DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 431, 433, 435, and 457 

[CMS-2349-P] 

RIN 0938-AQ62 

Medicaid Program; Eligibility Changes under the Affordable Care Act of 2010 

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule. 

SUMMARY: This proposed rule would implement provisions of the Patient Protection and 

Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 

(collectively referred to as the Affordable Care Act). The Affordable Care Act expands access to 

health insurance through improvements in Medicaid, the establishment of Affordable Insurance 

Exchanges (“Exchanges”), and coordination between Medicaid, the Children’s Health Insurance 

Program (CHIP), and Exchanges. This proposed rule would implement sections of the 

Affordable Care Act related to Medicaid and CHIP eligibility, enrollment simplification, and 

coordination. 

 In addition, this proposed rule also sets out the increased Federal Medical Assistance 

Percentage (FMAP) rates and the related conditions and requirements that will be available for 

State medical assistance expenditures relating to “newly eligible” individuals and certain medical 

assistance expenditures in “expansion States” beginning January 1, 2014, including a proposal of 

three alternative methodologies to use for purposes of applying the appropriate FMAP for 

expenditures in accordance with section 2001 of the Affordable Care Act. 
CMS-2349-P 2 

DATES: To be assured consideration, comments must be received at one of the addresses 

provided below, no later than 5 p.m. on [OFR--insert date 75 days after 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 cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please choose only one of the ways listed): 

1. Electronically. You may submit electronic comments on this regulation to 

http://www.regulations.gov. Follow the "Submit a comment" instructions. 

 2. By regular mail. You may mail written comments to the following address ONLY: 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-2349-P, 

P.O. Box 8016, 

Baltimore, MD 21244-8016. 

Please allow sufficient time for mailed comments to be received before the close of the 

comment period. 

3. By express or overnight mail. You may send written comments to the following 

address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-2349-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 
CMS-2349-P 3 

Baltimore, MD 21244-1850.

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your 

written comments ONLY to the following addresses prior to the close of the comment period: 

a. For delivery in Washington, DC-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, commenters are encouraged to 

leave their comments in the CMS drop slots located in the main lobby of the building. A stampin clock is available for persons wishing to retain a proof of filing by stamping in and retaining 

an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

If you intend to deliver your comments to the Baltimore address, call telephone number 

(410) 786-7195 in advance to schedule your arrival with one of our staff members. 

 Comments erroneously mailed to the addresses indicated as appropriate for hand or courier 

delivery may be delayed and received after the comment period. 
CMS-2349-P 4 

For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Sarah Delone, (410) 786-0615. 

Stephanie Kaminsky, (410) 786-4653. 

SUPPLEMENTARY INFORMATION: 

A detailed Preliminary Regulatory Impact Analysis associated with this proposed rule is 

available at http://www.cms.gov/MedicaidEligibility/downloads/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, including any personally identifiable or confidential 

business information that is included in a comment. We post all comments received before the 

close of the comment period on the following Web site as soon as possible after they have been 

received: http://www.regulations.gov. Follow the search instructions on that web site to view 

public comments. 

 Comments received timely will also be available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of a document, at the 

headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To 

schedule an appointment to view public comments, phone 1-800-743-3951. 

Table of Contents 

I. Background 
CMS-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 Older and Under Age 65 at or below 133 Percent 

FPL (§435.119) 

2. Individuals Above 133 Percent FPL (§435.218)

3. Amendments to Part 435, Subparts A through D 

a. Eligibility for Parents and Other Caretaker Relatives, Pregnant Women, and Children 

(1) Parents and Other Caretaker Relatives (§435.110) 

(2) Pregnant Women (§435.116) 

(3) Infants and Children Under Age 19 (§435.118) 

b. Other Conforming Changes to Existing Regulations 

B. Financial Methodologies for Determining Medicaid Eligibility Based on MAGI under 

the Affordable Care Act 

1. Point-in-time Measurement of Income (budget periods) (§435.603(h)) 

2. Changes to Medicaid Financial Methods 

3. Provisions of Proposed Rule Implementing MAGI Methods 

a. Proposed Methods for Counting Income Based on MAGI (§435.603(e)) 

b. Proposed Rules for Determining Household Composition under MAGI Based 

Methods (§435.603(f)) 

(1) Household Composition for Tax Filers (§435.603(f)(1)) and their Tax Dependents 
CMS-2349-P 6 

(§435.603(f)(2)) 

(2) Household Composition for Non-Filers (§435.603(f)(3)) 

(3) Retention of Existing Financial Methods (§435.603(i)) 

C. Residency for Medicaid Eligibility Defined 

1. Residency Definition for Adults (age 21 and over) §435.403(h)) 

2. Residency Definition for Children (under age 21) (§435.403(i)) 

D. Application and Enrollment Procedures for Medicaid 

1. Availability of Program Information (§435.905) 

2. Applications (§435.907) 

3. Assistance with Application and Redetermination (§435.908) 

E. MAGI Screen (§435.911) 

F. Coverage Month 

G. Verification of Income and Other Eligibility Criteria (§435.940 through §435.956) 

1. Basis, Scope, and General Requirements (§435.940 and §435.945) 

2. Verification of Financial Eligibility (§435.948) 

3. Verification of Information from Federal agencies (§435.949) 

4. Use of Information and Request for Additional Information (§435.952) 

5. Verification of Other Non-Financial Information (§435.956)

H. Periodic Redetermination of Medicaid Eligibility (§435.916) 

I. Coordination of Eligibility and Enrollment among Insurance Affordability Programs – 

Medicaid Agency Responsibilities (§435.1200) 

1. Basic Responsibilities (§435.1200(c)) 

2. Internet Web site (§435.1200(d)) 
CMS-2349-P 7 

3. Provision of Medical Assistance for Individuals found Eligible for Medicaid by an 

Exchange (§435.1200(e)) 

4. Transfer of Applications from other Insurance Affordability Programs to the State 

Medicaid Agency (§435.1200(f)) 

5. Evaluation of Eligibility for other Insurance Affordability Programs (§435.1200(g)) 

J. Single State Agency (§431.10 and §431.11) 

K. Provisions of Proposed Regulation Implementing Application of MAGI to CHIP 

1. Definitions and Use of Terms (§457.10 and §457.301) 

2. State Plan Provisions (§457.305) 

3. Application of MAGI and Household Definition (§457.315) 

4. Other Eligibility Standards (§457.320) 

5. Clarifications Related to MAGI 

L. Residency for CHIP Eligibility (§457.320) 

M. CHIP Coordinated Eligibility and Enrollment Process 

1. Applications and Outreach Standards (§457.330, §457.334, §457.335 and §457.340) 

2. Determination of CHIP Eligibility and Coordination with Exchange and Medicaid 

(§457.348 and §457.350) 

3. Periodic Redetermination of CHIP Eligibility (§457.343) and Coverage Months 

4. Verification of Eligibility (§457.380) 

5. Ministerial Changes (§457.80, §457.300, §457.301, §457.305, and §457.353) 

N. Federal Medical Assistance Percentage (FMAP) for Newly Eligible Individuals and 

for Expansion States 

1. Availability of FMAP (§433.10(c)) 
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 Increase in FMAP (§433.10(c)(7)) 

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

2. Methodology (§433.206(a) and §433.206(b)) 

3. Alternative 1: 2009 Eligibility Standard Threshold 

4. Alternative 2: Statistically Valid Sampling Methodology (§433.210) 

5. Alternative 3: Use of a FMAP Methodology Based on Reliable Data Sources 

(§433.212) 

6. Additional Methodology Approaches. 

III. Collection of Information Requirements 

IV. Response to Comments 

V. Summary of Preliminary Regulatory Impact Analysis 

Regulations Text 

Acronyms 

 Because of the many organizations and terms to which we refer by acronym in this proposed 

rule, we are listing these acronyms and their corresponding terms in alphabetical order below: 

Act Social Security Act 

AFDC Aid to Families with Dependent Children 

BBA Balanced Budget Act of 1997 

CHIP Children’s Health Insurance Program 

CMS Centers for Medicare & Medicaid Services 

DHS Department of Homeland Security 
CMS-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 Reconciliation Act of 2010 (Pub. L. 111-152, enacted 

March 30, 2010) 

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

IRA Individual Retirement Account 

IRC Internal Revenue Code of 1986 

IRS Internal Revenue Service 

LEP Limited English Proficient 

MAGI Modified adjusted gross income 

MSA Medical Savings Account 

PRWORA Personal Responsibility and Work Opportunity Reconciliation Act of 1996 

QI Qualifying Individuals 

QMB Qualified Medicare Beneficiaries 

SHO State Health Official 

SLMB Specified Low-Income Medicare Beneficiaries 

SMD State Medicaid Director 

SNAP Supplemental Nutrition Assistance Program 

SPA State Plan Amendment 

SSA Social Security Administration 
CMS-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 Care Act (Pub. L. 111-148, enacted on March 23, 

2010), was amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-

152, enacted on March 30, 2010), and together these laws are referred to as the Affordable Care 

Act. In addition, section 205 of the Medicare & Medicaid Extenders Act of 2010 (Pub. L. 111-

309, enacted December 15, 2010) made technical corrections to the Social Security Act (the Act) 

to implement the Affordable Care Act. This proposed rule addresses changes to Medicaid and 

CHIP eligibility in the Affordable Care Act. 

Prior to the implementation of the Affordable Care Act in 2014, individuals who fall into 

certain “categories” or “categorical groups” are eligible for Medicaid, including low-income 

children, pregnant women, parents and other caretaker relatives, seniors, and people with 

disabilities. Federal minimum income eligibility standards vary by category. All States 

currently cover pregnant women and children under age 6 at or below 133 percent of the Federal 

poverty level (FPL) (in some States the minimum eligibility level is 185 percent FPL for 

pregnant women and children under one), and children age 6 through age 18 with family 

incomes at or below 100 percent of the FPL, though many States have implemented higher 

standards for pregnant women and children. The Federally-specified minimum eligibility levels 

for parents, people with disabilities and the elderly are significantly lower, although States have 

the option to expand coverage to people within these categories at higher income levels. Prior to 
CMS-2349-P 11 

the Affordable Care Act, States could not cover non-disabled, non-elderly adults who do not 

have dependent children, regardless of their income level, except through a Medicaid 

demonstration under Section 1115 of the Act. As a result of the varying Federal minimum 

standards and State options, eligibility for Medicaid is complicated and significant gaps continue 

to exist even among the lowest income Americans. 

The Affordable Care Act extends and simplifies Medicaid eligibility. Starting in calendar 

year (CY) 2014, it replaces the complex categorical groupings and limitations to provide 

Medicaid eligibility to all individuals under age 65 with income at or below 133 percent FPL, 

provided that the individual meets certain non-financial eligibility criteria, such as citizenship or 

satisfactory immigration status. Children and, in some States, pregnant women will be eligible at 

income levels equal to or higher than the 133 percent level, depending on existing 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 for most individuals, as well 

as for CHIP, will be determined using methodologies that are based on modified adjusted gross 

income (MAGI), as defined in the Internal Revenue Code of 1986 (IRC). Per the Affordable 

Care Act, eligibility for advance payments of premium tax credits for the purchase of private 

coverage through the Exchange will use MAGI as it is defined in the IRC to determine eligibility 

as well. Medicaid, CHIP and the Exchanges will use common income methodologies and will 

align the rules and methodologies used to evaluate eligibility for most individuals under all three 

programs. 

The alignment of the methods for determining eligibility is one part of an overall system 

established by the Affordable Care Act that allows for real-time eligibility determinations of 
CMS-2349-P 12 

most applicants and allows for prompt enrollment of individuals in the “insurance affordability 

program” for which they qualify. In this proposed rule, insurance affordability programs include 

Medicaid, CHIP, advance payments of premium tax credits and cost-sharing reductions through 

the Exchange, and any State-established Basic Health Program, if applicable. 

Individuals will not have to apply to multiple programs nor will they be sent from one 

program to another if they initially apply to a program for which they are not ultimately eligible. 

To achieve coordination, this proposed rule for Medicaid and CHIP eligibility is aligned with the 

applicable provisions in the proposed rule establishing the Exchanges published in the July 15, 

2011 Federal Register (76 FR 41866) (“Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health Plans”), as well as in the accompanying 

proposed rule published elsewhere in this Federal Register implementing the Affordable Care 

Act provisions related to the eligibility for advance payments of premium tax credits and costsharing reductions and enrollment in a qualified health plan through the Exchanges (referred to 

hereinafter as the “Exchange proposed rule”) as well as the proposed rule developed by the 

Department of the Treasury regarding the health insurance premium assistance tax credit (“the 

Treasury proposed rule”), also published elsewhere in this Federal Register. 

Section 2001 of the Affordable Care Act ensures that States will receive an increased 

FMAP for all newly eligible individuals, defined as those who would not have been eligible in 

the State in December 2009. The FMAP for these newly eligible individuals will be 100 percent 

for Calendar Year (CY) 2014 – 2016, gradually declining to 90 percent in 2020 where it remains 

indefinitely. In addition, some States that had expanded coverage to adults (parents and adults 

without children) prior to December 2009, referred to as “expansion States,” shall also receive 

an increased FMAP that begins in 2014 between the regular FMAP and the FMAP for newly 
CMS-2349-P 13 

eligible individuals and equalizing with the newly eligible FMAP in 2019 and beyond. The 

proposed rule sets forth the definitions of newly eligible individuals and expansion States as well 

as the applicable FMAPs beginning in 2014. 

While the new FMAPs provide significant new federal financial support for States, they 

could cause States significant burden to administer if States had to evaluate all applicants under 

the new simplified rules for purposes of determining eligibility and under their otherwise 

obsolete December 2009 eligibility rules for purposes of determining the appropriate FMAP. A 

dual system would be inefficient and likely lead to inaccuracies. To promote States’ ability to 

operate efficient and effective processes, this rule proposes three alternative approaches for 

determining the applicable FMAP. Based on the comments received through this proposed rule 

and the results of an upcoming CMS/HHS feasibility study, we expect to modify, narrow or 

combine the approaches available to States in the final rule. By establishing an alternative 

methodology or methodologies for use in the FMAP determination by a State, the proposed rule 

aims to ensure that it will not be necessary for a State to make an eligibility determination for 

every individual using two separate eligibility systems and thereby advancing efficient and 

effective operations for States, individuals, and the Federal government. 

Starting in 2014, individuals and small businesses will be able to purchase private health 

insurance through State-based competitive marketplaces called Affordable Insurance Exchanges. 

Exchanges will offer Americans competition, choice, and clout. Insurance companies will 

compete for business on a level playing field, driving down costs. Consumers will have a choice 

of health plans to fit their needs. And Exchanges will give individuals and small businesses the 

same purchasing clout as big businesses. The Departments of Health and Human Services, 

Labor, and the Treasury (the Departments) are issuing regulations implementing Exchanges in 
CMS-2349-P 14 

several phases. The first in this series was a Request for Comment relating to Exchanges, 

published in the August 3, 2010 Federal Register (75 FR 45584). Second, Initial Guidance to 

States on Exchanges was published issued on November 18, 2010. Third, a proposed rule for the 

application, review, and reporting process for waivers for State innovation was published in the 

March 14, 2011 Federal Register (76 FR 13553). Fourth, two proposed regulations were 

published in the Federal Register on July 15, 2011 (76 FR 41866 and 76 FR 41930) to 

implement components of the Exchange and health insurance premium stabilization policies in 

the Affordable Care Act. Fifth, a proposed regulation for the establishment of the Consumer 

Operated and Oriented Plan (CO-OP) Program under section 1322 of the Affordable Care Act 

was published in the Federal Register on July 20, 2011 (76 FR 43237). Sixth, three proposed 

rules, including this one, are being published in the Federal Register on [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 the Children’s Health Insurance Program (CHIP).

B. Legislative Overview 

This proposed rule implements the Medicaid and CHIP eligibility and enrollment 

provisions of the Affordable Care Act including: 

● Section 1413, which directs the Secretary of HHS (the “Secretary”) to establish a 

streamlined system for individuals to apply for and be enrolled in an insurance affordability 

program if eligible. 

● Section 1414, which directs the Secretary of Treasury, upon written request, to provide 

the Secretary with certain tax return information used in determining an individual’s eligibility 

for all insurance affordability programs. 
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 determination of financial eligibility for Medicaid 

for certain populations. 

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

● Section 2201, which simplifies and coordinates eligibility and enrollment system 

between all insurance affordability programs. 

● Section 2001(a)(3), which added a new section 1905(y) of the Act, which provides for 

a significant increase in the FMAP for medical assistance expenditures for individuals 

determined eligible under the adult group in the State and who are considered to be “newly 

eligible”, as defined in section 1905(y)(2)(A) of the Act. 

● Section 10201(c)(4), which added a new section 1905(z) to the Act. As discussed in 

section N of this rule, Section 1905(z) of the Act contains two provisions, which make available 

additional FMAP rates for the expansion States. 

In this rule, “CHIP” refers to a separate child health program operated by a State under 

title XXI and the regulations governing such programs at 42 CFR part 457. 

C. Overview of the Proposed Rule

The proposed amendments to 42 CFR parts 431, 435, and 457 in this rule propose the 

Federal policies and guidelines necessary to facilitate the creation of the eligibility and 

enrollment system established by the Affordable Care Act. Amendments to 42 CFR part 435 

subparts B and C are proposed to implement the statutory changes to Medicaid eligibility. We 

propose amendments to subpart A to add new or revised definitions. 
CMS-2349-P 16 

Amendments to 42 CFR part 435 subpart G propose that, for most individuals, financial 

eligibility for Medicaid will be based on MAGI, to define the new MAGI-based financial 

methodologies, and to identify those individuals whose eligibility will not be based on MAGI. 

Proposed amendments to subpart J and the addition of a new subpart M provide Federal 

rules to promote the establishment by States of a seamless and coordinated system to determine 

eligibility of individuals seeking assistance and to enroll them in the appropriate insurance 

affordability program. We propose a new subpart M to delineate the responsibilities of the State 

Medicaid agency in the coordinated system of eligibility and enrollment established under the 

Affordable Care Act, and propose comparable amendments for CHIP at 42 CFR Part 457. 

We propose to amend 42 CFR part 433 to add new provisions at §433.10(c) to indicate 

the increases to the FMAPs as available to States under the Affordable Care Act. A number of 

provisions in the Affordable Care Act are not included in this proposed rule, but either have been 

or will be addressed in separate rulemaking or other guidance. In the April 19, 2011 Federal 

Register, we published the Federal Funding for Medicaid Eligibility Determination and 

Enrollment Activities final rule (76 FR 21950) that provides details on enhanced Federal funding 

for Medicaid eligibility systems. 

We also intend to issue additional proposed rules on related matters such as appeals, 

notices, presumptive eligibility, eligibility for former foster care children, deletion of existing 

regulations that have been rendered obsolete, and eligibility policy in the territories. In addition, 

we intend to release a Request for Information (RFI) related to State conversion of current 

income standards to MAGI-equivalent standards per section 2002 of the Affordable Care Act as 

well as a RFI related to the State flexibility to establish basic health programs for 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 provisions being proposed and do not 

necessarily follow the order of the regulation’s text. 

A. Changes to Medicaid Eligibility

1. Coverage for Individuals Age 19 or Older and Under Age 65 at or Below 133 Percent FPL

(§435.119) 

 Section 2001(a) of the Affordable Care Act adds a new section 1902(a)(10)(A)(i)(VIII) of the 

Act (referred to as “the adult group”), under which States will provide Medicaid coverage 

starting in CY 2014 to individuals under age 65 who are not otherwise mandatorily eligible for 

Medicaid under sections 1902(a)(10)(A)(i)(I) through (VII) or (IX) of the Act and have 

household income, based on the new MAGI methods described in section II.B of this proposed 

rule, at or below 133 percent FPL. Although the Act specifies that this new group is for 

individuals under age 65, individuals under age 19 are not included because such individuals 

with household income at or below 133 percent FPL are covered in the eligibility groups under 

sections 1902(a)(10)(A)(i)(IV), (VI), and (VII) of the Act. 

 We propose to replace the current §435.119 (which addresses obsolete provisions for 

eligibility of qualified family members under section 1902(a)(10)(A)(i)(V) of the Act for which 

the statutory authority ended on September 30, 1998), to establish this new eligibility group. 

 Proposed §435.119(a) and (b) set forth the policy, explained above. Reflected in proposed 

paragraph (b), financial eligibility for the adult group will be based on MAGI, as defined in 

section 1902(e)(14) of the Act and implemented at proposed §435.603; there is no resource test. 

Section 1902(a)(10)(A)(i)(VIII) of the Act specifies that individuals may be eligible for 

the adult group if they “are not described in a previous subclause of” section 1902(a)(10)(A)(i) 
CMS-2349-P 18 

of the Act. Under these proposed rules, an individual is not eligible under the new adult group if 

the individual is otherwise eligible under section 1902(a)(10)(A)(i) of the Act and 42 CFR 435 

subpart B, but may be eligible for the adult group if the individual is described in but not eligible 

for Medicaid under another mandatory group. This will mean that an individual who is a 

recipient of Supplemental Security Income (SSI) benefits, and so potentially eligible under 

section 1902(a)(10)(A)(i)(II) of the Act, may be eligible for coverage under the adult group in a 

State that has elected in accordance with section 1902(f) of the Act and §435.121 to use more 

restrictive eligibility criteria for Medicaid than SSI. 

The new adult group will include parents as well as adults not living with children. It 

will also include individuals currently eligible under an optional coverage group (such as, for 

individuals with disabilities) who have household income, based on the new MAGI methods, at 

or below 133 percent of the FPL and otherwise meet the criteria for coverage under the new 

group. At proposed §435.119(c), we codify section 1902(k)(3) of the Act, which permits 

coverage of parents and other caretaker relatives under the new adult group only if their children 

under age 19 (or higher if the State has elected to cover children under age 20 or 21 under 

§435.222) are enrolled in Medicaid or “other health insurance coverage.” In paragraph (c)(1), 

we propose to define “other health insurance coverage” to mean minimum essential coverage, as 

defined in §435.4 of this proposed rule. 

2. Individuals Above 133 Percent FPL (§435.218) 

 Section 2001(e) of the Affordable Care Act adds a new section 1902(a)(10)(A)(ii)(XX) of the 

Act, giving States the option starting in CY 2014 to provide Medicaid coverage to individuals 

under age 65 (including pregnant women and children) with income above 133 percent FPL. 

This new eligibility group provides a simplified mechanism for States to cover individuals whose 
CMS-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 alternative to the use of income disregards under 

section 1902(r)(2) or 1931(b)(2)(C) of the Act, which have been used in the past to expand 

eligibility, but which will no longer be available starting in 2014. 

We propose to add a new §435.218 establishing this optional eligibility group, which 

covers individuals who are under 65 years old; are not eligible for and enrolled in an eligibility 

group under section 1902(a)(10)(A)(i) of the Act and 42 CFR 435 subpart B or under section 

1902(a)(10)(A)(ii) of the Act and 42 CFR part 435 subpart C; and have household income based 

on MAGI that exceeds 133 percent of the FPL but does not exceed the optional income standard 

established by the State. The basis and basic eligibility criteria for this group are set forth in 

proposed §435.218(a) and (b)(1). 

 Section 1902(a)(10)(A)(ii)(XX) of the Act specifies that individuals may be eligible under 

this category if they “are not described in or enrolled under a previous subclause of” section 

1902(a)(10)(A)(ii) of the Act. We interpret the language “described in or enrolled under” to 

mean eligible for another optional or mandatory group under section 1902(a)(10)(A) of the Act, 

and we propose at §435.218(b)(1)(ii) and (iii) that this limitation applies only if the individual is 

eligible for or enrolled under another eligibility group that is covered by the State. 

To ease administrative burden on States and to make it easier for States to enroll eligible 

individuals under the simplest eligibility category, we also propose in §435.218(b)(1)(ii) and (iii) 

that an individual who meets the eligibility criteria at §435.218(b)(1)(i) and (iv) would be 

determined eligible under this group, unless the individual can be determined eligible under 

another eligibility group based on information available to the State from the application. A 

State is not required to make determinations regarding eligibility factors such as disability, level 
CMS-2349-P 20 

of care, or resources first in order to decide whether an individual would be eligible for another 

eligibility group, unless such determination can be made based only on the information provided 

on the application. However, as an exception to this, if an individual appears to be eligible as 

“medically needy” based on information provided, he or she could still be enrolled in this 

optional group. States would still have to determine eligibility under all possible categories if the 

individual is not eligible under this new optional group. 

Section 1902(a)(10)(A)(ii)(XX) of the Act provides that, to be eligible under this optional 

group, an individual’s income must “not exceed the highest income eligibility level established 

under the State plan or under a waiver of the plan[.]” We are interpreting the statute to give 

States flexibility in establishing the income standard for this group, provided such standard 

exceeds 133 percent FPL and is approved in the State plan. 

 Section 1902(hh)(1) of the Act provides that States “may elect to phase-in” coverage for this 

optional group “based on the categorical group (including non-pregnant childless adults) or 

income, so long as the State does not extend such eligibility to individuals...with higher income 

before making individuals...with lower income eligible for medical assistance.” We propose that 

if a State wants to phase-in coverage for this group, it submit a plan for Secretarial approval. 

 Children are included in this new optional group for individuals above 133 percent FPL if 

they are not already eligible for Medicaid. Therefore, if a State covers children above 133 

percent FPL under a separate CHIP and adopts coverage under this new optional group, the State 

ultimately must shift coverage of children with income at or below the income standard from 

CHIP to Medicaid under this group. The State would still be able to claim enhanced FMAP 

under title XXI for such children. 
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 children have coverage in the same manner as 

eligibility is limited for parents and caretaker relatives under the new adult group per section 

1902(k)(3) of the Act. At §435.218(b)(2)(ii), we propose to implement this provision in the 

same manner as proposed for the new adult group at §435.119(c). 

3. Amendments to Part 435, Subparts A through D 

Determining Medicaid eligibility prior to the Affordable Care Act changes in CY 2014 is 

complicated due to a patchwork of multiple mandatory and optional eligibility groups for 

different “categorical populations.” Many States cover 50, 60, or more distinct eligibility 

groups. Financial eligibility is determined using methodologies based on other programs, such 

as the SSI and the former AFDC programs, adding further complexity to the eligibility 

determination process. In this rule, consistent with the Affordable Care Act policies, we propose 

to streamline and simplify current regulations governing Medicaid eligibility for children, 

pregnant women, parents, and other caretaker relatives whose financial eligibility, beginning in 

CY 2014, will be based on MAGI. 

 In response to the President’s request, outlined in Executive Order 13563, that agencies 

streamline and simplify Federal regulations, we propose to use the authority of section 

1902(a)(19) of the Act, which provides “that eligibility ... be determined ... in a manner 

consistent with simplicity of administration and the best interests of recipients,” to simplify and 

consolidate certain existing mandatory and optional eligibility groups into three categories 

starting in CY 2014, to complement the new adult group: (1) parents and caretaker relatives 

(new §435.110); (2) pregnant women (new §435.116); and (3) children (new §435.118). 
CMS-2349-P 22 

 As illustrated in Table 1, we are proposing to collapse existing Medicaid eligibility categories, 

with the goal of making the program significantly easier for States to administer and for the 

public to understand. In subsequent rulemaking, we will provide additional guidance on existing 

regulatory provisions that are effectively subsumed under the provisions contained in these 

proposed rules or have been rendered obsolete for other reasons. In proposing a simplified 

approach to eligibility for populations whose eligibility will be based on MAGI, it is our intent 

that eligibility for coverage will not change for any of the populations as a result of this proposal. 

We solicit comments on the implications of these proposed rules for individuals as well as States. 

Table 1 shows how the mandatory and optional groups in current regulations (the column on the 

left) are moved into the new broader groups (parents, pregnant women, and children) under this 

proposed rule. 

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 X
CMS-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 and other caretaker relatives, pregnant women, and children

(1) Parents and other caretaker relatives (§435.110) 

 We propose to delete in its entirety §435.110 for individuals receiving AFDC and to replace it 

with a new §435.110 for existing eligibility that is continuing under sections 1902(a)(10)(A)(i)(I) 

and 1931(b) and (d) of the Act for parents and other caretaker relatives of dependent children 

(including pregnant women who are parents or caretaker relatives). These statutory provisions 

remain and are not superseded by the provisions of the Affordable Care Act establishing a new 

adult group for individuals not otherwise eligible under section 1902(a)(10)(A)(i) of the Act. 

While the parent/caretaker relative category continues to apply, our proposed rules simplify this 

category considerably and provides States flexibility to set their income eligibility standard under 

this category within allowable Federal parameters. 

 Under the proposed rule, each State will establish an income standard in its State plan for 

coverage of parents and other caretaker relatives under §435.110. The Federal minimum and 

maximum income standards for this group are set forth in sections 1931(b)(2)(A) and 

1931(b)(2)(B) of the Act. The minimum income standard for the new parent/caretaker relative 

group is a State’s AFDC income standards for a household of the applicable family size in effect 

as of May 1, 1988. The maximum income standard would be established as set forth below. The 
CMS-2349-P 24 

maximum income standard for the parent and other caretaker relative eligibility group would be 

the higher of: 

● The State’s effective income level (including any disregard of a block of income) for 

section 1931 families under the State plan or waiver of such plan as of March 23, 2010 or 

December 31, 2013, if higher, converted to a MAGI-equivalent income standard in accordance 

with guidance to be issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act (The 

conversion of current income standards to a MAGI-equivalent standard is discussed in section 

II.B.3.a of this proposed rule.); and 

● The State’s AFDC income standard in effect as of July 16, 1996, increased by no more 

than the percentage increase in the Consumer Price Index for all urban consumers since such 

date. 

If a State’s income standard for the parent/caretaker relative group is below 133 percent 

FPL, parents and other caretaker relatives with income above that income standard and at or 

below 133 percent FPL would qualify for Medicaid under the new adult group. The conversion 

of current income standards to a MAGI-equivalent standard is discussed in section II.B.3.a of 

this proposed rule. 

States currently have the option to cover parents and other caretaker relatives at income 

levels above the standard for families under section 1931 of that Act. They can do so under the 

authority at section 1902(a)(10)(A)(ii)(I) of the Act and §435.210 of the existing regulations. 

This option will continue under the Affordable Care Act for coverage of parents and other 

caretaker relatives who are not eligible for mandatory Medicaid coverage under §435.110 or the 

new adult group at proposed §435.119. We note that parents and other caretaker relatives who 
CMS-2349-P 25 

are Medicare-eligible or elderly may be covered under §435.110 and §435.210, even though they 

are excluded from coverage under the adult group at §435.119. 

 We are also proposing to simplify the income methods for determining eligibility under the 

new parent and other caretaker relative group. Pre-Affordable Care Act, section 1931 of the Act 

requires a two-step process in determining income eligibility: (1) the family must have gross 

income at or below 185 percent of the State’s consolidated standard of need under its AFDC 

program, in effect as of July 16, 1996; and (2) the family’s net countable income after 

subtracting various income exclusions and disregards and expenses must be at or below the 

State’s AFDC payment standard or a higher income standard established by the State under 

section 1931 of the Act. Because each State’s net countable income standard converted to a 

MAGI-equivalent income standard will be lower than its current gross income standard, we 

propose to eliminate the 185 percent gross income test as unnecessary and, to simplify eligibility, 

base income eligibility in proposed §435.110 only on the second prong of the income test, that is, 

the net countable income standard converted to a MAGI-equivalent income standard. 

 Consistent with section 1931 of the Act, we propose Medicaid definitions of “caretaker 

relative” and “dependent child” at §435.4. A caretaker relative is defined as a parent or other 

relative (related by blood, adoption, or marriage) living with a dependent child for whom such 

individual is assuming primary responsibility. Per section 1931 of the Act, to be “dependent,” 

the child must be “deprived” of at least one parent’s support by reason of death, absence, or 

unemployment. Under the statute, a parent is considered to be unemployed if he or she is 

working less than 100 hours per month. However, we propose to codify in this rule the 

flexibility given States in a final rule amending 45 CFR 233.101 (63 FR 42270) and in a State 

Medicaid Director letter dated September 22, 1997 to eliminate the “deprivation” requirement 
CMS-2349-P 26 

altogether (which most States have done) or to establish a higher number of working hours as the 

threshold for determining unemployment. 

 In proposing this rule, we are retaining the minimum income standards specified in Federal 

statute for each eligibility group, while giving States flexibility to set new standards at a level 

that takes into account a State’s current rules regarding how income is counted. In all cases, the 

income standard would be applied to an individual’s MAGI-based household income. We 

considered whether or not States should convert the Federal minimum income standards 

prescribed in statute – for example, the minimum standard for pregnant women and children 

specified in section 1902(l) and for parents and other caretaker relatives in section 1931(b) of the 

Act – to a MAGI-equivalent minimum income standard based on the income exclusions and 

disregards currently used by the State. While doing so could result in maintaining eligibility for 

individuals who might otherwise lose Medicaid due to the elimination of income exclusions and 

disregards under MAGI, if a State were to reduce its income standard to the minimum permitted, 

it also would result in different minimum income eligibility standards being applied across States 

and reduce the amount of eligibility simplification that could be achieved. We, therefore, do not 

propose to require conversion of the Federal minimum income standards currently prescribed in 

statute to MAGI-equivalent standards. 

 Furthermore, we do not believe that the impact on eligibility of the proposed policy will be 

significant. Eligibility standards for children must be maintained through September 2019, in 

accordance with the maintenance of effort provisions (MOE) in section 1902(gg) of the Act, and 

when the MOE provision expires, eligibility for only a small number of children would be 

affected if a State were to drop coverage to the minimum level permitted. Parents and other 

caretaker relatives who could lose eligibility under section 1931 of the Act if a State were to 
CMS-2349-P 27 

reduce coverage to the minimum permitted under the statute would retain eligibility under the 

new adult group. Pregnant women would be affected if a State were to decrease its income 

standard to the statutory minimum level, as the MOE for pregnant women ends with the 

establishment of an Exchange in 2014 and there is no other coverage group to which affected 

pregnant women would necessarily be transferred; instead, pregnant women affected by a State’s 

decision to reduce its Medicaid income standard for pregnant women to the minimum permitted 

under the Act would likely become eligible for advanced payments of the premium tax credit for 

enrollment through the Exchange. 

(2) Pregnant women (§435.116) 

 As is true for parents and caretaker relatives, the law retains eligibility based on pregnancy. 

To simplify the eligibility rules, we propose to replace the current §435.116 for qualified 

pregnant women and qualified children under section 1902(a)(10)(A)(i)(III) of the Act with a 

new §435.116 for pregnant women. In addition, under the authority of section 1902(a)(19) of the 

Act, we are consolidating many different eligibility categories for pregnant women and are 

proposing to include in the revised §435.116 all mandatory and optional eligibility groups, 

except the medically needy, for which pregnancy status and income are the only factors of 

eligibility. The following sections of the Act are included under the proposed §435.116: 1931 

(low-income families); 1902(a)(10)(A)(i)(III) (qualified pregnant women); 

1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(ii)(IX), and 1902(l) (poverty-level related pregnant 

women); 1902(a)(10)(A)(ii)(I) (pregnant women who meet AFDC financial eligibility criteria); 

and 1902(a)(10)(A)(ii)(IV) (institutionalized pregnant women). 

 Under the proposed rule, paragraphs (a) through (c) set forth the basis and basic provisions for 

coverage of pregnant women under §435.116. We propose at §435.116(c) that each State will 
CMS-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 higher income standard, at or below 185 percent 

FPL, was in effect for pregnant women on December 19, 1989 (section 1902(l)(2)(A) of the 

Act). The maximum income standard is the higher of: 

● The highest effective income level (including any disregard of a block of income), 

converted to a MAGI-equivalent income standard, in effect under the State plan or waiver of the 

State plan as of March 23, 2010 or December 31, 2013, if higher, for coverage of pregnant 

women under the sections of the Act identified above; and 

● 185 percent FPL. 

 We are also codifying current law to add a definition of “pregnant woman” in §435.4, 

incorporating the post partum period. 

 While we propose to consolidate various eligibility categories for pregnant women, States 

continue to have flexibility under the statute to provide different benefits to certain pregnant 

women or to provide all pregnant women with full Medicaid coverage, as many States do today. 

Thus, under clause (V) in the matter following section 1902(a)(10)(G) of the Act, pregnant 

women eligible for Medicaid under sections 1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(ii)(IX), and 

1902(l) of the Act are only covered for services related to pregnancy or to a condition which may 

complicate the pregnancy. In accordance with section 1902(a)(10)(B) of the Act, all other 

pregnant women eligible for coverage under the sections of the Act listed in §435.116(a) are 

eligible for all services that the State covers under the State plan, regardless of whether the 

service is related to pregnancy or to a condition that may complicate pregnancy. 

 However, States currently have the flexibility to provide full Medicaid coverage as 

pregnancy-related services for all pregnant women. Thus, we propose at §435.116(d) that 
CMS-2349-P 29 

pregnant women are covered for full Medicaid coverage, unless a State elects to provide only the 

pregnancy-related services described at §435.116(d)(3) for pregnant women whose income 

exceeds an income limit established by the State for full coverage. States have flexibility under 

existing regulations at §440.210(a)(2) to establish a policy that all services covered under the 

State plan are related to pregnancy or to a condition that may complicate pregnancy. Therefore, 

States will not have to establish an income limit for full coverage for pregnant women under 

§435.116(d)(4), but may elect to provide full coverage for all pregnant women. Reflected at 

proposed paragraph (d)(3), States also may elect to cover certain enhanced pregnancy-related 

services, as specified in §440.250(p), for pregnant women only. 

(3) Infants and children under age 19 (§435.118) 

 Section 2001(a)(4) of the Affordable Care Act amends section 1902(l)(2)(C) of the Act to 

provide Medicaid to children ages 6 through 18 with household income at or below at least 133 

percent FPL. This amendment eliminates certain of the age-based differences in Federal 

Medicaid eligibility rules for children, which currently provide for a minimum income standard 

of 100 percent FPL for coverage of children ages 6 through 18 (although many States have 

implemented optional coverage at higher levels), and means that all children and adults under 

age 65 with household income at or below 133 percent FPL will be eligible for Medicaid. 

Section 205(b) of the Medicare and Medicaid Extenders Act of 2010 clarifies that this 

amendment is effective January 1, 2014. If some or all of these children are covered under a 

separate CHIP before this provision takes effect, these children will move to coverage under 

Medicaid. Such a change, however, will not affect States’ ability to claim enhanced FMAP 

under title XXI for these children. 
CMS-2349-P 30 

 Currently, there are many different mandatory and optional eligibility categories for children. 

To simplify the eligibility rules, we propose to include under §435.118 all mandatory and 

optional eligibility groups for which age under 19 and income are the only factors of eligibility. 

The following sections of the Act are included under proposed §435.118: 1931 (low-income 

families); 1902(a)(10)(A)(i)(III) (qualified children who meet AFDC financial eligibility 

criteria); 1902(a)(10)(A)(i)(IV) and 1902(a)(10)(A)(ii)(IX) (infants); 1902(a)(10)(A)(i)(VI) 

(children ages 1 through 5); 1902(a)(10)(A)(i)(VII) (children ages 6 through 18); and 

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

 Proposed §435.118(a) through (c) set forth the basis and eligibility criteria for children, as 

explained above. We propose in §435.118(c) that each State will establish income standard(s) in 

its State plan for coverage of children by age group. There is no resource test. The minimum 

income standard for all age groups is 133 percent FPL, unless, for infants per section 

1902(l)(2)(A) of the Act, a higher income standard, at or below 185 percent FPL, was in effect 

on December 19, 1989. The maximum income standard for each age group is the higher of: 

● The highest effective income level for the age group (including any disregard of a 

block of income) – converted to a MAGI-equivalent standard – in effect under the State plan or 

waiver as of March 23, 2010 or December 31, 2013; or 

● For infants, 185 percent FPL. 

 A State may not otherwise increase its income standard above the levels specified because, 

effective January 1, 2014, States may no longer apply new income disregards in determining 

eligibility for individuals whose eligibility is based on MAGI. Coverage at higher income levels 

can be implemented through adoption of the new optional group at proposed §435.218. 
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 children at the levels in effect on March 23, 2010; 

these standards are maintained for children until September 30, 2019. These proposed 

regulations do not address the MOE provisions specified in sections 1902(a)(74) and 1902(gg) of 

the Act, as added by section 2001(b) of the Affordable Care Act. As a condition of receiving 

Federal financial participation, States must comply with these provisions, which are being 

addressed through subregulatory guidance. 

b. Other Conforming Changes to Existing Regulations

 Revisions are proposed at §435.4 to the definition of “families and children” to delete 

references to AFDC rules. Definitions are proposed for “agency,” “caretaker relative,” 

“dependent child,” and “pregnant woman.” Definitions related to implementation of the 

Affordable Care Act are proposed for “advance payments of the premium tax credit,” 

“Affordable Insurance Exchange (Exchange),” “effective income level,” “electronic account,” 

“household income,” “insurance affordability program,” “MAGI-based income,” “minimum 

essential coverage,” “modified adjusted gross income (MAGI),” “secure electronic interface,” 

and “tax dependent”. 

B. Financial methodologies for determining Medicaid Eligibility based on MAGI under the 

Affordable Care Act

Section 2002 of the Affordable Care Act, as amended by section 1004 of the HCERA, 

creates a new section 1902(e)(14) of the Act, which provides that effective January 1, 2014, 

financial eligibility for most individuals shall be based on MAGI and “household income,” as 

defined in section 36B(d)(2) of the IRC (hereinafter referred to as “section 36B definitions”). In 

this preamble, “MAGI-based methodologies” refers both to the rules governing the 
CMS-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-income populations. We are considering permitting 

States to convert to MAGI-based methodologies prior to 2014 through section 1115 

demonstrations. 

Proposed §435.603 sets forth proposed methodologies to implement MAGI in 

determining Medicaid eligibility for affected individuals effective January 1, 2014. Our 

proposed methodologies codify the section 36B definitions of MAGI and household income, 

except in a very limited number of cases discussed below. At proposed §435.603(i), we identify 

those populations excepted under the Affordable Care Act from application of MAGI-based 

methodologies; for these populations pre-Affordable Care Act Medicaid financial 

methodologies – generally set forth in existing regulations at §435.601 and §435.602 – will 

continue to apply. 

1. Point-in-time measurement of income (budget periods) (§435.603(h)) 

Under pre-Affordable Care Act Medicaid rules, per section 402(a)(13)(A) of former title 

IV-A of the Act, income eligibility for Medicaid is based on current income actually available to 

the individual in any given month. MAGI, as defined in section 36B of the IRC, is determined 

on the basis of annual income. The Affordable Care Act addresses this issue by adding section 

1902(e)(14)(H)(i) of the Act to provide that the use of MAGI in determining eligibility for 
CMS-2349-P 33 

Medicaid shall not be “construed as affecting or limiting the application of the requirement under 

this title to determine an individual’s income as of the point in time at which an application for 

medical assistance is processed.” Moreover, section 1902(a)(17) of the Act provides that States 

use eligibility standards and methodologies that are “reasonable,” “consistent with the objectives 

of [the Act],” and take into account only such income as is “determined in accordance with 

standards prescribed by the Secretary, available to the applicant or recipient[.]” 

In this proposed rule, we refer to the “point in time” rules referenced in the statute as the 

“budget period” (that is, monthly versus annual income) based upon which income eligibility is 

determined. At proposed §435.603(h)(3), we are retaining the current flexibility afforded States 

to take into account future changes in income that can be reasonably anticipated (as may be the 

case with certain seasonal workers or someone with a signed employment contract or layoff 

notice). Such anticipated changes would be determined in accordance with the verification 

regulations at §435.940 et seq. Uncertain changes in future income (for example, someone who 

is looking for, but has not secured, a job) may not be considered under the option reflected at 

proposed §435.603(h)(3). Actual changes in income – including deviations from reasonably 

anticipated fluctuations in income – must still be reported to, and acted upon by, the agency in 

accordance with §435.916(c) and (d). 

To promote flexibility, administrative simplification and continuity of coverage for 

beneficiaries already enrolled in Medicaid, we propose at §435.603(h)(2) to give States the 

additional flexibility, for individuals eligible for Medicaid based on MAGI, to maintain 

eligibility as long as annual income based on MAGI methods for the calendar year remains at or 

below the Medicaid income standard. This gives States the option to align with the annual 
CMS-2349-P 34 

eligibility period applied in the Exchanges and to minimize the extent to which individuals 

experiencing relatively small fluctuations in income bounce back and forth between programs. 

We believe that these flexibilities will help address some of the challenges that will arise 

due to the reliance on monthly income for purposes of eligibility for Medicaid versus annual 

income for purposes of eligibility for advance payments of premium tax credits. In particular, if 

a State does not opt to take into account a reasonably predictable drop in future income, someone 

with current monthly income above the Medicaid income standard, but projected annual income 

below 100 percent FPL could be determined both ineligible for Medicaid (until their monthly 

income actually dropped) and for advance payments of the premium tax credit for enrollment 

through the Exchange (because, with very limited exceptions, individuals with income below 

100 percent FPL are not eligible for advance payments of the premium tax credit). We solicit 

comments on how best to prevent a gap in coverage, including whether to ensure that State 

Medicaid agencies take into account a predictable future drop in income. 

2. Changes to Medicaid financial methods 

Under pre-Affordable Care Act Medicaid rules for families and children, essentially all 

money received, from whatever source, is counted as income in the month in which it is 

received, unless explicitly excluded or disregarded under the Act, disregarded at State option, or 

excluded under other Federal statutes. A “household” (for purposes of determining family size 

and whose income is counted) generally consists of parents and the children with whom they are 

living. Other non-legally responsible relatives and unrelated individuals living together are not 

included, nor are spouses or parents living apart from the rest of the family, which means that the 

income of such individuals is not deemed available to the Medicaid applicant. Under preAffordable Care Act Medicaid rules, inclusion of stepparents in a stepchild’s household depends 
CMS-2349-P 35 

on State law relating to obligations to support stepchildren. A stepparent’s income is considered 

available to his or her spouse since spouses are legally responsible for each other. 

Section 36B of the IRC, and §1.36B-1 of the IRS proposed premium tax credit rule, 

define “MAGI ,” “household income,” and “family size.” See also section 152 of the IRC and 

Internal Revenue Service (IRS) Publication 501 regarding rules for claiming “qualifying 

children” and “qualifying relatives” as tax dependents. To be eligible to receive advance 

payments of a premium tax credit for the purchase of coverage through an Exchange, married 

couples generally must file jointly. 

As discussed in section II.I of this proposed rule, sections 1413 and 2201 of the 

Affordable Care Act direct the creation of a seamless, simplified system of coordinated 

eligibility and enrollment between insurance affordability programs, and in most instances, 

section 36B definitions of “MAGI” and “household income” are applied to Medicaid to promote 

seamless coordination. In some situations, the application of these new rules will have the 

impact of constraining Medicaid eligibility, but consistent with the statute, we have applied the 

36B rules because of the impact on coordination. In a few limited situations in which the 

potential adverse impact of adopting the section 36B definitions could be significant (albeit for a 

relatively small group of individuals), and the impact on coordination minimal, we propose, 

consistent with the statute, retention of current Medicaid rules. 

3. Provisions of Proposed Rule Implementing MAGI Methods 

Proposed §435.603(a)(1) and (2) set forth the basis and scope of this section. At 

proposed §435.603(a)(3), we implement section 1902(e)(14)(D)(v) of the Act, as added by 

section 2002(a) of the Affordable Care Act, which specifies that, in determining ongoing 

eligibility of individuals enrolled in the Medicaid program as of January 1, 2014, the financial 
CMS-2349-P 36 

methodologies based on MAGI shall not be applied until the next regularly-scheduled 

redetermination of eligibility after December 31, 2013 or March 31, 2014, whichever is later, if 

such individual otherwise would lose eligibility as a result of the shift to MAGI-based 

methodologies before such date. 

Consistent with the 36B definition, we propose in §435.603(b) to define “family size” as 

equal to the number of persons in the individual’s household (as defined in paragraph (f) of this 

section and discussed below); “tax dependent” is defined in proposed revisions to §435.4, and 

cross referenced at proposed §435.603(b), as an individual for whom another individual properly 

claims a deduction for a personal exemption under section 151 of the IRC for a taxable year. 

Proposed §435.603(c) sets forth the basic rule that, except for eligibility determinations exempt 

from MAGI methodologies, financial eligibility for Medicaid must be based on household 

income as defined in §435.603(d). 

Consistent with the section 36B definition of household income, proposed §435.603(d)(1) 

provides that, for purposes of determining Medicaid eligibility under §435.603, “household 

income” is the sum of the income based on MAGI-based methods of every individual who is: 

(1) included in the individual’s household; and (2) required to file a tax return under section 6012

of the IRC, except that, also consistent with section 36B definitions, the 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 rules at §435.603(e) that are the same as the 

section 36B definitions to ensure streamlined eligibility rules and avoid coverage gaps. There 

are some differences in the treatment of several types of income under the IRC as compared to 

pre-Affordable Care Act Medicaid rules, in which the changes occasioned by the adoption of the 

section 36B definitions would have varying effects on the Medicaid eligibility of potential 

beneficiaries. Given the general directive to apply the section 36B definitions and the value of 

alignment, these proposed rules generally codify the section 36B rules and definitions. This is 

the case with respect to the treatment of child support payments, depreciation of business 

expenses, and capital gains and losses. 

Under this regulation as proposed, we also are applying the section 36B rules and 

definitions of Social Security benefits under title II of the Act. Such benefits count as income for 

the purpose of determining eligibility for Medicaid under pre-Affordable Care Act treatment of 

income, but certain amounts of Social Security benefits are not counted as income under the 36B 

definition of MAGI. The section 36B treatment of Social Security benefits may increase State 

Medicaid costs, as some individuals who receive Social Security benefits would gain Medicaid 

eligibility using the 36B definitions. The Administration is concerned about this unintended 

consequence and is exploring options to address it, including a modification of the section 36B 

treatment of Social Security benefits through regulation. We seek comment on this issue, 

including how any modification of the proposed regulation may affect eligibility for premium tax 

credits for enrollment in a qualified health plan through the Exchange and how any potential 

gaps in coverage that may be created by such modification could be minimized. 

There are three types of income for which we propose to codify current Medicaid rules. 

We solicit comments on these proposed policies. 
CMS-2349-P 38 

The first is lump sum payments, which consist of non-recurring income received on a 

one-time-only basis (for example, insurance settlements, back pay, State tax refunds, inheritance, 

and retroactive benefit payments). Under section 36B definitions, taxable “lump sum” payments 

are included in computing MAGI in the year the lump sum is received. Currently in Medicaid, 

most States count lump sum payments as income in the month received and, for any amounts 

retained, as a resource in months following. Because of the statutory directive to consider pointin-time (that is, current monthly) rather than annual income for determination of Medicaid 

eligibility, and the challenges in amortizing a lump sum payment over time to pay for coverage, 

we propose in §435.603(e)(1) to count lump sum payments of taxable income as income only in 

the month received. 

Second, certain types of educational scholarships and grants (for example, work-study 

arrangements and other situations in which the individual has to provide a service) are generally 

counted as taxable income under the IRC, but not counted as income under current Medicaid 

rules. To avoid low-income students having to forgo either Medicaid or this education-related 

aid, we propose in §435.603(e)(2) to retain the Medicaid rules for this type of income. 

Third, American Indian and Alaska Native (AI/AN) income is the subject of special 

treatment and protections in multiple provisions of titles XIX and XXI of the Act. Most recently, 

the Recovery Act added section 1902(ff) to the Act (applied also to CHIP through the addition of 

section 2107(e)(1)(c) of the Act) to broaden exemptions related to certain AI/AN financial 

interests to ensure that low-income AI/AN individuals have access to Medicaid. There are 

certain instances where the IRC and the section 36B definition of MAGI are identical to or more 

liberal than current Medicaid rules with regard to income exclusions for AI/AN populations, and 

therefore, are adopted in the proposed rule. However, there are several instances in which the 
CMS-2349-P 39 

IRC treats as taxable income distributions from AI/AN trust properties, which are excluded from 

income for purposes of Medicaid and CHIP eligibility under the Recovery Act and other current 

law. In these instances, we propose at §435.603(e) to codify current Medicaid treatment of 

AI/AN income, including distributions from Alaska Native corporations and settlement trusts; 

distributions from any property held in trust, or otherwise under the supervision of the Secretary 

of the Interior; distributions resulting from certain real property ownership interests; payments 

from other ownership interests or usage rights that support subsistence or a traditional lifestyle; 

and student financial assistance provided under the Bureau of Indian Affairs education programs. 

 In addition, section 1902(B)(e)(14)(B) of the Act, codified at §435.603(g), prohibits the 

continued use of any asset test or income or expense disregards for individuals whose financial 

eligibility is based on MAGI (other than a disregard of 5 percent of the FPL to be applied to 

every such individual under section 1902(e)(14)(I) of the Act.) In order to account for the 

general elimination of income disregards and to ensure continued coverage at pre-Affordable 

Care Act levels, per section 1902(e)(14)(A) and (E), States will convert current income standards 

for eligibility groups under which financial eligibility will be based on MAGI to a “MAGIequivalent” income standard. Separate guidance will be issued regarding the methodologies 

States may employ to determine such MAGI-equivalent income standards. Application of the 

statutory across-the-board 5 percent disregard is reflected in proposed §435.603(d)(1). 

 Detailed guidance on the treatment of all types of income under the new MAGI-based 

methodologies will be provided in subregulatory guidance. 

b. Proposed Rules for Determining Household Composition under MAGI-Based Methods 

(§435.603(f))
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 are divided into two categories: those for 

individuals filing taxes (§435.603(f)(1)) and their tax dependents (§435.603(f)(2)); and those for 

individuals who neither file a tax return nor are claimed as a tax dependent on someone else’s tax 

return, whom we refer to as “non-filers” (§435.603(f)(3)). 

After analyzing the differences between the section 36B definitions and current Medicaid 

rules, we believe that for most families, the section 36B definitions and current Medicaid rules 

yield the same household. However, there are a relatively small number of situations in which 

application of the section 36B definitions yields a different household than current Medicaid 

rules, including the following: 

 (1) Families in which the parents claim as tax dependents children age 21 or older. 

(2) Families in which the parents claim as tax dependents children living outside of the 

home. 

(3) Families with stepchildren/stepparents (in States without a law requiring stepparents to 

support their stepchildren. 

(4) Families in which one or more children are required to file a tax return. 

(5) Families in which one member is supporting and claiming as a tax dependent 

extended family members or unrelated individuals, including children other than their own 

biological or adopted children. 

(6) Children claimed as a tax dependent by a non-custodial parent. 

(7) Pregnant women. 

(8) Married couples who do not file jointly. 
CMS-2349-P 41 

In the first four types of households identified, consistent with the general statutory 

directive to apply the section 36B definitions to Medicaid, we are proposing at §435.603(f)(1) to 

adopt the household composition rules embodied in the section 36B definitions. Doing so will 

result in some loss of Medicaid eligibility compared to pre-2014 Medicaid rules. However, 

maintaining different rules for the insurance affordability programs for these household types 

would undermine simplicity and coordination, which benefits consumers and States alike, and 

add to States’ and potentially families’ administrative burden. 

For the fifth type of household identified (for example, a grandparent caring for a 

grandchild claimed as a tax dependent), the income of the claimed tax dependent is likely to be 

quite low, making them likely eligible for Medicaid based on their income alone. However, in 

such situations adoption of the section 36B definitions for household composition for 

determining the Medicaid eligibility of the tax dependent could significantly affect both the 

taxpayer and the relative or unrelated individual whom the taxpayer has no legal responsibility to 

support, putting such taxpayers in the position either of: (1) forgoing a tax advantage (including, 

in some cases, an Earned Income Tax Credit) so as to enable the tax dependent to apply for 

Medicaid on his own; or (2) assuming financial responsibility for purchasing health care for such 

individual – a responsibility which they do not have under current law. Accordingly, we propose 

at §435.603(f)(2)(i) to codify current Medicaid rules in determining the eligibility of qualifying 

relatives claimed as tax dependents by another taxpayer. MAGI-based definitions would be used 

in determining household composition for purposes of the taxpayer’s eligibility, per proposed 

§435.603(f)(1). It is also important to note that, reflected in proposed §435.603(d)(3) and 

consistent with current Medicaid rules, actually available cash support provided by the nonlegally responsible relative is counted as income to the claimed tax dependent. The purpose of 
CMS-2349-P 42 

retaining the Medicaid household rules as a backstop in these situations is to prevent the 

attribution of income from non-legally responsible relatives when that income is not in fact 

available to the tax dependent. We do not believe that this proposal would disrupt coordination 

or create a gap in coverage. 

Regarding households in which a child is claimed as a tax dependent by a non-custodial 

parent, we are proposing at §435.603(f)(2)(iii) to apply rules based on pre-Affordable Care Act 

Medicaid principles of parents’ legal responsibility for the children with whom they are living. 

By applying the rules for non-filers in this situation, as proposed in these rules, these children 

would be treated as members of the custodial parent’s household for Medicaid eligibility 

purposes, and the income of the custodial parent (and other members of the custodial parent’s 

household required to file a tax return) would be counted in determining the child’s Medicaid 

eligibility. Alternatively, the child could enroll in coverage through the Exchange in the child’s 

State of residence as a member of the non-custodial parent’s household. (See discussion in 

section II.A.4 (b) of the preamble for the accompanying Exchange proposed rule.) We 

specifically solicit comments on the proposed handling of the household composition for these 

children. 

Under pre-2014 Medicaid rules, a pregnant woman is considered as a household of two 

for purposes of determining eligibility. States have the option to count a pregnant woman as two 

in determining the family size of other members of a pregnant woman’s household (for example, 

her spouse or other children). Under the section 36B definition of family size, pregnant women 

count as one person for purposes of eligibility for advance payments of the premium tax credit, 

but if the child is born by the end of the calendar year, the annual premium tax credit would be 

for two persons. Counting the pregnant woman as a household that will be comprised of two for 
CMS-2349-P 43 

Medicaid eligibility purposes essentially anticipates the change in household size that will occur 

after the birth. Applying the 36B definitions would result in some women being enrolled, with 

advance payments of the premium tax credit, in a qualified health plan through the Exchange 

who, after giving birth, will be eligible for Medicaid. Therefore, the proposed definition of 

family size in §435.603(b) retains current Medicaid rules for pregnant women to promote 

continuity of coverage for the family and to ease State administrative burden. 

Married couples who file separately are not eligible for premium tax credits. However, 

there is no similar provision in title XIX of the Act with respect to Medicaid eligibility. 

Therefore, in such situations, we propose at §435.603(f)(4) to codify current Medicaid rules to 

include each spouse in the household of the other and to count the MAGI-based income of each 

spouse required to file a tax return in determining the other’s household income, regardless of 

whether the couple files a joint tax return. We recognize that at times two legally married 

individuals may live apart. Therefore, consistent with current Medicaid rules, the proposed rule 

also limits the inclusion of spouses in each other’s household to those who are living together. 

In some cases, a child may be living with both parents, but the parents do not file, or are 

not married and therefore cannot file, a joint tax return. Consistent with current Medicaid 

principles of legal responsibility, we propose at §435.603(f)(2)(ii) to apply the proposed rules for 

non-filers in the case of children living with such parents, so that both parents, if living with the 

child, will be included in the child’s household and their income counted in determining the 

child’s eligibility. 

(2) Household Composition for Non-Filers (§435.603(f)(3)) 

The IRC contains provisions regarding filing thresholds – ranging from $9,350 in 2010 

(86 percent FPL) for a single individual to $19,800 for a married couple filing jointly with one 
CMS-2349-P 44 

spouse 65 or older (137 percent FPL) – below which individuals are not required to file. 

Individuals below these thresholds may file a tax return, but for non-filers, section 36B of the 

IRC does not specifically address household composition. 

 To be eligible for a premium tax credit, spouses must file jointly and (except in cases of 

divorce or separation in which the non-custodial parent is permitted to claim a child) parents who 

file can claim their children under 19 who are living with them (or under age 24 if a full time 

student) as a qualifying child. See IRS Publication 501. The current Medicaid principle that 

parents are legally responsible for their children and that spouses are legally responsible for each 

other is consistent with section 36B of the IRC. In the case of Medicaid, parents are assumed to 

be financially responsible for their children up to age 21; this does not vary with the child’s 

student status. 

Under either section 36B of the IRC or pre-Affordable Care Act Medicaid rules, spouses 

living together are considered to be part of the same household for eligibility purposes, and 

proposed paragraph §435.603(f)(3) similarly specifies that spouses living together be included in 

the same household. We considered several alternatives regarding when children who are living 

with their parent(s), but are not claimed as a tax dependent on such parent’s tax return, should be 

included in the parent’s household. 

Applying pre-Affordable Care Act Medicaid rules making parents financially responsible 

for children who are under age 21 could result in a gap in coverage for children aged 19 and 20 

who are not in school and are not claimed as dependents on their parents’ tax return, but whose 

parents do file a tax return and have household income above the Medicaid income standard for 

19 and 20 year-olds. (Coverage for 19 and 20-year olds, in most States, will be under the new 

group for adults with household income at or below 133 percent FPL). On the other hand, 
CMS-2349-P 45 

adopting the IRC rule allowing parents to claim as a qualifying child their children only until age 

19, unless a full-time student, could result in an increase in Medicaid eligibility for 19 and 20-

year olds who are not full-time students and are living with their parents, as compared to preAffordable Care Act Medicaid rules. Adopting the IRC rule with respect to adult children ages 

21-23 who are full-time students could result in a decrease in Medicaid eligibility and an 

imposition of legal responsibility for certain adult children not consistent with current law. 

In balancing these considerations, we propose at §435.603(f)(3), to treat spouses/parents 

(including stepparents) and all children (including stepchildren and stepsiblings) under age 19 or, 

if a full-time student, under age 21, who are living together, as members of the same household. 

This proposed policy will avoid the gap in coverage for 19 and 20 year olds, discussed above, 

while limiting any unnecessary increase in Medicaid eligibility. Children who are not living 

with their parents, or who are over the specified age limit, would not be included in their parents’ 

household, and as with tax filing households, individuals other than a spouse, biological, 

adopted, or step-parent, child or sibling would not be included in the same Medicaid household 

under this proposed rule. We specifically solicit comments on the proposed rule for household 

composition of non-filers at §435.603(f)(3). 

(3) Retention of Existing Financial Methods (§435.603(i)) 

Section 1902(e)(14)(D) of the Act provides that the financial methodologies based on 

MAGI will not apply in certain situations. In those cases, eligibility will be determined using the 

rules in effect prior to the Affordable Care Act, codified in existing regulations at §435.601 and 

§435.602. Proposed §435.603(i) sets out six exceptions: 

● Individuals eligible for Medicaid on a basis that does not require a determination of 

income by the Medicaid agency. This exception from use of MAGI-based methods includes, but 
CMS-2349-P 46 

is not limited to, individuals receiving or deemed to be receiving SSI, individuals receiving 

assistance under title IV-E of the Act, and individuals for whom the agency is relying on a 

finding of income made by an Express Lane Agency under section 1902(e)(13) of the Act. 

● Individuals who qualify for medical assistance on the basis of being blind or disabled. 

This exception applies only to those individuals for whom the determination of eligibility is 

made on the basis of being blind or disabled. Individuals who are blind or who have disabilities 

can also be covered under the new mandatory eligibility group for adults (codified at proposed 

§435.119) with MAGI-based household income at or below 133 percent of FPL. To the extent 

that their income exceeds that level, current financial methodologies will be used to determine 

their eligibility for coverage on the basis of being blind or disabled under an optional eligibility 

group for blind or disabled individuals. 

 In proposed §435.603(i)(3), we identify the most common of the eligibility groups for blind 

and disabled individuals excepted from MAGI methods under the Act. We are not listing 

coverage provided to individuals receiving SSI in so-called “criteria States” because they are 

encompassed under proposed §435.603(i)(1)(iii)(A). (These individuals are receiving SSI but 

the State does not have an agreement under section 1634 of the Act under which the Social 

Security Administration makes a determination of Medicaid eligibility for the State.) We also 

are not specifically identifying children under age 18 who were receiving SSI as of the date of 

enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 

(PRWORA) (August 22, 1996), who would continue to receive SSI but for the enactment of 

section 211 of that Act and who are eligible for Medicaid in accordance with section 

1902(a)(10)(A)(i)(II) of the Act. While financial eligibility for continued coverage of these 

children will be excepted from MAGI, most, if not all, of the affected children will have reached 
CMS-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 children still eligible under this mandatory coverage 

group as of 2014, and therefore, whether they should be identified in these regulations. 

● Individuals age 65 or older are categorically excepted from MAGI methods under 

section 1902(e)(14)(D)(i)(II) of the Act. We recognize that the exception of all elderly 

individuals from MAGI methodologies for all eligibility groups could result in States having to 

retain application of AFDC financial methodologies in a small number of cases in which an 

elderly individual is being evaluated for coverage on the basis of being a parent or caretaker 

relative, for which age is not a factor. We solicit comments on possible approaches we might 

adopt to avoid this result - for example, interpreting the exception to apply only in the case of 

elderly individuals when age is a condition of eligibility or of applying SSI methodologies 

(which will continue to be used for most MAGI-excepted groups) in determining the eligibility 

of elderly individuals for coverage as a caretaker relative. 

● Individuals whose eligibility is being determined on the basis of the need for long-term 

care services, including nursing facility services or a level of care equivalent to such services. 

Similar to the exceptions from MAGI for determinations based on being blind or disabled, we 

propose to apply this exception in the case of individuals whose eligibility is based on the need 

for or receipt of such services. Individuals otherwise eligible for Medicaid under an eligibility 

group to which MAGI-based methods apply (for example, children eligible under proposed 

§435.118) will not be excepted from application of 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 Medicare cost sharing assistance. 

● Medically needy individuals eligible under section 1902(a)(10)(C) of the Act. This 

exception also applies only to the determination of eligibility for medically-needy coverage. 

Individuals who meet the eligibility criteria for coverage under another eligibility group – for 

example, the new adult group – are not excepted from application of MAGI-based methods for 

purposes of determining their eligibility for such other groups simply because they would qualify 

for coverage as a medically needy individual if not eligibility under such other group. 

 Section 1902(e)(14)(D)(iii) of the Act provides that MAGI-based methods shall not be used in 

determining eligibility for Medicare Part D premium and cost sharing subsidies under section 

1860D-14 of the Act. Because such subsidies are not a form of Medicaid and determinations for 

Part D cost sharing subsidies are not performed under the authority of the Medicaid statute, we 

are not proposing to include regulations regarding this exception in these rules. 

C. Residency for Medicaid eligibility defined

We propose to simplify Medicaid’s residency rules to promote achievement of the 

coordinated eligibility and enrollment system established under sections 1413 and 2201 of the 

Affordable Care Act and discussed in section II.I of this proposed rule. We propose to 

redesignate and revise paragraphs §435.403(h) and §435.403(i) to §435.403(i) (rules for 

individuals under age 21) and (h) (rules for individuals age 21 and older), which set parameters 

for States to determine who is a State resident. These revisions are not significantly different 

than the current rules. We do not propose changes to our current regulations regarding 

individuals living in institutions, receiving Federal foster care or adoption assistance under title 
CMS-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 Adults (age 21 and over) (§435.403(h)) 

We propose to strike the term “permanently and for an indefinite period” from the 

definition for adults in redesignated §435.403(h)(1) and (h)(4), and replace the term “remain” 

with “reside.” An adult’s residency will be determined based upon where the individual is living 

and has intent to reside, including without a fixed address, or the State which the individual 

entered with a job commitment or seeking employment (whether or not currently employed). 

While proposing to remove the phrase “permanently or for an indefinite period” and use the term 

“reside,” we are maintaining existing policy that an individual must intend to remain living in the 

State in which he or she is seeking coverage. Persons visiting a State for personal pleasure or 

purposes of obtaining medical care are not residents of the State visited. By removing the term 

“living” in the State or replacing the term “remain” with “reside,” we do not intend to have any 

policy impact on State policy. Indeed, we note that section 1902(b)(2) of the Act refers to 

individuals who “reside in the State”. We are removing the word “living” from the definition in 

order to simplify the language. An individual must still maintain present intent to reside in the 

State being claimed as the State of residence; a State would not be required to recognize an intent 

to reside at some future point in time. We have retained the term “living” for individuals who do 

not have the capacity to state intent, as we are not modifying the regulations for that population. 

Our proposal to remove language regarding permanency and “an indefinite period” will 

help to facilitate coordination of eligibility determinations across and between programs and is 

also consistent with long-standing statutory requirements. Under section 1902(b)(2) of the Act, 
CMS-2349-P 50 

States may not exclude from coverage an individual who resides in the State “regardless of 

whether or not the residence is maintained permanently or at a fixed address[.]” 

2. Residency definition for children (under age 21) (§435.403(i)) 

For individuals who are emancipated or married, we propose language to align the 

residency rules with the proposed definition for adults. Accordingly, at redesignated 

§435.403(i)(1), we propose to strike the term “permanently and for an indefinite period” and to 

replace the word “remain” with “reside.” 

We propose in §435.403(i)(2) to combine and consolidate two different definitions of 

residency currently set forth in paragraphs (h)(2) and (h)(3) for unemancipated individuals under 

age 21: (1) those whose Medicaid eligibility is based on a disability and (2) those who are not 

disabled and not living in an institution or receiving foster care or adoption assistance under 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 definition as that proposed for most adults, but 

without the “intent” component, as individuals under age 21 may not legally be able to express 

intent. Under the proposed rule, States may not determine residency of a child based solely on 

the residency of the parent. 

Our proposal will simplify State administration and make the rules clearer to the public. 

Our proposal to allow children to establish residency to the same extent as adults when a parent 

or caretaker is seeking or has confirmed employment is intended to ensure a consistent approach 

for migrant, seasonal workers and other families living in a State while employed or in search of 

employment. The proposed definition also allows flexibility for families in which children 

attend school in a State other than where the parents live; such children may be considered 

residents of the parents’ “home State,” if the parent expresses the requisite intent. However, we 
CMS-2349-P 51 

do not change States’ current flexibility to determine whether students “reside” in a State, as long 

as each individual has the opportunity to provide evidence of actual residence. The proposed 

rule excludes children who are visitors for pleasure or for purposes of obtaining medical care. 

Parents, caretakers, and persons acting responsibly on behalf of a child may attest to where the 

child resides, under new §435.956(c). 

While we do not believe our proposed changes significantly affect Federal guidance on 

residency, we seek comments on the proposed modifications to §435.403(h) and (i), particularly 

on the impact of this proposed rule on children eligible for Medicaid based on disability. We 

also seek comments on whether to change the current State residency policy with regard to 

individuals living in institutions and adults who do not have the capacity to express intent. 

D. Application and Enrollment Procedures for Medicaid

1. Availability of program information (§435.905) 

 Section 2201 of the Affordable Care Act adds a new section 1943(b)(1)(A) to the Act which 

directs States to develop procedures that enable individuals to apply for, renew, and enroll in 

coverage through an internet Web site. Section 1943(b)(4) directs States to establish a Web site 

(which must be linked to the Web site established by the Exchange operating in the State) that 

will allow individuals to obtain information regarding coverage under Medicaid and CHIP and 

compare such coverage to that available through the Exchange. Thus, we propose to amend 

§435.905 to ensure that program information be made available electronically through a Web site 

in addition to providing information to applicants both orally and in writing. We propose to 

modify §435.905(b) to eliminate specific requirements regarding quantity and electronic 

availability of bulletins and pamphlets, as we do not believe these are necessary in regulations. 

2. Applications (§435.907) 
CMS-2349-P 52 

 To support States in developing a coordinated eligibility and enrollment system for all 

insurance affordability programs, section 1943(b)(3) and section 1413 of the Affordable Care 

Act direct the Secretary to develop and provide States with a single, streamlined application. The 

single application, to be used for all insurance affordability programs and available through a 

variety of formats including on-line and phone applications, will build on the successes many 

States have had in developing simplified applications. 

Accordingly, we propose to amend current regulations at §435.907 to reflect use of the 

new single, streamlined application. The Secretary will develop the data elements for the 

application in collaboration with States and consumer groups. As permitted in section 

1413(b)(1)(B) of the Affordable Care Act, proposed §435.907(b)(2) provides States the option to 

develop and use an alternative streamlined application, subject to review and approval by the 

Secretary. Under the law, those who are limited English proficient (LEP) and persons with 

disabilities must have equal access to health care and the benefits. We intend to address the 

readability and accessibility of applications, forms and other communications with applicants 

and beneficiaries in future guidance. 

 In §435.907(c), we propose two alternative approaches related to applications for individuals 

who may qualify for coverage on a basis other than MAGI. First, we propose that States may 

use supplemental forms to gather additional information, such as information pertaining to 

resources, needed to make an eligibility determination. This approach would permit anyone 

seeking coverage to begin by completing the same single, streamlined application as all other 

applicants. Second, we propose to permit States to develop and use an alternative single, 

streamlined application form designed specifically to capture information needed to determine 

eligibility for individuals whose eligibility is not determined based on MAGI. Under the statute 
CMS-2349-P 53 

and proposed 435.907(c), such supplemental and alternative forms are subject to the Secretary’s 

approval. We seek comment on both of the proposed approaches as well as other alternatives to 

ensure a simple application process. 

 In §435.907(d), we explain that the agency must establish procedures to allow persons 

seeking coverage to file an application through a variety of means including online, in person, 

over the phone and by mail. Applications may be submitted in person, but under this proposed 

rule, particularly in light of the seamless coordination process required for enrollment in 

Medicaid and the Exchange, in person interviews cannot be required for the individuals whose 

eligibility is based on MAGI. 

For individuals not seeking coverage for themselves (“non-applicants”), to ensure privacy 

we propose in §435.907(e)(1) to codify the long-standing policy against requiring such 

individuals to provide Social Security numbers (SSNs) or information regarding their citizenship, 

nationality, or immigration status. To promote enrollment of eligible applicants, States may 

request an SSN of a non-applicant on a voluntary basis. Proposed §435.907(e)(2) codifies 

existing policy grounded in Title VI of the Civil Rights Act of 1964, the Privacy Act, and 

Medicaid confidentiality provisions at section 1902(a)(7) of the Act to allow States to request an 

SSN of a non-applicant only if: (1) providing an SSN is voluntary; (2) use of a non-applicant’s 

SSN is limited to processing the applicant’s eligibility or for other functions necessary to the 

administration of the State’s plan; and (3) the State provides notice that provision of an SSN is 

voluntary and indicates how the SSN will be used. 

In support of the proposed rule, we note that sections 1411(g) and 1414(a)(2) of the 

Affordable Care Act specify that taxpayer information may only be used for eligibility 

determinations and other functions directly related to the administration of benefits. Section 
CMS-2349-P 54 

1902(a)(7) of the Act directs States to have safeguards that restrict the “use or disclosure of 

information concerning applicants and recipients only for purposes directly connected with the 

administration of the [State] plan...” Non-applicant information used to determine an 

applicant’s eligibility is considered to be information “concerning” the applicant or recipient; 

thus, this information must be appropriately safeguarded. 

We propose to continue the current policy that Medicaid applicants and beneficiaries 

must provide an SSN, if the individual has one. Under our current regulations at §435.910, if an 

individual does not have an SSN, the agency must assist the individual in obtaining one. For 

background and a detailed discussion of the current policy on the collection of SSNs, see the TriAgency Guidance issued in conjunction with the Administration for Children and Families and 

the Food Nutrition Service, in September 2000, at 

http://www.hhs.gov/ocr/civilrights/resources/specialtopics/tanf/triagencyletter.html. 

Section 1943(b)(1)(A) of the Act directs Medicaid agencies to permit enrollment and 

reenrollment in the State plan or under a waiver through electronic signature. Accordingly, we 

propose in §435.907(f) that States must accept applications signed through the use of electronic 

signature techniques, including telephonically recorded signatures, as well as handwritten 

signatures transmitted by fax or other electronic means. This is consistent with current practice in 

most States. 

3. Assistance with application and redetermination (§435.908) 

 Some of the individuals eligible for coverage in 2014 may need assistance with the 

application and renewal process. Therefore, we propose to amend current §435.908(b) to ensure 

that the agency provides assistance through a variety of means to any individual seeking help 
CMS-2349-P 55 

with the application or redetermination process. This is consistent with current State practice 

and is in accordance with section 1902(a)(19) of the Act. 

 We are proposing that States have flexibility to design the available assistance, while assuring 

that such assistance is provided in a manner accessible to individuals with disabilities and who 

are LEP. In addition, section 1943(b)(1)(F) of the Act directs States to conduct outreach to 

vulnerable and underserved populations eligible for Medicaid. Such outreach and assistance will 

be particularly important for those who are newly eligible, as well as for people with disabilities, 

underserved racial and ethnic minorities and other groups. We will provide technical assistance 

and subregulatory guidance to further address application and renewal assistance to meet the 

needs of the multiple populations served by the program. 

E. MAGI Screen (§435.911)

This section of the preamble and the proposed rules at §435.911 describe the process for 

applying a new simplified test for determining eligibility based on MAGI – which is facilitated 

by the simplified eligibility categories, including the new adult coverage group, discussed in 

section II.A of this proposed rule – as well as the steps States will take to ensure that individuals 

who do not meet the simplified test are evaluated for Medicaid eligibility on other bases and for 

potential eligibility for other insurance affordability programs. 

Proposed §435.911(a) sets forth the statutory basis for this section. In proposed 

§435.911(b) we set forth several pertinent definitions, including “applicable modified adjusted 

gross income standard,” which will be at least 133 percent FPL, but in some States may be 

higher for certain individuals, including parents or other caretaker relatives, pregnant women or 

children. 
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 individual who has submitted an application and who 

meets the non-financial criteria for eligibility (or for whom the agency is providing a reasonable 

opportunity to provide documentation of citizenship or immigrations status in accordance with 

sections 1903(x), 1902(ee) and 1137(d) of the Act), the Medicaid agency would determine 

whether such individual has household income at or below the applicable MAGI standard. This 

means that States will not need to review whether an individual who meets the applicable MAGI 

standard (for example, 133 percent FPL for the new adult group) is also eligible as a disabled or 

medically needy individual, both of which typically entail a more involved eligibility 

determination. 

For individuals with household income at or below the applicable MAGI standard, the 

agency would provide Medicaid benefits promptly and without undue delay. Benefits will be 

addressed in subsequent guidance. 

Some individuals with household income above the applicable MAGI standard may be 

eligible for Medicaid on another basis. In some States, for example, some individuals may be 

eligible based on disability or need for long-term care services, even if their income exceeds the 

applicable MAGI standard, and individuals eligible for Medicare may be eligible for assistance 

with Medicare premiums and cost sharing charges. In accordance with §435.911(c)(2), for each 

individual who is not eligible for Medicaid based on MAGI under §435.911(c)(1), the Medicaid 

agency shall collect additional information, consistent with proposed §435.907(c), as may be 

needed to determine Medicaid eligibility on other such other bases. 

We note that the MAGI screen proposed for State Medicaid agencies is the same process 

as that at proposed 45 CFR §155.305(c) of the Exchange Proposed Rule published elsewhere in 
CMS-2349-P 57 

this Federal Register; however, the Exchange will not be required to undertake Medicaid 

eligibility determinations based on factors other than MAGI. Under proposed §435.1200(e)(2) 

and the Exchange Proposed Rule at 45 CFR §155.345, the Medicaid agency will retain 

responsibility for making such determinations, although the State can establish procedures 

whereby the Exchange will undertake such other determinations in certain circumstances, 

consistent with regulations at §431.10 and §431.11, as revised in and discussed in section J of 

this proposed rule. 

Proposed §435.911(c)(2)(iii) specifies that the agency must follow the policies of 

proposed §435.1200(g) to assess individuals determined not eligible for Medicaid based on 

MAGI for potential eligibility for other insurance affordability programs and to facilitate 

seamless transfer of the individual’s electronic account to these other programs. Under proposed 

§435.1200(g)(2), evaluation of individuals for Medicaid eligibility based on blindness or 

disability in accordance with proposed §435.911(c)(2) should occur at that same time as 

evaluation for potential eligibility for premium tax credits for enrollment through the Exchange. 

We are not proposing specific timeliness standards for the determination of eligibility 

under proposed §435.911. In collaboration with States, we will be developing performance 

standards and metrics for the streamlined and coordinated eligibility and enrollment system. 

These metrics will also support the standards and conditions described in the Federal Funding for 

Medicaid Eligibility Determination and Enrollment Activities final rule (76 FR 21950) published 

in the April 19, 2011 Federal Register. 

F. Coverage Month

In proposed §155.410 of the Exchange proposed rule, enrollment through the Exchange 

for individuals terminated from Medicaid can begin at the earliest on the 1st day of the month 
CMS-2349-P 58 

following the date the individual loses Medicaid and is determined eligible for enrollment 

through the Exchange. If the individual loses Medicaid eligibility and is determined eligible for 

enrollment through the Exchange after the 22nd day of the month, enrollment through the 

Exchange begins at the earliest on the first day of the second month following such date. To 

promote coordination with coverage through the Exchange, we are considering adding a 

provision to the regulations to extend Medicaid coverage until the end of the month that the 

appropriate termination notice period ends. Certain exceptions - such as the death of a 

beneficiary – would apply. This is the current practice in many States which now end Medicaid 

coverage at the end of a month for administrative convenience or to align with coverage offered 

by participating health plans paid on a per capita per month basis, as permitted under current 

regulations. We believe that providing coverage through the end of the month is similar to 

existing regulations at redesignated §435.915(b), which allows States to make eligibility 

effective from the beginning of a month. 

 We invite comments on this potential approach to coverage, its likely impact on maintaining 

continuous coverage, whether the costs of this approach outweigh the benefits, or whether we 

should retain the current policy that provides State flexibility to end coverage at any time during 

a month. 

G. Verification of income and other eligibility criteria (§435.940 through §435.956). 

In this section, we discuss changes to 42 CFR part 435 subpart J to make verification 

processes more efficient, modernized and coordinated with the Exchange. In general, the 

proposed rules maximize reliance on electronic data sources, shift certain verification 

responsibilities to the Federal government, and provide States flexibility in how and when they 

verify information needed to determine Medicaid eligibility. The proposed changes draw from 
CMS-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 section 1413(c) of the Affordable Care Act, State Medicaid 

agencies will use a system established by the Secretary pursuant to her authority under sections 

1411(c) and 1413(c) of such Act, through which all insurance affordability programs can 

corroborate or verify certain information with other Federal agencies (for example, citizenship 

with the Social Security Administration (SSA), immigration status through the Department of 

Homeland Security (DHS), and income data from the IRS.) This system will reduce 

administrative burden on State Medicaid agencies and Exchanges. 

● Consistent with current policy, State Medicaid agencies may accept self-attestation of 

all eligibility criteria, with the exception of citizenship and immigration status. To ensure 

program integrity, States must comply with the requirements of section 1137 of the Act to 

request information from trusted data sources when useful to verifying financial eligibility. 

● We propose that in verifying eligibility States will rely, to the maximum extent 

possible, on electronic data matches with trusted third party data sources. Additional 

information, including paper documentation, may be requested from individuals when 

information cannot be obtained through an electronic data source or is not “reasonably 

compatible” with information provided by the individual. These changes align eligibility 

verification methods for Medicaid with those used for advance payments of premium tax credits 

and other insurance affordability programs. This proposal would apply to the specific financial 

and non-financial information referenced in these rules, as well as to any additional information 

the agency finds it necessary to verify in order to determine eligibility, regardless of whether that 

information is specifically referenced in the regulation. 
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 prescriptive provisions that are in current 

regulations as to when or how often States must query certain data sources, or when certain State 

wage agencies must provide data to the State Medicaid agency. We do not believe that this level 

of specificity regarding State use of data sources is necessary, nor do we believe it is appropriate 

to include in Medicaid regulations requirements that bind other agencies, such as State wage 

agencies. 

These and other proposed revisions are discussed in more detail below. 

1. Basis, Scope, and General Requirements (§435.940 and §435.945) 

At §435.940, we add statutory citations to the basis and scope of the income and 

eligibility verification regulations to include, in addition to section 1137 of the Act, sections 

1902(a)(4), 1902(a)(19), 1903(r)(3) and 1943 of the Act, as well as section 1413 of the 

Affordable Care Act. 

At §435.945(a), consistent with 42 CFR part 455, we are specifying that nothing in this 

proposed rule shall prevent a State from acting to ensure program integrity. Program integrity is 

a top priority and should be considered in commenting on the proposed rule. 

Consistent with current policy, at §435.945(b), we add language to expressly permit 

States to accept attestation of information related to eligibility, including income, age, birth date 

and State residency, without requesting paper documentation. The exceptions to this provision 

are citizenship and immigration status, as these are subject to separate statutory requirements. 

States must continue to comply with the provisions of section 1137 of the Act relating to income 

information in accordance with rules set out in this section. 
CMS-2349-P 61 

Redesignated §435.945(c) directs the agency to request and use information in 

accordance with the appropriate sections of the regulations. We modify existing cross references 

to reflect other changes proposed and add cross references to the new §435.949 and §435.956. 

In addition, we have deleted references in §435.945(c) and throughout the regulation to verifying 

“medical assistance payments,” “amount of medical assistance payments” and “benefit amount” 

as the reference to the verification of “eligibility” is sufficient. 

We removed the list of programs with which the State Medicaid agency must exchange 

information at §435.945(d) and instead include a reference to those programs listed in 1137(b) of 

the Act, as well as the child support enforcement program under Part IV-D of the Act (which is 

also referenced in section 1137) and SSA. Pursuant to sections 1413 of the Affordable Care Act 

and 1943 of the Social Security Act, we have added insurance affordability programs as 

programs with which the agency must exchange information. 

We have not changed the rules for reimbursement arrangements between agencies for 

data exchanges at redesignated §435.945(e), except for an updated cross reference and citing to 

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

Redesignated §435.945(f) specifies that before a request for information from a thirdparty data source is initiated, an individual must receive notice of the information being 

requested and its use. Consistent with current State practice, we anticipate that this notice would 

be provided as part of the application process. We have deleted the current exception to this 

notice requirement when an individual’s eligibility has been determined by another agency 

because, under our revised rule, proper notice is required only when the agency itself will be 

requesting data from another agency or program. The reporting requirements at redesignated 
CMS-2349-P 62 

§435.945(g) remain unchanged; however the regulatory citations relating to MEQC and 

documentation have been updated. 

Existing §435.945(g), regarding a State Wage Information Collection Agency (SWICA) 

that does not use the quarterly wages reported by employers under section 1137 of the Act, has 

been deleted, as we believe these requirements are not within the purview of the State Medicaid 

agency. 

Per section 1413(c) of the Affordable Care Act, we add a new §435.945(h) (renumbering 

the next paragraph) to require that data exchanged electronically under this section must be sent 

and received via secure electronic interfaces which, as defined in proposed §435.4, must be 

consistent with 42 CFR part 433. 

Redesignated §435.945(i), pertaining to written agreements between agencies engaged in 

data exchanges, has been modified to eliminate specific requirements regarding the precise 

content of such agreements and the timing and frequency of data exchanges to provide States 

greater flexibility. This flexibility will facilitate coordination with Exchanges and other 

insurance affordability programs and allow States to take full advantage of the increased 

automation of electronic data matching enabled through the provision of enhanced Federal 

funding for the development and implementation of such systems available under 42 CFR part 

433 subpart C. 

2. Verification of Financial Eligibility (§435.948) 

Under sections 1137 and 1902(a)(46) of the Act, certain Federally-funded, Stateadministered programs, including Medicaid, are required to conduct electronic data matches to 

obtain income information from the State quarterly wage reports and Unemployment Insurance 
CMS-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 Medicaid, as determined by the Secretary. 

However, not all data sources are useful in all situations and under section 1137(a)(4)(C). 

The use of information identified in section 1137 of the Act “shall be targeted to those uses 

which are most likely to be productive in identifying and preventing ineligibility ... and no State 

shall be required to use such information to verify the eligibility of all recipients.” In addition to 

the data sources specifically listed in section 1137 of the Act, many States also rely on other data 

matches, which they find useful to verify income. 

We believe that States are in the best position to determine the usefulness of the available 

data sources in specific cases. Therefore, we propose at §435.948(a) to delegate to the State 

Medicaid agency the discretion afforded to the Secretary of the HHS under section 1137(a)(2) of 

the Act to determine when the information identified in section 1137 of the Act is useful to 

verifying financial eligibility for an individual and must be requested. The sources of data which 

States much check, if useful, remain unchanged, except as follows: 

● For the reasons discussed above, specific references to the timing and/or frequency 

with which information must be requested are deleted; 

● Public Assistance Reporting Information System (PARIS)is added as a new data 

source given the requirement in 1903(r)(3) of the Act that all eligibility determination systems 

must conduct data matching through PARIS; 

● We eliminate reference to the former AFDC program; and 

● We replace reference to “Food Stamps” with “Supplemental Nutrition Assistance 

Program” to reflect the new name under the Food, Conservation and Energy Act of 2008. 
CMS-2349-P 64 

As noted above and discussed in more detail below in relation to proposed §435.949, the 

Secretary is required to establish a system through which all insurance affordability programs 

can verify certain information with other Federal agencies. At new §435.948(b), we propose 

that, to the extent available, States must access needed information when available through the 

system established by the Secretary, consistent with sections 1943(b)(3) and 1902(a)(4) of the 

Act. 

At §435.948(c)(1), we provide that information not available through the service 

established by the Secretary under §435.949 may be obtained directly from the agency or 

program housing the information. At §435.948(c)(2), we retain the current policy in paragraph 

(c) of the existing regulations that information be requested by SSN, but clarify that, when an 

SSN is not available, the agency attempt to obtain needed information using other personally 

identifying information otherwise available in the individual’s account, as described in §435.4. 

Note that when an SSN is not available, the agency must assist the individual in obtaining a SSN 

in accordance with §435.910. 

States may request and use alternate data sources, as permitted at proposed §435.948(d), 

subject to Secretarial approval. Such alternative sources should reduce administrative costs and 

burdens on individuals and States, maximize accuracy, and minimize delay. Also, we make 

explicit existing policy that use of any such alternative data source must meet applicable 

requirements relating to the confidentiality, disclosure, maintenance, or use of information. 

Finally, consistent with section 1413 of the Affordable Care Act, we add that the use of an 

alternative data source facilitate coordination between all other insurance affordability programs. 

3. Verification of Information from Federal Agencies (§435.949) 
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 secure electronic interfaces, through 

which all State health coverage programs can verify information needed to determine eligibility. 

Section 1411(c) of the Affordable Care Act specifically directs that the system enable electronic 

verification of household income and family size with the IRS, citizenship data with SSA, and 

immigration status with DHS. 

By enabling access to multiple Federal sources though a single inquiry, insurance 

affordability programs can receive prompt, reliable data through the same service, thereby 

alleviating multiple data inquiries that the State might otherwise have to make. Since all of the 

insurance affordability programs will rely on certain common sources (that is, SSA, DHS and 

IRS), once such information is gathered and evaluated by one program, reevaluation or reverification of data will not be necessary, and thus, not permitted by another program (unless an 

individual reports a change in circumstances). 

We propose at §435.949(a) to specify the Federal agencies from which information will 

be available through the Secretary, including SSA, DHS and the IRS. We propose in 

§435.949(b) that, if data included in §435.949 is available through the Secretary, States would be 

required to obtain such data through the service established by the Secretary. Other applicable 

regulations, including those set forth at §435.948, §435.956 and §435.960, remain in effect for 

information, which cannot be requested through the Secretary. 

We propose §435.949(c) to codify section 1413(c)(3) of the Affordable Care Act, which 

provides that the Secretary may modify the methods used in the verification system established if 

she determines that modifications would reduce the administrative costs and burdens on 
CMS-2349-P 66 

individuals or agencies; ensure accurate and timely verification; comply with applicable 

requirements for the confidentiality, disclosure, program integrity, and maintenance or use of the 

information, including the requirements of section 6103 of the IRC; and promote coordination 

among insurance affordability programs. Section 435.949(c) is proposed to be consistent and 

coordinated with §155.315 of the proposed Exchange rule. 

4. Use of Information and Requests for Additional Information (§435.952) 

We are proposing changes to §435.952, which describes the appropriate use of 

information. We are proposing to eliminate vague language at the end of §435.952(a) regarding 

the requirement to independently verify information “...if determined appropriate by agency 

experience.” We expect processes to occur in real time wherever possible and we will be 

defining more detailed standards and other performance metrics, with State and stakeholder 

input, in subsequent Federal guidance. Accordingly, we also are proposing to delete the specific 

timeliness requirements contained in the current regulation at §435.952(c), which now requires 

agency action within 45 days from the date new information is received. 

Under §435.952(b), as revised, if information provided by an individual is reasonably 

compatible with information that the agency has obtained from other trusted sources, the agency 

must act on such information and may not request additional information from the individual. 

To establish an appropriate balance between reliance on electronic verification and paper 

documentation, we propose to establish a “reasonable compatibility” standard governing when 

additional information, including paper documentation, can be requested from applicants and 

beneficiaries. Under proposed §435.952(c), no further information may be required from the 

individual unless the agency is unable to obtain information through electronic data matching or 

the information obtained is not reasonably compatible with that provided by the individual. In 
CMS-2349-P 67 

such cases, the agency may contact the individual and accept the individual’s explanation 

without further documentation, if reasonable, or the agency may request additional information, 

including paper documentation. “Reasonably compatible” does not necessarily mean an 

identical match for the data, only that the information is generally consistent. Since what is 

“reasonably compatible” may vary depending on the particular circumstances, we are proposing 

to provide States flexibility to apply this standard. Under §435.948(d), if the individual fails to 

respond to a request for additional information permitted under the proposed rule, the agency 

shall proceed to deny, terminate, or reduce Medicaid only after notice and appeal rights have 

been provided in accordance with part 431, subpart E. 

Sections 435.953 and 435.955 of the current regulations are deleted in the proposed rule. 

Provisions contained in §435.953(a) and §435.955(a) through (c) and (f) are revised and 

incorporated into §435.948 and §435.952, in accordance with the discussion above. We propose 

to remove the remaining requirements in §435.953(b) through (d) (relating to detailed 

information the State must submit for the Secretary’s approval to exclude specific data requests) 

and the detailed requirements in §435.955(a) and (d), (e) and (g) (relating to the additional 

provisions regarding information released by a Federal agency, including State reporting 

requirements and requests for a waiver from the Federal agency’s Data Integrity Board). We 

believe that the detailed nature of these provisions may unnecessarily hamper development of an 

efficient, modernized and coordinated system and that such details are best developed in 

collaboration with States and addressed through subregulatory guidance. 

5. Verification of Other Non-financial Information (§435.956) 
CMS-2349-P 68 

We propose a new §435.956 to address verifying non-financial information. As with 

financial information, to the extent non-financial information is available through the electronic 

service established by the Secretary, States would use that service under proposed §435.949(b). 

Under the proposed rule, at §435.956(c), States may use attestation (including attestation 

of someone acting responsibly on behalf of the individual) or electronic data sources to 

determine State residency, in accordance with §435.945(b) and §435.952. Under proposed 

§435.956(c), documents that provide information regarding immigration status should be used as 

a source of evidence to verify satisfactory immigration status, but may not, by themselves, be 

used to demonstrate lack of residency. For example, a temporary or time-limited immigration 

status, such as Temporary Protected Status (TPS), does not necessarily establish that the 

individual is not a State resident because TPS is routinely renewed. The proposed rule relating 

to residency does not diminish States’ responsibility to ensure that only individuals with valid 

and satisfactory immigration status are determined eligible for and enrolled in Medicaid; if an 

individual has a temporary immigration status, the agency must ensure that the individual’s 

Medicaid eligibility is reviewed at the appropriate time. 

Proposed §435.956(d) simply cross-references current policy at §435.910(f) and (g) 

regarding issuance and verification of SSNs. 

Current Federal rules regarding verification of pregnancy vary based on the woman’s 

eligibility category, but verification of pregnancy is not required in all cases under current rules. 

Verification (except by self-attestation) may not be required for pregnant women eligible for 

pregnancy related services under section 1902(a)(10)(A)(i)(IV) or (ii)(IX) of the Act, but 

pregnant women must provide medical verification of pregnancy to be eligible for full Medicaid 

coverage as a qualified pregnant woman (with very low-income below the State’s former AFDC 
CMS-2349-P 69 

standard) under section 1902(a)(10)(A)(i)(III) of the Act or under section 1931 of the Act, if 

medical verification was required under the State’s AFDC program in effect on July 16, 1996. 

In light of the proposed regulations at §435.116, which combine these different eligibility 

categories to achieve greater simplicity in the program, we believe a verification rule for the 

combined group is needed. Thus, we are exercising the authority provided in section 

1902(e)(14)(A)of the Act to propose application of the self-attestation verification rule under 

section 1902(a)(10)(A)(i)(IV) or (ii)(IX) of the Act in determining eligibility under §435.116. 

Although a change in federal guidelines, we do not believe that this will have significant 

practical impact for States, as we believe most pregnant women today are covered under the 

eligibility groups for which medical verification is already not required. Proposed §435.956(e) 

reflects this policy, providing that the agency must rely on the woman’s attestation of pregnancy, 

unless the agency has other information (for example, claims history) that is not reasonably 

compatible with her attestation. To promote coordination of eligibility rules and procedures 

with the Exchange, we also propose at §435.956(e) to codify the widespread State practice of 

accepting attestation of household composition unless the State has information which is not 

reasonably compatible with such attestation. 

In proposed §435.956(f), in the situations when age is a factor of eligibility, States may 

apply the same proposed verification procedures and options, as are available for other eligibility 

criteria verification, in accordance with §435.945(b) and §435.952. 

 When agencies obtain information regarding residency, SSN, pregnancy, age, and birth date 

in accordance with paragraphs (c) through (f) that is not reasonably compatible with the 

information or attestation provided by an individual, they must take reasonable steps to reconcile 

discrepancies that would affect eligibility, following the process set out in §435.952(c) and (d). 
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 individuals remain enrolled for as long as they 

meet eligibility standards, we propose to amend §435.916 to establish simplified, data-driven 

renewal policies and procedures for individuals whose eligibility is based on MAGI, consistent 

with ensurance of program integrity. 

States are increasingly re-engineering their renewal processes, recognizing that the 

traditional process, which involves a new application and documentation, may be unnecessary 

and can be burdensome for families and agencies. In addition, many eligible beneficiaries lose 

coverage at renewal for procedural reasons, only to reapply, and to regain eligibility, soon after 

losing coverage. This churning on and off of coverage is administratively costly and 

burdensome for the agency, health plans, and consumers, and is disruptive to continuity of care 

and efforts to achieve quality and efficiency in the delivery of care. This rule proposes renewal 

procedures that are consistent with those that will operate for the premium tax credit and that 

mirror the practices many States have adopted as they have sought to simplify the enrollment 

process and promote continuity of coverage. 

Under current Federal policy, eligibility must be redetermined at least once every 12 

months, and although States can have a shorter regular redetermination period, very few States 

do so today. According to a 2011 50-State survey by the Kaiser Family Foundation, all but two 

States currently have a 12-month renewal period for children and all but five also provide 12-

month renewal periods to parents. Consistent with this State trend and the annual 

redetermination procedures for individuals eligible for tax credits to purchase coverage through 

the Exchange at §155.335 of the Exchange proposed rule, we propose at §435.916(a)(1) that 
CMS-2349-P 71 

States schedule regular redeterminations or renewals 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 reports a change in circumstance that may affect 

continued eligibility, or the agency obtains information (for example, through a data match from 

other program records) that suggests the need for an eligibility review. States maintain authority 

and flexibility to establish procedures that ensure program integrity. 

 In recent years, States also have increasingly adopted measures to streamline the renewal 

process, including the use of administrative, telephone and online renewals. Consistent with this 

State trend, under the proposed process at §435.916(a), States would not need a renewal form 

from all individuals, further streamlining the process for individuals and States. Similar to the 

proposed verification processes at initial application, discussed in section II.H. of this proposed 

rule, the proposed renewal procedures maximize the use of current third-party data matching to 

verify continued eligibility. Thus, at §435.916(a)(2), we propose to codify the longstanding 

policy (see www.cms.gov/smdl/downloads/smd040700.pdf) that agencies renew eligibility for 

beneficiaries by first evaluating information available to the agency in the electronic account or 

from other reliable data sources. If the information available to the agency is sufficient to make 

a determination of continued eligibility, including information that establishes that the individual 

or family continues to reside in the State, coverage shall be renewed on the basis of this 

information and the agency would send the appropriate notice to the beneficiary without 

requiring any further action. This eliminates the need for and administrative burden of a renewal 

form or a signed returned notice and unnecessary requests for information already on hand. 

State experience with this type of renewal process shows that it reduces the number of 

eligible beneficiaries who lose coverage for procedural reasons while maintaining program 
CMS-2349-P 72 

integrity. Beneficiaries must correct any inaccurate information contained in the determination 

notice and would be permitted to do so through a variety of means, including online, in person, 

by telephone, or via mail. As noted below, if any information is missing or is not reasonably 

compatible with ongoing eligibility, the agency must take further action to complete the renewal 

process. 

If the agency cannot determine that the individual remains eligible through the process 

described above, we propose in §435.916(a)(3) a process in which the agency would provide the 

individual with a pre-populated renewal form containing information that is relevant to the 

renewal and available to the agency. The agency would then provide the individual with a 

reasonable period—-these rules propose at least 30 days--to furnish necessary information and to 

correct any inaccurate information either in person, online, by telephone, and via mail. We seek 

comments on this proposed process. 

At §435.916(a)(3)(ii), we propose that the agency verify the information reported by the 

beneficiary in accordance with §435.945 through §435.956, as revised in these proposed rules, 

including, at State option, reliance on self-attestation consistent with those sections. In 

§435.916(a)(3)(iii), to avoid unnecessary reapplications for coverage, we also propose a 

reconsideration period for individuals who lose coverage for failure to return the renewal form. 

Individuals who return the form within a reasonable period after coverage is terminated would be 

redetermined without the need for a new application. We considered specifying a 90-day 

reconsideration period to align with the 3-month retroactive assistance period provided under 

section 1902(a)(34) of the Act, but did not specify a particular length of time in this proposed 

rule. We seek comments on the use and length of a specified reconsideration period. 
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 eligible for Medicaid, the agency assess the 

individual for eligibility in other insurance affordability programs and transmit the electronic 

account and other pertinent data to the appropriate program for a determination of eligibility in 

accordance with proposed §435.1200(g). 

 We have not proposed amending the renewal procedures for beneficiaries eligible on a basis 

other than MAGI (reflected in current regulations at redesignated §435.916(b)), but seek 

comment on extending the renewal procedures proposed in §435.916(a) to such individuals. 

We propose to expand the standards under redesignated §435.916(c) to include options 

for permitting all beneficiaries to report changes online, over the telephone, by mail or in person. 

Given the evolving reliance on methods for communication that go beyond the in-person 

interview, we solicit comment on whether more modernized procedures to report changes should 

be available to both the MAGI and MAGI-excepted populations. 

We note that we will be modifying the Payment Error Rate Measurement (PERM) and 

Medicaid Eligibility Quality Control (MEQC) regulations to ensure that both the PERM 

Medicaid eligibility review and MEQC processes take into account these rules and procedures, 

including the use of authoritative data sources in redetermining eligibility. We also note that any 

State expenditures (before the end of 2015) for system changes necessary to adopt these renewal 

procedures should be subject to the enhanced (90 percent) match as outlined in the Federal 

Funding for Medicaid Eligibility Determination and Enrollment Activities final rule published in 

the April 19, 2011 Federal Register (76 FR 21950), provided these systems meet the standards 

and conditions set forth in that rule. 
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, Coordination between Medicaid and other insurance 

affordability programs, including a new §435.1200 to delineate the State Medicaid agency’s 

responsibilities in effectuating such coordination. Proposed §435.1200 also includes policies 

previously included in §431.636, Coordination of Medicaid with the State CHIP. Section 

435.1200(a) and (b) set forth the basis for and definitions used in the proposed section. 

1. Basic Responsibilities (§435.1200(c)) 

Proposed §435.1200(c) sets forth the basic responsibilities of the State Medicaid agency. 

Proposed §435.1200(c)(1) specifies that the Medicaid agency must participate in the coordinated 

eligibility and enrollment system described in section 1943 of the Act. As discussed, most 

individuals will be evaluated for eligibility in the Exchange, Medicaid, and CHIP using a 

coordinated set of rules and these programs will work together to ensure that eligible applicants 

are enrolled in the appropriate program, no matter where their application originates. For 

example, an individual who directly applies for and is determined ineligible for Medicaid would 

be immediately assessed for eligibility for advance payment of the premium tax credit and 

coverage through the Exchange. That individual would not need to file a new application in 

order to participate in Exchange coverage, if eligible. Integration among these programs will 

help to avoid duplication of costs, processes, data, and effort on the part of both the State and the 

individual. 

We expect the use of a shared eligibility service to adjudicate placement for most 

individuals. The shared eligibility service would coordinate determination and renewal 

requirements for eligibility in each of the insurance affordability programs. It may include 
CMS-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 organization/assister, through the mail, or through a 

consumer assistance office established by the Exchange), this shared eligibility service would be 

used whenever the single streamlined application for enrollment, discussed in section II.E.2 of 

this proposed rule, is initiated or whenever a renewal occurs. 

We note that shared systems and the Medicaid functions they perform are eligible for 

enhanced Federal financial participation (FFP) of 90 percent for development (through 

December 31, 2015) and 75 percent for operations (no time limit) if certain conditions and 

standards are met. For additional information, see the April 19, 2011 final rule establishing 

enhanced funding for Medicaid eligibility and enrollment activities. Such systems are subject to 

cost allocation principles, per OMB Circular A-87 and guidance from CMS. In addition, the 

entities and agencies performing functions on behalf of one another that involve the use or 

disclosure of an individual’s health information will be required to comply with the applicable 

business associate provisions of the Privacy and Security Rules under the Health Insurance 

Portability and Accountability Act of 1996. 

Section 435.1200(c)(2) proposes that State Medicaid agencies enter into one or more 

agreements with the Exchange and other insurance affordability programs as necessary to ensure 

coordination of eligibility and enrollment, including coordination with a Basic Health Program if 

applicable. Details about the Basic Health Program will be included in forthcoming guidance. 

States may also use such agreements to coordinate related activities, such as health plan 

management. 
CMS-2349-P 76 

States may design these agreements in different ways that reflect their governance 

structures. We see three broad options. First, one or more of the entities (the Exchange, 

Medicaid or CHIP agencies) could enter into an agreement whereby some or all of the 

responsibilities of each entity are performed by one or more of the others. Second, a State could 

develop a fully integrated system whereby the responsibilities of all entities are performed by a 

single integrated entity. Third, each entity could fulfill its responsibilities and establish strong 

connections to ensure the seamless exchange of information and data. We solicit public 

comments on these different working relationships and the best mechanisms to facilitate States’ 

ability to coordinate eligibility and enrollment. 

We note that relationships between the State Medicaid program and other insurance 

affordability programs must be established in accordance with section 1902(a)(5) of the Act, 

which specifies that a single State agency will administer or supervise the administration of the 

Medicaid program. When the Exchange or other entity is performing delegated functions, it 

must at all times conduct such business consistent with the rules adopted by the Medicaid 

agency. This is further discussed in section II.J of this proposed rule. 

At §435.1200(c)(3), we propose that the State Medicaid agency must certify criteria 

necessary for the Exchange to use in determining Medicaid eligibility based on MAGI. This 

includes the applicable Medicaid MAGI standard for parents and caretaker relatives, other adults, 

pregnant women, and children, as well as the criteria for determining satisfactory immigration 

status, in accordance with the Medicaid State plan. We invite public comment on other 

eligibility rules or criteria that should be certified by the Medicaid agency for Medicaid 

eligibility determinations made by the Exchange. MAGI methodologies and Medicaid eligibility 
CMS-2349-P 77 

based on the applicable MAGI standards are discussed in sections II.B.3 and II.E of this 

proposed rule. 

2. Internet web site (§435.1200(d)) 

Section 1943 of the Act says that no later than January 1, 2014, States shall establish an 

Internet web site, linked to the web sites of other insurance affordability programs, through 

which individuals may obtain information, apply for, and enroll in Medicaid. To accomplish 

this, States could, for example, create one enrollment web site for information and enrollment in 

all insurance affordability programs, or they could establish a broad health care web site that 

includes health insurance coverage, health care services and supports, and health education 

information from a broad array of entities. Additionally, a State could establish a Medicaid 

presence on an existing State web site. This web site must be coordinated with the Exchange 

web site as described at §155.205 of the Exchange proposed rule. 

 Proposed §435.1200(d) gives individuals the option to apply for or renew their eligibility for 

Medicaid online. A web site that connects an individual directly into the Medicaid eligibility 

determination system is eligible for enhanced FFP under the April 2011 final rule establishing 

enhanced funding for Medicaid eligibility and enrollment activities, if the system in its totality, 

including the website, meets certain standards and conditions. Additional information on 

website specifications will be provided in forthcoming guidance. 

Because the internet web site may serve as the primary mechanism through which 

individuals communicate with the agency, it must be accessible to individuals with disabilities 

and persons who are limited English proficient (LEP). At §435.1200(d)(2) we propose that the 

agency must ensure accessibility of web resources in accordance with the Americans with 

Disabilities Act and section 504 of the Rehabilitation Act, and must take reasonable steps to 
CMS-2349-P 78 

provide meaningful access for LEP persons. Accessibility needs of LEP persons may be met by 

providing language assistance services, such as translated information and "taglines" that inform 

LEP persons of the ability to talk to a multilingual staff person or an interpreter. 

Web sites, interactive kiosks, and other information systems would be viewed as being in 

compliance with section 504 if they meet or exceed section 508 standards, which ensure that 

Federal agencies’ electronic information technology is accessible to people with disabilities. The 

latest Section 508 guidelines issued by the US Access Board can be accessed at http://accessboard.gov/sec508/standards.htm, and W3C's Web Content Accessibility Guidelines (WCAG) 2.0 

can be accessed at http://www.w3.org/TR/WCAG20/. 

3. Provision of medical assistance for individuals found eligible for Medicaid by an Exchange 

(§435.1200(e)) 

Consistent with sections 1413 and 2201 of the Affordable Care Act, under the 

coordinated system proposed in these rules, if the Exchange finds that an individual is eligible 

for Medicaid, the State Medicaid agency must enroll the individual without further determination 

of eligibility. This enrollment is subject to the rules established by the agency. We note that the 

State Medicaid agency has the responsibility to facilitate health plan selection for enrolled 

individuals, but may arrange with the Exchange to undertake this function. This could include 

providing the individual with available health plan options and transmitting enrollment 

transactions to the health plan, if applicable. 

As discussed in section II.B.3 of this proposed rule, for most individuals, eligibility for 

Medicaid would be determined based on MAGI. As described in the Exchange proposed rule, 

the scope of the final eligibility determinations made by the Exchanges is limited to those based 

on individuals having MAGI-based income at or below the applicable MAGI standard. Note that 
CMS-2349-P 79 

in certain circumstances the State may establish procedures whereby the Exchange will 

undertake Medicaid eligibility determinations on other bases. Individuals who are not eligible 

for Medicaid based on MAGI, would be screened, using information provided on the application, 

for potential Medicaid eligibility on other bases. As appropriate, their applications and other 

relevant information would be transmitted to the Medicaid agency for a full Medicaid eligibility 

determination. See section 155.345 of the Exchange proposed rule for additional information. 

Further, all applicants have the right to request and receive a full determination of eligibility on 

bases other than MAGI from the State Medicaid agency. 

Section 435.1200(e) describes the standards for the Medicaid agency to promptly and 

efficiently enroll individuals determined to be Medicaid eligible by the Exchange. To 

accomplish this, we propose that the agency establish procedures to receive, via secure electronic 

interface from the Exchange, the finding of Medicaid eligibility and the individual’s electronic 

account, including all application information. We recognize that an actual transfer of data may 

not occur, as the Medicaid agency and the Exchange may be utilizing a shared eligibility system. 

However, the legal responsibility for the electronic accounts and for further action, as 

appropriate, will transfer from the Exchange to the Medicaid agency. We expect processes to 

occur in real time whenever possible and, as noted earlier, we will be defining more detailed 

standards and other performance metrics, with State and stakeholder input, in subsequent Federal 

guidance. 

4. Transfer of applications from other insurance affordability programs to the State Medicaid 

agency (§435.1200(f)) 

To ensure a coordinated eligibility and enrollment process as directed by the Affordable 

Care Act and address existing coordination rules for separate CHIP and Medicaid agencies in 
CMS-2349-P 80 

section 2102(b)(3)(B) of the Act, we propose a new §435.1200(f). This provision includes and 

revises provisions previously covered under §431.636(b)(1) through (b)(3). Under proposed 

§435.1200(f), the State Medicaid agency must adopt procedures to promptly determine the 

eligibility of individuals assessed as potentially Medicaid-eligible by other insurance 

affordability programs and, if eligible, to enroll them without delay. 

Under this proposal, individuals with household income below the applicable MAGI 

level who are assessed as potentially Medicaid eligible by another insurance affordability 

program would be quickly and easily enrolled in Medicaid. Because all insurance affordability 

programs will be utilizing a common process for MAGI-based eligibility determinations, an 

individual assessed by such a program as potentially Medicaid eligible based on MAGI should 

receive a seamless determination from the Medicaid agency, and no further action should be 

required of the applicant. For individuals with household income above the applicable MAGI 

standard, who are either assessed by an insurance affordability program as potentially eligible on 

a basis other than MAGI, or who request an eligibility determination on another basis, we 

propose that the Medicaid agency must conduct a full Medicaid eligibility determination in the 

same manner as if their application had been submitted directly to the agency. 

We propose that the Medicaid agency establish procedures to receive the electronic 

account of any individual determined potentially Medicaid eligible by another insurance 

affordability program, and to promptly and without undue delay conduct an eligibility 

determination in accordance with the provisions set forth in §435.911(c). The agency must not 

request any information already obtained, or duplicate any eligibility verifications already 

performed, by the other insurance affordability program and included in the individual’s 

electronic account. Once the Medicaid determination is complete, we propose that the agency 
CMS-2349-P 81 

notify the insurance affordability program of the determination of Medicaid eligibility or 

ineligibility. Issues related to the notices needed to effectuate coordinated eligibility will be 

addressed in future rulemaking. 

5. Evaluation of eligibility for other insurance affordability programs (§435.1200(g)) 

Section 1943(b)(1)(C) of the Act directs States to ensure that any individual who applies 

for, but is determined ineligible for, Medicaid or CHIP is screened for eligibility for advance 

payment of the premium tax credit, cost sharing reductions, and enrollment in a qualified health 

plan offered through the Exchange. Therefore, in §435.1200(g)(1), we propose that the 

Medicaid agency must assess potential eligibility for other insurance affordability programs 

when the agency determines that an individual is not eligible for Medicaid. 

While the Affordable Care Act does not provide express authority for Medicaid to make 

eligibility determinations for coverage through the Exchanges, sections 1943(b)(2) of the Act 

and 1413(d)(2) of the Affordable Care Act do permit the agency to enter into a contract with the 

Exchange to do so. Absent such an agreement, the agency must promptly transfer the electronic 

account of individuals screened as potentially eligible, via secure electronic interface, to the 

Exchange so that such individuals can receive an immediate eligibility determination and, if 

eligible, be enrolled without delay. This provision assumes that verification of any information 

required only for eligibility in the Exchange, such as access to affordable employer-sponsored 

insurance, will be completed by the applicable program once the applicant’s case is transferred. 

(Under current law and regulations, States also have the flexibility to have the State Medicaid 

agency administer some or all of the administrative functions for a separate CHIP, including the 

determination of eligibility for such program.) 
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 information provided on the single 

streamlined application and, as appropriate, verified by the State Medicaid agency. We note 

again that an actual transfer of data may not be necessary, but legal responsibility for the case 

will transfer from Medicaid to the appropriate program. We also note that the Exchange cannot 

reverse a determination of Medicaid ineligibility made by the Medicaid agency. 

In this and the Exchange proposed rule, we propose that individuals determined ineligible 

for Medicaid based on MAGI, for whom the Medicaid agency is evaluating eligibility on the 

basis of being blind or disabled, may enroll in other insurance affordability programs while a 

final Medicaid determination is pending. Once the Medicaid determination is completed, if the 

individual is Medicaid-eligible, such coverage would be terminated in favor of Medicaid, but if 

not Medicaid-eligible, coverage would continue through the other program. This avoids 

unnecessary delays in coverage for individuals whose Medicaid eligibility determination process 

may be lengthy, while avoiding any overlap in coverage for those eventually determined 

Medicaid eligible based on blindness or disability. Proposed §435.1200(g)(2) reflects the 

Medicaid agency’s responsibilities in effectuating this policy. We note that proposed 26 CFR 

1.36B(2)(c)(2)(iii)(B) in the Treasury proposed rule specifies that if an individual receiving 

advance payments of the premium tax credit is approved for Medicaid coverage, the individual is 

treated for purposes of eligibility for such credit, as eligible for minimum essential coverage no 

earlier than the first day of the first calendar month after such coverage is approved; thus, an 

applicant who is being evaluated by the Medicaid agency for eligibility based on blindness or 

disability and who is provided with advance payments of the premium tax credit in the interim 
CMS-2349-P 83 

would not be liable to repay such advance payments upon retroactive approval of Medicaid 

during the period for which advance payments were paid. 

Since it would be inefficient and confusing to transfer and enroll individuals in other 

coverage, only to be disenrolled from such coverage days or even a few weeks later for 

enrollment in Medicaid, we propose to limit application of the policy described to individuals 

whom the Medicaid agency, in accordance with procedures in proposed §435.911(c)(3), is 

evaluating for eligibility on the basis of being blind or disabled. 

J. Single State Agency (§431.10 and §431.11)

As discussed in section II.I above, to ensure a fully coordinated eligibility determination 

and enrollment process, the Exchange proposed rule provides that Exchanges will make 

Medicaid eligibility determinations to effectuate Section 1943(b)(B). For numerous reasons, 

including the coordinated enrollment process, we anticipate that States will want to consider 

different ways to achieve integration across Exchanges, Medicaid agencies and CHIP. 

Under Medicaid’s “single State agency” requirement in section 1902(a)(5) of the Act, as 

codified in §431.10 and §431.11, States must identify a “single State agency to administer or to 

supervise the administration” of the Medicaid program (that is, the Medicaid agency). This 

ensures that there is a single point of responsibility and accountability for proper administration 

of the State Medicaid program, including for eligibility determinations. 

We note, however, that the statute at 1902(a)(5) specifically permits and in some cases 

requires the single State agency to delegate the authority to make eligibility determinations to 

certain other agencies. Current regulations provide for such delegation of eligibility functions in 

§431.10(c). The regulations at §431.10(e) provide that, in delegating any single State agency 

functions, the Medicaid agency retain authority to exercise administrative discretion in the 
CMS-2349-P 84 

administration or supervision of the plan, and that if other State or local agencies perform 

services for the Medicaid agency, they must not have the authority to change or disapprove any 

administrative decision of the Medicaid agency, or otherwise substitute their judgment for that of 

the Medicaid agency in the application of policies, rules and regulations issued by the Medicaid 

agency. It is our understanding that the use of this delegation authority is widespread across the 

nation, and in some States, multiple State agencies separate and apart from the State Medicaid 

agency, as well as county agencies make Medicaid eligibility determinations on behalf of the 

single State agency and under its supervision. In all instances, the single State agency is 

responsible under the statute to set the rules for the program, and to ensure that the 

determinations made are consistent with the statute. 

 Related section 1902(a)(4) of the Act requires a State plan to provide for certain methods 

of administration, including the establishment of personnel standards on a merit basis. We have 

historically advised States that public employees must make Medicaid eligibility determinations. 

This position has been based on the premise that certain activities in the eligibility determination 

process cannot be delegated to private entities because they involve discretion or value judgment 

that are inherently governmental in nature, and in such instances we have stated that State merit 

system employees must be utilized. In addition, there have been concerns about whether States 

that contract out their eligibility determination capacity would be able to effectively monitor and 

if necessary bring that capacity back “in house” if policy implementation issues arose. 

Section 1413(d)(2)(B) of the Affordable Care Act reaffirms the single State agency 

requirement by providing that nothing in the law “changes any requirement under Title XIX that 

eligibility for participation in a State’s Medicaid program must be determined by a public 

agency.” The proposed regulation is consistent with this provision. Simultaneously, we solicit 
CMS-2349-P 85 

comments on how these statutory provisions should apply in the context of Exchanges making 

Medicaid eligibility determinations and simpler, more uniform eligibility criteria. 

In this rule, we propose to allow Medicaid agencies to delegate eligibility determinations 

for individuals whose eligibility will be determined according to MAGI to Exchanges that are 

public agencies. Specifically, we propose to permit Exchanges that are public agencies to make 

Medicaid eligibility determinations as long as the single State Medicaid agency retains discretion 

in the administration or supervision of the plan. We note that if Exchanges are established as a 

non-governmental entity as allowed by the Affordable Care Act, the coordination provisions in 

the law may mean the co-location of Medicaid State workers at Exchanges or other 

accommodations to ensure coordination is accomplished. We solicit comment on approaches to 

accommodate the statutory option for a State to operate an Exchange through a private entity, 

including whether such entities should be permitted to conduct Medicaid eligibility 

determinations consistent with the law. 

In §431.10(c)(1)(iii), we propose to permit Medicaid single State agencies to delegate 

their MAGI eligibility determination function to Exchanges operated by governmental entities, 

provided the single State agency remains solely responsible for setting eligibility policies and is 

accountable for ensuring the program operates consistently with such polices. In §431.10(c), we 

propose that the single State agency be responsible for ensuring that eligibility determinations 

are made consistent with its rules and that corrective actions are instituted as appropriate; that 

there is no conflict of interest by any agency delegated the responsibility to make determinations; 

that eligibility determinations are made in the best interest of beneficiaries; and that it guard 

against improper incentives or outcomes. 
CMS-2349-P 86 

We further propose to add new §435.10(d)(l) through (5), and a conforming change to the 

introductory text at §431.10(d), to provide that agreements between single State agencies and 

agencies making determinations must state the quality control and oversight plans by the single 

State agency to review determinations made by agencies making Medicaid eligibility 

determinations; that the agencies making Medicaid eligibility determinations report to the single 

State agency; that confidentiality and security requirements in accordance with sections 

1902(a)(7) and 1942 of the Act for all beneficiary data are met; and that all agencies making 

Medicaid eligibility determinations meet the requirements of 1902(a)(4) relating to personnel 

standards. 

Finally, we would retain the requirement in §431.10(e) that Medicaid agencies may not 

delegate the authority to exercise administrative discretion or issue policies and rules on program 

matters; that the authority must not be impaired if subject to review by other entities; and that 

other entities must not have the authority to change or disapprove any administrative decision of 

that agency, or otherwise substitute their judgment for that of the Medicaid agency for the 

application of policies, rules and regulations issued by the Medicaid agency. 

K. Provisions of Proposed Regulation Implementing Application of MAGI to CHIP

Section 2101(d) of the Affordable Care Act revises section 2102(b)(1)(B) of the Act to 

ensure that, effective January 1, 2014, that States base income eligibility for CHIP on MAGI and 

household income, as defined in section 36B of the IRC, consistent with section 1902(e)(14) of 

the Act. Below we outline proposed changes to existing sections (§457.10, §457.301, §457.305 

and §457.320) of the CHIP regulations, as well as the addition of new §457.315, to implement 

the CHIP MAGI components of the law. 

1. Definitions and Use of Terms (§457.10 and §457.301) 
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 definition for “household 

income.” We propose to modify the term “Medicaid applicable income level” to clarify that the 

1997 Medicaid applicable income level used in CHIP will also be converted to a MAGIequivalent income level, consistent with guidance provided by the Secretary under sections 

1902(e)(14)(A) and (E) of the Act. We are also adding other new terms related to the proposed 

regulations. 

2. State Plan Provisions (§457.305) 

Section 2102(a)(5) of the Act directs States to include a description of their income 

eligibility standards in their State plan. We propose to add a reference to the new §457.315 on 

application of MAGI and household income. 

3. Application of MAGI and Household Definition (§457.315) 

Under section 2102(b)(1)(B)(v) of the Act, as added by section 2101(d)(1) of the 

Affordable Care Act, beginning January 1, 2014, States will use “modified adjusted gross 

income” (MAGI) and “household income,” as those terms are defined in section 36B(d)(2) of the 

IRC, to determine eligibility for CHIP, and for other purposes for which an income 

determination is needed, “consistent with section 1902(e)(14)” of the Act, which governs the 

application of MAGI and “household” income in Medicaid and which is implemented at 

proposed §435.603 of these rules. In addition, section 2107(e)(1)(F) of the Act, as added by 

section 2101(d)(2) of the Affordable Care Act, states that section 1902(e)(14) be applied to CHIP 

“in the same manner” as it is applied to Medicaid. 

Currently, States use different methods for defining income and household composition 

under CHIP. Many States operate their programs through expansions of Medicaid coverage. 
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 represents a change for some States, doing so is 

consistent with broader goals of coordination across programs. The adoption of MAGI-based 

methodologies to determine income for CHIP represents a necessary alignment with other 

insurance affordability programs and is particularly important for families both because children 

will be moving among different programs as family circumstances changes and because CHIPeligible children will often be in families where the parent is eligible for a premium tax credit 

through the Exchange. Because the statute provides that CHIP apply the new MAGI 

methodologies in the same manner as Medicaid, we propose at §457.315 that, in determining 

financial eligibility for CHIP, States use the methodologies for determining household 

composition and income as those proposed for Medicaid at §435.603(b) – (h), as well as the 

exception, codified at proposed §435.603(i)(1), to permit States to rely on a finding of income 

made by an Express Lane Agency in accordance with section 2107(e)(1)(E) of the Act. As 

discussed in section II.B. of this proposed rule, our proposed 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 proposed financial methodologies based on MAGI 

to be applied to both CHIP and Medicaid, see section II.B.1 and II.B.3 of this proposed rule. 

4. Other eligibility standards (§457.320) 

As discussed in section II.B.3.a and consistent with current practice in almost all State 

CHIPs, assets will no longer be considered in determining financial eligibility for Medicaid or 

CHIP. Section 457.320(a) lists the various eligibility standards States may adopt for one or more 
CMS-2349-P 89 

groups of children. We propose eliminating “resources” and “disposition of resources” in 

conformance with the law. 

The Affordable Care Act also eliminates the use of income disregards other than a 

disregard of 5 percent of income specified under section 1902(e)(14)(I) of the Act. This means 

that, as of 2014, States no longer will be able to raise their effective income standards for their 

CHIPs through the use of a “block of income” disregard. The maximum income standard will be 

the higher of 200 percent FPL, 50 percentage points above the applicable Medicaid income level 

defined in section 2110(b)(4) of the Act and §457.301, and the effective income standard in 

effect in the State (taking into account any income disregards adopted) as of December 31, 2013, 

converted to a MAGI-equivalent income standard in accordance with section 1902(e)(14)(A) and 

(E) of the Act. 

5. Clarifications Related to MAGI 

Nothing in this regulation affects existing rules regarding family size in States that take 

up the CHIP “unborn child option” (per the existing definition of child at §457.10). In States 

that provide coverage under the option at §457.10, the unborn child is counted in family size. 

L. Residency for CHIP eligibility (§457.320)

CHIP regulations currently allow States the option to adopt eligibility standards related to 

residency. The following changes to the regulations governing residency standards for separate 

CHIPs are proposed to ensure coordination between all insurance affordability programs. 

Further discussion on the rationale behind the proposed changes can be found in section II.C of 

this proposed rule. 

We propose at §457.320(d) to modify the definition of residency for non-institutionalized 

children who are not wards of the State under CHIP to reference the Medicaid definition for 
CMS-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 including without a fixed address), or in which a parent 

or caretaker is employed or seeking employment, including seasonal workers. The provisions of 

the proposed rule are not intended to effect a significant change in policy, and are discussed in 

more detail in section II.C.2 of this proposed rule. The provision at §435.403(m) of the 

Medicaid rule, involving situations in which two or more States dispute a child’s State of 

residence, is also applied under the proposed rule to CHIP; under that provision, physical 

location governs. 

M. CHIP Coordinated Eligibility and Enrollment Process

Section 2101(e) of the Affordable Care Act adds section 2107(e)(1)(O) to the Act to 

apply to CHIP the same enrollment simplification standards described for Medicaid under the 

new section 1943 of the Act. These standards build on existing practices and provisions in 

section 2102(b)(3)(B) of the Act relating to coordinated eligibility and enrollment between 

Medicaid and CHIP. The regulatory amendments proposed correspond to proposed changes and 

additions to Medicaid at §435.905 through §435.908, §435.916, §435.917, §435.940 through 

§435.956, and §435.1200, discussed more fully at sections II.D, II.E, II.G, II.H, II.I, and II.K of 

this proposed rule. We seek comments for CHIP on the issues raised in these corresponding 

sections for Medicaid. 

1. Applications and Outreach Standards (§457.330, §457.334, §457.335 and §457.340) 

We propose revisions to §457.330 similar to those proposed for Medicaid at §435.907 to 

implement the use of a single, streamlined application for all insurance affordability programs, 
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 application assistance, similar to those proposed for 

Medicaid at §435.905 and at §435.908, discussed in section II.E.3 of this proposed rule. We 

propose removing the mention of enrollment caps in §457.340(a) to support the role of CHIP 

agencies in accepting the single streamlined application and screening for all insurance 

affordability programs regardless of whether CHIP enrollment is capped. To implement section 

1943(b)(4)of the Act, relating to the establishment of Web sites to facilitate application and 

enrollment in all insurance affordability programs, we propose adding §457.335 similar to the 

rule proposed for Medicaid at §435.1200(d), discussed in section II.I. of this proposed rule. 

We propose to revise §457.340(b) to specify that all CHIP agencies require applicants 

who have an SSN to provide it. We recognize that the Privacy Act makes it unlawful for States 

to deny benefits to an individual based upon that individual’s failure to disclose his or her Social 

Security number, unless such disclosure is required by Federal law or was part of a Federal, State 

or local system of records in operation before January 1, 1975. However, section 1414(a)(2) of 

the Affordable Care Act authorizes the Secretary to collect and use SSNs where necessary to 

administer the provisions of, and amendments made by, the Affordable Care Act. We believe 

such section provides the authority for the requirement of SSNs when applicants are using the 

coordinated system and streamlined application designed by the Secretary under section 1413 of 

the Affordable Care Act. However, similar to Medicaid, non-applicants cannot be required (but 

may be requested) to provide an SSN. Consistent with Medicaid regulations at §435.910, the 
CMS-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 effective date of coverage will provide for a 

coordinated transition of children between programs as family circumstances change, without 

gaps or overlaps in coverage. 

2. Determination of CHIP Eligibility and Coordination with Exchange and Medicaid (§457.348 

and §457.350) 

We propose to add new coordination rules at §457.348 to mirror the rules for Medicaid 

agencies at proposed §435.1200(e) and (f), and to coordinate with the rules in 45 CFR §155.345 

of the Exchange proposed rule. Proposed §457.348(a) and (b) would ensure that State CHIP 

agencies promptly enroll individuals determined eligible for CHIP by the Exchange, without 

requiring additional information or making further determinations, and promptly determine the 

eligibility of (and, if eligible, enroll) individuals determined potentially eligible for CHIP by the 

State Medicaid agency. Consistent with current CHIP policy, proposed §457.348(c) clarifies that 

CHIP agencies may enter into arrangements with the State Medicaid agency to accept that 

agency’s determinations of CHIP eligibility. 

We also propose revisions to regulations at §457.350, which currently relate to the 

responsibilities of the CHIP agency to coordinate with Medicaid. The proposed revisions are 

consistent with those proposed for Medicaid agencies at §435.1200(g), discussed in section II.I.5 

of this preamble, and 45 CFR §155.345 of the Exchange rule, discussed in section II.A.1 of the 

Exchange preamble. 
CMS-2349-P 93 

Two of the proposed revisions to §457.350 warrant particular mention. First, the 

standards at §457.350, as revised, apply to all individuals who are included as applicants on the 

single application – for example, parents and other adults in the household. Second, at 

§457.350(j), we propose that, for children who do not appear Medicaid eligible based on MAGI, 

but whom the CHIP agency identifies as potentially eligible for Medicaid on another basis, such 

as disability, the CHIP agency both transmit the application and all pertinent information to the 

Medicaid agency for a full Medicaid evaluation and continue to process the CHIP determination, 

enrolling the child, if eligible, in the program unless and until the child is determined eligible for 

Medicaid. This is consistent with the process proposed for the Exchange at 45 CFR 155.345 in 

the Exchange proposed rule and with the responsibilities of the Medicaid agency at proposed 

§435.1200(f) 

We anticipate significant variation in how States choose to operationalize the 

coordination of CHIP with other insurance affordability programs, and we will work with States 

to achieve the high level of integration of processes, which will be needed to effectuate the 

coordination required and to avoid duplication of costs and reduce administrative burden on 

States, children, and their families. At proposed §457.350(k), we note that CHIP agencies may 

enter into arrangements with the Exchange to make eligibility determinations for advanced 

premium tax credits in accordance with section 1943(b)(2) of the Act. 

3. Periodic Redetermination of CHIP Eligibility (§457.343) and Coverage Months 

Under sections 1943(b)(3) of the Act and sections 1413(a) and 1413(c)(2) of the 

Affordable Care Act, we propose to add new policies at §457.343 to implement the data-driven 

renewal procedures for CHIP proposed for Medicaid at §435.916. For a fuller discussion of the 

proposed renewal process, which we believe is consistent with current renewal processes in 
CMS-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 proposed for the premium tax credit determinations 

conducted by the Exchange. 

 In proposed 45 CFR §155.410 of the Exchange proposed rule published on July 15, 2011, 

eligibility begins on the first day of the following month for all qualified health plan selections 

made by the 22nd of the previous month, and on the first day of the second following month for 

all qualified health plan selections made between the 23rd and last day of a given month. Similar 

to Medicaid, we are seeking comment on a provision that would continue CHIP coverage until 

the end of the month following the end of the appropriate termination notice period, subject to 

certain exceptions. This policy, which we believe is the policy currently in operation in most 

CHIPs, would prevent a gap in coverage for an individual or family moving from CHIP to the 

Exchange. Further discussion of this issue can be found at section II.G. of this proposed rule. 

4. Verification of Eligibility (§457.380) 

Consistent with the provisions of section 1413(c)(3)(A) of the Affordable Care Act 

(applicable to CHIP through sections 1943(b)(3) and 2107(e)(1)(O) of the Act), we propose 

revising §457.380, based on section 1413 of the Affordable Care Act, relating to verification of 

eligibility for separate CHIPs consistent with the rules proposed for the Exchanges and 

Medicaid. Consistent verification procedures prevent gaps in coverage caused by different 

programs operating under different rules. 

To better align all insurance affordability programs, we reference specific verification 

methods for residency and income. Proposed §457.380(c) references proposed regulations for 

verification of residency for purposes of Medicaid eligibility at §435.956(c), which also align 

with proposed Exchange regulations at 45 CFR §155.315(c). At proposed §457.380(d), we 
CMS-2349-P 95 

require separate CHIPs to verify income in accordance with proposed Medicaid regulations at 

§435.948, which are coordinated with proposed Exchange regulations at 45 CFR §155.320. As 

described in §435.945(b) and §435.948, States may continue to choose to accept self-declaration 

of income, but must also request information from third-party data sources in accordance with 

§435.948 and to continue to comply with program integrity requirements. States are not required 

under §435.948 to request third-party financial eligibility information that the State determines is 

not useful to verifying the financial eligibility of the applicant. For other eligibility criteria, we 

propose in §457.380(a) and (e) to continue to allow CHIPs to develop reasonable verification 

procedures, including reliance on self-declaration or attestation (except when verifying 

citizenship or immigration status). However, we explicitly provide that States accept selfattestation of pregnancy and household membership, as proposed for Medicaid in §435.956(e), 

unless the State has other information that is not reasonably compatible with the attestation. We 

also provide standards for verifying age and date of birth. 

The Affordable Care Act envisions a data-driven verification system in order to improve 

the application experience for families while maintaining strong program integrity. Mirroring 

standards being proposed for Medicaid at §435.952 and the Exchange at 45 CFR §155.315, we 

propose adding §457.380(f) to clarify that the State may only request additional information if it 

is not available electronically. Consistent with proposed Medicaid regulations at §435.948(b), 

we propose in §457.380(g) that States must use the electronic service established by the 

Secretary under proposed §435.949 if reliable electronic data needed for verification is available. 

In proposed §457.380(h), we affirm that program integrity responsibilities for CHIP are not 

affected by this proposed regulation. 
CMS-2349-P 96 

Finally, we propose adding §457.380(i), similar to proposed §435.948(f) and §435.949(c) 

of the Medicaid regulation, and to enable States, with approval from the Secretary, to modify the 

verification procedures used by its program. We solicit comments on alternative verification 

methods that may help improve coordination between CHIP and other insurance affordability 

programs. 

5. Ministerial Changes (§457.80, §457.300, §457.301, §457.305 and §457.353) 

 We are also proposing a number of ministerial changes necessary to bring other sections of 

the current CHIP into conformance with the proposed changes and revisions described above, 

including revisions to §457.80, §457.300, §457.301, §457.305 and §457.353. 

N. FMAP for Newly Eligible Individuals and for Expansion States 

 The Affordable Care Act provides for a significant increase in the FMAP for medical 

assistance expenditures for individuals determined eligible under the adult group in the State and 

who are considered to be “newly eligible”, as defined in section 1905(y)(2)(A) of the Act. The 

increased FMAP specified in section 1902(y)(1) of the Act is not available for the medical 

assistance expenditures for any individual who is not considered newly eligible. Under section 

1905(y)(2) of the Act, an individual is newly eligible if the individual would not have otherwise 

been determined eligible for Medicaid under the eligibility provisions of the Medicaid State plan, 

demonstrations, or waivers in effect in the State as of December 1, 2009. 

1. Availability of FMAP (§433.10(c)) 

 We propose to amend 42 CFR part 433 to add new provisions at §433.10(c) to indicate the 

increases to the FMAPs as available to States under the Affordable Care Act. The following 

describes these new FMAP provisions. 

a. Newly Eligible FMAP (§433.10(c)(6)) 
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 beginning January 1, 2014, for the medical assistance expenditures of 

individuals determined eligible under the adult group who are considered 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 Increase in FMAP (§433.10(c)(7)) 

Per section 1905(z)(1) of the Act, we propose to add §433.10(c)(7) to indicate the 

availability of a general 2.2 percentage point increase to the base FMAP of a State (as 

determined under section 1905(b) of the Act) for certain expansion States, as defined in section 

1905(z)(3) of the Act. The general 2.2 percentage increase to the base FMAP is available only to 

a State that: (1) meets the definition of expansion State; (2) does not qualify for any payments for 

the full increased FMAP for individuals who are newly eligible; and (3) has not been approved 

by the Federal government to use amounts of their DSH allotments for the costs of providing 

medical assistance or other health benefits coverage under a demonstration that was in effect on 

July 1, 2009. Only for States that meet these 3 conditions, the base FMAP would be increased 

by 2.2 percentage points for all expenditures in CYs 2014 and 2015 (to which the base FMAP 

would apply). Since by definition, the base FMAP plus 2.2 percentage points would only be 

available and applicable for expenditures for individuals who are not newly eligible, such general 

increase would be available for all individuals in such States. 

(2) Expansion State FMAP (§433.10(c)(8)) 
CMS-2349-P 98 

The increased FMAP discussed in section II.N.1.a. of this proposed rule is available for 

individuals in the adult group who are considered to be newly eligible. We propose to add 

§433.10(c)(8) to indicate an additional FMAP rate will be available for expansion States for the 

expenditures for certain nonpregnant childless adults who are determined eligible under the adult 

group, and who are not considered to be newly eligible, as defined in section 1905(y)(2)(A) of 

the Act. 

Beginning in CY 2014 and each year thereafter, the expansion State FMAP for medical 

assistance for individuals described in the adult group who are nonpregnant childless adults is 

equal to the base FMAP for the State increased by a certain percentage determined in accordance 

with a formula specified in section 1905(z) of the Act, as amended by the Affordable Care Act. 

This new expansion State FMAP is equal to the base FMAP plus a "transition percentage" 

multiplied by the difference between the Newly Eligible FMAP provided to States beginning in 

CY 2014 and the expansion State’s base FMAP. The transition percentage is as follows: 

• 50 percent in CY 2014; 

• 60 percent in CY 2015; 

• 70 percent in CY 2016; 

• 80 percent in CY 2017; 

• 90 percent in CY 2018; and 

• 100 percent in CY 2019 and every year thereafter. 

The following illustrates how the expansion State's FMAP would be calculated: 

Example. In CY 2019, assume the expansion State's base FMAP is 60 percent. In CY 

2019 the Newly Eligible FMAP is 93 percent. Therefore, in this example, in CY 2019 

the expansion State FMAP would be 93 percent, calculated as follows: 
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 eligibility determination process for individuals 

and States involves developing a methodology that ensures the Federal government will pay the 

appropriate FMAP rate for both “newly eligible” individuals as well as for expenditures that are 

subject to the expansion State FMAP rate. As discussed above, the Affordable Care Act 

provides for streamlined eligibility and enrollment policies and processes that are a departure 

from the more complex pre-Affordable Care Act Federal Medicaid eligibility policy, but the preAffordable Care Act rules retain relevance for the purposes of determining the appropriate 

FMAP rate for expenditures beginning in CY 2014. Although the new MAGI rules are used for 

purposes of determining eligibility for the adult group, the newly eligible FMAP is not available 

for all individuals whose eligibility will be determined using MAGI; rather the newly eligible 

FMAP is only available for those members of the adult group who are determined to be newly 

eligible as discussed in this regulation. In order for States to determine which beneficiaries are 

“newly eligible” and which are not, States must evaluate a large group of beneficiaries against 

the State’s pre-Affordable Care Act eligibility rules. To do so on a case-by-case basis would 
CMS-2349-P 100 

require States to operate two eligibility systems or processes — one simplified system for the 

purpose of determining eligibility, and another different and more complex system to assign the 

appropriate FMAP rate. The two sets of rules would, in turn, require Exchanges as well as State 

Medicaid agencies to collect from applicants information in excess of what is required for States 

to determine eligibility either for Medicaid or premium tax credits available through the 

Exchange. 

Running two distinct eligibility systems would pose challenges to applicants, States, and 

the Federal government. Applicants would have to report and verify income, assets, and 

deductions under pre-Affordable Care Act rules, even though that information would no longer 

be required to determine eligibility. Similarly, States and the Federal government would have to 

seek and verify information not needed for eligibility determinations, resulting in excess 

administrative burden and inefficiency, a result counter to the goals of the Affordable Care Act. 

Because a double eligibility system is burdensome and costly to States and the Federal 

government, a barrier to enrollment for eligible individuals and families, and would likely lead to 

inaccurate determinations, we have identified possible alternate approaches for determining the 

appropriate FMAP rate. Specifically, this proposed rule discusses the potential revision of 

regulatory provisions in part 433 to propose three alternative methodologies which States could 

use for claiming expenditures at the appropriate FMAPs: the regular FMAP, the newly eligible 

FMAP and the expansion State FMAP for individuals eligible for Medicaid beginning in CY 

2014 under the provisions in sections 1902(a)(10)(A)(i)(VIII) and 1905(y) and (z) of the Act as 

amended by the Affordable Care Act. The proposed rules would not permit FFP for the costs of 

maintaining dual eligibility systems for the adult group. HHS plans to test, with States, each of 

the proposed methodologies and possibly others suggested through the comment process. Once 
CMS-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 certain 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 application of the applicable FMAPs to actual expenditures as 

possible in the determination of the appropriate amounts of Federal payments for such 

expenditures. The methodology must not include a systemic bias in favor of either the States or 

the Federal government. Second, any allowable methodology should minimize administrative 

burdens and costs to States, the Federal government, individuals, and the health care system. 

Third, any methodology must be developed and applied transparently by both the Federal 

government and States. Fourth, any method must take into consideration the practical 

programmatic and operational goals of the Medicaid program. Finally, in order to ensure that the 

States claim expenditures at the correct FMAP, any methodologies used by the States should 

include sufficient data to identify, associate and reconcile expenditures with the related eligibility 

group to which the FMAPS apply. With these principles in mind, we propose that States work in 

partnership with the Federal government on technical support and review as well as ongoing 

monitoring, verification, and adjustment by States and the Federal government. HHS plans to 

monitor State implementation and operations closely and could require adjustments and changes 

to processes as necessary to ensure that systems are implemented in an unbiased and accurate 

way. HHS is exploring mechanisms to verify methodology results, including on-site reviews, 
CMS-2349-P 102 

sampling and confirmation with outside data sources, which could identify issues resulting in 

improper levels of FMAP being claimed. HHS will define procedures as needed to ensure 

accurate reporting and verification of computations to determine the applicable FMAP 

potentially including enhanced monitoring and prospective or retrospective FMAP adjustments. 

States and the Federal government each have a strong interest in an accurate, simplified system, 

and we expect to undertake these efforts in full partnership with States. 

Given the principles discussed above, we are considering three main approaches to 

identifying newly eligible individuals for purposes of applying the correct FMAP rate in the 

development of States’ claims for Federal funding in Medicaid: (1)using upper income and other 

thresholds across categorical eligibility groups, taking into account the December 2009 eligibility 

standards in effect under State plans, waivers or demonstrations and applicable disregards and 

adjustments, to approximate, in the aggregate, the December 2009 standards; (2) using a 

sampling methodology across individuals in the adult group and related Medicaid expenditures 

to make a statistically valid extrapolation of who is newly eligible and their related expenditures; 

or (3) using an extrapolation from available data sources to determine the proportion of 

individuals covered under the new adult group who would not have been eligible under the 

eligibility criteria in effect under the State plan or applicable waiver as of December 1, 2009, 

validating and adjusting the estimate, based on sampling or some other mechanism, going 

forward. We seek comment on these three approaches. 

At §433.206(a), we propose that a State may opt to use any of the specified alternatives 

discussed below. As discussed further, these specific options may not ultimately be the methods 

available, as we expect to modify, narrow or combine the proposed approaches in the final rule 

depending upon public comment and testing for feasibility. We are specifically interested in 
CMS-2349-P 103 

input as to what other options should be considered, and whether it is advisable for States to 

choose from among different methods or for HHS to identify a single method that all States 

would use. 

If selection is available, we propose at §433.206(b) that a State provide notice to CMS of 

which methodology it plans to use at least two calendar years prior to the first day of the calendar 

year in which the State will use that particular method, except for 2014 as discussed below. For 

example, a State would provide notice to CMS of the methodology it plans to use for CY 2017 

no later than December 31, 2014. For the initial year (CY 2014), States would give notice to 

CMS no later than one year prior to the beginning of the calendar year, January 1, 2013. This 

allows States time to determine which method best meets their needs in that context and to make 

preparations for the systems and eligibility determination modifications needed for the initial 

years. We further propose that once a State selects a methodology, it must use that method for a 

3-year period, at a minimum, subject to necessary monitoring and adjustment. This will allow 

stability in the process and allow for the provision of appropriate allocation of resources within 

the State and at the Federal level. We request comments on this minimum 3-year period. 

As noted above, we are proposing to not provide the option of maintaining double 

eligibility systems and completing a determination for each individual under obsolete eligibility 

rules for purposes of determining the appropriate FMAP because we believe that this is neither 

necessary nor efficient. Rather, we propose to rely on one or more alternate methodologies. 

3. Alternative 1: 2009 Eligibility Standard Threshold 

The “threshold methodology” would allow States to use upper-income thresholds, as well 

as proxies for other eligibility criteria (such as assets or disability status) across categorical 

eligibility groups, taking into account the December 1, 2009 eligibility standards, to determine 
CMS-2349-P 104 

whether an individual is considered to be newly eligible for purposes of assigning a Federal 

matching rate. This methodology would use information the individual supplied on their 

application, and other appropriate data sources, subject to appropriate verification and 

documentation requirements, to assign the individual to one of the categories that the Affordable 

Care Act subsumed into the adult group, such as certain parents and caretaker relatives, 19 and 

20 year olds, and childless adults, and to then apply simplified eligibility criteria based on the 

rules in effect December 1, 2009 to identify those who would have been eligible under the 

December 1, 2009 criteria. This option requires States to apply the December 1, 2009 eligibility 

criteria, but in a simplified manner, to each Medicaid beneficiary who is included in the adult 

group. Based on the threshold combined with proxies, the individual would be determined to be 

newly eligible or an individual who would have been eligible based on the December 2009 

eligibility standards. 

As previously noted, States will need to establish income eligibility thresholds for MAGI 

populations to be eligible for Medicaid under the State plan, demonstration or a waiver of the 

plan using MAGI that are not less than the effective income eligibility levels that applied under 

the State plan, demonstration or waiver on the date of enactment of the Act (“income standard 

conversion”). States using the threshold methodology similarly could convert the income 

standards in effect as of December 1, 2009 for other optional eligibility groups (for example, 

based on disability) to MAGI-equivalent standards, against which the MAGI-based income of an 

individual eligible under the new adult group would be compared for the purpose of determining 

whether such individual would have been eligible under the optional group and thus is newly 

eligible or not. CMS will solicit State input and providing further guidance and technical support 

on the income standard conversion process. 
CMS-2349-P 105 

We propose that States employing this threshold methodology would also establish, 

subject to CMS approval, proxies of eligibility criteria in place prior to CY 2014 that are not 

related to income, such as disability status and asset value. For disability, for example, proxies 

could be based on receipt of SSDI, screening questions included in the application process (for 

example, “Have you had an accident or illness serious enough that it has caused and is still 

causing you to miss work for an extended period of time?”), retroactive claims review (to 

determine individuals with significant medical problems), some other method, or such methods 

in combination (for example, use of both a screening question and retrospective claims review). 

States would have to be clear with applicants that this information would not be used for an 

eligibility determination purposes. We are requesting comments on what methods or proxies 

could be used by States for disability status as well as whether there are any special 

considerations which must be considered in the identification or use of appropriate proxies for 

States that apply a more restrictive definition of disability than the SSI program. 

Although we are looking for proxies for disability determinations to determine whether to 

claim enhanced FMAP for an individual or not, we are also considering the possibility of using 

only actual disability determinations to ascertain the appropriate FMAP. Thus, if an individual 

underwent an actual disability determination and was found to be disabled, and met other criteria 

associated with a pre-Affordable Care Act optional eligibility category for the disabled such that 

he or she would have been eligible as disabled in December 2009, that individual would not be 

newly eligible. This proposal would be feasible to the extent that it is reasonable to expect that 

individuals with disabilities have sufficient incentives to undergo disability determinations, most 

likely to obtain disability-related cash benefits, such that a proxy is not necessary. We are 

soliciting comments on whether adequate incentives do exist such that no additional proxies for a 
CMS-2349-P 106 

disability determination need be applied. 

For the reasons noted, we are also proposing that States using the threshold methodology 

identify thresholds or proxies for estimating whether individuals in the adult group meet any 

asset test that was applied to the applicant’s coverage category in December 2009. The State 

would also propose procedures for obtaining the information needed to compare the situation of 

individuals in the adult group to the proxy. For example a State might include a few simple 

questions during the application process to enable comparison against the proxy, for example, 

“Excluding your primary residence and automobile, are your assets, including any savings or 

checking accounts, stocks, bonds, or other liquid assets, greater than X dollars?” States could 

also use information on tax returns to obtain information about assets via interest or dividend 

income. We also are interested in comments regarding the feasibility of using the Asset 

Verification System (AVS), required for all States under section 1940 of the Act as a tool to 

obtain asset data on individuals in the adult group without asking for it directly. 

We also considered proposing that the threshold methodology be limited to an 

individual’s income and not the assets/resources when comparing the individual against the 

December 2009 eligibility criteria. This would allow States to not collect asset information no 

longer needed for eligibility purposes and it is consistent with analysis showing that only very 

small numbers of people with income in this range will have disqualifying assets. However, 

without evaluating assets, all individuals whose incomes are below the income threshold would 

not be newly eligible, even though it is possible that some would not have been eligible under the 

pre-Affordable Care Act rules. Thus, if assets are not considered there could be individuals who 

would be newly eligible, but for whom the State could not claim enhanced match. We believe 

this methodology has merit as we recognize there is a burden on States and to beneficiaries in 
CMS-2349-P 107 

including an asset proxy and that a significant portion of low-income individuals do not have 

assets in excess of those thresholds. We invite comment on both approaches. 

In lieu of additional questions on an application for coverage asking about assets, we are 

also considering allowing States to develop an estimate based on actual data on the proportion of 

individuals applying for coverage who failed eligibility for a specific group in effect as of 

December 1, 2009 due to possession of assets exceeding the asset limit. For example, if the State 

had an optional disability group in December 2009 with a resource test, and 15 percent of 

applicants were denied coverage in that group because their assets exceeded the resource, the 

State could assume that 15 percent of the disabled individuals with incomes below the converted 

December 2009 standard in the adult group would also fail the asset test. The State would 

therefore estimate the percentage of individuals who were disabled in the adult group would be 

newly eligible. We are interested in comments as to whether States have reliable data upon 

which this calculation could be made. 

We also propose that once an individual is determined to be either a newly eligible 

individual or an individual who would have been eligible under the December 2009 standards for 

FMAP determination purposes, the determination would be applicable throughout the 12-month 

eligibility period after a person is determined eligible. Our proposal is based on the observation 

that changes in income occur in both directions and are not biased in one direction or the other. 

Our proposal is also based on the goal of achieving administrative simplicity, which can best be 

obtained through a single annual FMAP determination for an individual who remains enrolled in 

Medicaid, whether continuously enrolled or not, rather than requiring a State to potentially make 

many such determinations over the course of a year. 

Finally, we do not believe that States need to consider whether an individual would have 
CMS-2349-P 108 

been eligible under a spend down for a medically needy category under section 1902(a)(10)(C) 

of the Act in considering whether someone would have been eligible under standards in effect in 

December 2009. This is because we believe that there is inherent uncertainty in determining 

whether and when a spend down would have been met. An individual who is not yet “medically 

needy” because he or she has not yet met the spenddown requirements would not be considered 

to be eligible for Medicaid under the December 2009 standards. However, if an individual does 

qualify by meeting the medically needy income standard without a spenddown, the State could 

not claim enhanced FMAP for that individual. 

The threshold methodology would require ongoing monitoring, verification, and 

adjustment. States using the threshold methodology would need to work with CMS to verify this 

methodology for a sample of cases within the first 2 years of use to test whether the threshold 

methodology is accurate and valid. We propose to undertake a periodic review, working 

collaboratively with States to evaluate the accuracy of the threshold methodologies and make 

adjustments to improve the accuracy of the threshold, as needed. We propose that adjustments to 

the methodology would be prospective only. Once a State has an approved methodology, that 

methodology would apply unless and until a review process indicated that adjustment was 

necessary. Finality and certainty are important for the operation of the program. 

4. Alternative 2: Statistically Valid Sampling Methodology (§433.210) 

At §433.210, we are proposing the standards for States to use sampling to extrapolate the 

correct expenditures for which the State would receive the FMAP rate for newly eligible 

individuals established under the Affordable Care Act. Sampling is the statistical practice of 

selecting a random and unbiased subset of Medicaid eligible individuals and their related 

expenditures. We believe that a statistically valid sampling plan is a transparent, and widely 
CMS-2349-P 109 

accepted methodology of allocating costs. OMB Circular A-87 revised establishes principles 

and standards for determining costs for Federal awards carried out through grants, cost 

reimbursement contracts, and other agreements with State and local governments and Federallyrecognized Indian tribal governments. We propose that States using this methodology would use 

a statistically valid sampling methodology meeting the requirements of OMB A-87. 

To ensure consistency, we propose to specify the additional standards States would need 

to use to perform a statistically valid sample of the population of individuals covered under the 

new eligibility group created by the Affordable Care Act, to determine the proportion that would 

not have been eligible based on the State’s December 2009 eligibility standards, and therefore be 

newly eligible. We propose to specify standards within this regulation as well as in 

accompanying guidance relating to sample size and specifics of sampling techniques, etc. We 

believe this will allow HHS to work with States to refine specific sampling requirements and 

procedures as we gain experience over time. For example, we anticipate the sample size 

requirements may evolve as we gain experience with actual data becoming available and tested 

over time. We also believe that guidance on the inclusion of specific demonstration-related 

issues would be best provided through subregulatory guidance to allow better consideration of 

State-specific issues, as well as to provide an opportunity to refine the specific methodologies 

and requirements. 

For all individuals selected for the sample, the State would perform the equivalent of a 

full eligibility determination using the eligibility standards in place in that State as of December 

2009. Each individual in the sample would be determined to be either a newly eligible 

individual or an individual who would have been eligible under the December 2009 standards. 

We propose that States should submit their sampling plans to CMS with adequate time for 
CMS-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 State would determine the proportion of actual 

expenditures in the sample that were for newly eligible individuals and extrapolate this 

proportion to the population sampled to determine the correct allocation of expenditures for 

which the State would make a claim at the FMAP rate for newly eligible individuals established 

under the Affordable Care Act. We believe this methodology would most accurately determine a 

weighted expenditure proportion from actual claims to apply to the adult group. 

We also considered using a methodology in which a per capita expenditure would be 

determined for the adult group. States would apply this per capita expenditure amount 

proportionately to determine the appropriate FMAP claiming. We believe this methodology may 

allow for greater ease of administration, but seek comment on whether this would reflect a fair 

allocation of expenditures to each distinct population. 

 We propose that States would perform a statistically valid sample for the year in which the 

State is claiming. This sample would be based on the entire adult group population, from which 

the State would randomly select Medicaid eligible individuals on a monthly basis, in accordance 

with CMS’ sampling guidelines. Once individuals are determined in that month of review to be 

either a newly eligible individual or an individual who would have been eligible under the 

December 2009 standards, the State would apply that eligibility determination throughout the 

entire year for the purpose of FMAP determination. Our proposal is based on the observation 

that switches occur in both directions and are not biased in one direction and the administrative 

simplicity that can be obtained through a single annual determination is preferred. 
CMS-2349-P 111 

The State would pull all medical expenditures for the prior 12 months for the individual. 

If the individual is enrolled exclusively in a managed care organization (MCO), for which the 

State makes a capitated monthly payment to an MCO, the State would consider the risk-adjusted 

monthly payment to the MCO as the full medical assistance expenditure for that individual for 

each month the individual is so enrolled. Otherwise, the medical expenditures for each 

individual are equal to the actual expenditures made to providers for items and services provided 

to that individual. It does not include any Medicaid supplemental payments that are not 

associated with medical assistance payments made for specific items and services provided to a 

specific individual. 

 We propose that the State complete the sampling and related expenditure analysis no later 

than 2 years after the completion of the designated year. The State will retroactively apply the 

FMAP to the correct year and make any necessary prior period adjustments to the CMS-64 

expenditure report to assure accurate Federal funding. We will work with States to meet the 

proposed time frame to ensure their ability to claim the enhanced funding. 

 We propose that the State would claim based on the most recent data for the current year. We 

understand that the State will not have accurate data based on the actual year’s enrollment and 

expenditures until after the finish of that year. Therefore, we propose to allow States to make 

interim claims for the FMAP rate for newly eligible individuals established under the Affordable 

Care Act. These claims would be based on the most recent year for which a State has 

statistically valid data. For example, in CY 2020, if a State had a completed sample for CY 

2018, but was finalizing its sample and related extrapolation for CY 2019, the State would use 

the data from the CY 2018 sample and apply the FMAP according to the CY 2018 findings. 

Once the State completes the CY 2020 sample, it will retroactively adjust the CY 2020 
CMS-2349-P 112 

expenditures claimed on the CMS-64 to incorporate the actual data from 2020 (the process for 

CYs 2014 and 2015 is discussed below). We solicit comment on this estimation and 

reconciliation process. 

 We propose that States will continue to sample on an annual basis for the first consecutive 

three years the State implements a sampling methodology. For all following years, we propose 

that the State would sample on a 3-year basis. 

For the initial years (CYs 2014 and 2015), we propose to allow States to calculate and 

apply a reasonable estimate of the expenditures claimed at the Newly Eligible and expansion 

State FMAP rates established under the Affordable Care Act and make the retroactive 

adjustment described above based on CY 2014 data extrapolated using the State’s sampling 

methodology. We would allow States to create a reasonable estimate in one of two ways: (a) 

based on a State’s statistically valid sample of low-income populations that reasonably 

approximates the expected Medicaid adult group; or (b) based on a HHS developed estimate of 

the proportion of newly eligibles and per capita expenditures for the projected newly eligibles 

that HHS would develop and test in collaboration with States by, for example, using a 

combination of Medical Expenditure Panel Survey (MEPS) and Medical Statistical Information 

System (MSIS) data, or other existing data sources. In the first option, we propose to allow 

States to calculate the projected per capita expenditures for the newly eligible population based 

on a sample of the low-income population of those individuals enrolled in and appearing to be 

potentially eligible for Medicaid as of CY 2014. The States would use the sampling 

methodology guidelines applied to the population of State residents (Medicaid enrollees and 

other low-income individuals) that approximated the expected Medicaid eligible adult group. 

We propose that States submit a sampling plan demonstrating compliance with OMB Circular A-
CMS-2349-P 113 

87 and, other requirements specified within this rule and other CMS sampling guidance. The 

methodology must include not only a description of the population from which the sample will 

be pulled prior to CY 2014, but also how the chosen population approximates the adult group. 

States would complete the sample and expenditure extrapolation in accordance with a sampling 

plan prior to January 1, 2014. 

We propose that States use data from the sample to calculate the projected proportion of 

newly eligible individuals, as well as per capita expenditures for such individuals. The State 

would use MSIS data and Medicaid experience to estimate expenditures for the “would have 

been eligible” population. The State would use this information to determine the appropriate 

estimated expenditure proportions to claim at the respective FMAP rates for the initial years. 

We propose to allow Federal match based on the estimate until the actual data became 

available and sampled in accordance with the methodology established above. The State would 

make a retroactive claims adjustment on the CMS-64 based on the actual data from CY 2014. 

Alternatively, in the second option we propose to allow States to use a CMS established 

estimate of the proportion and per capita expenditures for the projected newly eligible for CY 

2014 based on currently available State-specific data (for example using MEPS data, a 

combination of MEPS and MSIS data, or other existing data sources). We propose to establish 

the proportion of newly eligible individuals and per capita expenditure amounts that each State 

could use in estimating FMAP for the initial years. We would publish the estimates for State use 

for CY 2014 no later than January 1, 2013 to ensure States have sufficient time to incorporate the 

data and create reasonable estimates. 

We propose to provide Federal match based on the estimate until the actual data became 

available and sampled in accordance with the CMS-established sampling requirements 
CMS-2349-P 114 

established in this regulation and in future subregulatory guidance or validated in another way. 

If sampling were chosen as a validation method, we propose to require that States would 

implement a statistically valid sample methodology throughout CYs 2014 and 2015 to determine 

the correct proportion of newly eligibles and expenditures to claim at the 100 percent FMAP for 

CYs 2014 and 2015, respectively. The State would make a retroactive adjustment based on the 

actual data from CY 2014. 

We consider this concept to be similar to an interim rate payment methodology. It allows 

for the State to receive the increased FMAP rate for a reasonable estimate of newly eligible 

individuals and settle to actual expenditures when the data is available. We are soliciting 

comments on this approach. 

5. Alternative 3: Use of a FMAP Methodology Based on Reliable Data Sources (§433.212) 

 We are also proposing an option for States to use State specific estimates established by the 

Secretary using reliable data sources such as MEPS data or State MSIS data. This option is 

described in proposed §433.212. 

Under this model, States would use the estimated proportions in claiming FFP for 

medical assistance expenditures for newly eligible individuals. Because the model and estimated 

proportions would be available prior to each year, the State would claim expenditures and draw 

down Federal funds in real time. There would be no need for a retroactive adjustment. Rather, 

the verification to actual claims beginning in CY 2016 would apply to correcting for future years 

by adjusting the model. 

 We have reviewed current Federal analytic models created for other purposes to determine if 

they could estimate the potential impact of eligibility changes in the Affordable Care Act. We 

believe these models may have merit and may be an appropriate starting point for creating 
CMS-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 appropriate percentages of 

Medicaid enrollees with a given set of characteristics (such as income, age, assets, family 

structure, disability status) who would be considered newly eligible or not newly eligible under 

the December 2009 eligibility rules for purposes or applying the related FMAP. The algorithm 

would estimate for example, that 90 percent of the adults with a child with income between 100 

percent and 110 percent of the FPL in a specific State would not have been eligible under the old 

rules. Then, the State would count the number of adult Medicaid enrollees in CY 2014 who had 

a child and whose income was between 100 percent and 110 percent of FPL, and would receive 

the Newly Eligible FMAP for 90 percent of their expenditures, and the base FMAP for 10 

percent. 

We propose to review, evaluate, and potentially expand upon existing models to develop 

an acceptable estimate to be the basis for determining FMAP. We are specifically interested in 

receiving comments on the data sources that should be considered for inclusion in the model. 

We believe MSIS and MEPS data likely to be the most useful and relevant data sources available 

consistently for all States. We propose to not limit the data sources we may choose to review 

and incorporate into a predictive model as long as the data sources are relevant, accurate and 

available in a timely manner to both the Federal government and the State. We believe the 

modeling process, as well as the data sources used to create the specific models must be fully 

tested, transparent and readily available to States. 

 We further propose that we would annually establish a model to reasonably predict in an 

unbiased way the appropriate proportion of expenditures (that is, State-specific rates) to 

determine the amount each State could claim using the “Newly Eligible” FMAP. We propose to 
CMS-2349-P 116 

solicit and integrate public input into the development of the final modeling estimate. The Statespecific rates would be finalized and made public no later than October 1 of the year prior to the 

calendar year in which the State would implement the methodology. For CY 2014, we would 

establish and publish the State-specific rates by October 1, 2012. 

We solicit comments on the potential of creating accurate State specific estimates given 

the available data sources and the limitations of each. We also are requesting comments on other 

possible approaches to compensate for the potential limits on State-specific data to create robust 

accurate estimates at the State level. 

Beginning in CY 2016, we propose to integrate validation measures, such as statistically 

valid sampling methodologies, into the model to verify and assure the data accuracy. This 

verification of actual claims would apply to correcting for future years by adjusting the model. 

For example, we would work with selected States in each year to pull a random sample of 

Medicaid enrolled individuals in the adult group. We would then work with the State to apply 

the State’s December 1, 2009 eligibility standards to determine the proportion of individuals that 

are newly eligible and the proportion that would have been eligible under the standards at that 

time. We would then determine actual expenditures for those individuals to determine the 

appropriate proportion of expenditures to be claimed at the Newly Eligible FMAP rate. We 

propose that such sampling methodology be transparent to States. We further propose to employ 

a public notice and comment process to assure the integration of State and other stakeholder 

concerns into a final verification system. 

6. Additional methodology approaches 

We are requesting comments and suggestions on hybrid approaches that incorporate all of 

the alternatives listed. We believe that the above-described alternatives could be combined, so as 
CMS-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 estimates made under the threshold methodology or 

as stated above in the other data source methodology. While sampling might be necessary in the 

initial years, as confidence in the accuracy of the other method increased, sampling could be 

required on a less frequent basis (for example, once every 3 to 5 years), thereby diminishing the 

burden otherwise imposed by sampling, or we could see using the threshold methodology for 

simpler, more straight-forward cases and sampling for more complicated ones. We invite 

comments on using a hybrid approach. 

 In addition, regardless of which approach is ultimately employed, we intend to monitor 

the effects and impact of that method over time and make refinements as necessary. We are 

interested in assuring that the alternatives proposed are viable in the sense that States can 

implement them in a meaningful way. We solicit comments on how each method may be 

operationalized and what challenges or obstacles a State may face in doing so. We also seek 

comment on analytical approaches that CMS should consider using when comparing the relative 

feasibility, validity, and reliability of the methods proposed above. 

 III. Collection of Information Requirements 

 Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in 

the Federal Register and solicit public comment before a collection of information requirement 

is submitted to the Office of Management and Budget (OMB) for review and approval. In order 

to fairly evaluate whether an information collection should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the 

following issues: 
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 information collection burden on the affected 

public, including automated collection techniques. 

This proposed rule would implement provisions of the Affordable Care Act that expand 

access to health coverage through improvements in Medicaid and CHIP; ensure coordination 

between Medicaid, CHIP, and the new Affordable Insurance Exchanges (which are proposed in a 

separate NPRM under RIN 0938-AR25); and simplify the enrollment and renewal processes. 

Taken together, the policies proposed in this rule would result in a reduction in burden for 

individuals applying for or receiving coverage, as well as for States. Although there are 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 CHIP eligibility rules 

for most individuals, and creating a coordinated process that results in a seamless enrollment 

experience across Medicaid, CHIP, and the new affordable insurance Exchanges. 

 At the same time, CMS is undertaking a number of business process, structural and system 

improvements designed to support modernized IT systems and streamline the manner in which it 

works with States and to minimize burdens in review and approval processes. A new reliance on 

automated information sources and data-sharing across agencies and programs will facilitate 

enrollment and renewal. In addition, the business process, structural and data system 

improvements underway at CMS are designed to create an environment where a significant 
CMS-2349-P 119 

proportion of the interactions between States and the Federal government can take place through 

a web-based information portal. For example, we anticipate that CMS will have developed a 

web-based system for States to submit the State plan amendments that will be needed to 

implement the Medicaid and CHIP programmatic modifications and that the system itself, for 

submission, review, and approval will be significantly more streamlined. It is not possible at this 

point to quantify the impact of these changes in terms of burden, but we believe that the 

estimates included in this collection of information discussion likely overstate the actual burden 

on States. The foundation for this is established through a final rule that enables States to receive 

a 90 percent Federal matching rate for design, development, installation or enhancement of 

eligibility determination systems through December 31, 2015, for those States meeting a series 

of specified standards and conditions. In addition, enhanced funding at a 75 percent Federal 

matching rate is available for States to maintain and operate their eligibility systems, subject to 

the conditions noted above. The estimates of the impact of these changes and the additional 

Federal support in this area are discussed in more detail in the final rule published on April 19, 

2011 (76 FR 21950) entitled “Federal Funding for Medicaid Eligibility Determination and 

Enrollment Activities.”

Information collection requirements (ICRs) are outlined below that involve Medicaid and 

CHIP eligibility determinations and enrollment. We are soliciting public comment on each of 

these issues for the following sections of the proposed rule that contain ICRs. We used data 

from the Bureau of Labor Statistics to derive average costs for all estimates of salary in 

establishing the information collection requirements. Salary estimates include the cost of fringe 

benefits, calculated at 35 percent of salary, which is based on the March 2011 Employer Costs 

for Employee Compensation report by the U.S. Bureau of Labor Statistics. 
CMS-2349-P 120 

Finally, in calculating the estimates of burden on States, it was important to take into 

account the Federal government’s contribution to the cost of administering the Medicaid and 

CHIP programs. The Federal government provides funding based on a Federal Medical 

Assistance Percentage (FMAP) that is established for each State based on the per capita income 

in the State as compared to the national average. FMAPs range from a minimum of 50 percent 

in States with higher per capita incomes to a maximum of 76.25 percent in States with lower per 

capita incomes. States receive an “enhanced” FMAP for administering their CHIP programs, 

ranging from 65 to 83 percent. All States receive a 50 percent FMAP for administration. As 

noted above, States also receive higher Federal matching rates for certain services and now for 

systems improvements or redesign, so the level of Federal funding provided to a State can be 

significantly higher. As such, in taking into account the Federal contribution to the costs of 

administering the Medicaid and CHIP programs for purposes of estimating State burden with 

respect to collection of information, we elected to use the higher end estimate that the States 

would contribute 50 percent of the costs, even though the burden will likely be much smaller. 

The following provisions will be addressed through separate PRA notices and comment 

processes: 

 Medicaid and CHIP State Plans: §§ 431.10(c) and (d); 431.11(d); 435.110(b); 

435.116(b); 435.118(b); 435.119(b); 435.218(b); 435.403(h) and (i); 435.603(a); 435.905(a) and 

(b); 435.948(d); 435.949(c); 435.1200(c), (d), (e), (f), and (g); 457.80(c); 457.305(a) and (b); 

457.310(b); 457.320(d); 457.340(a), (b), and (f); 457.343; 457.348(a), (b), (c), and (d); 

457.350(a), (b), (c), (f), (g), and (j); 457.380(a), (c), (d), (e), (f), (g), (h), and (i); and 457.390; 

 Choice of Methodology for Determining Expenditures Claimed at FMAP Rate for Newly 

Eligibles: §§ 433.206(b); 433.208(b); 433.210(a); and 433.212(a); 
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 Reporting Template System (CARTS): §435.907(e), 

§457.353. 

A. ICRs Regarding Program Information (§§ 435.905 and 457.335)

 Amendments are proposed to §435.905 for Medicaid and §457.335 for CHIP that would 

require Medicaid and CHIP State agencies to disclose program information to the public 

electronically. These provisions are necessary to ensure that Medicaid and CHIP program 

information is available on the internet Web site where individuals and families can explore their 

coverage options and submit an application. 

 In a review of State Web sites, we found that all 50 States and the District of Columbia 

have Web sites for Medicaid and CHIP and that nearly every State already provides the 

information specified in this proposed rule. We also found that all States offer access to their 

health insurance applications online. 

 While these provisions are subject to the PRA, we believe that the requirement above is a 

usual and customary practice in keeping with the use of modern technology and, therefore, 

presents no new burden. States have always been required to assure that applicants, providers, 

other interested parties, and the general public have access to information about Medicaid and 

CHIP eligibility requirements, available Medicaid services, and the rights and responsibilities of 

applicants and beneficiaries. 

B. ICRs Regarding Verification (§§ 435.945, 435.948, 435.956, 457.350, and 457.380)

 The provisions propose guidelines for verification of certain factors for Medicaid and 

CHIP eligibility (for example, income, State residency, SSNs, and pregnancy status) and the 
CMS-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, these guidelines will reduce burden on States and 

individuals. The State of Utah’s eFIND system provides an example of a successfully 

streamlined verification process. eFIND gathers data from more than 15 Federal and State 

sources including wage reporting, SSA, the SAVE system, and child support to verify Medicaid 

eligibility for applicants in real time. The State has estimated that eFIND has reduced the 

processing time for an eligibility determination from 17 minutes down to 3 minutes, saving the 

State $2.1 million in the first year. 

 The specific burden associated with the written agreements for data sharing is the time 

and effort necessary for the State to modify existing agreements with applicable agencies for the 

collection of this information. We estimate that 53 State Medicaid agencies (the 50 States, the 

District of Columbia, Northern Mariana Islands, and American Samoa) will be subject to this 

requirement. We estimate it will take each State an average of 30 hours to modify agreements 

with the appropriate agencies. For the purpose of the cost burden, we estimate it will take a 

health policy analyst 20 hours, at $43 an hour, and a manager 10 hours, at $77 an hour, to 

complete the agreements. The estimated cost burden for each State is $1,630 [($43 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 account the Federal contribution to Medicaid and CHIP program 

administration, the estimated State share of these costs will be no more than $43,195 [$86,390 x 

50 percent]. 

 D. ICRs Regarding Renewal (§§ 435.916 and 457.343)

 These provisions discuss the redetermination process for individuals whose eligibility is 
CMS-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 additional 43 CHIP agencies (States that have a 

separate or combination CHIP) will be subject to the provision above, for a total of 96 agencies. 

 The burden associated with this requirement is the time and effort necessary for the State 

to develop and automate renewal notices and perform the revised recordkeeping related to 

redetermining eligibility. Individuals whose eligibility is based on MAGI would need to provide 

any additional information for the State to complete a redetermination of eligibility. 

 Research has indicated that 33 – 50 percent of people experience a change in 

circumstance that may impact their eligibility for coverage (Sommers and Rosenbaum, Health 

Affairs 2011). Based on this research we conservatively estimate that of the approximately 51 

million individuals enrolled in Medicaid and CHIP whose eligibility will be based on MAGI, 

half (25.5 million individuals) will have their eligibility redetermined using the information 

already available to the agency. This approach greatly simplifies the renewal process and will 

ultimately reduce costs for States. 

 For example, the State of Louisiana streamlined its renewal process through a 

combination of administrative renewal, ex-parte review and conducting renewals over the 

telephone in 2007. As a result, fewer than 10 percent of families actually complete and submit a 

renewal form in order to remain enrolled in Medicaid or CHIP coverage. The State reports more 

than $18 million in savings each year due to these changes. 

 We estimate that it will take each Medicaid and CHIP agency 16 hours annually to 

develop, automate and distribute the notice of eligibility determination based on use of existing 
CMS-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 senior 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 contribution, 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 place in many States that require individuals to 

complete a new application at renewal. We estimate that it will take an individual 20 minutes to 

complete the proposed streamlined renewal process. The total annual hour burden is 8.5 million 

hours [(20 minutes x 25.5 million individuals)/60 minutes] for 25.5 million individuals. We note 

that the number of people who need to provide additional information may be smaller than our 

estimate, but we used a higher end estimate to account for the greatest potential impact on States 

and individuals. Some States that employ a simplified renewal approach similar to what is 

proposed in this rule are able to renew coverage for nearly 80 percent of beneficiaries without 

contacting the individual or family. 

 States will keep records of each renewal that is processed in Medicaid and CHIP. The 

amount of time for recordkeeping will be the same for renewals based on information available 

to the agency and renewals that require additional information from individuals. We estimate 

that it will take the State agency 3 minutes (0.05 hour) at a rate of $25 per hour for the average 

State eligibility worker to conduct the required 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 per 
CMS-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 contribution, 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 and separate CHIP agencies to have a 

Web site that performs the functions described in this proposed rule. 

 We estimate that 53 Medicaid agencies and an additional 43 CHIP agencies (in States 

that have a separate or combination CHIP) would be subject to the provisions above. To achieve 

efficiency, we assume that States will develop only one Web site to perform the required 

functions. Therefore, we base our burden estimates on 50 States, the District of Columbia, the 

Northern Mariana Islands, and American Samoa (53 agencies) and do not include the 43 separate 

CHIP programs. 

 The burden associated with this ICR for information disclosure is the time and effort 

necessary for the State to develop and disclose information on the Web site, develop and 

automate the required notices, and transmit (report) the application data to the appropriate 

insurance affordability program. 

 We know that all States have Web sites and printable applications online and that 19 

States have some ability to enable individuals to renew their coverage online. We estimate that it 

will take each State an average of 320 hours to develop the additional functionality to meet the 

proposed requirements, including developing an online application, automating the renewal 

process and adding a health plan selection function. We estimate that it will take a health policy 

analyst 85 hours (at $43 an hour), a senior manager 50 hours (at $77 an hour), and various 
CMS-2349-P 126 

network/computer administrators or programmers 185 hours (at $54 an hour) to meet the 

reporting requirements for this subpart. We estimate the total cost burden for a State to be 

$17,495 [(85 x $43) + (50 x $77) + (185 x $54)] for 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 contribution to Medicaid and CHIP systems development 

and administration efforts, we estimate that the total State share of costs would be $463,618 

[$927,235 x 50 percent] at most. States that elect to pursue these activities as part of a larger 

systems redesign effort would have significantly lower costs due to the availability of the 90 

percent FMAP. 

 We estimate that it will take each State entity 16 hours annually to develop and automate 

each of the two required notices (32 total hours). For the purpose of the cost burden, we estimate 

it will take a health policy analyst 10 hours, at $43 an hour, and a senior manager 6 hours, at $77 

an hour, to complete each notice. The estimated cost burden of two notices for each agency is 

$1,784 [$892 x 2]. The total estimated cost burden 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/computer administrators or programmers 150 hours 

(at $54 an hour) to transmit the application data of ineligible individuals to the appropriate 

insurance affordability program and meet this information reporting requirement for each State 

(53). The estimated cost burden for each agency is $8,100 [150 x $54]. The total estimated cost 

burden for 53 States is $429,300 [53 x $8,100], and the total annual hour burden is 7,950 hours 

[150 x 53]. Taking into account the Federal contribution, 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 $1,451,087 
CMS-2349-P 127 

[$927,235 + $94,552 + $429,300], and the total annual hour burden is 26,606 hours [16,960 + 

1,696 + 7,950]. 

F. ICRs Regarding Medicaid Statement of Expenditures for the Medical Assistance Program 

(CMS-64)

This action does not revise or impose any new information collection requirements or 

burden that would require additional OMB review of CMS-64. OMB has approved the burden 

and information collection requirements of CMS-64 under OMB control number 0938-0067. 

TABLE 2: Annual Recordkeeping and Reporting Requirements 

Regulation 

Section(s) Respondents Responses 

Burden 

per 

Response 

(hours) 

Total 

Annual 

Burden 

(hours) 

Labor 

Cost of 

Reporting 

($) 

Total Cost 

($) 

State Share of 

Costs 

($) 

§§435.945, 

435.948, 

435.956, 

457.350, and 

457.380 

53 1 30 1,590 1,630 86,390 43,195 

§§435.916 

and 457.343 

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

§§435.916 

and 457.343 

25.5 million 1 .33 8.5 

million 

 

§§435.916 

and 457.343

96 1 26,562.5 2.55 

million 

664,063 63,750,000 31,875,000 

§§435.1200 

and 457.335 

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

Total 65,373,100 32,686,555 

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

table. 

There are no capital or maintenance costs incurred by the proposed collections, therefore it is 

omitted from the table. Capital costs resulting from the development or improvement of new 

electronic systems were addressed in the Federal Funding for Medicaid Eligibility Determination and 

Enrollment Activities final rule (76 FR 21950). 

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

The 1.4 average responses per Agency (that is, Respondent) are based on the total estimated 

number of agreements divided by the number of respondents. The number of actual agreements 

will vary by State based on the governance structure of the State’s Medicaid, CHIP, and 

Exchange programs. 
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 recordkeeping requirements. These requirements are not effective 

until they have been approved by the OMB. 

 To obtain copies of the supporting statement and any related forms for the proposed 

paperwork collections referenced above, access CMS’ Web site at 

http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the Reports Clearance Office at 410–

786–1326. 

We invite public comments on these potential information collection requirements. If 

you comment on these information collection and recordkeeping requirements, please do either 

of the following: 

 1. Submit your comments electronically as specified in the ADDRESSES section of this 

proposed rule; or 

 2. Submit your comments to the Office of Information and Regulatory Affairs, Office of 

Management and Budget, Attention: CMS Desk Officer, (CMS–2349–P) Fax: (202) 395–6974; 

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

IV. Response to Comments 

Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. We will 

consider all comments we receive by the date and time specified in the "DATES" section of this 

preamble, and, when we proceed with a subsequent document, we will respond to the comments 

in the preamble to that document. 

V. Summary of Preliminary Regulatory Impact Analysis

The summary analysis of benefits and costs included in this proposed rule is drawn from 
CMS-2349-P 129 

the detailed Preliminary Regulatory Impact Analysis (PRIA), available at 

http://www.cms.gov/MedicaidEligibility/downloads/CMS-2349-PPreliminaryRegulatoryImpactAnalysis.pdf.

A. Introduction

The Office of Management and Budget has determined that this rule is “economically 

significant” for the purposes of Executive Order 12866. Therefore, we have prepared a PRIA 

that presents the costs and benefits of this rulemaking. 

B. Need for this Regulation

This proposed rule would implement provisions of the Affordable Care Act related to 

Medicaid eligibility, enrollment and coordination with the Exchanges, CHIP, and other insurance 

affordability programs. It also addresses the current eligibility restrictions and barriers to 

enrollment in the Medicaid program which leave millions of low-income Americans uninsured, 

and which contribute to poor health outcomes, financial stress, and high health care and 

administrative costs. In addition, this proposed rule sets out the increased Federal medical 

assistance percentage (FMAP) rates relating to “newly eligible” individuals and certain medical 

assistance expenditures in expansion States” beginning January 1, 2014. 

C. Summary of Costs and Benefits

The preliminary impact analysis uses the estimates of the CMS Office of the Actuary 

(OACT) and the estimates prepared by the Congressional Budget Office (CBO) and the staff of 

the Joint Committee on Taxation. It provides both estimates to illustrate the uncertainty inherent 

in projections of future Medicaid financial operations. Analysis by OACT indicates that the 

proposed rule would result in an estimated additional 24 million newly eligible and currently 
CMS-2349-P 130 

eligible individuals enrolling in Medicaid by 2016.1 2 OACT notes that such estimates are 

uncertain, since they depend on future economic, demographic, and other factors that cannot be 

precisely determined in advance. Similarly, the actual behavior of individuals and the actual 

operation of the new enrollment processes and Affordable Insurance Exchanges will affect 

enrollment and costs. The Congressional Budget Office (CBO) has estimated a net increase of 

16 million newly and previously eligible people enrolled in Medicaid and CHIP in 2016 as a 

result of the new law as implemented through this regulation.3 Some of the difference between 

OACT and CBO’s projections can be explained by different participation rate assumptions, 

which are described further in the more detailed PRIA. 

Increased access to medical care and the simplified enrollment process proposed by this 

rule would benefit both newly eligible and currently eligible individuals by improving health 

outcomes and providing financial security. Additionally, the proposed rule would benefit States 

and providers by reducing uncompensated care costs, shifting spending on either State-funded 

health coverage or uncompensated care to the Federal government. Finally, the simplified 

Medicaid eligibility policies will over time reduce administrative burdens on State Medicaid 

agencies. 

 

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 assumptions, and later information on policy decisions. 2

 OACT’s estimates include approximately 2-3 million individuals with primary health insurance coverage through 

employer-sponsored plans who would enroll in Medicaid for supplemental coverage.

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 impose costs on a small number of currently 

eligible individuals who will become ineligible for Medicaid coverage under the new eligibility 

methodology. These individuals would bear the cost of purchasing subsidized insurance in the 

Exchanges, though these costs may be offset by premium tax credits. 

OACT estimates that Federal spending on Medicaid for newly and currently eligible 

individuals who enroll as a result of the changes made by the Affordable Care Act would 

increase by a total of $202 billion from 2012 through 2016. Reflecting somewhat different 

participation assumptions and other projection factors, CBO estimates an increase in federal 

spending of $162 billion over the same period of time.4

 OACT estimates that State expenditures 

on behalf of the additional individuals and families gaining Medicaid coverage as a result of the 

Affordable Care Act will total $2.7 billion in FY 2014, $4.0 billion in FY 2015, and $4.9 billion 

in FY 2016.5

 For both OACT and CBO, these estimates do not consider offsetting savings to 

States that will result, to a varying degree depending on the State, from less uncompensated care, 

less need for State-financed health services and coverage programs, and greater efficiencies in 

the delivery of care. Indeed, an Urban Institute analysis estimates that the costs to States will be 

more fully offset by other effects of the legislation, for net savings to States of $92 to $129 

billion from 2014 to 2019.6

D. Methods of Analysis

OACT prepared its estimate using data on individuals and families, together with their 

 

4 CBO. Analysis of the Major Health Care Legislation Enacted in March 2010. Statement of Douglas W. 

Elmendorf. March 30, 2011 -- http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf. 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 comparison, 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 the Current Population Survey and the Medical 

Expenditure Panel Survey. In addition, they made assumptions as to the actions of individuals in 

response to the new coverage options under the Affordable Care Act and the operations of the 

new enrollment processes and the Affordable Insurance Exchanges. The estimated Medicaid 

coverage and financial effects are particularly sensitive to these latter assumptions. Among those 

eligible for Medicaid under the expanded eligibility criteria established by the Affordable Care 

Act, and who would not otherwise have health insurance, OACT assumed that 95 percent would 

enroll. This assumption, which is significantly higher than current enrollment percentages, 

reflects OACT’s consideration of the experience with health insurance reform in Massachusetts 

and its expectation that the streamlined enrollment process and enrollment assistance available to 

people through the Affordable Insurance Exchanges will be very effective in helping eligible 

individuals and families become enrolled. Although CBO used similar data and overall 

methodologies, and also anticipates that the streamlined enrollment process and Exchange 

enrollment assistance will improve applicants’ ability to become enrolled, CBO has included a 

significantly smaller from this factor than assumed by OACT.7

 

E. Regulatory Options Considered

Alternative approaches to implementing the Medicaid eligibility, enrollment and 

coordination requirements in the Affordable Care Act were considered in developing this 

 

7 CBO’s specific take-up assumptions are not available. Researchers at the Urban Institute have approximated the 

participation rate assumed by CBO. The Kaiser Family Foundation has characterized this assumption as follows: 

“These results assume moderate levels of participation similar to current experience among those made newly 

eligible for coverage and little additional participation among thos currently eligible. This scenario assumes 57 

percent participation among the newly eligible uninsured and lower participation across other coverage groups.” J. 

Holohan and I. Headen, “Medicaid coverage and spending in health reform: National and State-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-Reform-National-and-StateBy-State-Results-for-Adults-at-or-Below-133-FPL.pdf
CMS-2349-P 133 

proposed rule. However, it was determined that these alternatives would have created substantial 

administrative burdens for States and individuals, and created gaps in coverage that would 

reduce the number of people with insurance. We welcome public comment regarding the 

potential economic effects of the proposed rule. 

F. Accounting Statement

For full documentation and discussion of these estimated costs and benefits, see the 

detailed PRA, available at http://www.cms.gov/MedicaidEligibility/downloads/CMS-2349-PPreliminaryRegulatoryImpactAnalysis.pdf. 

Table 3. Accounting Statement: Classification of Estimated Net Costs, 

from FY 2012 to FY 2016 (in millions) 

Category TRANSFERS

Year Dollar Units Discount Rate Period Covered

2012 7% 3%

Annualized 

Monetized 

Transfers from 

Federal 

Government to 

States on Behalf of 

Beneficiaries

Primary Estimate $35,564 $37,324 FYs 2012-2016

Annualized 

Monetized Transfers 

from States on 

Behalf of 

Beneficiaries

Primary Estimate $2,131 $2,235 FYs 2012-2016

Annualized 

Monetized Transfers 

from Federal 

Government to 

States

Primary Estimate $1,577 $1,657 FYs 2012-2016

Source: CMS Office of the Actuary 

G. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that 

agencies assess anticipated costs and benefits before issuing any rule whose mandates require 

spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2011, 
CMS-2349-P 134 

that threshold is approximately $136 million. It is important to understand, however, that the 

UMRA does not address the total cost of a rule. Rather, it focuses on certain categories of cost, 

mainly costs resulting from (A) imposing enforceable duties on State, local, or tribal 

governments, or on the private sector, or (B) increasing the stringency of conditions in, or 

decreasing the funding of, State, local, or tribal governments under entitlement programs. 

 We believe that States can take actions that will largely offset the increased medical 

assistance spending for newly enrolled persons. Because the net effects are uncertain and the 

overall costs significant, we have drafted the PRIA to meet the requirements for analysis 

imposed by UMRA, together with the rest of the preamble. The extensive consultation with 

States we describe later in this analysis was aimed at the requirements of both UMRA and 

Executive Order 13132 on Federalism. We invite comment on these issues from States and local 

governments as well as any other interested parties. 

1. State and Local Governments 

Our discussion of the potential expected impact on States is provided in the benefits, 

costs, and transfers section of the preliminary regulatory impact analysis. As noted previously, 

the Affordable Care Act requires States that participate in the Medicaid program to cover adults 

with incomes below 133 percent of the Federal poverty level, and provides substantial new 

Federal support to nearly offset the costs of covering that population. 

2. Private Sector and Tribal Governments

We do not believe this proposed rule would impose any unfunded mandates on the 

private sector. As we explain in more detail in the Regulatory Flexibility Act analysis, the 

provisions of the Affordable Care Act implemented by the proposed rule deal with eligibility and 

enrollment for the Medicaid and CHIP programs, and as such are directed toward State 
CMS-2349-P 135 

governments rather than toward the private sector. Since the proposed rule would impose no 

mandates on the private sector, we conclude that the cost of any possible unfunded mandates 

would not meet the threshold amounts discussed previously that would otherwise require an 

unfunded mandate analysis for the private sector. We also conclude that an unfunded mandate 

analysis also is not needed for tribal governments since the proposed rules would not impose 

mandates on tribal governments. 

H. Regulatory Flexibility Act (RFA)

The RFA requires agencies to analyze options for regulatory relief of small entities if a 

proposed rule would have a significant economic impact on a substantial number of small 

entities. Few of the entities that meet the definition of a small entity as that term is used in the 

RFA (for example, small businesses, nonprofit organization, and small governmental 

jurisdictions with a population of less than 50,000) would be impacted directly by this proposed 

rule. Individuals and States are not included in the definition of a small entity. There are some 

States in which counties or cities share in the costs of Medicaid. OACT has estimated that 

between 2014 and 2021 the Federal government would pay about 94 percent of the costs of 

benefits for new Medicaid enrollees with the States paying the remaining 6 percent. An Urban 

Institute and Kaiser Family Foundation study estimated that the Federal government will bear 

between 92 and 95 percent of the overall costs of the new coverage provided as a result of the 

Affordable Care Act, with the States shouldering the remaining five to eight percent of the 

costs.8 To the extent that States require counties to share in these costs, some small jurisdictions 

could be affected by the requirements of this proposed rule. However, nothing in this rule would 

 

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-Coverage-and-Spending-in-Health-Reform-National-and-StateBy-State-Results-for-Adults-at-or-Below-133-FPL.pdf
CMS-2349-P 136 

constrain States from making changes to alleviate any adverse effects on small jurisdictions. The 

Department has no way of estimating the impact of this proposed rule on small jurisdictions and 

requests public comment on this issue. 

Because this proposed rule is focused on eligibility and enrollment in public programs, it 

does not contain provisions that would have a significant direct impact on hospitals, and other 

health care providers that are designated as small entities under the RFA. However, the 

provisions in this proposed rule may have a substantial, positive indirect effect on hospitals and 

other health care providers due to the substantial increase in the prevalence of health coverage 

among populations who are currently unable to pay for needed health care, leading to lower rates 

of uncompensated care at hospitals. Again, the Department cannot determine whether this 

proposed rule would have a significant economic impact on a substantial number of small 

entities, and we request public comment on this issue. 

Section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a 

proposed rule may have a significant economic impact on the operations of a substantial number 

of small rural hospitals. This analysis must conform to the provisions of section 603. For 

purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is 

located outside of a metropolitan statistical area and has fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) of the Act because the Secretary has determined that 

this proposed rule would not have a direct economic impact on the operations of a substantial 

number of small rural hospitals. As indicated in the preceding discussion, there may be indirect 

positive effects from reductions in uncompensated care. 

I. Federalism

Executive Order 13132 establishes certain requirements that an agency must meet when it 
CMS-2349-P 137 

promulgates a proposed rule (and subsequent final rule) that imposes substantial direct effects on 

States, preempts State law, or otherwise has Federalism implications. As discussed previously, 

the Affordable Care Act and this proposed rule have significant direct effects on States. 

The Affordable Care Act requires major changes in the Medicaid and CHIP programs, 

which would require changes in the way States operate their individual programs. While these 

changes are intended to benefit beneficiaries and enrollees by improving coordination between 

programs, they are also designed to reduce the administrative burden on States by simplifying 

and streamlining systems. 

We have consulted with States to receive input on how the various Affordable Care Act 

provisions codified in this proposed rule would affect States. We have participated in a number 

of conference calls and in person meetings with State officials in the months before and since the 

law was enacted. These discussions have enabled the States to share their thinking and questions 

about how the Medicaid changes in the legislation would be implemented. The conference calls 

also furnished opportunities for CMS to explore these implementation issues together with States 

and also provide information on an informal basis about implementation plans to the State 

Medicaid Directors, and for the Directors to comment informally on what they heard in the 

course of those conversations. 

We continue to engage in ongoing consultations with Medicaid and CHIP Technical 

Advisory Groups (TAGs), which have been in place for many years and serve as a staff level 

policy and technical exchange of information between CMS and the States. In particular, we 

have had discussions with the Eligibility TAG (E-TAG) and the Children’s Coverage TAG. The 

E-TAG is a group of State Medicaid officials with specific expertise in the field of eligibility 

policy under the Medicaid program. The Children’s Coverage TAG is a combination of 
CMS-2349-P 138 

Medicaid and CHIP officials that convene to discuss issues that affect children enrolled in those 

programs. Through consultations with these TAGs, we have been able to get input from States 

specific to issues surrounding the changes in eligibility groups and rules that will become 

effective in 2014.
CMS-2349-P 139 

List of Subjects 

42 CFR Part 431

Grant programs-health, Health facilities, Medicaid, Privacy, Reporting and recordkeeping 

requirements. 

42 CFR Part 433

 Administrative practice and procedure, Child support Claims, Grant programs-health, 

Medicaid, Reporting and recordkeeping requirements. 

42 CFR Part 435 

Aid to Families with Dependent Children, Grant programs-health, Medicaid, Reporting 

and recordkeeping requirements, Supplemental Security Income (SSI), Wages. 

42 CFR Part 457 

Administrative practice and procedure, Grant programs-health, Health insurance, 

Reporting and recordkeeping requirements. 
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 431 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 1302). 

Subpart A--Single State Agency 

2. Section 431.10 is amended by-- 

A. Revising paragraph (b)(2)(ii) and the introductory text of paragraph (c)(1). 

B. Adding paragraphs (c)(1)(iii) and (c)(3). 

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

The revisions and additions read as follows: 

§431.10 Single State agency. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Make rules and regulations that it follows in administering the plan or that are binding 

upon State or other agencies that administer the plan. 

* * * * * 

(c) * * * 

(1) The plan must specify whether the entity that determines eligibility for families, 

adults, and for individuals under 21 is-- 

* * * * * 
CMS-2349-P 141 

(iii) A government-operated Exchange established under sections 1311(b)(1) or 

1321(c)(1) of the Affordable Care Act (Pub. L. 111-148). 

* * * * * 

(3) The single State agency is responsible for assuring and enforcing that-- 

(i) Eligibility determinations are made consistent with its rules and if there is a pattern of 

incorrect determinations that corrective actions are instituted and/or the delegation is terminated; 

(ii) There is no conflict of interest by any agency delegated the responsibility to make 

eligibility determinations; and 

(iii) Eligibility determinations will be made in the best interest of applicants and 

beneficiaries and that the single State agency will guard against improper incentives and/or 

outcomes. 

(d) Agreement with Federal or State and local agencies. The plan must provide for 

written agreements between the Medicaid agency and the Federal or other State or local agencies 

that determine eligibility for Medicaid, stating-- 

(1) The relationships and respective responsibilities of the agencies; 

(2) The quality control and oversight plans by the single State agency to review 

determinations made by the delegee; 

(3) The reporting requirements from the delegee making Medicaid eligibility 

determinations to the single State agency. 

(4) The confidentiality and security requirements in accordance with sections 1902(a)(7) 

and 1942 of the Act for all applicant and beneficiary data; and 

(5) That merit protection principles are employed by the agency responsible for the 

Medicaid eligibility determination. 
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 change or disapprove any administrative decision of, 

or otherwise substitute their judgment for that of, the Medicaid agency for the application of 

policies, rules and regulations issued by the Medicaid agency. 

3. Section 431.11 is amended by revising paragraph (d) to read as follows: 

§431.11 Organization for administration. 

* * * * * 

(d) Eligibility determined by other agencies. If eligibility is determined by Federal or 

State agencies other than the Medicaid agency or by local agencies under the supervision of 

other State agencies, the plan must include a description of the staff designated by those other 

agencies and the functions they perform in carrying out their responsibilities. 

Subpart M--Relations with Other Agencies 

§431.636 [Removed] 

 4. Remove §431.636. 

PART 433—STATE FISCAL ADMINISTRATION 

 5. The authority citation for part 433 continues to read as follows: 

Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302). 

Subpart A—Federal Matching and General Administration Provisions

 6. Section 433.10 is amended by -- 

 A. In paragraph (a), removing the phrase “and 1905(b),” and adding in its place the 

phrase “1905(b), 1905(y), and 1905(z)”

 B. Adding new paragraphs (c)(6), (c)(7), and (c)(8). 
CMS-2349-P 143 

 The additions read as follows: 

§433.10 Rates of FFP for program services 

* * * * * 

 (c) * * * 

 (6)(i)Beginning January 1, 2014, under section 1905(y) of the Act, the FMAP for a State that 

is one of the 50 States or the District of Columbia, for amounts expended by such State for 

medical assistance for newly eligible individuals, as defined in §433.204 of this part, will be an 

increased FMAP equal to: 

 (A) 100 percent, for calendar quarters in calendar years (CYs) 2014 through 2016; 

 (B) 95 percent, for calendar quarters in CY 2017; 

 (C) 94 percent for calendar quarters in CY 2018; 

 (D) 93 percent for calendar quarters in CY 2019; 

 (E) 90 percent for calendar quarters in CY 2020; and 

 (F) 90 percent for calendar quarters in all other CYs after 2020. 

 (ii) The FMAP specified in paragraph (c)(6)(i) of this section will apply to amounts 

expended by a State for medical assistance for newly eligible individuals in accordance with the 

requirements of the methodology selected by the State under §422.206 of this chapter. 

 (7)(i)During the period January 1, 2014 through December 31, 2015, under section 1905(z)(1) 

of the Act for a State described in paragraph (c)(7)(ii) of this section, the FMAP determined 

under paragraph (b) of this section will be increased by 2.2 percentage points. 

 (ii) A State qualifies for the general increase in the FMAP under paragraph (c)(7)(i) of this 

section, if the State: 

 (A) Is an expansion State, as described in paragraph (c)(8)(iii) of this section; 
CMS-2349-P 144 

 (B) Does not qualify for any payments on the basis of the increased FMAP under paragraph 

(c)(6) of this section, as determined by the Secretary; and 

 (C) Has not been approved by the Secretary to divert a portion of the Disproportionate Share 

Hospital Allotment for the State to the costs of providing medical assistance or other health 

benefits coverage under a demonstration that is in effect on July 1, 2009. 

 (iii) The increased FMAP under paragraph (c)(7)(i) of this section is available for amounts 

expended by the State for medical assistance for individuals that are not newly eligible as 

defined in §433.204 of this part. 

 (8)(i) Beginning January 1, 2014, under section 1905(z) of the Act, the FMAP for an 

expansion State defined in paragraph (c)(8)(iii) of this section, for amounts expended by such 

State for medical assistance for individuals described in section 1902(a)(10)(A)(i)(VIII) of the 

Act who are not newly eligible as defined in §433.204 of this part and who are nonpregnant 

childless adults for whom the State may require enrollment in benchmark coverage under section 

1937 of the Act, will be determined in accordance with the following formula: 

F + (T 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 determined under paragraph (c)(6) of 

this section.

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

to: 

 (A) 50 percent, for calendar quarters in CY 2014; 
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 the March 23, 2010, the State offered health benefits 

coverage Statewide to parents and nonpregnant, childless adults whose income is at least 100 

percent of the poverty line, that includes inpatient hospital services, is not dependent on access to 

employer coverage, employer contribution, or employment and is not limited to premium 

assistance, hospital-only benefits, a high deductible health plan, or alternative benefits under a 

demonstration program authorized under section 1938 of the Act. A State that offers health 

benefits coverage to only parents or only nonpregnant childless adults described in the preceding 

sentence will not be considered to be an expansion State. 

 (iv) For amounts expended by an expansion State as defined in paragraph (c)(8)(iii) of this 

section for medical assistance for individuals described in section 1902(a)(10)(A)(i)(VIII) of the 

Act who are newly eligible as defined in §433.201, and who are non-pregnant childless adults for 

whom the State may require enrollment in benchmark coverage under section 1937 of the Act, 

the FMAP is as specified in paragraph (c)(6) of this section. 

 7. Subpart E is added to part 433 to read as follows: 

Subpart E—Methodologies for Determining Federal Share of Medicaid Expenditures for 

Mandatory Group 

Sec. 

433.202 Scope. 
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 for newly eligible individuals 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 new adult group and who would not have been eligible for Medicaid 

under the State’s eligibility standards and methodologies for the Medicaid State plan, waiver or 

demonstration programs in effect in the State as of December 1, 2009. 

§433.206 Choice of methodology. 

 (a) Beginning January 1, 2014, the State must determine the expenditures which may 

be claimed at the FMAP rate described in §433.10 of this part using one of the following 

methods: 

 (1) Applying eligibility thresholds and proxies in accordance with §433.208 of this 

part; or 
CMS-2349-P 147 

 (2) Conducting a statistically valid sample in accordance with §433.210 of this part; or 

 (3) Electing to utilize the CMS established FMAP proportion rate established in 

accordance with §433.212 of this part. 

 (b) The State must provide to CMS for approval a methodology that provides the 

description of the method it will use to determine the appropriate FMAP claim for medical 

assistance expenditures for newly eligible individuals including all of the following 

requirements: 

 (1) Except as provided in paragraph (b)(2) of this section, at least 2 years prior to the 

year in which the State will implement that method. 

 (2) For CY 2014, the State must notify CMS of such method no later than December 

31, 2012. 

 (3) Changing claiming methodologies: 

 (i) The State must use the chosen methodology for at least 3 consecutive years before 

changing to another methodology; 

 (ii) The State must notify CMS of any change in methodology in accordance with 

paragraphs (b)(1) and (b)(2) of this section. 

 (c) To implement each methodology— 

(1) The State must first determine those individuals eligible under section 

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

(2) The State may apply a CMS approved methodology only to expenditures for such 

individuals. 

 (d) Nothing in this section impacts the timing or approval of an individual’s eligibility 

for Medicaid. 
CMS-2349-P 148 

§433.208 Threshold methodology. 

(a) Beginning January 1, 2014, States may elect to apply a CMS-approved State specific 

threshold methodology that meets all of the following requirements: 

(1) Incorporates State eligibility standards, including disregards and other adjustments 

that were in place as of December 1, 2009. 

(2) Incorporates any enrollment caps under section 1115 demonstration programs that 

were in place in the State on December 1, 2009. 

(3) Is applied to each individual applicant determined eligible for Medicaid under the 

adult group. 

(4) Is used to determine whether each individual is newly eligible so that the State may 

claim the FMAP described in §433.10(c) of this subpart for all expenditures for such individuals. 

(b) To implement the threshold methodology, the State must submit a methodology and 

receive CMS approval of such methodology prior to its application to new FMAP 

determinations. 

(1) Such methodology will specify how the State will determine the population within the 

adult group and describe in a format provided by CMS how it is approximating the December 1, 

2009 standards and methodologies, as well as how the State will apply the established criteria. 

(2) Subject to approval by CMS, a State may use criteria including but not limited to: 

(i) Self-declaration. 

(ii) Claims history. 

(iii) Receipt of Social Security Disability Income. 

(iv) Disability determination by SSA. 

(v) Information from the Asset Verification System established under the DRA. 
CMS-2349-P 149 

(vi) Information from tax returns. 

(vii) Application of a proportion derived from historical data of the actual proportion of 

individuals within specific eligibility groups that were ineligible for Medicaid due to assets or 

eligible for Medicaid due to disability status using the eligibility standards in place as of 

December 1, 2009. 

(viii) Other disability and asset data sources. 

(c) The threshold methodology must: 

(1) Not be biased in such a manner as to overestimate or over report individuals as newly 

eligible who were actually individuals who would have been eligible using the State’s December 

1, 2009 eligibility standards. 

(2) Provide an accurate estimation of which individuals would have been eligible in 

accordance with the December 1, 2009 eligibility standards to be used for the designated year, by 

incorporating simplified assessments of asset and disability requirements in place at that time. 

Once individuals are determined to be either a newly eligible individual or an individual who 

would have been eligible under the December 2009 standards, the State would apply that 

eligibility determination throughout the entire year. 

(3) Be verified by, and adjusted prospectively to include results of, any evaluations 

conducted by CMS in conjunction with the State(s) of the accuracy of the threshold. 

§433.210 Statistically valid sampling methodology. 

 (a)(1) A State choosing to implement a statistically-valid sampling methodology to 

determine the proportion of expenditures to which the FMAP specified in §433.10(c) of this 

subpart will apply, must submit to CMS a methodology that details the sampling plan prior to 

making such claims which demonstrates compliance with the requirements established in this 
CMS-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 sampling plan follows all relevant requirements 

established in the most current OMB Circular A-87. 

 (c) The State must implement the plan as specified in the CMS-approved sampling plan 

for the year in which it claims expenditures based on the sampling plan. 

 (d) A State must draw a statistically valid sample from the population of Medicaid 

applicants who are eligible for Medicaid under the adult group. 

 (e) The State must evaluate each individual randomly selected to be included in the 

sample to determine whether: 

 (1) The individual is newly eligible; or 

 (2) The individual would have been eligible under the standards in place to determine 

eligibility under the Medicaid State plan and/or demonstration program as of December 1, 2009, 

including any enrollment caps under section 1115 demonstration programs that were in place in 

the State on December 1, 2009. 

(f) The State will attribute all actual medical assistance expenditures in that calendar year 

for each newly eligible individual in the sample and for each individual in the sample who would 

have been eligible under the December 1, 2009 standards. The State will extrapolate and apply 

the proportion of Medicaid expenditures attributed to the newly eligible in the sample to the 
CMS-2349-P 151 

expenditures of the population. 

(g) The State will consider the amount determined in accordance with paragraph (f) of 

this section to be the expenditures of the newly eligible individuals and receive the FMAP rate 

described in §433.10(c) of this subpart for such expenditures when the State claims on the 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 expenditure information is finalized under the provisions of paragraph (f) of this 

section. 

(3)(i) Results of a statistically-valid sampling methodology for any given year must be 

finalized and applied, and adjustments to claims on the CMS-64 must be made, within 2 years 

from the date of the actual expenditure. 

(ii) If the State does not have supporting documentation at the end of the second year 

following the year at issue, the State must make a decreasing adjustment on the CMS-64 to 

refund the higher FMAP rates, and such claims will be regarded as untimely under to 45 CFR 

95.7 if resubmitted. 

(iii) A State must implement the statistically valid sampling methodology in accordance 

with this section on an annual basis for the initial 3 consecutive years. 

(A) States that have completed the requirements for 3 consecutive years, are required 

thereafter to verify using a sampling methodology in accordance with this section every 3 years. 
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 the rates of the calendar year expenditures for the 

years prior to the sample up to the last year in which the State completed and applied the results 

of a sampling methodology. 

§433.212 CMS established FMAP proportion. 

(a) Beginning January 1, 2014, States may elect to apply a CMS determined proportion to 

medical assistance expenditures for individuals eligible for Medicaid in the adult group. 

(b) CMS will publish State-specific estimated FMAP proportions of eligibility under the 

December 2009 eligibility criteria using data sources including, but not limited to MEPS and 

MSIS data. 

(c) CMS will meet all of the following requirements: 

(1) Solicit and incorporate comments on the development of rates. 

(2) Annually establish a model to predict in an unbiased way the appropriate proportion 

of expenditures for which each State would claim the FMAP rate described in §433.10(c) of this 

subpart for newly eligible individuals taking into account any enrollment caps under 

demonstration programs that were in place in the State on December 1, 2009. 

(3) Publish the State-specific rates by October 1 of the preceding year. For CY 2014, the 

model must be published no later than January 1, 2013. 

(4) Incorporate results from a validation methodology in accordance with §433.212(e) of 

this subpart such as a statistically valid sampling of State data of actual individuals eligible for 

and enrolled in Medicaid in accordance with section 1902(a)(10)(A)(i)(VIII) of the Act. 

(5) Provide technical assistance to States on applying the rates established. 

(d) States will apply the CMS published State-specific proportion of expenditures 
CMS-2349-P 153 

attributed to the newly eligible to expenditures for all individuals eligible for and enrolled in 

Medicaid in accordance with section 1902(a)(10)(A)(i)(VIII) of the Act. The State will consider 

the amount determined in accordance with this section to be the expenditures of the newly 

eligible individuals and receive the FMAP rate described in §433.10(c) of this part for such 

expenditures when the State claims expenditures on the CMS-64. 

(e) Validation measures such as statistical sampling must be incorporated into the 

estimate: 

(1) On an annual basis beginning in CY 2016, to include expenditures related to CY 

2014, and continue through CY 2021; 

(2) After CY 2021, validation will be completed, and results incorporated into the model, 

on a 3-year basis; 

(3) After CY 2030, validation will be completed, and results incorporated into the model, 

on a 5-year basis. 

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 

NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA 

8. The authority citation for part 435 continues to read as follows: 

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302). 

9a. Remove the term “family income” wherever it appears in part 435 and add in its 

place the term “household income.” 

Subpart A--General Provisions and Definitions 

9b. Section 435.4 is amended by-- 

A. Adding the definitions of “Advance payments of the premium tax credit,” 

“Affordable Insurance Exchange (Exchange),” “Agency,” “Caretaker relative,” “Dependent 
CMS-2349-P 154 

child,” “Effective income level,” “Electronic account,” “Household income,” “Insurance 

affordability program,” “MAGI-based income,” “Minimum essential coverage,” “Modified 

adjusted gross income (MAGI),” “Pregnant woman,” “Secure electronic interface,” and “Tax 

dependent” in alphabetical order. 

B. Revising the definition of “Families and children.” 

The revisions read as follows: 

§435.4 Definitions and use of terms. 

* * * * * 

Advance payments of the premium tax credit means payments of the tax credit specified 

in section 36B of the Internal Revenue Code of 1986, which provide premium assistance on an 

advance basis to support enrollment of an eligible individual in a qualified health plan through 

the Exchange. 

* * * * * 

Affordable Insurance Exchange (Exchange) means a governmental agency or non-profit 

entity that meets the applicable requirements and makes qualified health plans available to 

qualified individuals and qualified employers. Unless otherwise identified, this term refers to 

State Exchanges, regional Exchanges, subsidiary Exchanges, and a Federally-facilitated 

Exchange. 

Agency means a State Medicaid agency. 

* * * * * 

Caretaker relative means a relative of a dependent child by blood, adoption, or marriage 

with whom the child is living, who assumes primary responsibility for the child’s care (as may, 

but is not required to, be indicated by claiming the child as a tax dependent for Federal income 
CMS-2349-P 155 

tax purposes), including the child’s natural, adoptive, or step parent; another relative of the child 

based on blood (including those of half-blood), adoption, or marriage; and the spouse of such 

parent or relative, even after the marriage is terminated by death or divorce. 

* * * * * 

Dependent child means a child who is under the age of 18, or is age 18 and a full-time 

student, and who is deprived of parental support by reason of the death, absence from the home, 

or unemployment of at least one parent, unless the State has elected in its State plan to eliminate 

such deprivation requirement. A parent is considered to be unemployed if he or she is working 

less than 100 hours per month, or such higher number of hours as the State may elect in its State 

plan. 

Effective income level means the income standard applicable under the State plan for an 

eligibility group, after taking into consideration any disregard of a block of income. 

Electronic account means an electronic file that includes all information collected and 

generated by the State regarding each individual’s Medicaid eligibility and enrollment, including 

all documentation required under §435.913. 

Families and children means individuals whose eligibility for Medicaid is determined 

based on being a pregnant woman, a child younger than age 21, or a parent or other caretaker 

relative of a dependent child. It does not include individuals whose eligibility is based on other 

factors, such as blindness, disability, being aged (65 or more years old), or a need for long-term 

care services. 

Household income has the meaning provided in §435.603(d). 

Insurance affordability program means: 

(1) A State Medicaid program under title XIX of the Act; 
CMS-2349-P 156 

(2) A State children’s health insurance program (CHIP) under title XXI of the Act; 

(3) A State basic health program established under section 1331 of the Affordable Care 

Act; 

(4) Coverage in a qualified health plan through the Exchange with advance payments of 

the premium tax credit established under section 36B of the Internal Revenue Code of 1986; or 

(5) Coverage in a qualified health plan through the Exchange with cost-sharing 

reductions established under section 1402 of the Affordable Care Act. 

MAGI-based income has the meaning provided in §435.603(e). 

* * * * * 

Minimum essential coverage means coverage defined in section 5000A(f) of subtitle D of 

the Internal Revenue Code of 1986, as added by section 1401 of the Affordable Care Act, and 

implementing regulations of such section issued by the Secretary of the Treasury. 

Modified adjusted gross income (MAGI) has the meaning provided in section 36B(d)(2) 

of the Internal Revenue Code of 1986. 

* * * * * 

Pregnant woman means a woman during pregnancy and the post partum period, which 

extends until the last day of the month in which a 60-day period, beginning on the date the 

pregnancy terminates, ends. 

Secure electronic interface means an interface which allows for the exchange of data 

between Medicaid and other insurance affordability programs and adheres to the requirements in 

part 433, subpart C of this chapter. 

* * * * * 
CMS-2349-P 157 

Tax dependent means an individual for whom another individual properly claims a 

deduction for a personal exemption under section 151 of the Internal Revenue Code of 1986 for a 

taxable year. 

Subpart B--Mandatory Coverage 

10. The heading for subpart B is revised as set forth above. 

11. Section 435.110 is revised to read as follows: 

§435.110 Parents and other caretaker relatives. 

(a) Basis. This section implements sections 1931(b) and (d) of the Act. 

(b) Scope. The agency must provide Medicaid to parents and other caretaker relatives, as 

defined in §435.4, and if applicable the spouse of the parent or other caretaker relative, whose 

household income is at or below the income standard established by the agency in the State plan, 

in accordance with paragraph (c) of this section. 

(c) Income standard. The agency must establish in its State plan the income standard as 

follows: 

(1) The minimum income standard is a State’s AFDC income standard in effect as of 

May 1, 1988 for a household of the applicable family size. 

(2) The maximum income standard is the higher of-- 

(i) The effective income level in effect for section 1931 low-income families under the 

Medicaid State plan or waiver of the State plan as of March 23, 2010 or December 31, 2013, if 

higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the 

Secretary under section 1902(e)(14)(A) and (E) of the Act; or 
CMS-2349-P 158 

(ii) A State’s AFDC income standard in effect as of July 16, 1996 for a household of the 

applicable family size, increased by no more than the percentage increase in the Consumer Price 

Index for all urban consumers between July 16, 1996 and the effective date of such increase. 

12. Revise the undesignated center heading that is immediately before §435.116 to read 

as follows: 

Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn Children 

13. Section 435.116 is revised to read as follows: 

§435.116 Pregnant women. 

(a) Basis. This section implements sections 1902(a)(10)(A)(i)(III) and (IV); 

1902(a)(10)(A)(ii)(I), (IV), and (IX); and 1931(b) and (d) of the Act. 

(b) Scope. The agency must provide Medicaid to pregnant women whose household 

income is at or below the income standard established by the agency in its State plan, in 

accordance with paragraph (c) of this section. 

(c) Income standard. The agency must establish in its State plan the income standard as 

follows: 

(1) The minimum income standard is the higher of: 

(i) 133 percent FPL for a household of the applicable family size; or 

(ii) Such higher income standard up to 185 percent FPL, if any, as the State had 

established as of December 19, 1989 for determining eligibility for pregnant women, or, as of 

July 1, 1989, had authorizing legislation to do so. 

(2) The maximum income standard is the higher of-- 

(i) The highest effective income level in effect under the Medicaid State plan for 

coverage under the sections specified at paragraph (a) of this section, or waiver of the State plan 
CMS-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 described in paragraph (d)(3) of this section for pregnant women 

whose income exceeds the applicable income limit established by the agency in its State plan, in 

accordance with paragraph (d)(4) of this section. 

(2) Full Medicaid coverage-- 

(i) Consists of all services which the State is required to cover under §440.210(a)(1) of 

this chapter and all services which it has opted to cover under §440.225 of this chapter; and 

(ii) May include, at State option, enhanced pregnancy-related services in accordance with 

§440.250(p) of this chapter. 

(3) Pregnancy-related services-- 

(i) Consist at least of services, as defined by the agency, related to pregnancy (including 

prenatal, delivery, postpartum, and family planning services) and other conditions which may 

complicate pregnancy; and 

(ii) May include, at State option, enhanced pregnancy-related services in accordance with 

§440.250(p) of this chapter). 

 (4) Applicable income limit for full Medicaid coverage of pregnant women. For 

purposes of paragraph (d)(1) of this section — 
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)(10)(A)(i)(III) of the Act or under section 1931(b) and (d) of the 

Act in effect under the Medicaid State plan or waiver of the State plan as of March 23, 2010 or 

December 31, 2013, if higher, converted to a MAGI-equivalent standard. 

14. Section 435.118 is added to read as follows: 

§435.118 Infants and children under age 19. 

(a) Basis. This section implements sections 1902(a)(10)(A)(i)(III), (IV), (VI), and (VII); 

1902(a)(10)(A)(ii)(IV) and (IX); and 1931(b) and (d) of the Act. 

(b) Scope. The agency must provide Medicaid to children under age 19 whose household 

income is at or below the income standard established by the agency in its State plan, in 

accordance with paragraph (c) of this section. 

(c) Income standard. 

(1) The minimum income standard is the higher of-— 

(i) 133 percent FPL for a household of the applicable family size; or 

(ii) For infants under age 1, such higher income standard up to 185 percent FPL, if any, 

as the State had established as of December 19, 1989 for determining eligibility for infants, or, as 

of July 1, 1989 had authorizing legislation to do so. 

(2) The maximum income standard for each of the age groups of infants under age 1, 

children age 1 through age 5, and children age 6 through age 18 is the higher of - 

(i) 133 percent FPL; 
CMS-2349-P 161 

(ii) The highest effective income level for each age group in effect under the Medicaid 

State plan for coverage under the applicable sections of the Act listed at §435.118(a), or waiver 

of the State plan covering such age group, as of March 23, 2010 or December 31, 2013, if higher, 

converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary 

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

(iii) For infants under age 1, 185 percent FPL. 

15. Revise the undesignated center heading that is before §435.119 to read as follows: 

Mandatory Coverage for Individuals Age 19 through 64 

16. Section 435.119 is revised to read as follows: 

§435.119 Coverage for individuals age 19 or older and under age 65 at or below 133 

percent FPL. 

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

(b) Eligibility. The agency must provide Medicaid to individuals who: 

(1) Are age 19 or older and under age 65; 

(2) Are not pregnant; 

(3) Are not entitled to or enrolled for Medicare benefits under part A or B of title XVIII 

of the Act; 

(4) Are not otherwise eligible for and enrolled for mandatory coverage under a State’s 

Medicaid State plan in accordance with subpart B of this part; and 

(5) Have household income that is at or below 133 percent FPL for a household of the 

applicable family size. 

(c) Coverage for dependent children. 
CMS-2349-P 162 

(1) A State may not provide Medicaid to a parent or other caretaker relative living with a 

dependent child if the child is under the age specified in paragraph (c)(2) of this section, unless 

such child is receiving benefits under Medicaid, the Children’s Health Insurance Program under 

subchapter D of this chapter, or otherwise is enrolled in other minimum essential coverage as 

defined in §435.4 of this part. 

(2) For the purpose of paragraph (c)(1) of this section, the age specified is under age 19, 

unless the State had elected as of March 23, 2010 to provide Medicaid to individuals under age 

20 or 21 under §435.222 of this part, in which case the age specified is such higher age. 

Subpart C--Options for Coverage 

17. The heading for subpart C is revised to read as set forth above. 

18. Section 435.218 is added to read as follows: 

§435.218 Individuals above 133 percent FPL. 

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

(b) Eligibility. 

(1) Criteria. The agency may provide Medicaid to individuals who: 

(i) Are under age 65; 

(ii) Are not eligible for and enrolled for mandatory coverage under a State’s Medicaid 

State plan in accordance with subpart B of this part; 

(iii) Are not otherwise eligible for and enrolled for optional coverage under a State’s 

Medicaid State plan in accordance with subpart C of this part, based on information available to 

the State from the application filed by or on behalf of the individual; and 
CMS-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 under an approved phase-in plan adopted in 

accordance with paragraph (b)(3) of this section, provide Medicaid to higher income individuals 

described in paragraph (b)(1) of this section without providing Medicaid to lower income 

individuals described in such paragraph. 

(ii) The limitation on coverage of parents and other caretaker relatives specified in 

§435.119(c) also applies to coverage under this section. 

(3) Phase-in plan. A State may phase in coverage to all individuals described in 

paragraph (b)(1) of this section under a phase-in plan submitted in a State plan amendment to 

and approved by the Secretary. 

Subpart E--General Eligibility Requirements 

19. Section 435.403 is amended by--

A. Redesignating paragraphs (h) and (i) as paragraphs (i) and (h), respectively. 

B. Revising newly redesignated paragraphs (h)(1) and (h)(4) 

C. Revising newly redesignated paragraphs (i)(1) and (i)(2). 

D. Removing newly redesignated paragraph (i)(3). 

E. Further redesignating newly redesignated paragraph (i)(4) as paragraph (i)(3). 

F. Amending paragraph (l)(2) by removing “paragraph (h)” and adding “paragraph (i)” 

in its place. 

The revisions and addition read as follows: 
CMS-2349-P 164 

§435.403 State residence. 

* * * * * 

(h) Individuals age 21 and over. 

(1) For an individual not residing in an institution as defined in paragraph (b) of this 

section, the State of residence is the State where the individual-- 

(i) Intends to reside, including without a fixed address or, if incapable of stating intent, 

where the individual is living; or 

(ii) Has entered the State with a job commitment or seeking employment (whether or not 

currently employed). 

* * * * * 

(4) For any other institutionalized individual, the State of residence is the State where the 

individual intends to reside or, if incapable of stating intent, where the individual is living. 

(i) Individuals under age 21. 

(1) For an individual under age 21 who is capable of indicating intent and who is 

emancipated from his or her parent or who is married, the State of residence is determined in 

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

 (2) For an individual under age 21 not described in paragraph (i)(1) of this section, not 

living in an institution as defined in paragraph (b) of this section and not eligible for Medicaid 

based on receipt of assistance under title IV-E of the Act, as addressed in paragraph (g) of this 

section, the State of residence is the State: 

(i) Where the individual resides, including with a custodial parent or caretaker or without 

a fixed address; or 
CMS-2349-P 165 

(ii) Where the individual’s parent or caretaker has entered the State with a job 

commitment or seeking employment (whether or not currently employed). 

* * * * * 

Subpart G--General Financial Eligibility Requirements and Options 

20. Section 435.603 is added to read as follows: 

§435.603 Application of modified adjusted gross income (MAGI). 

(a) Basis, scope, and implementation. 

(1) This section implements section 1902(e)(14) of the Act. 

(2) Effective January 1, 2014, the agency must apply the financial methodologies set 

forth in this section in determining the financial eligibility of all individuals for Medicaid, except 

for individuals identified in paragraph (i) of this section and as provided in paragraph (a)(3) of 

this section. 

(3) In the case of determining ongoing eligibility for beneficiaries determined eligible for 

Medicaid on or before December 31, 2013 and receiving Medicaid as of January 1, 2014, 

application of the financial methodologies set forth in this section must not be applied until 

March 31, 2014 or the next regularly-scheduled redetermination of eligibility for such individual 

under §435.916, whichever is later, if the individual otherwise would lose eligibility as a result of 

the application of these methodologies. 

(b) Definitions. For purposes of this section-- 

Code means the Internal Revenue Code of 1986. 

Family size means the number of persons counted as members of an individual’s 

household. In the case of determining the family size of a pregnant woman, the pregnant woman 

is counted as 2 persons. In the case of determining the family size of other individuals who have 
CMS-2349-P 166 

a pregnant woman in their household, the pregnant woman is counted, at State option, as either 1 

or 2 person(s). 

Tax dependent has the meaning provided in §435.4 of this part. 

(c) Basic rule. Except as specified in paragraph (i) of this section, the agency must 

determine financial eligibility for Medicaid based on “household income” as defined in 

paragraph (d) of this section. 

(d) Household income. 

(1) Except as provided in paragraphs (d)(2) and (d)(3) of this section, household income

is the sum of the MAGI-based income, as defined in paragraph (e) of this section, of every 

individual included in the individual’s household, minus an amount equivalent to 5 percentage 

points of the Federal poverty level for the applicable family size. 

(2) The MAGI-based income of an individual who is included in the household of his or 

her natural, adopted or step parent and is not required to file a tax return under section 6012 of 

the Code for the taxable year in which eligibility for Medicaid is being determined, is not 

included in household income whether or not the individual files a tax return. 

(3) In the case of individuals described in paragraph (f)(2)(i) of this section, household 

income also includes actually available cash support provided by the person claiming such 

individual as a tax dependent. 

(e) MAGI-based income. For the purposes of this section, MAGI-based income means 

income calculated using the same financial methodologies used to determine modified adjusted 

gross income as defined in section 36B(d)(2)(B) of the Code, except that, notwithstanding the 

treatment of the following under the Code-- 

(1) An amount received as a lump sum is counted as income only in the month received. 
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 property held in trust, or that is subject to Federal restrictions, 

or otherwise under the supervision of the Secretary of the Interior. 

(iii) Distributions resulting from real property ownership interests related to natural 

resources and improvements-- 

(A) Located on or near a reservation or within the most recent boundaries of a prior 

Federal reservation; or 

(B) Resulting from the exercise of Federally-protected rights relating to such real 

property ownership interests; 

(iv) Payments resulting from ownership interests in or usage rights to items that have 

unique religious, spiritual, traditional, or cultural significance or rights that support subsistence 

or a traditional lifestyle according to applicable Tribal Law or custom; 

(v) Student financial assistance provided under the Bureau of Indian Affairs education 

programs. 

(f) Household. 

(1) Basic rule for taxpayers not claimed as a tax dependent. In the case of an individual 

filing a tax return for the taxable year in which an initial determination or redetermination of 

eligibility is being made, and who is not claimed as a tax dependent by another taxpayer, the 

household consists of the taxpayer and all tax dependents. 
CMS-2349-P 168 

(2) Basic rule for individuals claimed as a tax dependent. In the case of an individual 

who is claimed as a tax dependent by another taxpayer, the household is the household of the 

taxpayer claiming such individual as a tax dependent, except that the household must be 

determined in accordance with paragraph (f)(3) of this section in the case of -- 

(i) Individuals other than a spouse or a biological, adopted or step child who are claimed 

as a tax dependent by another taxpayer; 

(ii) Individuals under age 21 living with both parents, if the parents are not married; and 

(iii) Individuals under age 21 claimed as a tax dependent by a non-custodial parent. 

(3) Rules for individuals who neither file a tax return nor are claimed as a tax dependent. 

In the case of individuals who do not file a Federal tax return and are not claimed as a tax 

dependent, the household consists of the individual and, if living with the individual – 

(i) The individual’s spouse; 

(ii) The individual’s natural, adopted and step children under age 19 or, if such child is a 

full-time student, under age 21; and 

(iii) In the case of individuals under age 19, or, in the case of full-time students, under 

age 21 the individual’s natural, adopted and step parents and adoptive and step siblings under age 

19 or, if such sibling is a full-time student, under age 21. 

(4) Married couples. In the case of a married couple living together, each spouse will be 

included in the household of the other spouse, regardless of whether they file a joint tax return 

under section 6013 of the Code or whether one spouse is claimed as a tax dependent by the other 

spouse. 

(g) No resource test or income disregards. In the case of individuals whose financial 

eligibility for Medicaid is determined in accordance with this section, the agency must not – 
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 Medicaid benefits at the point at which eligibility for Medicaid is 

being determined must be based on current monthly household income and family size. 

(2) Current beneficiaries. For individuals who have been determined financially-eligible 

for Medicaid using the MAGI-based methods set forth in this section, a State may elect in its 

State plan to base financial eligibility either on current monthly household income and family 

size or projected annual household income for the current calendar year. 

(3) In determining current monthly or projected annual household income under 

paragraph (h)(1) or (h)(2) of this section, the agency may adopt a reasonable method to include a 

prorated portion of reasonably predictable future income, to account for a reasonably predictable 

decrease in future income, or both, as evidenced by a signed contract for employment, a clear 

history of predictable fluctuations in income, or other clear indicia of such future changes in 

income. Such future increase or decrease in income must be verified in the same manner as 

other income, in accordance with the income and eligibility verification requirements at 

§435.940 et seq., including by self-attestation if reasonably compatible with other electronic 

data obtained by the agency in accordance with such sections. 

(i) Eligibility Groups for which modified MAGI-based methods do not apply. The 

financial methodologies described in this section are not applied in determining the eligibility for 

individuals whose eligibility for Medicaid is being determined on the following bases or under 
CMS-2349-P 170 

the following eligibility groups. For individuals described in paragraphs (i)(3) through (i)(6) of 

this section, the agency must use the financial methods described in §435.601 and §435.602 of 

this subpart. 

(1) Individuals whose eligibility for Medicaid does not require a determination of income 

by the State Medicaid agency, including, but not limited to, individuals deemed to be receiving 

Supplemental Security Income (SSI) benefits and eligible for Medicaid under §435.120, 

individuals receiving SSI benefits and eligible for Medicaid under §435.135, §435.137 or 

§435.138 of this subpart and individuals for whom the State relies on a finding of income made 

by an Express Lane agency, in accordance with section 1902(e)(13) of the Act. 

(2) Individuals who are age 65 or older. 

(3) Individuals whose eligibility is being determined on the basis of being blind or 

disabled, or on the basis of being treated as being blind or disabled, including, but not limited to, 

individuals eligible under §435.121, §435.232 or §435.234 of this part or under section 

1902(e)(3) of the Act. 

(4) Individuals whose eligibility is being determined on the basis of the need for longterm care services, including nursing facility services or a level of care in any institution 

equivalent to such services; home and community-based services under section 1915 or under a 

demonstration under section 1115 of the Act; or services described in sections 1905(a)(7) or (24) 

or in sections 1905(a)(22) and 1929 of the Act. 

 (5) Individuals who are being evaluated for eligibility for Medicare cost sharing 

assistance under section 1902(a)(10)(E) of the Act, but only for purposes of determining 

eligibility for such assistance. 

(6) Individuals who are being evaluated for coverage as medically needy under subparts 
CMS-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 information in electronic and paper formats, 

and orally as appropriate, to all applicants and other individuals who request it: 

(1) The eligibility requirements; 

(2) Available Medicaid services; and 

(3) The rights and responsibilities of applicants and beneficiaries. 

(b) Such information must be provided in simple and understandable terms and in a 

manner that is accessible to persons who are Limited English Proficient (LEP) and individuals 

living with disabilities. 

22. Section 435.907 is revised to read as follows: 

§435.907 Application. 

(a) The agency must require an application from the applicant, an authorized 

representative, or someone acting responsibly for the applicant. 

(b) The application must be - 

(1) The single, streamlined application for all insurance affordability programs developed 

by the Secretary in accordance with section 1413 (b)(1)(A) of the Affordable Care Act; or 

(2) An alternative single, streamlined application for all insurance affordability programs 

developed by a State and approved by the Secretary in accordance with section 1413 (b)(1)(B) of 

the Affordable Care Act. The alternative application must be no more burdensome than the 
CMS-2349-P 172 

single streamlined application described in paragraph (b)(1) of this section and ensure 

coordination across insurance affordability programs. 

(c) For individuals applying for coverage, or who may be eligible, on a basis other than 

the applicable modified adjusted gross income standard in accordance with §435.911, the agency 

may use either the single, streamlined application and supplemental forms to collect additional 

information needed to determine eligibility on such other basis or an alternative application form 

approved by the Secretary. 

(d) The agency must establish procedures to enable an individual, or other authorized 

person acting on behalf of the individual, to submit an application -- 

(1) Via the internet website described in §435.1200(d) of this part; 

(2) By telephone; 

(3) Via mail; 

(4) In person; or 

(5) Via facsimile. 

(e) Information related to 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 immigration status on any application or supplemental form. 

(2) The agency may request that a household 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 applicant’s eligibility for 

Medicaid or for a purpose directly connected to the administration of the State plan; and 

(iii) The agency clearly notifies the non-applicant that the provision of an SSN is 

voluntary and informs the individual how the SSN will be used, at the time it is requested. 

(f) The initial application must be signed under penalty of perjury. Electronic, including 

telephonically recorded, signatures and handwritten signatures transmitted by fascimile or other 

electronic transmission must be accepted. 

23. Section 435.908 is revised to read as follows: 

§435.908 Assistance with application and redetermination. 

(a) The agency must allow individual(s) of the applicant or beneficiary's choice to assist 

in the application process or during a redetermination of eligibility. 

(b) The agency must provide assistance to any individual seeking help with the 

application or redetermination process in person, over the telephone, and online, and in a manner 

that is accessible to individuals with disabilities and those who are limited English proficient. 

24. Redesignate §435.911 through §435.914 as §435.912 through §435.915 respectively. 

25. Add new §435.911 to read as follows: 

§435.911 Determination of eligibility. 

 (a) Statutory basis. This section implements sections 1902(a)(4), (a)(8), (a)(10)(A), 

(a)(19), and (e)(14) and section 1943 of the Act. 

 (b)(1) Applicable modified adjusted gross income standard means 133 percent of the 

Federal poverty level or, if higher –- 

(i) In the case of parents and other caretaker relatives described in §435.110(b), the 

income standard established in accordance with §435.110(c); 
CMS-2349-P 174 

(ii) In the case of pregnant women, the income standard established in accordance with 

§435.116(c); 

(iii) In the case of individuals under age 19, the income standard established in 

accordance with §435.118(c); 

(iv) The income standard established under §435.218(b)(1)(iv) of this part, if the State 

has elected to provide coverage under such section and, if applicable, coverage under the State’s 

phase-in plan has been implemented for the individual whose eligibility is being determined. 

(2) [Reserved] 

(c) For each individual who has submitted an application described §435.907 and who 

meets the non-financial requirements for eligibility (or for whom the agency is providing a 

reasonable opportunity to provide documentation of citizenship or immigration status, in 

accordance with sections 1903(x), 1902(ee) or 1137(d) of the Act), the State Medicaid Agency 

must comply with the following -- 

(1) Eligibility determination for mandatory coverage on basis of modified adjusted gross 

income. For each such individual who is under age 19, pregnant, or age 19 or older and under 

age 65 and not entitled to or enrolled for Medicare benefits under part A or B or title XVIII of 

the Act, and whose household income is at or below the applicable modified adjusted gross 

income standard, the agency must promptly and without undue delay furnish Medicaid benefits 

to such individual in accordance with parts 440 and 441 of this chapter. 

(2) Eligibility on basis other than applicable modified adjusted gross income standard. 

For each such individual not determined eligible for Medicaid in accordance with paragraph 

(c)(1) of this section, the agency must collect additional information as needed, consistent with 

§435.907(c), to-- 
CMS-2349-P 175 

(i) Determine whether such individual is eligible for Medicaid on any other basis. 

(ii) Promptly and without undue delay furnish Medicaid to each such individual 

determined eligible, in accordance with parts 440 and 441 of this chapter; and 

(iii) Comply with the requirements set forth in §435.1200(g). 

26. Section 435.916 is revised to read as follows: 

§435.916 Periodic redeterminations of Medicaid eligibility. 

(a) Redetermination of individuals whose Medicaid eligibility is based on modified 

adjusted gross income.

(1) Except as provided in paragraph (d) of this section, the eligibility of Medicaid 

beneficiaries whose financial eligibility is based on the applicable modified adjusted gross 

income standard in accordance with §435.911(c)(1)must be redetermined once every 12 months. 

(2) The agency must make a redetermination of eligibility without requiring information 

from the individual if able to do so based on reliable information contained in the individual’s 

account or other more current information available to the agency, including but not limited to 

information accessed through any data bases accessed by the agency under §435.948, §435.949 

and §435.956 of this part. 

(i) Individuals redetermined eligible on the basis of information available to the agency. 

(A) If the agency determines, on the basis of information available to the agency that the 

individual remains eligible for Medicaid, consistent with the requirements of this subpart and 

subpart E of part 431 the agency must notify the individual – 

(1) Of the eligibility determination, and basis therefore; and 
CMS-2349-P 176 

(2) That the individual must inform the agency, through any of the modes permitted for 

submission of applications under §435.907(d) of this subpart, if any of the information contained 

in such notice is inaccurate. 

(B) Such individuals must not be required to sign and return the notice. 

(ii) Individuals not redetermined eligible on basis of information available to agency. If 

the agency cannot determine, on the basis of information available to it, that the individual 

remains eligible for Medicaid, or if it otherwise needs additional information to complete the 

redetermination, the agency must comply with the requirements in paragraph (a)(3) of this 

section. 

(3) Use of a pre-populated renewal form. For individuals not redetermined eligible under 

paragraph (a)(2) of this section, the agency must -- 

(i) Provide the individual with – 

(A) A renewal form containing information available to the agency that is needed to 

renew eligibility, as specified by the Secretary; 

(B) At least 30 days from the date of the renewal form to respond and provide necessary 

information; 

(C) Notice of the agency’s decision concerning eligibility in accordance with this subpart 

and subpart E of part 431 of this chapter; and 

(D) The ability to respond to the renewal form through any of the modes permitted for 

submission of applications under §435.907(d), and if required, sign the renewal electronically. 

(ii) Verify any information provided by the beneficiary in accordance with §435.945 

through §435.956. 
CMS-2349-P 177 

(iii) Reconsider in a timely manner the eligibility of an individual who is terminated for 

failure to respond to the renewal form, if the individual subsequently responds to the agency 

within a reasonable period after the date of termination without the need for the individual to file 

a new application. 

(4) Transmission of data on individuals no longer eligible for Medicaid. If an individual 

is determined ineligible for Medicaid, the agency must assess the individual for eligibility for 

other insurance affordability programs and transmit the electronic account and any relevant 

information used to make the eligibility determination to the appropriate program in accordance 

with the requirements set forth in §435.1200(g) of this part. 

(b) Redetermination of individuals whose Medicaid eligibility is determined on a basis 

other than modified adjusted gross income. The agency must redetermine the eligibility of 

Medicaid beneficiaries excepted from modified adjusted gross income under §435.603(i) of this 

part, for circumstances that may change, at least every 12 months. The agency may -- 

(1) Consider blindness as continuing until the reviewing physician under §435.531 of this 

part determines that a beneficiary’s vision has improved beyond the definition of blindness 

contained in the plan; and 

(2) Consider disability as continuing until the review team, under §435.541 of this part, 

determines that a beneficiary’s disability no longer meets the definition of disability contained in 

the plan. 

(c) Procedures for reporting changes. The agency must have procedures designed to 

ensure that beneficiaries make timely and accurate reports of any change in circumstances that 

may affect their eligibility and that such changes may be reported in accordance with the modes 

required for submission of applications under §435.907(d) of this subpart. 
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 eligibility, it must redetermine eligibility at the 

appropriate time based on such changes. 

 27. Section 435.940 is revised to read as follows: 

§435.940 Basis and scope.

 The income and eligibility verification requirements set forth at §435.940 through 

§435.960 of this subpart are based on sections 1137, 1902(a)(4), 1902(a)(19), 1903(r)(3) and 

1943(b)(3) of the Act and section 1413 of the Affordable Care Act. 

 28. Section 435.945 is revised to read as follows: 

§435.945 General requirements. 

(a) Nothing in these regulations in this subpart should be construed as limiting the 

State’s program integrity measures or affecting the State’s obligation to ensure that only eligible 

individuals receive benefits, consistent with part 455 of this subchapter. 

(b) Except with respect to citizenship and immigration status information, and subject to 

the verification requirements set forth in this subpart, the agency may accept attestation without 

requiring further paper documentation (either self-attestation by the applicant or beneficiary or 

by a parent, caretaker or other person acting responsibly on behalf of an applicant or beneficiary) 

of all information needed to determine the eligibility of an applicant or beneficiary for Medicaid. 
CMS-2349-P 179 

(c) The agency must request and use information relevant to verifying an individual’s 

eligibility for Medicaid in accordance with §435.948 through §435.956 of this subpart. 

(d) The agency must furnish, in a timely manner, income and eligibility information 

needed for verifying eligibility for the following programs: 

(1) To other agencies in the State and other States and to the Federal programs both listed 

in §435.948(a) of this subpart and identified in section 1137(b) of the Act; 

(2) Other insurance affordability programs; 

(3) The child support enforcement program under part D of title IV of the Act; and 

(4) SSA for OASDI under title II and for SSI benefits under title XVI of the Act. 

(e) The agency must, as required under section 1137(a)(7) of the Act, and upon request, 

reimburse another agency listed in §435.948(a) of this subpart or paragraph (d) of this section for 

reasonable costs incurred in furnishing information, including new developmental costs 

associated with furnishing the information to another agency. 

(f) Prior to requesting information for an applicant or beneficiary from another agency or 

program under this subpart, the agency must inform the individual that the agency will obtain 

and use information available to it under this subpart to verify income and eligibility or for other 

purposes directly connected to the administration of the State plan. 

(g) The agency must report information as prescribed by the Secretary for purposes of 

determining compliance with §431.305, subpart P of part 431, §435.910, §435.913, and 

§435.940 through §435.965 of this chapter and of evaluating the effectiveness of the income and 

eligibility verification system. 
CMS-2349-P 180 

(h) Information exchanged electronically between the State Medicaid agency and any 

other agency or program must be sent and received via secure electronic interfaces as defined in 

§435.4 of this part. 

(i) The agency must execute written agreements with other agencies before releasing data 

to, or requesting data from, those agencies. Such agreements must provide for appropriate 

safeguards limiting the use and disclosure of information as required by Federal or State law or 

regulations. 

 29. Section 435.948 is revised to read as follows: 

§435.948 Verifying financial information. 

(a) The agency must request information relating to financial eligibility from other 

agencies in the State and other States and Federal programs in accordance with this section. To 

the extent the agency determines such information is useful to verifying the financial eligibility 

of an individual, the agency must request: 

(1) Information related to wages, net earnings from self-employment, unearned income 

and resources from the State Wage Information Collection Agency (SWICA), the Internal 

Revenue Service, the Social Security Administration, the agencies administering the State 

unemployment compensation laws, the State-administered supplementary payment programs 

under section 1616(a) of the Act, and any State program administered under a plan approved 

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

(2) Information related to eligibility or enrollment from the Public Assistance Reporting 

Information System (PARIS), the Supplemental Nutrition Assistance Program, and other 

insurance affordability programs.(Note: all eligibility determination systems must conduct data 

matching through PARIS). 
CMS-2349-P 181 

(b) To the extent that the information identified in paragraph (a) is available through the 

electronic service established in accordance with §435.949 of this subpart, the agency must 

obtain the information through such service. 

(c)(1) If the information identified in paragraph (a) of this section is not available through 

the electronic service established in accordance with §435.949 of this subpart, the agency may 

obtain the information directly from the appropriate agency or program consistent with the 

requirements in §435.945 of this subpart. 

(2) The agency must request the information by SSN, or if a SSN is not available, using 

other personally identifying information in the individual’s account, if possible. 

(d) Flexibility in information collection and verification. Subject to approval by the 

Secretary, the agency may request and use income information from a source or sources 

alternative to those listed in paragraph (a) of this section provided that such alternative source 

will reduce the administrative costs and burdens on individuals and States while maximizing 

accuracy, minimizing delay, meeting applicable requirements relating to the confidentiality, 

disclosure, maintenance, or use of information, and promoting coordination with other insurance 

affordability programs. 

30. Section 435.949 is added to read as follows: 

§435.949 Verification of information through an electronic service. 

(a) The Secretary will establish an electronic service through which States may verify 

certain information with, or obtain such information from, Federal agencies, including the Social 

Security Administration, the Department of Treasury, the Department of Homeland Security and 

any other Federal offices that maintain records containing information related to eligibility for 

Medicaid or other minimum essential coverage. 
CMS-2349-P 182 

(b) To the extent that information is available through the electronic service established 

by the Secretary, States must obtain the information through such service, subject to the 

requirements in subpart C of part 433 of this chapter. 

(c) The Secretary may provide for, or approve a request from a State to utilize, an 

alternative mechanism through which States may collect and verify such information, if the 

Secretary determines that such alternative mechanism meets the criteria set forth in §435.948(d) 

of this subpart. 

31. Section 435.952 is revised to read as follows: 

§435.952 Use of information and requests of additional information from individuals. 

(a) The agency must promptly evaluate information received or obtained by it in 

accordance with regulations under §435.940 through §435.960 of this subpart to determine 

whether such information may affect the eligibility of an individual or the benefits to which he or 

she is entitled. 

(b) If information provided by or on behalf of an individual (on the application or 

renewal form or otherwise) is reasonably compatible with information obtained by the agency in 

accordance with §435.948, §435.949 or §435.956 of this subpart, the agency must determine or 

redetermine eligibility based on such information.

(c) An individual must not be required to provide additional information or 

documentation unless information needed by the agency in accordance with §435.948, §435.949 

or §435.956 of this subpart cannot be obtained electronically or the information obtained 

electronically is not reasonably compatible with information provided by or on behalf of the 

individual. 
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 furnish such additional 

information. 

(d) The agency may not deny or terminate eligibility or reduce benefits for any individual 

on the basis of information received in accordance with regulations under §435.940 through 

§435.960 of this subpart unless the agency has sought additional information from the individual 

in accordance with paragraph (c) of this section, and provided proper notice and hearing rights to 

the individual in accordance with this subpart and subpart E of part 431. 

§435.953 [Removed]

32. Section 435.953 is removed. 

§435.955 [Removed] 

33. Section 435.955 is removed. 

34. Section 435.956 is added to read as follows: 

§435.956 Verification of other non-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 procedures consistent with the requirements in §435.952 

of this subpart. 
CMS-2349-P 184 

(2) A document that provides evidence of immigration status may not be used alone to 

determine State residency. 

(d) Social security numbers. The agency must verify social security numbers (SSNs) in 

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

(e) Pregnancy and household size. The agency must accept self-attestation of pregnancy 

and the individuals that comprise an individual’s household, as defined in 435.603(f), unless the 

state has information that is not reasonably compatible with such attestation, subject to the 

requirements of §435.952 of this subpart. 

(f) Age and date of birth. The agency may verify date of birth in accordance with 

§435.945(b) of this subpart or through other reasonable verification procedures consistent with 

the requirements in §435.952 of this subpart. 

35. Subpart M is added to read as follows: 

Subpart M--Coordination of eligibility and enrollment between Medicaid, CHIP, 

Exchanges and other insurance affordability programs. 

§435.1200 Medicaid agency responsibilities. 

(a) Statutory basis. This section implements sections 1943 and 2102(b)(3)(B) and (c)(2) 

of the Act. 

(b) Definitions. As used in this subpart: 

Applicable modified adjusted gross income (MAGI) standard is defined as provided in 

§435.911(b)(1) of this part. 

Application means the single streamlined application described in §435.907(b) submitted 

by or on behalf of an individual. 

Exchange is defined as provided in §435.4 of this part. 
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 coordinated eligibility and enrollment system 

described in section 1943 of the Act to ensure that the agency fulfills the responsibilities set forth 

in paragraphs (e) through (g) of this section in partnership with other insurance affordability 

programs. 

(2) Consistent with §431.10(d) of this chapter, enter into one or more agreements with the 

Exchange and the agencies administering other insurance affordability programs, as defined in 

§435.4 of this part, as are necessary to fulfill each of the requirements of this section. 

(3) In accordance with the Medicaid State plan, certify the criteria, including but not 

limited to applicable MAGI standards as defined in §435.911(b) of this subpart and satisfactory 

immigration status, necessary for the Exchange to determine Medicaid eligibility. 

(d) Internet web site. The State Medicaid agency must make available to current and 

prospective Medicaid applicants and beneficiaries a web site that: 

(1) Supports applicant and beneficiary activities, including accessing information on the 

insurance affordability programs available in the State, applying for and renewing coverage, and 

other activities as appropriate; and 

(2) Is accessible to people with disabilities in accordance with the Americans with 

Disabilities Act and section 504 of the Rehabilitation Act and provides meaningful access for 

persons who are limited English proficient. 
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 electronic interface, the electronic account containing the 

finding of Medicaid eligibility, all information provided on the application, and any information 

obtained or verified by the Exchange in making such finding; and 

(2) To furnish Medicaid to the individual promptly and without undue delay in 

accordance with parts 440 and 441 of this chapter, to the same extent and in the same manner as 

if such individual had been determined eligible for Medicaid by the agency. 

(f) Transfer of applications from other insurance affordability programs to the State 

Medicaid agency. The agency must adopt procedures to ensure that it promptly and without 

undue delay determines the Medicaid eligibility of individuals determined to be potentially 

eligible for Medicaid by other insurance affordability programs. The procedures must ensure 

that-- 

(1) The agency accepts, via secure electronic interface, the electronic account for the 

individual screened as potentially Medicaid eligible, including all information provided on the 

application and any information obtained or verified by the insurance affordability program; 

(2) The agency may not request information or documentation from the individual that is 

already contained in the electronic account; 

(3) The agency determines the Medicaid eligibility of the individual, promptly and 

without undue delay, in accordance with §435.911(c) of this part in the same manner as if the 

application had been submitted directly to, and processed by, the agency, except that the agency 

must not verify eligibility criteria already verified by the insurance affordability program. 
CMS-2349-P 187 

(4) The agency notifies the insurance affordability program of the final determination of 

the individual’s eligibility or ineligibility for Medicaid. 

(g) Evaluation of eligibility for the Exchanges and other insurance affordability 

programs.

(1) Individuals determined not eligible for Medicaid. For individuals who submit an 

application which includes sufficient information to determine Medicaid eligibility, and whom 

the agency determines are not eligible for Medicaid, the agency must establish procedures to 

assess such individuals for potential eligibility for other insurance affordability programs and 

promptly and without undue delay transfer such individuals’ electronic accounts to any other 

program(s) for which they may be eligible. The electronic account must include all information 

provided on the application and any information obtained or verified by the agency, including 

the determination of Medicaid ineligibility. 

(2) Individuals undergoing a Medicaid eligibility determination on a basis other than 

MAGI. In the case of an individual with household income, as defined in §435.603(d) of this 

part, greater than the applicable MAGI standard and for whom the agency is determining 

eligibility on the basis of being blind or disabled, the agency must establish procedures to – 

(i) Assess the individual for potential eligibility for coverage under other insurance 

affordability programs and, promptly and without undue delay, provide the individual’s 

electronic account to any such program for which the individual may be eligible. The electronic 

account must be transmitted via secure electronic interface and must include all information 

provided on the application and any information obtained or verified by the agency, along with 

the determination that the individual is not Medicaid eligible on the basis of the applicable 

MAGI standard, but that a final determination of Medicaid eligibility is still pending; and 
CMS-2349-P 188 

(ii) Notify the appropriate insurance affordability program(s) of the agency’s final 

determination of eligibility or ineligibility. 

PART 457—ALLOTMENTS AND GRANTS TO STATES 

36a. The authority citation for part 457 continues to read as follows: 

Authority: Section 1102 of the Social Security Act (42 U.S.C. 1302) 

36b. In part 457, remove the term "family income" wherever it appears and add in its 

place the term "household income." 

37. In part 457 remove “SCHIP” wherever it appears and add in its place “CHIP.” 

Subpart A--Introduction; State Plans for Child Health Insurance Programs and Outreach 

Strategies 

38. Section §457.10 is amended by-- 

A. Removing the definition of “Medicaid applicable income level.” 

B. Adding the following definitions in alphabetical order “Affordable Insurance 

Exchange (Exchange),” “Electronic account,” “Household income,” “Insurance affordability 

program,” “Secure electronic interface,” and “Single, streamlined application.” 

The additions read as follows: 

§457.10 Definitions and use of terms. 

* * * * * 

Affordable Insurance Exchange (Exchange) is defined as provided in §435.4 of this 

chapter. 

* * * * * 
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 paragraph (c)(3) to read as follows:

§457.80 Current State child health insurance coverage and coordination. 

* * * * * 

(c) * * * 

(3) Ensure coordination with other insurance affordability programs in the determination 

of eligibility and enrollment in coverage to ensure that there are no unnecessary gaps in 

coverage, including through use of the procedures described in §457.305, §457.350 and 

§457.353. 

Subpart C--State Plan Requirements: Eligibility, Screening, Applications, and Enrollment 

 40. Section 457.300 is amended by–- 
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 expansion program are found at 

§435.4, §435.229, §435.905 through §435.908, §435.1102, §435.940 through §435.958, 

§435.1200, §436.3, §436.229, and §436.1102 of this chapter. 

41. Section 457.301 is amended by–- 

A. Adding the definitions of “Family size” and “Medicaid applicable income level” in 

alphabetical order. 

B. Removing the definition of “Joint application.” 

The additions read as follows: 
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 the Federal poverty level and converted to a modified adjusted 

gross income equivalent level in accordance with guidance issued by the Secretary under section 

1902(e)(14)(A) and (E) of the Act) specified under the policies of the State plan under title XIX 

of the Act (including for these purposes, a section 1115 waiver authorized by the Secretary or 

under the authority of section 1902(r)(2) of the Act) as of March 31, 1997 for the child to be 

eligible for Medicaid under either section 1902(l)(2) or 1905(n)(2) of the Act. 

* * * * * 

42. Section 457.305 is revised to read as follows: 

§457.305 State plan provisions. 

The State plan must include a description of-- 

(a) The standards, consistent with §457.310 and §457.320 of this subpart, and financial 

methodologies consistent with §457.315 of this subpart used to determine the eligibility of 

children for coverage under the State plan. 

(b) The State's policies governing enrollment and disenrollment; processes for screening 

applicants for and, if eligible, facilitating their enrollment in other insurance affordability 

programs; and processes for implementing waiting lists and enrollment caps (if any). 

 43. Section 457.310 is amended by-- 

A. Republishing paragraph (b) introductory text. 
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 poverty level for a family of the size involved; 

 (ii) Resides in a State with no Medicaid applicable income level; 

(iii) Resides in a State that has a Medicaid applicable income level and has a household 

income that either— 

* * * * * 

(B) Does not exceed the income level specified for such child to be eligible for medical 

assistance under policies of the State plan under title XIX on June 1, 1997; or 

(iv) Is not eligible for Medicaid as a result of the elimination of income disregards as 

specified under §435.603(g) of this chapter. 

* * * * * 

44. Section 457.315 is added to read as follows: 

§457.315 Application of modified adjusted gross income and household definition. 

Effective January 1, 2014, the CHIP agency shall apply the financial methodologies set 

forth in paragraphs (b) through (h) of §435.603 of this chapter in determining the financial 
CMS-2349-P 193 

eligibility of all individuals for CHIP. The exception to application of such methods for 

individuals for whom the State relies on a finding of income made by an Express Lane agency at 

§435.603(i)(1) also applies. 

45. Section 457.320 is amended by-– 

A. Removing paragraphs (a)(4) and (a)(6). 

B. Redesignating paragraphs (a)(5), (a)(7), (a)(8), (a)(9), and (a)(10) as paragraphs 

(a)(4), (a)(5), (a)(6), (a)(7), and (a)(8), respectively. 

C. Revising paragraph (d). 

D. Removing and reserving paragraph (e)(2). 

The revisions and additions read as follows: 

§457.320 Other eligibility standards. 

* * * * * 

(d) Residency. 

(1) Residency for a 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 residency requirement; 

(ii) Preclude the following individuals from declaring residence in a State— 

 (A) An institutionalized child who is not a ward of a State, if the State is the State of 

residence of the child's custodial parent or caretaker at the time of placement; or 

(B) A child who is a ward of a State, regardless of where the child lives 

(3) In cases of disputed residency, the State must follow the process described in 

§435.403(m) of this chapter. 
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 the provisions of such §435.907 of 

this chapter, except that the terms of §435.907(c) of this chapter(relating to applicants seeking 

coverage on a basis other than modified adjusted gross income) do not apply. 

47. Section 457.335 is added to read as follows: 

§457.335 Availability of program information and Internet Web site. 

The terms of §435.905 and §435.1200(d) of this chapter apply equally to the State in 

administering a separate CHIP. 

48. Section 457.340 is amended by revising the section heading and paragraphs (a), (b) 

and (f) to read as follows: 

§457.340 Application for and enrollment in CHIP. 

(a) Application assistance. A State must afford families an opportunity to apply for CHIP 

without delay and must provide assistance to families in understanding and completing 

applications and in obtaining any required documentation. Such assistance must be made 

available to applicants and enrollees in person, over the telephone, and online, and must be 

provided in a manner that is accessible to individuals living with disabilities and those who are 

limited English proficient. 

(b) Use of Social Security number. A State must require each individual applying for 

CHIP to provide a Social Security number (SSN) in accordance with §435.910 and cannot 
CMS-2349-P 195 

require non-applicants to provide an SSN consistent with the requirements at §435.907(e) of this 

chapter. 

* * * * * 

(f) Effective date of eligibility. A State must specify a method for determining the 

effective date of eligibility for CHIP, which can be determined based on the date of application 

or through any other reasonable method that ensures coordinated transition of children between 

programs as family circumstances change and avoids gaps or overlaps in coverage. 

49. Section 457.343 is added to read as follows: 

§457.343 Periodic redetermination of CHIP eligibility. 

The redetermination procedures described in §435.916 of this chapter apply equally to 

the State in administering a separate CHIP, except that the State shall verify information needed 

to renew CHIP eligibility in accordance with §457.380 of this subpart, shall provide notice 

regarding the State’s determination of renewed eligibility or termination in accordance with 

§457.340(e) of this subpart and shall comply with the requirements set forth in §457.350 of this 

subpart for screening individuals for other insurance affordability programs and transmitting 

such individuals’ electronic account and other relevant information to the appropriate program. 

50. Section 457.348 is added to read as follows: 

§457.348 Determinations of Children’s Health Insurance Program eligibility from other 

applicable health coverage programs. 

(a) Exchange determinations of CHIP eligibility. 

(1) For each individual found eligible for CHIP by the Exchange based on the applicable 

MAGI standard, the State must establish procedures – 
CMS-2349-P 196 

(i) To receive, via secure electronic interface, the electronic account containing the 

finding of CHIP eligibility and all information provided on the application and/or verified by the 

Exchange which made such finding; and 

(ii) To furnish CHIP to the individual promptly and without undue delay in accordance 

with §457.340 of this subpart, to the same extent and in the same manner as if such individual 

had been determined by the State to be eligible for CHIP in accordance with such section. 

(2) [Reserved]. 

(b) Screening for potential CHIP eligibility by other insurance affordability programs. 

The State must adopt procedures to ensure that it promptly and without undue delay determines 

the CHIP eligibility of individuals determined to be potentially eligible for CHIP, by other 

insurance affordability programs. The procedures must ensure that-- 

(1) The State accepts, via secure electronic interface, the electronic account for the 

individual screened as potentially CHIP eligible, including all information provided on the 

application and any information obtained or verified by the insurance affordability program; 

(2) The State may not request information or documentation from the individual that is 

already contained in the electronic account; 

(3) The State determines the CHIP eligibility of the individual, promptly and without 

undue delay, in accordance with §457.340 in the same manner as if the application had been 

submitted directly to, and processed by, the State, except that the State must not verify eligibility 

criteria already verified by the insurance affordability program. 

(4) The State notifies the insurance affordability program of the final determination of the 

individual’s eligibility or ineligibility for CHIP. 
CMS-2349-P 197 

(c) Option to accept CHIP eligibility determinations from the Medicaid agency. A State 

may accept determinations of CHIP eligibility made by another insurance affordability program 

in the same manner that it accepts Exchange determinations of CHIP eligibility under paragraph 

(a) of this section. 

(d) Certification of eligibility criteria. The State must certify for the Exchange the 

criteria necessary to determine CHIP eligibility, including but not limited to the income standard 

adopted for its separate CHIP program and the criteria related to satisfactory immigration status, 

as set forth in the State plan in accordance with §457.305 of this part. 

51. Section 457.350 is amended by-- 

A. Revising the section heading. 

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

C. Removing and reserving paragraph (d). 

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

The additions and revisions read as follows: 

§457.350 Eligibility screening and enrollment in other insurance affordability programs. 

(a) State plan requirement. The State plan shall include a description of the coordinated 

eligibility and enrollment procedures used, at intake and any follow-up eligibility determination, 

including any periodic redetermination, to ensure that: 

(1) Only targeted low-income children are furnished CHIP coverage under the plan; and 

(2) Enrollment is facilitated for applicants found to be potentially eligible for other 

insurance affordability programs in accordance with this section. 
CMS-2349-P 198 

(b) Screening objectives. A State must identify any applicant, beneficiary, or other 

individual applying for coverage on the single, streamlined application who is potentially eligible 

for: 

(1) Medicaid on the basis of having household income at or below the applicable 

modified adjusted gross income standard, as defined in §435.911(b) of this chapter; 

(2) Medicaid on a basis other than having household income at or below the applicable 

modified adjusted gross income standard; or 

(3) Eligibility for other insurance affordability programs, including eligibility for 

advanced payments for premium tax credits based on having household income above the 

income standard in the State for CHIP or the applicable modified adjusted gross income standard 

in the State for Medicaid, as appropriate, or for enrollment in a qualified health plan through an 

Exchange without advanced payments for a premium tax credit. 

(c) Income eligibility test. To identify the individuals described in paragraphs (b)(1) and 

(b)(3) of this section, a State must apply the methodologies used to determine household income 

described in §457.315 of this part. 

(d) [Reserved]. 

* * * * * 

(f) Applicants found potentially eligible for Medicaid based on modified adjusted gross 

income. If the screening process reveals that the applicant is potentially eligible for Medicaid 

based on modified adjusted gross income, the State must - 

(1) Promptly transmit the electronic account, and any other relevant information obtained 

through the application, to the Medicaid agency via secure electronic interface; and 
CMS-2349-P 199 

(2) Except as provided in §457.355 of this subpart, find the applicant ineligible, 

provisionally ineligible, or suspend the applicant’s application for CHIP unless and until the 

Medicaid application for the applicant is denied; and 

(3) Determine or redetermine eligibility for CHIP, consistent with the timeliness 

standards established under §457.340(d) of this subpart, if — 

(i) The State is notified, in accordance with §435.1200(f)(4) of this chapter that the 

applicant has been found ineligible for Medicaid; or 

(ii) The State is notified prior to the final Medicaid eligibility determination that the 

applicant’s circumstances have changed and another screening shows that the applicant is not 

likely to be eligible for Medicaid. 

* * * * * 

(i) Applicants found potentially eligible for other insurance affordability programs. If the 

screening process reveals that an applicant is not eligible for CHIP, is not screened as potentially 

eligible for Medicaid on the basis of modified adjusted gross income, and is potentially eligible 

for enrollment in a qualified health plan through the Exchange or other insurance affordability 

programs, the State must promptly transmit the electronic account, and other relevant 

information obtained through the application to the applicable program using secure electronic 

interfaces. 

(j) Applicants potentially eligible for Medicaid on a basis other than modified adjusted 

gross income. If, based on information obtained through the single, streamlined application, the 

applicant is not screened as potentially eligible for Medicaid on the basis of modified adjusted 

gross income but may be eligible for Medicaid on another basis, the State must – 
CMS-2349-P 200 

(1) Promptly transmit the electronic account, and any other relevant information obtained 

through the application to the Medicaid agency using secure electronic interfaces; and 

(2) Complete the determination of eligibility for CHIP in accordance with §457.340 of 

this subpart; and 

(3) Disenroll the beneficiary from CHIP if the State is notified in accordance with 

§435.1200(f)(4) of this chapter that the applicant has been determined eligible for Medicaid. 

(k) A State may enter into an arrangement with the Exchange to make eligibility 

determinations for advanced premium tax credits in accordance with Section 1943(b)(2) of the 

Act. 

52. Section 457.353 is revised to read as follows: 

§457.353 Monitoring and evaluation of screening process. 

States must establish a mechanism and monitor to evaluate the screen and enroll process 

described at §457.350 of this subpart to ensure that children who are: 

(a) Screened as potentially eligible for other insurance affordability programs are enrolled 

in such programs, if eligible; or 

(b) Determined ineligible for other insurance affordability programs are enrolled in 

CHIP, if eligible. 

53. Section 457.380 is revised to read as follows: 

§457.380 Eligibility verification. 

(a) General requirements. Except with respect to verification of citizenship and 

immigration status, and subject to the verification requirements set forth in paragraph (d) of this 

section, the State may accept attestation of all information needed to determine the eligibility of 

an applicant or beneficiary for CHIP. 
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 verification of financial eligibility described in 

§435.945(b), §435.948 and §435.952 of this chapter. 

(e) Verification of other factors of eligibility. For eligibility requirements not described 

in paragraphs (b), (c) or (d) of this section, a State may adopt reasonable verification procedures, 

except that the State must accept self-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 verification procedures consistent with the requirements in §435.952. 

(f) Requesting information. 

(1) The State must use electronic sources of data, if available, before requesting 

additional information, including paper documentation, from an individual. 

(2) An individual shall not be required to provide additional information or 

documentation unless information needed by the State cannot be obtained electronically or 

information obtained electronically is not reasonably compatible with information provided by or 

on behalf of the individual. In such cases, the State may seek additional information, including a 

statement which reasonably explains the discrepancy and/or paper documentation, from the 

individual. The State must provide the individual a reasonable period to furnish such 

information. 
CMS-2349-P 202 

(g) Electronic service. To the extent that information sought under this section is 

available through the electronic service established by the Secretary at §435.949 of this chapter, 

the State shall access the information through that service. 

(h) Interaction with program integrity requirements. Nothing in this section should be 

construed as limiting the State’s program integrity measures or affecting the State’s obligation to 

ensure that only eligible individuals receive benefits. 

(i) Flexibility in information collection and verification. Subject to approval by the 

Secretary, the State may modify the methods to be used for collection of information and 

verification of information as set forth in this section, provided that such alternative source will 

reduce the administrative costs and burdens on individuals and States while maximizing 

accuracy, minimizing delay, meeting applicable requirements relating to the confidentiality, 

disclosure, maintenance, or use of information, and promoting coordination with other insurance 

affordability programs. 
CMS-2349-P 

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

Dated: June 29, 2011. 

 _____________________________ 

 Donald M. Berwick, 

 Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: August 10, 2011. 

 _____________________________ 

 Kathleen Sebelius, 

 Secretary, 

 Department of Health and Human Services. 

BILLING CODE 4120-01-P 

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