eligible for Medicaid under another mandatory group. Th is will mean that an individual who is a recipient of Supplemental Security Income (SS I) benefits, and so poten tially eligible under section 1902(a)(10)(A)(i)(II ) of the Act, may be eligible fo r coverage under the adult group in a State that has elected in acco rdance with section 1902(f) of the Act and §435.121 to use more restrictive eligibility criter ia for Medicaid than SSI. The new adult group will include parents as well as adults not livi ng with children. It will also include individuals currently eligible under an optional coverage group (such as, for individuals with disabilities) who have household income, based on the new MAGI methods, at or below 133 percent of the FPL and otherwis e meet the criteria for coverage under the new group. At proposed §435.119(c), we codify sec tion 1902(k)(3) of the Act, which permits coverage of parents and other ca retaker relatives under the new a dult group only if their children under age 19 (or higher if the State has elec ted to cover children under age 20 or 21 under §435.222) are enrolled in Medicaid or “other health insurance coverage.” In paragraph (c)(1), we propose to define “other health insurance co verage” to mean minimum essential coverage, as defined in §435.4 of this proposed rule. 2. Individuals Above 133 Percent FPL (§435.218) Section 2001(e) of the Affordable Care Act adds a new section 1902(a) (10)(A)(ii)(XX) of the Act, giving States the option st arting in CY 2014 to provide Medi caid coverage to individuals under age 65 (including pregnant women and ch ildren) with income above 133 percent FPL. This new eligibility group provides a simplified m echanism for States to cover individuals whoseCMS-2349-P 19

income exceeds the State’s income standard for mandatory coverage (for example, 133 percent FPL for the adult group). This option is an alte rnative to the use of income disregards under section 1902(r)(2) or 1931( b)(2)(C) of the Act, which have be en used in the past to expand eligibility, but which will no longe r be available starting in 2014. We propose to add a new §435.218 establishing this optional eligib ility group, which covers individuals who are under 65 years old; are not eligible for and enrolled in an eligibility group under section 1902(a)(10)(A)( i) of the Act and 42 CFR 435 subpart B or under section 1902(a)(10)(A)(ii) of the Act and 42 CFR part 435 subpart C; and have household income based on MAGI that exceeds 133 percent of the FPL bu t does not exceed the optional income standard established by the State. The ba sis and basic eligibility criteria for this group are set forth in proposed §435.218(a) and (b)(1). Section 1902(a)(10)(A)(ii)(XX) of the Act specifies that indi viduals may be eligible under this category if they “are not described in or enrolled under a previous subclause of” section 1902(a)(10)(A)(ii) of the Act. We interpret the language “described in or enrolled under” to mean eligible for another optional or mandato ry group under section 1902(a)(10)(A) of the Act, and we propose at §435.218(b)(1)(ii) a nd (iii) that this limitation app lies only if the individual is eligible for or enrolled under another elig ibility group that is covered by the State. To ease administrative burden on States and to make it easier for States to enroll eligible individuals under the simplest el igibility category, we also pr opose in §435.218(b)(1)(ii) and (iii) that an individual who meets the eligibility criteria at §435.21 8(b)(1)(i) and (iv) would be determined eligible under this group, unless the indi vidual can be determ ined eligible under another eligibility group based on information ava ilable to the State from the application. A State is not required to make determinations regard ing eligibility factors such as disability, levelCMS-2349-P 20
of care, or resources first in or der to decide whether an individu al would be eligible for another eligibility group, unless such dete rmination can be made based only on the information provided on the application. However, as an exception to this , if an individual appears to be eligible as “medically needy” based on information provided, he or she could still be enrolled in this optional group. States would still have to determ ine eligibility under all po ssible categories if the individual is not eligible under this new optional group. Section 1902(a)(10)(A)(ii)(XX) of the Act provides that, to be eligible under this optional group, an individual’s income must “not exceed th e highest income eligibility level established under the State plan or under a waiver of the plan [.]” We are interpreti ng the statute to give States flexibility in establis hing the income standard for th is group, provided such standard exceeds 133 percent FPL and is approved in the State plan. Section 1902(hh)(1) of the Act provides that Stat es “may elect to phase-in” coverage for this optional group “based on the categorical group (inc luding non-pregnant childless adults) or income, so long as the State does not extend such eligibility to individual s...with higher income before making individuals...with lower income elig ible for medical assistance.” We propose that if a State wants to phase-in coverage for this group, it submit a plan for Secretarial approval. Children are included in this new optional group for individu als above 133 percent FPL if they are not already eligible for Medicaid. Th erefore, if a State c overs children above 133 percent FPL under a separate CHIP and adopts cove rage under this new optional group, the State ultimately must shift coverage of children with income at or below the income standard from CHIP to Medicaid under this group. The State w ould still be able to claim enhanced FMAP under title XXI for such children.CMS-2349-P 21 Section 1902(hh)(2) of the Act limits eligibility of parents and other caretaker relatives under the new optional group to individuals whose ch ildren have coverage in the same manner as eligibility is limited for parents and caretaker relatives under the new adult group per section 1902(k)(3) of the Act. At §435.218(b)(2)(ii), we propose to implement this provision in the same manner as proposed for th e new adult group at §435.119(c). 3. Amendments to Part 435, Subparts A through D Determining Medicaid eligibility prior to th e Affordable Care Act changes in CY 2014 is complicated due to a patchwork of multiple mandatory and optional eligibility groups for different “categorical populations .” Many States cover 50, 60, or more distinct eligibility groups. Financial eligibility is determined us ing methodologies based on other programs, such as the SSI and the former AFDC programs, a dding further complexity to the eligibility determination process. In this rule, consistent with the Affordab le Care Act policies, we propose to streamline and simplify curre nt regulations governing Medi caid eligibility for children, pregnant women, parents, and other caretaker re latives whose financial eligibility, beginning in CY 2014, will be based on MAGI. In response to the President’s request, ou tlined in Executive Order 13563, that agencies streamline and simplify Federal regulations, we propose to use the authority of section 1902(a)(19) of the Act, which provides “that e ligibility ... be determined ... in a manner consistent with simplicity of admi nistration and the best interests of recipients,” to simplify and consolidate certain existing mandatory and optio nal eligibility groups into three categories starting in CY 2014, to complement the new adul t group: (1) parents a nd caretaker relatives (new §435.110); (2) pregnant women (new §435.116); and (3) children (new §435.118).CMS-2349-P 22 As illustrated in Table 1, we are proposing to collapse existing Medicaid eligibility categories, with the goal of making the progr am significantly easier for States to administer and for the public to understand. In subsequent rulemaki ng, we will provide additional guidance on existing regulatory provisions that are effectively subsumed under the provisions contained in these proposed rules or have been re ndered obsolete for other reasons . In proposing a simplified approach to eligibility for popula tions whose eligibility will be based on MAGI, it is our intent that eligibility for coverage will not change for an y of the populations as a result of this proposal. We solicit comments on the implications of these pr oposed rules for individuals as well as States. Table 1 shows how the mandatory and optional groups in current regulations (the column on the left) are moved into the new br oader groups (parents, pregnant women, and children) under this proposed rule. TABLE 1: Medicaid Proposed Rule Social Security Act and Pre-ACA Regulations Parents/Caretaker Relatives (§ 435.110) Pregnant Women (§ 435.116) Children <19 (§ 435.118) Mandatory Medicaid Eligibility Groups Low-income families - 1902(a)(10)(A)(i)(I) and 1931 AFDC recipients – §435.110 X X X

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

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

Poverty-level related children 1-5 - 1902(a)(10)(A)(i)(VI) – No rule X Poverty-level related children 6-18 - 1902(a)(10)(A)(i)(VII) – No rule X Optional Medicaid Eligibility Groups Families & children financially eligible for AFDC - 1902(a)(10)(A)(ii)(I) – §435.210 Keeps 435.210 for parents/caretaker relatives X XCMS-2349-P 23
Medicaid Proposed Rule Social Security Act and Pre-ACA Regulations Parents/Caretaker Relatives (§ 435.110) Pregnant Women (§ 435.116) Children <19 (§ 435.118)
Families & children who would be eligible for AFDC if not institutionalized - 1902(a)(10)(A)(ii)(IV) – §435.211 X X

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

a. Eligibility for parents a nd other caretaker relatives, pregnant women, and children (1) Parents and other caretaker relatives (§435.110) We propose to delete in its entirety §435.110 for individuals receiving AFDC and to replace it with a new §435.110 for existing eligibility that is continuing under sections 1902(a)(10)(A)(i)(I) and 1931(b) and (d) of the Act for parents and ot her caretaker relatives of dependent children (including pregnant women who ar e parents or caretaker relatives ). These statutory provisions remain and are not superseded by the provisions of the Affordable Care Act establishing a new adult group for individuals not ot herwise eligible under section 1902( a)(10)(A)(i) of the Act. While the parent/caretaker relati ve category continues to apply, our proposed rules simplify this category considerably and provides States flexibility to set their income eligibility standard under this category within allowable Federal parameters. Under the proposed rule, each St ate will establish an income st andard in its State plan for coverage of parents and other caretaker re latives under §435.110. The Federal minimum and maximum income standards for this group ar e set forth in sections 1931(b)(2)(A) and 1931(b)(2)(B) of the Act. The minimum income st andard for the new parent/caretaker relative group is a State’s AFDC income standards for a hous ehold of the applicable family size in effect as of May 1, 1988. The maximum income standard w ould be established as set forth below. TheCMS-2349-P 24 maximum income standard for the parent and ot her caretaker relative el igibility group would be the higher of:

● The State’s effective income level (incl uding any disregard of a block of income) for section 1931 families under the State plan or waiver of such plan as of March 23, 2010 or December 31, 2013, if higher, converted to a MAG I-equivalent income standard in accordance with guidance to be issued by th e Secretary under section 1902(e)(1 4)(A) and (E) of the Act (The conversion of current income standards to a MAG I-equivalent standard is discussed in section II.B.3.a of this proposed rule.); and

● The State’s AFDC income standard in e ffect as of July 16, 1996, increased by no more than the percentage increase in the Consumer Price Index for all urban consumers since such date. If a State’s income standard for the parent /caretaker relative group is below 133 percent FPL, parents and other caretaker relatives with in come above that income standard and at or below 133 percent FPL would qualify for Medica id under the new adult group. The conversion of current income standards to a MAGI-equivalent standard is di scussed in section II.B.3.a of this proposed rule. States currently have the opti on to cover parents and other ca retaker relatives at income levels above the standard for families under sec tion 1931 of that Act. They can do so under the authority at section 1902(a)(10 )(A)(ii)(I) of the Act and §435.210 of the existing regulations. This option will continue under the Affordable Care Act for coverage of parents and other caretaker relatives who are not eligible for ma ndatory Medicaid coverage under §435.110 or the new adult group at proposed §435.119. We note that parents and other care taker relatives whoCMS-2349-P 25 are Medicare-eligible or el derly may be covered under §435.110 and §435.210, even though they are excluded from coverage under the adult group at §435.119. We are also proposing to simplify the income methods for determining eligibility under the new parent and other caretaker relative group. Pre- Affordable Care Act, section 1931 of the Act requires a two-step process in de termining income eligibility: (1) the family must have gross income at or below 185 percent of the State’s consolidated standard of need under its AFDC program, in effect as of July 16, 1996; and (2 ) the family’s net countable income after subtracting various income exclus ions and disregards and expenses must be at or below the State’s AFDC payment standard or a higher in come standard established by the State under section 1931 of the Act. Because each State’s net countable income standard converted to a MAGI-equivalent income standard will be lower than its current gross income standard, we propose to eliminate the 185 percent gross income te st as unnecessary and, to simplify eligibility, base income eligibility in proposed §435.110 only on the second prong of the income test, that is, the net countable income sta ndard converted to a MAGI-e quivalent income standard. Consistent with section 1931 of the Act, we propose Medicaid definitions of “caretaker relative” and “dependent child” at §435.4. A caretak er relative is defined as a parent or other relative (related by bl ood, adoption, or marriage) living with a dependent child for whom such individual is assuming primary responsibility. Pe r section 1931 of the Act, to be “dependent,” the child must be “deprived” of at least one parent’s support by reason of death, absence, or unemployment. Under the statute, a parent is considered to be unemployed if he or she is working less than 100 hours per month. Howeve r, we propose to codify in this rule the flexibility given States in a final rule amending 45 CFR 233. 101 (63 FR 42270) and in a State Medicaid Director letter date d September 22, 1997 to eliminate the “deprivation” requirementCMS-2349-P 26 altogether (which most States have done) or to establish a highe r number of working hours as the threshold for determining unemployment. In proposing this rule, we are retaining the minimum income standards specified in Federal statute for each eligibility group, while giving Stat es flexibility to set ne w standards at a level that takes into account a State’s cu rrent rules regarding how income is counted. In all cases, the income standard would be applied to an i ndividual’s MAGI-based household income. We considered whether or not States should c onvert the Federal minimum income standards prescribed in statute – for example, the mini mum standard for pregna nt women and children specified in section 1902(l) and fo r parents and other caretaker rela tives in section 1931(b) of the Act – to a MAGI-equivalent minimum income standard based on the income exclusions and disregards currently used by the State. While doi ng so could result in maintaining eligibility for individuals who might otherwise lo se Medicaid due to the elimina tion of income exclusions and disregards under MAGI, if a State were to reduc e its income standard to the minimum permitted, it also would result in different minimum income eligibility standards bei ng applied across States and reduce the amount of eligibility simplification that could be achieved. We, therefore, do not propose to require conversion of the Federal minimum income sta ndards currently prescribed in statute to MAGI-equivalent standards. Furthermore, we do not believe that the imp act on eligibility of the proposed policy will be significant. Eligibility standa rds for children must be maintained through September 2019, in accordance with the maintenance of effort provisi ons (MOE) in section 1902(gg) of the Act, and when the MOE provision expires, eligibility for only a small number of children would be affected if a State were to drop coverage to the minimum level permitted. Parents and other caretaker relatives who could lose eligibility under section 1931 of the Act if a State were toCMS-2349-P 27 reduce coverage to the minimum permitted under th e statute would retain eligibility under the new adult group. Pregnant women would be affect ed if a State were to decrease its income standard to the statutory minimum level, as the MOE for pregnant women ends with the establishment of an Exchange in 2014 and ther e is no other coverage group to which affected pregnant women would necessarily be transferred; instead, pregna nt women affected by a State’s decision to reduce its Medicaid income standard for pregnant women to the minimum permitted under the Act would likely become eligible for a dvanced payments of the premium tax credit for enrollment through the Exchange. (2) Pregnant women (§435.116) As is true for parents and car etaker relatives, the law retains eligibility based on pregnancy. To simplify the eligibility rules, we pr opose to replace the current §435.116 for qualified pregnant women and qualified children under sec tion 1902(a)(10)(A)(i)(II I) of the Act with a new §435.116 for pregnant women. In addition, under the authority of sec tion 1902(a)(19) of the Act, we are consolidating many different elig ibility categories for pr egnant women and are proposing to include in the revised §435.116 a ll mandatory and optiona l eligibility groups, except the medically needy, for which pregnancy status and income are the only factors of eligibility. The following sect ions of the Act are included under the proposed §435.116: 1931 (low-income families); 1902(a)(10)(A)(i )(III) (qualified pregnant women); 1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(ii)(IX), and 1902(l) (poverty-leve l related pregnant women); 1902(a)(10)(A)(ii)(I) (pregn ant women who meet AFDC fina ncial eligibility criteria); and 1902(a)(10)(A)(ii)(IV) (inst itutionalized pregnant women). Under the proposed rule, paragraphs (a) through (c ) set forth the basis and basic provisions for coverage of pregnant wome n under §435.116. We propose at §435.116( c) that each State willCMS-2349-P 28 establish an income standard in its State plan for coverage of pregnant women. The minimum income standard is 133 percent FPL, unless a highe r income standard, at or below 185 percent FPL, was in effect for pregnant women on December 19, 1989 (section 1902(l)(2)(A) of the Act). The maximum income standard is the higher of:

● The highest effective income level (incl uding any disregard of a block of income), converted to a MAGI-equivalent in come standard, in effect under the State plan or waiver of the State plan as of March 23, 2010 or December 31, 2013, if higher, for coverage of pregnant women under the sections of the Act identified above; and

● 185 percent FPL. We are also codifying curre nt law to add a definition of “pregnant woman” in §435.4, incorporating the post partum period. While we propose to consolidate various elig ibility categories for pregnant women, States continue to have flexibility unde r the statute to provide different benefits to ce rtain pregnant women or to provide all pregna nt women with full Medicaid cove rage, as many States do today. Thus, under clause (V) in the matter following section 1902(a)(10)(G) of the Act, pregnant women eligible for Medicaid under sections 1902 (a)(10)(A)(i)(IV), 1902(a )(10)(A)(ii)(IX), and 1902(l) of the Act are only covered for services related to pregnancy or to a condition which may complicate the pregnancy. In accordance with section 1902(a)(10)(B) of the Act, all other pregnant women eligible for coverage under th e sections of the Act listed in §435.116(a) are eligible for all services that the State covers under the Stat e plan, regardless of whether the service is related to pregnancy or to a condition that may complicate pregnancy. However, States currently have the flexibility to provide full Medicaid coverage as pregnancy-related services for all pregnant women. Thus, we propose at §435.116(d) thatCMS-2349-P 29 pregnant women are covered for full Medicaid co verage, unless a State el ects to provide only the pregnancy-related services described at §435.116(d)(3) for pregnant women whose income exceeds an income limit established by the State fo r full coverage. States have flexibility under existing regulations at §440.210(a)(2) to establish a policy that all servic es covered under the State plan are related to pregna ncy or to a condition that may complicate pregnancy. Therefore, States will not have to establ ish an income limit for full coverage for pregnant women under §435.116(d)(4), but may elect to provide full covera ge for all pregnant women. Reflected at proposed paragraph (d)(3), States also may elect to cover certa in enhanced pregnancy-related services, as specified in §440.250( p), for pregnant women only. (3) Infants and children under age 19 (§435.118) Section 2001(a)(4) of the Affo rdable Care Act amends secti on 1902(l)(2)(C) of the Act to provide Medicaid to children ag es 6 through 18 with household inco me at or below at least 133 percent FPL. This amendment eliminates cert ain of the age-based differences in Federal Medicaid eligibility rules for children, which cu rrently provide for a minimum income standard of 100 percent FPL for coverage of children ages 6 through 18 (alt hough many States have implemented optional coverage at higher levels), and means that all ch ildren and adults under age 65 with household income at or below 133 percent FPL will be eligible for Medicaid. Section 205(b) of the Medicare and Medicaid Extenders Act of 2010 clarifies that this amendment is effective January 1, 2014. If some or all of these child ren are covered under a separate CHIP before this provision takes eff ect, these children will move to coverage under Medicaid. Such a change, however, will not aff ect States’ ability to claim enhanced FMAP under title XXI for these children.CMS-2349-P 30 Currently, there are many different mandatory and optional eligibility categories for children. To simplify the eligib ility rules, we propose to in clude under §435.118 all mandatory and optional eligibility groups for which age under 19 and income ar e the only factors of eligibility. The following sections of the Act are incl uded under proposed §435.118: 1931 (low-income families); 1902(a)(10)(A)(i)(III) (qualified child ren who meet AFDC financial eligibility criteria); 1902(a)(10)(A)(i)(IV) and 1902(a)(10) (A)(ii)(IX) (infants); 1902(a)(10)(A)(i)(VI) (children ages 1 through 5) ; 1902(a)(10)(A)(i)(VI I) (children ages 6 through 18); and 1902(a)(10)(A)(ii)(IV) (institu tionalized children). Proposed §435.118(a) through (c) set forth the ba sis and eligibility cr iteria for children, as explained above. We propose in §435.118(c) that each State will establish income standard(s) in its State plan for coverage of children by age gr oup. There is no resource test. The minimum income standard for all age groups is 133 pe rcent FPL, unless, for infants per section 1902(l)(2)(A) of the Act, a higher income standard, at or below 185 percent FPL, was in effect on December 19, 1989. The maximum income standard for each age group is the higher of:

● The highest effective income level for the age group (including any disregard of a block of income) – converted to a MAGI-equivalent standard – in effect under the State plan or waiver as of March 23, 2010 or December 31, 2013; or

● For infants, 185 percent FPL. A State may not otherwise increase its income standard above the levels specified because, effective January 1, 2014, States may no longer ap ply new income disregards in determining eligibility for individuals whose eligibility is ba sed on MAGI. Coverage at higher income levels can be implemented through adoption of the new optional group at proposed §435.218.CMS-2349-P 31 The maintenance of effort (MOE) provisions of the Affordable Care Act at section 2001(b) maintain the minimum income standards for child ren at the levels in effect on March 23, 2010; these standards are maintained for child ren until September 30, 2019. These proposed regulations do not address the MO E provisions specified in sec tions 1902(a)(74) and 1902(gg) of the Act, as added by section 2001(b) of the Affo rdable Care Act. As a condition of receiving Federal financial participation, States must co mply with these provisi ons, which are being addressed through subregulatory guidance. b. Other Conforming Changes to Existing Regulations Revisions are proposed at §435.4 to the defini tion of “families and children” to delete references to AFDC rules. Definitions ar e proposed for “agency,” “caretaker relative,” “dependent child,” and “pregna nt woman.” Definitions related to implementation of the Affordable Care Act are proposed for “adva nce payments of the premium tax credit,” “Affordable Insurance Exchange (Exchange),” “e ffective income level, ” “electronic account,” “household income,” “insurance affordability program,” “MAGI-based income,” “minimum essential coverage,” “modified adjusted gros s income (MAGI),” “secure electronic interface,” and “tax dependent”. B. Financial methodologies for determining Medicaid Eligibility based on MAGI under the Affordable Care Act Section 2002 of the Affordable Care Act, as amended by section 1004 of the HCERA, creates a new section 1902(e)(14) of the Act, which provides that effective January 1, 2014, financial eligibility for most individuals shall be based on M AGI and “household income,” as defined in section 36B(d)(2) of the IRC (hereinafter referred to as “section 36B definitions”). In this preamble, “MAGI-based methodologies” refers both to the rules governing theCMS-2349-P 32

determination of the MAGI of an individual or a married couple filing a joint tax return, as well as to the determination of total household income . Similarly, reference to the determination of income eligibility “based on MAGI” refers to determinations based on household income using MAGI-based methodologies. The adoption of MAGI-based methodologies to determine income represents a significant simplification for the Medicaid program, eligibility for which has historically been linked to programs providing cash assistance to low-inco me populations. We are considering permitting States to convert to MAGI-based met hodologies prior to 2014 through section 1115 demonstrations. Proposed §435.603 sets forth proposed me thodologies to implement MAGI in determining Medicaid eligibil ity for affected individuals effective January 1, 2014. Our proposed methodologies codify the section 36B definitions of MAGI and household income, except in a very limited number of cases disc ussed below. At propos ed §435.603(i), we identify those populations excepted under the Affordable Care Act from application of MAGI-based methodologies; for these populations pre- Affordable Care Act Medicaid financial methodologies – generally set forth in ex isting regulations at §435.601 and §435.602 – will continue to apply. 1. Point-in-time measurement of income (budget periods) (§435.603(h)) Under pre-Affordable Care Act Medicaid rules, per section 402(a)(13 )(A) of former title IV-A of the Act, income eligibility for Medicaid is based on current inco me actually available to the individual in any given mont h. MAGI, as defined in section 36B of the IRC, is determined on the basis of annual income. The Affordable Care Act addresses this issue by adding section 1902(e)(14)(H)(i) of the Act to pr ovide that the use of MAGI in determining eligibility forCMS-2349-P 33

Medicaid shall not be “construed as affecting or limiting the app lication of the requirement under this title to determine an individual’s income as of the point in time at which an application for medical assistance is processed.” Moreover, sect ion 1902(a)(17) of the Act provides that States use eligibility standards and met hodologies that are “reasonable,” “consistent with the objectives of [the Act],” and take into account only such income as is “determined in accordance with standards prescribed by the Secretary, availa ble to the applicant or recipient[.]” In this proposed rule, we refer to the “point in time” rules referenced in the statute as the “budget period” (that is, monthly versus annual income) based upon which income eligibility is determined. At proposed §435.603(h)(3), we are reta ining the current flexib ility afforded States to take into account future changes in income th at can be reasonably anticipated (as may be the case with certain seasonal workers or someone with a signed employment contract or layoff notice). Such anticipated changes would be determined in accordance with the verification regulations at §435.940 et seq. Unce rtain changes in future income (for example, someone who is looking for, but has not secured, a job) may not be considered under the option reflected at proposed §435.603(h)(3). Actual changes in in come – including deviations from reasonably anticipated fluctuations in income – must sti ll be reported to, and acted upon by, the agency in accordance with §435.916(c) and (d). To promote flexibility, administrative simplif ication and continuity of coverage for beneficiaries already enrolled in Medicaid, we propose at §435.603(h)(2) to give States the additional flexibility, for indi viduals eligible for Medicaid based on MAGI, to maintain eligibility as long as annual income based on M AGI methods for the calendar year remains at or below the Medicaid income standard. This give s States the option to align with the annualCMS-2349-P 34 eligibility period applied in the Exchanges and to minimize the extent to which individuals experiencing relatively small fluctuations in in come bounce back and forth between programs. We believe that these flexibilities will help address some of the challenges that will arise due to the reliance on monthly in come for purposes of eligibili ty for Medicaid versus annual income for purposes of eligibility for advance paym ents of premium tax cred its. In particular, if a State does not opt to take into account a reasonably predictable drop in fu ture income, someone with current monthly income above the Medicaid income standard, but projected annual income below 100 percent FPL could be determined both ineligible for Medicaid (until their monthly income actually dropped) and for advance paymen ts of the premium tax credit for enrollment through the Exchange (because, with very limite d exceptions, individuals with income below 100 percent FPL are not eligible fo r advance payments of the premium tax credit). We solicit comments on how best to prevent a gap in cove rage, including whether to ensure that State Medicaid agencies take into account a predictable future drop in income. 2. Changes to Medicaid financial methods Under pre-Affordable Care Act Medicaid rules for families and children, essentially all money received, from whatever source, is counted as income in the month in which it is received, unless explicitly exclude d or disregarded under the Act, disregarded at State option, or excluded under other Federal statutes. A “househol d” (for purposes of determining family size and whose income is counted) generally consists of parents and the children with whom they are living. Other non-legally responsible relatives a nd unrelated individuals living together are not included, nor are spouses or parent s living apart from the rest of the family, which means that the income of such individuals is not deemed ava ilable to the Medicaid applicant. Under preAffordable Care Act Medicaid rules, inclusion of stepparents in a stepchild’s household dependsCMS-2349-P 35 on State law relating to obligations to support stepchildren. A steppa rent’s income is considered available to his or her spous e since spouses are legally responsible for each other. Section 36B of the IRC, and §1.36B-1 of the IRS proposed premium tax credit rule, define “MAGI ,” “household income,” and “famil y size.” See also section 152 of the IRC and Internal Revenue Service (IRS) Publicati on 501 regarding rules for claiming “qualifying children” and “qualifying relativ es” as tax dependents. To be eligible to receive advance payments of a premium tax credit for the purch ase of coverage through an Exchange, married couples generally must file jointly. As discussed in section II.I of this pr oposed rule, sections 1413 and 2201 of the Affordable Care Act direct th e creation of a seamless, simplified system of coordinated eligibility and enrollment between insurance a ffordability programs, and in most instances, section 36B definitions of “MAGI” and “household income” are applied to Medicaid to promote seamless coordination. In some situations, the application of these new rules will have the impact of constraining Medicaid e ligibility, but consistent with th e statute, we have applied the 36B rules because of the impact on coordination. In a few lim ited situations in which the potential adverse impact of adopting the section 36B definitions could be significant (albeit for a relatively small group of individuals), and the impact on coordination minimal, we propose, consistent with the statute, reten tion of current Medicaid rules. 3. Provisions of Proposed Rule Implementing MAGI Methods Proposed §435.603(a)(1) and (2) set forth the basis and scope of this section. At proposed §435.603(a)(3), we implement section 1902(e)(14)(D)(v) of the Act, as added by section 2002(a) of the Affordable Care Act, which specifies that, in determining ongoing eligibility of individuals enroll ed in the Medicaid program as of January 1, 2014, the financialCMS-2349-P 36 methodologies based on MAGI shall not be a pplied until the next regularly-scheduled redetermination of eligibility after December 31, 2013 or March 31, 2014, whichever is later, if such individual otherwise woul d lose eligibility as a result of the shift to MAGI-based methodologies before such date. Consistent with the 36B definition, we pr opose in §435.603(b) to define “family size” as equal to the number of persons in the individual’s house hold (as defined in paragraph (f) of this section and discussed below); “t ax dependent” is defined in proposed revisions to §435.4, and cross referenced at proposed §435.603(b), as an i ndividual for whom anot her individual properly claims a deduction for a personal exemption under section 151 of the IRC for a taxable year. Proposed §435.603(c) sets forth the basic rule that, except for elig ibility determinations exempt from MAGI methodologies, financial eligibility for Medicaid must be based on household income as defined in §435.603(d). Consistent with the section 36B definiti on of household income, proposed §435.603(d)(1) provides that, for purposes of determining Medicaid eligibility under §435.603, “household income” is the sum of the income based on MAG I-based methods of every individual who is: (1) included in the individual’s household; and (2) requi red to file a tax re turn under section 6012 of the IRC, except that, also c onsistent with section 36B defin itions, the MAGI-based income of a child who files a tax return, but is not required to file, is not included in household income under proposed §435.603(d)(2). The MAGI-based income of adults as well as children who are not included in the household of their parent(s) is always counted in determining the household income of the adult or such child as well as the household income of their spouse and children with whom they are living (if any). a. Proposed Methods for Counting Income based on MAGI (§435.603(e))CMS-2349-P 37 In general, we propose income counting ru les at §435.603(e) that are the same as the section 36B definitions to ensure streamlined e ligibility rules and avoid coverage gaps. There are some differences in the treatment of severa l types of income under the IRC as compared to pre-Affordable Care Act Medicaid rules, in wh ich the changes occasioned by the adoption of the section 36B definitions would have varying e ffects on the Medicaid eligibility of potential beneficiaries. Given the genera l directive to apply the section 36B definitions and the value of alignment, these proposed rules generally codify the section 36B rules and definitions. This is the case with respect to the treatment of ch ild support payments, depreciation of business expenses, and capital gains and losses. Under this regulation as proposed, we also are applying the se ction 36B rules and definitions of Social Security benefits under title II of the Act. Such benefits count as income for the purpose of determining eligib ility for Medicaid under pre-Affordable Care Act treatment of income, but certain amounts of Social Security be nefits are not counted as income under the 36B definition of MAGI. The section 36B treatment of Social Security benefits may increase State Medicaid costs, as some individuals who receive Social Security benefits would gain Medicaid eligibility using the 36B definitions. The Admi nistration is concerned about this unintended consequence and is exploring opti ons to address it, including a modification of the section 36B treatment of Social S ecurity benefits through regulation. We seek comment on this issue, including how any modification of the proposed regulation may affect eligibility for premium tax credits for enrollment in a qualified health pl an through the Exchange and how any potential gaps in coverage that may be created by such modification could be minimized. There are three types of income for which we propose to codify current Medicaid rules. We solicit comments on these proposed policies.CMS-2349-P 38 The first is lump sum payments, which c onsist of non-recurring income received on a one-time-only basis (for example, insurance settle ments, back pay, State ta x refunds, inheritance, and retroactive benefit payments). Under sectio n 36B definitions, taxable “lump sum” payments are included in computing MAGI in the year the lump sum is received. Currently in Medicaid, most States count lump sum payments as inco me in the month received and, for any amounts retained, as a resource in months following. Because of the statutory direc tive to consider pointin-time (that is, current monthly) rather than annual income for determination of Medicaid eligibility, and the challenges in amortizing a lu mp sum payment over time to pay for coverage, we propose in §435.603(e)(1) to count lump sum paym ents of taxable income as income only in the month received. Second, certain types of educational scholar ships and grants (for example, work-study arrangements and other situations in which the individual has to provide a service) are generally counted as taxable income under the IRC, but not counted as income under current Medicaid rules. To avoid low-income students having to fo rgo either Medicaid or this education-related aid, we propose in §435.603(e)(2) to retain the Medicaid rules fo r this type of income. Third, American Indian and Alaska Native (A I/AN) income is the subject of special treatment and protections in multiple provisions of titles XIX and XXI of the Act. Most recently, the Recovery Act added section 1902(ff) to the Ac t (applied also to CHIP through the addition of section 2107(e)(1)(c) of th e Act) to broaden exemptions re lated to certain AI/AN financial interests to ensure that low-income AI/AN i ndividuals have access to Medicaid. There are certain instances where the IRC and the section 36 B definition of MAGI are identical to or more liberal than current Medicaid rule s with regard to income excl usions for AI/AN populations, and therefore, are adopted in the proposed rule. Ho wever, there are several instances in which theCMS-2349-P 39

IRC treats as taxable income dist ributions from AI/AN trust properties, which are excluded from income for purposes of Medicaid and CHIP elig ibility under the Recovery Act and other current law. In these instances, we propose at §435.603(e) to codify current Medicaid treatment of AI/AN income, including distributions from Alaska Native corporations and settlement trusts; distributions from any property held in trust, or otherwise under the supervision of the Secretary of the Interior; distributions re sulting from certain real propert y ownership interests; payments from other ownership interests or usage rights th at support subsistence or a traditiona l lifestyle; and student financial assistance pr ovided under the Bureau of Indian Affairs education programs. In addition, section 1902(B)(e)( 14)(B) of the Act, codified at §435.603(g), prohibits the continued use of any asset test or income or expense disregards for individuals whose financial eligibility is based on MAGI (other than a disreg ard of 5 percent of the FPL to be applied to every such individual under section 1902(e)(14)(I) of the Act.) In order to account for the general elimination of income disregards and to ensure continued coverage at pre-Affordable Care Act levels, per section 1902(e)(14)(A) and (E), States will convert cu rrent income standards for eligibility groups under whic h financial eligibility will be based on MAGI to a “MAGIequivalent” income standard. Separate guida nce will be issued regarding the methodologies States may employ to determine such MAGI-equivale nt income standards. Application of the statutory across-the-board 5 pe rcent disregard is reflected in proposed §435.603(d)(1). Detailed guidance on the treatment of all types of income under the new MAGI-based methodologies will be provided in subregulatory guidance. b. Proposed Rules for Determining Household Composition under MAGI-Based Methods (§435.603(f))CMS-2349-P 40 (1) Household composition for tax filers (§435.603(f)(1)) and their tax dependents (§435.603(f)(2)) Our proposed rules for household composition ar e divided into two categories: those for individuals filing taxes (§435.603(f) (1)) and their tax dependents (§435.603(f)(2)); and those for individuals who neither file a ta x return nor are claimed as a ta x dependent on someone else’s tax return, whom we refer to as “non-filers” (§435.603(f)(3)). After analyzing the differences between the section 36B definitions and current Medicaid rules, we believe that for most families, the se ction 36B definitions and current Medicaid rules yield the same household. However, there are a relatively small number of situations in which application of the sectio n 36B definitions yields a different household than current Medicaid rules, including the following: (1) Families in which the parents claim as tax dependents children age 21 or older. (2) Families in which the parents claim as tax dependents children living outside of the home. (3) Families with stepchildren/stepparents (in States without a law re quiring stepparents to support their stepchildren. (4) Families in which one or more children are required to file a tax return. (5) Families in which one member is supporting and claiming as a tax dependent extended family members or unrelated individua ls, including children other than their own biological or adopted children. (6) Children claimed as a tax de pendent by a non-custodial parent. (7) Pregnant women. (8) Married couples who do not file jointly.CMS-2349-P 41 In the first four types of households identif ied, consistent with the general statutory directive to apply the section 36B definitions to Medicaid, we are proposing at §435.603(f)(1) to adopt the household composition rules embodied in the section 36B definitions. Doing so will result in some loss of Medicaid eligibility compared to pre-2014 Medicaid rules. However, maintaining different rules for the insurance a ffordability programs for these household types would undermine simplicity and coordination, which benefits consumers and States alike, and add to States’ and potentially families’ administrative burden. For the fifth type of household identified (for example, a grandparent caring for a grandchild claimed as a tax dependent), the income of the claimed tax dependent is likely to be quite low, making them likely eligible for Medica id based on their income alone. However, in such situations adoption of the section 36B definitions for household composition for determining the Medicaid eligibility of the ta x dependent could significantly affect both the taxpayer and the relative or unrelat ed individual whom the taxpayer has no legal responsibility to support, putting such taxpayers in the position eith er of: (1) forgoing a tax advantage (including, in some cases, an Earned Income Tax Credit) so as to enable the tax dependent to apply for Medicaid on his own; or (2) a ssuming financial responsibility for purchasing health care for such individual – a responsibility wh ich they do not have under curren t law. Accordingly, we propose at §435.603(f)(2)(i) to codify current Medicaid rules in determini ng the eligibility of qualifying relatives claimed as tax dependents by another ta xpayer. MAGI-based definitions would be used in determining household composition for purposes of the taxpayer’s e ligibility, per proposed §435.603(f)(1). It is also important to note that, reflected in proposed §435.603(d)(3) and consistent with current Medicaid rules, ac tually available cash support provided by the nonlegally responsible relative is c ounted as income to the claimed tax dependent. The purpose ofCMS-2349-P 42 retaining the Medicaid househol d rules as a backstop in these situations is to prevent the attribution of income from non-le gally responsible relatives when that income is not in fact available to the tax dependent. We do not beli eve that this proposal w ould disrupt coordination or create a gap in coverage. Regarding households in which a child is claimed as a tax dependent by a non-custodial parent, we are proposing at §435.603(f )(2)(iii) to apply rules base d on pre-Affordable Care Act Medicaid principles of parents’ legal responsibi lity for the children with whom they are living. By applying the rules for non-file rs in this situation, as propose d in these rules, these children would be treated as members of the custodial parent’s household fo r Medicaid eligibility purposes, and the income of the custodial parent (and other members of the custodial parent’s household required to file a tax return) would be counted in determining the child’s Medicaid eligibility. Alternativel y, the child could enroll in coverage through the Exchange in the child’s State of residence as a member of the non-cust odial parent’s household. (See discussion in section II.A.4 (b) of the preamble for the a ccompanying Exchange proposed rule.) We specifically solicit comments on the proposed ha ndling of the household composition for these children. Under pre-2014 Medicaid rules, a pregnant wo man is considered as a household of two for purposes of determining eligibility. States ha ve the option to count a pregnant woman as two in determining the family size of other members of a pregnant woman’s household (for example, her spouse or other children). Under the secti on 36B definition of family size, pregnant women count as one person for purposes of eligibility for advance payments of the premium tax credit, but if the child is born by the end of the calen dar year, the annual premiu m tax credit would be for two persons. Counting the pregnant woman as a household that will be comprised of two forCMS-2349-P 43 Medicaid eligibility purposes essentially anticipat es the change in household size that will occur after the birth. Applying the 36B definitions wo uld result in some wome n being enrolled, with advance payments of the premium tax credit, in a qualified health plan through the Exchange who, after giving birth, will be e ligible for Medicaid. Therefore, the proposed definition of family size in §435.603(b) retains current Medica id rules for pregnant women to promote continuity of coverage for the family a nd to ease State administrative burden. Married couples who file separately are not eligible for premium tax credits. However, there is no similar provision in title XIX of the Act with respect to Medicaid eligibility. Therefore, in such situations, we propose at §435.603(f)(4) to codify cu rrent Medicaid rules to include each spouse in the household of the other and to count the MAGI-based income of each spouse required to file a tax return in determ ining the other’s househol d income, regardless of whether the couple files a joint tax return. We recognize th at at times two legally married individuals may live apart. Theref ore, consistent with current Medi caid rules, the proposed rule also limits the inclusion of spouses in each ot her’s household to those who are living together. In some cases, a child may be living with both parents, but the parent s do not file, or are not married and therefore cannot file, a joint tax return. Cons istent with current Medicaid principles of legal responsibil ity, we propose at §435.603(f)(2)(ii) to apply the proposed rules for non-filers in the case of children living with such parents, so that both pare nts, if living with the child, will be included in the child’s household and their income counted in determining the child’s eligibility. (2) Household Composition fo r Non-Filers (§435.603(f)(3)) The IRC contains provisions regarding f iling thresholds – ranging from $9,350 in 2010 (86 percent FPL) for a single individual to $19,800 for a married couple filing jointly with oneCMS-2349-P 44 spouse 65 or older (137 percent FPL) – below wh ich individuals are not required to file. Individuals below these thresholds may file a ta x return, but for non-filers, section 36B of the IRC does not specifically addr ess household composition. To be eligible for a premium tax credit, spous es must file jointly a nd (except in cases of divorce or separation in which the non-custodial pa rent is permitted to claim a child) parents who file can claim their children unde r 19 who are living with them (or under age 24 if a full time student) as a qualifying child. See IRS Publicat ion 501. The current Medicaid principle that parents are legally responsible fo r their children a nd that spouses are legally responsible for each other is consistent with section 36B of the IRC. In the case of Medicaid, parents are assumed to be financially responsible for their children up to age 21; this does not vary with the child’s student status. Under either section 36B of the IRC or pre-A ffordable Care Act Medicaid rules, spouses living together are considered to be part of the same household for eligibility purposes, and proposed paragraph §435.603(f)(3) similarly specifies that spouses living toge ther be included in the same household. We considered several alte rnatives regarding when children who are living with their parent(s), but are not claimed as a ta x dependent on such parent ’s tax return, should be included in the parent’s household. Applying pre-Affordable Care Act Medicaid rules making parents financially responsible for children who are under age 21 co uld result in a gap in coverage for children aged 19 and 20 who are not in school and are not claimed as dependents on their parents’ tax return, but whose parents do file a tax return and have household income above the Medicaid income standard for 19 and 20 year-olds. (Coverage for 19 and 20-year olds, in most States, will be under the new group for adults with househol d income at or below 133 percent FPL). On the other hand,CMS-2349-P 45 adopting the IRC rule allowing parents to claim as a qualifying child th eir children only until age 19, unless a full-time student, coul d result in an increase in Medi caid eligibility for 19 and 20- year olds who are not full-time students and are living with their parents, as compared to preAffordable Care Act Medicaid rules. Adopting th e IRC rule with respect to adult children ages 21-23 who are full-time students co uld result in a decrease in Medicaid eligibility and an imposition of legal responsibility for certain ad ult children not consiste nt with current law. In balancing these considerations, we propos e at §435.603(f)(3), to treat spouses/parents (including stepparents) and all ch ildren (including stepchildren a nd stepsiblings) under age 19 or, if a full-time student, under ag e 21, who are living together, as members of the same household. This proposed policy will avoid the gap in cove rage for 19 and 20 year olds, discussed above, while limiting any unnecessary increase in Medi caid eligibility. Children who are not living with their parents, or who are over the specified age limit, would not be in cluded in their parents’ household, and as with tax filing households, in dividuals other than a spouse, biological, adopted, or step-parent, child or sibling would not be included in the same Medicaid household under this proposed rule. We specifically soli cit comments on the proposed rule for household composition of non-filers at §435.603(f)(3). (3) Retention of Existing Financial Methods (§435.603(i)) Section 1902(e)(14)(D) of the Act provides that the financial methodologies based on MAGI will not apply in certain situations. In th ose cases, eligibility will be determined using the rules in effect prior to the A ffordable Care Act, codified in existing regulati ons at §435.601 and §435.602. Proposed §435.603(i) sets out six exceptions:

● Individuals eligible for Medicaid on a ba sis that does not require a determination of income by the Medicaid agency . This exception from use of M AGI-based methods includes, butCMS-2349-P 46
is not limited to, individuals receiving or deemed to be re ceiving SSI, individuals receiving assistance under title IV-E of the Act, and in dividuals for whom the agency is relying on a finding of income made by an Express Lane Agency under section 1902 (e)(13) of the Act.

● Individuals who qualify for medical assistance on the basi s of being blind or disabled

. This exception applies only to those individuals for whom the determination of eligibility is made on the basis of being blind or disabled. In dividuals who are blind or who have disabilities can also be covered under the new mandatory elig ibility group for adults (codified at proposed §435.119) with MAGI-based household income at or below 133 percent of FPL. To the extent that their income exceeds that le vel, current financial methodologies will be used to determine their eligibility for coverage on the basis of bein g blind or disabled under an optional eligibility group for blind or disabled individuals. In proposed §435.603(i)(3), we identify the most common of the eligibility groups for blind and disabled individuals excep ted from MAGI methods under th e Act. We are not listing coverage provided to individuals receiving SSI in so-called “criteria States” because they are encompassed under proposed §435.603(i)(1)(iii)(A). (These individuals are receiving SSI but the State does not have an agreement under section 1634 of the Act under which the Social Security Administration makes a determination of Medicaid eligibility for the State.) We also are not specifically identifying children under age 18 who were receiving SSI as of the date of enactment of the Personal Responsibility a nd Work Opportunity R econciliation Act of 1996 (PRWORA) (August 22, 1996), who would continue to receive SSI but for the enactment of section 211 of that Act and who are eligible for Medicaid in acco rdance with section 1902(a)(10)(A)(i)(II) of the Act. While financia l eligibility fo r continued coverage of these children will be excepted from MAGI, most, if not a ll, of the affected children will have reachedCMS-2349-P 47 age 18 as of January 1, 2014, the effective date for the transition to MAGI-based methods. We seek comment as to whether there might be childr en still eligible under this mandatory coverage group as of 2014, and therefore, whether they should be identified in these regulations.

● Individuals age 65 or older are categorically excepte d from MAGI methods under section 1902(e)(14)(D)(i) (II) of the Act. We recognize th at the exception of all elderly individuals from MAGI methodologies for all eligib ility groups could result in States having to retain application of AFDC financial methodologi es in a small number of cases in which an elderly individual is being evalua ted for coverage on the basis of being a parent or caretaker relative, for which age is not a factor. We solicit comments on possible approaches we might adopt to avoid this result - fo r example, interpreting the exception to apply only in the case of elderly individuals when age is a condition of eligibility or of applying SSI methodologies (which will continue to be us ed for most MAGI-excepted groups) in determining the eligibility of elderly individuals for cove rage as a caretaker relative.

● Individuals whose eligibility is being determined on the ba sis of the need for long-term care services, including nursing fac ility services or a level of car e equivalent to such services

. Similar to the exceptions from MAGI for determ inations based on being blind or disabled, we propose to apply this exception in the case of i ndividuals whose eligibility is based on the need for or receipt of such services. Individuals ot herwise eligible for Medi caid under an eligibility group to which MAGI-based methods apply (for example, children e ligible under proposed §435.118) will not be excepted from application of MAGI-based methods in determining ongoing eligibility under such group simply because they may need long-term care services.CMS-2349-P 48

● Individuals eligible for assistance with Medicare cost sharing under section 1902(a)(10)(E) of the Act. We propose to interpret this exception to apply only to the determination of eligibility for Medi care cost sharing assistance.

● Medically needy individuals eligible under section 1902(a)( 10)(C) of the Act. This exception also applies only to the determinati on of eligibility for medically-needy coverage. Individuals who meet the eligibil ity criteria for coverage under another eligibility group – for example, the new adult group – are not excepted from application of MAGI-based methods for purposes of determining their elig ibility for such other groups simply because they would qualify for coverage as a medically needy individua l if not eligibility under such other group. Section 1902(e)(14)(D)(iii ) of the Act provides that MAGI-bas ed methods shall not be used in determining eligibility for Medicare Part D pr emium and cost sharing subsidies under section 1860D-14 of the Act. Because such subsidies are not a form of Medicaid and determinations for Part D cost sharing subsidies are not performed u nder the authority of the Medicaid statute, we are not proposing to include regulations regarding this exception in these rules. C. Residency for Medicaid eligibility defined We propose to simplify Medicaid’s residenc y rules to promote achievement of the coordinated eligibility and enrollment system established under sections 1413 and 2201 of the Affordable Care Act and discussed in section II.I of this proposed rule. We propose to redesignate and revise paragraphs § 435.403(h) and §435.403(i) to §435.403(i) (rules for individuals under age 21) and (h) (rules for indi viduals age 21 and older), which set parameters for States to determine who is a State resident. These revisions are not significantly different than the current rules. We do not propose changes to our current regulations regarding individuals living in institutions , receiving Federal fost er care or adoption assistance under titleCMS-2349-P 49
IV-E of the Act, or adults who do not have the capacity to state intent. Note that policies regarding verification of residency are proposed at §435.956(c) and discussed in section II.H.5 of this proposed rule. 1. Residency Definition for Adu lts (age 21 and over) (§435.403(h)) We propose to strike the term “permanently and for an indefinite period” from the definition for adults in redesi gnated §435.403(h)(1) and (h)(4), a nd replace the term “remain” with “reside.” An adult’s residency will be de termined based upon where the individual is living and has intent to reside, includ ing without a fixed address, or the State which the individual entered with a job commitment or seeking employ ment (whether or not currently employed). While proposing to remove the phrase “permanently or for an indefinite period” and use the term “reside,” we are maintaining existing policy that an individual must intend to remain living in the State in which he or she is seeking coverage. Persons visiting a State for personal pleasure or purposes of obtaining medical care ar e not residents of the State vi sited. By removing the term “living” in the State or replacing the term “rem ain” with “reside,” we do not intend to have any policy impact on State policy. I ndeed, we note that section 1902( b)(2) of the Act refers to individuals who “reside in the St ate”. We are removing the word “living” from the definition in order to simplify the language. An individual must still maintain present in tent to reside in the State being claimed as the State of residence; a State would not be required to recognize an intent to reside at some future point in time. We have retained the term “living” for individuals who do not have the capacity to state inte nt, as we are not modifying the re gulations for that population. Our proposal to remove language regarding pe rmanency and “an indefinite period” will help to facilitate coordination of eligibility determinations across and between programs and is also consistent with long-stand ing statutory requirement s. Under section 1902(b)(2) of the Act,CMS-2349-P 50 States may not exclude from coverage an indivi dual who resides in the State “regardless of whether or not the residence is maintained permanently or at a fixed address[.]” 2. Residency definition for ch ildren (under age 21) (§435.403(i)) For individuals who are emancipated or married, we propose language to align the residency rules with the proposed definition for adults. Accordingly, at redesignated §435.403(i)(1), we propose to strike the term “perma nently and for an indefinite period” and to replace the word “remain” with “reside.” We propose in §435.403(i)(2) to combine and co nsolidate two differe nt definitions of residency currently set forth in paragraphs (h)( 2) and (h)(3) for unemancipated individuals under age 21: (1) those whose Medicaid eligibility is based on a disabi lity and (2) those who are not disabled and not living in an institution or rece iving foster care or a doption assistance under IVE of the Act. We eliminate the cross-reference to the AFDC rules at 45 CFR 233.40 and for both groups of children we propose to apply a similar de finition as that proposed for most adults, but without the “intent” component, as individual s under age 21 may not lega lly be able to express intent. Under the proposed rule, States may not determine residency of a child based solely on the residency of the parent. Our proposal will simplify State administration and make the rules clearer to the public. Our proposal to allow children to es tablish residency to the same ex tent as adults when a parent or caretaker is seeking or has c onfirmed employment is intended to ensure a consistent approach for migrant, seasonal workers and other families liv ing in a State while employed or in search of employment. The proposed definition also allo ws flexibility for families in which children attend school in a State other than where the pa rents live; such childre n may be considered residents of the parents’ “home St ate,” if the parent expresses the requisite intent. However, weCMS-2349-P 51 do not change States’ current flex ibility to determine whether stude nts “reside” in a State, as long as each individual has the opportunity to provide evidence of actual resi dence. The proposed rule excludes children who are vi sitors for pleasure or for purpos es of obtaining medical care. Parents, caretakers, and persons acting responsibly on behalf of a child may attest to where the child resides, under new §435.956(c). While we do not believe our proposed change s significantly affect Federal guidance on residency, we seek comments on the proposed modi fications to §435.403(h) and (i), particularly on the impact of this proposed rule on children eligible for Medicaid based on disability. We also seek comments on whether to change the cu rrent State residency policy with regard to individuals living in institutions and adults who do not have the capacity to express intent. D. Application and Enrollment Procedures for Medicaid

1. Availability of program information (§435.905) Section 2201 of the Affordable Care Act adds a new section 1943(b)(1)(A) to the Act which directs States to develop procedur es that enable individuals to apply for, renew, and enroll in coverage through an internet Web site. Section 1 943(b)(4) directs States to establish a Web site (which must be linked to the We b site established by the Exchange operating in the State) that will allow individuals to obtai n information regarding covera ge under Medicaid and CHIP and compare such coverage to that available th rough the Exchange. Thus, we propose to amend §435.905 to ensure that program information be made available electronica lly through a Web site in addition to providing information to applican ts both orally and in writing. We propose to modify §435.905(b) to eliminat e specific requirements regard ing quantity and electronic availability of bulletins and pamphl ets, as we do not believe these are necessary in regulations. 2. Applications (§435.907)CMS-2349-P 52 To support States in developi ng a coordinated eligibility a nd enrollment system for all insurance affordability programs, section 1943(b) (3) and section 1413 of the Affordable Care Act direct the Secretary to deve lop and provide States with a si ngle, streamlined application. The single application, to be used for all insuran ce affordability programs and available through a variety of formats including on-line and phone applications, will build on the successes many States have had in developi ng simplified applications. Accordingly, we propose to amend current re gulations at §435.907 to reflect use of the new single, streamlined application. The Secr etary will develop the data elements for the application in collaboration with States a nd consumer groups. As permitted in section 1413(b)(1)(B) of the Affordable Care Act, pr oposed §435.907(b)(2) provides States the option to develop and use an alternative streamlined applicati on, subject to review and approval by the Secretary. Under the law, those who are limite d English proficient (LEP) and persons with disabilities must have equal acce ss to health care and the benefits. We intend to address the readability and accessibility of applications, fo rms and other communications with applicants and beneficiaries in future guidance. In §435.907(c), we propose two alte rnative approaches related to applications for individuals who may qualify for coverage on a basis other than MAGI. First, we propose that States may use supplemental forms to gather additional information, such as information pertaining to resources, needed to make an eligibility determination. This approach would permit anyone seeking coverage to begin by completing the same single, streamlined application as all other applicants. Second, we propose to permit States to develop and use an alternative single, streamlined application form designed specificall y to capture information needed to determine eligibility for individuals whose eligibility is not determined based on M AGI. Under the statuteCMS-2349-P 53 and proposed 435.907(c), such supplemental and altern ative forms are subject to the Secretary’s approval. We seek comment on both of the proposed approaches as well as other alternatives to ensure a simple application process. In §435.907(d), we explain that the agency mu st establish procedures to allow persons seeking coverage to file an application thr ough a variety of means including online, in person, over the phone and by mail. Applications may be submitted in person, but under this proposed rule, particularly in light of the seamless c oordination process require d for enrollment in Medicaid and the Exchange, in person interviews cannot be requi red for the individuals whose eligibility is based on MAGI. For individuals not seeking cove rage for themselves (“non-app licants”), to ensure privacy we propose in §435.907(e)(1) to codify the l ong-standing policy ag ainst requiring such individuals to provide So cial Security numbers (SSNs) or in formation regarding their citizenship, nationality, or immigration status. To promote enrollment of eligible applicants, States may request an SSN of a non-applicant on a volunt ary basis. Proposed §435.907(e)(2) codifies existing policy grounded in Title VI of the Civil Rights Act of 1964, the Privacy Act, and Medicaid confidentiality provisions at section 1902(a)(7) of the Act to allow States to request an SSN of a non-applicant only if: (1) providing an SSN is voluntar y; (2) use of a non-applicant’s SSN is limited to processing the applicant’s eligib ility or for other functions necessary to the administration of the State’s plan; and (3) the St ate provides notice that provision of an SSN is voluntary and indicates how the SSN will be used. In support of the proposed rule, we note th at sections 1411(g) and 1414(a)(2) of the Affordable Care Act specify that taxpayer in formation may only be used for eligibility determinations and other functions directly related to the admini stration of benefits. SectionCMS-2349-P 54 1902(a)(7) of the Act directs States to have safeguards that restri ct the “use or disclosure of information concerning applicants and recipients only for purposes directly connected with the administration of the [State] plan...” Non-a pplicant information used to determine an applicant’s eligibility is considered to be in formation “concerning” the applicant or recipient; thus, this information must be appropriately safeguarded. We propose to continue the current policy th at Medicaid applicants and beneficiaries must provide an SSN, if the individual has one. Under our current regu lations at §435.910, if an individual does not have an SSN, the agency mu st assist the individual in obtaining one. For background and a detailed discussion of the current policy on the co llection of SSNs, see the TriAgency Guidance issued in conjunction w ith the Administration for Children and Families and the Food Nutrition Service, in September 2000, at http://www.hhs.gov/ocr/civilrights/resources /specialtopics/tanf/triagencyletter.html

. Section 1943(b)(1)(A) of the Act directs Medicaid agencies to permit enrollment and reenrollment in the State plan or under a waiver through electroni c signature. Accordingly, we propose in §435.907(f) that States must accept app lications signed through the use of electronic signature techniques, including telephonically recorded signatures, as well as handwritten signatures transmitted by fax or other electronic mean s. This is consistent with current practice in
most States. 3. Assistance with applicati on and redetermination (§435.908) Some of the individuals elig ible for coverage in 2014 ma y need assistance with the application and renewal process. Therefore, we propose to am end current §435.908(b) to ensure that the agency provides assist ance through a variety of means to any individual seeking helpCMS-2349-P 55 with the application or redetermination process. This is consistent with current State practice and is in accordance with sect ion 1902(a)(19) of the Act. We are proposing that States have flexibility to design the available a ssistance, while assuring that such assistance is provided in a manner acce ssible to individuals wi th disabilities and who are LEP. In addition, section 1943(b)(1)(F) of th e Act directs States to conduct outreach to vulnerable and underserved populations eligible for Medicaid. Such outreach and assistance will be particularly important for those who are newly eligible, as well as for people with disabilities, underserved racial and ethnic minorities and other groups. We will provide technical assistance and subregulatory guidance to further address ap plication and renewal assistance to meet the needs of the multiple populations served by the program. E. MAGI Screen (§435.911) This section of the preamble and the proposed rules at §435.9 11 describe the process for applying a new simplified test for determining el igibility based on MAGI – which is facilitated by the simplified eligibility cate gories, including the new adul t coverage group, discussed in section II.A of this proposed rule – as well as the steps States will take to ensure that individuals who do not meet the simplified test are evaluated for Medicaid eligibility on other bases and for potential eligibility for other insu rance affordability programs. Proposed §435.911(a) sets forth the statutory basis for this section. In proposed §435.911(b) we set forth several pertinent definiti ons, including “applicable modified adjusted gross income standard,” which will be at least 133 percent FPL, but in some States may be higher for certain individuals, in cluding parents or other caretaker relatives, pregnant women or children.CMS-2349-P 56 Proposed §435.911(c) describes the key steps in the proposed streamlined eligibility process. Under §435.911(c)(1), for every indivi dual who has submitted an application and who meets the non-financial criteria for eligibility (o r for whom the agency is providing a reasonable opportunity to provide documentation of citizenship or immigrations status in accordance with sections 1903(x), 1902(ee) and 1137(d) of the Ac t), the Medicaid agency would determine whether such individual has household income at or below the applicable MAGI standard. This means that States will not need to review whethe r an individual who meets the applicable MAGI standard (for example, 133 percent FPL for the new a dult group) is also eligible as a disabled or medically needy individual, both of which t ypically entail a more involved eligibility determination. For individuals with household income at or below the appl icable MAGI standard, the agency would provide Medicaid benefits promp tly and without undue delay. Benefits will be addressed in subsequent guidance. Some individuals with household income a bove the applicable MAGI standard may be eligible for Medicaid on another basis. In some States, for ex ample, some individuals may be eligible based on disability or need for long-term care services, even if their income exceeds the applicable MAGI standard, and in dividuals eligible for Medicare may be eligible for assistance with Medicare premiums and cost sharing char ges. In accordance with §435.911(c)(2), for each individual who is not eligible for Medicaid based on MAGI under §435.911(c)(1), the Medicaid agency shall collect additional information, c onsistent with proposed §435.907(c), as may be needed to determine Medicaid eligibili ty on other such other bases. We note that the MAGI screen proposed for St ate Medicaid agencies is the same process as that at proposed 45 CFR §155.305(c) of the Ex change Proposed Rule published elsewhere inCMS-2349-P 57 this Federal Register; however, the Exchange will not be required to undertake Medicaid eligibility determinations ba sed on factors other than M AGI. Under proposed §435.1200(e)(2) and the Exchange Proposed Rule at 45 CF R §155.345, the Medicaid agency will retain responsibility for making such determinations , although the State can establish procedures whereby the Exchange will undertake such other determinations in certain circumstances, consistent with regulations at §431.10 and §431.11, as revised in and discussed in section J of this proposed rule. Proposed §435.911(c)(2)(iii) specifies that the agency must follow the policies of proposed §435.1200(g) to assess individuals determ ined not eligible for Medicaid based on MAGI for potential eligibility for other insurance affordability programs and to facilitate seamless transfer of the individua l’s electronic account to these other programs. Under proposed §435.1200(g)(2), evaluation of individuals for Me dicaid eligibility ba sed on blindness or disability in accordance with proposed §435.911(c)(2) should occur at that same time as evaluation for potential e ligibility for premium ta x credits for enrollment through the Exchange. We are not proposing specific ti meliness standards for the determination of eligibility under proposed §435.911. In collaboration with St ates, we will be developing performance standards and metrics for the streamlined and co ordinated eligibility and enrollment system. These metrics will also support the standards and conditions described in the Federal Funding for Medicaid Eligibility Determination and Enrollm ent Activities final rule (76 FR 21950) published in the April 19, 2011 Federal Register. F. Coverage Month In proposed §155.410 of the Exchange proposed rule, enrollment through the Exchange for individuals terminated from Medicai d can begin at the earliest on the 1 st day of the monthCMS-2349-P 58 following the date the individual loses Medicaid and is determined eligible for enrollment through the Exchange. If the individual loses Medi caid eligibility and is de termined eligible for enrollment through the Exchange after the 22 nd day of the month, enrollment through the Exchange begins at the earliest on the first day of the second month following such date. To promote coordination with coverage through th e Exchange, we are considering adding a provision to the regulations to extend Medicaid coverage until the end of the month that the appropriate termination notice period ends. Certain exceptions - such as the death of a beneficiary – would apply. This is the current practice in many States which now end Medicaid coverage at the end of a month for administrativ e convenience or to align with coverage offered by participating health plans paid on a per cap ita per month basis, as permitted under current regulations. We believe that providing coverage through the end of the month is similar to existing regulations at redesi gnated §435.915(b), which allows St ates to make eligibility effective from the beginning of a month. We invite comments on this potential approach to coverage, its likely impact on maintaining continuous coverage, whether the costs of this approach outweigh the benefits, or whether we should retain the current policy th at provides State flexibility to end coverage at any time during a month. G. Verification of income and othe r eligibility criteri a (§435.940 through §435.956). In this section, we discuss changes to 42 CFR part 435 subpart J to make verification processes more efficient, modernized and coor dinated with the Exchange. In general, the proposed rules maximize reliance on electronic data sources, shift certain verification responsibilities to the Federal gov ernment, and provide States flex ibility in how and when they verify information needed to determine Medicai d eligibility. The propos ed changes draw fromCMS-2349-P 59 successful State systems and are aligned with those proposed at §155.315 and §155.320 of the Exchange proposed rule. The major changes are:

● In accordance with secti on 1413(c) of the Affordable Care Act, State Medicaid agencies will use a system established by the Se cretary pursuant to her authority under sections 1411(c) and 1413(c) of such Act, through whic h all insurance affordability programs can corroborate or verify certain info rmation with other Federal agenci es (for example, citizenship with the Social Security Admini stration (SSA), immigration stat us through the Department of Homeland Security (DHS), and income data from the IRS.) This system will reduce administrative burden on State Me dicaid agencies and Exchanges.

● Consistent with current policy, State Medi caid agencies may accept self-attestation of all eligibility criteria , with the exception of citizenship and immigration stat us. To ensure program integrity, States must comply with th e requirements of section 1137 of the Act to request information from trusted data sources when useful to ve rifying financial eligibility.

● We propose that in verifying eligibility States will rely, to the maximum extent possible, on electronic data matches with tr usted third party data sources. Additional information, including paper documentation, ma y be requested from individuals when information cannot be obtained through an el ectronic data source or is not “reasonably compatible” with information provided by the in dividual. These cha nges align eligibility verification methods for Medicaid with those used for advance pa yments of premium tax credits and other insurance affordability programs. This proposal would apply to the specific financial and non-financial information referenced in these ru les, as well as to any additional information the agency finds it necessary to verify in order to determine eligibility, rega rdless of whether that information is specifically referenced in the regulation

.CMS-2349-P 60

● A new section at §435.956 relates to requests by the agency for information about nonfinancial eligibility factors.

● Finally, we have deleted a number of pres criptive provisions th at are in current regulations as to when or how often States must query certain data sources, or when certain State wage agencies must provide data to the State Me dicaid agency. We do not believe that this level of specificity regarding State use of data sources is necessary, nor do we believe it is appropriate to include in Medicaid regulati ons requirements that bind other agencies, such as State wage agencies. These and other proposed revisions ar e discussed in more detail below. 1. Basis, Scope, and General Requirements (§435.940 and §435.945) At §435.940, we add statutory citations to th e basis and scope of the income and eligibility verification re gulations to include, in addition to section 1137 of the Act, sections 1902(a)(4), 1902(a)(19), 1903(r)(3) and 1943 of th e Act, as well as section 1413 of the Affordable Care Act. At §435.945(a), consistent with 42 CFR part 455, we are specifying that nothing in this proposed rule shall prevent a State from acting to ensure program integrity. Program integrity is a top priority and should be consider ed in commenting on the proposed rule. Consistent with current policy, at §435.945(b) , we add language to expressly permit States to accept attestation of information related to eligibility, including income, age, birth date and State residency, without requesting paper do cumentation. The exceptions to this provision are citizenship and immigration status, as these are subject to separate statutory requirements. States must continue to comply with the provis ions of section 1137 of the Act relating to income information in accordance with rules set out in this section.CMS-2349-P 61 Redesignated §435.945(c) directs the agency to request and use information in accordance with the appropriate sect ions of the regulations. We m odify existing cross references to reflect other changes proposed and add cross references to the new §435.949 and §435.956. In addition, we have deleted references in §435. 945(c) and throughout the regulation to verifying “medical assistance payments,” “amount of medi cal assistance payments” and “benefit amount” as the reference to the verificati on of “eligibility” is sufficient. We removed the list of programs with which the State Medicaid agency must exchange information at §435.945(d) and instead include a re ference to those programs listed in 1137(b) of the Act, as well as the child support enforcement program under Part IV-D of the Act (which is also referenced in section 1137) and SSA. Pursuant to sections 1413 of the Affordable Care Act and 1943 of the Social Security Act, we have added insurance affordability programs as programs with which the agency must exchange information. We have not changed the rules for reimburse ment arrangements between agencies for data exchanges at redesignated §435.945(e), except for an updated cross reference and citing to section 1137(a)(7) of the Act. Redesignated §435.945(f) specifies that before a request for information from a thirdparty data source is initiated, an individual must receive notice of the information being requested and its use. Consistent with current St ate practice, we anticipat e that this notice would be provided as part of the appl ication process. We have dele ted the current exception to this notice requirement when an indi vidual’s eligibility has been determined by another agency because, under our revised rule, proper notice is required only when the agency itself will be requesting data from another agency or progr am. The reporting requirements at redesignatedCMS-2349-P 62 §435.945(g) remain unchanged; however the regul atory citations relating to MEQC and documentation have been updated. Existing §435.945(g), regarding a State Wage Information Collection Agency (SWICA) that does not use the quarterly wages reported by employers under section 1137 of the Act, has been deleted, as we believe these requirements are not within the purview of the State Medicaid
agency. Per section 1413(c) of the Affordable Ca re Act, we add a new §435.945(h) (renumbering the next paragraph) to require th at data exchanged electronically under this section must be sent and received via secure electronic interfaces which, as defined in proposed §435.4, must be consistent with 42 CFR part 433. Redesignated §435.945(i), pertaining to written agreements between agencies engaged in data exchanges, has been modified to elimin ate specific requirements regarding the precise content of such agreements and the timing and fr equency of data exchanges to provide States greater flexibility. This flexibility will fac ilitate coordination with Exchanges and other insurance affordability programs and allow States to take full advantage of the increased automation of electronic data matching enable d through the provision of enhanced Federal funding for the development and implementation of such systems available under 42 CFR part 433 subpart C. 2. Verification of Financial Eligibility (§435.948) Under sections 1137 and 1902(a)(46) of th e Act, certain Federally-funded, Stateadministered programs, including Medicaid, are required to conduct electronic data matches to obtain income information from the State quarter ly wage reports and Unemployment InsuranceCMS-2349-P 63 Benefits, the IRS, and the SSA to verify financial eligibility for benefits, if such information may be useful in verifying eligibility for Me dicaid, as determined by the Secretary. However, not all data sources are useful in all situations and under section 1137(a)(4)(C). The use of information identified in section 1137 of the Act “sha ll be targeted to those uses which are most likely to be productive in iden tifying and preventing inel igibility ... and no State shall be required to use such information to verify the eligibility of all recipients.” In addition to the data sources specifically list ed in section 1137 of the Act, ma ny States also rely on other data matches, which they find useful to verify income. We believe that States are in the best positi on to determine the usefulness of the available data sources in specific cases. Therefore, we propose at §435.948(a) to delegate to the State Medicaid agency the discretion afforded to the Secretary of the HHS under section 1137(a)(2) of the Act to determine when the information identi fied in section 1137 of the Act is useful to verifying financial eligibility for an individual and must be requested. The sources of data which States much check, if useful, remain unchanged, except as follows:

● For the reasons discussed above, specific references to the timing and/or frequency with which information must be requested are deleted;

● Public Assistance Reporting Informati on System (PARIS)is added as a new data source given the requirement in 1903(r)(3) of the Act that all eligibility determination systems must conduct data matching through PARIS;

● We eliminate reference to the former AFDC program; and

● We replace reference to “Food Stamps ” with “Supplemental Nutrition Assistance Program” to reflect the new name under the Food, Conservation and Energy Act of 2008.CMS-2349-P 64

As noted above and discussed in more de tail below in relatio n to proposed §435.949, the Secretary is required to establish a system th rough which all insurance affordability programs can verify certain information with other Federal agencies. At new §435.948(b), we propose that, to the extent available, States must acce ss needed information when available through the system established by the Secretary, consistent with sections 1943(b)(3 ) and 1902(a)(4) of the
Act. At §435.948(c)(1), we provide that inform ation not available through the service established by the Secretary under §435.949 may be obtained dire ctly from the agency or program housing the information. At §435.948(c)(2), we retain the current policy in paragraph (c) of the existing regulations that information be requested by SSN, but clarify that, when an SSN is not available, the agency attempt to obtain needed information using other personally identifying information otherwise available in the individual’s account, as described in §435.4. Note that when an SSN is not available, the agen cy must assist the individual in obtaining a SSN in accordance with §435.910. States may request and use alternate data sources, as permitted at proposed §435.948(d), subject to Secretarial approval. Such alternative sources shouldreduce administrative costs and burdens on individuals and States, maximize acc uracy, and minimize delay. Also, we make explicit existing policy that use of any such alternative data source must meet applicable requirements relating to the conf identiality, disclosure, maintenance, or use of information. Finally, consistent with section 1413 of the Affordable Care Act, we add that the use of an alternative data source facilitate coordination betw een all other insurance affordability programs. 3. Verification of Information from Federal Agencies (§435.949)CMS-2349-P 65 Section 1413(c) of the Affordable Care Act directs the Secretary of HHS, in consultation with the Secretary of the Treasury, the Secretary of Homeland Security and the Commissioner of Social Security, to establish a system of verification, using secu re electronic in terfaces, through which all State health coverage programs can verify information needed to determine eligibility. Section 1411(c) of the Affordable Care Act specifically directs th at the system enable electronic verification of household income and family size with the IRS, citizenship data with SSA, and immigration status with DHS. By enabling access to multiple Federal s ources though a single inquiry, insurance affordability programs can receive prompt, reliable data through the same service, thereby alleviating multiple data inquiries that the State might otherwise have to make. Since all of the insurance affordability programs will rely on certain common sources (that is, SSA, DHS and IRS), once such information is gathered and evaluated by one program, reevaluation or reverification of data will not be necessary, and th us, not permitted by another program (unless an individual reports a chan ge in circumstances). We propose at §435.949(a) to specify the Federa l agencies from which information will be available through the Secr etary, including SSA, DHS and the IRS. We propose in §435.949(b) that, if data included in §435.949 is avai lable through the Secretary, States would be required to obtain such data through the service established by the Secret ary. Other applicable regulations, including those set forth at §435.948, §435.956 and §435.960, remain in effect for information, which cannot be requested through the Secretary. We propose §435.949(c) to codify section 1413(c)(3 ) of the Affordable Care Act, which provides that the Secretary may modify the methods used in the verification system established if she determines that modifications would re duce the administrative costs and burdens onCMS-2349-P 66 individuals or agencies; ensure accurate and timely verification; comply with applicable requirements for the confidentiality, disclosure, pr ogram integrity, and maintenance or use of the information, including the requirements of sect ion 6103 of the IRC; and promote coordination among insurance affordability pr ograms. Section 435.949(c) is pr oposed to be consistent and coordinated with §155.315 of the proposed Exchange rule. 4. Use of Information and Requests for Additional Information (§435.952) We are proposing changes to §435.952, whic h describes the appropriate use of information. We are proposing to eliminate vague language at the e nd of §435.952(a) regarding the requirement to independently verify inform ation “...if determined appropriate by agency experience.” We expect processes to occur in real time wherever possible and we will be defining more detailed standards and other perf ormance metrics, with State and stakeholder input, in subsequent Federal guidance. Accordingl y, we also are proposing to delete the specific timeliness requirements contained in the curr ent regulation at §435.952(c), which now requires agency action within 45 days from the date new information is received. Under §435.952(b), as revised, if information provided by an indivi dual is reasonably compatible with information that the agency has obtained from ot her trusted sources, the agency must act on such information and may not reques t additional information from the individual. To establish an appropriate balance between reliance on electronic verification and paper documentation, we propose to establish a “reasonab le compatibility” standard governing when additional information, including paper documenta tion, can be requested from applicants and beneficiaries. Under proposed §435.952(c), no fu rther information may be required from the individual unless the agency is unable to obtai n information through electronic data matching or the information obtained is not reasonably compatib le with that provided by the individual. InCMS-2349-P 67 such cases, the agency may contact the indi vidual and accept the individual’s explanation without further documentation, if reasonable, or the agency may request additional information, including paper documentation. “Reasonably co mpatible” does not necessarily mean an identical match for the data, only that the inform ation is generally consis tent. Since what is “reasonably compatible” may vary depending on the particular circumstances, we are proposing to provide States flexibility to apply this st andard. Under §435.948(d), if the individual fails to respond to a request for additional information permitted under the proposed rule, the agency shall proceed to deny, terminate, or reduce Medi caid only after notice and appeal rights have been provided in accordance with part 431, subpart E. Sections 435.953 and 435.955 of the current regula tions are deleted in the proposed rule. Provisions contained in §435.953( a) and §435.955(a) through (c) and (f) are revised and incorporated into §435.948 and §435.952, in accordance with the discussion above. We propose to remove the remaining requirements in §435.953(b) through (d) (r elating to detailed information the State must submit for the Secretar y’s approval to exclude sp ecific data requests) and the detailed requirements in §435.955(a) a nd (d), (e) and (g) (rela ting to the additional provisions regarding information released by a Federal agency, incl uding State reporting requirements and requests for a waiver from the Federal agency’s Data Integrity Board). We believe that the detailed nature of these provi sions may unnecessarily hamper development of an efficient, modernized and coordinated system and that such details are best developed in collaboration with States and addres sed through subregulatory guidance. 5. Verification of Other Non- financial Information (§435.956)CMS-2349-P 68 We propose a new §435.956 to address verifyi ng non-financial information. As with financial information, to the extent non-financia l information is available through the electronic service established by the Secretary, States wo uld use that service under proposed §435.949(b). Under the proposed rule, at §435.956(c), States may use attestation (i ncluding attestation of someone acting responsibly on behalf of the individual) or electronic data sources to determine State residency, in accordance with §435.945(b) and §435.952. Under proposed §435.956(c), documents that provide information rega rding immigration status should be used as a source of evidence to verify satisfactory im migration status, but may not, by themselves, be used to demonstrate lack of residency. For example, a temporary or time-limited immigration status, such as Temporary Prot ected Status (TPS), does not ne cessarily establish that the individual is not a State reside nt because TPS is routinely renewed. The proposed rule relating to residency does not diminish States’ responsibility to ensure that only individuals with valid and satisfactory immigration status are determined eligible for and enrolled in Medicaid; if an individual has a temporary immigr ation status, the agency must ensure that the individual’s Medicaid eligibility is reviewed at the appropriate time. Proposed §435.956(d) simply cross-referen ces current policy at §435.910(f) and (g) regarding issuance and verification of SSNs. Current Federal rules regarding verificati on of pregnancy vary based on the woman’s eligibility category, but ve rification of pregnancy is not required in all cas es under current rules. Verification (except by self-attes tation) may not be required for pregnant women eligible for pregnancy related services under section 1902(a)(10)(A)(i)(IV) or (ii)(IX) of the Act, but pregnant women must provide medi cal verification of pregnancy to be eligible for full Medicaid coverage as a qualified pregnant woman (with very low-income below the State’s former AFDCCMS-2349-P 69 standard) under section 1902(a)(10)(A)(i)(III) of the Act or under secti on 1931 of the Act, if medical verification was required under the Stat e’s AFDC program in effect on July 16, 1996. In light of the proposed regulations at §435.116, which combine these different eligibility categories to achieve greater simplicity in the pr ogram, we believe a verification rule for the combined group is needed. Thus, we are ex ercising the authority provided in section 1902(e)(14)(A)of the Act to propose application of the self-attestation verification rule under section 1902(a)(10)(A)(i) (IV) or (ii)(IX) of the Act in de termining eligibility under §435.116. Although a change in federal guidelines, we do not believe that this will have significant practical impact for States, as we believe mo st pregnant women today are covered under the eligibility groups for which medical verifica tion is already not re quired. Proposed §435.956(e) reflects this policy, providing that the agency must rely on the woman’s at testation of pregnancy, unless the agency has other information (for exam ple, claims history) that is not reasonably compatible with her attestation. To promote coordination of e ligibility rules and procedures with the Exchange, we also propose at §435.956(e) to codify the widespread State practice of accepting attestation of household composition unle ss the State has information which is not reasonably compatible with such attestation. In proposed §435.956(f), in the situations when ag e is a factor of eligibility, States may apply the same proposed verificatio n procedures and options, as are available for other eligibility criteria verification, in acco rdance with §435.945(b) and §435.952. When agencies obtain information regarding re sidency, SSN, pregnancy, age, and birth date in accordance with paragraphs (c) through (f) th at is not reasonably compatible with the information or attestation provided by an individual , they must take reasonable steps to reconcile discrepancies that would affect eligibility, fo llowing the process set ou t in §435.952(c) and (d).CMS-2349-P 70

H. Periodic redetermination of Medicaid eligibility (§435.916) Consistent with section 1943(b )(3) of the Act and sections 1413(a) and 1413(c)(2) of the Affordable Care Act, which aim to ensure that i ndividuals remain enrolled for as long as they meet eligibility standards, we propose to am end §435.916 to establish simplified, data-driven renewal policies and procedures for individuals whose eligibility is based on MAGI, consistent with ensurance of program integrity. States are increasingly re-engineering their renewal processes, recognizing that the traditional process, which involves a new app lication and documentation, may be unnecessary and can be burdensome for families and agencies. In addition, many eligible beneficiaries lose coverage at renewal for procedur al reasons, only to reapply, and to regain eligibility, soon after losing coverage. This churning on and off of coverage is administratively costly and burdensome for the agency, health plans, and cons umers, and is disruptive to continuity of care and efforts to achieve quality a nd efficiency in the delivery of care. This rule proposes renewal procedures that are consistent with those that will operate for the premium tax credit and that mirror the practices many States have adopted as they have sought to simplify the enrollment process and promote continuity of coverage. Under current Federal policy, eligibility must be redetermined at least once every 12 months, and although States can ha ve a shorter regular redetermin ation period, very few States do so today. According to a 2011 50-State survey by the Kaiser Family Foundation, all but two States currently have a 12-mont h renewal period for children and all but five also provide 12- month renewal periods to parents. Consis tent with this State trend and the annual redetermination procedures for individuals eligib le for tax credits to purchase coverage through the Exchange at §155.335 of the Exchange pr oposed rule, we propose at §435.916(a)(1) thatCMS-2349-P 71 States schedule regular redeterminations or rene wals for beneficiaries whose eligibility is based on MAGI once every 12 months. Consistent with current policy, eligibility should be redetermined more frequently if a beneficiary re ports a change in circumstance that may affect continued eligibility, or the agency obtains info rmation (for example, through a data match from other program records) that suggest s the need for an eligibility revi ew. States maintain authority and flexibility to establish procedures that ensure program integrity. In recent years, States also have increasin gly adopted measures to streamline the renewal process, including the use of admi nistrative, telephone and online re newals. Consistent with this State trend, under the proposed pr ocess at §435.916(a), States woul d not need a renewal form from all individuals, further streamlining the pro cess for individuals and States. Similar to the proposed verification processes at initial application, di scussed in section II. H. of this proposed rule, the proposed renewal procedures maximize th e use of current third-party data matching to verify continued eligibility. Thus, at §435.916(a) (2), we propose to codify the longstanding policy (see www.cms.gov/smdl/downloads/smd040700.pdf ) that agencies renew eligibility for beneficiaries by first evaluating in formation available to the agency in the electronic account or from other reliable data sources. If the informati on available to the agency is sufficient to make a determination of continued elig ibility, including information that establishes that the individual or family continues to reside in the State, coverage shall be renewed on the basis of this information and the agency would send the a ppropriate notice to the beneficiary without requiring any further action. This eliminates the need for and administrative burden of a renewal form or a signed returned notice and unnecessary requests for information already on hand. State experience with this t ype of renewal process shows that it reduces the number of eligible beneficiaries who lose coverage for procedural reasons while maintaining programCMS-2349-P 72 integrity. Beneficiaries must correct any inaccura te information contained in the determination notice and would be permitted to do so through a variety of means, including online, in person, by telephone, or via mail. As noted below, if any information is missing or is not reasonably compatible with ongoing eligibility, the agency mu st take further action to complete the renewal
process. If the agency cannot determine that the indi vidual remains eligible through the process described above, we propose in §435.916(a)(3) a process in which the agency would provide the individual with a pre-populated renewal form containing informa tion that is relevant to the renewal and available to the agency. The agen cy would then provide the individual with a reasonable period—-these rules prop ose at least 30 days--to furnis h necessary information and to correct any inaccurate information either in person, online, by telephone, and via mail. We seek comments on this proposed process. At §435.916(a)(3)(ii), we propose that the agency verify the information reported by the beneficiary in accordance with §435.945 through §435.956, as revised in these proposed rules, including, at State option, reli ance on self-attestation consiste nt with those sections. In §435.916(a)(3)(iii), to avoid unnece ssary reapplications for coverage, we also propose a reconsideration period for individua ls who lose coverage for failure to return the renewal form. Individuals who return the form w ithin a reasonable peri od after coverage is terminated would be redetermined without the need for a new app lication. We considered specifying a 90-day reconsideration period to align with the 3-m onth retroactive assistance period provided under section 1902(a)(34) of the Act, but did not specify a particular le ngth of time in this proposed rule. We seek comments on the use and lengt h of a specified rec onsideration period.CMS-2349-P 73 Finally, consistent with section 1413 of the Affordable Care Act, we propose at §435.916(a)(4) that for beneficiaries no longer el igible for Medicaid, the agency assess the individual for eligibility in other insurance a ffordability programs and transmit the electronic account and other pertinent data to the appropriate program for a de termination of eligibility in accordance with proposed §435.1200(g). We have not proposed amending the renewal pro cedures for beneficiarie s eligible on a basis other than MAGI (reflected in current regula tions at redesignated §435.916(b)), but seek comment on extending the renewal procedures propos ed in §435.916(a) to such individuals. We propose to expand the standards under re designated §435.916(c) to include options for permitting all beneficiaries to report changes online, over the telephone, by mail or in person. Given the evolving reliance on methods for communication that go beyond the in-person interview, we solicit comment on whether more modernized procedures to report changes should be available to both the MAGI and MAGI-excepted populations. We note that we will be modifying the Pa yment Error Rate Measurement (PERM) and Medicaid Eligibility Quality Control (MEQC) regulations to ensure that both the PERM Medicaid eligibility review and MEQC processes take into acc ount these rules and procedures, including the use of author itative data sources in redetermining eligibility. We also note that any State expenditures (before the end of 2015) for sy stem changes necessary to adopt these renewal procedures should be subject to the enhanced (90 percent) match as outlined in the Federal Funding for Medicaid Eligibility Determination a nd Enrollment Activities fi nal rule published in the April 19, 2011 Federal Register (76 FR 21950), provided these sy stems meet the standards and conditions set fort h in that rule.CMS-2349-P 74 I. Coordination of eligibility and enrollment among insurance affordability programs - Medicaid agency responsibilities (§435.1200) We propose to add a new subpart M, Coordina tion between Medicaid and other insurance affordability programs, including a new §435.1200 to delineate the State Medicaid agency’s responsibilities in effectuati ng such coordination. Propos ed §435.1200 also includes policies previously included in §431.636, Coordination of Medicaid with the State CHIP. Section 435.1200(a) and (b) set forth the basis for and de finitions used in the proposed section. 1. Basic Responsibilities (§435.1200(c)) Proposed §435.1200(c) sets forth the basic respon sibilities of the St ate Medicaid agency. Proposed §435.1200(c)(1) specifies that the Medicaid agency must participat e in the coordinated eligibility and enrollment syst em described in section 1943 of the Act. As discussed, most individuals will be evaluated for eligibility in the Exchange, Medicaid, and CHIP using a coordinated set of rules and these programs will work together to ensure that eligible applicants are enrolled in the appropriate program, no ma tter where their application originates. For example, an individual who directly applies for and is determined inelig ible for Medicaid would be immediately assessed for eligibility for a dvance payment of the premium tax credit and coverage through the Exchange. That individual would not need to file a new application in order to participate in Exchange coverage, if eligible. Integration among these programs will help to avoid duplication of costs, processes, data , and effort on the part of both the State and the individual. We expect the use of a shared eligibility service to adjudicate placement for most individuals. The shared eligibility servi ce would coordinate determination and renewal requirements for eligibility in each of the insu rance affordability programs. It may includeCMS-2349-P 75 processes such as those used for collecting and verifying applicant information, including verification of citizenship and immigration status and certain income information as well as determining and renewing eligibility. Regardless of an applicant’s point of entry (directly online at home, with a navigator or community orga nization/assister, through the mail, or through a consumer assistance office established by the Excha nge), this shared eligibility service would be used whenever the single streamlined application for enrollment, discussed in section II.E.2 of this proposed rule, is initiated or whenever a renewal occurs. We note that shared systems and the Medicaid functions they perform are eligible for enhanced Federal financial participation ( FFP) of 90 percent for development (through December 31, 2015) and 75 percent for operations (no time limit) if certain conditions and standards are met. For additional information, see the April 19, 2011 final rule establishing enhanced funding for Medicaid eligibility and enro llment activities. Such systems are subject to cost allocation principles, per OMB Circular A- 87 and guidance from CMS. In addition, the entities and agencies performing functions on beha lf of one another that involve the use or disclosure of an individual’s health informati on will be required to comply with the applicable business associate provisions of the Privacy a nd Security Rules under the Health Insurance Portability and Accountability Act of 1996. Section 435.1200(c)(2) proposes th at State Medicaid agencies enter into one or more agreements with the Exchange and other insuranc e affordability programs as necessary to ensure coordination of eligibility and enrollment, includi ng coordination with a Ba sic Health Program if applicable. Details about the Basic Health Prog ram will be included in forthcoming guidance. States may also use such agreements to coordi nate related activities, such as health plan management.CMS-2349-P 76 States may design these agreements in diffe rent ways that reflect their governance structures. We see three broad options. First, one or more of the entities (the Exchange, Medicaid or CHIP agencies) co uld enter into an agreement whereby some or all of the responsibilities of each entity are performed by one or more of th e others. Second, a State could develop a fully integrated system whereby the responsibilities of all entities are performed by a single integrated entity. Third, each entity coul d fulfill its responsibilities and establish strong connections to ensure the seamless exchange of information and da ta. We solicit public comments on these different working relationships and the best mechanisms to facilitate States’ ability to coordinate el igibility and enrollment. We note that relationships between the St ate Medicaid program and other insurance affordability programs must be established in accordance with section 1902(a)(5) of the Act, which specifies that a single State agency will ad minister or supervise the administration of the Medicaid program. When the Exchange or othe r entity is performing delegated functions, it must at all times conduct such business consiste nt with the rules adopted by the Medicaid agency. This is further discussed in section II.J of this proposed rule. At §435.1200(c)(3), we propose that the State Me dicaid agency must certify criteria necessary for the Exchange to use in determin ing Medicaid eligibility based on MAGI. This includes the applicable Medicaid MAGI standard for parents and car etaker relatives, other adults, pregnant women, and children, as well as the crit eria for determining satisfactory immigration status, in accordance with the Medicaid Stat e plan. We invite public comment on other eligibility rules or criteria that should be certified by the Me dicaid agency for Medicaid eligibility determinati ons made by the Exchange. MAGI me thodologies and Medi caid eligibilityCMS-2349-P 77 based on the applicable MAGI standards are di scussed in sections II.B.3 and II.E of this proposed rule. 2. Internet web site (§435.1200(d)) Section 1943 of the Act says that no later th an January 1, 2014, States shall establish an Internet web site, linked to the web sites of other insurance affordability programs, through which individuals may obtain information, apply for, and enroll in Medicaid. To accomplish this, States could, for example, create one enroll ment web site for information and enrollment in all insurance affordability programs, or they coul d establish a broad health care web site that includes health insurance covera ge, health care services and supports, and health education information from a broad array of entities. Additionally, a State could establish a Medicaid presence on an existing State web site. This web site must be coordinated with the Exchange web site as described at §155.205 of the Exchange proposed rule. Proposed §435.1200(d) gives individuals the option to apply for or renew their eligibility for Medicaid online. A web site that connects an i ndividual directly into the Medicaid eligibility determination system is eligible for enhan ced FFP under the April 2011 final rule establishing enhanced funding for Medicaid eligibility and enro llment activities, if the system in its totality, including the website, meets certain standard s and conditions. Additional information on website specifications will be pr ovided in forthcoming guidance. Because the internet web site may serve as the primary mechanism through which individuals communicate with the agency, it must be accessible to individuals with disabilities and persons who are limited English proficient (LEP). At §435.1200(d)(2) we propose that the agency must ensure accessibility of web res ources in accordance with the Americans with Disabilities Act and section 504 of the Rehabilitation Act, and must take reasonable steps toCMS-2349-P 78 provide meaningful access for LEP persons. Acce ssibility needs of LEP persons may be met by providing language assistance services , such as translated informati on and "taglines" that inform LEP persons of the ability to talk to a multil ingual staff person or an interpreter. Web sites, interactive kiosks, and other inform ation systems would be viewed as being in compliance with section 504 if th ey meet or exceed section 508 standards, which ensure that Federal agencies’ electronic information technology is accessible to people w ith disabilities. The latest Section 508 guidelines issued by the US Access Board can be access ed at http://accessboard.gov/sec508/standards.htm , and W3C's Web Content Accessibi lity Guidelines (WCAG) 2.0 can be accessed at http ://www.w3.org/TR/WCAG20/

. 3. Provision of medical assist ance for individuals found eligible for Medicaid by an Exchange (§435.1200(e)) Consistent with sections 1413 and 2201 of the Affordable Care Act, under the coordinated system proposed in thes e rules, if the Exchange finds th at an individual is eligible for Medicaid, the State Medicaid agency must en roll the individual without further determination of eligibility. This enrollment is subject to th e rules established by the agency. We note that the State Medicaid agency has the responsibility to facilitate health plan selection for enrolled individuals, but may arrange with the Exchange to undertake this function. This could include providing the individual with available health plan options and transmitting enrollment transactions to the health plan, if applicable. As discussed in section II.B.3 of this proposed rule, for most individuals, eligibility for Medicaid would be determined based on MAGI. As described in the Exchange proposed rule, the scope of the final eligibility determinations made by the Exchanges is limited to those based on individuals having MAGI-based income at or be low the applicable MAGI standard. Note thatCMS-2349-P 79 in certain circumstances the State may establish procedures whereby the Exchange will undertake Medicaid eligibility determinations on ot her bases. Individuals who are not eligible for Medicaid based on MAGI, would be screene d, using information provided on the application, for potential Medicaid eligibility on other bases. As appropriate, their applications and other relevant information would be tr ansmitted to the Medicaid agency for a full Medicaid eligibility determination. See section 155.345 of the Exchange proposed rule for additional information. Further, all applicants have the right to request and receive a fu ll determination of eligibility on bases other than MAGI from the State Medicaid agency. Section 435.1200(e) describes the standards fo r the Medicaid agency to promptly and efficiently enroll individuals determined to be Medicaid eligible by the Exchange. To accomplish this, we propose that the agency establis h procedures to receive, via secure electronic interface from the Exchange, the finding of Medi caid eligibility and the individual’s electronic account, including all applica tion information. We recognize that an actual transfer of data may not occur, as the Medicaid agency and the Exchange may be utilizing a shared eligibility system. However, the legal responsibility for the electronic accounts and for further action, as appropriate, will transfer from the Exchange to the Medicaid agency. We expect processes to occur in real time whenever possible and, as not ed earlier, we will be defining more detailed standards and other perfor mance metrics, with State and stake holder input, in subsequent Federal guidance. 4. Transfer of applications from other insu rance affordability programs to the State Medicaid agency (§435.1200(f)) To ensure a coordinated eligib ility and enrollment process as directed by the Affordable Care Act and address existing c oordination rules for separate CH IP and Medicaid agencies inCMS-2349-P 80 section 2102(b)(3)(B) of the Ac t, we propose a new §435.1200(f). This provision includes and revises provisions previously covered unde r §431.636(b)(1) through (b)(3). Under proposed §435.1200(f), the State Medicaid agency must adopt procedures to promptly determine the eligibility of individuals a ssessed as potentially Medicaid -eligible by other insurance affordability programs and, if eligible, to enroll them without delay. Under this proposal, individuals with house hold income below the applicable MAGI level who are assessed as poten tially Medicaid eligible by an other insurance affordability program would be quickly and easily enrolled in Medicaid. Because all insurance affordability programs will be utilizing a common process for MAGI-based eligibility determinations, an individual assessed by such a program as potenti ally Medicaid eligible based on MAGI should receive a seamless determination from the Medi caid agency, and no further action should be required of the applicant. For individuals with household income above the applicable MAGI standard, who are either assessed by an insurance affordability program as potentially eligible on a basis other than MAGI, or who request an e ligibility determination on another basis, we propose that the Medicaid agency must conduct a fu ll Medicaid eligibility determination in the same manner as if their application had been submitted directly to the agency. We propose that the Medicaid agency estab lish procedures to receive the electronic account of any individual determined potential ly Medicaid eligible by another insurance affordability program, and to promptly and without undue delay conduct an eligibility determination in accordance with the provisions set forth in §435.911(c). The agency must not request any information alrea dy obtained, or duplicate any elig ibility verifications already performed, by the other insuranc e affordability program and included in the individual’s electronic account. Once the Me dicaid determination is complete, we propose that the agencyCMS-2349-P 81 notify the insurance affordability program of the determination of Medicaid eligibility or ineligibility. Issues related to the notices need ed to effectuate coordinated eligibility will be addressed in future rulemaking. 5. Evaluation of eligibility for other insurance affordability programs (§435.1200(g)) Section 1943(b)(1)(C) of the Act directs States to ensure that any individual who applies for, but is determined ineligible for, Medicaid or CHIP is screened for eligibility for advance payment of the premium tax credit, cost sharing reductions, and enrollment in a qualified health plan offered through the Exchange. Theref ore, in §435.1200(g)(1), we propose that the Medicaid agency must assess potential eligibil ity for other insurance affordability programs when the agency determines that an indi vidual is not eligible for Medicaid. While the Affordable Care Act does not provi de express authority for Medicaid to make eligibility determinations for coverage through the Exchanges, sections 1943(b)(2) of the Act and 1413(d)(2) of the Affordable Care Act do permit the agency to enter into a contract with the Exchange to do so. Absent such an agreement, the agency must promptly transfer the electronic account of individuals screened as potentially eligible, via secure electronic interface, to the Exchange so that such individua ls can receive an immediate e ligibility determination and, if eligible, be enrolled without de lay. This provision assumes that verification of any information required only for eligibility in the Exchange, such as access to affordable employer-sponsored insurance, will be completed by the applicable program once the applicant’s case is transferred. (Under current law and regulations, States also have the flexibility to have the State Medicaid agency administer some or all of the administ rative functions for a sepa rate CHIP, including the determination of eligibility for such program.)CMS-2349-P 82 We further propose that the electronic account transferred include the determination of ineligibility made by the Medicaid agency as well as all informati on provided on the single streamlined application and, as appropriate, veri fied by the State Medicaid agency. We note again that an actual transfer of data may not be necessary, but legal responsibility for the case will transfer from Medicaid to th e appropriate program. We also note that the Exchange cannot reverse a determination of Medicaid ine ligibility made by the Medicaid agency. In this and the Exchange proposed rule, we pr opose that individuals determined ineligible for Medicaid based on MAGI, for whom the Medi caid agency is evaluating eligibility on the basis of being blind or disabled, may enroll in other insurance affordability programs while a final Medicaid determination is pending. Once th e Medicaid determination is completed, if the individual is Medicaid-eligible, such coverage would be terminated in favor of Medicaid, but if not Medicaid-eligible, coverage would continue through the other program. This avoids unnecessary delays in coverage for individuals whose Medicaid el igibility determination process may be lengthy, while avoiding any overlap in coverage for those eventually determined Medicaid eligible based on blindness or di sability. Proposed §435.1200( g)(2) reflects the Medicaid agency’s responsibiliti es in effectuating this policy. We note that proposed 26 CFR 1.36B(2)(c)(2)(iii)(B) in the Treasury proposed rule specifies that if an individual receiving advance payments of the premium tax credit is approved for Medicaid cove rage, the individual is treated for purposes of eligibility for such cred it, as eligible for minimum essential coverage no earlier than the first day of the first calendar mo nth after such coverage is approved; thus, an applicant who is being evaluated by the Medicai d agency for eligibility based on blindness or disability and who is provided with advance paym ents of the premium tax credit in the interimCMS-2349-P 83 would not be liable to repay such advance pa yments upon retroactive approval of Medicaid during the period for which advance payments were paid. Since it would be inefficient and confusing to transfer and enroll individuals in other coverage, only to be disenrolled from such coverage days or even a few weeks later for enrollment in Medicaid, we propose to limit appl ication of the policy de scribed to individuals whom the Medicaid agency, in accordance with procedures in proposed §435.911(c)(3), is evaluating for eligibility on the basi s of being blind or disabled. J. Single State Agency (§431.10 and §431.11) As discussed in section II.I above, to ensure a fully coordinated eligibility determination and enrollment process, the Exchange proposed rule provides that Exchanges will make Medicaid eligibility determinations to effect uate Section 1943(b)(B). For numerous reasons, including the coordinated enrollment process, we anticipate that States will want to consider different ways to achieve integration acro ss Exchanges, Medicaid agencies and CHIP. Under Medicaid’s “single State agency” requirement in section 1902(a)(5) of the Act, as codified in §431.10 and §431.11, States must identify a “single State agency to administer or to supervise the administration” of the Medicaid program (that is , the Medicaid agency). This ensures that there is a single point of respons ibility and accountability for proper administration of the State Medicaid program, includi ng for eligibility determinations. We note, however, that the st atute at 1902(a)(5) specifically permits and in some cases requires the single State agency to delegate the au thority to make eligibility determinations to certain other agencies. Current re gulations provide for such delega tion of eligibility functions in §431.10(c). The regulations at §431. 10(e) provide that, in delega ting any single State agency functions, the Medicaid agency retain authority to exercise administrative discretion in theCMS-2349-P 84 administration or supervision of the plan, and th at if other State or local agencies perform services for the Medicaid agency, they must not ha ve the authority to change or disapprove any administrative decision of the Medi caid agency, or otherwise substi tute their judgment for that of the Medicaid agency in the applic ation of policies, rules and regul ations issued by the Medicaid agency. It is our understanding that the use of th is delegation authority is widespread across the nation, and in some States, multiple State agencies separate and apart from the State Medicaid agency, as well as county agencies make Medicai d eligibility determinat ions on behalf of the single State agency and under its supervision. In all instances, the sing le State agency is responsible under the statute to set the rules for the program , and to ensure that the determinations made are consistent with the statute. Related section 1902(a)(4) of the Act requires a State plan to provide for certain methods of administration, including the es tablishment of personnel standard s on a merit basis. We have historically advised States that public employees must make Medicaid elig ibility determinations. This position has been based on the premise that cer tain activities in the eligibility determination process cannot be delegated to private entities because they i nvolve discretion or value judgment that are inherently governmental in nature, and in such instances we have stated that State merit system employees must be utilized. In addition, there have been concerns about whether States that contract out their eligibility determination ca pacity would be able to effectively monitor and if necessary bring that cap acity back “in house” if policy implementation issues arose. Section 1413(d)(2)(B) of the Affordable Care Act reaffirms the single State agency requirement by providing that nothing in the la w “changes any requirement under Title XIX that eligibility for participation in a State’s Medi caid program must be determined by a public agency.” The proposed regulation is consistent with this prov ision. Simultaneously, we solicitCMS-2349-P 85 comments on how these statutory pr ovisions should apply in the context of Exchanges making Medicaid eligibility determinations and simpler, more uniform eligibility criteria. In this rule, we propose to allow Medicaid agen cies to delegate elig ibility determinations for individuals whose eligibility will be determ ined according to MAGI to Exchanges that are public agencies. Specifically, we propose to perm it Exchanges that are public agencies to make Medicaid eligibility determinations as long as th e single State Medicaid agency retains discretion in the administration or supervision of the plan. We note that if Exchanges are established as a non-governmental entity as allowed by the Affordab le Care Act, the coor dination provisions in the law may mean the co-location of Medica id State workers at Exchanges or other accommodations to ensure coordination is accomplished. We solicit comment on approaches to accommodate the statutory option for a State to operate an Exchange through a private entity, including whether such enti ties should be permitted to conduct Medicaid eligibility determinations consistent with the law. In §431.10(c)(1)(iii), we propose to permit Medica id single State agencies to delegate their MAGI eligibility determination function to Exchanges operated by governmental entities, provided the single State agency re mains solely responsible for set ting eligibility policies and is accountable for ensuring the program operates consis tently with such polices. In §431.10(c), we propose that the single State agen cy be responsible for ensuring th at eligibility determinations are made consistent with its rules and that corre ctive actions are instituted as appropriate; that there is no conflict of interest by any agency delegated the respons ibility to make determinations; that eligibility determinations are made in the be st interest of beneficiar ies; and that it guard against improper incentives or outcomes.CMS-2349-P 86 We further propose to add new §435.10(d)(l) thro ugh (5), and a conforming change to the introductory text at §431.10(d), to provide that agreements betw een single State agencies and agencies making determinations must state the quality control and overs ight plans by the single State agency to review determinations ma de by agencies making Medicaid eligibility determinations; that the agencies making Medicaid eligibility determinations report to the single State agency; that confidentiality and securi ty requirements in accordance with sections 1902(a)(7) and 1942 of the Act for all beneficiary data are met; and that all agencies making Medicaid eligibility determina tions meet the requirements of 1902(a)(4) relating to personnel standards. Finally, we would retain the requirement in §431.10(e) that Medicaid agencies may not delegate the authority to exercise administrativ e discretion or issue polic ies and rules on program matters; that the authority must not be impaired if subject to review by other entities; and that other entities must not have the authority to change or disapprove any admi nistrative decision of that agency, or otherwise substi tute their judgment for that of the Medicaid agency for the application of policies, rules and regula tions issued by the Medicaid agency. K. Provisions of Proposed Regulation Im plementing Application of MAGI to CHIP Section 2101(d) of the Affordable Care Act revises section 2102(b)(1 )(B) of the Act to ensure that, effective January 1, 2014, that States base income e ligibility for CHIP on MAGI and household income, as defined in section 36B of th e IRC, consistent with section 1902(e)(14) of the Act. Below we outline proposed ch anges to existing sections (§457.10, §457.301, §457.305 and §457.320) of the CHIP regulations, as well as the addition of new §457.315, to implement the CHIP MAGI components of the law. 1. Definitions and Use of Terms (§457.10 and §457.301)CMS-2349-P 87 We propose a nomenclature change, replacing the term “family income” with “household income” wherever it appears in 42 CFR part 457, and adding a defi nition for “household income.” We propose to modify th e term “Medicaid applicable inco me level” to clarify that the 1997 Medicaid applicable income level used inCHIP will also be converted to a MAGIequivalent income level, consistent with guidance provided by the S ecretary under sections 1902(e)(14)(A) and (E) of the Act. We are also adding other new terms related to the proposed regulations. 2. State Plan Provisions (§457.305) Section 2102(a)(5) of th e Act directs States to include a description of their income eligibility standards in their State plan. We propose to add a reference to the new §457.315 on application of MAGI and household income. 3. Application of MAGI and Household Definition (§457.315) Under section 2102(b)(1)(B)(v) of the Act, as added by section 2101(d)(1) of the Affordable Care Act, beginning January 1, 2014 , States will use “modified adjusted gross income” (MAGI) and “household income,” as those terms are defined in se ction 36B(d)(2) of the IRC, to determine eligibility for CHIP, a nd for other purposes for which an income determination is needed, “consis tent with section 1902(e)(14)” of the Act, which governs the application of MAGI and “household” income in Medicaid and which is implemented at proposed §435.603 of these rules. In addition, se ction 2107(e)(1)(F) of the Act, as added by section 2101(d)(2) of the Affordable Care Act, states that secti on 1902(e)(14) be applied to CHIP “in the same manner” as it is applied to Medicaid. Currently, States use different methods fo r defining income and household composition under CHIP. Many States operate their programs through expansions of Medicaid coverage.CMS-2349-P 88 Among States with separate CHIP programs, some follow Medicaid financial methodologies while others rely on different methods, including gross income tests. While we recognize that the statutory application of MAGI rules to CHIP re presents a change for some States, doing so is consistent with broader goals of coordination across programs. The adoption of MAGI-based methodologies to determine income for CHIP re presents a necessary alignment with other insurance affordability programs and is particularly important for families both because childrenwill be moving among different programs as family circumstances changes and because CHIPeligible children will often be in families wher e the parent is eligible for a premium tax credit through the Exchange. Because the statute provides that CHIP apply the new MAGI methodologies in the same manner as Medica id, we propose at §457.315 that, in determining financial eligibility for CHIP, States us e the methodologies for determining household composition and income as those proposed for Me dicaid at §435.603(b) – (h), as well as the exception, codified at proposed §435.603(i)(1), to pe rmit States to rely on a finding of income made by an Express Lane Agency in accordance with section 2107(e)(1)(E) of the Act. As discussed in section II.B. of this proposed rule, our proposed MAGI-based methods for determining Medicaid eligibility mirror the section 36B definitions of MAGI and household income, except in a very limited number of situations. For a more detailed discussion of the pr oposed financial methodologies based on MAGI to be applied to both CHIP and Medicaid, see s ection II.B.1 and II.B.3 of this proposed rule. 4. Other eligibility standards (§457.320) As discussed in section II.B.3.a and consistent with current practice in almost all State CHIPs, assets will no longer be considered in determining financial eligibility for Medicaid or CHIP. Section 457.320(a) lists the va rious eligibility sta ndards States may adopt for one or moreCMS-2349-P 89 groups of children. We propose eliminating “r esources” and “dispositio n of resources” in conformance with the law. The Affordable Care Act also eliminates the use of income disregards other than a disregard of 5 percent of income specified under section 1902(e)(14)(I) of the Act. This means that, as of 2014, States no longer will be able to raise their effective inco me standards for their CHIPs through the use of a “block of income” di sregard. The maximum income standard will be the higher of 200 percent FPL, 50 pe rcentage points above the app licable Medicaid income level defined in section 2110(b)(4) of the Act and §457.301, and the effective income standard in effect in the State (taking into account any income disregards adopted) as of December 31, 2013, converted to a MAGI-equivalent income standard in accordance with section 1902(e)(14)(A) and (E) of the Act. 5. Clarifications Related to MAGI Nothing in this regulation affects existing rule s regarding family size in States that take up the CHIP “unborn child option” (per the exis ting definition of child at §457.10). In States that provide coverage under th e option at §457.10, the unbor n child is counted in family size. L. Residency for CH IP eligibility (§457.320) CHIP regulations currently allo w States the option to adopt el igibility standards related to residency. The following changes to the regulati ons governing residency standards for separate CHIPs are proposed to ensure coordination betw een all insurance affo rdability programs. Further discussion on the rationale behind the pr oposed changes can be found in section II.C of this proposed rule. We propose at §457.320(d) to modify the definition of residency for non-institutionalized children who are not wards of the State under CHIP to refere nce the Medicaid definition forCMS-2349-P 90 children at proposed §435.403(i). As under §435.403(i), for purposes of CHIP eligibility, a child under the proposed rule is considered a resident of the State in which he or she resides (for example, with a parent or caretaker and includin g without a fixed address), or in which a parent or caretaker is employed or seek ing employment, including seasonal workers. The provisions of the proposed rule are not intended to effect a si gnificant change in polic y, and are discussed in more detail in section II.C.2 of this propos ed rule. The provision at §435.403(m) of the Medicaid rule, involving situations in which tw o or more States dispute a child’s State of residence, is also applied under the proposed rule to CHIP; under th at provision, physical location governs. M. CHIP Coordinated Eligibility and Enrollment Process Section 2101(e) of the Affordable Care Ac t adds section 2107(e )(1)(O) to the Act to apply to CHIP the same enrollment simplifica tion standards described for Medicaid under the new section 1943 of the Act. These standards build on existing practices and provisions in section 2102(b)(3)(B) of the Act relating to co ordinated eligibility and enrollment between Medicaid and CHIP. The regul atory amendments proposed corre spond to proposed changes and additions to Medicaid at §435.905 through §435.908, §435.916, §435.917, §435.940 through §435.956, and §435.1200, discussed more fully at sections II.D, II.E, II.G, II.H, II.I, and II.K of this proposed rule. We seek comments for CH IP on the issues raised in these corresponding sections for Medicaid. 1. Applications and Outreach Standards (§457.330, §457.334, §457.335 and §457.340) We propose revisions to §457.330 similar to those proposed for Medicaid at §435.907 to implement the use of a single, streamlined appli cation for all insurance affordability programs,CMS-2349-P 91 which builds on the successful experience many States have had with joint Medicaid-CHIP applications. We propose adding §457.335 and modifying §457.340( a) to set forth standards for the availability of program information and appli cation assistance, simila r to those proposed for Medicaid at §435.905 and at §435.908, discussed in se ction II.E.3 of this proposed rule. We propose removing the mention of enrollment cap s in §457.340(a) to support the role of CHIP agencies in accepting the single streamlined a pplication and screening for all insurance affordability programs regardless of whether CHIP enrollment is capped. To implement section 1943(b)(4)of the Act, relating to the establishment of Web sites to facilitate application and enrollment in all insurance affordability pr ograms, we propose adding §457.335 similar to the rule proposed for Medicaid at §435.1200(d), discu ssed in section II.I. of this proposed rule. We propose to revise §457.340(b) to specify th at all CHIP agencies require applicants who have an SSN to provide it. We recognize th at the Privacy Act makes it unlawful for States to deny benefits to an individual based upon that individual’s failure to disclose his or her Social Security number, unless such disclosure is require d by Federal law or was part of a Federal, State or local system of records in operation before January 1, 1975. However, section 1414(a)(2) of the Affordable Care Act authorizes the Secret ary to collect and use SSNs where necessary to administer the provisions of, and amendments ma de by, the Affordable Care Act. We believe such section provides the authority for the requi rement of SSNs when applicants are using the coordinated system and stream lined application designed by th e Secretary under section 1413 of the Affordable Care Act. However, similar to Medicaid, non-applicants ca nnot be required (but may be requested) to provide an SSN. Consis tent with Medicaid regulations at §435.910, theCMS-2349-P 92 CHIP agency must not deny or delay services to an otherwise eligible applicant pending issuance or verification of an applicant’s SSN. We propose revisions to the effective date of eligibility in §457.340(f) to ensure that the method adopted by the State for determining the e ffective date of covera ge will provide for a coordinated transition of children between progr ams as family circumstances change, without gaps or overlaps in coverage. 2. Determination of CHIP Eligibility and C oordination with Exchange and Medicaid (§457.348 and §457.350) We propose to add new coordination rules at §457.348 to mirror the rules for Medicaid agencies at proposed §435.1200(e) and (f), and to coordinate with the rules in 45 CFR §155.345 of the Exchange proposed rule. Proposed §457.348( a) and (b) would ensure that State CHIP agencies promptly enroll individuals determined eligible for CHIP by the Exchange, without requiring additional information or making further determinations, and promptly determine the eligibility of (and, if el igible, enroll) individual s determined potentially eligible for CHIP by the State Medicaid agency. Consistent with curr ent CHIP policy, proposed §457.348(c) clarifies that CHIP agencies may enter into arrangements with the State Medicaid agency to accept that agency’s determinations of CHIP eligibility. We also propose revisions to regulations at §457.350, which currently relate to the responsibilities of the CHIP agency to coordi nate with Medicaid. The proposed revisions are consistent with those proposed for Medicaid ag encies at §435.1200(g), disc ussed in section II.I.5 of this preamble, and 45 CFR §155.345 of the Excha nge rule, discussed in section II.A.1 of the Exchange preamble.CMS-2349-P 93 Two of the proposed revisions to §457.350 wa rrant particular mention. First, the standards at §457.350, as revised, appl y to all individuals who are included as applicants on the single application – for example, parents a nd other adults in the household. Second, at §457.350(j), we propose that, for children who do not appear Medicaid e ligible based on MAGI, but whom the CHIP agency identifies as potentiall y eligible for Medicaid on another basis, such as disability, the CHIP agency both transmit the application and all pertinent information to the Medicaid agency for a full Medica id evaluation and continue to process the CHIP determination, enrolling the child, if eligible, in the program unle ss and until the child is determined eligible for Medicaid. This is consistent with the process proposed for the Exchange at 45 CFR 155.345 in the Exchange proposed rule and with the respon sibilities of the Medica id agency at proposed §435.1200(f) We anticipate significant variation in how States choose to operationalize the coordination of CHIP with other insurance afford ability programs, and we will work with States to achieve the high level of inte gration of processes, which will be needed to effectuate the coordination required and to avoid duplication of costs and reduce ad ministrative burden on States, children, and their families. At proposed §457.350(k), we note that CHIP agencies may enter into arrangements with the Exchange to make eligibility determinations for advanced premium tax credits in accordance wi th section 1943(b)(2) of the Act. 3. Periodic Redetermination of CHIP E ligibility (§457.343) and Coverage Months Under sections 1943(b)(3) of the Act a nd sections 1413(a) and 1413(c)(2) of the Affordable Care Act, we propose to add new policies at §457.343 to implement the data-driven renewal procedures for CHIP proposed for Medi caid at §435.916. For a fuller discussion of the proposed renewal process, which we believe is consistent with current renewal processes inCMS-2349-P 94 many States; see section II.G of this proposed rule. The proposed data-driven verification system is also consistent with the system pr oposed for the premium tax credit determinations conducted by the Exchange. In proposed 45 CFR §155.410 of the Exchange proposed rule published on July 15, 2011, eligibility begins on the first day of the following month for all qualified health plan selections made by the 22 nd of the previous month, and on the firs t day of the second following month for all qualified health plan sele ctions made between the 23 rd and last day of a given month. Similar to Medicaid, we are seeking comment on a provis ion that would continue CHIP coverage until the end of the month following the end of the appropriate termination notice period, subject to certain exceptions. This policy, which we believe is the policy currently in operation in most CHIPs, would prevent a gap in coverage for an individual or family movi ng from CHIP to the Exchange. Further discussion of this issue can be found at section II.G. of this proposed rule. 4. Verification of Eligibility (§457.380) Consistent with the provisions of secti on 1413(c)(3)(A) of the Affordable Care Act (applicable to CHIP through sections 1943(b )(3) and 2107(e)(1)(O) of the Act), we propose revising §457.380, based on section 1413 of the Afford able Care Act, relating to verification of eligibility for separate CHIPs consistent w ith the rules proposed for the Exchanges and Medicaid. Consistent verifica tion procedures prevent gaps in coverage caused by different programs operating under different rules. To better align all insurance affordability pr ograms, we reference specific verification methods for residency and income. Proposed §45 7.380(c) references proposed regulations for verification of residency for purposes of Medicaid eligibility at §435.956(c), which also align with proposed Exchange regulations at 45 CFR §155.315(c). At proposed §457.380(d), weCMS-2349-P 95 require separate CHIPs to verify income in accordance with proposed Medicaid regulations at §435.948, which are coordinated with proposed Ex change regulations at 45 CFR §155.320. As described in §435.945(b) and §435.948, States may con tinue to choose to accept self-declaration of income, but must also request information fr om third-party data sour ces in accordance with §435.948 and to continue to comply with program in tegrity requirements. St ates are not required under §435.948 to request third-party fi nancial eligibility information that the State determines is not useful to verifying the financia l eligibility of the applicant. For other eligibility criteria, we propose in §457.380(a) and (e) to continue to allow CHIPs to develop reasonable verification procedures, including reliance on self-declaration or attesta tion (except when verifying citizenship or immigration status). However, we explicitly provide th at States accept selfattestation of pregnancy and household member ship, as proposed for Medicaid in §435.956(e), unless the State has other information that is not reasonably compatible w ith the attestation. We also provide standards for verify ing age and date of birth. The Affordable Care Act envisions a data-dri ven verification system in order to improve the application experience for families while maintaining strong progr am integrity. Mirroring standards being proposed for Medicaid at §435.952 and the Exchange at 45 CFR §155.315, we propose adding §457.380(f) to clarify that the State may only request additional information if it is not available electronically. Consistent with proposed Me dicaid regulations at §435.948(b), we propose in §457.380(g) that States must use the electronic service established by the Secretary under proposed §435.949 if relia ble electronic data needed fo r verification is available. In proposed §457.380(h), we affirm that program integrity responsibilities for CHIP are not affected by this proposed regulation.CMS-2349-P 96 Finally, we propose adding §457.380(i), sim ilar to proposed §435.948(f) and §435.949(c) of the Medicaid regulation, and to enable States , with approval from the Secretary, to modify the verification procedures used by its program. We solicit comments on alternative verification methods that may help improve coordination be tween CHIP and other in surance affordability
programs. 5. Ministerial Changes (§457.80, §457.300, §457.301, §457.305 and §457.353) We are also proposing a number of ministerial changes necessary to bring other sections of the current CHIP into conformance with the pr oposed changes and revisions described above, including revisions to §457.80, §457.300, §457.301, §457.305 and §457.353. N. FMAP for Newly Eligible Indi viduals and for Expansion States The Affordable Care Act provides for a si gnificant increase in the FMAP for medical assistance expenditures for individu als determined eligible under the adult group in the State and who are considered to be “newly eligible”, as defined in sectio n 1905(y)(2)(A) of the Act. The increased FMAP specified in section 1902(y)(1) of the Act is not available for the medical assistance expenditures for any i ndividual who is not considered newly eligible. Under section 1905(y)(2) of the Act, an individu al is newly eligible if the in dividual would not have otherwise been determined eligible for Me dicaid under the eligibil ity provisions of the Medicaid State plan, demonstrations, or waivers in effect in the State as of December 1, 2009.
1. Availability of FMAP (§433.10(c)) We propose to amend 42 CFR part 433 to a dd new provisions at §433.10 (c) to indicate the increases to the FMAPs as available to States under the Afford able Care Act. The following describes these new FMAP provisions. a. Newly Eligible FMAP (§433.10(c)(6))CMS-2349-P 97 In §433.10, we propose to add a new paragraph (c )(6) to indicate the increased FMAP rates available to States beginni ng January 1, 2014, for the medica l assistance expenditures of individuals determined eligible under the adult group who are consid ered to be newly eligible, as defined in section 1905(y)(2)(A) of the Act. b. Expansion State FMAP (§433.10(c)(7) and §433.10(c)(8))) In §433.10, we propose to add new paragraphs (c)(7 ) and (8) to indicate the availability of additional FMAP rates for expansion States. (1). 2.2 Percentage Point Incr ease in FMAP (§433.10(c)(7)) Per section 1905(z)(1) of the Act, we pr opose to add §433.10(c)(7 ) to indicate the availability of a general 2.2 pe rcentage point increase to th e base FMAP of a State (as determined under section 1905(b) of the Act) for cer tain expansion States, as defined in section 1905(z)(3) of the Act. The general 2.2 percentage increase to the base FMAP is available only to a State that: (1) meets the defini tion of expansion State; (2) does not qualify for any payments for the full increased FMAP for individuals who are newly eligible; and (3) has not been approved by the Federal government to use amounts of thei r DSH allotments for the costs of providing medical assistance or other health benefits cove rage under a demonstration that was in effect on July 1, 2009. Only for States that meet these 3 conditions, the base FMAP would be increased by 2.2 percentage points for all expenditures in CYs 2014 and 2015 (to which the base FMAP would apply). Since by definiti on, the base FMAP plus 2.2 per centage points would only be available and applicable for expenditures for indi viduals who are not newly eligible, such general increase would be available for al l individuals in such States. (2) Expansion State FMAP (§433.10(c)(8))CMS-2349-P 98

The increased FMAP discussed in section II.N.1.a . of this proposed ru le is available for individuals in the adult group who are considered to be newly eligible. We propose to add §433.10(c)(8) to indicate an additional FMAP rate wi ll be available for expansion States for the expenditures for certain nonpregnant childless adults who are determ ined eligible under the adult group, and who are not considered to be newly eligible, as defined in section 1905(y)(2)(A) of the Act. Beginning in CY 2014 and each year thereafter , the expansion State FMAP for medical assistance for individuals described in the adul t group who are nonpregnant childless adults is equal to the base FMAP for the State increased by a certain percentage determined in accordance with a formula specified in secti on 1905(z) of the Act, as amended by the Affordable Care Act. This new expansion State FMAP is equal to th e base FMAP plus a "transition percentage" multiplied by the difference between the Newly Eligible FMAP provided to States beginning in CY 2014 and the expansion State’s base FMAP. Th e transition percentage is as follows:

• 50 percent in CY 2014;

• 60 percent in CY 2015;

• 70 percent in CY 2016;

• 80 percent in CY 2017;

• 90 percent in CY 2018; and

• 100 percent in CY 2019 and ev ery year thereafter. The following illustrates how the expansion State's FMAP would be calculated: Example. In CY 2019, assume the expansion State's base FMAP is 60 percent. In CY 2019 the Newly Eligible FMAP is 93 percent. Therefore, in this example, in CY 2019 the expansion State FMAP would be 93 percent, calculated as follows:CMS-2349-P 99 E = F + (T x (N - F)) E = Expansion State FMAP F = Expansion State's Base FMAP T = Transition Percentage N = Newly Eligible FMAP 93% = 60% + (100% x (93% - 60%)) Beginning in 2020 both the expansion State FMAP and the newly eligible FMAP will be 90 percent. 2. Methodology (§433.206(a) and §433.206(b)) One of the key steps in simplifying the eligib ility determination process for individuals and States involves developing a methodology that ensures the Federal government will pay the appropriate FMAP rate for both “newly eligible” individuals as well as for expenditures that are subject to the expansion State FMAP rate. As discussed above, the Affordable Care Act provides for streamlined eligibility and enrollme nt policies and processe s that are a departure from the more complex pre-Affordable Care Ac t Federal Medicaid eligib ility policy, but the preAffordable Care Act rules retain relevance fo r the purposes of determining the appropriate FMAP rate for expenditures be ginning in CY 2014. Although the new MAGI rules are used for purposes of determining eligibility for the adult group, the newly e ligible FMAP is not available for all individuals whose eligibility will be dete rmined using MAGI; rather the newly eligible FMAP is only available for those members of th e adult group who are determined to be newly eligible as discussed in this re gulation. In order for States to determine which beneficiaries are “newly eligible” and which are not, States must evaluate a large group of beneficiaries against the State’s pre-Affordable Care Act eligibility rules. To do so on a case-by-case basis wouldCMS-2349-P 100 require States to operate two e ligibility systems or processes — one simplified system for the purpose of determining eligibilit y, and another different and more complex system to assign the appropriate FMAP rate. The two sets of rules w ould, in turn, require Exch anges as well as State Medicaid agencies to collect from applicants info rmation in excess of what is required for States to determine eligibility either for Medicaid or premium tax credits available through the Exchange. Running two distinct eligibility systems would pose challenges to applicants, States, and the Federal government. Applicants would have to report and verify income, assets, and deductions under pre-Affordable Care Act rules, even though that info rmation would no longer be required to determine eligibility. Similarly, States and the Federal government would have to seek and verify information not needed for e ligibility determinations, resulting in excess administrative burden and inefficiency, a result counter to the goals of the Affordable Care Act. Because a double eligibility system is burdens ome and costly to States and the Federal government, a barrier to enrollment for eligible in dividuals and families, and would likely lead to inaccurate determinations, we have identified po ssible alternate approaches for determining the appropriate FMAP rate. Specifi cally, this proposed rule discu sses the potential revision of regulatory provisions in part 433 to propose three alternative me thodologies which States could use for claiming expenditures at the appropriate FMAPs: the regular FMAP, the newly eligible FMAP and the expansion State FMAP for individua ls eligible for Medicaid beginning in CY 2014 under the provisions in sections 1902(a)(10)(A )(i)(VIII) and 1905(y) and (z) of the Act as amended by the Affordable Care Act. The propos ed rules would not permit FFP for the costs of maintaining dual eligibility systems for the adult group. HHS plans to test , with States, each of the proposed methodologies and possibly others suggested through the comment process. OnceCMS-2349-P 101 the rules are finalized, CMS will provide technical support to States as they adopt an identified methodology. In developing the proposed claiming methods, in consultation with States and subject matter experts, we identified and applied cert ain principles to assure that each method will accurately reflect the application of the appropriate FMAP. These principles are also the criteria against which we will measure the feasibility of the approaches proposed in this proposed rule and others that may be proposed during the comment period. First, any methodology must provide as accurate and valid ap plication of the applicable FM APs to actual expenditures as possible in the determination of the appropr iate amounts of Federal payments for such expenditures. The methodology must not include a sy stemic bias in favor of either the States or the Federal government. Second, any allowabl e methodology should minimize administrative burdens and costs to States, the Federal governme nt, individuals, and the health care system. Third, any methodology must be developed and applied transparently by both the Federal government and States. Fourt h, any method must take into consideration the practical programmatic and operational goals of the Medicaid program. Finally, in order to ensure that the States claim expenditures at th e correct FMAP, any methodologies used by the States should include sufficient data to identify, associate and reconcile expenditures with the related eligibility group to which the FMAPS apply. With these princi ples in mind, we propose that States work in partnership with the Federal government on t echnical support and re view as well as ongoing monitoring, verification, and adjust ment by States and the Federa l government. HHS plans to monitor State implementation and operations clos ely and could require adjustments and changes to processes as necessary to ensure that system s are implemented in an unbiased and accurate way. HHS is exploring mechanisms to verify methodology results, including on-site reviews,CMS-2349-P 102 sampling and confirmation with outside data s ources, which could identif y issues resulting in improper levels of FMAP being claimed. HHS will define procedures as needed to ensure accurate reporting and verification of comput ations to determine the applicable FMAP potentially including enhanced monitoring and pros pective or retrospective FMAP adjustments. States and the Federal government each have a st rong interest in an accurate, simplified system, and we expect to undertake these effort s in full partnership with States. Given the principles discussed above, we ar e considering three main approaches to identifying newly eligible individuals for purpos es of applying the correct FMAP rate in the development of States’ claims for Federal funding in Medicaid: (1)using upper income and other thresholds across categorical eligibility groups, taking into account the December 2009 eligibility standards in effect under State pl ans, waivers or demonstrations and applicable disregards and adjustments, to approximate, in the aggreg ate, the December 2009 standards; (2) using a sampling methodology across individuals in the a dult group and related Me dicaid expenditures to make a statistically valid extrapolation of who is newly eligible and their related expenditures; or (3) using an extrapolation from available data sources to determine the proportion of individuals covered under the new adult group w ho would not have been eligible under the eligibility criteria in e ffect under the State plan or applic able waiver as of December 1, 2009, validating and adjusting the estimate, based on sampling or some other mechanism, going forward. We seek comment on these three approaches. At §433.206(a), we propose that a State may opt to use any of the specified alternatives discussed below. As discussed further, these sp ecific options may not ultimately be the methods available, as we expect to modify, narrow or co mbine the proposed approaches in the final rule depending upon public comment and testing for feasib ility. We are specifi cally interested inCMS-2349-P 103 input as to what other options should be considered, and whethe r it is advisable for States to choose from among different methods or for HHS to identify a single method that all States would use. If selection is available, we propose at §433.206( b) that a State provide notice to CMS of which methodology it plans to use at least two calenda r years prior to the fi rst day of the calendar year in which the State will use that particular method, except for 2014 as discussed below. For example, a State would provide notice to CMS of the methodology it plans to use for CY 2017 no later than December 31, 2014. For the initial year (CY 2014), States would give notice to CMS no later than one year prior to the beginni ng of the calendar year, January 1, 2013. This allows States time to determine which method best meets their needs in that context and to make preparations for the systems and eligibility dete rmination modifications needed for the initial years. We further propose that once a State selects a methodology, it must use that method for a 3-year period, at a minimum, subject to necessa ry monitoring and adjustment. This will allow stability in the process and allow for the provisio n of appropriate allocati on of resources within the State and at the Federal level. We re quest comments on this minimum 3-year period. As noted above, we are proposing to not provide the option of maintaining double eligibility systems and completing a determinatio n for each individual under obsolete eligibility rules for purposes of determining the appropriate FMAP because we believe that this is neither necessary nor efficient. Rather, we propose to rely on one or more alternate methodologies. 3. Alternative 1: 2009 Eligib ility Standard Threshold The “threshold methodology” would allow Stat es to use upper-income thresholds, as well as proxies for other eligibility criteria (such as assets or disa bility status) across categorical eligibility groups, taking into account the Decem ber 1, 2009 eligibility standards, to determineCMS-2349-P 104

whether an individual is considered to be newl y eligible for purposes of assigning a Federal matching rate. This methodology would use in formation the individual supplied on their application, and other appropria te data sources, subject to appropriate verification and documentation requirements, to assign the individua l to one of the categories that the Affordable Care Act subsumed into the adult group, such as certain parents and caretaker relatives, 19 and 20 year olds, and childless adults, and to then ap ply simplified eligibility criteria based on the rules in effect December 1, 2009 to identify thos e who would have been eligible under the December 1, 2009 criteria. This option requires St ates to apply the December 1, 2009 eligibility criteria, but in a simplified manner, to each Me dicaid beneficiary who is included in the adult group. Based on the threshold combined with proxie s, the individual would be determined to be newly eligible or an individual who would have been eligible based on the December 2009 eligibility standards. As previously noted, States will need to establish income eligibility thresholds for MAGI populations to be eligible for Me dicaid under the State plan, dem onstration or a waiver of the plan using MAGI that are not le ss than the effective income elig ibility levels that applied under the State plan, demonstration or waiver on the da te of enactment of the Act (“income standard conversion”). States using the threshold methodology similarly coul d convert the income standards in effect as of December 1, 2009 for other optional eligibility groups (for example, based on disability) to MAGI-equiva lent standards, against which the MAGI-based income of an individual eligible under the new adult group woul d be compared for the purpose of determining whether such individual would have been elig ible under the optional gr oup and thus is newly eligible or not. CMS will solicit State input and providing further guidance and technical support on the income standard conversion process.CMS-2349-P 105 We propose that States employing this th reshold methodology would also establish, subject to CMS approval, proxies of eligibility criteria in place prior to CY 2014 that are not related to income, such as disabi lity status and asset value. Fo r disability, for example, proxies could be based on receipt of SSDI, screening ques tions included in the ap plication process (for example, “Have you had an accident or illness serious enough that it has caused and is still causing you to miss work for an extended period of time?”), retroactive claims review (to determine individuals with signi ficant medical problems), some other method, or such methods in combination (for example, use of both a scre ening question and retrosp ective claims review). States would have to be clear w ith applicants that this inform ation would not be used for an eligibility determination purposes . We are requesting comments on what methods or proxies could be used by States for disability status as well as whether there are any special considerations which must be c onsidered in the identification or use of appropriate proxies for States that apply a more rest rictive definition of disabili ty than the SSI program. Although we are looking for proxies for disabilit y determinations to determine whether to claim enhanced FMAP for an individual or not, we are also considering the possibility of using only actual disability determinati ons to ascertain the appropriate FMAP. Thus, if an individual underwent an actual disability determination and wa s found to be disabled, and met other criteria associated with a pre-Affordable Care Act optiona l eligibility category for the disabled such that he or she would have been eligible as disabl ed in December 2009, that individual would not be newly eligible. This proposal woul d be feasible to the extent that it is reasonable to expect that individuals with disabilities have sufficient incentives to undergo di sability determinations, most likely to obtain disability-related cash benefits, such that a proxy is not necessary. We are soliciting comments on whether ade quate incentives do exist such that no additional proxies for aCMS-2349-P 106 disability determination need be applied. For the reasons noted, we are also proposing that States using th e threshold methodology identify thresholds or proxies for estimating whether individuals in the adult group meet any asset test that was applied to the applicant’ s coverage category in December 2009. The State would also propose procedures for obtaining the in formation needed to compare the situation of individuals in the adult group to the proxy. Fo r example a State might include a few simple questions during the application process to enable comparison against the proxy, for example, “Excluding your primary residence and automob ile, are your assets, including any savings or checking accounts, stocks, bonds, or other liquid assets, greater than X dollars?” States could also use information on tax return s to obtain information about a ssets via interest or dividend income. We also are interested in comments regarding the feasibility of using the Asset Verification System (AVS), required for all Stat es under section 1940 of th e Act as a tool to obtain asset data on individua ls in the adult group wit hout asking for it directly. We also considered proposing that th e threshold methodology be limited to an individual’s income and not the assets/resour ces when comparing the individual against the December 2009 eligibility criteria. This would a llow States to not collect asset information no longer needed for eligibili ty purposes and it is consistent with analysis showing that only very small numbers of people with income in this range will have disqualifying assets. However, without evaluating assets, all i ndividuals whose incomes are belo w the income threshold would not be newly eligible, even though it is possible th at some would not have been eligible under the pre-Affordable Care Act rules. Thus, if assets are not considered there could be individuals who would be newly eligible, but for whom the Stat e could not claim enhanced match. We believe this methodology has merit as we recognize there is a burden on States and to beneficiaries inCMS-2349-P 107 including an asset proxy and that a significant portion of low-in come individuals do not have assets in excess of those thresholds. We invite comment on both approaches. In lieu of additional questions on an application for coverage asking about assets, we are also considering allowing States to develop an estimate based on actual data on the proportion of individuals applying for coverage who failed eligibility for a specific group in effect as of December 1, 2009 due to possession of assets exceedi ng the asset limit. For example, if the State had an optional disability group in December 2009 with a resource test, and 15 percent of applicants were denied coverage in that group because their assets exceeded the resource, the State could assume that 15 percent of the disabl ed individuals with incomes below the converted December 2009 standard in the adult group would also fail the asset test. The State would therefore estimate the percentage of individuals who were disabl ed in the adult group would be newly eligible. We are interest ed in comments as to whether States have reliable data upon which this calculation could be made. We also propose that once an individual is determined to be either a newly eligible individual or an individual w ho would have been eligible und er the December 2009 standards for FMAP determination purposes, the determinatio n would be applicable throughout the 12-month eligibility period after a person is determined eligible. Our proposal is based on the observation that changes in income occur in bo th directions and are not biased in one direction or the other. Our proposal is also based on the goal of achievi ng administrative simplicity, which can best be obtained through a single annual FMAP determination for an individual who remains enrolled in Medicaid, whether continuously enro lled or not, rather than requiri ng a State to potentially make many such determinations over the course of a year. Finally, we do not believe that States need to consider whether an individual would haveCMS-2349-P 108 been eligible under a spend down for a medical ly needy category under section 1902(a)(10)(C) of the Act in considering whether someone would have been eligible under standards in effect in December 2009. This is because we believe that there is inherent uncertainty in determining whether and when a spend down would have been me t. An individual who is not yet “medically needy” because he or she has not yet met the spenddown requirements would not be considered to be eligible for Medicaid unde r the December 2009 standards. However, if an individual does qualify by meeting the medically needy income standard withouta spenddown, the State could not claim enhanced FMAP for that individual. The threshold methodology would require ongoing monitorin g, verification, and adjustment. States using the th reshold methodology would need to work with CMS to verify this methodology for a sample of cases within the first 2 years of use to test whether the threshold methodology is accurate and valid. We propose to undertake a periodic review, working collaboratively with States to evaluate the ac curacy of the threshold methodologies and make adjustments to improve the accuracy of the threshold, as needed. We propose that adjustments to the methodology would be prospective only. On ce a State has an approved methodology, that methodology would apply unless and until a review process indicated that adjustment was necessary. Finality and certainty are im portant for the operation of the program. 4. Alternative 2: Statistical ly Valid Sampling Methodology (§433.210) At §433.210, we are proposing the standards for St ates to use sampling to extrapolate the correct expenditures for which the State would receive the FMAP rate for newly eligible individuals established under the A ffordable Care Act. Sampling is the statistical practice of selecting a random and unbiased subset of Medi caid eligible individu als and their related expenditures. We believe that a statistically valid sampling plan is a transparent, and widelyCMS-2349-P 109 accepted methodology of allocating costs. OMB Ci rcular A-87 revised establishes principles and standards for determining costs for Fede ral awards carried out through grants, cost reimbursement contracts, and other agreements with State and local governments and Federallyrecognized Indian tribal governments. We propos e that States using this methodology would use a statistically valid sampling methodology meeting the requirements of OMB A-87. To ensure consistency, we propose to specify the additional standards States would need to use to perform a statistically valid sample of the population of individuals covered under the new eligibility group created by the Affordable Care Act, to dete rmine the proportion that would not have been eligible based on the State’s Dece mber 2009 eligibility standa rds, and therefore be newly eligible. We propose to specify standa rds within this regul ation as well as in accompanying guidance relating to sample size and specifics of sampling t echniques, etc. We believe this will allow HHS to work with States to refine specific sampling requirements and procedures as we gain experience over time. For example, we anticipate the sample size requirements may evolve as we gain experience with actual data becoming available and tested over time. We also believe that guidance on th e inclusion of specific demonstration-related issues would be best provided through subregul atory guidance to allow better consideration of State-specific issues, as well as to provide an opportunity to refine the specific methodologies and requirements. For all individuals selected for the sample, the State would perform the equivalent of a full eligibility determination using the eligibility standards in place in that State as of December 2009. Each individual in the sample would be determined to be either a newly eligible individual or an individual w ho would have been eligible und er the December 2009 standards. We propose that States should submit their sa mpling plans to CMS with adequate time forCMS-2349-P 110 review and approval in advance of implementation, preferably not later than the first day of the calendar year for which the State will implement that plan. We propose that the State would pull the claims for each selected individual to determine actual expenditures for the sample. The Stat e would determine the proportion of actual expenditures in the sample that were for newl y eligible individuals and extrapolate this proportion to the population sampled to determin e the correct allocation of expenditures for which the State would make a claim at the FMAP rate for newly eligible individuals established under the Affordable Care Act. We believe this methodology would most accurately determine a weighted expenditure proportion from actua l claims to apply to the adult group. We also considered using a methodology in which a per capita expenditure would be determined for the adult group. States woul d apply this per capita expenditure amount proportionately to determine the appropriate FM AP claiming. We believe this methodology may allow for greater ease of administration, but seek comment on whether this would reflect a fair allocation of expenditures to each distinct population. We propose that States would perform a statis tically valid sample for the year in which the State is claiming. This sample would be base d on the entire adult group population, from which the State would randomly select Medicaid eligible individuals on a monthly basis, in accordance with CMS’ sampling guidelines. Once individuals ar e determined in that month of review to be either a newly eligible individual or an indi vidual who would have been eligible under the December 2009 standards, the State would apply that eligibility determination throughout the entire year for the purpose of FMAP determin ation. Our proposal is based on the observation that switches occur in both directions and are no t biased in one directi on and the administrative simplicity that can be obta ined through a single annual determination is preferred.CMS-2349-P 111 The State would pull all medical expenditures fo r the prior 12 months for the individual. If the individual is enrolled exclusively in a managed care organization (MCO), for which the State makes a capitated monthly payment to an MC O, the State would cons ider the risk-adjusted monthly payment to the MCO as the full medical assistance expenditure for that individual for each month the individual is so enrolled. Otherwise, the medical expenditures for each individual are equal to the actua l expenditures made to providers for items and services provided to that individual. It does not include a ny Medicaid supplemental payments that are not associated with medical assistance payments made for specific items and services provided to a specific individual. We propose that the State complete the samp ling and related expenditure analysis no later than 2 years after the completion of the designated year. The St ate will retroactively apply the FMAP to the correct year and make any necessary prior period adjustments to the CMS-64 expenditure report to assure accurate Federal fund ing. We will work with States to meet the proposed time frame to ensure their ab ility to claim the enhanced funding. We propose that the State would claim based on th e most recent data for the current year. We understand that the State will not have accurate data based on the actual year’s enrollment and expenditures until after the finish of that year. Therefore, we propose to allow States to make interim claims for the FMAP rate for newly elig ible individuals established under the Affordable Care Act. These claims would be based on the most recent year for which a State has statistically valid data. For example, in CY 2020, if a State had a completed sample for CY 2018, but was finalizing its sample and related extrapolation for CY 2019 , the State would use the data from the CY 2018 sample and appl y the FMAP according to the CY 2018 findings. Once the State completes the CY 2020 sample , it will retroactively adjust the CY 2020CMS-2349-P 112 expenditures claimed on the CMS-64 to incorporat e the actual data from 2020 (the process for CYs 2014 and 2015 is discussed below). We solicit comment on this estimation and reconciliation process. We propose that States will continue to samp le on an annual basis for the first consecutive three years the State implemen ts a sampling methodology. For all following years, we propose that the State would sample on a 3-year basis. For the initial years (CYs 2014 and 2015), we pr opose to allow States to calculate and apply a reasonable estimate of the expenditures claimed at the Newly El igible and expansion State FMAP rates established under the Afford able Care Act and make the retroactive adjustment described above based on CY 2014 da ta extrapolated using the State’s sampling methodology. We would allow States to create a r easonable estimate in one of two ways: (a) based on a State’s statistically valid sample of low-income populations that reasonably approximates the expected Medicaid adult group; or (b) based on a HHS developed estimate of the proportion of newly eligibles and per capita expenditures for the projected newly eligibles that HHS would develop and test in collabora tion with States by, for example, using a combination of Medical Expenditure Panel Survey (MEPS) and Medical Statistical Information System (MSIS) data, or other existing data s ources. In the first option, we propose to allow States to calculate the projected per capita expenditures for th e newly eligible population based on a sample of the low-income population of thos e individuals enrolled in and appearing to be potentially eligible for Medicaid as of CY 2014. The States would use the sampling methodology guidelines applied to the population of State reside nts (Medicaid enrollees and other low-income individuals) that approximated the expected Medicaid eligible adult group. We propose that States submit a sampling plan demonstrating compliance with OMB Circular A-CMS-2349-P 113 87 and, other requirements specifie d within this rule and other CMS sampling guidance. The methodology must include not only a description of the population from which the sample will be pulled prior to CY 2014, but also how the chosen population approximates the adult group. States would complete the sample and expenditure extrapolation in accordance with a sampling plan prior to January 1, 2014. We propose that States use data from the sa mple to calculate the projected proportion of newly eligible individuals, as well as per capita expenditures fo r such individuals. The State would use MSIS data and Medi caid experience to estimate e xpenditures for the “would have been eligible” population. The State would use th is information to determine the appropriate estimated expenditure proportions to claim at the respective FMAP ra tes for the initial years. We propose to allow Federal match based on the estimate until the actual data became available and sampled in accordance with the methodology established above. The State would make a retroactive claims adjustment on the CMS-64 based on the actual data from CY 2014. Alternatively, in the second option we propose to allow States to use a CMS established estimate of the proportion and per capita expendi tures for the projected newly eligible for CY 2014 based on currently available State-specifi c data (for example using MEPS data, a combination of MEPS and MSIS data, or other ex isting data sources). We propose to establish the proportion of newly eligible individuals and per capita expend iture amounts that each State could use in estimating FMAP for the initial year s. We would publish the estimates for State use for CY 2014 no later than January 1, 2013 to ensure States have sufficient time to incorporate the data and create reasonable estimates. We propose to provide Federal match based on the estimate until the actual data became available and sampled in accordance with the CMS-established sampling requirementsCMS-2349-P 114 established in this regulation and in future subr egulatory guidance or vali dated in another way. If sampling were chosen as a validation met hod, we propose to require that States would implement a statistically valid sample me thodology throughout CYs 2014 and 2015 to determine the correct proportion of newly eligibles and expe nditures to claim at the 100 percent FMAP for CYs 2014 and 2015, respectively. The State would ma ke a retroactive adjustment based on the actual data from CY 2014. We consider this concept to be similar to an interim rate paymen t methodology. It allows for the State to receive the increased FMAP rate for a reasonable estimate of newly eligible individuals and settle to actual expenditures when the data is available. We are soliciting comments on this approach. 5. Alternative 3: Use of a FMAP Methodol ogy Based on Reliable Data Sources (§433.212) We are also proposing an opti on for States to use State speci fic estimates established by the Secretary using reliable data sources such as ME PS data or State MSIS data. This option is described in proposed §433.212. Under this model, States would use th e estimated proportions in claiming FFP for medical assistance expenditures for newly eligible individuals. Because the model and estimated proportions would be available prior to each year , the State would claim expenditures and draw down Federal funds in real time. There would be no need for a retroactive adjustment. Rather, the verification to actual claims beginning in CY 2016 would apply to correcting for future years by adjusting the model. We have reviewed current Federal analytic mode ls created for other pur poses to determine if they could estimate the potential impact of eligib ility changes in the Affo rdable Care Act. We believe these models may have merit and may be an appropriate star ting point for creatingCMS-2349-P 115 estimates for payment purposes beginning CY 2014. We are also considering a model in which HHS develops an algorithm to determine, for each State, the appropr iate percentages of Medicaid enrollees with a give n set of characteristics (such as income, age, assets, family structure, disability status) who would be consid ered newly eligible or not newly eligible under the December 2009 eligibility rules for purposes or applying the related FMAP. The algorithm would estimate for example, that 90 percent of th e adults with a child with income between 100 percent and 110 percent of the FPL in a specific State would not have been eligible under the old rules. Then, the State would count the number of adult Medicaid enrollees in CY 2014 who had a child and whose income was between 100 percent and 110 per cent of FPL, and would receive the Newly Eligible FMAP for 90 percent of th eir expenditures, and the base FMAP for 10 percent. We propose to review, evaluate, and potenti ally expand upon existing models to develop an acceptable estimate to be the basis for determin ing FMAP. We are specif ically interested in receiving comments on the data sources that should be considered for inclusion in the model. We believe MSIS and MEPS data likely to be the most useful and relevant data sources available consistently for all States. We propose to not limit the data sources we may choose to review and incorporate into a predictive model as long as the data sources are relevant, accurate and available in a timely manner to both the Federa l government and the State. We believe the modeling process, as well as the data sources used to create th e specific models must be fully tested, transparent and readily available to States. We further propose that we would annually es tablish a model to reas onably predict in an unbiased way the appropriate propo rtion of expenditures (that is , State-specific rates) to determine the amount each State could claim usi ng the “Newly Eligible” FMAP. We propose toCMS-2349-P 116 solicit and integrate public input in to the development of the final modeling estimate. The Statespecific rates would be finalized and made public no later than Oct ober 1 of the year prior to the calendar year in which the State would implement the methodology. For CY 2014, we would establish and publish the State-sp ecific rates by October 1, 2012. We solicit comments on the potential of creat ing accurate State specific estimates given the available data sources and the limitations of each. We also are requesting comments on other possible approaches to compensate for the potentia l limits on State-specific data to create robust accurate estimates at the State level. Beginning in CY 2016, we propose to integrate validation measur es, such as statistically valid sampling methodologies, into the model to ve rify and assure the data accuracy. This verification of actual claims woul d apply to correcting for future years by adjusting the model. For example, we would work with selected St ates in each year to pull a random sample of Medicaid enrolled individuals in the adult group. We would then work with the State to apply the State’s December 1, 2009 eligibility standards to determine the proportion of individuals that are newly eligible and the proportion that would have been eligible under the standards at that time. We would then determine actual expend itures for those individu als to determine the appropriate proportion of expenditu res to be claimed at the Newly Eligible FMAP rate. We propose that such sampling methodology be transpar ent to States. We further propose to employ a public notice and comment process to assure th e integration of State and other stakeholder concerns into a final verification system. 6. Additional methodology approaches We are requesting comments and suggestions on hybrid approaches that incorporate all of the alternatives listed. We believe that the above- described alternatives c ould be combined, so asCMS-2349-P 117 to achieve the benefits, while mitigating the downside of each. Thus, sampling could be used to verify and improve upon the accuracy of the es timates made under the threshold methodology or as stated above in the other data source met hodology. While sampling might be necessary in the initial years, as conf idence in the accuracy of the other method increased, sampling could be required on a less frequent basis (f or example, once every 3 to 5 years), thereby diminishing the burden otherwise imposed by sampling, or we could see using the th reshold methodology for simpler, more straight-forward cases and samp ling for more complicated ones. We invite comments on using a hybrid approach. In addition, regardless of which approach is ultimately employed, we intend to monitor the effects and impact of that method over time and make refinements as necessary. We are interested in assuring that the alternatives proposed are viable in the sense that States can implement them in a meaningful way. We solicit comments on how each method may be operationalized and what challenge s or obstacles a State may face in doing so. We also seek comment on analytical approaches that CMS shoul d consider using when comparing the relative feasibility, validity, and reliability of the methods proposed above. III. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provi de 60-day notice in the Federal Register and solicit public comment before a co llection 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:CMS-2349-P 118

● 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 inform ation collection burden on the affected public, including automate d collection techniques. This proposed rule would implement provision s of the Affordable Care Act that expand access to health coverage through improvements in Medicaid and CHIP; ensure coordination between Medicaid, CHIP, and the new Affordable Insurance Exchanges (which are proposed in a separate NPRM under RIN 0938-AR25); and simplif y the enrollment and renewal processes. Taken together, the policies proposed in this rule would result in a reduction in burden for individuals applying for or receiving coverage, as well as for States. Although there are shortterm burdens associated with implementation of this proposed rule, over time the Medicaid program would be made substantially easier for States to administer and for individuals to navigate by streamlining Medicaid eligibility, simplifying Medicaid and CH IP eligibility rules for most individuals, and creati ng a coordinated process that re sults in a seamless enrollment experience across Medicaid, CHIP, and the new affordable insurance Exchanges. At the same time, CMS is undertaking a number of business process, structural and system improvements designed to support modernized IT systems and streamline the manner in which it works with States and to minimi ze burdens in review and approva l processes. A new reliance on automated information sources and data-sharing across agencies and programs will facilitate enrollment and renewal. In addition, the bus iness process, structur al and data system improvements underway at CMS are designed to create an environment where a significantCMS-2349-P 119 proportion of the interactions be tween States and the Federal gove rnment can take place through a web-based information portal. For example, we anticipate that CMS will have developed a web-based system for States to submit the Stat e plan amendments that will be needed to implement the Medicaid and CHIP programmatic m odifications and that the system itself, for submission, review, and approval will be significantly more streamline d. It is not possible at this point to quantify the impact of these changes in terms of burden, but we believe that the estimates included in this collection of informa tion discussion likely overstate the actual burden on States. The foundation for this is established through a final rule that enables States to receive a 90 percent Federal matching rate for design, de velopment, installation or enhancement of eligibility determination systems through Decem ber 31, 2015, for those States meeting a series of specified standards and condi tions. In addition, enhanced funding at a 75 percent Federal matching rate is available for States to maintain and operate their eligibility systems, subject to the conditions noted above. The estimates of the impact of these ch anges and the additional Federal support in this area are discussed in more detail in the final rule published on April 19, 2011 (76 FR 21950) entitled “Federal Funding fo r Medicaid Eligibility Determination and Enrollment Activities.” Information collection requirements (ICRs) are outlined below that involve Medicaid and CHIP eligibility determinations and enrollme nt. We are soliciting public comment on each of these issues for the following sections of the prop osed rule that contain ICRs. We used data from the Bureau of Labor Statistics to derive average costs for all estimates of salary in establishing the information collection requirements. Salary estimates include the cost of fringe benefits, calculated at 35 pe rcent of salary, which is based on the March 2011 Employer Costs for Employee Compensation report by the U. S. Bureau of Labor Statistics.CMS-2349-P 120 Finally, in calculating the estimates of burde n on States, it was important to take into account the Federal government’s contribution to the cost of administering the Medicaid and CHIP programs. The Federal government provides funding based on a Federal Medical Assistance Percentage (FMAP) that is established for each State based on the per capita income in the State as compared to the national averag e. FMAPs range from a minimum of 50 percent in States with higher per capita incomes to a maximum of 76.25 per cent in States with lower per capita incomes. States receive an “enhanced” FMAP for administering their CHIP programs, ranging from 65 to 83 percent. All States r eceive a 50 percent FMAP for administration. As noted above, States also receive higher Federal matching rates fo r certain services and now for systems improvements or redesign, so the level of Federal funding provided to a State can be significantly higher. As such, in taking into ac count the Federal contri bution to the costs of administering the Medicaid and CHIP programs for purposes of estimati ng State burden with respect to collection of information, we elected to use the hi gher end estimate that the States would contribute 50 percent of the costs, even th ough the burden will likely be much smaller. The following provisions will be addressed th rough separate PRA notices and comment
processes: Medicaid and CHIP State Plans: §§ 431.10(c) and (d); 431.11(d); 435.110(b); 435.116(b); 435.118(b); 435.119(b); 435.218(b); 435.403(h) and (i); 435.603(a); 435.905(a) and (b); 435.948(d); 435.949(c); 435.1200(c) , (d), (e), (f), and (g ); 457.80(c); 457.305(a) and (b); 457.310(b); 457.320(d); 457.340(a), (b), and (f); 457.343; 457.348(a), (b), (c), and (d); 457.350(a), (b), (c), (f), (g), and (j); 457.380(a), (c), (d), (e), (f) , (g), (h), and (i); and 457.390; Choice of Methodology for Determining Expenditures Claimed at FMAP Rate for Newly Eligibles: §§ 433.206(b); 433.208(b); 433.210(a); and 433.212(a);CMS-2349-P 121 Single, Streamlined Application: §§ 435.907 and 457.330; Collection of Applicant’s Social Security Number: §§ 435.907(e) and 457.340(b); and Revisions to CHIP Annual Repor ting Template System (CARTS): §435.907(e), §457.353. A. ICRs Regarding Program Information (§§ 435.905 and 457.335) Amendments are proposed to §435.905 for Medicaid and §457.335 for CHIP that would require Medicaid and CHIP State agencies to disclose program information to the public electronically. These provisions are necessary to ensure that Medicaid and CHIP program information is available on the internet Web site where individuals and families can explore their coverage options and submit an application. In a review of State Web sites, we found that all 50 States and the District of Columbia have Web sites for Medicaid and CHIP and th at nearly every Stat e already provides the information specified in this proposed rule. We also found that all States offer access to their health insurance applications online. While these provisions are subj ect to the PRA, we believe th at the requirement above is a usual and customary practice in keeping with th e use of modern techno logy and, therefore, presents no new burden. States ha ve always been required to assu re that applicants, providers, other interested parties, and the general public have access to information about Medicaid and CHIP eligibility requirements, available Medicaid services, and the rights and responsibilities of applicants and beneficiaries. B. ICRs Regarding Veri fication (§§ 435.945, 435.948, 435.956, 457.350, and 457.380) The provisions propose guidelines for verifi cation of certain fact ors for Medicaid and CHIP eligibility (for example, income, State residency, SSNs, and pregnancy status) and theCMS-2349-P 122 sharing of data among agencies. These proposed amendments are necessary to facilitate the determination of eligibility with minimal paper documentation required from individuals. We expect that over the long-term, thes e guidelines will reduce burden on States and individuals. The State of Utah’s eFIND sy stem provides an example of a successfully streamlined verification process. eFIND gather s data from more than 15 Federal and State sources including wage reporting, SSA, the SAVE system, and child support to verify Medicaid eligibility for applicants in real time. The State has estimated that eFIND has reduced the processing time for an eligibility determinati on from 17 minutes down to 3 minutes, saving the State $2.1 million in the first year. The specific burden associated with the writ ten agreements for data sharing is the time and effort necessary for the State to modify exis ting agreements with applicable agencies for the collection of this information. We estimate that 53 State Medicaid agencies (the 50 States, the District of Columbia, Northern Mariana Islands, and American Samoa) will be subject to this requirement. We estimate it will take each State an average of 30 hours to modify agreements with the appropriate agencies. For the purpose of the cost burden, we estimate it will take a health policy analyst 20 hours, at $43 an hour, and a manager 10 hours, at $77 an hour, to complete the agreements. The estimated cost burden for each State is $1,630 [($43 x 20) + ($77 x 10)], for a total cost burden of $86,390 [$1,630 x 53] and a total annual hour burden of 1,590 hours [30 x 53]. Taking into ac count the Federal contribution to Medicaid and CHIP program administration, the estimated State share of these costs will be no more than $43,195 [$86,390 x 50 percent]. D. ICRs Regarding Renewal (§§ 435.916 and 457.343) These provisions discuss the redetermination process for individuals whose eligibility isCMS-2349-P 123 based on MAGI. These provisions are necessary to facilitate the accurate and efficient redetermination of Medicaid and CHIP eligibility. We estimate 53 Medicaid agencies (the 50 States, District of Columbia, Northern Mariana Islands, and American Samoa) and an ad ditional 43 CHIP agencies (States that have a separate or combination CHIP) will be subject to the provision above, for a total of 96 agencies. The burden associated with this requirement is the time and effort necessary for the State to develop and automate renewal notices and perform the revised reco rdkeeping related to redetermining eligibility. Individuals whose elig ibility is based on MAGI would need to provide any additional information for the State to co mplete a redetermination of eligibility. Research has indicated that 33 – 50 pe rcent of people experience a change in circumstance that may impact their eligib ility for coverage (Sommers and Rosenbaum, Health Affairs 2011). Based on this resear ch we conservatively estimate that of the approximately 51 million individuals enrolled in Medicaid and CH IP whose eligibility will be based on MAGI, half (25.5 million individuals) will have their el igibility redetermined using the information already available to the agency. This approach greatly simplifies the renewal process and will ultimately reduce costs for States. For example, the State of Louisiana st reamlined its renewal process through a combination of administrative renewal, ex-p arte review and conduc ting renewals over the telephone in 2007. As a result, fewer than 10 per cent of families actually complete and submit a renewal form in order to remain enrolled in Medi caid or CHIP coverage. The State reports more than $18 million in savings each year due to these changes. We estimate that it will take each Medi caid and CHIP agency 16 hours annually to develop, automate and distribute the notice of eligibility determ ination based on use of existingCMS-2349-P 124 information. For the purpose of the cost burden, we estimate it will take a health policy analyst 10 hours, at $43 an hour, and a seni or manager 6 hours, at $77 an hour, to complete the notice. The estimated cost burden for each agency is $892 [(10 x $43) + (6 x $77)]. The total estimated cost burden is $85,632 [96 x $892], and the total annual hour burden is 1,536 hours [(10 + 6) x 96]. Taking into account the Federal contribu tion, the total estimated State costs would be $42,816 [$85,632 x 50 percent]. The remaining half of the individuals ( 25.5 million) will need to provide additional information to the State so that their eligibility can be renewed. The proposed process is much less burdensome than the processes currently in pl ace in many States that require individuals to complete a new application at renewal. We estim ate that it will take an individual 20 minutes to complete the proposed streamlined renewal process. The total annual hour burden is 8.5 million hours [(20 minutes x 25.5 million indi viduals)/60 minutes] for 25.5 mill ion individuals. We note that the number of people who need to provide additional information may be smaller than our estimate, but we used a higher end estimate to account for the greatest pote ntial impact on States and individuals. Some States that employ a si mplified renewal approach similar to what is proposed in this rule are able to renew coverage for nearly 80 percent of beneficiaries without contacting the individual or family. States will keep records of each renewal that is processed in Medicaid and CHIP. The amount of time for recordkeeping will be the sa me for renewals based on information available to the agency and renewals that require additi onal information from individuals. We estimate that it will take the State agency 3 minutes ( 0.05 hour) at a rate of $25 per hour for the average State eligibility worker to conduct the requi red record keeping for each of the 51 million renewals. The total estimated annual hour burden is 2,550,000 hours or 26,562.5 hours perCMS-2349-P 125 agency [2,550,000/96]. At a rate of $25 per hour the total estimated cost burden for recordkeeping is $63,750,000 [2,550,000 x $25] or $664,063 per agency [$63,750,000/96]. Taking into account the Federal c ontribution, the total estimated State share of the costs would be $31,875,000 [$63,750,000 x 50 percent]. E. ICRs Regarding Web Sites (§435.1200 and §457.335) Sections 435.1200 and 457.335 require Medicaid a nd separate CHIP agencies to have a Web site that performs the functions described in this proposed rule. We estimate that 53 Medicaid agencies and an additional 43 CHIP agencies (in States that have a separate or combin ation CHIP) would be subject to the provisions above. To achieve efficiency, we assume that States will devel op only one Web site to perform the required functions. Therefore, we base our burden esti mates on 50 States, the District of Columbia, the Northern Mariana Islands, and American Samoa (53 agencies) and do not include the 43 separate CHIP programs. The burden associated with this ICR for info rmation disclosure is the time and effort necessary for the State to develop and disclo se information on the Web site, develop and automate the required notices, and transmit (repo rt) the application data to the appropriate insurance affordability program. We know that all States have Web sites a nd printable applicati ons online and that 19 States have some ability to enable individuals to renew their coverage online. We estimate that it will take each State an average of 320 hours to de velop the additional func tionality to meet the proposed requirements, including developing an online application, automating the renewal process and adding a health plan selection functio n. We estimate that it will take a health policy analyst 85 hours (at $43 an hour), a senior ma nager 50 hours (at $77 an hour), and variousCMS-2349-P 126 network/computer administrato rs or programmers 185 hours (a t $54 an hour) to meet the reporting requirements for this subpart. We estim ate the total cost burden for a State to be $17,495 [(85 x $43) + (50 x $77) + (185 x $54)] fo r a total estimated burden of $927,235 [53 x $17,495] and a total annual hour burden of 16,960 hours for all 53 entities [(85 + 50 + 185) x 53]. Taking into account the Federal contribu tion to Medicaid and CHIP systems development and administration efforts, we estimate that the total State share of costs would be $463,618 [$927,235 x 50 percent] at most. Stat es that elect to pursue these ac tivities as part of a larger systems redesign effort would ha ve significantly lower costs due to the availability of the 90 percent FMAP. We estimate that it will take each State en tity 16 hours annually to develop and automate each of the two required notices (32 total hours). For the purpose of the cost burden, we estimate it will take a health policy analyst 10 hours, at $43 an hour, and a senior manager 6 hours, at $77 an hour, to complete each notice. The estimated cost burden of two notices for each agency is $1,784 [$892 x 2]. The total estimated cost bur den is $94,552 [$1,784 x 53], and the total annual hour burden is 1,696 hours [16 x 2 x 53] for the notices. We estimate that it will take network/com puter administrators or programmers 150 hours (at $54 an hour) to transmit the application data of ineligible individua ls to the appropriate insurance affordability program and meet this information reporting requirement for each State (53). The estimated cost burden for each agen cy is $8,100 [150 x $54]. Th e total estimated cost burden for 53 States is $429,300 [53 x $8,100], a nd the total annual hour burden is 7,950 hours [150 x 53]. Taking into account the Federal cont ribution, the estimated total State share of costs would be $214,650 [$429,300 x 50 percent]. The total estimated cost burden of the provisions described above is $1,451,087CMS-2349-P 127 [$927,235 + $94,552 + $429,300], and the total annua l hour burden is 26,606 hours [16,960 + 1,696 + 7,950]. F. ICRs Regarding Medicaid Statement of Expe nditures for the Medical Assistance Program (CMS-64) This action does not revise or impose any ne w information collection requirements or burden that would require addi tional OMB review of CMS-64. OMB has approved the burden and information collection requirements of CMS-64 under OMB control number 0938-0067.

TABLE 2: Annual Recordkeepin g and Reporting Requirements

Regulation Section(s) Respondents Responses Burden per Response

(hours) Total Annual Burden (hours) Labor Cost of Reporting ($) Total Cost ($) State Share of Costs

($) §§435.945, 435.948, 435.956, 457.350, and 457.380 53 1 30 1,590 1,630 86,390 43,195

§§435.916 and 457.343 96 1 16 1,536 892 85,632 42,816 §§435.916 and 457.343 25.5 million 1 .33 8.5 million §§435.916 and 457.343 96 1 26,562.5 2.55 million 664,063 63,750,000 31,875,000 §§435.1200 and 457.335 53 1 502 26,606 27,379 1,451,087 725,543
Total 65,373,100 32,686,555

Notes: All proposed collections are new therefore the OMB Control Number is omitted from the table. There are no capital or maintenance costs incurre d by the proposed collections, therefore it is omitted from the table. Capital costs resulting from the development or improvement of new electronic systems were addressed in the Federal Funding for Medicaid Eligibility Determination and Enrollment Activities final rule (76 FR 21950)

. Labor Cost figures are indicated he re on a per Respondent basis. The 1.4 average responses per Agency (that is , Respondent) are based on the total estimated number of agreements divided by the number of respondents. The number of actual agreements will vary by State based on th e governance structure of the State’s Medicaid, CHIP, and Exchange programs.CMS-2349-P 128 We have submitted a copy of this proposed rule to the OMB for its review of the rule’s information collection and record keeping requirements. These requirements are not effective until they have been approved by the OMB. To obtain copies of the supporting statem ent and any related forms for the proposed paperwork collections referenced above, access CMS’ Web site at http://www.cms.hhs.gov/Paperwork@cms.hhs.gov , or call the Reports Clearance Office at 410–
786–1326. We invite public comments on these potential information collection requirements. If you comment on these information collection and recordkeeping requirements, please do either of the following: 1. Submit your comments electronically as sp ecified in the ADDRESSES section of this proposed rule; or 2. Submit your comments to the Office of Info rmation and Regulatory Affairs, Office of Management and Budget, Attention: CMS Desk Officer, (CMS–2349–P) Fax: (202) 395–6974; or E-mail: OIRA_submission@omb.eop.gov

. IV. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the "DATES" section of this preamble, and, when we proceed with a subse quent document, we will respond to the comments in the preamble to that document. V. Summary of Preliminary Regulatory Impact Analysis The summary analysis of benefits and costs in cluded in this proposed rule is drawn fromCMS-2349-P 129 the detailed Preliminary Regulatory Im pact Analysis (PRIA), available at http://www.cms.gov/MedicaidEligib ility/downloads/CMS-2349-PPreliminaryRegulatoryImpactAnalysis.pdf

. A. Introduction The Office of Management and Budget has dete rmined that this rule is “economically significant” for the purposes of Executive Order 12866. Therefore, we have prepared a PRIA that presents the costs and be nefits of this rulemaking. B. Need for this Regulation This proposed rule would implement provision s of the Affordable Care Act related to Medicaid eligibility, enrollment and coordination with the Exchanges, CHIP, and other insurance affordability programs. It also addresses the cu rrent eligibility restrictions and barriers to enrollment in the Medicaid program which leav e millions of low-income Americans uninsured, and which contribute to poor health outcomes, financial stress, a nd high health care and administrative costs. In addi tion, this proposed rule sets out the increased Federal medical assistance percentage (FMAP) rates relating to “n ewly eligible” individu als and certain medical assistance expenditures in expans ion States” beginning January 1, 2014. C. Summary of Costs and Benefits The preliminary impact analysis uses the estimates of the CMS Office of the Actuary (OACT) and the estimates prepared by the C ongressional Budget Office (CBO) and the staff of the Joint Committee on Taxation. It provides both estimates to illust rate the uncertainty inherent in projections of future Medicaid financial operations. Analysis by OACT indicates that the proposed rule would result in an estimated a dditional 24 million newly eligible and currentlyCMS-2349-P 130 eligible individuals en rolling in Medicaid by 2016. 1 2 OACT notes that such estimates are uncertain, since they depend on future economic, de mographic, and other f actors that cannot be precisely determined in advance. Similarly, th e actual behavior of i ndividuals and the actual operation of the new enrollment processes and A ffordable Insurance Exchanges will affect enrollment and costs. The Congressional Budge t Office (CBO) has estima ted a net increase of 16 million newly and previously eligible people enrolled in Medicaid and CHIP in 2016 as a result of the new law as imple mented through this regulation. 3 Some of the difference between OACT and CBO’s projections can be explained by different part icipation rate assumptions, which are described further in the more detailed PRIA. Increased access to medical care and the simp lified enrollment process proposed by this rule would benefit both newly eligible and curr ently eligible individua ls by improving health outcomes and providing financial se curity. Additionally, the proposed rule would benefit States and providers by reducing uncompensated care cost s, shifting spending on either State-funded health coverage or uncompensated care to th e Federal government. Finally, the simplified Medicaid eligibility policies will over time reduce administrative burdens on State Medicaid agencies.

1 OACT’s original estimates for the financial impact of the expansion of Medicaid eligibility under the Affordable Care Act are documented in an April 22, 2010 memorandum, “Estimated Financial Effects of the Patient Protection and Affordable Care Act, as Amended,” available at https://www.cms.gov/ActuarialStudies /downloads/PPACA _2010-04-22.pdf . These estimates have been updated using later data, revised participation assumpti ons, and later information on policy decisions. 2 OACT’s estimates include approximatel y 2-3 million individuals with primary health insurance coverage through employer-sponsored plans who would enroll in Medicaid for supplemental coverage. 3 CBO. Analysis of Major Health Care Legislation Enacted in March 2010. Statement of Douglas W. Elmendorf. March 30, 2011 – http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf The CBO estimates exclude individuals with primary coverage through employer-sponsored plans who enroll in Medicaid for supplemental coverage.CMS-2349-P 131 We anticipate that the proposed rule would im pose costs on a small number of currently eligible individuals who will beco me ineligible for Medicaid coverage under the new eligibility methodology. These individuals woul d bear the cost of purchasing subsidized insurance in the Exchanges, though these costs may be offset by premium tax credits. OACT estimates that Federal spending on Me dicaid for newly and currently eligible individuals who enroll as a re sult of the changes made by th e Affordable Care Act would increase by a total of $202 billion from 2012 through 2016. Reflecting somewhat different participation assumptions and other projection fa ctors, CBO estimates an increase in federal spending of $162 billion over the same period of time. 4 OACT estimates that State expenditures on behalf of the additional individuals and families gaining Medicaid covera ge as a result of the Affordable Care Act will total $2.7 billion in FY 2014, $4.0 billion in FY 2015, and $4.9 billion in FY 2016. 5 For both OACT and CBO, these estimates do not consider offsetting savings to States that will result, to a varying degree depe nding on the State, from less uncompensated care, less need for State-financed health services and coverage programs, and greater efficiencies in the delivery of care. Indeed, an Urban Institute an alysis estimates that the costs to States will be more fully offset by other effects of the legi slation, for net savings to States of $92 to $129 billion from 2014 to 2019. 6 D. Methods of Analysis OACT prepared its estimate using data on indi viduals and families, together with their

4 CBO. Analysis of the Major Health Care Legislati on Enacted in March 2010. Statement of Douglas W. Elmendorf. March 30, 2011 -- http://www.cbo.gov/ftpdocs/121xx/doc12 119/03-30-HealthCareLegislation.pdf

. 5 OACT estimates total gross additional State expenditures of approximately $80 billion for FYs 2012 through 2021, offset by $35 billion in lower State costs as a result of the transitional FMAP for expansion States, for a net total increase of $45 billion. For comp arison, CBO estimates net additional State expenditures of about $60 million for the same time frame. 6 M. Buettgens et al., “Consider savings as well as costs: State governments would spend at least $90 billion less with the ACA than without it from 2014 to 2019,” The Urban Institute, July 2011. Available at www.urban.org/uploadedpdf/412361-consider-savings.pdf

.CMS-2349-P 132
income levels and insured status, from th e Current Population Survey and the Medical Expenditure Panel Survey. In addition, they made assumptions as to the actions of individuals in response to the new coverage options under the A ffordable Care Act and the operations of the new enrollment processes and the Affordable In surance Exchanges. The estimated Medicaid coverage and financial effects ar e particularly sensitive to thes e latter assumptions. Among those eligible for Medicaid under the expanded eligibility criteria established by the Affordable Care Act, and who would not otherwise have health insurance, OACT assumed that 95 percent would enroll. This assumption, which is significantl y higher than current en rollment percentages, reflects OACT’s consideration of the experience w ith health insurance reform in Massachusetts and its expectation that the streamlined enrollment process and enrollment assistance available to people through the Affordable Insurance Exchanges will be very effective in helping eligible individuals and families become enrolled. Although CBO used similar data and overall methodologies, and also anticipates that the st reamlined enrollment process and Exchange enrollment assistance will improve applicants’ ability to become enrolled, CBO has included a significantly smaller from this factor than assumed by OACT. 7 E. Regulatory Options Considered Alternative approaches to implementing the Medicaid eligibility, enrollment and coordination requirements in the Affordable Ca re Act were considered in developing this

7 CBO’s specific take-up assumptions are not available. Re searchers at the Urban Institute have approximated the participation rate assumed by CBO. The Kaiser Family Foundation has characterized this assumption as follows: “These results assume moderate levels of participati on similar to current experience among those made newly eligible for coverage and little additional participation among thos currently eligible. This scenario assumes 57 percent participation among the newly eligible uninsured an d lower participation across other coverage groups.” J. Holohan and I. Headen, “Medicaid coverage and spending in health reform: National and State-by-State results for adults at or below 133% FPL,” Kaiser Commission on Medicaid and the Uninsured, May 2010, available online at http://www.kff.org/healthreform/upload/Medicaid-Coverage -and-Spending-In-Health-R eform-National-and-StateBy-State-Results-for-Adults-at-or-Below-133-FPL.pdfCMS-2349-P 133 proposed rule. However, it was determined that th ese alternatives would ha ve created substantial administrative burdens for States and individual s, and created gaps in coverage that would reduce the number of people w ith insurance. We welcome public comment regarding the potential economic effects of the proposed rule. F. Accounting Statement For full documentation and discussion of thes e estimated costs and benefits, see the detailed PRA, available at http://www.cms.gov/MedicaidElig ibility/downloads/CMS-2349-PPreliminaryRegulatoryImpactAnalysis.pdf

. Table 3. Accounting Statement: Classifi cation of Estimated Net Costs, from FY 2012 to FY 2016 (in millions) Category TRANSFERS Year Dollar Units Discount Rate Period Covered 2012 7% 3% Annualized Monetized Transfers from Federal Government to States on Behalf of Beneficiaries Primary Estimate $35,564 $37,324 FYs 2012-2016

Annualized Monetized Transfers from States on Behalf of Beneficiaries Primary Estimate $2,131 $2,235 FYs 2012-2016

Annualized Monetized Transfers from Federal Government to States Primary Estimate $1,577 $1,657 FYs 2012-2016
Source: CMS Office of the Actuary G. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Re form Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 do llars, updated annually for inflation. In 2011,CMS-2349-P 134 that threshold is approximately $136 million. It is important to understand, however, that the UMRA does not address the total co st of a rule. Rather, it focuse s on certain categories of cost, mainly costs resulting from (A) imposing enfo rceable duties on State, local, or tribal governments, or on the private sector, or (B) increasing the stringency of conditions in, or decreasing the funding of, State, local, or trib al governments under entitlement programs. We believe that States can take actions th at will largely offset the increased medical assistance spending for newly enrolled persons. Because the net effects are uncertain and the overall costs significant, we have drafted the PRIA to m eet the requirements for analysis imposed by UMRA, together with the rest of the preamble. Th e extensive consultation with States we describe later in th is analysis was aimed at the requirements of both UMRA and Executive Order 13132 on Federalism. We invite co mment on these issues from States and local governments as well as any othe r interested parties. 1. State and Local Governments Our discussion of the potential expected imp act on States is provided in the benefits, costs, and transfers section of th e preliminary regulatory impact analysis. As noted previously, the Affordable Care Act requires States that part icipate in the Medicaid program to cover adults with incomes below 133 percent of the Federal poverty level, and pr ovides substantial new Federal support to nearly offset the costs of covering that population. 2. Private Sector and Tribal Governments We do not believe this proposed rule would impose any unfunded mandates on the private sector. As we explain in more detail in the Regulatory Flexibility Act analysis, the provisions of the Affordable Care Act implemente d by the proposed rule deal with eligibility and enrollment for the Medicaid and CHIP program s, and as such are directed toward StateCMS-2349-P 135 governments rather than toward the private sect or. Since the proposed rule would impose no mandates on the private sector, we conclude th at the cost of any possible unfunded mandates would not meet the threshold amounts discussed previously that would otherwise require an unfunded mandate analysis for the private sector. We also conclude that an unfunded mandate analysis also is not needed fo r tribal governments since the proposed rules would not impose mandates on tribal governments. H. Regulatory Flexibility Act (RFA) The RFA requires agencies to analyze options for regulatory relief of small entities if a proposed rule would have a significant economic impact on a substantial number of small entities. Few of the entities that meet the definiti on of a small entity as that term is used in the RFA (for example, small businesses, nonpr ofit organization, and small governmental jurisdictions with a popu lation of less than 50,000) would be impacted directly by this proposed rule. Individuals and States ar e not included in the de finition of a small entity. There are some States in which counties or ci ties share in the costs of Medi caid. OACT has estimated that between 2014 and 2021 the Federal government w ould pay about 94 percent of the costs of benefits for new Medicaid enrollees with the Stat es paying the remaining 6 percent. An Urban Institute and Kaiser Family Foundation study estim ated that the Federal government will bear between 92 and 95 percent of the ove rall costs of the new coverage provided as a result of the Affordable Care Act, with the States shoulderi ng the remaining five to eight percent of the costs.8 To the extent that States require counties to share in these costs, some small jurisdictions could be affected by the requirement s of this proposed rule. Howe ver, nothing in this rule would

8 J. Holahan and I. Headen, “Medicaid coverage and spending in health reform: National and State-by-State results for adults at or below 133% FPL,” Kaiser Commission on Medicaid and the Uninsured, May 2010, available online at http://www.kff.org/healthreform/upload/Medicaid-Covera ge-and-Spending-in-Health-Reform-National-and-StateBy-State-Results-for-Adults-at-or-Below-133-FPL.pdfCMS-2349-P 136 constrain States from making changes to alleviat e any adverse effects on small jurisdictions. The Department has no way of estimating the impact of this proposed rule on small jurisdictions and requests public comment on this issue. Because this proposed rule is focused on elig ibility and enrollment in public programs, it does not contain provisions that would have a si gnificant direct impact on hospitals, and other health care providers that are designated as small entities under the RFA. However, the provisions in this proposed rule may have a substa ntial, positive indirect effect on hospitals and other health care providers due to the substantial increase in the prevalence of health coverage among populations who are currently unable to pay fo r needed health care, leading to lower rates of uncompensated care at hospitals. Again, the Department cannot determine whether this proposed rule would have a significant economic impact on a substantial number of small entities, and we request pub lic comment on this issue. Section 1102(b) of the Act requires us to pr epare a regulatory impact analysis if a proposed rule may have a significant economic im pact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewe r than 100 beds. We are not preparing an analysis for section 1102(b) of th e Act because the Secretar y has determined that this proposed rule would not have a direct ec onomic impact on the opera tions of a substantial number of small rural hospitals. As indicated in the preceding discussion, there may be indirect positive effects from reductions in uncompensated care. I. Federalism Executive Order 13132 establishes certain requirem ents that an agency must meet when itCMS-2349-P 137 promulgates a proposed rule (and subsequent final ru le) that imposes substant ial direct effects on States, preempts State law, or otherwise has Federalism implica tions. As discussed previously, the Affordable Care Act and this proposed rule have significant direct effects on States. The Affordable Care Act requires major changes in the Medicaid and CHIP programs, which would require changes in the way States operate their i ndividual programs. While these changes are intended to benefit beneficiaries and enrollees by improving coordination between programs, they are also designed to reduce th e administrative burden on States by simplifying and streamlining systems. We have consulted with States to receive input on how the various Affordable Care Act provisions codified in this proposed rule would affect States. We have participated in a number of conference calls and in person meetings with St ate officials in the mont hs before and since the law was enacted. These discussions have enabled the States to sh are their thinking and questions about how the Medicaid changes in the legisla tion would be implemented. The conference calls also furnished opportunities for CMS to explore thes e implementation issues together with States and also provide information on an informal basis about implementation plans to the State Medicaid Directors, and for the Directors to comment informally on what they heard in the course of those conversations. We continue to engage in ongoing consulta tions with Medicaid and CHIP Technical Advisory Groups (TAGs), which have been in pl ace for many years and serve as a staff level policy and technical exchange of information be tween CMS and the States. In particular, we have had discussions with the Eligibility TAG (E-TAG) and the Children’s Coverage TAG. The E-TAG is a group of State Medicaid officials with specific expertis e in the field of eligibility policy under the Medicaid program. The Childre n’s Coverage TAG is a combination ofCMS-2349-P 138

Medicaid and CHIP officials that convene to discuss issues that a ffect children enrolled in those programs. Through consultations with these TAGs, we have been able to get input from States specific to issues surrounding th e changes in eligibility groups and rules that will become effective in 2014.CMS-2349-P 139

List of Subjects
42 CFR Part 431 Grant programs-health, Health facilities, Me dicaid, Privacy, Reporti ng and recordkeeping requirements.
42 CFR Part 433 Administrative practice and procedure, Child support Claims, Grant programs-health, Medicaid, Reporting and reco rdkeeping requirements.
42 CFR Part 435 Aid to Families with Dependent Children, Grant programs-health, Medicaid, Reporting and recordkeeping requirements, Supplemen tal Security Income (SSI), Wages.
42 CFR Part 457 Administrative practice and procedure, Grant programs-health, Health insurance, Reporting and recordkeeping requirements.CMS-2349-P 140

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR chapter IV as set forth below: PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION 1. The authority citation for part 43 1 continues to read as follows: Authority : Sec . 1102 of the Social Security Act, (42 U.S.C. 1302). Subpart A--Single State Agency 2. Section 431.10 is amended by-- A. Revising paragraph (b)(2)(ii) and the introductory text of paragraph (c)(1). B. Adding paragraphs (c)(1)(iii) and (c)(3). C. Revising paragraphs (d) and (e)(3). The revisions and additions read as follows: §431.10 Single State agency

. * * * * * (b) * * * (2) * * * (ii) Make rules and regulations that it follows in administerin g the plan or that are binding upon State or other agencies that administer the plan.
* * * * * (c) * * * (1) The plan must specify whether the entity that determines eligibility for families, adults, and for individuals under 21 is--
* * * * *CMS-2349-P 141 (iii) A government-operated Exchange es tablished under sections 1311(b)(1) or 1321(c)(1) of the Affordable Care Act (Pub. L. 111-148).
* * * * * (3) The single State agency is responsible for assuring and enforcing that-- (i) Eligibility determinations are made consistent with its rules and if there is a pattern of incorrect determinations that corrective actions ar e instituted and/or the delegation is terminated; (ii) There is no conflict of in terest by any agency delegate d the responsibility to make eligibility determinations; and (iii) Eligibility determinations will be made in the best interest of applicants and beneficiaries and that the single State agency will guard against improper incentives and/or

outcomes. (d) Agreement with Federal or State and local agencies . The plan must provide for written agreements between the Medicaid agency a nd the Federal or other State or local agencies that determine eligibility for Medicaid, stating-- (1) The relationships and respective responsibilities of the agencies; (2) The quality control and oversight plan s by the single State agency to review determinations made by the delegee; (3) The reporting requirements from th e delegee making Medicaid eligibility determinations to the single State agency. (4) The confidentiality and security require ments in accordance with sections 1902(a)(7) and 1942 of the Act for all appli cant and beneficiary data; and (5) That merit protection principles are employed by the agency responsible for the Medicaid eligibility determination.CMS-2349-P 142 (e) * * * (3) If other Federal, State or local agencies or offices perform services for the Medicaid agency, they must not have the authority to chan ge or disapprove any ad ministrative decision of, or otherwise substitute their judgment for that of, the Medicaid agency for the application of policies, rules and regulations issued by the Medicaid agency. 3. Section 431.11 is amended by revising paragraph (d) to read as follows: §431.11 Organization for administration. * * * * * (d) Eligibility determined by other agencies . If eligibility is determined by Federal or State agencies other than the Medicaid agency or by local agen cies under the supervision of other State agencies, the plan must include a de scription of the staff designated by those other agencies and the functions they perform in carrying out their responsibilities. Subpart M--Relations with Other Agencies §431.636 [Removed] 4. Remove §431.636. PART 433—STATE FISCAL ADMINISTRATION 5. The authority citation for part 433 continues to read as follows: Authority: Section 1102 of the Social S ecurity Act (42 U.S.C. 1302). Subpart A—Federal Matching and Ge neral Administration Provisions 6. Section 433.10 is amended by -- A. In paragraph (a), removing the phrase “and 1905(b),” and a dding in its place the phrase “1905(b), 1905(y), and 1905(z)” B. Adding new paragraphs (c)(6), (c)(7), and (c)(8).CMS-2349-P 143

The additions read as follows: §433.10 Rates of FFP for program services * * * * * (c) * * * (6)(i)Beginning January 1, 2014, unde r section 1905(y) of the Act, the FMAP for a State that is one of the 50 States or the District of Columbia, for amounts expended by such State for medical assistance for newly eligib le individuals, as defined in §433.204 of this part, will be an increased FMAP equal to: (A) 100 percent, for calendar quarters in calendar years (CYs) 2014 through 2016; (B) 95 percent, for calendar quarters in CY 2017; (C) 94 percent for calendar quarters in CY 2018; (D) 93 percent for calendar quarters in CY 2019; (E) 90 percent for calendar quarters in CY 2020; and (F) 90 percent for calendar quarters in all other CYs after 2020. (ii) The FMAP specified in paragraph (c)(6 )(i) of this sectio n will apply to amounts expended by a State for medical assistance for newl y eligible individuals in accordance with the requirements of the methodology selected by the State under §422.206 of this chapter. (7)(i)During the period January 1, 2014 th rough December 31, 2015, under section 1905(z)(1) of the Act for a State described in paragraph (c )(7)(ii) of this secti on, the FMAP determined under paragraph (b) of this section will be increased by 2.2 percentage points. (ii) A State qualifies for the general increase in the FMAP unde r paragraph (c)(7)(i) of this section, if the State: (A) Is an expansion State, as described in paragraph (c)(8)(iii) of this section;CMS-2349-P 144 (B) Does not qualify for any payments on th e basis of the increased FMAP under paragraph (c)(6) of this secti on, as determined by the Secretary; and (C) Has not been approved by the Secretary to divert a portion of the Disproportionate Share Hospital Allotment for the State to the costs of providing medical assist ance or other health benefits coverage under a demonstrati on that is in effect on July 1, 2009. (iii) The increased FMAP under paragraph (c)(7)( i) of this section is available for amounts expended by the State for medical assistance for individuals that are not newly eligible as defined in §433.204 of this part. (8)(i) Beginning January 1, 2014, under secti on 1905(z) of the Act, the FMAP for an expansion State defined in paragr aph (c)(8)(iii) of this secti on, for amounts expended by such State for medical assistance for individuals described in sectio n 1902(a)(10)(A)(i )(VIII) of the Act who are not newly eligible as defined in§433.204 of this part and who are nonpregnant childless adults for whom the Stat e may require enrollment in benchmark coverage under section 1937 of the Act, will be determined in accordance with the following formula: F + (T x (N – F)) F = The base FMAP for the State determined under paragraph (b) of this section, subject to paragraph (c)(7) of this section. T = The transition percentage specified in paragraph (c)(8)(ii) of this section. N = The Newly Eligible FMAP dete rmined under paragraph (c)(6) of this section.

(ii) For purposes of paragraph (c)(8)(i) of th is section, the transition percentage is equal

to: (A) 50 percent, for calendar quarters in CY 2014;CMS-2349-P 145 (B) 60 percent, for calendar quarters in CY 2015; (C) 70 percent, for calendar quarters in CY 2016; (D) 80 percent, for calendar quarters in CY 2017; (E) 90 percent, for calendar quarters in CY 2018; and (F) 100 percent, for calendar quarters in CY 2019 and all subsequent calendar years. (iii) A State is an expansion State if, on th e March 23, 2010, the State offered health benefits coverage Statewide to parents and nonpregnant, childless adults whose income is at least 100 percent of the poverty line, that includes inpatient hospital services, is not dependent on access to employer coverage, employer contribution, or em ployment and is not limited to premium assistance, hospital-only benefits , a high deductible health plan, or alternative benefits under a demonstration program authorized under section 1938 of the Act. A State that offers health benefits coverage to only parent s or only nonpregnant childless adul ts described in the preceding sentence will not be considered to be an expansion State. (iv) For amounts expended by an expansion State as defined in paragraph (c)(8)(iii) of this section for medical assistance for individuals de scribed in section 1902(a )(10)(A)(i)(VIII) of the Act who are newly eligible as defined in §433.201, and who are non-pregnant childless adults for whom the State may require enrollment in be nchmark coverage under section 1937 of the Act, the FMAP is as specified in pa ragraph (c)(6) of this section. 7. Subpart E is added to part 433 to read as follows: Subpart E—Methodologies for Determining Federal Share of Medicaid Expenditures for Mandatory Group Sec. 433.202 Scope.CMS-2349-P 146

433.204 Definitions. 433.206 Choice of methodology. 433.208 Threshold methodology. 433.210 Statistically-valid sampling methodology. 433.212 CMS established FMAP proportion. Subpart E—Methodologies for Determining Federal Share of Medicaid Expenditures for Mandatory Group §433.202 Scope. This subpart sets forth the requirements and procedures under which States may claim for the higher Federal share of expenditures fo r newly eligible indivi duals specified in §433.204 of this subpart. §433.204 Definitions. As used in this subpart: Newly Eligible Individual means an individual eligible for Medicaid in accordance with the requirements of the ne w adult group and who would not have been eligible for Medicaid under the State’s eligibility standa rds and methodologies for the Me dicaid State plan, waiver or demonstration programs in effect in the State as of December 1, 2009. §433.206 Choice of methodology. (a) Beginning January 1, 2014, the State mu st determine the expenditures which may be claimed at the FMAP rate described in § 433.10 of this part using one of the following methods: (1) Applying eligibility threshol ds and proxies in accordance with § 433.208 of this part; orCMS-2349-P 147 (2) Conducting a statistically valid sample in accordance with § 433.210 of this part; or (3) Electing to utilize the CMS establis hed FMAP proportion rate established in accordance with § 433.212 of this part. (b) The State must provide to CMS fo r approval a methodology that provides the description of the method it wi ll use to determine the approp riate FMAP claim for medical assistance expenditures for newly eligible individuals including all of the following requirements: (1) Except as provided in para graph (b)(2) of this section, at least 2 years prior to the year in which the State will implement that method. (2) For CY 2014, the State must notify CMS of such method no later than December 31, 2012. (3) Changing claiming methodologies: (i) The State must use the chosen methodol ogy for at least 3 consecutive years before changing to another methodology; (ii) The State must notify CMS of any change in methodology in accordance with paragraphs (b)(1) and (b)(2) of this section. (c) To implement each methodology— (1) The State must first determine those individuals eligible under section 1902(a)(10)(A)(i)(VIII) of the Act. (2) The State may apply a CMS approved methodology only to expenditures for such individuals. (d) Nothing in this section impacts the timi ng or approval of an i ndividual’s eligibility for Medicaid.CMS-2349-P 148
§433.208 Threshold methodology. (a) Beginning January 1, 2014, St ates may elect to apply a CMS-approved State specific threshold methodology that meets al l of the following requirements: (1) Incorporates State eligibility standards, including disregards and other adjustments that were in place as of December 1, 2009. (2) Incorporates any enrollment caps under section 1115 demonstration programs that were in place in the State on December 1, 2009. (3) Is applied to each individual applicant determined eligible for Medicaid under the adult group. (4) Is used to determine whether each individu al is newly eligible so that the State may claim the FMAP described in §433.10(c) of this subpa rt for all expenditures for such individuals. (b) To implement the threshold methodology, the State must submit a methodology and receive CMS approval of such methodology pr ior to its application to new FMAP determinations. (1) Such methodology will specify how the Stat e will determine the population within the adult group and describe in a format provided by CMS how it is approx imating the December 1, 2009 standards and methodologies, as well as how the State will apply the established criteria. (2) Subject to approval by CMS, a State ma y use criteria including but not limited to: (i) Self-declaration. (ii) Claims history. (iii) Receipt of Social Security Disability Income. (iv) Disability determination by SSA. (v) Information from the Asset Verifica tion System established under the DRA.CMS-2349-P 149 (vi) Information from tax returns. (vii) Application of a proportion derived from historical data of th e actual proportion of individuals within specif ic eligibility groups that were inelig ible for Medicaid due to assets or eligible for Medicaid due to di sability status using the eligib ility standards in place as of December 1, 2009. (viii) Other disability and asset data sources. (c) The threshold methodology must: (1) Not be biased in such a manner as to ove restimate or over report individuals as newly eligible who were actually individuals who would have been eligible using the State’s December 1, 2009 eligibility standards. (2) Provide an accurate estimation of which individuals would have been eligible in accordance with the December 1, 2009 eligibility st andards to be used for the designated year, by incorporating simplified assessments of asset and disability require ments in place at that time. Once individuals are determined to be either a ne wly eligible individual or an individual who would have been eligible under the December 2009 standards, the State would apply that eligibility determination th roughout the entire year. (3) Be verified by, and adjusted prospectiv ely to include results of, any evaluations conducted by CMS in conjunction with the Stat e(s) of the accuracy of the threshold. §433.210 Statistically valid sampling methodology. (a)(1) A State choosing to implement a statistically-valid sampling methodology to determine the proportion of expenditures to wh ich the FMAP specified in §433.10(c) of this subpart will apply, must submit to CMS a metho dology that details the sampling plan prior to making such claims which demonstrates complian ce with the requirements established in thisCMS-2349-P 150 section as well as all additional requirements that CMS issues in subregulatory guidance. (2) The methodology with the sampling plan must be submitted to CMS on or before January 1 of the calendar year in which the State will claim expenditures using the sampling methodology. (3) The State may not implement the sampling methodology until CMS has reviewed and approved the State’s sampling plan. (b) A State must verify that its sampli ng plan follows all relevant requirements established in the most current OMB Circular A-87. (c) The State must implement the plan as specified in the CMS-approved sampling plan for the year in which it claims expenditures based on the sampling plan. (d) A State must draw a statistically va lid sample from the population of Medicaid applicants who are eligible fo r Medicaid under the adult group. (e) The State must evaluate each individua l randomly selected to be included in the sample to determine whether: (1) The individual is newly eligible; or (2) The individual would have been eligible under the standards in place to determine eligibility under the Medicaid St ate plan and/or demonstration program as of December 1, 2009, including any enrollment caps unde r section 1115 demonstration progr ams that were in place in the State on December 1, 2009. (f) The State will attribute all actual medical assistance expenditures in that calendar year for each newly eligible individual in the sample and for each individual in the sample who would have been eligible under the December 1, 2009 sta ndards. The State will extrapolate and apply the proportion of Medicaid expenditur es attributed to the newly e ligible in the sample to theCMS-2349-P 151 expenditures of the population. (g) The State will consider the amount dete rmined in accordance with paragraph (f) of this section to be the expenditures of the newly eligible individuals and receive the FMAP rate described in §433.10(c) of this subpart for such expenditures when the State claims on the CMS64. (h) The State may claim and receive the FMAP described in §433.10(c) of this subpart for an estimated proportion on an interim basis as follows: (1) States may claim expenditures in current years based on an interim FMAP proportion determined by the most recent year for which data is available. (2) States must make a retroactive adjustment to claims on the CMS-64 for the current year once that expe nditure information is finalized under th e provisions of paragraph (f) of this section. (3)(i) Results of a statistically-valid sa mpling methodology for any given year must be finalized and applied, and adjustments to claims on the CMS-64 must be made, within 2 years from the date of the actual expenditure. (ii) If the State does not have supporting doc umentation at the end of the second year following the year at issue, the State must ma ke a decreasing adjustment on the CMS-64 to refund the higher FMAP rates, and such claims will be regarded as untimely under to 45 CFR 95.7 if resubmitted. (iii) A State must implement the statisti cally valid sampling methodology in accordance with this section on an annual basis for the initial 3 consecutive years. (A) States that have completed the require ments for 3 consecutive years, are required thereafter to verify using a sa mpling methodology in accordance with this section every 3 years.CMS-2349-P 152 (B) Any State that meets the requirements of paragraph (h)(3)(iii)(A) of this section may retroactively apply results of the sample to th e rates of the calendar ye ar expenditures for the years prior to the sample up to the last year in which the State completed and applied the results of a sampling methodology. §433.212 CMS established FMAP proportion. (a) Beginning January 1, 2014, St ates may elect to apply a CMS determined proportion to medical assistance expenditures for individuals eligible for Medicaid in the adult group. (b) CMS will publish State-specific estimated FMAP proportions of eligibility under the December 2009 eligibility criteri a using data sources including, but not limited to MEPS and MSIS data. (c) CMS will meet all of the following requirements: (1) Solicit and incorporate commen ts on the development of rates. (2) Annually establish a model to predict in an unbiased way the appropriate proportion of expenditures for which each State would claim the FMAP rate described in §433.10(c) of this subpart for newly eligible individuals taking into account any enrollment caps under demonstration programs that were in place in the State on December 1, 2009. (3) Publish the State-specific rates by Oct ober 1 of the preceding year. For CY 2014, the model must be published no later than January 1, 2013. (4) Incorporate results from a validation methodology in accordan ce with §433.212(e) of this subpart such as a statistica lly valid sampling of State data of actual individuals eligible for and enrolled in Medicaid in accordance with section 1902(a)(10)(A)(i )(VIII) of the Act. (5) Provide technical assistance to Stat es on applying the ra tes established. (d) States will apply the CMS published St ate-specific proportion of expendituresCMS-2349-P 153 attributed to the newly eligible to expenditures for all individuals eligible for and enrolled in Medicaid in accordance with sec tion 1902(a)(10)(A)(i)(VIII) of the Act. The State will consider the amount determined in accordance with this section to be the expenditures of the newly eligible individuals and receiv e the FMAP rate described in §433.10(c) of this part for such expenditures when the State claims expenditures on the CMS-64. (e) Validation measures such as statistical sampling must be incorporated into the estimate: (1) On an annual basis beginning in CY 2016, to include expenditures related to CY 2014, and continue through CY 2021; (2) After CY 2021, validation will be completed, and results incorporated into the model, on a 3-year basis; (3) After CY 2030, validation will be completed, and results incorporated into the model, on a 5-year basis. PART 435--ELIGIBILITY IN THE STA TES, DISTRICT OF COLUMBIA, THE NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA 8. The authority citation for part 435 continues to read as follows: Authority : Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 9a. Remove the term “family income” wherev er it appears in pa rt 435 and add in its place the term “household income.” Subpart A--General Provisi ons and Definitions 9b. Section 435.4 is amended by-- A. Adding the definitions of “Advance payments of the premium tax credit,” “Affordable Insurance Exchange (Exchange),” “A gency,” “Caretaker relative,” “DependentCMS-2349-P 154
child,” “Effective income level,” “Electroni c account,” “Household income,” “Insurance affordability program,” “MAGI-based income,” “Minimum essential coverage,” “Modified adjusted gross income (MAGI),” “Pregnant woma n,” “Secure electronic interface,” and “Tax dependent” in alphabetical order. B. Revising the definition of “Families and children.” The revisions read as follows: §435.4 Definitions and use of terms. * * * * * Advance payments of the premium tax credit means payments of the tax credit specified in section 36B of the Internal Revenue Code of 1986, which pr ovide premium assistance on an advance basis to support enrollment of an eligib le individual in a qualifi ed health plan through the Exchange.
* * * * * Affordable Insurance Exchange (Exchange) means a governmental agency or non-profit entity that meets the applicab le requirements and makes qualified health plans available to qualified individuals and qualified employers. Unless otherwise identified, this term refers to State Exchanges, regional Exchanges, subsid iary Exchanges, and a Federally-facilitated Exchange. Agency means a State Medicaid agency.
* * * * * Caretaker relative means a relative of a dependent ch ild by blood, adoption, or marriage with whom the child is living, who assumes prim ary responsibility for th e child’s care (as may, but is not required to, be indica ted by claiming the child as a tax dependent for Federal incomeCMS-2349-P 155 tax purposes), including the child’s natural, adoptive, or step parent; anothe r relative of the child based on blood (including those of half-blood), adoption, or marriage; and the spouse of such parent or relative, even after the marria ge is terminated by death or divorce.
* * * * * Dependent child means a child who is under the age of 18, or is age 18 and a full-time student, and who is deprived of parental support by reason of the death, absence from the home, or unemployment of at least one pa rent, unless the State has elected in its State plan to eliminate such deprivation requirement. A pa rent is considered to be unemployed if he or she is working less than 100 hours per month, or su ch higher number of hours as th e State may elect in its State plan. Effective income level means the income standard applicable under the State plan for an eligibility group, after taking in to consideration any disreg ard of a block of income. Electronic account means an electronic file that includes all information collected and generated by the State regarding each individual’s Medi caid eligibility and enrollment, including all documentation required under §435.913. Families and children means individuals whose eligibil ity for Medicaid is determined based on being a pregnant woman, a child younger than age 21, or a parent or other caretaker relative of a dependent child. It does not include individuals whose eligib ility is based on other factors, such as blindness, disa bility, being aged (65 or more y ears old), or a need for long-term care services. Household income has the meaning provided in §435.603(d). Insurance affordability program means: (1) A State Medicaid program under title XIX of the Act;CMS-2349-P 156 (2) A State children’s health insurance pr ogram (CHIP) under title XXI of the Act; (3) A State basic health program established under section 1331 of the Affordable Care Act; (4) Coverage in a qualified health plan thr ough the Exchange with advance payments of the premium tax credit establishe d under section 36B of the Inte rnal Revenue Code of 1986; or (5) Coverage in a qualified health plan through the Exchange with cost-sharing reductions established under section 1402 of the Affordable Care Act. MAGI-based income has the meaning provided in §435.603(e).
* * * * * Minimum essential coverage means coverage defined in se ction 5000A(f) of subtitle D of the Internal Revenue Code of 1986, as added by s ection 1401 of the Affordable Care Act, and implementing regulations of such section issued by the Secretary of the Treasury. Modified adjusted gross income (MAGI) has the meaning provided in section 36B(d)(2) of the Internal Re venue Code of 1986.
* * * * * Pregnant woman means a woman during pregnancy a nd the post partum period, which extends until the last day of the month in which a 60-day period, beginning on the date the pregnancy terminates, ends. Secure electronic interface means an interface which allows for the exchange of data between Medicaid and other insura nce affordability programs and adheres to the requirements in part 433, subpart C of this chapter.
* * * * *CMS-2349-P 157 Tax dependent means an individual for whom an other individual properly claims a deduction for a personal exemption under section 151 of the Internal Revenue Code of 1986 for a taxable year. Subpart B--Mandatory Coverage 10. The heading for subpart B is revised as set forth above. 11. Section 435.110 is revised to read as follows: §435.110 Parents and other caretaker relatives. (a) Basis . This section implements sectio ns 1931(b) and (d) of the Act. (b) Scope . The agency must provide Medicaid to parents and ot her caretaker relatives, as defined in §435.4, and if applicable the spouse of the parent or other caretaker relative, whose household income is at or below the income standa rd established by the agency in the State plan, in accordance with paragraph (c) of this section. (c) Income standard . The agency must establish in its State plan the income standard as follows: (1) The minimum income standard is a State’ s AFDC income standard in effect as of May 1, 1988 for a household of the applicable family size. (2) The maximum income standard is the higher of-- (i) The effective income level in effect for section 1931 low-income families under the Medicaid State plan or waiver of the State plan as of Ma rch 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(1 4)(A) and (E) of the Act; orCMS-2349-P 158 (ii) A State’s AFDC income standard in e ffect as of July 16, 1996 for a household of the applicable family size, increased by no more than the percentage increase in the Consumer Price Index for all urban consumers between July 16, 1 996 and the effective date of such increase. 12. Revise the undesignated center heading th at is immediately before §435.116 to read as follows: Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn Children

13. Section 435.116 is revised to read as follows: §435.116 Pregnant women. (a) Basis . This section implements secti ons 1902(a)(10)(A)(i)(III) and (IV); 1902(a)(10)(A)(ii)(I), (IV), and (IX); and 1931(b) and (d) of the Act. (b) Scope . The agency must provide Medicaid to pregnant women whose household income is at or below the income standard es tablished by the agency in its State plan, in accordance with paragraph (c) of this section. (c) Income standard . The agency must establish in its State plan the income standard as follows: (1) The minimum income standard is the higher of: (i) 133 percent FPL for a household of the applicable family size; or (ii) Such higher income standard up to 185 percent FPL, if any, as the State had established as of December 19, 1989 for determini ng eligibility for pregnant women, or, as of July 1, 1989, had authorizing legislation to do so. (2) The maximum income standard is the higher of-- (i) The highest effective income level in effect under the Medicaid State plan for coverage under the sections specified at paragraph (a) of this section, or waiver of the State planCMS-2349-P 159 covering pregnant women, as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act; or (ii) 185 percent FPL. (d) Covered services

. (1) Pregnant women are covered under this section for the full Medicaid coverage described in paragraph (d)(2) of this section, except that the agency may provide only pregnancy-related services desc ribed in paragraph (d)(3) of th is section for pregnant women whose income exceeds the applicable income limit established by the agency in its State plan, in accordance with paragraph (d )(4) of this section. (2) Full Medicaid coverage -- (i) Consists of all services which the Stat e is required to co ver under §440.210(a)(1) of this chapter and all se rvices which it has opted to c over under §440.225 of this chapter; and (ii) May include, at State opti on, enhanced pregnancy-related se rvices in accordance with §440.250(p) of this chapter. (3) Pregnancy-related services -- (i) Consist at least of services, as defined by the agency, related to pregnancy (including prenatal, delivery, postpartum, and family pl anning services) and othe r conditions which may complicate pregnancy; and (ii) May include, at State opti on, enhanced pregnancy-related se rvices in accordance with §440.250(p) of this chapter). (4) Applicable income limit for full Me dicaid coverage of pregnant women . For purposes of paragraph (d)(1) of this section —CMS-2349-P 160 (i) The minimum applicable income limit is the State’s AFDC income standard in effect as of May 1, 1988 for a household of the applicable family size. (ii) The maximum applicable income limit is the highest effective income level for coverage under section 1902(a)(1 0)(A)(i)(III) of the Ac t or under section 1931( b) and (d) of the Act in effect under the Medicaid State plan or waiver of the St ate plan as of March 23, 2010 or December 31, 2013, if higher, converte d to a MAGI-equivalent standard. 14. Section 435.118 is added to read as follows: §435.118 Infants and children under age 19. (a) Basis . This section implements sections 1902(a )(10)(A)(i)(III), (IV) , (VI), and (VII); 1902(a)(10)(A)(ii)(IV) and (IX); an d 1931(b) and (d) of the Act. (b) Scope . The agency must provide Medicaid to children under age 19 whose household income is at or below the income standard es tablished by the agency in its State plan, in accordance with paragraph (c) of this section. (c) Income standard

. (1) The minimum income standard is the higher of-— (i) 133 percent FPL for a household of the applicable family size; or (ii) For infants under age 1, such higher in come standard up to 185 percent FPL, if any, as the State had established as of December 19, 1989 for determining eligibility for infants, or, as of July 1, 1989 had authorizing legislation to do so. (2) The maximum income standard for each of the age groups of infants under age 1, children age 1 through age 5, and children age 6 through age 18 is the higher of - (i) 133 percent FPL;CMS-2349-P 161 (ii) The highest effective income level for each age group in effect under the Medicaid State plan for coverage under th e applicable sections of the Act listed at §435.118(a), or waiver of the State plan covering such age group, as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordan ce with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act; or (iii) For infants under age 1, 185 percent FPL. 15. Revise the undesignated center heading that is before §435.119 to read as follows: Mandatory Coverage for Individuals Age 19 through 64 16. Section 435.119 is revised to read as follows: §435.119 Coverage for individuals age 19 or older and under age 65 at or below 133 percent FPL. (a) Basis . This section implements secti on 1902(a)(10)(A)(i)(VIII) of the Act. (b) Eligibility . The agency must provide Medicaid to individuals who: (1) Are age 19 or older and under age 65; (2) Are not pregnant; (3) Are not entitled to or enrolled for Medi care benefits under part A or B of title XVIII of the Act; (4) Are not otherwise eligible for and enroll ed for mandatory coverage under a State’s Medicaid State plan in accordance with subpart B of this part; and (5) Have household income th at is at or below 133 percent FPL for a household of the applicable family size. (c) Coverage for dependent children

.CMS-2349-P 162 (1) A State may not provide Medicaid to a pare nt or other caretaker relative living with a dependent child if the child is und er the age specified in paragra ph (c)(2) of this section, unless such child is receiving benefits under Medicai d, the Children’s Health Insurance Program under subchapter D of this chapter, or otherwise is enrolled in other minimum essential coverage as defined in §435.4 of this part. (2) For the purpose of paragraph (c)(1) of th is section, the age sp ecified is under age 19, unless the State had elected as of March 23, 2010 to provide Medicaid to individuals under age 20 or 21 under §435.222 of this part, in which cas e the age specified is such higher age. Subpart C--Options for Coverage 17. The heading for subpart C is revi sed to read as set forth above. 18. Section 435.218 is added to read as follows: §435.218 Individuals above 133 percent FPL. (a) Basis . This section implements section 1902(a)(10)(A)(ii)(XX) of the Act. (b) Eligibility

. (1) Criteria . The agency may provide Me dicaid to individuals who: (i) Are under age 65; (ii) Are not eligible for and enrolled for mandatory coverage under a State’s Medicaid State plan in accordance with subpart B of this part; (iii) Are not otherwise eligib le for and enrolled for optional coverage under a State’s Medicaid State plan in accordance with subpart C of this part, based on information available to the State from the application filed by or on behalf of the individual; andCMS-2349-P 163 (iv) Have household income that exceeds 133 percent FPL but is at or below the income standard elected by the agency and approved in its Medicaid State plan, for a household of the applicable family size. (2) Limitations

. (i) A State may not, except as permitted unde r an approved phase-in plan adopted in accordance with paragraph (b)(3) of this section, provide Medicaid to higher income individuals described in paragraph (b)(1) of this section without providing Medicaid to lower income individuals described in such paragraph. (ii) The limitation on coverage of parents and other caretaker relatives specified in §435.119(c) also applies to c overage under this section. (3) Phase-in plan . A State may phase in coverage to all individuals described in paragraph (b)(1) of this section under a phase-in plan submitted in a State plan amendment to and approved by the Secretary. Subpart E--General Eligibility Requirements 19. Section 435.403 is amended by-- A. Redesignating paragraphs (h) and (i) as paragraphs (i) and (h), respectively. B. Revising newly redesignate d paragraphs (h)(1) and (h)(4) C. Revising newly redesignated paragraphs (i)(1) and (i)(2). D. Removing newly redesignated paragraph (i)(3). E. Further redesignating newly redesignate d paragraph (i)(4) as paragraph (i)(3). F. Amending paragraph (l)(2) by removing “paragraph (h)” and adding “paragraph (i)” in its place. The revisions and addition read as follows:CMS-2349-P 164
§435.403 State residence. * * * * * (h) Individuals age 21 and over

. (1) For an individual not residi ng in an institution as define d in paragraph (b) of this section, the State of residence is the State where the individual-- (i) Intends to reside, including without a fixed address or, if incapable of stating intent, where the individual is living; or (ii) Has entered the State with a job commitme nt or seeking employme nt (whether or not currently employed).
* * * * * (4) For any other institutionalized individual, the State of resi dence is the State where the individual intends to reside or , if incapable of stating intent , where the individual is living. (i) Individuals under age 21

. (1) For an individual under age 21 who is capable of indicating intent and who is emancipated from his or her parent or who is ma rried, the State of residence is determined in accordance with paragraph (h )(1) of this section. (2) For an individual under age 21 not describe d in paragraph (i)(1) of this section, not living in an institution as defined in paragraph (b ) of this section and not eligible for Medicaid based on receipt of assistance under title IV-E of the Act, as addr essed in paragraph (g) of this section, the State of re sidence is the State: (i) Where the individual resides, including with a custodial pare nt or caretaker or without a fixed address; orCMS-2349-P 165 (ii) Where the individual’s parent or caretaker has en tered the State with a job commitment or seeking employment (w hether or not currently employed).
* * * * * Subpart G--General Financ ial Eligibility Requi rements and Options 20. Section 435.603 is added to read as follows: §435.603 Application of modified ad justed gross income (MAGI). (a) Basis, scope, and implementation

. (1) This section implements sec tion 1902(e)(14) of the Act. (2) Effective January 1, 2014, the agency must apply the financial methodologies set forth in this section in determining the financial eligibility of all individu als for Medicaid, except for individuals identified in para graph (i) of this sect ion and as provided in paragraph (a)(3) of this section. (3) In the case of determini ng ongoing eligibility for benefici aries determined eligible for Medicaid on or before December 31, 2013 a nd receiving Medicaid as of January 1, 2014, application of the financial methodologies set fo rth in this section must not be applied until March 31, 2014 or the next regularly-scheduled rede termination of eligibility for such individual under §435.916, whichever is later, if the individual otherwise would lose elig ibility as a result of the application of these methodologies. (b) Definitions . For purposes of this section-- Code means the Internal Revenue Code of 1986. Family size means the number of persons counted as members of an individual’s household. In the case of determining the family size of a pregnant woman, the pregnant woman is counted as 2 persons. In the case of determin ing the family size of other individuals who haveCMS-2349-P 166 a pregnant woman in their househol d, the pregnant woman is counted, at State option, as either 1 or 2 person(s). Tax dependent has the meaning provided in §435.4 of this part. (c) Basic rule . Except as specified in paragraph (i ) of this section, the agency must determine financial eligibility for Medicaid based on “household income” as defined in paragraph (d) of this section. (d) Household income

. (1) Except as provided in paragraphs (d)(2) and (d)(3) of this s ection, household income is the sum of the MAGI-based income, as define d in paragraph (e) of this section, of every individual included in the indi vidual’s household, minus an amount equivalent to 5 percentage points of the Federal poverty level fo r the applicable family size. (2) The MAGI-based income of an individual who is included in the household of his or her natural, adopted or step parent and is not required to file a tax return under section 6012 of the Code for the taxable year in which eligibil ity for Medicaid is being determined, is not included in household income whether or not the individual files a tax return. (3) In the case of individuals described in paragraph (f)(2)(i) of this section, household income also includes actually available cash su pport provided by the person claiming such individual as a tax dependent. (e) MAGI-based income . For the purposes of this s ection, MAGI-based income means income calculated using the same financial met hodologies used to determine modified adjusted gross income as defined in section 36B(d)(2)( B) of the Code, except that, notwithstanding the treatment of the follo wing under the Code-- (1) An amount received as a lump sum is c ounted as income only in the month received.CMS-2349-P 167 (2) Scholarships or fellowship grants used for education purposes and not for living expenses are excluded from income. (3) American Indian/Alaska Native exceptions. The following are excluded from income: (i) Distributions from Alaska Native Corporations and Settlement Trusts; (ii) Distributions from any propert y held in trust, or that is subject to Federal restrictions, or otherwise under the supervision of the Secretary of the Interior. (iii) Distributions resulting from real prope rty ownership interests related to natural resources and improvements-- (A) Located on or near a reservation or w ithin the most recent boundaries of a prior Federal reservation; or (B) Resulting from the exerci se of Federally-protected ri ghts relating to such real property ownership interests; (iv) Payments resulting from ownership intere sts in or usage rights to items that have unique religious, spiritual, traditional, or cultural significance or rights that support subsistence or a traditional lifestyle according to applicable Tribal Law or custom; (v) Student financial assistance provided under the Bureau of Indian Affairs education
programs. (f) Household

. (1) Basic rule for taxpayers not claimed as a tax dependent . In the case of an individual filing a tax return for the taxable year in which an initial determination or redetermination of eligibility is being made, and who is not clai med as a tax dependent by another taxpayer, the household consists of the taxpa yer and all tax dependents.CMS-2349-P 168 (2) Basic rule for individual s claimed as a tax dependent . In the case of an individual who is claimed as a tax depende nt by another taxpayer , the household is the household of the taxpayer claiming such individual as a tax de pendent, except that the household must be determined in accordance with paragraph (f )(3) of this section in the case of -- (i) Individuals other than a s pouse or a biological, adopted or step child who are claimed as a tax dependent by another taxpayer; (ii) Individuals under age 21 liv ing with both parents, if th e parents are not married; and (iii) Individuals under age 21 claimed as a tax dependent by a non-custodial parent. (3) Rules for individuals who neither file a tax return nor are claimed as a tax dependent

. In the case of individuals who do not file a Fe deral tax return and ar e not claimed as a tax dependent, the household consists of the indivi dual and, if living w ith the individual – (i) The individual’s spouse; (ii) The individual’s natural, adopted and step children under age 19 or, if such child is a full-time student, under age 21; and (iii) In the case of individuals under age 19, or, in the case of full-time students, under age 21 the individual’s natural, adopted and step parents and adoptive and step siblings under age 19 or, if such sibling is a full-time student, under age 21. (4) Married couples . In the case of a married couple living together, each spouse will be included in the household of the other spouse, regard less of whether they f ile a joint tax return under section 6013 of the Code or whether one spouse is claimed as a tax dependent by the other
spouse. (g) No resource test or income disregards

. In the case of indi viduals whose financial eligibility for Medicaid is determined in accord ance with this section, the agency must not –CMS-2349-P 169 (1) Apply any assets or resources test; or (2) Apply any income or expense disregards under sections 1902(r) (2) or 1931(b)(2)(C), or otherwise under title XIX, of the Act. (h) Budget period. (1) Applicants and new enrollees . Financial eligibility for Medicaid for applicants and other individuals not receiving Medi caid benefits at the point at which eligibility for Medicaid is being determined must be based on current mo nthly household income and family size. (2) Current beneficiaries . For individuals who have been determined financially-eligible for Medicaid using the MAGI-based methods set fo rth in this section, a State may elect in its State plan to base financial el igibility either on current monthly household income and family size or projected annual household inco me for the current calendar year. (3) In determining current monthly or projected annual household income under paragraph (h)(1) or (h)(2) of this section, the agency may adopt a reasona ble method to include a prorated portion of reasonably pr edictable future income, to acc ount for a reasonably predictable decrease in future income, or both, as eviden ced by a signed contract for employment, a clear history of predictable fluctuations in income, or other clear indicia of such future changes in income. Such future increase or decrease in in come must be verified in the same manner as other income, in accordance with the income and eligibility verification requirements at §435.940 et seq., including by self-att estation if reasonably compatib le with other electronic data obtained by the agency in accordance with such sections. (i) Eligibility Groups for which modified MAGI-based methods do not apply

. The financial methodologies described in this section are not applied in determining the eligibility for individuals whose eligib ility for Medicaid is being determin ed on the following bases or underCMS-2349-P 170 the following eligibility groups. For individuals described in para graphs (i)(3) through (i)(6) of this section, the agency must use the fina ncial methods described in §435.601 and §435.602 of this subpart. (1) Individuals whose eligibility for Medicaid does not require a dete rmination of income by the State Medicaid agency, incl uding, but not limited to, indivi duals deemed to be receiving Supplemental Security Income (SSI) benef its and eligible for Medicaid under §435.120, individuals receiving SSI benefits and e ligible for Medicaid under §435.135, §435.137 or §435.138 of this subpart and indivi duals for whom the State relie s on a finding of income made by an Express Lane agency, in accordance with section 1902(e)(13) of the Act. (2) Individuals who are age 65 or older. (3) Individuals whose eligibility is being determined on the basis of being blind or disabled, or on the basis of bei ng treated as being blind or disa bled, including, but not limited to, individuals eligible und er §435.121, §435.232 or §435.234 of this part or under section 1902(e)(3) of the Act. (4) Individuals whose eligibility is being de termined on the basis of the need for longterm care services, including nur sing facility servi ces or a level of care in any institution equivalent to such services; home and commun ity-based services under section 1915 or under a demonstration under section 1115 of the Act; or serv ices described in sec tions 1905(a)(7) or (24) or in sections 1905(a)(22) and 1929 of the Act. (5) Individuals who are being evaluated for eligibility for Me dicare cost sharing assistance under section 1902(a)(10)(E) of the Act, but only for purposes of determining eligibility for such assistance. (6) Individuals who are being evaluated for coverage as medically needy under subpartsCMS-2349-P 171 D and I of this part. Subpart J—Eligibility in the States and District of Columbia Applications 21. Section 435.905 is revised to read as follows: §435.905 Availability of program information. (a) The agency must furnish the following in formation in electronic and paper formats, and orally as appropriate, to all applican ts and other individuals who request it: (1) The eligibility requirements; (2) Available Medicaid services; and (3) The rights and responsibilities of applicants and beneficiaries. (b) Such information must be provided insimple and understandable terms and in a manner that is accessible to persons who are Li mited English Proficient (LEP) and individuals living with disabilities. 22. Section 435.907 is revised to read as follows: §435.907 Application. (a) The agency must require an application from the applicant, an authorized representative, or someone acting responsibly for the applicant. (b) The application must be - (1) The single, streamlined application for a ll insurance affordability programs developed by the Secretary in accordance with section 1413 (b)(1)(A) of the Affordable Care Act; or (2) An alternative single, streamlined applica tion for all insurance affordability programs developed by a State and approved by the Secret ary in accordance with section 1413 (b)(1)(B) of the Affordable Care Act. The alternative a pplication must be no more burdensome than theCMS-2349-P 172 single streamlined application described in pa ragraph (b)(1) of this section and ensure coordination across insurance affordability programs. (c) For individuals applying fo r coverage, or who may be e ligible, on a basis other than the applicable modified adjusted gross income standard in accordance with §435.911, the agency may use either the single, streamlined applica tion and supplemental forms to collect additional information needed to determine eligibility on such other basis or an alternative application form approved by the Secretary. (d) The agency must establish procedures to enable an individual, or other authorized person acting on behalf of the indivi dual, to submit an application -- (1) Via the internet website desc ribed in §435.1200(d) of this part; (2) By telephone; (3) Via mail; (4) In person; or (5) Via facsimile. (e) Information related to non-applicants

. (1) The agency may not require an individual who is not applying for benefits for himself or herself (a “non-applicant”) to provide an SSN or information regarding such individual’s citizenship, nationality, or im migration status on any appli cation or supplemental form. (2) The agency may request that a househol d member who is a non-applicant provide an SSN, only if-- (i) Provision of the SSN to the agency is voluntary and the agency permits the completion of the application without such information;CMS-2349-P 173 (ii) The SSN from a non-applicant is used to determine an appli cant’s eligibility for Medicaid or for a purpose direc tly connected to the administration of the State plan; and (iii) The agency clearly no tifies the non-applicant that the provision of an SSN is voluntary and informs the individual how the SSN will be used, at the time it is requested. (f) The initial application must be signed under penalty of perjury. Electronic, including telephonically recorded, signatures and handwritte n signatures transmitted by fascimile or other electronic transmission must be accepted. 23. Section 435.908 is revised to read as follows: §435.908 Assistance with application and redetermination. (a) The agency must allow individual(s) of th e applicant or beneficiary's choice to assist in the application process or duri ng a redetermination of eligibility. (b) The agency must provide assistance to any individual seeking help with the application or redetermination process in pers on, over the telephone, and online, and in a manner that is accessible to individuals with disabilities and those who are limited English proficient. 24. Redesignate §435.911 through §435.914 as §435.912 through §435.915 respectively. 25. Add new §435.911 to read as follows: § 435.911 Determination of eligibility. (a) Statutory basis . This section implements secti ons 1902(a)(4), (a)(8), (a)(10)(A), (a)(19), and (e)(14) and section 1943 of the Act. (b)(1) Applicable modified ad justed gross income standard means 133 percent of the Federal poverty level or, if higher –- (i) In the case of parents and other caretaker relative s described in §435.110(b), the income standard established in accordance with §435.110(c);CMS-2349-P 174 (ii) In the case of pregnant women, the inco me standard establishe d in accordance with §435.116(c); (iii) In the case of individuals under ag e 19, the income standard established in accordance with §435.118(c); (iv) The income standard established under §435.218(b)(1)(iv) of this part, if the State has elected to provide coverage under such sectio n and, if applicable, coverage under the State’s phase-in plan has been implemented for the indivi dual whose eligibility is being determined. (2) [Reserved] (c) For each individual w ho has submitted an applicat ion described §435.907 and who meets the non-financial requirements for eligibilit y (or for whom the agency is providing a reasonable opportunity to provide documentati on of citizenship or immigration status, in accordance with sections 1903(x), 1902(ee) or 1137( d) of the Act), the State Medicaid Agency must comply with the following -- (1) Eligibility determination for mandatory co verage on basis of modified adjusted gross income . For each such individual who is under age 19, pregnant, or age 19 or older and under age 65 and not entitled to or enrolled for Medica re benefits under part A or B or title XVIII of the Act, and whose household income is at or below the applicable modified adjusted gross income standard, the agency must promptly and without undue delay furnish Medicaid benefits to such individual in accordance with parts 440 and 441 of this chapter. (2) Eligibility on basis other than applicable modified adjusted gross income standard

. For each such individual not determined eligib le for Medicaid in accordance with paragraph (c)(1) of this section, th e agency must collect additional info rmation as needed, consistent with §435.907(c), to--CMS-2349-P 175 (i) Determine whether such individual is e ligible for Medicaid on any other basis. (ii) Promptly and without undue delay fu rnish Medicaid to each such individual determined eligible, in a ccordance with parts 440 a nd 441 of this chapter; and (iii) Comply with the requirements set forth in §435.1200(g). 26. Section 435.916 is revised to read as follows: §435.916 Periodic redeterminations of Medicaid eligibility. (a) Redetermination of indivi duals whose Medicaid eligibility is based on modified adjusted gross income

. (1) Except as provided in para graph (d) of this section, th e eligibility of Medicaid beneficiaries whose financial elig ibility is based on the applicable modified adjusted gross income standard in accordan ce with §435.911(c)(1)must be redete rmined once every 12 months. (2) The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on re liable information contai ned in the individual’s account or other more current info rmation available to the agency, including but not limited to information accessed through any data bases accessed by the agency under §435.948, §435.949 and §435.956 of this part. (i) Individuals redetermined e ligible on the basis of information available to the agency

. (A) If the agency determines, on the basis of information avai lable to the agency that the individual remains eligible for Medicaid, consistent with the re quirements of this subpart and subpart E of part 431 the agency must notify the individual – (1) Of the eligibility determina tion, and basis therefore; andCMS-2349-P 176 (2) That the individual must inform the ag ency, through any of the modes permitted for submission of applications under §435.907(d) of this subpart, if a ny of the information contained in such notice is inaccurate. (B) Such individuals must not be requ ired to sign and return the notice. (ii) Individuals not redetermined eligible on basis of information available to agency. If the agency cannot determine, on the basis of in formation available to it, that the individual remains eligible for Medicaid, or if it otherwise needs additional information to complete the redetermination, the agency must comply with the requirements in paragraph (a)(3) of this section. (3) Use of a pre-populated renewal form . For individuals not rede termined eligible under paragraph (a)(2) of this s ection, the agency must -- (i) Provide the individual with – (A) A renewal form containing information avai lable to the agency that is needed to renew eligibility, as spec ified by the Secretary; (B) At least 30 days from the date of the renewal form to respond and provide necessary information; (C) Notice of the agency’s decision concerning el igibility in accordance with this subpart and subpart E of part 431 of this chapter; and (D) The ability to respond to the renewal form through any of the modes permitted for submission of applications unde r §435.907(d), and if required, si gn the renewal electronically. (ii) Verify any information provided by the beneficiary in accordance with §435.945 through §435.956.CMS-2349-P 177 (iii) Reconsider in a timely manner the eligibil ity of an individual who is terminated for failure to respond to the renewal form, if the individual subseque ntly responds to the agency within a reasonable period after the date of termin ation without the need for the individual to file a new application. (4) Transmission of data on individu als no longer eligible for Medicaid

. If an individual is determined ineligible for Medicaid, the agency must assess the individual for eligibility for other insurance affordability pr ograms and transmit the electronic account and any relevant information used to make the eligibility determin ation to the appropriate program in accordance with the requirements set fort h in §435.1200(g) of this part. (b) Redetermination of individuals whose Me dicaid eligibility is determined on a basis other than modified adjusted gross income

. The agency must redeterm ine the eligibility of Medicaid beneficiaries excepted from modified adjusted gross income under §435.603(i) of this part, for circumstances that may change, at least every 12 months. The agency may -- (1) Consider blindness as continuing until the reviewing physician under §435.531 of this part determines that a beneficiary’s vision has improved beyond the definition of blindness contained in the plan; and (2) Consider disability as continuing until the review team, under §435.541 of this part, determines that a beneficiary’s disability no longer meets the definition of di sability contained in the plan. (c) Procedures for reporting changes

. The agency must have procedures designed to ensure that beneficiaries make timely and accurate reports of any change in circumstances that may affect their eligibility and that such change s may be reported in accordance with the modes required for submission of applicatio ns under §435.907(d) of this subpart.CMS-2349-P 178 (d) Agency action on information about changes

. Consistent with the requirements of §435.952 of this subpart-- (1) The agency must promptly redetermine eligibility when it receives information about changes in a beneficiary's circumstances that may affect his or her eligibility. (2) If the agency has information about anticipated changes in a beneficiary's circumstances that may affect his or her elig ibility, it must redetermine eligibility at the appropriate time based on such changes. 27. Section 435.940 is revised to read as follows: §435.940 Basis and scope. The income and eligibility verifica tion requirements set forth at §435.940 through §435.960 of this subpart are base d on sections 1137, 1902(a)(4 ), 1902(a)(19), 1903(r)(3) and 1943(b)(3) of the Act and section 14 13 of the Affordable Care Act. 28. Section 435.945 is revised to read as follows: §435.945 General requirements. (a) Nothing in these regulations in this s ubpart should be construed as limiting the State’s program integrity measures or affecting the State’s obligation to ensure that only eligible individuals receive benefits , consistent with part 455 of this subchapter.
(b) Except with respect to citizenship and immigration st atus information, and subject to the verification requirements set forth in this su bpart, the agency may accept attestation without requiring further paper documentation (either self -attestation by the appli cant or beneficiary or by a parent, caretaker or other pers on acting responsibly on behalf of an applicant or beneficiary) of all information needed to determine the eligibil ity of an applicant or be neficiary for Medicaid.CMS-2349-P 179 (c) The agency must request and use informa tion relevant to verify ing an individual’s eligibility for Medicaid in accordance with §435.948 through §435.956 of this subpart. (d) The agency must furnish, in a timely ma nner, income and eligibility information needed for verifying eligibility for the following programs: (1) To other agencies in the State and other States and to the Federal programs both listed in §435.948(a) of this subpart and identified in sec tion 1137(b) of the Act; (2) Other insurance affordability programs; (3) The child support enforcement program under part D of title IV of the Act; and (4) SSA for OASDI under title II and for SSI benefits under title XVI of the Act. (e) The agency must, as required under sec tion 1137(a)(7) of the Act, and upon request, reimburse another agency listed in §435.948(a) of this subpart or paragraph (d) of this section for reasonable costs incurred in furnishing info rmation, including new developmental costs associated with furnishing the information to another agency. (f) Prior to requesting information for an appl icant or beneficiary from another agency or program under this subpart, the agency must inform the individua l that the agency will obtain and use information available to it under this subpart to verify income and eligibility or for other purposes directly connected to the administration of the State plan. (g) The agency must report information as prescribed by the Secretary for purposes of determining compliance with §431.305, subpart P of part 431, §435.910, §435.913, and §435.940 through §435.965 of this chapter and of evalua ting the effectiveness of the income and eligibility verification system.CMS-2349-P 180 (h) Information exchanged electronically be tween the State Medicaid agency and any other agency or program must be sent and receive d via secure electronic interfaces as defined in §435.4 of this part. (i) The agency must execute written agreements with other agencies before releasing data to, or requesting data from, those agencies. Such agreements must provide for appropriate safeguards limiting the use and disclosure of info rmation as required by Federal or State law or regulations. 29. Section 435.948 is revised to read as follows: §435.948 Verifying financial information. (a) The agency must request information relating to financial eligibility from other agencies in the State and other States and Federa l programs in accordance w ith this section. To the extent the agency determines such information is useful to verifying the financial eligibility of an individual, the agency must request: (1) Information related to wages, net earnings from self-employment, unearned income and resources from the State Wage Informati on Collection Agency (SWICA), the Internal Revenue Service, the Social Security Admini stration, the agencies administering the State unemployment compensation laws, the State-ad ministered supplementary payment programs under section 1616(a) of the Act, and any State program administered under a plan approved under Titles I, X, XIV, or XVI of the Act; and (2) Information related to eligibility or en rollment from the Public Assistance Reporting Information System (PARIS), the Supplementa l Nutrition Assistance Program, and other insurance affordability programs. (Note: all eligibility determination systems must conduct data matching through PARIS).CMS-2349-P 181 (b) To the extent that the information identi fied in paragraph (a) is available through the electronic service established in accordance with §435.949 of this subpart, the agency must obtain the information through such service. (c)(1) If the information identified in paragra ph (a) of this section is not available through the electronic service established in accordance with §435.949 of this s ubpart, the agency may obtain the information directly from the appropr iate agency or program consistent with the requirements in §435.945 of this subpart. (2) The agency must request the information by SSN, or if a SSN is not available, using other personally identifying information in the individual’s a ccount, if possible. (d) Flexibility in information collection and verification

. Subject to approval by the Secretary, the agency may request and use income information from a source or sources alternative to those listed in pa ragraph (a) of this section provid ed that such alternative source will reduce the administrative costs and burdens on individuals and States while maximizing accuracy, minimizing delay, meeting applicable requirements relating to the confidentiality, disclosure, maintenance, or use of information, and promoting c oordination with other insurance affordability programs. 30. Section 435.949 is added to read as follows: §435.949 Verification of information through an electronic service. (a) The Secretary will establish an electroni c service through which States may verify certain information with, or obtain such informa tion from, Federal agencies, including the Social Security Administration, the De partment of Treasury, the Depart ment of Homeland Security and any other Federal offices that maintain records containing information related to eligibility for Medicaid or other minimu m essential coverage.CMS-2349-P 182 (b) To the extent that information is avai lable through the electron ic service established by the Secretary, States must obtain the inform ation through such service, subject to the requirements in subpart C of part 433 of this chapter. (c) The Secretary may provide for, or approve a request from a St ate to utilize, an alternative mechanism through which States may collect and verify such information, if the Secretary determines that such alternative mechanism meets the criteria set forth in §435.948(d) of this subpart. 31. Section 435.952 is revised to read as follows: § 435.952 Use of information and requests of a dditional information from individuals. (a) The agency must promptly evaluate information received or obtained by it in accordance with regulations under §435.940 thro ugh §435.960 of this subpart to determine whether such information may affect the eligibility of an individual or the be nefits to which he or she is entitled. (b) If information provided by or on behalf of an individual (on the application or renewal form or otherwise) is reasonably compa tible with information obtained by the agency in accordance with §435.948, §435.949 or §435.956 of this subp art, the agency must determine or redetermine eligibility based on such information. (c) An individual must not be required to provide additi onal information or documentation unless information needed by the agency in accordance with §435.948, §435.949 or §435.956 of this subpart cannot be obtained electronically or the information obtained electronically is not reasonably compatible with information pr ovided by or on behalf of the individual.CMS-2349-P 183 (1) In such cases, the agency may seek additional information, including a statement which reasonably explains the discrepancy or other additional information (including paper documentation), from the individual. (2) The agency must provide the individual a reasonable period to fu rnish such additional information. (d) The agency may not deny or terminate eligibility or reduce benefits for any individual on the basis of information received in accordance with regulations under §435.940 through §435.960 of this subpart unless the ag ency has sought additional info rmation from the individual in accordance with paragraph (c) of this secti on, and provided proper noti ce and hearing rights to the individual in accordance with this subpart and subpart E of part 431. §435.953 [Removed] 32. Section 435.953 is removed. §435.955 [Removed] 33. Section 435.955 is removed. 34. Section 435.956 is added to read as follows: §435.956 Verification of other no n-financial information. (a) [Reserved] (b) [Reserved] (c) State residency

. (1) The agency may verify State residency in accordance with §435.945( b) of this subpart or through other reasonable verification procedur es consistent with the requirements in §435.952 of this subpart.CMS-2349-P 184 (2) A document that provides evidence of i mmigration status may not be used alone to determine State residency. (d) Social security numbers . The agency must verify social security numbers (SSNs) in accordance with §435.910(f) and (g) of this subpart. (e) Pregnancy and household size . The agency must accept se lf-attestation of pregnancy and the individuals that comprise an individu al’s household, as define d in 435.603(f), unless the state has information that is not reasonably co mpatible with such attestation, subject to the requirements of §435.952 of this subpart. (f) Age and date of birth. The agency may verify date of birth in accordance with §435.945(b) of this subpart or thr ough other reasonable verification procedures consistent with the requirements in §435.952 of this subpart. 35. Subpart M is added to read as follows: Subpart M--Coordination of eligibility and enrollment between Medicaid, CHIP, Exchanges and other insurance affordability programs. §435.1200 Medicaid agency responsibilities. (a) Statutory basis . This section implements secti ons 1943 and 2102(b)(3)(B) and (c)(2) of the Act. (b) Definitions . As used in this subpart: Applicable modified adjusted gross income (MAGI) standard is defined as provided in §435.911(b)(1) of this part. Application means the single streamlined application described in §435.907(b) submitted by or on behalf of an individual. Exchange is defined as provided in §435.4 of this part.CMS-2349-P 185 Insurance Affordability Program is defined as provided in §435.4 of this part. Secure electronic interface is defined as provided in §435.4 of this part. (c) General requirements . The State Medicaid Agency must -- (1) Participate in and comply with the coor dinated eligibility and enrollment system described in section 1943 of the Act to ensure that the agency fulfills the responsibilities set forth in paragraphs (e) through (g) of this section in partnership wi th other insurance affordability
programs. (2) Consistent with §431.10( d) of this chapter, enter into one or more agreements with the Exchange and the agencies administering other in surance affordability programs, as defined in §435.4 of this part, as are necessary to fulf ill each of the requirements of this section. (3) In accordance with the Medicaid State pl an, certify the criteri a, including but not limited to applicable MAGI standards as define d in §435.911(b) of this subpart and satisfactory immigration status, necessary for the Exch ange to determine Medicaid eligibility. (d) Internet web site . The State Medicaid agency must make available to current and prospective Medicaid applicants a nd beneficiaries a web site that: (1) Supports applicant and bene ficiary activities, includi ng accessing information on the insurance affordability programs available in th e State, applying for and renewing coverage, and other activities as appropriate; and (2) Is accessible to people w ith disabilities in accordance with the Americans with Disabilities Act and section 504 of the Rehabilitation Act and provides meaningful access for persons who are limited English proficient.CMS-2349-P 186 (e) Provision of Medicaid for individuals found eligible for Medicaid by the Exchange

. For each individual found eligible for Medicaid by the Exchange based on the applicable MAGI standard, the agency must establish procedures – (1) To receive, via secure el ectronic interface, the elec tronic account containing the finding of Medicaid eligibility, all information provided on the application, and any information obtained or verified by the Exchan ge in making such finding; and (2) To furnish Medicaid to the individual promptly and without undue delay in accordance with parts 440 and 441 of this chapter, to the same extent and in the same manner as if such individual had been determined eligible for Medicaid by the agency. (f) Transfer of applications from other insurance affordability programs to the State Medicaid agency . The agency must adopt procedures to ensure that it promptly and without undue delay determines the Medica id eligibility of individuals determined to be potentially eligible for Medicaid by other insurance affordability programs. The procedures must ensure that-- (1) The agency accepts, via secure electroni c interface, the electro nic account for the individual screened as potentia lly Medicaid eligible, including all information provided on the application and any information obtained or veri fied by the insurance affordability program; (2) The agency may not request information or documentation from the individual that is already contained in the electronic account; (3) The agency determines the Medicaid el igibility of the indi vidual, promptly and without undue delay, in accordance with §435.911(c) of this part in the same manner as if the application had been submitted directly to, and pr ocessed by, the agency, except that the agency must not verify eligibility criteria already veri fied by the insurance affordability program.CMS-2349-P 187 (4) The agency notifies the insurance affordab ility program of the final determination of the individual’s eligibility or ineligibility for Medicaid. (g) Evaluation of eligibility for the Exch anges and other insurance affordability
programs . (1) Individuals determined not eligible for Medicaid

. For individuals who submit an application which includes sufficient informati on to determine Medicaid eligibility, and whom the agency determines are not eligible for Medi caid, the agency must establish procedures to assess such individuals for potential eligibility for other insurance affo rdability programs and promptly and without undue dela y transfer such individuals’ el ectronic accounts to any other program(s) for which they may be eligible. Th e electronic account must include all information provided on the application and any information obtained or verified by the agency, including the determination of Medicaid ineligibility. (2) Individuals undergoing a Medicaid eligibil ity determination on a basis other than
MAGI . In the case of an individual with househ old income, as defined in §435.603(d) of this part, greater than the applicable MAGI standa rd and for whom the agency is determining eligibility on the basis of being blind or disabl ed, the agency must establish procedures to – (i) Assess the individual for potential eligibility for c overage under other insurance affordability programs and, promptly and w ithout undue delay, provide the individual’s electronic account to any such program for which the individual may be eligible. The electronic account must be transmitted via secure electron ic interface and must include all information provided on the application and any information obtained or verified by the agency, along with the determination that the indivi dual is not Medicaid eligible on the basis of the applicable MAGI standard, but that a final determination of Medicaid eligibility is still pending; andCMS-2349-P 188 (ii) Notify the appropriate insurance affordability program(s) of the agency’s final determination of eligibility or ineligibility. PART 457—ALLOTMENTS A ND GRANTS TO STATES 36a. The authority citation for part 457 continues to read as follows: Authority: Section 1102 of the Social S ecurity Act (42 U.S.C. 1302) 36b. In part 457, remove the term "family income" wh erever it appears and add in its place the term "household income." 37. In part 457 remove “SCHIP” wherever it appears and add inits place “CHIP.” Subpart A--Introduction; State Plans for Chil d Health Insurance Programs and Outreach Strategies 38. Section §457.10 is amended by-- A. Removing the definition of “Med icaid applicable income level.” B. Adding the following definitions in alphabetical order “Affordable Insurance Exchange (Exchange),” “Electr onic account,” “Household income,” “Insurance affordability program,” “Secure electronic interface,” a nd “Single, streamlined application.” The additions read as follows: §457.10 Definitions and use of terms. * * * * * Affordable Insurance Exchange (Exchange) is defined as provided in §435.4 of this chapter.
* * * * *CMS-2349-P 189

Electronic account means an electronic file that includes all information collected and generated by the State regarding each individual’s CHIP eligibility and enrollment, including all documentation required under §457.380 of this part.
* * * * * Household income is defined as provided in §435.603(d) of this chapter. Insurance affordability program is defined as provided in §435.4 of this chapter.
* * * * * Secure electronic interface is defined as provided in §435.4 of this chapter.
* * * * * Single, streamlined application means the single, streamlined application form that is used by the State in accordance with §435.907( b) of this chapter and 45 CFR 155.405 for individuals to apply for coverage for all insurance affordability programs.
* * * * * 39. Section §457.80 is amended by revising pa ragraph (c)(3) to read as follows: §457.80 Current State child health insura nce coverage and coordination. * * * * * (c) * * * (3) Ensure coordination with other insurance affordability programs in the determination of eligibility and enrollment in coverage to ensure that there are no unnecessary gaps in coverage, including through use of the procedures described in §457.305, §457.350 and §457.353. Subpart C--State Plan Requirements: Eligib ility, Screening, Applications, and Enrollment 40. Section 457.300 is amended by–-CMS-2349-P 190 A. Republishing paragraph (a) introductory text. B. Adding paragraphs (a)(4) and (a)(5) C. Revising paragraph (c). The addition and revision reads as follows: §457.300 Basis, scope, and applicability. (a) Statutory basis. This subpart interprets and implements—
* * * * * (4) Section 2107(e)(1)(O) of the Act, which relates to coordination of CHIP with the Exchanges and the State Medicaid agency. (5) Section 2107(e)(1)(F) of the Act, which relates to income determined based on modified adjusted gross income.
* * * * * (c) Applicability . The requirements of this subpart apply to child health assistance provided under a separate child health program. Regulations relating to eligibility, screening, applications and enrollment that are applicable to a Medicaid expans ion program are found at §435.4, §435.229, §435.905 through §435.908, §435.1102, §435.940 through §435.958, §435.1200, §436.3, §436.229, and §436.1102 of th is chapter. 41. Section 457.301 is amended by–- A. Adding the definitions of “Family size” a nd “Medicaid applicable income level” in alphabetical order. B. Removing the definiti on of “Joint application.” The additions read as follows:CMS-2349-P 191
§457.301 Definitions and use of terms. * * * * * Family size is defined as provided in §435.603(b) of this chapter.). Medicaid applicable income level means, for a child, the effective income level (expressed as a percentage of th e Federal poverty level and conve rted to a modified adjusted gross income equivalent level in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act) specified under the policies of the Stat e plan under title XIX of the Act (including for these purposes, a sec tion 1115 waiver authorized by the Secretary or under the authority of section 1902 (r)(2) of the Act) as of Marc h 31, 1997 for the child to be eligible for Medicaid unde r either section 1902(l)(2) or 1905(n)(2) of the Act.
* * * * * 42. Section 457.305 is revised to read as follows: §457.305 State plan provisions. The State plan must include a description of-- (a) The standards, consistent with § 457.310 and §457.320 of this subpart, and financial methodologies consistent with §457.315 of this subpa rt used to determin e the eligibility of children for coverage under the State plan. (b) The State's policies governing enrollment and disenrollment; processes for screening applicants for and, if eligible, facilitating th eir enrollment in other insurance affordability programs; and processes for implementing wa iting lists and enrollment caps (if any). 43. Section 457.310 is amended by-- A. Republishing paragraph (b) introductory text.CMS-2349-P 192 B. Revising paragraphs (b)(1)(i), (b)(1)(ii), (b)(1 )(iii) introductory text, and (b)(1)(iii)(B). C. Adding paragraph (b)(1)(iv). The revisions and addition read as follows: §457.310 Targeted low-income child. * * * * * (b) Standards

. A targeted low-income child must meet the following standards: (1) * * * (i) Has a household income, as determined in accordance with §457.315, at or below 200 percent of the Federal po verty level for a family of the size involved; (ii) Resides in a State with no Medicaid applicable income level; (iii) Resides in a State that has a Medicaid applicable in come level and has a household income that either—
* * * * * (B) Does not exceed the income level specified for such child to be eligible for medical assistance under policies of the State pl an under title XIX on June 1, 1997; or (iv) Is not eligible for Medi caid as a result of the elimin ation of income disregards as specified under §435.603(g) of this chapter.
* * * * * 44. Section 457.315 is added to read as follows: §457.315 Application of modified adjusted gross income and household definition. Effective January 1, 2014, the CHIP agency shall apply the financial methodologies set forth in paragraphs (b) thr ough (h) of §435.603 of this chapter in determ ining the financialCMS-2349-P 193 eligibility of all individuals for CHIP. The exception to appl ication of such methods for individuals for whom the State re lies on a finding of income made by an Express Lane agency at §435.603(i)(1) also applies. 45. Section 457.320 is amended by-– A. Removing paragraphs (a)(4) and (a)(6). B. Redesignating paragraphs (a)(5), (a)(7), (a)(8), (a)(9), and (a)(10) as paragraphs (a)(4), (a)(5), (a)(6), (a)(7), and (a)(8), respectively. C. Revising paragraph (d). D. Removing and reserving paragraph (e)(2). The revisions and additions read as follows: §457.320 Other eligibility standards. * * * * * (d) Residency. (1) Residency for a non-institutionalized child who is not a ward of the State must be determined in accordance with §435.403(i) of this chapter. (2) A State may not— (i) Impose a durational re sidency requirement; (ii) Preclude the following individuals from declaring residence in a State— (A) An institutionalized child who is not a wa rd of a State, if the State is the State of residence of the child's custodial parent or caretaker at the time of placement; or (B) A child who is a ward of a State, regardless of where the child lives (3) In cases of disputed residency, the St ate must follow the process described in §435.403(m) of this chapter.CMS-2349-P 194 (e) * * * (2) [Reserved] 46. Section 457.330 is added to read as follows: §457.330 Application. The State shall use the single, streamlined application used by the State in accordance with §435.907(b) of this chapter, and otherwise comply with th e provisions of such §435.907 of this chapter, excep t that the terms of §435.907(c) of this chapter(relati ng to applicants seeking coverage on a basis other than modified adjusted gross income) do not apply. 47. Section 457.335 is added to read as follows: §457.335 Availability of program inform ation and Internet Web site. The terms of §435.905 and §435.1200(d) of this ch apter apply equally to the State in administering a separate CHIP. 48. Section 457.340 is amended by revising the s ection heading and paragraphs (a), (b) and (f) to read as follows: §457.340 Application for and enrollment in CHIP. (a) Application assistance . A State must afford families an opportunity to apply for CHIP without delay and must provide assistance to families in understanding and completing applications and in obtaining any required doc umentation. Such assistance must be made available to applicants and enrollees in pers on, over the telephone, and online, and must be provided in a manner that is accessible to indivi duals living with disabilities and those who are limited English proficient. (b) Use of Social Security number . A State must require ea ch individual applying for CHIP to provide a Social Security number (SSN) in accordance with §435.910 and cannotCMS-2349-P 195 require non-applicants to provide an SSN consistent with the re quirements at §435.907(e) of this chapter.
* * * * * (f) Effective date of eligibility. A State must specify a method for determining the effective date of eligibility for CHIP, which can be determined based on the date of application or through any other reasonable method that ensu res coordinated transition of children between programs as family circumstances change a nd avoids gaps or overlaps in coverage.

49. Section 457.343 is added to read as follows: §457.343 Periodic redetermination of CHIP eligibility. The redetermination procedures described in §435.916 of this chapter apply equally to the State in administering a separate CHIP, except that the State shall verify information needed to renew CHIP eligibility in accordance with §457.380 of this subpart, shall provide notice regarding the State’s determination of renewed el igibility or termination in accordance with §457.340(e) of this subpart and sha ll comply with the requirements set forth in §457.350 of this subpart for screening individuals for other in surance affordability programs and transmitting such individuals’ electronic acc ount and other relevant informati on to the appropriate program. 50. Section 457.348 is added to read as follows: §457.348 Determinations of Children’s Health In surance Program eligibility from other applicable health coverage programs. (a) Exchange determinations of CHIP eligibility

. (1) For each individual found eligible for CHIP by the Exch ange based on the applicable MAGI standard, the State must establish procedures –CMS-2349-P 196 (i) To receive, via secure electronic interface, the elec tronic account containing the finding of CHIP eligibility and all information pr ovided on the application and/or verified by the Exchange which made such finding; and (ii) To furnish CHIP to the individual prom ptly and without undue delay in accordance with §457.340 of this subpart, to th e same extent and in the same manner as if such individual had been determined by the State to be eligib le for CHIP in accordance with such section. (2) [Reserved]. (b) Screening for potential CHIP eligibility by other insurance affordability programs

. The State must adopt procedures to ensure that it promptly a nd without undue delay determines the CHIP eligibility of individuals determined to be potentially eligible for CHIP, by other insurance affordability programs. The procedures must ensure that-- (1) The State accepts, via secure electroni c interface, the electronic account for the individual screened as potent ially CHIP eligible, including all information provided on the application and any information obtained or veri fied by the insurance affordability program; (2) The State may not request information or documentation from the individual that is already contained in the electronic account; (3) The State determines the CHIP eligibilit y of the individual, promptly and without undue delay, in accordance with §457.340 in the sa me manner as if the application had been submitted directly to, and processed by, the State, ex cept that the State must not verify eligibility criteria already verified by the in surance affordability program. (4) The State notifies the insurance affordability program of the final determination of the individual’s eligibility or ineligibility for CHIP.CMS-2349-P 197 (c) Option to accept CHIP eligibility determinat ions from the Medicaid agency. A State may accept determinations of CHIP eligibility made by another insurance affordability program in the same manner that it accepts Exchange dete rminations of CHIP eligibility under paragraph (a) of this section. (d) Certification of eligibility criteria. The State must certify for the Exchange the criteria necessary to determine CHIP eligibilit y, including but not limited to the income standard adopted for its separate CHIP program and the cr iteria related to satisfact ory immigration status, as set forth in the State plan in accordance with §457.305 of this part. 51. Section 457.350 is amended by-- A. Revising the section heading. B. Revising paragraphs (a ), (b), (c), and (f). C. Removing and reserving paragraph (d). D. Adding paragraphs (i), (j), and (k). The additions and revisions read as follows: §457.350 Eligibility screening and en rollment in other insuran ce affordability programs. (a) State plan requirement. The State plan shall include a description of the coordinated eligibility and enrollment proce dures used, at intake and any fo llow-up eligibility determination, including any periodic redete rmination, to ensure that: (1) Only targeted low-income children are fu rnished CHIP coverage under the plan; and (2) Enrollment is facilitated for applicants found to be potentially eligible for other insurance affordability programs in accordance with this section.CMS-2349-P 198 (b) Screening objectives . A State must identify any app licant, beneficiary, or other individual applying for coverage on the single, streamlined application who is potentially eligible for: (1) Medicaid on the basis of having househol d income at or below the applicable modified adjusted gross income standard, as defined in §435.911(b) of this chapter; (2) Medicaid on a basis other than having hous ehold income at or below the applicable modified adjusted gross income standard; or (3) Eligibility for other insurance afford ability programs, including eligibility for advanced payments for premium tax credit s based on having household income above the income standard in the State for CHIP or the appl icable modified adjusted gross income standard in the State for Medicaid, as appropriate, or fo r enrollment in a qualified health plan through an Exchange without advanced paymen ts for a premium tax credit. (c) Income eligibility test . To identify the individuals desc ribed in paragraphs (b)(1) and (b)(3) of this section, a State must apply the methodologies used to determine household income described in §457.315 of this part. (d) [Reserved].
* * * * * (f) Applicants found potentially eligible for Medicaid based on modified adjusted gross income. If the screening process rev eals that the applicant is poten tially eligible for Medicaid based on modified adjusted gross income, the State must - (1) Promptly transmit the elec tronic account, and any other re levant information obtained through the application, to the Medicaid agen cy via secure electronic interface; andCMS-2349-P 199 (2) Except as provided in §457.355 of this subpart, find the app licant ineligible, provisionally ineligible, or suspend the appli cant’s application for CHIP unless and until the Medicaid application for the applicant is denied; and (3) Determine or redetermine eligibility for CHIP, consistent with the timeliness standards established under §457.34 0(d) of this subpart, if — (i) The State is notified, in accordance with §435.1200(f)(4) of this chapter that the applicant has been found inel igible for Medicaid; or (ii) The State is notified prior to the final Medicaid eligibility determination that the applicant’s circumstances have changed and anot her screening shows that the applicant is not likely to be eligible for Medicaid.
* * * * * (i) Applicants found potentially eligible for other insurance affordability programs. If the screening process reveals that an applicant is not eligible for CHIP, is not screened as potentially eligible for Medicaid on the basi s of modified adjusted gross in come, and is potentially eligible for enrollment in a qualified health plan through the Exchange or other insurance affordability programs, the State must promptly transmit the electronic account, and other relevant information obtained through the ap plication to the applicable pr ogram using secure electronic interfaces. (j) Applicants potentially eligible for Medicaid on a basis other than modified adjusted gross income . If, based on information obtained through the single, streamlined application, the applicant is not screened as potentially eligible for Medicaid on the basis of modified adjusted gross income but may be eligible for Medi caid on another basis, the State must –CMS-2349-P 200 (1) Promptly transmit the elec tronic account, and any other re levant information obtained through the application to the Medicaid agency using secure electr onic interfaces; and (2) Complete the determination of eligib ility for CHIP in accordance with §457.340 of this subpart; and (3) Disenroll the beneficiary from CHIP if the State is notified in accordance with §435.1200(f)(4) of this chapter that the applicant has been determined eligible for Medicaid. (k) A State may enter into an arrangement with the Exchange to make eligibility determinations for advanced premium tax credits in accordance with Section 1943(b)(2) of the
Act. 52. Section 457.353 is revised to read as follows: §457.353 Monitoring and evaluation of screening process. States must establish a mechanism and monitor to evaluate the screen and enroll process described at §457.350 of this subpart to ensure that children who are: (a) Screened as potentially eligible for other insurance affordability programs are enrolled in such programs, if eligible; or (b) Determined ineligible for other insura nce affordability programs are enrolled in CHIP, if eligible. 53. Section 457.380 is revised to read as follows: §457.380 Eligibility verification. (a) General requirements . Except with respect to veri fication of citizenship and immigration status, and subject to the verification requirements set forth in paragraph (d) of this section, the State may accept attestation of all info rmation needed to determ ine the eligibility of an applicant or beneficiary for CHIP.CMS-2349-P 201 (b) [Reserved] (c) State Residents . If the State does not accept self -attestation of residency, the State must verify residency in accordance with §435.956(c) of this chapter. (d) Income . The State must verify the income of an individual by using the data sources and following the standards and procedures for ve rification of financial e ligibility described in §435.945(b), §435.948 and §435.952 of this chapter. (e) Verification of othe r factors of eligibility . For eligibility requi rements not described in paragraphs (b), (c) or (d) of this section, a State may adopt reasonabl e verification procedures, except that the State must accept se lf-attestation of pregnancy and the individuals that comprise an individual’s household unless the state has information that is not reasonably compatible with such attestation. The State may verify date of birth in accordance with §435.945(b) or through other reasonable verificati on procedures consistent w ith the requirements in §435.952. (f) Requesting information

. (1) The State must use electronic sources of data, if available, before requesting additional information, including paper documentation, from an individual. (2) An individual shall not be required to provide additi onal information or documentation unless information needed by the State cannot be obtained electronically or information obtained electronically is not reasonably compatible with information provided by or on behalf of the individual. In such cases, th e State may seek additional information, including a statement which reasonably explains the disc repancy and/or paper documentation, from the individual. The State must provide the individual a reasonable period to furnish such information.CMS-2349-P 202 (g) Electronic service . To the extent that informa tion sought under this section is available through the electronic service established by the Secret ary at §435.949 of this chapter, the State shall access the info rmation through that service. (h) Interaction with prog ram integrity requirements

. Nothing in this section should be construed as limiting the State’s program integrity measures or affecting the State’s obligation to ensure that only eligible i ndividuals receive benefits. (i) Flexibility in information collection and verification

. Subject to approval by the Secretary, the State may modify the methods to be used for collection of information and verification of information as set forth in this s ection, provided that such alternative source will reduce the administrative costs and burdens on individuals and States while maximizing accuracy, minimizing delay, meeting applicable requirements relating to the confidentiality, disclosure, maintenance, or use of information, and promoting c oordination with other insurance affordability programs.CMS-2349-P

(Catalog of Federal Domestic Assistance Pr ogram No. 93.778, Medical Assistance Program)

Dated: June 29, 2011

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_____________________________ Donald M. Berwick, Administrator , Centers for Medicare & Medicaid Services

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Approved: August 10, 2011

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_____________________________ Kathleen Sebelius, Secretary , Department of Health and Human Services

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BILLING CODE 4120-01-P

[FR Doc. 2011-20756 Filed 08/12/2011 at 8:45 am; Publication Date: 08/17/2011]