[Federal Register Volume 77, Number 57 (Friday, March 23, 2012)]
[Rules and Regulations]
[Pages 17144-17217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6560]



[[Page 17143]]

Vol. 77

Friday,

No. 57

March 23, 2012

Part III





Department of Health and Human Services





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Centers for Medicare and Medicaid Services





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42 CFR Parts 431, 435 and 457





Medicaid Program; Eligibility Changes Under the Affordable Care Act of 
2010; Final Rule

Federal Register / Vol. 77 , No. 57 / Friday, March 23, 2012 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 431, 435, and 457

[CMS-2349-F]
RIN 0938-AQ62


Medicaid Program; Eligiblity Changes Under the Affordable Care 
Act of 2010

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

ACTION: Final rule; Interim final rule.

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SUMMARY: This final rule implements several 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 coverage through improvements to the Medicaid and Children's 
Health Insurance (CHIP) programs, the establishment of Affordable 
Insurance Exchanges (``Exchanges''), and the assurance of coordination 
between Medicaid, CHIP, and Exchanges. This final rule codifies policy 
and procedural changes to the Medicaid and CHIP programs related to 
eligibility, enrollment, renewals, public availability of program 
information and coordination across insurance affordability programs.

DATES: Effective Date: These regulations are effective on January 1, 
2014.
    Comment Date: Certain provisions of this final rule are being 
issued as interim final. We will consider comments from the public on 
the following provisions: Sec.  431.300(c)(1) and (d), Sec.  
431.305(b)(6), Sec.  435.912, Sec.  435.1200, Sec.  457.340(d), Sec.  
457.348 and Sec.  457.350(a), (b), (c), (f), (i), (j), and (k).
    To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. Eastern Standard 
Time (EST) on May 7, 2012.

ADDRESSES: In commenting, please refer to file code CMS-2349-F. 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-F, 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-F, Mail 
Stop C4-26-05, 7500 Security Boulevard, 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 stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
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. 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:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.
    In addition, several sections in this final rule are being issued 
as interim final rules and we are soliciting comment on those sections. 
Given the highly connected nature of these provisions, we are combining 
provisions that are being issued as an interim final rule and 
provisions that are being issued as a final rule into a single document 
so that a reader will be able to see the context and interrelationships 
in the overall regulatory framework.

Table of Contents

I. Executive Summary
II. Background
III. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments
    A. Changes to Medicaid Eligibility
    B. Financial Methodologies for Determining Medicaid Eligibility 
Based on MAGI Under the Affordable Care Act (Sec.  435.603)
    C. Residency for Medicaid Eligibility Defined (Sec.  435.403)
    D. Timeliness Standards (Sec.  435.912)
    E. Application and Enrollment Procedures for Medicaid (Sec.  
435.905, Sec.  435.907, and Sec.  435.908)
    F. MAGI Screen (Sec.  435.911)
    G. Coverage Month (Sec.  435.917)
    H. Verification of Income and Other Eligibility Criteria (Sec.  
435.940, Sec.  435.945, Sec.  435.948, Sec.  435.949, Sec.  435.952, 
and Sec.  435.956)
    I. Periodic Renewal of Medicaid Eligibility (Sec.  435.916)
    J. Coordination of Eligibility and Enrollment Among Insurance 
Affordability Programs--Medicaid Agency Responsibilities (Sec.  
435.1200)
    K. Single State Agency (Sec.  431.10 and Sec.  431.11)
    L. Implementing Application of MAGI to CHIP (Sec.  457.10, Sec.  
457.301, Sec.  457.305, Sec.  457.315, and Sec.  457.320)
    M. Residency for CHIP Eligibility (Sec.  457.320)
    N. CHIP Coordinated Eligibility and Enrollment Process (Sec.  
457.330, Sec.  457.340, Sec.  457.343, Sec.  457.348, Sec.  457.350, 
Sec.  457.353, and Sec.  457.380)
    O. FMAP for Newly Eligible Individuals and for Expansion States 
(Sec.  433.10, Sec.  433.206, Sec.  433.210, and Sec.  433.212)
IV. Provisions of the Final Rule
V. Waiver of Proposed Rulemaking

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VI. Collection of Information Requirements
VII. Summary of Regulatory Impact Analysis

I. Executive Summary

    The legal authority for this final rule comes from the Patient 
Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 
23, 2010), as amended by the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010), and together 
referred to as the Affordable Care Act of 2010 (Affordable Care Act).
    This final rule implements several provisions of the Affordable 
Care Act related to Medicaid eligibility, enrollment and coordination 
with the Affordable Insurance Exchanges (Exchanges), the Children's 
Health Insurance Program (CHIP), and other insurance affordability 
programs. It also simplifies the current eligibility rules and systems 
in the Medicaid and CHIP programs. This final rule: (1) Reflects the 
statutory minimum Medicaid income eligibility level of 133 percent of 
the Federal Poverty Level (FPL) across the country for most non-
disabled adults under age 65; (2) eliminates obsolete eligibility 
categories and collapses other categories into four primary groups: 
children, pregnant women, parents, and the new adult group; (3) 
modernizes eligibility verification rules to rely primarily on 
electronic data sources; (4) codifies the streamlining of income-based 
rules and systems for processing Medicaid and CHIP applications and 
renewals for most individuals; and (5) ensures coordination across 
Medicaid, CHIP, and the Exchanges.
    Several provisions of this rule are issued on an interim final 
basis. As such, we will consider comments from the public on the 
following provisions:
    Sec.  431.300(c)(1) and (d) and Sec.  431.305(b)(6)--Safeguarding 
information on applicants and beneficiaries.
    Sec.  435.912--Timeliness and performance standards for Medicaid.
    Sec.  435.1200--Coordinated eligibility and enrollment among 
insurance affordability programs.
    Sec.  457.340(d)--Timeliness standards for CHIP.
    Sec.  457.348--Coordinated eligibility and enrollment among CHIP 
and other insurance affordability programs.
    Sec.  457.350(a), (b), (c), (f), (i), (j), and (k)--Coordinated 
eligibility and enrollment among CHIP and other insurance affordability 
programs.

II. Background

    The Patient Protection and Affordable Care Act (Pub. L. 111-148, 
enacted on March 23, 2010), and amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 
30, 2010), are together referred to as the Affordable Care Act of 2010 
(Affordable Care Act). 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. The Three Percent Withholding Repeal and Job 
Creation Act (Pub. L. 112-56, enacted November 21, 2011), changed the 
MAGI definition of income to include all Social Security benefits.
    In the August 17, 2011 Federal Register (76 FR 51148), we published 
a proposed rule entitled ``Medicaid Program; Eligibility Changes under 
the Affordable Care Act of 2010,'' (hereinafter referred to as 
``Medicaid Eligibility proposed rule''). This Medicaid Eligibility 
proposed rule was published in concert with three other proposed rules: 
the July 15, 2011 rule titled ``Establishment of Exchanges and 
Qualified Health Plans;'' the August 17, 2011 rule titled ``Exchange 
Functions in the Individual Market: Eligibility Determinations and 
Exchange Standards for Employers;'' and the August 17, 2011 rule titled 
``Health Insurance Premium Tax Credit Proposed Rule.'' These rules 
proposed eligibility and enrollment provisions for the Affordable 
Insurance Exchanges and the accompanying changes to the Internal 
Revenue Code (IRC) needed to implement the calculation of modified 
adjusted gross income (MAGI) for purposes of determining eligibility 
for assistance with purchasing health coverage. Together, these 
proposed rules were designed to implement the eligibility and 
enrollment-related provisions of the Affordable Care Act that expand 
access to health coverage through improvements in Medicaid and CHIP and 
the establishment of the new Affordable Insurance Exchanges. In 
addition, the proposed rules simplify and streamline the enrollment and 
renewal processes and create alignment across insurance affordability 
programs.

III. Summary of Proposed Provisions and Analysis of and Responses to 
Public Comments

    We received a total of 813 comments from State Medicaid and CHIP 
agencies, policy and advocacy organizations, health care providers and 
associations, Tribes, Tribal organizations, and individual citizens. In 
addition, we held many consultation sessions with States and interested 
parties, including three sessions with Tribal governments (August 22, 
2011, September 7, 2011, and September 15, 2011), to provide an 
overview of the Medicaid Eligibility proposed rule where interested 
parties were afforded an opportunity to ask questions and make 
comments. At these consultation sessions, the public was reminded to 
submit written comments before the close of the public comment period 
that was announced in the Medicaid Eligibility proposed rule.
    The vast majority of commenters supported the policies we proposed, 
although, as discussed below, there were concerns about some specific 
policies. In particular, a large number of comments focused on the need 
for coverage options for individuals with disabilities. Summaries of 
the public comments that are within the scope of the proposals and our 
responses to those comments follow.
    We have revised the proposed regulation to reflect our final 
policies. However, some comments were outside the scope of the Medicaid 
Eligibility proposed rule, and therefore, are not addressed in this 
final rule. In some instances, commenters raised policy or operational 
issues that will be addressed through regulatory and subregulatory 
guidance subsequent to this final rule; therefore some, but not all, 
comments are addressed in the preamble to this final rule.
    The Medicaid Eligibility proposed rule proposed to amend 42 CFR 
parts 431, 435, and 457 to implement an eligibility, enrollment, and 
renewal system required by the Affordable Care Act. We proposed 
amendments to 42 CFR part 435 subparts B and C to implement the changes 
to Medicaid eligibility. We proposed amendments to subpart A to add new 
definitions or revise current definitions.
    Under our proposed amendments to 42 CFR part 435 subpart G, most 
individuals would have financial eligibility for Medicaid determined 
based on MAGI. The proposed regulations also defined the new MAGI-based 
financial methodologies and identified individuals whose eligibility 
would not be based on MAGI. Subpart E included proposed eligibility 
requirements regarding residency.
    Proposed amendments to subpart J established Federal guidelines for 
States to establish a seamless and coordinated system for determining 
eligibility and enrolling in the appropriate insurance affordability 
program. Subpart M delineates the responsibilities of the State 
Medicaid agency in the coordinated system of eligibility and enrollment 
established under the Affordable Care Act, and proposed

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comparable amendments for CHIP at 42 CFR part 457.
    We proposed to amend 42 CFR part 433 to add new provisions at Sec.  
433.10(c) to specify options for establishing the increased Federal 
Medicaid matching rates available to States under the Affordable Care 
Act; these amendments will be finalized in future rulemaking. A number 
of other provisions in the Affordable Care Act were not included in the 
Medicaid Eligibility proposed rule, but either have been or will be 
addressed in separate rulemaking or other guidance.

Responses to General Comments

    Generally, comments were supportive of the policies in the Medicaid 
Eligibility proposed rule to simplify, streamline, and align the 
eligibility and enrollment process, coordinate with other insurance 
affordability programs, reduce or eliminate burdensome requirements on 
States, and build on successful State practices that are currently 
underway. Throughout this rule, we summarize comments received that 
pertain to this rule: comments on policies not contained in this rule 
are not addressed.
    Comment: We received several comments (nearly half of all comments 
received) raising concerns about coverage of individuals with 
disabilities or in need of long-term services and supports under the 
new eligibility group for low-income adults.
    Response: We acknowledge and have responded to these concerns as 
discussed in detail in sections III.B. and III.E. of this preamble and 
at Sec.  435.603 and Sec.  435.911 of the regulation text.
    Comment: We received some comments, questions, and scenarios 
related to how States will operationalize the policy changes to 
Medicaid and CHIP that were set forth in the Medicaid Eligibility 
proposed rule.
    Response: As we have done in these regulations, we plan to rely on 
and build upon State experience with implementing new policies and 
program changes as a means of ensuring a successful partnership between 
the States and the Federal government. We also intend to provide 
intensive technical assistance and support to States, as well as 
facilitate sharing and collaboration across States as implementation 
continues. The public comments received will inform the development of 
future operational guidance and tools that will be designed to support 
State implementation efforts.
    The effective date for this final rule is January 1, 2014. However, 
it should be noted that States may, and are encouraged to, conduct 
activities in preparation for the policy and programmatic changes that 
will need to take place in order to implement the provisions of this 
final rule. Federal administrative matching funds will be available for 
such activities.
    Comment: Some commenters requested additional information for the 
data reporting requirements for States to ensure adequate oversight of 
the administration of the program.
    Response: Under existing Medicaid regulations at Sec.  431.16, 
Sec.  431.17, and Sec.  457.720, States must maintain records, collect 
data and submit to the Secretary such reports as are needed by the 
Secretary to monitor State compliance with the regulations and ensure 
the proper and efficient operation of the Medicaid program. In the 
Medicaid Eligibility proposed rule, as well as this final rule, we have 
noted several types of data that States will need to provide, including 
data to ensure compliance with single State agency regulations at Sec.  
431.10, and we will issue guidance on the specific data to be 
submitted, as well as the format and method for such submission.
    Comment: We received some comments regarding the need for program 
integrity and Payment Error Rate Measurement (PERM) rules to be 
clarified and aligned with the policies in the proposed rules.
    Response: We agree that PERM and other program integrity rules and 
procedures must be aligned with the new eligibility rules, and also 
must account for the role that Exchanges may play in determining 
eligibility in a particular State. We will address these issues in 
subsequent guidance.

A. Changes to Medicaid Eligibility

    To establish a foundation for a more simplified, streamlined 
Medicaid eligibility process in the context of the new eligibility 
group for low-income adults that will become effective in 2014, we 
proposed a more straightforward structure of four major eligibility 
groups: children, pregnant women, parents and caretaker relatives, and 
the new adult group.
1. Coverage for Individuals Age 19 or Older and Under Age 65 at or 
Below 133 Percent of the FPL (Sec.  435.119)
    We proposed to implement section 1902(a)(10)(A)(i)(VIII) of the 
Act, referred to as ``the adult group,'' under which States will 
provide Medicaid coverage starting on January 1, 2014 to non-pregnant 
individuals between 19 and 64 years old who are not otherwise eligible 
and enrolled for mandatory Medicaid coverage; are not entitled to or 
enrolled in Medicare; and have household income, based on the new MAGI-
based methods (described in more detail in 76 FR 51155 through 51160), 
at or below 133 percent of the FPL.
    Comment: One commenter requested clarification of the requirement 
at Sec.  435.119(c) that a parent or other caretaker relative living 
with a dependent child may not be covered by Medicaid under the adult 
group if the child is not enrolled in Medicaid, CHIP, or other minimum 
essential coverage. The commenter was uncertain whether this 
requirement applies to a custodial parent when the child is claimed as 
a tax dependent by the non-custodial parent and to a non-custodial 
parent who is required to pay for all, or part, of the child's medical 
support. Several commenters pointed out the difficulty and unfairness 
of applying this requirement to a parent in custody situations if the 
other parent is legally responsible for the child's medical support. 
Also, the commenters pointed out the difficulty in applying the 
requirement to a non-parent caretaker relative who is not financially 
responsible for the child. Another commenter recommended that the 
requirement be revised to include an exception to the prohibition on 
coverage for parents and caretaker relatives if an application for a 
child's coverage is pending. Finally, other commenters were unclear 
about the eligibility groups to which this requirement applies.
    Response: We are finalizing Sec.  435.119(c) without modification. 
We believe the requirements for coverage of parents and other caretaker 
relatives under Sec.  435.119 and Sec.  435.218 are clear and 
consistent with the statutory requirements at sections 1902(k)(3) and 
1902(hh)(2) of the Act. The requirements are limited to custodial 
parents and other caretaker relatives who live with dependent children, 
because non-custodial parents are not taken into account in determining 
a child's Medicaid eligibility according to Sec.  435.603 of this final 
rule. We do not provide an exemption from the requirement if an 
application for a child's coverage is pending because if a child's 
pending application is denied for all insurance affordability programs 
or the parent or caretaker relative fails to enroll the child in such 
program, the child must be enrolled in other minimum essential coverage 
for the custodial parent or other caretaker relative to be covered by 
Medicaid under the Sec.  435.119 or Sec.  435.218. In virtually all 
cases, if the parent or other caretaker relative is eligible for 
Medicaid, the child also will be eligible for Medicaid, and the 
adjudication of

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eligibility for the child should not delay the eligibility 
determination for the parent or caretaker relative.
    Comment: Numerous commenters expressed concern about the placement 
of disabled individuals and individuals needing long-term services and 
supports in the adult group, because individuals under the adult group 
will receive a benchmark benefit package that might not cover 
institutional services, home and community-based services, or other 
specialized services available under certain optional eligibility 
groups.
    Response: We agree with the commenters' concerns. As discussed 
further in section III.F. of this preamble, we have revised the policy 
in Sec.  435.911 of this final rule to address the needs of this 
population consistent with the statute.
2. Individuals With MAGI-Based Income Above 133 Percent of the FPL 
(Sec.  435.218)
    We proposed at Sec.  435.218 to implement section 
1902(a)(10)(A)(ii)(XX) of the Act that gives States the option, 
starting on January 1, 2014, to provide Medicaid coverage to 
individuals under age 65 (including pregnant women and children) with 
income determined based on MAGI to be above 133 percent of the FPL. We 
proposed to establish this optional eligibility group for individuals 
who are not eligible for and enrolled in an eligibility group under 
section 1902(a)(10)(A)(i) of the Act and 42 CFR part 435 subpart B or 
under section 1902(a)(10)(A)(ii)(I) through (XIX) 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 income standard 
established by the State for coverage of this optional group.
    Comment: Several commenters recommended that we revise proposed 
Sec.  435.218 to provide that an individual who appears, based on 
information provided on the application, to be eligible for Medicaid as 
medically needy or as a spend down beneficiary in a 209(b) State may be 
enrolled in the optional group under this section. Another commenter 
recommended that an individual enrolled in an optional Medicaid group 
that does not provide minimum essential coverage should not be 
prohibited from enrollment in the group under Sec.  435.218, which 
provides full Medicaid benefits.
    Response: We believe the rule is clear that only individuals 
eligible and enrolled as categorically needy for coverage are excluded 
from coverage under this section. The provision does not apply to 
individuals potentially eligible as medically needy under section 
1902(a)(10)(C) of the Act or as spend down beneficiaries in a 209(b) 
State eligible under section 1902(f) of the Act. However, we are 
revising the final rule to specify sections 1902(a)(10)(A)(ii)(I) 
through (XIX) of the Act as statutory citations for the optional groups 
related to this requirement, because individuals eligible for the 
optional family planning group under section 1902(a)(10)(A)(ii)(XXI) of 
the Act are not excluded from enrollment under the new optional 
eligibility group at Sec.  435.218. The determination as to whether 
this coverage constitutes minimum essential coverage is governed by 
section 5000A of the Code, and the determination as to when an 
individual is considered eligible for minimum essential coverage is 
governed by section 36B(c)(2)(b).
    Comment: Several commenters requested that we clarify the intended 
Federal financial participation (FFP) rate for this optional coverage 
group and whether the enhanced Federal medical assistance percentage 
(FMAP) rates specified in proposed Sec.  433.10 apply.
    Response: As discussed in section III.O. of this preamble, the 
enhanced FMAP for ``newly eligible'' individuals under section 1905(y) 
of the Act, as added by section 2001 of the Affordable Care Act, is 
only available for individuals covered under the new adult group. 
However, enhanced FMAP rates under CHIP specified at Sec.  433.11 may 
apply for children younger than age 19 covered under Sec.  435.218 who 
meet the definition of optional targeted low-income child at Sec.  
435.4.
3. Simplified Eligibility Rules for Parents and Caretaker Relatives, 
Pregnant Women, and Children--Amendments to Part 435, Subpart B (Sec.  
435.110, Sec.  435.116, and Sec.  435.118)
    We proposed 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. Consistent with section 1902(a)(19) of 
the Act, we proposed to simplify and consolidate certain existing 
mandatory and optional eligibility groups into three categories: (1) 
Parents and other caretaker relatives (Sec.  435.110); (2) pregnant 
women (Sec.  435.116); and (3) children (Sec.  435.118). The Medicaid 
Eligibility proposed rule (76 FR 51152 through 51155) provided a 
detailed description of the proposed consolidation and explained how 
certain mandatory and optional groups in current regulations would be 
moved into the new broader groups for parents and other caretaker 
relatives, pregnant women, and children under age 19.
    Comment: Many commenters supported the proposal. A few commenters 
recommended that CMS consolidate eligibility categories beyond what was 
already proposed in this regulation. One commenter suggested having one 
eligibility group for all individuals with MAGI-based income up to 133 
percent of the FPL, one for individuals with MAGI-based income above 
133 percent of the FPL, and another for the MAGI-exempt populations. 
Another recommended eliminating the proposed minimum and maximum income 
standards and requiring a common income standard of 133 percent of the 
FPL for parents and other caretaker relatives at Sec.  435.110, 
pregnant women at Sec.  435.116, and children under age 19 at Sec.  
435.118. One commenter stated that nothing about the proposed structure 
can credibly be described as simplified because it maintains all the 
old categorical and optional eligibility groups and standards in 
addition to an entirely new array of ``simplified'' eligibility 
groupings.
    Response: We will consider future rulemaking or issuance of 
guidance to address further simplification of Medicaid eligibility 
groups not addressed in this rule. We do not have the statutory 
authority to eliminate the maximum permissible income standards 
specified for each eligibility group in this final rule, nor do we 
think it would be appropriate to eliminate State flexibility to cover 
each of these groups at a higher income standard up to the maximum 
permitted.
    Comment: Some commenters questioned whether guidance will be issued 
for the new eligibility group for former foster care children and for 
the new options of presumptive eligibility provided by the Affordable 
Care Act starting on January 1, 2014. The commenters also questioned 
whether certain existing Medicaid mandatory and optional coverage and 
eligibility groups will remain after January 1, 2014 such as 
Transitional Medical Assistance; deemed newborn eligibility; optional 
coverage for parents and other caretaker relatives; women needing 
treatment for breast or cervical cancer; non-IV-E State subsidized 
adoption children; continuous eligibility for children; and presumptive 
eligibility for children and pregnant women.
    Response: The Affordable Care Act did not eliminate or change the 
requirements of existing Medicaid eligibility groups, except to require 
the use of MAGI-based financial methodologies for the populations

[[Page 17148]]

included under MAGI. These eligibility categories and coverage options, 
as well as the other new eligibility pathways created by the Affordable 
Care Act will be addressed in future guidance.
    Comment: Several commenters questioned whether there is any reason 
to keep medically needy coverage for Aid to Families of Dependent 
Children (AFDC) related populations and stated that this is especially 
a problem because States must cover pregnant women and children under 
age 18 as medically needy to cover the aged, blind, or disabled (ABD) 
populations as medically needy. Some commenters were concerned that 
eligibility for medically needy coverage under Medicaid would preclude 
eligibility for the advance payments of premium tax credits (APTCs) 
through the Exchange. Another commenter stated that States should have 
the option to provide medically needy coverage under section 
1902(a)(10)(C) of the Act and 42 CFR part 435 subpart D for the 
population of adults described in paragraph (xiv) of the matter 
preceding sections 1905(a) and 1902(a)(10)(A)(i)(VIII) of the Act.
    Response: The Affordable Care Act did not change any current 
requirements for medically needy eligibility under section 
1902(a)(10)(C) of the Act, including the requirement that States 
covering medically needy individuals must cover medically needy 
pregnant women and children under age 18. However, by expanding 
coverage to adults under age 65, the Affordable Care Act also provides 
States with the option to cover as medically needy those adults under 
age 65 who have incomes above the Medicaid income levels but otherwise 
meet the eligibility requirements of the adult group or the optional 
group for individuals with income over 133 percent of the FPL, provided 
that they meet spend-down requirements. Individuals otherwise eligible 
for APTCs through the Exchange who can spend down to medically needy 
eligibility under Medicaid could potentially enroll in either program, 
depending on whether they elect to spend down to Medicaid eligibility 
as medically needy. Individuals who do not spend down to Medicaid 
eligibility may be eligible to receive APTCs for enrollment through the 
Exchange.
    Comment: Many commenters disagreed with the policy in the Medicaid 
Eligibility proposed rule that States will not be required to convert 
the statutory minimum income standards set forth in sections 1931 and 
1902(l) of the Act for coverage under Sec.  435.110(c)(1), Sec.  
435.116(c)(1) and (d)(4)(i), and Sec.  435.118(c)(1) to a MAGI-
equivalent standard, to account for disregards and exclusions currently 
used by the State that are not permitted under MAGI. The commenters 
stated that some individuals would lose eligibility if a State lowers 
its income standard for a group to the minimum once the maintenance of 
effort requirement ends for that population; for others, the scope of 
benefits could be reduced. Several commenters requested clarification 
about the conversion of States' income standards to MAGI-equivalent 
standards and whether income conversion applies for the eligibility 
groups exempt from MAGI.
    Response: We are not revising the final rule to require MAGI 
conversion of the statutory minimum income standards for each 
eligibility group, to which a State may reduce its income standard once 
maintenance of effort ends. Section 1902(e)(14)(A) and (E) of the Act, 
as added by section 2002 of the Affordable Care Act, provides only for 
the conversion of the income standards in effect in the State prior to 
the Affordable Care Act. The Act does not provide for conversion of the 
Federal statutory minimum income standards. Further, by raising the 
statutory minimum standard for children ages 6 to 18 to 133 percent of 
the FPL under section 1902(a)(10)(A)(i)(VII) of the Act, according to 
section 2001 of the Affordable Care Act, we believe the Congress 
indicated an intent to align the minimum statutory standards for all 
age groups of children at 133 percent of the FPL, along with adults 
under age 65. Since the statutory increase in the minimum standard for 
older children would not be converted from MAGI, conversion of the 
minimum standards for younger children would defeat such alignment and 
result in children in the same family potentially being eligible for 
different insurance affordability programs depending on their age. (The 
only exception to complete alignment would be for infants and pregnant 
women, in States required to cover pregnant women and infants at a 
higher income standard under section 1902(l)(2)(A) of the Act.) We note 
that the potential for a State to reduce its income standard for a 
children's eligibility group to the minimum standard permitted under 
statute will not occur until the maintenance of effort for children 
ends on October 1, 2019, in accordance with section 1902(gg) of the Act 
as added by section 2001 of the Affordable Care Act. In States that 
reduce coverage of parents and caretaker relatives under Sec.  435.110 
to the minimum permitted under statute, the affected individuals may be 
eligible under the new adult group. Pregnant women affected by a 
reduction of coverage to the minimum permitted may be eligible for APTC 
for enrollment through the Exchange.
a. Parents and Other Caretaker Relatives (Sec.  435.110)
    Comment: One commenter stated that CMS should provide clarifying 
information on how the ``1931 program'' should be administered through 
both MAGI and AFDC rules.
    Response: The rules for Medicaid coverage under section 1931 of the 
Act are set forth in Sec.  435.110 and the related definitions of 
``caretaker relative'' and ``dependent child'' at Sec.  435.4. AFDC 
methodologies for determining financial eligibility under section 1931 
will be superseded effective January 1, 2014 by methodologies based on 
MAGI (set forth in Sec.  435.603), and therefore, no longer will be 
relevant to eligibility under section 1931 of the Act.
b. Pregnant Women (Sec.  435.116)
    Comment: Many commenters urged that we revise proposed Sec.  
435.116(d) to eliminate the State option to establish an applicable 
income limit for full Medicaid coverage of pregnant women and only 
cover services related to pregnancy or to other conditions which may 
complicate pregnancy (hereinafter referred to as ``pregnancy-related 
services'') for pregnant women with income above that limit. The 
commenters recommended that we not permit each State to define 
pregnancy-related services, but that we amend Sec.  440.210(a)(2) to 
broadly define ``pregnancy-related services'' as full Medicaid 
coverage. The commenters noted that this would be consistent with the 
current practice in most States. Commenters stated that, otherwise, 
pregnant women with incomes above that limit but with income no more 
than 133 percent of the FPL might be covered for lesser benefits than 
non-pregnant adults covered under the adult group at Sec.  435.119, 
from which pregnant women are excluded by statute. These commenters 
stated that the Congress did not intend to make low-income pregnant 
women eligible for a more limited scope of benefits than other adults 
with the same income.
    Response: Clause VII in the matter following section 1902(a)(10) of 
the Act expressly limits the medical assistance for which pregnant 
women are eligible under sections 1902(a)(10)(A)(i)(IV) and 
1902(a)(10)(A)(ii)(IX) of the Act to pregnancy-related services. 
Eligibility for all pregnant women--including those eligible under 
these sections, as well as sections 1931 and 1902(a)(10)(A)(i)(III) of 
the Act--is

[[Page 17149]]

codified at Sec.  435.116. Pregnant women with income no more than the 
applicable income limit for full Medicaid coverage defined in Sec.  
435.116(d)(4) are eligible under section 1931 or 1902(a)(10)(A)(i)(III) 
of the Act, while those with income above such limit are eligible under 
section 1902(a)(10)(A)(i)(IV) or 1902(a)(10)(A)(ii)(IX) of the Act. 
While we appreciate the commenters' concern, we do not have the 
authority to specifically require that pregnancy-related services be 
considered to mean full Medicaid coverage. However, because it is 
difficult to identify what is ``pregnancy-related'' and because the 
health of a pregnant woman is intertwined with the health of her 
expected child, the scope of such services is necessarily 
comprehensive, as reflected in current regulation at Sec.  
440.210(a)(2). Therefore, we are revising Sec.  435.116(d)(3) to 
clarify that a State's coverage of pregnancy-related services must be 
consistent with Sec.  440.210(a)(2) and Sec.  440.250(p), which allows 
States to provide additional services related to pregnancy to pregnant 
women. If a State proposes not to cover certain services or items for 
pregnant women that it covers for other adults, the State must describe 
in a State plan amendment for the Secretary's approval its basis for 
determining that such services are not pregnancy-related.
    Comment: One commenter supported the elimination of the ``third 
trimester rule,'' which permitted States to deny full-scope Medicaid to 
pregnant women in the first or second trimester of pregnancy who have 
no dependent children, for pregnant women's eligibility under section 
1931 of the Act.
    Response: States have the option under section 1931 of the Act (in 
accordance with section 406(g)(2) of the Act as in effect prior to 
enactment of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA)) to provide full Medicaid coverage 
for pregnant women with no dependent children during the third 
trimester of pregnancy. States are required to cover ``qualified 
pregnant women'' during all trimesters of pregnancy for full Medicaid 
benefits, in accordance with sections 1902(a)(10)(A)(i)(III) and 
1905(n) of the Act, if they meet the statutory minimum income and 
resource requirements or more liberal methodologies implemented by the 
State for this group under section 1902(r)(2) of the Act. These 
coverage requirements are incorporated into the consolidated group for 
pregnant women at Sec.  435.116.
    Comment: Several commenters raised a question about whether a woman 
covered under the adult group must be transferred to coverage under 
Sec.  435.116 when she becomes pregnant, and whether, when the post-
partum period ends, the woman would then be transferred back to 
coverage under the adult group. Commenters were concerned that this 
could result in lesser coverage at a time when the woman is more 
vulnerable. Also, these commenters were concerned that this 
transferring back and forth could impact continuity and quality of care 
and the receipt of medically necessary services during pregnancy.
    Response: While continuity is important, States are not required to 
monitor the pregnancy status of women covered under the adult group. 
However, women should be informed, in accordance with Sec.  435.905 
related to the availability of program information discussed later in 
this preamble at section III.E.1, of the benefits afforded to pregnant 
women under the State's program. If a woman becomes pregnant and 
requests a change in coverage category, the State must make the change 
if she is eligible. But, we will not otherwise expect States to monitor 
pregnancy status and to shift women into the group for pregnant women 
once they become pregnant.
c. Infants and Children Under Age 19 (Sec.  435.118)
    Comment: Many commenters supported the expanded minimum income 
standard for children aged 6 through 18 from 100 to 133 percent of the 
FPL. The commenters also supported States' ability to continue to claim 
enhanced match from their CHIP allotment for children transferred from 
a separate CHIP to Medicaid as a result of this Medicaid expansion. One 
commenter expressed concern about quality, access, and continuity of 
care when children are moved from coverage under a separate CHIP to 
coverage under Medicaid, and proposed that children be allowed to 
remain with their medical home rather than being shifted from one 
program to another.
    Response: States may claim enhanced match from their CHIP allotment 
for children who meet the definition of an ``optional targeted low-
income child'' at Sec.  435.4 and become eligible for Medicaid as a 
result of the amendment of section 1902(1)(2)(C) of the Act to increase 
the income standard for mandatory coverage of children aged 6 through 
18 under section 1902(a)(10)(A)(i)(VII) of the Act from 100 to 133 
percent of the FPL.
4. Other Conforming Changes to Existing Regulations (Sec.  435.4)
    We proposed several definitions specific to the Medicaid 
eligibility changes under the Affordable Care Act (listed in more 
detail in 76 FR 51155) and received the following comments.
    Comment: One commenter recommended that the definition of 
``Affordable Insurance Exchanges (Exchanges)'' be revised to include a 
``quasi-governmental agency.'' Another commenter recommended that the 
definition be revised to include an ``individual market Exchange'' and 
a ``SHOP Exchange,'' and that ``refer'' be changed to ``may refer'' 
because some references to an Exchange just refer to certain types of 
Exchanges.
    Response: The definition of ``Exchange'' is outside the scope of 
the Medicaid regulations and governed by the Exchange regulations. 
Therefore, we are revising the definition of ``Affordable Insurance 
Exchanges (Exchanges)'' in this final rule to reference the definition 
of ``Exchange'' in 45 CFR 155.20 of the final Exchange regulation. We 
are making a similar revision to the definition of ``advance payment of 
the premium tax credit (APTC).''
    Comment: One commenter recommended that the definition of 
``caretaker relative'' include the domestic partner of a child's parent 
or other caretaker relative, and also a parent or relative standing 
``in loco parentis.'' Another commenter pointed out that, under the 
AFDC rules, a caretaker relative had to be a certain degree of 
relationship to a dependent child.
    Response: States should have the option to consider the domestic 
partner of a child's parent or relative as a ``caretaker relative'' of 
a dependent child. We are also revising the final rule to offer States 
the option to consider any adult with whom a child is living and who 
assumes primary responsibility for the dependent child's care to be a 
caretaker relative. However, since caretaker relatives are, in essence, 
standing in the shoes of a parent to assume primary responsibility to 
care for a child, we do not see the need to add a reference to 
relatives standing ``in loco parentis.'' Moreover, the term ``in loco 
parentis'' could be read overly broadly to include relatives who have 
only temporary or fleeting custody of the child (such as in the 
provision of day care or babysitting). We are also revising the 
definition of ``caretaker relative'' in this final rule to specify the 
degrees for relationship of relatives, for consistency with current 
policy based

[[Page 17150]]

on section 406(a) of the Act, as in effect prior to enactment of 
PRWORA. However, we have revised the regulation text to provide States 
with the option to expand the definition of caretaker relatives to 
cover additional degrees of relationship to a dependent child.
    Comment: Many commenters supported the codification of the 
definition of ``dependent child,'' including the State option either to 
eliminate the ``deprivation'' requirement altogether or to establish a 
higher number of working hours as the threshold for determining 
unemployment if deprivation is considered. One commenter pointed out 
that the definition omitted a parent's physical or mental incapacity as 
a reason for a child to be considered ``deprived'' of parental support 
and so ``dependent.'' Another commenter expressed concern that the 
proposed definition of ``dependent child'' would change the 
longstanding option for States to include as ``dependent children'' 18-
year olds who are full-time students to a requirement.
    Response: We unintentionally omitted a parent's physical or mental 
incapacity as a reason for a child to be considered ``deprived'' of 
parental support, and are adding this to the definition of ``dependent 
child'' for consistency with 45 CFR 233.90(c)(i), as required by 
section 1931(b) of the Act. We also revised the final rule to clarify 
that the 18-year old full-time students included as ``dependent 
children'' at Sec.  435.4 are those in a secondary school (or 
equivalent level of vocational or technical training), consistent with 
the definition of ``dependent child'' in section 406(a) of the Act, as 
in effect prior to passage of PRWORA. Also, we revised the final rule 
to clarify that coverage of 18-year old full-time students as 
``dependent children'' is a State option, rather than a requirement, 
consistent with current policy.
    Comment: One commenter recommended that the definition of 
``insurance affordability program'' be amended to include the Medicare 
Part D Low Income Subsidy (LIS) program.
    Response: The definition of ``insurance affordability program'' 
mirrors the definition of ``applicable State health subsidy program'' 
in section 1413(e) of the Affordable Care Act and is limited to the 
programs included by statute in the streamlined eligibility and 
enrollment system required by the Affordable Care Act, eligibility for 
which can be determined based on MAGI. The LIS program does not meet 
this definition.
    Comment: Several commenters stated that the definition and 
application of the term ``minimum essential coverage'' are unclear. The 
commenters questioned whether an individual who is covered by Medicaid 
for limited benefits is considered enrolled in minimum essential 
coverage and so is ineligible for subsidized full benefits from the 
Exchange. Commenters pointed to several situations in which Medicaid-
eligible individuals receive a limited benefit package including: 
pregnant women eligible for pregnancy-related services only (if the 
State does not cover all State plan benefits as pregnancy-related); 
individuals eligible under the State plan or a waiver for family 
planning services; individuals eligible under section 
1902(a)(10)(A)(ii)(XII) of the Act for tuberculosis-related services 
only; and certain immigrants who are eligible only for emergency 
medical services. The commenters recommended that CMS clarify that 
limited-benefit coverage under Medicaid is not considered ``minimum 
essential coverage,'' so that individuals would be permitted to receive 
APTCs to enroll in a qualified health plan (QHP) through the Exchange. 
For individuals who so choose, commenters suggested that Medicaid would 
serve as a secondary payer to the Exchange plan.
    Response: We do not have authority to define ``minimum essential 
coverage,'' which is defined in section 5000A(f) of the Internal 
Revenue Service (IRS) Code (IRC) and is subject to implementing 
regulations issued by the Secretary of the Treasury, as referenced in 
the definition at Sec.  435.4. Providing further guidance on the 
meaning of this term is beyond the scope of this rule, but will be 
addressed by the Secretary of the Treasury in future guidance. However, 
we affirm that to the extent that an individual is enrolled in any 
insurance plan, including an Exchange plan, Medicaid would be a 
secondary payer. No change has been made to section 1902(a)(25) of the 
Act, which provides generally that Medicaid pays secondary to legally 
liable third parties.
    Comment: Several commenters recommended that we drop the word 
``properly'' from the definition of ``tax dependent'' because the 
agency cannot and should not determine whether an individual is or will 
be properly claimed as a tax dependent for tax purposes. The commenters 
noted that only the IRS can make such a determination.
    Response: We made this revision in the final rule to drop the word 
``properly'' from the definition of ``tax dependent.'' Also, we revised 
the definition to reference both sections 151 and 152 of the IRC.

B. Financial Methodologies for Determining Medicaid Eligibility Based 
on MAGI Under the Affordable Care Act (Sec.  435.603)

    In the Medicaid Eligibility proposed rule, we set forth proposed 
methodologies to implement MAGI in determining financial eligibility 
for Medicaid for most individuals effective January 1, 2014. Consistent 
with section 1902(e)(14) of the Act, our proposed methodologies codify 
the definition of MAGI and household income in section 36B of the IRC 
(``36B definitions''), except in a limited number of situations.
    We received the following comments concerning the proposed 
provisions for determining financial eligibility based on MAGI methods. 
We also received many questions from commenters asking how MAGI applies 
in specific scenarios. We will continue to provide information and 
assistance for such scenarios as we work with States to implement these 
final regulations.
1. Basis, Scope, and Implementation (Sec.  435.603(a))
    Comment: Some commenters suggested that the final regulation should 
permit a State to convert its current income levels for eligibility 
groups to which MAGI-based methodologies do not apply to a MAGI-
equivalent threshold using a process that is the same as or similar to 
that provided under section 1902(e)(14)(A) and (E) of the Act for 
groups to which MAGI-based methodologies will apply. Commenters were 
concerned that States would have to maintain two eligibility systems, 
but would not receive Federal funds to maintain the necessary legacy 
systems.
    Response: We do not have the statutory authority to permit States 
to apply MAGI-based methodologies and convert current income standards 
to equivalent MAGI-based standards for MAGI-excepted individuals and 
eligibility groups described under section 1902(e)(14)(D) of the Act. 
However, if a State is able to demonstrate that application of MAGI-
based methods to an income standard converted for such methods is less 
restrictive than the methodologies and standard otherwise applied, a 
State may be able to accomplish the goal sought by the commenters by 
proposing a State plan amendment in accordance with section 1902(r)(2) 
of the Act. Alternatively, a State could seek to convert standards for 
MAGI-excepted groups to MAGI-based methods through a demonstration 
under section 1115 of

[[Page 17151]]

the Act. We are available to work with any State interested in 
exploring this possibility.
    We do not believe States will need to maintain two eligibility 
systems, even with the different income methodologies for the MAGI and 
non-MAGI populations, nor will Federal matching funds be available to 
operate two eligibility systems. We note that State eligibility systems 
currently must support eligibility categories using different financial 
methodologies, based on the rules applied under either the AFDC or 
Supplemental Security Income (SSI) programs. Enhanced funding is 
available to States to develop, design, and maintain eligibility 
systems supporting the full range of eligibility categories, as long as 
certain conditions and standards ensuring high performance are met. 
States can also use the enhanced funding to transform their eligibility 
systems in phases, since 90/10 match is available through the end of CY 
2015 for design and development activities. Legacy systems unable to 
meet those conditions and standards are still eligible for a 50/50 
match.
    Comment: Many commenters recommended that current beneficiaries be 
converted to MAGI as of their first redetermination on or after January 
1, 2014, so that everyone's eligibility would not have to be 
redetermined as of January 1, 2014 to see if the grace period applies, 
which would place an enormous burden on States.
    Response: Section 1902(e)(14)(D)(v) of the Act, as added by section 
2002 of the Affordable Care Act, provides for a temporary 
grandfathering of coverage for beneficiaries who are enrolled in 
Medicaid on January 1, 2014 and would lose eligibility due to the 
application of MAGI-based methodologies prior to March 31, 2014 or 
their next regularly-scheduled renewal, whichever is later. We proposed 
this provision in the Medicaid Eligibility proposed rule at Sec.  
435.603(a)(3); however, we are deleting in the final rule the phrase in 
the Medicaid Eligibility proposed rule that provides for the delay of 
the application of MAGI-based methodologies to current beneficiaries 
``if the individual otherwise would lose eligibility as the result of 
the application of these methods,'' as we believe that this phrase is 
unnecessary and may be the source of the commenters' concern. We 
revised Sec.  435.603(a)(3) in the final rule to clarify that MAGI-
based methodologies will not be applied to current beneficiaries who 
were determined eligible for Medicaid on or before December 31, 2013 
until March 31, 2014 or the next regularly-scheduled renewal of 
eligibility for such individual under Sec.  435.916, whichever is 
later. However, according to Sec.  435.603(a)(2), MAGI will be applied 
to individuals whose eligibility for Medicaid is determined effective 
on or after January 1, 2014.
2. Definitions (Sec.  435.603(b))
    Comment: Many commenters recommended that, in the case of a 
pregnant woman expecting more than one child, States be required to 
count each expected child in determining family size when making an 
eligibility determination for a pregnant woman, as well as when 
determining eligibility for other household members. A few other 
commenters recommended that States be provided with the option to count 
each expected child, especially for the family size of other household 
members.
    Response: Our intent was to codify current Medicaid policy for 
household size for pregnant women, but the Medicaid Eligibility 
proposed rule did not accomplish this intent. Therefore, we are 
revising the definition of ``family size'' in Sec.  435.603(b) to be 
consistent with current policy, as intended. Under the final rule, for 
the purpose of determining a pregnant woman's eligibility, family size 
will reflect the pregnant woman plus the number of children the woman 
is expecting. For the family size of other individuals in the pregnant 
woman's household, States will have the option to count the pregnant 
woman as either one or two persons or to count her as one person plus 
each expected child, if more than one.
3. Financial Methodologies Based on MAGI Sec.  435.603(c) Through (i)
    Comment: Many commenters believed that, in attempting to strike the 
proper balance between using 36B policies and current Medicaid 
policies, the Medicaid Eligibility proposed rule is too complex. Others 
supported the exceptions from 36B definitions provided in the Medicaid 
Eligibility proposed rule--including the treatment of certain types of 
income and the treatment of individuals claimed as qualifying relatives 
by someone other than a parent or spouse, children claimed as a tax 
dependent by a non-custodial parent, and spouses who do not file a 
joint tax return--but believed that we should go further to retain 
current Medicaid principles in all instances. Some commenters expressed 
concern about the impact of using the 36B definitions on States' 
budgets because the 36B definitions are more generous in the treatment 
of several types of income from the perspective of individuals seeking 
eligibility as compared to current Medicaid methods. Other commenters 
stated that we are not justified in deviating from the 36B definitions, 
and that the rule should be simplified by adopting the 36B definitions 
without exception. One commenter stated that the proposed regulations 
violate a clear Congressional mandate at section 1902(e)(14) of the Act 
to use MAGI as defined by the IRC for determining Medicaid and CHIP 
eligibility. Several commenters recommended that CMS first apply the 
36B definitions and then apply current Medicaid rules if the individual 
is ineligible based on the 36B definitions, or give individuals a 
choice as to which rules are applied.
    Response: After consideration of all of these comments, we are not 
modifying our policy. As explained in the Medicaid Eligibility proposed 
rule (76 FR 51155 through 51159), eligibility for most individuals for 
Medicaid, as well as for APTCs, is based in the statute on the 36B 
definitions and we do not have flexibility to retain current Medicaid 
rules across the board. While there are some modest differences between 
the 36B definitions and the MAGI-based household and income counting 
rules adopted for Medicaid, due to statutory requirements at section 
1902(e)(14)(H) of the Act for continued application of Medicaid rules 
regarding point-in-time income and sources of income, the rules adopted 
are for the most part fully consistent with the 36B definitions and we 
believe that overall, simplicity has been achieved relative to current 
Medicaid household and income counting rules. Where there are 
differences, we believe that they can be handled without compromising 
seamless coordination. We believe that by using targeted solicitation 
of information and computer programming tools, States can implement 
these requirements efficiently. We will work closely with States to 
provide technical assistance on this and other issues as we work 
together to implement this final rule.
    Comment: Many commenters expressed concern about potential gaps in 
coverage due to application of different MAGI-based methods for 
determining financial eligibility for Medicaid and APTCs for enrollment 
through the Exchange. Several commenters recommended a ``safe harbor'' 
to ensure coverage in Medicaid for individuals who otherwise would fall 
into a coverage gap because their household income based on the MAGI-
based methodologies in Sec.  435.603 is above the applicable Medicaid 
income standard, but household income based on the 36B definition of 
MAGI and

[[Page 17152]]

household income is below the floor of 100 percent of the FPL for APTC 
eligibility.
    Response: We believe that such potential coverage gaps will be 
rare, but agree that eliminating any potential gap is important. 
Therefore, we are redesignating proposed paragraph (i) of Sec.  435.603 
to paragraph (j) in this final rule and are adding a new paragraph (i) 
to provide that States apply the 36B definitions in the situation 
described above.
    Comment: Several commenters questioned how States or applicants can 
be expected to determine and verify prospectively for the current 
calendar year who will file for taxes, what dependents will be claimed, 
and whether children or other tax dependents will be required to file a 
tax return. Commenters pointed out that such determinations may affect 
eligibility and questioned whether the State needs to verify whether an 
individual is properly claiming someone as a dependent or whether an 
individual must file taxes; if so, the commenters were concerned that 
this would interfere with the IRS's authority. Several commenters 
stated that such attestations would be prone to fraud, abuse, and 
error. One commenter expressed concern about a State's potential 
liability when making Medicaid determinations regarding tax dependency 
that is later proved wrong when the individual files his or her tax 
return.
    Response: As with other factors of eligibility, States must make 
their best determination as to whether an individual's attestation or 
statement regarding the tax dependency status of another individual is 
reasonable, based on the information available at the time. However, 
there may be circumstances in which such status cannot be reasonably 
ascertained. We have added a new paragraph (f)(5) in Sec.  435.603 to 
provide that when a taxpayer cannot, consistent with the procedures 
adopted by the State in accordance with Sec.  435.956(f), reasonably 
establish that another individual will be a tax dependent of the 
taxpayer for the tax year in which Medicaid is sought, the inclusion of 
the other individual in the household of the taxpayer is determined in 
accordance with the rules for non-filers set forth in paragraph (f)(3) 
of Sec.  435.603. Finally, the PERM program, which identifies improper 
payments, measures the accuracy of the agency's determinations based on 
the information available to the agency at the time the determination 
is made, not based on information that only becomes available at a 
later date, when the taxpayer actually files his or her tax return. We 
will be working to ensure that all PERM rules and instructions conform 
to this principle and will issue additional guidance for States as 
needed.
4. Household Income (Sec.  435.603(d))
    Comment: Several commenters recommended using current Medicaid 
policies for determining whether a child's income is counted, rather 
than requiring the applicant and the agency to determine whether a 
minor or adult child who is included in the parent's household will be 
required to file taxes for the current calendar year. The commenters 
questioned how States can determine prospectively whether an individual 
will earn enough during the year for which eligibility is being 
determined to be required to file a tax return.
    Response: Except in cases where the statute provides for use of a 
different rule for Medicaid, we must apply the 36B rules for household 
income when States determine Medicaid financial eligibility for MAGI-
included populations. The statute calls for reliance on the 36B 
household definition. We have clarified the regulation text at Sec.  
435.603(d)(2)(i) to provide that the income of a child included in his 
or her parent's household is not counted if the child is not expected 
to be required to file a tax return for the year in which coverage is 
sought. We expect that States will be able to make a reasonable 
determination as to whether an individual will be expected to be 
required to file a tax return, based on the individual's current income 
for the applicable budget period (current monthly income for 
applicants; current monthly, or projected annual income for 
beneficiaries if the State exercised the option provided at Sec.  
435.603(h)(2)). Such determinations would be based on information 
available at the time of application and renewal, not based on 
information only available at a later date, and States will not be held 
accountable for reasonable determinations made at the time of the 
determination, even if later proven wrong. Filing requirements are 
contained in section 6102 of the IRC and are discussed in IRS 
Publication 501.
    However, we are revising Sec.  435.603(d)(2) to make a technical 
correction in the language so as to implement the intent behind the 
proposed regulation to clarify when the income of tax dependents is and 
is not counted in total household income. Specifically, we are 
redesignating Sec.  435.603(d)(2) of the Medicaid Eligibility proposed 
rule at paragraph (d)(2)(i) of this final rule and adding language at 
Sec.  435.603(d)(2)(ii) to clarify that the income of tax dependents 
other than the taxpayer's children also is not counted in determining 
household income of the taxpayer if such dependent is not expected to 
be required to file a tax return. The income of such tax dependents, 
who are described in Sec.  435.603(f)(2)(i), is counted in determining 
the tax dependent's household income. For example, consider Taxpayer 
Joe, an adult (not himself claimed as a tax dependent) who claims his 
Uncle Harry as a tax dependent. Harry is not expected to be required to 
file a tax return. Consistent with the 36B definitions, Harry is 
included in Joe's family size for purposes of Joe's eligibility per 
Sec.  435.603(f)(1), but Harry's income is not counted in Joe's 
household income under Sec.  435.603(d)(2)(ii). Under Sec.  
435.603(f)(2)(i) and (f)(3) of our regulations, Harry will be 
considered for Medicaid eligibility as a separate household, and under 
Sec.  435.603(d)(1), Harry's income will be counted in determining his 
own eligibility.
    Comment: Many commenters supported the exception at Sec.  
435.603(f)(2)(i) to the use of 36B definitions for individuals claimed 
as a tax dependent by someone other than a parent or spouse, and the 
application of the household composition rules for non-filers in 
determining such individuals' eligibility. However, some of the 
commenters opposed inclusion of the requirement at Sec.  435.603(d)(3) 
to count as household income for such individuals any actually 
available cash support received from a taxpayer who claims the 
individual as a tax dependent. Several commenters stated that this 
policy would be difficult to implement and that obtaining and verifying 
information about such support would interfere with real-time 
eligibility determinations, while not making much of a difference in 
the eligibility result. One commenter suggested counting such support 
only if it exceeds a certain amount, but not counting insignificant 
sums.
    Response: After considering the comments received, we are revising 
this provision in the final rule to make it a State option, rather than 
a requirement, to count actually available cash support, exceeding 
nominal amounts, provided by a taxpayer to a tax dependent in 
determining the latter's eligibility.
5. MAGI-Based Income (Sec.  435.603(e))
    Comment: In the Medicaid Eligibility proposed rule (76 FR 51157), 
we proposed income counting rules at Sec.  435.603(e) that are, in 
general, the

[[Page 17153]]

same as the section 36B definitions, to ensure streamlined eligibility 
rules and avoid coverage gaps. We solicited comments on the application 
of the treatment of non-taxable Social Security benefits under the 
section 36B definitions for purposes of Medicaid eligibility. We 
received many such comments.
    Response: When the Medicaid Eligibility proposed rule was 
published, section 36B of the IRC did not include non-taxable Social 
Security benefits in MAGI. Public Law No. 112-56, signed into law on 
November 21, 2011, amended section 36B(d)(2)(B) of the IRC to modify 
calculation of MAGI to include in MAGI Social Security benefits which 
are not taxed. Therefore, all Social Security benefits under Title II 
of the Act, including those that are not taxable, will be counted in 
determining MAGI for Medicaid and other insurance affordability 
programs.
    Comment: We also solicited comments on our proposal to retain 
current Medicaid rules for the treatment of income in three limited 
circumstances: Lump sum payments; certain educational scholarships and 
grants; and certain American Indian and Alaska Native (AI/AN) income.
    While many commenters supported the proposed policy for 
consideration of lump sum income, several commenters opposed counting a 
lump sum as income only in the month received and not prorating lump 
sum income to count such windfalls of potentially large amounts of 
money (for example, lottery earnings or gambling profits) over the 
period under consideration.
    Response: The policy specified in the Medicaid Eligibility proposed 
rule reflects the methodology already applied in many States. It also 
reflects the SSI policy that is used for many non-MAGI eligibility 
groups. No commenter provided evidence and we are not aware of any 
evidence that this policy will have a significant impact on Medicaid 
eligibility. We believe that the potential for individuals who receive 
large windfalls of money in a lump sum payment to become eligible for 
Medicaid under the rule is outweighed by the likelihood that many more 
low-income individuals would lose Medicaid eligibility under the 
commenters' proposal due to receipt of a small lump sum payment that is 
not in fact available to purchase coverage through the Exchange 
throughout the year.
    Comment: A number of commenters requested that the rule specify 
that if an individual is determined ineligible due to lump sum income, 
the individual's eligibility should be considered for the next month 
when the lump sum income is not taken into consideration, and the 
individual should not be required to file a new application.
    Response: We are not requiring States to reconsider applicants' 
eligibility in a subsequent month without a new application if lump sum 
income in the month of application results in financial ineligibility 
for Medicaid. However, doing so is permitted under the statute and 
regulations.
    Comment: Some commenters supported our proposed policy at Sec.  
435.603(e)(2) for certain educational scholarships and grants to be 
excluded as MAGI-based income; no commenters opposed the proposed 
policy.
    Response: We are finalizing Sec.  435.603(e)(2) as proposed, except 
that we are also excluding awards used for education purposes. It was 
an oversight that such awards were not mentioned in the Medicaid 
Eligibility proposed rule.
    Comment: Several commenters recommended clarifying revisions in the 
exemption of certain AI/AN income specified at Sec.  435.603(e)(3) to 
reflect section 5006 of the American Recovery and Reinvestment Act of 
2009 (Recovery Act) (Pub. L. 111-5, enacted on February 17, 2009) and 
other legislative and statutory requirements. Several commenters 
supported the provisions proposed in Sec.  435.603(e)(3) to use the 
most beneficial (that is, least restrictive) exemptions of AI/AN income 
from the current Medicaid and 36B rules, to maximize these individuals' 
access to Medicaid coverage while maintaining enrollment simplification 
and coordination.
    Response: We are finalizing Sec.  435.603(e)(3) with some 
modifications for consistency with Federal statutory requirements about 
certain AI/AN income and with the guidance issued by CMS on January 22, 
2010 in State Medicaid Director Letter <greek-i>10-001, available at 
http://www.cms.gov/smdl/downloads/SMD10001.PDF.
    Comment: Several commenters suggested that we replace the words 
``distributions'' and ``payments'' with the term ``income derived'' 
throughout Sec.  435.603(e)(3).
    Response: Section 5006(b) of the Recovery Act specifies that these 
properties and ownership interests are excluded resources for Medicaid 
and CHIP. Monies that result from converting excluded resources are not 
considered income, but are still considered resources. Therefore, 
changing ``distributions'' and ``payments'' to ``income derived'' would 
reclassify exempted resources as income that would need to be counted 
under MAGI, which we do not believe is the commenter's intent. 
Resources are not counted in determining financial eligibility using 
MAGI-based methods. Therefore, we are not accepting the comment.
    Comment: Several commenters recommended adding exclusions for 
Judgment Funds distributions due to their exclusion from taxable income 
under the Judgment Fund Use and Distribution Act (25 U.S.C. 1401, et 
seq).
    Response: We are finalizing Sec.  435.603(e)(3) without adding a 
specific exclusion for Judgment Funds because the IRC and the section 
36B definition of MAGI treat Judgment Fund distributions either 
identically to or more liberally than current Medicaid rules for 
exclusions from consideration for AI/AN populations. In Sec.  
435.603(e)(3), we are only listing the specific types of distributions 
that the IRC treats as taxable income, but which are excluded from 
consideration as income for purposes of Medicaid and CHIP eligibility 
under the Recovery Act and current law.
    Comment: Several commenters stated that proposed Sec.  
435.603(e)(3) narrows the exclusion under section 1396a(ff) of the Act 
of distributions from ownership interests and real property usage 
rights relating to off-reservation hunting, fishing, gathering, 
harvesting, or usage rights not tied to real property ownership from 
consideration for purposes of Medicaid eligibility.
    Response: We have added a new paragraph (iii) at Sec.  
435.603(e)(3) (and have renumbered paragraphs (iii) through (v) in the 
Medicaid Eligibility proposed rule as (iv) through (vi) in this final 
rule) to exclude distributions and payments derived from the ownership 
interests and real property usage rights at issue.
    Comment: Several commenters inquired whether alien sponsor deeming 
will still apply under MAGI policies for Medicaid.
    Response: Nothing in the Affordable Care Act changed the 
requirements in section 421 of PRWORA, as amended, which require that 
the income of a sponsor and the sponsor's spouse be deemed available to 
certain sponsored non-citizens. We expect to provide subsequent 
guidance on this matter.
    Comment: Several commenters mentioned that the proposed rules are 
silent on how to treat other types of income, and requested 
clarification as to whether current Medicaid rules or the 36B rules 
will apply to those types of income in determining Medicaid 
eligibility.
    Response: Unless there is an exception provided at Sec.  435.603(e) 
of the regulation, 36B definitions are

[[Page 17154]]

applied to all types of income. We will provide subsequent detailed 
guidance on the treatment of all types of income under the new MAGI-
based methodologies.
    Comment: Several commenters requested guidance regarding how States 
will obtain different MAGI income calculated for various household 
members.
    Response: Section 1902(e)(14) of the Act, as added by section 2002 
of the Affordable Care Act, provides for application of a new set of 
rules--or methodologies--to determine financial eligibility for 
Medicaid. While the new Medicaid MAGI-based financial methodologies 
differ somewhat from current Medicaid AFDC-based methodologies, the 
need to determine countable income for different household members is 
similar to the process used today for obtaining information and 
calculating countable income for eligibility determinations. States 
generally will need to obtain information through the application 
process, as well as from electronic data sources to calculate the MAGI-
based income of each person in the household whose income will be 
included in total household income.
6. Household (Sec.  435.603(f))
    Comment: One commenter encouraged the Federal agencies to come up 
with a common, workable definition of household and fully reimburse 
States for the cost of implementing the new definition, including the 
costs resulting from any increased Medicaid and CHIP enrollment.
    Response: While we understand the commenters' interest in having a 
single definition of household across all Federal programs, the 
statutory provisions governing the definitions and methodologies for 
each program necessitate some variation. State options, such as Express 
Lane eligibility, offer ways that States can look beyond differences in 
program definitions. Enhanced funding at a 90/10 matching rate is 
available for systems development needed to implement the new rules 
subject to certain standards and conditions, under the ``Federal 
Funding for Medicaid Eligibility Determination and Enrollment 
Activities'' final rule published on April 19, 2011 (76 FR 21950). 
Under section 1905(y) of the Act, increased FFP, set at 100 percent for 
the first 3 years of implementation and phasing down to 90 percent in 
2020 and beyond, also is available for ``newly-eligible'' individuals 
eligible for coverage under the adult group at Sec.  435.119.
    Comment: One commenter questioned whether States can permit an 
applicant to exclude certain household members (for example, a 
stepparent or a sibling with income) to make other members eligible for 
Medicaid, as is permitted currently under Medicaid.
    Response: Individuals cannot choose who is to be included or 
excluded from their household under Sec.  435.603(f).
    Comment: Some commenters see no reason to apply different policies 
for tax filers versus non-filers or based on who files and claims 
someone else in the family as a tax dependent. These commenters stated 
that whether and how families file taxes should not have such a direct 
impact on their eligibility for health insurance.
    Response: As explained in the preamble of the Medicaid Eligibility 
proposed rule (76 FR 51156-51159), section 1902(e)(14)(A) of the Act 
generally requires application of tax relationships in determining 
household composition, except as provided in section 1902(e)(14) (D) 
and (H) of the Act. However, in the case of non-filers, there are no 
tax relationships upon which to determine the household for purposes of 
Medicaid eligibility. Therefore, separate rules are needed. As 
explained in the Medicaid Eligibility proposed rule (76 FR 51158 
through 51159), we are issuing rules for non-filers which, for most 
families, will result in the same outcome as the rules for tax filing 
families. Also, we are revising language at Sec.  435.603(f)(1), 
(f)(2), and (f)(3) to replace language about who ``files'' a tax return 
with who ``expects to file'' and to replace language about who ``is 
claimed'' with who ``expects to be claimed'' as a tax dependent by 
another taxpayer for the taxable year in which an initial determination 
or renewal of eligibility is being made. Similarly, consistent with 
tax-filing rules, we are providing at Sec.  435.603(d)(2)(i) and (ii) 
that the income of a child or other tax dependent is not counted in the 
taxpayer's household income if such dependent does not expect to be 
required to file a tax return for the year in which coverage is sought.
    Comment: Many commenters expressed particular concern about 
stepparent deeming under Sec.  435.603(f)(1) and (f)(2) of the rule, 
especially in States where stepparents are not financially responsible 
for stepchildren or if the stepparent does not claim the stepchild as a 
tax dependent. Many commenters also opposed counting a child's income 
in determining the eligibility of other household members, including 
parents and siblings. Some commenters opposed inclusion in the parents' 
household of children aged 21 and older and those living outside the 
parents' home if such child is claimed as a tax dependent. The 
commenters feel that adopting the 36B definitions in such cases will 
result in a loss of eligibility that cannot be justified by a desire 
for consistency between Medicaid and Exchange policies. Several 
commenters mentioned the Sneede v. Kizer and related court decisions 
which prohibit income deeming for individuals besides the spouse or a 
minor child's parents.
    Response: Some individuals' eligibility will be affected by the 
inclusion of children in their stepparents' household, the inclusion of 
older children and those living outside of the home in the parents' 
household if they are claimed as tax dependents, and the inclusion of 
stepparent income, as well as the income of a child or sibling when 
required to file a tax return. However, the law generally requires that 
Medicaid apply the 36B household and income definitions beginning in 
2014. Therefore, for the reasons specified in the Medicaid Eligibility 
proposed rule (76 FR 51157 through 51159), we are finalizing without 
modification the provisions relating to the inclusion of stepchildren 
and stepparents in the household and the counting of child and sibling 
income when such income exceeds the filing threshold defined in the 
IRC. We do not comment on specific existing court orders. Parties 
affected by such orders must determine whether they need to seek relief 
or modification from the appropriate court in light of the changes to 
Federal law affected by the Affordable Care Act.
    Comment: Several commenters stated that the agency should not have 
to determine whether an individual aged 19 or 20 is a full-time student 
for purposes of the household composition rules at Sec.  435.603(f)(3) 
because doing so will increase the administrative burden and time 
required for determining eligibility.
    Response: While determining student status may add to 
administrative burden and complexity, we do not think it appropriate to 
prohibit States from counting parental income for full-time students 
age 19 and 20 whom the parents can claim as qualifying children on 
their tax return. To accommodate both these concerns, we are revising 
the final regulations at Sec.  435.603(f)(3)(ii) and (iii) and adding a 
new paragraph at Sec.  435.603(f)(3)(iv) to provide States with the 
flexibility to consider children and siblings age 19 or 20 who are 
full-time

[[Page 17155]]

students to be members of the same household as the parents and other 
siblings under age 19. Conforming revisions to the exceptions to the 
application of the 36B definitions at Sec.  435.603(f)(2)(ii) (relating 
to children living with both parents who do not expect to file a joint 
tax return) and Sec.  435.603(f)(2)(iii) (relating to children expected 
to be claimed as a tax dependent by a non-custodial parent) also are 
made to align the ages of children specified in those paragraphs with 
the option now afforded States under Sec.  435.603(f)(3)(iv).
    Comment: Regarding the exception to the application of the 36B 
definition of household at Sec.  435.603(f)(2)(ii) for children living 
with both unmarried parents, some commenters recommended that we follow 
the 36B definition to count only income of the parent claiming the 
child as a tax dependent. The commenters were concerned that similarly-
situated families will be treated differently depending on their tax 
filing and marital status, such as a child living with married parents 
compared with a child living with unmarried parents. These commenters 
stated that under the Medicaid rule, the income of both parents will be 
counted in determining the child's Medicaid eligibility; whereas under 
the Treasury rule, only the income of the parent claiming the child as 
a tax dependent will be counted in determining eligibility for APTC 
through the Exchange. Although the income of both parents in this 
situation is considered for the child's Medicaid eligibility under 
current Medicaid rules, the commenters were concerned that counting 
both parents' income for the child's Medicaid eligibility could cause a 
gap in coverage if the Exchange only counts the income of one parent 
and both parents have income below the Medicaid standard for coverage 
under the adult group.
    Response: We do not believe that the gap about which the commenters 
are concerned will, as a practical matter, exist. If one parent has 
income above the applicable MAGI standard for the child's Medicaid 
eligibility, that parent can receive an APTC for the child, as long as 
the parent claims the child when filing his or her tax return for the 
year in which coverage is sought. If both parents' income is below 100 
percent of the FPL, we believe that the child's household income for a 
family size including both parents, as well as the child, will be at or 
below the lowest possible applicable MAGI standard possible for 
children under Federal law--133 percent of the FPL, so the child will 
be eligible for Medicaid. However, new Sec.  435.603(i) eliminates any 
inadvertent gaps in coverage resulting from a difference in 
methodologies applied under the Medicaid and Exchange regulations.
    Additionally, we are making a technical change to the proposed 
regulation at Sec.  435.603(f)(2)(ii) to except a child from the 
general rule applicable to children expected to be claimed as a tax 
dependent by a parent in paragraph (f)(1). The Medicaid Eligibility 
proposed rule applied this exception to children under 21 who are 
living with both parents when the parents are not married. The intent, 
as explained in the Medicaid Eligibility proposed rule (76 FR 51158), 
was to apply this exception in the case of children living with both 
parents when the parents cannot (because they are not married) or do 
not choose to file a joint tax return. We are revising paragraph 
(f)(2)(ii) to reflect this intent in this final rule. Under the final 
rule, the rules applicable to non-filers at Sec.  435.603(f)(3) will 
apply to children living with both parents, when the parents do not 
expect to file a joint tax return.
    Comment: Commenters generally supported proposed Sec.  
435.603(f)(2)(iii) for recognizing that custodial parents need to be 
able to apply for and obtain, based on that parent's income, coverage 
for the child, regardless of which parent claims the child as a tax 
dependent. However, commenters also expressed concern that different 
policies applied for purposes of determining Medicaid eligibility 
versus eligibility for APTCs (for which the child is always counted in 
the household of the parent who claims the child as a tax dependent) 
would be difficult to administer and may result in a gap in coverage in 
some situations. Some commenters stated that the proposed Medicaid 
policy for custody situations does not address joint or shared custody 
arrangements. Many commenters suggested more flexibility in the rules, 
such as permitting parental choice. Some commenters recommended that if 
the custodial parent refused to apply for Medicaid for the child, the 
non-custodial parent should be able to apply for the child. Some 
commenters recommended that the non-custodial parent's income rather 
than the custodial parent's income be counted for the child's 
eligibility if that would make the child eligible. A few commenters 
pointed out that if a court requires a non-custodial parent to provide 
medical support for the child, the non-custodial parent may not know 
whether the custodial parent has filed an application for coverage 
under Medicaid or other insurance affordability programs.
    Response: We agree with the commenters that the rule regarding 
shared or joint custody situations needs clarification. We are revising 
Sec.  435.603(f)(2)(iii) to provide that, for purposes of Medicaid 
eligibility, the custodial parent is established based on physical 
custody specified in a court order or binding separation, divorce, or 
custody agreement; or if there is no such order or agreement or in the 
event of a shared custody agreement, based on with whom the child 
spends more nights. This definition is consistent with the rule applied 
by the IRS for determining which parent may claim a child as a tax 
dependent. (See IRS Publication 501.)
    We do not agree that a gap is created by the lack of alignment in 
the rules. A divorced or separated parent is not required to claim a 
child in the current tax year simply because he or she did so in the 
year before coverage is sought. Under sections 151 and 152 of the IRC 
(and as explained in IRS Publication 501), the custodial parent has the 
right to claim the child as a tax dependent, and only with the 
custodial parent's agreement can the non-custodial parent do so. Thus, 
by claiming the child on his or her tax return, the custodial parent 
can avoid any potential coverage gap that might otherwise result. We 
also do not agree that parents should be able to choose which parent 
claims the child as a member of his or her household for purposes of 
Medicaid eligibility, or that the non-custodial parent should be able 
to claim the child as part of his or her household whenever the 
custodial parent does not file an application for Medicaid, which would 
create a potential for gaming the rules (by allowing the parents to 
include the child in whichever household would make the child Medicaid 
eligible).
    Comment: One commenter requested that we clarify the meaning of 
``living with'' in the context of the non-filer household composition 
rule and questioned whether the State would have the flexibility to 
determine this in the context of students and in other situations.
    Response: This provision, which relates to whether spouses, 
parents, and children are members of the same household for purposes of 
determining financial eligibility and reflects longstanding Federal 
policy derived from the former AFDC program, is a different matter than 
the State residency rules addressed in section III.C. of this preamble 
and Sec.  435.403 of this final rule. We will consider providing future 
guidance on the meaning of this term.

[[Page 17156]]

    Comment: A commenter questioned whether a child under age 21 not 
living with the child's parents may file an application without the 
parent being informed or involved (even if the parent claims the child 
as a tax dependent), consistent with current practice in many States.
    Response: State law and regulation establish who may file an 
application for an insurance affordability program on behalf of a child 
under age 21, and nothing in the Affordable Care Act or these 
regulations alters State authority or flexibility on this matter.
    Comment: One commenter asked whether the omission of the word 
``natural'' related to siblings in Sec.  435.603(f)(3)(iii) was an 
oversight.
    Response: The omission of ``natural'' before ``adoptive and 
stepsiblings'' in Sec.  435.603(f)(3)(iii) was an oversight which we 
are correcting in this final rule.
    Comment: Several commenters recommended retaining current Medicaid 
policies for a minor child who is pregnant or a custodial parent and is 
living with the minor child's parent, so the minor child may be 
considered as a separate household from the minor child's parent if 
otherwise the minor child would be ineligible, even if the minor 
child's parent is claiming the child as a tax dependent.
    Response: Under section 1902(a)(17)(D) of the Act, States currently 
are generally required to count the income of a minor child's parent in 
determining the child's eligibility. However, prior to the 
implementation of MAGI in 2014, States may use the authority of section 
1902(r)(2) or 1931 of the Act to adopt a more generous financial 
methodology and disregard a parent's income to make a pregnant teen or 
teen parent eligible. Such income disregards will not be possible under 
the MAGI-based financial methodologies.
7. No Resource Test or Income Disregards (Sec.  435.603(g))
    Comment: Many commenters supported the proposal to prohibit 
consideration of assets in determining financial eligibility for 
Medicaid and CHIP. A few commenters recommended retaining the asset 
test because eliminating the test entirely could incentivize people 
with significant assets to stop working and could result in others with 
significant assets, but minimal income, being enrolled in Medicaid at 
the taxpayer's expense.
    Response: Section 1902(e)(14)(C) of the Act, as added by section 
2002 of the Affordable Care Act, expressly prohibits consideration of 
assets in determining eligibility for individuals whose financial 
eligibility is based on MAGI methods. We do not have the flexibility to 
issue regulations to the contrary and are finalizing the regulation at 
Sec.  435.603(g) as proposed. We note that currently almost all States 
do not consider assets when determining children's eligibility for 
Medicaid and nearly half of all States have also dropped the asset test 
for parents.
8. Budget Period (Sec.  435.603(h))
    Comment: In the Medicaid Eligibility proposed rule (76 FR 51156), 
we solicited comments on how best to prevent a gap in coverage between 
eligibility for Medicaid and for APTCs through the Exchange when 
eligibility for APTCs is based on annual income, whereas eligibility 
for Medicaid is based on current monthly income. Many commenters 
expressed concern that the goals of coordination and simplicity will be 
undermined if the budget periods used by Medicaid, CHIP, and the 
Exchange are not aligned, and that confusion on the part of consumers 
and gaps in coverage might result. Many commenters recommended either 
requiring the use of annual income for new applicants or providing this 
as a State option. One commenter suggested requiring use of annual 
income, but giving applicants a choice to use current monthly income if 
less than annual income. A number of commenters also recommended 
requiring use of annual income for current beneficiaries, rather than 
doing so at State option. Some commenters urged that the annual income 
previously reported to, and available through, a data match with the 
IRS be used by all programs. A number of commenters recommended that 
annual projected income for beneficiaries under the option afforded 
States in proposed Sec.  435.603(h)(3) be based on each individual's 
12-month redetermination period established under Sec.  435.916, rather 
than the current calendar year, as proposed in Sec.  435.603(h)(2). 
Several commenters stated that a mechanism is needed to cover 
individuals in Medicaid if their current monthly income exceeds the 
Medicaid limits but they are ineligible for APTCs through the Exchange 
because their projected annual income is less than 100 percent of the 
FPL.
    Response: The Medicaid ``point in time'' principle is explicitly 
retained in the Affordable Care Act. Thus, we are finalizing Sec.  
435.603(h)(1) as proposed to require the use of current monthly income 
in evaluating eligibility of applicants and individuals newly enrolling 
in the program, as provided under section 1902(e)(14)(H) of the Act. 
However, we agree with the commenters that unintended gaps in coverage 
should be avoided. As discussed above, we are adding new language at 
Sec.  435.603(i) of the final rule to apply 36B methodologies, 
including use of annual income, when application of different MAGI-
based methods under Medicaid than those applied under the 36B 
definitions otherwise would result in a gap in coverage. We also are 
revising Sec.  435.603(h)(2) to clarify that the projected annual 
household income which States can opt to use for current beneficiaries 
is for the remainder of the current calendar year. This will prevent a 
gap in coverage and someone bouncing back and forth between programs 
when current monthly income is below the Medicaid income standard, but 
projected annual income based on the full calendar year (including 
previous months) is above the Medicaid standard.
    Comment: Several commenters expressed concern about how to 
determine applicants' MAGI-based income for a monthly budget period, as 
some of the line items on the Federal tax return, reported as an annual 
figure, are not easily translated to a monthly amount.
    Response: While we are not addressing this issue in this 
rulemaking, we understand the need for further information and will 
provide ongoing technical assistance on the determination of current 
monthly income using MAGI-based methodologies in the context of working 
with States on implementing this final rule.
    Comment: Several commenters stated the potential difference in FPL 
amounts used by Medicaid as compared with the Exchange for determining 
eligibility.
    Response: Because Medicaid eligibility is determined at a point in 
time, Medicaid uses the FPL amounts that are published and in effect 
when eligibility is determined. Under 45 CFR 155.300(a) of the final 
Exchange regulation and Sec.  1.36B-1(h) of the proposed Treasury 
regulation, eligibility for APTCs is based on the most recently 
published FPL amounts as of the first day of the annual open enrollment 
period for applying for coverage in a QHP through the Exchange. Since 
Medicaid will always use the same or more recent FPL amounts, which are 
adjusted for inflation, than those used for purposes of the APTC, the 
FPL amounts for Medicaid will be either the same as or higher than the 
amounts used for purposes of APTC eligibility. Therefore, no gap in 
coverage will result. In addition, we are adding a

[[Page 17157]]

definition of FPL to Sec.  435.4 of the Medicaid final rule.
    Comment: Many commenters supported the flexibility offered to 
States at Sec.  435.603(h)(3) to adopt a reasonable method for 
including a prorated portion of reasonably predictable future income 
when determining eligibility for applicants and current beneficiaries, 
to account for seasonal workers, changes in employment contracts, or 
layoffs. Many commenters recommended that this method be required to 
prevent churning in and out of coverage, rather than offered to States 
as an option. A few commenters recommended that States be required to 
take into account predictable decreases, but not increases, in income. 
One commenter recommended that States not be given the option to 
include future increases in income, which may never come to pass. 
Several commenters recommended that the rule provide examples of what 
CMS would consider to be a ``reasonable method.'' Several commenters 
recommended that proposed Sec.  435.603(h)(1) be amended to make it 
clear that paragraph (h)(3) is an exception to the use of monthly 
income under paragraph (h)(1).
    Response: We are finalizing proposed Sec.  435.603(h)(3) without 
modification. The policy is designed to provide States with flexibility 
to reduce churning between programs, which results from the 
fluctuations in income experienced by many Medicaid beneficiaries, and 
thereby to promote continuity of coverage for individuals and reduce 
administrative burden on States. States may make different choices in 
how best to achieve the goals of efficiency and continuity of coverage, 
so we are not making this policy a requirement. We also do not believe 
it is necessary to indicate in Sec.  435.603(h)(1) that paragraph 
(h)(3) is an exception to the rule. Section 435.603(h)(3) clearly 
states that the option it affords States can be applied in determining 
monthly income under Sec.  435.603(h)(1). Section 435.603(h)(3) 
provides that a prorated portion of a predictable change in income may 
be included or excluded in determining current monthly income. States 
will have flexibility to develop reasonable methodologies which make 
sense in the context of their State eligibility and enrollment systems. 
We will work with States to ensure the reasonableness of any method 
adopted. We will also collect and analyze data to inform States, the 
Federal government, and others as to the extent to which churning 
occurs and the policies and procedures that are effective in reducing 
churning.
    Comment: Many commenters supported providing States with the 
flexibility to ignore temporary fluctuations in income when determining 
eligibility for current beneficiaries by using annual income rather 
than average monthly income. Several commenters recommended that States 
be offered the option to cover adults for a continuous eligibility 
period, similar to the option for children's coverage at section 
1902(e)(12) of the Act.
    Response: Use of the option to project annual income for current 
beneficiaries can help States minimize the churning between programs 
that each of the strategies proposed by the commenters seeks to 
address. However, there is no statutory authority for States to elect 
continuous eligibility for adults. In addition, section 1902(e)(14)(B) 
of the Act does not permit States to disregard fluctuations in income 
experienced by beneficiaries. However, States may propose section 1115 
demonstration projects to apply continuous eligibility for adults and 
to adopt other simplification measures for parents or other adults.
9. Eligibility Groups for Which MAGI-Based Methods Do Not Apply (Sec.  
435.603(j))
    Comment: Numerous commenters were concerned about the eligibility 
of individuals with disabilities and those needing long-term services 
and supports under the Medicaid Eligibility proposed rule. Commenters 
were concerned that such individuals would be adversely affected if 
they are evaluated for coverage under optional eligibility groups only 
after they fail to establish eligibility based on MAGI-based 
methodologies.
    Response: The expansion of eligibility to all adults under 65 under 
the Affordable Care Act was not intended to keep anyone from being able 
to access coverage under Medicaid that is more appropriately suited to 
their needs. Therefore, we are revising our policy under the final rule 
such that individuals who meet the eligibility requirements, and are 
determined eligible, for coverage under an eligibility group for blind 
or disabled individuals or for an eligibility group under which long-
term services and supports are covered will be able to enroll for such 
coverage, regardless of whether or not they have MAGI-based household 
income which is at or below the applicable MAGI standard (133 percent 
of the FPL for the new adult group). Revisions to implement this change 
in policy being made to the MAGI screen regulation at Sec.  435.911 are 
discussed in section III.F. of the preamble. Conforming revisions to 
the exceptions from application of MAGI-based methodologies for blind 
and disabled individuals and those needing long term care services also 
are being made in the final rule at Sec.  435.603(j)(3) and (j)(4) 
(redesignated from paragraph (i) in the Medicaid Eligibility proposed 
rule) to provide for exception from application of MAGI methodologies 
to such individuals, but only for the purposes of determining 
eligibility on the basis of disability or being blind or for an 
eligibility group under which long term care services are covered. We 
also clarify in the final rule at Sec.  435.603(j)(6) that the 
exception from MAGI for the medically needy is only for the purpose of 
determining eligibility on such basis.
    Comment: One commenter requested clarification regarding the 
methodologies to be applied when eligibility is being determined based 
on the need for long term care services. The commenter specifically 
inquired about the applicability of spousal impoverishment rules.
    Response: Our reference to eligibility ``on the basis of the need 
for long-term care services'' in the Medicaid Eligibility proposed rule 
would have too narrowly limited the MAGI exception contemplated by 
1902(e)(14)(D)(iv) of the Act to individuals eligible under 
1902(a)(10)(A)(ii)(V) and (VI) of the Act, and certain section 1115 
waivers. We have revised the language relating to this exception in 
Sec.  435.603(j)(4) of this final rule to except from application of 
MAGI methods individuals seeking coverage of long term care services 
for the purpose of determining eligibility under a group that covers 
such services. In making such determinations, all current 
methodologies, including spousal impoverishment rules, will apply to 
the same extent as such methodologies apply today.
    Comment: Individuals over the age of 65 are exempt under the 
Affordable Care Act from application of MAGI-based methods, but 
determinations of eligibility for parents/caretaker relatives is based 
on MAGI methodologies. In the Medicaid Eligibility proposed rule (76 FR 
51159), we solicited comments on what methodology should be used in 
determining eligibility for elderly parents and caretaker relatives 
over the age 65. Many commenters believe it would be burdensome for 
States to have to apply existing AFDC methodologies in the small number 
of cases in which an individual age 65 or older is being evaluated for 
eligibility on the basis of being a parent or caretaker relative. The 
commenters suggested that we limit the MAGI exemption for individuals 
age 65

[[Page 17158]]

and older to determinations where age is a condition of eligibility.
    Response: We are revising Sec.  435.603(j)(2) to except individuals 
age 65 or older from application of MAGI-based methods only when being 
65 or older is a condition of Medicaid eligibility.
    Comment: Some commenters suggested that we explicitly identify 
newborns automatically deemed eligible for Medicaid under section 
1902(e)(4) of the Act (``deemed newborns'') as an exception to MAGI-
based methodologies in Sec.  435.603(j)(1) (Sec.  435.603(i)(1) in the 
Medicaid Eligibility proposed rule) because the Medicaid agency does 
not need to make a determination of income for these babies.
    Response: Deemed newborns are excepted from application of MAGI-
based methodologies as noted by the commenters. However, we are not 
modifying the Medicaid Eligibility proposed rule, as we do not find it 
necessary to list every situation in which the agency is not required 
to make an income determination in the regulation.
    Comment: Sec.  453.603(i)(6) provides that MAGI-methodologies do 
not apply to the determination of financial eligibility for the 
medically needy. One commenter questioned whether States will have 
flexibility to choose to apply some or all of the MAGI methodologies in 
determining medically needy eligibility for simplicity of 
administration.
    Response: The Affordable Care Act expressly exempts medically needy 
individuals, whose eligibility is based on either AFDC or SSI financial 
methodologies, from application of MAGI-based financial methodologies. 
States which cover medically needy individuals are required under 
section 1902(a)(10)(C) of the Act to cover medically needy pregnant 
women and children, financial eligibility for whom currently is 
determined using AFDC methods. We recognize that retention of AFDC 
methods solely for the purpose of determining medically needy 
eligibility for these populations could be administratively burdensome 
for States. We are examining the options that may be available to avoid 
such burden.
    Comment: One commenter questioned whether aged, blind and disabled 
individuals in section 209(b) States would be required to spend-down 
income to the traditional standard of need or 133 percent of the FPL. 
This same commenter suggested that the current policy of spending down 
to the standard of need forces a result contrary to the intent of 
Affordable Care Act because it places higher financial burden on access 
to coverage for ABD individuals.
    Response: States which have elected to apply more restrictive 
methods than those applied for determining eligibility for SSI under 
section 1902(f) of the Act and Sec.  435.121 of the regulations 
(``209(b) States''), but which do not cover medically needy aged, blind 
and disabled individuals, must allow aged, blind and disabled 
individuals whose income exceeds the income standard established for 
eligibility under Sec.  435.121 to spend down to such standard and 
receive coverage. Nothing in the Affordable Care Act changes this 
provision. However, as explained in the preamble to the Medicaid 
Eligibility proposed rule (76 FR 51151), blind and disabled individuals 
whose income exceeds the standard established in a 209(b) State for 
coverage under Sec.  435.121 are not required to spend down to such 
standard to become eligible for Medicaid. Such individuals are eligible 
for and can enroll in coverage under the new adult group without 
meeting a spend-down, provided that their MAGI-based income is at or 
below the applicable MAGI standard (133 percent of the FPL for the new 
adult group). However, such individuals have the choice to spend-down 
to establish eligibility under Sec.  435.121 if coverage on such basis 
better meets their needs. Individuals age 65 and over are not eligible 
for Medicaid under the new adult group. Such individuals may be able to 
spend-down to Medicaid eligibility under Sec.  435.121.
    Comment: One commenter supported the policy that the exemption from 
MAGI only applies to the determination of eligibility for medically 
needy coverage and suggested that this policy be extended to 
individuals spending down to eligibility under Sec.  435.121 in 209(b) 
States.
    Response: An exception from application of MAGI-based methods 
applies in both circumstances. Eligibility for medically needy coverage 
under section 1902(a)(10)(C) of the Act is excepted from application of 
MAGI-based methods per section 1902(e)(14)(D)(IV) of the Act, as 
codified at Sec.  435.603(j)(6) in this final rule. Eligibility for 
mandatory coverage for blind and disabled individuals in 209(b) States 
under sections 1902(a)(10)(A)(i)(II) and 1902(f) of the Act and Sec.  
435.121 of the regulations, including the ability to spend down to such 
eligibility, is excepted from application of MAGI-based methods per 
section 1902(e)(14)(D)(i)(III) of the Act, as codified at Sec.  
435.603(j)(3) in this final rule.
    Comment: One commenter questioned why proposed Sec.  435.603(i)(5) 
excludes from MAGI-based methods only the determination of Medicaid 
eligibility for Medicare cost sharing assistance and not individuals 
who are in receipt of Medicare generally.
    Response: The Affordable Care Act does not provide for an exception 
from application of MAGI-based methods for individuals eligible for 
Medicare. The exception at section 1902(e)(14)(D)(i)(III) is limited to 
individuals eligible for Medicare cost-sharing assistance under section 
1902(a)(10)(E) of the Act. We are interpreting the exception to apply 
only to determinations of eligibility for Medicare cost sharing so that 
States can apply the same MAGI-based methods used to determine such 
individuals' eligibility for full Medicaid benefits under other 
eligibility groups as are used for other individuals who are not 
eligible for Medicare cost-sharing assistance.
    Comment: For the exception for foster care children from MAGI-based 
methods in section 1902(e)(14)(D)(i)(I) of the Act, one commenter 
questioned what ``being deemed to be a child in foster care under the 
responsibility'' of the State means. The commenter questioned whether 
``under the responsibility of the State'' requires only that the State 
provide State-funded foster care assistance, or whether the State must 
exercise additional legal responsibility for the child.
    Response: The exception to MAGI-based methods at section 
1902(e)(14)(D)(i)(I) of the Act, as codified at Sec.  435.603(j)(1) in 
the final rule, applies to children receiving Federal foster care, 
guardianship or adoption assistance payments under title IV-E of the 
Act and children eligible under an optional eligibility group for 
children receiving State foster care payments or in State-funded foster 
care, if the State covers such optional group under its State plan and 
does not apply an income test. Key to the application of the MAGI 
exception to such children is whether the State Medicaid agency is 
required to make a determination of income for a child in foster care 
to determine eligibility for Medicaid. The precise legal or custodial 
status of the child in relationship to the State is not material.
    Comment: One commenter noted that children as a group are omitted 
from the list of exceptions from MAGI proposed Sec.  435.603(i), which 
the commenter believes is inconsistent with section 1902(e)(14)(H)(ii) 
of the Act and section 2101(f) of the Affordable Care Act. The 
commenter recommended that the regulations should provide a

[[Page 17159]]

``secondary'' screening for children who would be eligible using 
current standards and methodologies, but who are not eligible when 
MAGI-based income is compared to the MAGI-equivalent income standard 
determined by the State under section 1902(e)(14)(A) and (E) of the 
Act.
    Response: We disagree that the policy in the Medicaid Eligibility 
proposed rule is inconsistent with section 1902(e)(14)(H)(ii) of the 
Act or section 2101(f) of the Affordable Care Act. Section 
1902(14)(H)(ii) of the Act--which provides that the application of the 
definitions of MAGI and household income in section 36B of the IRC 
``shall not be construed as affecting or limiting the application of 
any rules established under'' the Medicaid statute or under a State 
plan or waiver of the State plan ``regarding sources of countable 
income''--must be read in conjunction with the general directive in 
section 1902(e)(14)(A) of the Act that financial eligibility for 
Medicaid be determined based on the section 36B definitions. We 
interpreted the whole of section 1902(e)(14) of the Act in the Medicaid 
Eligibility proposed rule as requiring that the section 36B definitions 
of ``MAGI'' and ``household income'' apply, except as expressly 
provided in section 1902(e)(14)(D) of the Act, or under the authority 
of section 1902(e)(14)(H)(ii) of the Act, where the impact on 
beneficiaries of applying the 36B definitions would be significant and 
where departing from the 36B definitions in favor of retaining the 
current Medicaid rule would not undermine the seamless and coordinated 
eligibility and enrollment system established under section 1413 of the 
Affordable Care Act and section 1943 of the Act. Section 1902(e)(14)(D) 
does not provide for a general exception from application of MAGI-based 
methodologies for children. Finally, the commenters' reliance on 
section 2101(f) of the Affordable Care Act is misplaced. As explained 
in section III.L. of the preamble, that section relates to the CHIP 
eligibility of children who lose Medicaid eligibility due to the 
elimination of income or expense disregards under section 
1902(e)(14)(B) of the Act. Section 2101(f) of the Affordable Care Act 
does not provide for the retention of current financial methodologies 
for children in determining their eligibility for Medicaid.
    Comment: One commenter disagreed that individuals who are deemed to 
be receiving SSI should be excepted from application of MAGI-based 
methods because an income determination for Medicaid is not required. 
The commenter stated that, except for eligibility under section 1619(a) 
and (b) of the Act, a determination of income must be made by the State 
Medicaid agency to determine if someone is deemed to be receiving SSI. 
The commenter also believes that a regulatory citation for disabled 
adult children should be included in the list of regulatory cross 
references included in Sec.  435.603(j)(1), (Sec.  435.603(i)(1) in the 
Medicaid Eligibility proposed rule) for individuals who are deemed to 
be receiving SSI.
    Response: The statute specifically includes the eligibility groups 
for deemed SSI recipients, along with individuals actually receiving 
SSI, in the list of individuals to whom the MAGI rules will not apply 
under section 1902(e)(14)(D)(i)(I) of the Act, which we proposed to 
codify at Sec.  435.603(i)(1). Therefore, we are retaining the 
exception from MAGI-based methods for deemed SSI recipients in the 
final rule at Sec.  435.603(j)(1). However, we are making a technical 
correction at Sec.  435.603(j)(1) to indicate accurately which of the 
regulations cross referenced relate to eligibility based on receipt of 
SSI benefits and which relate to eligibility based on being deemed to 
receive such benefits.
    Eligibility for disabled adult children under section 1634(c) of 
the Act is not codified in the Medicaid regulations at this time. 
Therefore, we will take the suggestion under consideration for possible 
future guidance.
    Comment: Commenters agreed with the proposal (discussed at 76 FR 
51159) not to identify at Sec.  435.603(j)(3) (Sec.  435.603(i)(3) in 
the Medicaid Eligibility proposed rule) as excepted from MAGI-based 
methods children who are under age 18 who were receiving SSI on the 
basis of disability as of August 22, 1996, and would continue to 
receive SSI but for changes made by section 211 of PRWORA. Although 
such children are excepted from MAGI methods, there will be no-- or 
virtually no-- such children eligible for Medicaid on this basis as of 
January 1, 2014.
    Response: We are not specifically identifying these children in 
this final rule.

C. Residency for Medicaid Eligibility Defined (Sec.  435.403)

    As part of our overall effort to promote the coordinated 
eligibility and enrollment system established under sections 1413 and 
2201 of the Affordable Care Act (discussed in greater detail in the 
Medicaid Eligibility proposed rule (76 FR 51160 and 51166)), we 
proposed to simplify Medicaid residency rules and to align those rules 
with those that will apply under the other insurance affordability 
programs.
    Comment: Many commenters supported our proposal to remove the term 
``permanently or for an indefinite period'' from the residency 
definition for adults in Sec.  435.403(h)(1) and (h)(4), and replace 
the term ``intention to remain'' with ``intends to reside, including 
without a fixed address.'' Another commenter requested that CMS provide 
guidance for residency determinations for individuals who live in or 
visit multiple States or countries.
    A few commenters expressed concern that the proposed term ``intends 
to reside'' introduces an element of ambiguity to the definition that 
may result in inconsistent application across States. A few of these 
commenters recommended that CMS add regulatory language consistent with 
the discussion in the preamble to the Medicaid Eligibility proposed 
rule to clarify that visitors are not considered residents of the State 
they are visiting.
    Response: We believe that the proposed term ``intends to reside,'' 
when read within the context of the preamble clarifications, limits any 
such potential for ambiguity. In the preamble to the Medicaid 
Eligibility proposed rule, we explained that we interpret this language 
to mean that persons who are visiting the State, including for the 
purpose of obtaining medical care, are not considered residents of the 
State (76 FR 51150). Also, current regulations at Sec.  435.403(j)(3) 
address a temporary absence and Sec.  435.403(m) provides guidance 
regarding cases of disputed residency between States. For these 
reasons, we believe that further clarification in the regulatory text 
to preclude visitors from being considered residents of a State in 
which they are visiting is unnecessary.
    Thus, we are adopting our proposal to strike the term ``permanently 
or for an indefinite period'' and replace the term ``intention to 
remain'' with ``intends to reside, including without a fixed address'' 
without substantive modification in Sec.  435.403(h)(1) and (h)(4). 
Note that the language that appears in the Medicaid Eligibility 
proposed rule at Sec.  435.403(h)(1)(i) regarding individuals who do 
not have capacity to state intent is now found at paragraph (h)(2) in 
the final rule, without any substantive modification. Therefore, we 
redesignated paragraphs (h)(2) through (h)(4) as paragraphs (h)(3) 
through (h)(5). We have also added clarifying language to paragraph (h) 
to specify that State residency of individuals receiving State

[[Page 17160]]

supplementary payments is addressed in paragraph (f) of this section.
    Comment: Many commenters supported the proposed inclusion of 
individuals who have entered the State with a job commitment or are 
seeking employment (whether or not currently employed) as satisfying 
the State residency requirement for adults as proposed at Sec.  
435.403(h)(1)(ii). However, a few commenters expressed concern that 
such inclusion could create a burden for States to cover those seeking 
work, but not living in the State. One commenter recommended we limit 
this provision to migrant or seasonal workers. A few commenters raised 
a concern that removal of ``living'' in the State from Sec.  
435.403(h)(1)(i) would have the unintended effect of eliminating the 
physical presence requirement from the definition of residency. In 
contrast, one commenter recommended inclusion of a future intent to 
reside in a State in limited circumstances, such as when a disabled 
individual desires to relocate but cannot safely do so until Medicaid 
services are in place.
    Response: We are retaining our proposed language in Sec.  
435.403(h) regarding individuals who have secured employment or are 
seeking employment and we are revising our regulation text consistent 
with commenters' recommendations so our intent is clear that to be a 
resident, an individual must be living in the State. As explained in 
the Medicaid Eligibility proposed rule preamble, we proposed to remove 
the word ``living'' from the definition of residency to simplify the 
language, not to change the policy. We are revising the proposed 
regulation at Sec.  435.403(h)(1) and Sec.  435.403(h)(4) (redesignated 
to Sec.  435.403(h)(5) in the final rule), to clarify its application 
to only those individuals who are living in the State.
    With regard to an individual's ability to initiate the application 
and enrollment process when such individual is not present in the 
State, we may address in future guidance ways in which States might 
facilitate the determination of eligibility for individuals moving into 
the State, particularly for those whose health care needs are such that 
a gap in coverage occasioned by a move would be detrimental to their 
health.
    Comment: In response to our proposal to maintain States' current 
flexibility to determine whether students ``reside'' in a State for 
families in which children attend school in a State different than 
their parents, many commenters urged CMS to establish a clear policy on 
student residency that aligns with Exchange policy, which allows 
taxpayers to choose State of residency for tax dependents who live in 
another State to prevent potential gaps in coverage. These commenters 
strongly recommended that States should not be given flexibility, but 
be required to allow parents to choose the State of their child's 
residence for purposes of Medicaid eligibility as well. Another 
commenter suggested that individuals age 18 and older be allowed to 
express their own intent, rather than relying on their parents. Several 
commenters expressed concern about access to services when American 
Indian/Alaskan Native (AI/AN) youth reside apart from their parents in 
boarding schools operated by the Bureau of Indian Education.
    Response: As stated in the Medicaid Eligibility proposed rule, 
while States will have flexibility for students attending school in 
States different from their parents, States must still provide 
individuals with the opportunity to provide evidence of actual 
residency (76 FR 51160). If there is a dispute in Medicaid State 
residency, the individual is a resident in the State in which the 
individual is physically located under our current regulations at Sec.  
435.403(m). If the individual's household income is under the 
applicable MAGI standard in the Medicaid State of residency (at least 
133 percent of the FPL), the individual will be eligible for Medicaid 
based on MAGI in that State. If the individual's household income is 
over the applicable MAGI standard in the Medicaid State of residence, 
the individual will be eligible for Exchange-based coverage in the 
State of residency determined in accordance with Exchange regulations 
at 45 CFR 155.305(a)(3)(iv). Thus, there should be no gap in coverage. 
Permitting taxpayers or parents/guardians to decide in which State an 
individual is a State resident could have significant cost implications 
for States, particularly with large student populations, and also could 
be challenging to operationalize. Note that students who are under age 
21 and who are married or emancipated will be considered State 
residents using the same rules as adults (see Sec.  435.403(i)(1)), 
enabling them to express their own intent about their State of 
residence. Thus, we are not modifying our regulation text, but will 
work with States and other stakeholders on the application and 
enrollment information that applicants will need to apply and enroll in 
coverage. Finally, access to care for individuals temporarily 
physically located in a State other than their State of residence is a 
concern that is not unique to AI/AN students going to a school in a 
State other than where their parents live. Coordination and cross-State 
payment arrangements are important mechanisms to address this and we 
will continue to work on this issue (see more information below).
    Comment: Many commenters supported the consolidation of two 
existing definitions of residency for children (disabled children with 
non-disabled, non-institutionalized, non-IV-E foster care/adoption 
assistance children) as proposed in Sec.  435.403(i)(2), primarily for 
stated simplification purposes. One commenter noted that such 
prohibition would eliminate the current problem with States denying 
Medicaid for newborns residing in the State born to parents who may not 
be considered State residents.
    Response: We are finalizing the Medicaid Eligibility proposed rule 
without significant change, as set forth at Sec.  435.403(i)(2). We 
agree that consolidation of the two existing definitions of residency 
for children, application of a similar residency definition as that 
proposed for most adults without the ``intent'' component simplifies 
the regulation. We have also made minor modifications to the regulation 
text to clarify that States cannot determine a child's residency based 
solely on the parent's residency at Sec.  435.403(i)(2). We have also 
added clarifying language to paragraph (i) to specify that State 
residency of individuals receiving State supplementary payments and 
individuals receiving IV-E assistance are addressed in paragraphs (f) 
and (g) of this section, respectively.
    Comment: In response to our solicitation for comments for whether 
we should change the current State residency policy with regard to 
individuals living in institutions and adults who do not have the 
capacity to express intent, we received many comments urging CMS to 
determine residency for institutionalized individuals based on the 
intent of the parent or guardian, rather than current policy that 
determines residency based on State residency of the parent or guardian 
at time of the individual's placement in the institution even after a 
parent or guardian has moved to another State. One commenter 
recommended that CMS consider amending Sec.  435.403 to provide that 
the State of residence for all individuals who lack the capacity to 
form intent be chosen by the parent or guardian, irrespective of an 
individual's age.
    Response: We will consider these suggestions in our development of

[[Page 17161]]

future guidance and technical assistance.
    Comment: Several commenters recommended that CMS modify the 
proposal to include as residents individuals who enter the State 
seeking medical treatment, particularly in the context of persons who 
are members of Tribes who receive services at Youth Residential 
Treatment Centers (YRTCs), federally-managed boarding schools for 
tribal members, Indian Health Service (IHS) or other tribal providers. 
The commenters also raised concerns about the administrative burdens 
and barriers that providers serving these individuals experience 
entering into provider agreements with multiple States and receiving 
Medicaid payments for services rendered to individuals who reside in 
those States. Some commenters suggested that we develop a rule that 
would provide State residency for AI/AN children in the State in which 
the provider or facility is located.
    Response: In general, we do not believe it is reasonable to require 
a State to administer benefits to individuals who are present in the 
State only to receive medical care, and thus we are not modifying the 
Medicaid Eligibility proposed rule. We believe such a policy would be 
inconsistent with the common understanding of State residency, which is 
focused on individuals who live and intend to remain living in the 
State. Requiring a State to cover individuals who were solely present 
in the State to seek medical treatment would have a differential 
financial impact on States with medical institutions that attract 
individuals from across the country. That said, it is important to 
address interstate coordination of enrollment, retention, and access to 
services for low-income Medicaid and CHIP children. In accordance with 
section 213 of the Children's Health Insurance Program Reauthorization 
Act (CHIPRA), we published a notice in the December 18, 2009 Federal 
Register (74 FR 67232) soliciting comments to assist in the development 
of a model interstate coordination process. The model process is 
available at http://www.cms.gov/CHIPRA/Downloads/InterstateCoordination.pdf and we have invited feedback from interested 
parties regarding the viability of the proposal.
    We intend to consider whether there is a need for further 
rulemaking to address the situation of individuals who are receiving 
services at entities that are federally-managed or operated under the 
authorities established by the Indian Self-Determination and Education 
Assistance Act, such as YRTCs operated under the Indian Health Care 
Improvement Act and boarding schools operated by the Bureau of Indian 
Education, whether operated by the Indian Health Service, Bureau of 
Indian Education, or by an Indian Tribe or Tribal organization. We 
welcome information on the impact such policy might have on States, 
federally-managed providers, Tribal governments, and Tribal members. We 
also plan to consult with Tribes as we consider this issue.
    Comment: One commenter recommended that Sec.  435.403 codify the 
definition of ``lawfully residing'' currently in use in Medicaid and 
CHIP, under CHIPRA. Additionally, the commenter recommended the 
inclusion of the additional categories to the current CHIPRA 
definition.
    Response: The definition of ``lawfully residing'' is outside the 
scope of this final rule.
    Comment: We received one comment asking whether our proposed 
revisions to the State residency definition affect children receiving 
foster care or adoption assistance under title IV-E of the Act or 
State-funded programs.
    Response: Our proposed revisions to the State residency definition 
have no impact on IV-E foster care or subsidized adoption children, as 
we did not propose to amend the rules governing State residency of 
individuals who receive IV-E assistance at Sec.  435.403(g). All other 
individuals under the age of 21, who are not institutionalized or 
emancipated or receiving a State supplementary payment, would be 
treated under our rules at redesignated Sec.  435.403(i) in our final 
rule.

D. Timeliness Standards (Sec.  435.912)

    Comment: A number of commenters requested additional information 
regarding timeliness and performance standards that will assure a 
seamless consumer experience, minimize administrative burdens, and 
otherwise ensure compliance with various provisions of this final rule. 
We also received comments requesting additional information with 
respect to the data reporting requirements for States to ensure 
adequate oversight of the administration of the program.
    Response: We recognize the need to provide parameters within which 
performance will be measured and to outline the areas where data and 
other information will need to be provided to monitor compliance with 
this final rule. We have revised current regulations at Sec.  435.911 
(redesignated at Sec.  435.912) to provide additional guidance on the 
timeliness standards for making eligibility determinations. We are 
soliciting additional comment and issuing as interim final Sec.  
435.912.
    Under the current regulations, States are directed to establish 
standards not to exceed 90 days in the case of individuals applying for 
Medicaid on the basis of disability and 45 days for all other 
applicants. The revised regulation at Sec.  435.912 distinguishes 
between performance and timeliness standards, and States are directed 
to establish both. Under Sec.  435.912(a), ``timeliness standards'' 
refer to the maximum period of time in which every applicant is 
entitled to a determination of eligibility, subject to the exceptions 
in Sec.  435.912(e); ``performance standards'' are overall standards 
for determining eligibility in an efficient and timely manner across a 
pool of applicants, and include standards for accuracy and consumer 
satisfaction, but do not include standards for an individual 
applicant's determination of eligibility.
    Section 435.912(b) also includes the expectation, set forth in the 
proposed Sec.  435.911(c) and Sec.  435.1200(e) and (f), that the State 
agency determine eligibility and, where appropriate, transfer the 
electronic account of individuals to other insurance affordability 
programs, promptly and without undue delay. Section 435.912(c) sets 
forth criteria which the agency must account for in establishing 
timeliness and performance standards, including: (1) The capabilities 
and cost of generally available systems and technologies; (2) the 
general availability of electronic data matching and ease of 
connections to electronic sources of authoritative information to 
determine and verify eligibility; (3) the demonstrated performance and 
timeliness experience of State Medicaid, CHIP and other insurance 
affordability programs, as reflected in data reported to the Secretary 
or otherwise available; and (4) the needs of applicants and their 
preferred mode of application submission and communication, as well as 
the relative complexity of adjudicating the eligibility determination 
based on household, income, or other relevant information. Note that 
the standards to be adopted pursuant to proposed Sec.  435.912(c) are 
expected to reflect the systems and technological capabilities and 
electronic data matching which are generally available for use by 
States at reasonable cost. Our expectations are that these systems and 
technological capacities generally make it possible for real time 
determinations of eligibility in most cases. Standards shall be set 
reflecting this expectation as well as the pace and experience of 
States that are making ongoing and reasonable investments in systems 
improvements and technology

[[Page 17162]]

supported by Federal matching payments. Finally, we clarify in the 
regulation at Sec.  435.912(b) that the Secretary will provide 
additional guidance on the timeliness and performance standards, with 
which the standards established by States under the regulation also 
will need to comply.
    Not addressed in Sec.  435.912 are performance standards relating 
to other aspects of States' eligibility and enrollment systems to 
ensure accountability, consistency, and coordination. Guidance 
regarding such other performance standards is forthcoming.

E. Application and Enrollment Procedures for Medicaid (Sec.  435.905, 
Sec.  435.907, and Sec.  435.908)

    The Affordable Care Act directs the Secretary to establish a model, 
streamlined application and enrollment process for use by States. The 
sections that follow summarize the key elements of the process.
1. Availability of Program Information (Sec.  435.905)
    We proposed to implement section 1943(b)(1)(A) of the Act directing 
States to develop procedures that enable individuals to apply for, 
renew, and enroll in coverage through an internet Web site through 
amendments to Sec.  435.907 and Sec.  435.908. In conjunction with 
those procedures, we also proposed to revise Sec.  435.905 to require 
that information be available in electronic formats, as well as in 
paper formats (and orally as appropriate).
    Comment: Many commenters advised that the list of information that 
the agency must furnish, as described in Sec.  435.905(a)(1) through 
(a)(3), needs to be expanded to include information on application/
renewal processes, assistance, appeals, and benefits including the 
benchmark benefit package. One commenter also requested that Sec.  
435.905(a) be revised to state that applicant information should be 
confidential in all circumstances.
    Response: We do not believe that any revision to the proposed 
regulation is required. We are strongly committed to ensuring 
applicants and beneficiaries have the information they need as well as 
to ensuring the confidentiality of applicant and beneficiary 
information. Most of the information identified must be furnished to 
applicants and other parties under the existing regulation at Sec.  
435.905, and that requirement was not changed by the Medicaid 
Eligibility proposed rule. The remaining requested information is 
required to be provided to applicants and other parties in other parts 
of the regulations governing the Medicaid program. Applications and 
assistance must be available under Sec.  435.907 and Sec.  435.908. 
Regulations governing confidentiality of applicant and beneficiary 
information are set forth in existing regulations at subpart F of part 
431 of the regulations.
    Comment: Many commenters suggested that the information in Sec.  
435.905 needs to be publicly available online, not just to those ``who 
request it.'' Several commenters specifically recommended that we add a 
cross-reference to Sec.  435.1200(d), relating to the Internet Web site 
required under the Affordable Care Act. One commenter requested that we 
clarify that States only need to mail applicants program information 
upon request.
    Response: Our intention is for program information to be widely 
available in ``electronic'' formats, meaning that such information must 
be available to the public via the Internet Web site, not just upon 
request. We are adding a cross-reference to the regulation at Sec.  
435.1200(f) as a helpful clarification of this policy. Under Sec.  
435.905, States are only required to mail program information upon 
request.
    Comment: A few commenters stated that Medicaid agencies should be 
required to provide information regarding all insurance affordability 
programs, not just Medicaid, to promote consistency and coordination 
across programs.
    Response: It is our expectation that all insurance affordability 
programs will coordinate and make available the basic information 
needed for individuals to understand all programs and make informed 
choices about applying for coverage. The Internet Web site required 
under Sec.  435.1200(f) must promote access to information on all 
insurance affordability programs, which includes Exchange, Medicaid, 
CHIP, and the Basic Health Program (BHP) if applicable. Section 
1943(b)(4) of the Act, as added by section 2201 of the Affordable Care 
Act, requires that such Web site be linked to the Web site established 
by the Exchange, and under Sec.  435.1200(b)(3), the State Medicaid 
agency must enter into an agreement with the other insurance 
affordability programs operating in the State to implement the 
requirements of Sec.  435.1200, including paragraph (f).
    Comment: The large majority of commenters support our proposed 
regulation that program information be provided in simple and 
understandable terms and accessible to persons who are limited English 
proficient and people with disabilities. Many commenters made specific 
recommendations that we include in the regulation standards and 
thresholds for translation of written information. For example, many 
suggested that we require written translations where at least 5 percent 
or 500 limited English proficient individuals reside in the State or 
service area of the Medicaid program, whichever is less. Many 
commenters also recommended we add to this rule specific requirements 
to provide oral interpretation, such as for all languages free of 
charge to the individual, and to inform individuals how to access these 
services, such as requiring ``taglines'' in a specified number of 
languages. (A tagline is a brief statement in the individual's language 
that informs the person how to obtain language services.) Many of these 
commenters recommended that we add to the final rule more detailed 
requirements on accessibility, including providing written materials 
such as large print and Braille documents and information about 
obtaining sign language interpretation. One commenter recommended that 
we have a specific section of regulation that addresses access for 
people with disabilities. A number of other commenters suggested that 
accessibility standards be required in all modalities that individuals 
may wish to communicate with States, that is, paper, online, oral 
communication, and that applications and renewal forms meet the same 
accessibility standards. A few commenters requested flexibility for 
States in developing language services requirements as States' 
populations and needs differ, and one commenter expressed concern that 
requiring a specific standard for States could pose an unreasonable 
burden.
    Response: We are finalizing, with some modifications, our proposed 
regulations at Sec.  435.905 and Sec.  435.1200(d) (redesignated at 
Sec.  435.1200(f)) to provide information and make Web sites accessible 
to persons who are limited English proficient or have disabilities. 
Section 435.901 already requires States to comply with the Civil Rights 
Act of 1964, as well as section 504 of the Rehabilitation Act of 1973, 
and all other relevant provisions of Federal and State laws, which 
would include relevant provisions of the Americans with Disabilities 
Act. Guidance issued in 2003 (68 FR 47311) provides some parameters on 
language assistance services for persons who are limited English 
proficient, including oral interpretation and written translation 
services; this guidance is at http://www.justice.gov/crt/about/cor/lep/hhsrevisedlepguidance.pdf. On July 1, 2010 we also issued a State 
Health

[[Page 17163]]

Official Letter (<greek-i>10-007), available at http://www.cms.gov/smdl/downloads/SHO10006.pdf, explaining the enhanced match available 
for translation and interpretation services in connection with 
improving outreach to, enrollment of, and use of services by children 
in Medicaid and CHIP.
    In addition to the Civil Rights Act, we believe that the 
requirements reflected in section 1413 of the Affordable Care Act and 
section 1943 of the Act, as added by section 2201 of the Affordable 
Care Act, to establish a coordinated system of eligibility and 
enrollment across all insurance affordability programs, as well as the 
specific requirement in section 1943(b)(1)(F) of the Act that States 
establish procedures for conducting outreach to and enrolling 
vulnerable underserved populations, including racial and ethnic 
minorities, would support requiring written translation and oral 
interpretation.
    We modified our proposed Sec.  435.905(b), accordingly, to specify 
that information for persons who are limited English proficient or have 
a disability be provided in an accessible and timely manner and at no 
cost to the individual. For people with disabilities, we specify that 
accessibility includes auxiliary aids and services. We clarify that 
application and renewal forms meet the same accessibility standards at 
Sec.  435.907(g) and Sec.  435.916(g). Note that we make a minor 
modification to our proposed language in Sec.  435.905(b) to replace 
the term ``simple and understandable terms,'' with ``plain language'' 
to align with the language in the Exchange final rule at 45 CFR 
155.205(c).
    We are not adding specific accessibility standards and thresholds 
in this final rule, but intend to issue such standards in future 
guidance, seeking input first from States and other stakeholders about 
appropriate standards and thresholds. Such guidance will coordinate our 
accessibility standards with the Exchange, other insurance 
affordability programs, and across HHS programs, as appropriate, 
providing more detail regarding literacy levels, language services and 
access standards.
2. Applications (Sec.  435.907)
    To support States in developing a coordinated eligibility and 
enrollment system for all insurance affordability programs, we proposed 
to implement section 1943(b)(3) of the Act, which directs the Secretary 
to develop and provide States with a single, streamlined application. 
Accordingly, we proposed to amend the existing ``Application'' 
provisions at Sec.  435.907 to reflect use of the new single, 
streamlined application.
    Comment: Many commenters requested that we specify that States can 
continue to use multi-benefit applications. One commenter recommended 
that CMS only approve State-developed supplemental forms that collect 
enough information to qualify individuals for any human service program 
for which they may be eligible.
    Response: The intent of the rule is to codify the statutory 
requirement that there be a single streamlined application for timely 
enrollment of all eligible individuals in the appropriate health 
insurance affordability program. An individual must have an option to 
apply for Medicaid using the Secretary-developed or a Secretary-
approved single streamlined application which asks questions relevant 
only to the eligibility and administration of insurance affordability 
programs. The regulations do not prohibit use of multi-benefit 
applications, which may be approved in accordance with Sec.  
435.907(b)(2). Use of supplemental forms in conjunction with the 
streamlined application would be one acceptable approach to assure 
access to a range of benefits, but States also are permitted to develop 
alternative multi-benefit applications which do not use supplemental 
forms. We look forward to working with States interested in developing 
streamlined multi-benefit applications.
    Comment: Some commenters stated that applicants should be able to 
submit the alternative and supplemental forms for determination of non-
MAGI eligibility through the submission modes proposed at Sec.  
435.907(d).
    Response: States must make application processes accessible for all 
individuals, and maximize the submission options for individuals being 
evaluated for eligibility on a basis other than MAGI. All individuals 
must be able to begin the application process via the Internet Web 
site, telephone, mail, or in person using the single, streamlined 
application in accordance with Sec.  435.907(a). States have the option 
to use supplemental or separate forms for approval of eligibility under 
a non-MAGI category, as described in Sec.  435.907(c). To the extent 
practical, those forms should also be accepted by the agency through 
all submission modes described in Sec.  435.907(a).
    Comment: Most commenters supported the requirement for Secretarial 
approval of a State's alternative single, streamlined application and 
requested that if a State wishes to make substantive changes, we 
require an additional approval. Some commenters requested that the 
Secretarial approval process be flexible.
    Response: For States opting to develop an alternative single, 
streamlined application the statute requires that such applications be 
approved by the Secretary. To implement this provision, under Sec.  
435.907(b)(2), the regulations specify that the Secretary approve the 
initial application and any substantive change to such application. We 
intend to be flexible and timely in working with States to secure 
Secretarial approval of alternative applications that meet the relevant 
regulations and guidance.
    Comment: Some commenters mentioned specific criteria or questions 
that should be included on the model application and alternate 
applications, such as information that captures information to elicit 
eligibility for other Medicaid categories, including coverage under 
section 1115 waivers, Medicaid Buy-In programs, medically frail 
criteria or for long-term services and supports, as well as vital 
applicant information such as AI/AN status. Several commenters provided 
recommendations on the functioning of an online application, such as 
using decision tree logic to ask minimum questions, pre-populating the 
form with information available electronically, and providing a 
printable copy to applicants.
    Response: This input will help inform our work to develop the 
application and accompanying guidance.
    Comment: Some commenters supported the provision in the proposed 
regulation that alternative and supplemental forms for determination of 
non-MAGI eligibility must be approved by the Secretary in a manner 
similar to the single, streamlined application. Other commenters urged 
against requiring such approval, stating that such forms are already in 
use and do not require changes in 2014. One commenter suggested that 
the Secretary publish required data elements for these non-MAGI forms 
and facilitate best practices via review, but not approval, of non-MAGI 
applications and supplemental forms. Another commenter suggested 
delaying requirements for approval until after 2014, given the 
implementation demands on States over the next two years.
    Response: We have revised Sec.  435.907(c) to specify that any 
application or supplemental form used by a State for determining 
eligibility on bases other than the applicable MAGI standard meet 
Secretarial guidelines. These forms must be submitted to the Secretary, 
and will be available for

[[Page 17164]]

review by the public, but will not have to be approved prior to use.
    Comment: Many commenters requested that the single streamlined 
application include a question to screen for potential eligibility on a 
basis other than MAGI, such as whether an applicant may be disabled, 
and a notification that applicants have the right to a full Medicaid 
determination on all bases if desired. A few commenters requested that 
the application also include an explanation of the benefits of 
obtaining a non-MAGI determination. Many noted concerns that the 
Exchange proposed rules would require a screen for non-MAGI 
eligibility, while this is not explicitly required in the Medicaid 
Eligibility proposed rule.
    Response: We intend to include such questions on the model 
application, which will support State agencies in fulfilling provisions 
for appropriate eligibility determinations under Sec.  435.911.
    Comment: One commenter advised that the blind and disabled should 
not be required to complete any forms or provide any information beyond 
the single streamlined application. The commenter advised that the 
single, streamlined application ``should include all information 
necessary to determine eligibility whether based on income or some 
other criteria.''
    Response: Including all questions necessary for non-MAGI 
determinations on the single, streamlined application would make the 
application unnecessarily burdensome for the many applicants who will 
be eligible based on MAGI. We will work with States to design 
approaches to minimize burdens on all applicants and to help ensure 
that all eligible individuals are enrolled in the appropriate 
eligibility category.
    Comment: Some commenters questioned and raised concerns about 
logistics and expense of the requirement for telephonic applications 
and signatures and requested clarification on CMS' expectations. One 
commenter mentioned a concern with the requirement to accept 
applications via facsimile in proposed Sec.  435.907(d)(5) due to a 
possible lack of privacy inherent in fax submissions. Finally, a 
commenter expressed concern that the proposed regulations do not 
account for potential technological changes that may make new 
submission channels viable.
    Response: We anticipate that telephonic applications may be 
implemented in different ways by States, including through use of a 
call center that completes the online application in real-time with 
information obtained from the applicant on the phone. This may reduce 
expense and logistical difficulty as compared to implementing a new 
fully-automated telephonic application process. We recognize the need 
for State flexibility and will be issuing subsequent guidance on this 
issue that permits States flexibility to design their telephonic 
application process. In addition, we have deleted specific reference to 
accepting applications by facsimile in revised Sec.  435.907(a)(5), and 
have broadened this provision to include acceptance of applications via 
``other commonly available electronic means,'' to accommodate changing 
technologies. Such electronic means may include scanning, imaging, and 
email processes as well as facsimile. Under the final rule, States are 
expected to discontinue the use of technologies as they are superseded 
by newer and more commonly employed mechanisms. Acceptance of 
signatures along with an application accepted by facsimile may also 
continue under the authority to accept signatures via other electronic 
means in Sec.  435.907(f). Requirements to safeguard applicant 
information at part 431 subpart F apply equally to all applicant 
information, regardless of the mode of submission.
    Comment: Many commenters supported the policy to prohibit in-person 
interviews as a requirement of eligibility, as discussed in the 
preamble to the Medicaid Eligibility proposed rule, but requested that 
the policy be included in regulation text.
    Response: We have revised Sec.  435.907(d) to state that ``the 
agency may not require an individual to complete an in-person interview 
as part of the application process for a determination of eligibility 
using MAGI-based income.'' We are also adding corresponding language to 
Sec.  435.916 to clarify that face-to-face interviews cannot be 
required as part of a MAGI-based renewal.
    Comment: Many commenters strongly supported our proposed regulation 
to codify previous guidance prohibiting States from requiring an 
individual who is not applying for an eligibility determination for him 
or herself (a non-applicant) from providing a Social Security Number 
(SSN) or information about his or her citizenship or immigration 
status. Many commenters also supported codification of this policy in 
CHIP. However, a few commenters noted that verification of MAGI income 
through the IRS will require an SSN, and expressed concern that without 
an SSN it may not be possible to determine eligibility for these 
applicants through real-time processes. A few commenters requested that 
States be permitted to require an SSN from non-applicants to 
electronically verify household income of all applicants. A few other 
commenters requested guidance on how to verify income if a non-
applicant has not provided an SSN.
    Response: As stated in the preamble of the Medicaid Eligibility 
proposed rule (76 FR 51161), we are codifying the longstanding policy 
regarding use of an SSN contained in the Tri-Agency Guidance for 
Medicaid and CHIP, which is available at http://www.hhs.gov/ocr/civilrights/resources/specialtopics/tanf/triagencyletter.html. The 
Guidance states that individuals not seeking coverage for themselves 
who are included in an applicant's or beneficiary's household to 
determine eligibility of such applicant or beneficiary, may not be 
required to provide either an SSN or information about their 
citizenship, nationality or immigration status to avoid deterring 
enrollment of eligible applicants. Provision of an SSN may occur on a 
voluntary basis, as discussed below. That policy is grounded in section 
1902(a)(7) of the Act, Title VI of the Civil Rights Act of 1964, and 
the Privacy Act.
    If an SSN for a non-applicant household member is not provided, 
States will need to use other procedures to verify income, in 
accordance with our verification regulations, as done in States today. 
We recognize that, in some cases, verification of income without an SSN 
may not occur in real-time. We also codify this rule in CHIP at Sec.  
457.340(b) and have added a definition of ``non-applicant'' at Sec.  
435.4.
    Comment: Many commenters supported our proposed regulation that 
sets out conditions if States choose to ask for SSNs of non-applicants 
on a voluntary basis, stating these conditions are helpful to avoid 
deterring eligible individuals from applying for coverage and requested 
that we retain these requirements. A few other commenters noted their 
concern that in an online application, a non-applicant's SSN would be 
voluntary and that individuals be provided notice that providing this 
information is voluntary. A few commenters expressed concern that even 
permitting States to voluntarily ask for SSNs of non-applicants may 
deter eligible individuals and their families from applying.
    Response: We note that the Medicaid Eligibility proposed rule 
regarding the voluntary provision of SSNs codifies longstanding policy 
reflected in the Tri-Agency Guidance discussed above. We are retaining 
in this final rule the

[[Page 17165]]

codification of this policy at Sec.  435.907(e)(3), which will apply to 
the single streamlined application the Secretary develops under Sec.  
435.907(b)(1), as well as other applications and supplemental forms 
discussed at Sec.  435.907(b) and (c) of this section. We understand 
the concern that some individuals may be deterred from seeking 
coverage, even when provision of the SSN for non-applicants is 
voluntary. However, given the importance of electronic verification of 
income and other information to reduce burden and achieve real time 
eligibility determinations for applicants who may have non-applicant 
household members, we believe that States should be allowed to request, 
and individuals should have the option to provide, an SSN voluntarily, 
as long as the conditions set out in our Medicaid Eligibility proposed 
rule are met in accordance with current policy.
    Comment: A number of commenters requested that CMS codify in 
regulation text the discussion in the preamble of the Medicaid 
Eligibility proposed rule (76 CFR 51161) that information provided by a 
non-applicant necessary to determine eligibility of an applicant is 
considered information ``concerning'' the applicant or beneficiary, and 
therefore, is protected under confidentiality and safeguard provision 
of 1902(a)(7) of the Act. Commenters noted that this policy will avoid 
deterring family members that have eligible applicants.
    Response: In Sec.  431.300(b) of this final rule, we have codified 
our interpretation that information provided by a non-applicant, such 
as a parent, will be information ``concerning'' the applicant or 
beneficiary and will be protected to the same extent as applicant or 
beneficiary information under section 1902(a)(7) of the Act. We also 
clarify that information of applicants and beneficiaries includes 
information submitted by a non-applicant. Note that we have replaced 
the term ``recipient'' with ``beneficiary'' in our final rule, and we 
intend the terms to have the same meaning. At Sec.  431.305(b), we add 
SSNs to the list of information for which a State must have criteria 
and a plan to safeguard, consistent with current policy and other 
privacy law protections. In the final rule, we also revise proposed 
Sec.  435.907(e)(2)(ii), redesignated as Sec.  435.907(e)(3)(ii) in 
this rule, to permit a non-applicant's SSN to be shared with other 
insurance affordability programs for the purposes of an eligibility 
determination for those programs.
    Comment: A number of commenters requested that we codify in 
regulation that a State cannot require information that is not 
necessary to determine eligibility, including asking that we amend our 
regulations to preclude a State from ``requesting'' information from a 
non-applicant about his or her citizenship or immigration status. A 
number of commenters expressed concern that any inquiry about 
citizenship or immigration status will have a chilling effect on 
eligible applicants living with household members who are not applying 
for coverage.
    Response: States may only require information that is necessary to 
make an eligibility determination or that is directly connected to 
administration of the State plan and we are codifying this longstanding 
policy in regulation text in revised Sec.  435.907(e)(1) of the final 
rule. In Sec.  435.907(e)(2), we clarify that, in addition, a State may 
request information necessary to determine eligibility for another 
insurance affordability program or other benefit program. States may 
not request information regarding a non-applicant's citizenship or 
immigration status under this rule. We also have amended Sec.  
435.916(e) to clarify that renewal forms must not collect information 
that is unnecessary to renew eligibility and that the provisions at 
Sec.  435.907(e) apply to the renewal process.
    Comment: One commenter questioned if proposed Sec.  435.907(e) 
conflicts with proposed Sec.  435.948(c)(2) (redesignated at Sec.  
435.948(c) in the final rule) which requires the agency to request 
income information by submitting an individual's SSN when it is 
available.
    Response: We do not believe there is a conflict between these 
provisions. Section 435.948(c) takes into account the possibility that 
an SSN may not be available, which is consistent with Sec.  435.907(e).
    Comment: One commenter suggested that we include in regulation the 
legal sources and bases for the policy outlined in Sec.  435.907(e), 
such as the section 1902(a)(7) of the Act, the Civil Rights Act of 
1964, Privacy Act, and Tri-Agency Guidance. The commenter suggested we 
also include those sources in Medicaid and CHIP regulation for 
application and redetermination at Sec.  435.907, Sec.  435.916, Sec.  
457.330, and Sec.  457.335.
    Response: The applicability of section 1902(a)(7) of the Act to 
non-applicant information is specified at Sec.  431.300. Further, our 
current regulation at Sec.  435.901 requires compliance with Title VI 
of the Civil Rights Act of 1964 and other Federal laws. Thus, while we 
have discussed the statutes and guidance in the preamble to this final 
rule, we do not think that it is necessary to further cite the other 
recommended statutes and guidance in our revisions to the regulations.
3. Assistance With Application and Renewal (Sec.  435.908)
    We proposed to amend the provisions of Sec.  435.908 to ensure that 
the agency provide assistance through a variety of means to aid 
individuals seeking help with the application or redetermination 
process. We also proposed 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 individuals 
who are limited English proficient. In this final rule, we are 
switching the order of Sec.  435.908 (a) and (b).
    Comment: Some commenters requested that we clarify the difference 
between assisters and authorized representatives and specify what 
authorized representatives can do.
    Response: There is a difference between an application assister and 
an authorized representative both in the way that they are designated 
by the applicant, as well as the permissions that are given within the 
application and renewal processes. In general, application assisters 
are staff and volunteers of organizations authorized by the State 
Medicaid agency or State CHIP agency to provide assistance to 
individuals with the application and renewal process, at the request of 
the applicant/beneficiary. The activities of assisters generally 
include providing information on insurance affordability programs and 
coverage options, helping individuals complete an application or 
renewal, and gathering required documentation. In contrast, an 
applicant may designate an authorized representative who may act on 
behalf of the applicant or beneficiary including signing the 
application and receiving notices. Regardless of whether an applicant 
or beneficiary has selected an assister or designated an authorized 
representative, the agency must provide the assistance described in 
Sec.  435.908(a). Additional information about the potential roles and 
responsibilities of authorized representatives and assisters will be 
provided in subsequent guidance. We anticipate that if individuals who 
help with application and renewal processes as provided in Sec.  
435.908(b) are not recognized by a State agency, not officially 
designated as authorized representatives and not permitted to submit an 
application as provided in Sec.  435.907(a), then such individuals will 
not have access to sensitive applicant and beneficiary

[[Page 17166]]

information, consistent with confidentiality regulations in 42 CFR part 
431 subpart F and the statutory protections that apply to IRS data.
    Comment: One commenter noted that in their State a doctor's note is 
currently required for an individual to appoint an authorized 
representative.
    Response: Such a requirement is not consistent with current 
longstanding regulations at Sec.  435.907 and Sec.  435.908 as revised 
in this rulemaking. Legally competent applicants and beneficiaries must 
be permitted to designate representatives of their choosing and 
authorization from a physician is not a prerequisite for such a 
designation. In addition, we have further clarified at Sec.  435.907(a) 
the situations in which the State Medicaid agency must accept an 
application from someone acting responsibly on behalf of an applicant.
    Comment: Most commenters expressed strong support for the 
requirements in proposed Sec.  435.908(b) for agencies to provide 
assistance in multiple modes. Some commenters requested that we specify 
that assistance must be provided during and outside normal business 
hours, or through specific mechanisms such as internet kiosks. One 
commenter stated that assistance from community-based organizations is 
far more effective than a State's customer service telephone line.
    Response: While it is important to have a range of assistance 
opportunities available, we do not believe that our regulations should 
be revised to provide additional specificity as to the manner in which 
the Medicaid agency provides assistance. Assistance provided by other 
entities is outside the scope of this rulemaking.
    Comment: Some commenters suggested that the rule should codify 
outreach requirements to vulnerable and underserved populations, as 
required by section 1943(b)(1)(F) of the Act. Some emphasized the 
importance of addressing the unique needs of certain populations, such 
as those with mental illness and substance abuse disorders. Others 
asked that certain organizations and places be specifically recognized 
as key providers of application assistance and outreach, such as 
hospitals, Federally Qualified Health Centers (FQHCs), and correctional 
facilities. Some commenters noted the potential to leverage Medicaid 
outstationing requirements to provide outreach. Some commenters 
inquired about Federal funding for outreach.
    Response: We did not propose any new outreach requirements and, at 
this time, we are not codifying new outreach requirements. We recognize 
the importance of outreach, and we intend to inform States of all 
available options to obtain Federal funding for outreach activities as 
we work together to move ahead with implementation of these changes.
    Comment: One commenter noted that if an individual is found 
ineligible for all insurance affordability programs, then he or she 
should be referred to a consumer assistance program or navigator who 
can provide information on obtaining coverage outside the Exchange.
    Response: We do not have the authority to require agencies to 
provide assistance in obtaining coverage other than through the 
Exchange, Medicaid and CHIP and the BHP, if applicable.
    Comment: Several commenters wrote about the relationship between 
Sec.  435.908 and the requirements in 45 CFR 155.205 on Medicaid and 
CHIP assistance via Exchange Navigators. Some commenters suggested a 
requirement that Medicaid and CHIP application and renewal assistance 
meet the same criteria required for Exchange assistance. One commenter 
inquired whether States may combine these programs.
    Response: The Medicaid agency is responsible for fulfilling the 
requirements of the Medicaid regulations at Sec.  435.908. The 
assistance which Medicaid agencies provide under Sec.  435.908 is 
distinct from that provided by Exchange Navigators in accordance with 
45 CFR 155.210 of the final Exchange regulation. Some aspects of 
applicant and beneficiary assistance may be integrated with the 
consumer assistance tools and programs of the Exchange. For example, a 
State may choose to operate one application assistance call center or 
one applicant assistance online chat feature.
    Comment: Many commenters encouraged the Secretary to measure the 
effectiveness of the assistance efforts and State agency performance by 
looking at criteria including call abandonment, call wait times, number 
of days to wait for an in-person assistance appointment, and waiting 
time for online assistance.
    Response: As noted in the preamble to the Medicaid Eligibility 
proposed rule, we intend to develop performance and processing 
standards for many aspects of the application and eligibility 
determination process in consultation with States, consumer groups and 
other stakeholders. We will consider these recommendations in 
developing such standards.
    Comment: Many commenters expressed strong support for our proposed 
regulation at Sec.  435.908(b) to have States provide assistance to 
persons with disabilities and those who are limited English proficient 
who seek help with the application or redetermination process. Some 
commenters made recommendations to make the types of assistance 
required more specific, such as including oral interpretation, sign 
language interpreters, Braille and large print, and translated 
materials. A few commenters also suggested that we require that any 
assistance to persons who are limited English proficient be provided in 
a culturally competent manner. A few commenters recommended codifying a 
duty to assist when an applicant reports the existence of a disability, 
consistent with the requirements of the Americans with Disabilities 
Act.
    Response: We have revised Sec.  435.908 to align with our 
modifications in Sec.  435.905. Individual who are limited English 
proficient or have disabilities should be provided assistance in an 
accessible manner. We are not addressing specific components of 
assistance such as cultural competence or a duty to assist in this 
rule, but will consider these comments as we develop subsequent 
guidance on these issues. For more detail regarding accessibility, see 
the discussion in section III.E.1. of the preamble.

F. MAGI Screen (Sec.  435.911)

    Consistent with sections 1902(a)(4), (a)(8), (a)(10(A), (a)(19), 
and (e)(14) and section 1943 of the Act, in Sec.  435.911, we described 
a new simplified test for determining eligibility based on MAGI. We 
also proposed several pertinent definitions, including ``applicable 
MAGI standards,'' which will be at least 133 percent of the FPL, but in 
some States, based on State-established standards, may be higher for 
pregnant women, children, or in a few States, parents and caretaker 
relatives. These and other proposed provisions are discussed in more 
detail in the Medicaid Eligibility proposed rule (76 FR 51161 and 
51162).
    Comment: We received many comments on the eligibility of 
individuals with disabilities and those needing long-term services and 
supports under the Medicaid Eligibility proposed rule. Under the 
Medicaid Eligibility proposed rule, if an applicant is eligible based 
on the applicable MAGI standard, a State would not determine whether 
that person is also eligible under an optional group (for example, for 
blind or disabled individuals). Many commenters appreciated the ability 
of everyone with income below the applicable MAGI standard to be 
quickly and efficiently determined eligible for coverage without regard 
to disability

[[Page 17167]]

status or need for institutional or other long-term services and 
supports. However, commenters uniformly were concerned that individuals 
who qualify for coverage using current methodologies under an optional 
group for disabled individuals or an optional group covering 
institutional or other long-term services and supports would be 
adversely impacted under the Medicaid Eligibility proposed rule, 
because such individuals would be required to enroll for coverage in 
the adult group at Sec.  435.119 and the commenters were concerned that 
eligibility under the adult group would not meet their benefit needs to 
the same extent as eligibility under the optional eligibility groups.
    A few commenters noted the operational difficulty States may have 
in ensuring that persons needing long-term services and supports are 
placed in the most appropriate eligibility category. Many commenters 
stated that the Medicaid Eligibility proposed rule was inconsistent 
with Medicaid requirements that beneficiaries eligible for more than 
one category may choose to have their eligibility determined under 
either category and that States determine eligibility in the ``best 
interest'' of Medicaid beneficiaries. At least one commenter suggested 
that all individuals in need of long-term services and supports be 
exempted from using the MAGI methodology or be given the option to 
apply for long-term services and supports under existing methodologies.
    Response: We have revised the policy in this final rule to ensure 
that individuals who meet the eligibility requirements for coverage 
based on the applicable MAGI standard (for example, under the new adult 
group at Sec.  435.119) and who also meet the requirements for coverage 
under an optional eligibility group excepted under section 
1902(e)(14)(D) of the Act from the application of MAGI methods may 
enroll in the optional eligibility group. As discussed in Section B of 
the preamble, we are interpreting the exception from application of 
MAGI-based methods at sections 1902(e)(14)(D)(i)(III) and 
1902(e)(14)(D)(iv) of the Act, codified at Sec.  435.603(j)(3) and 
(j)(4) of this final rule, to apply for the purpose of determining 
eligibility on the basis of disability or being blind or for an 
eligibility group under which long-term services and supports are 
covered. Individuals who meet the eligibility requirements for coverage 
based on the applicable MAGI standard nonetheless may be excepted from 
application of MAGI methods for purposes of evaluation under an 
optional eligibility group which better meets their coverage needs. 
Until eligibility on such other basis is determined, such individuals 
are not precluded from enrolling in the program under the new adult 
group (or other eligibility group, such as for children or pregnant 
women) based on MAGI. However, while no individual may be required to 
provide additional information needed to determine eligibility based on 
disability or another MAGI-excepted basis, once eligibility on such 
basis is established, the individual would no longer be eligible for 
Medicaid on the basis of MAGI (unless his or her circumstances 
changed), but would enroll in the program on the MAGI-excepted basis.
    Under this final rule, individuals who meet the eligibility 
criteria for coverage based on the applicable MAGI standard will be 
able to receive coverage on that basis while they undergo a final 
determination of eligibility based on eligibility for an optional group 
covering long-term services and supports. Beneficiaries enrolled in 
coverage under a MAGI-based eligibility group also will be able to move 
to an optional group based on a disability or long-term care needs 
should their circumstances change. Consistent with current rules at 
Sec.  435.905(a) and in accordance with Sec.  435.911(c)(2), States 
must determine eligibility under a basis other than MAGI for an 
individual described in Sec.  435.911(d), which includes individuals 
who indicate such potential eligibility on the single streamlined 
application, alternative application or renewal forms, as well as those 
who request such a determination. In addition, in accordance with 
current regulations at Sec.  435.905, States must provide information 
to applicants and beneficiaries about the different eligibility options 
and benefit packages to enable them to make an informed decision about 
seeking coverage under other eligibility groups which may better meet 
their needs.
    This policy change is implemented through revisions to the 
regulatory provisions relating to the MAGI screen at proposed Sec.  
435.911 and to the regulatory provisions relating to the exceptions 
from MAGI-based financial methodologies proposed at Sec.  435.603(i)(3) 
and (i)(4) in the Medicaid Eligibility proposed rule (redesignated at 
Sec.  435.603(j)(3) and (j)(4) in this final rule). Revisions at Sec.  
435.603(j) are discussed in section III.B. of the preamble. For Sec.  
435.911, paragraphs (a) and (b), which set forth the statutory basis 
and applicable MAGI standards for the eligibility categories described 
at Sec.  435.110, Sec.  435.116, Sec.  435.118, Sec.  435.119, and 
Sec.  435.218, remain unchanged. In Sec.  435.911(c), we retain our 
proposed language that this paragraph applies to individuals who submit 
an application described in Sec.  435.907 and meet the non-financial 
eligibility criteria or are determined eligible for Medicaid under a 
reasonable opportunity period to verify citizenship or immigration 
status. We have also added language to paragraph (c) to clarify the 
responsibility of the agency to apply Sec.  435.911 to individuals 
whose eligibility is being renewed in accordance with Sec.  435.916. 
Note that the process for determining eligibility set forth in Sec.  
435.911 will not apply at initial enrollment to so-called ``auto-
eligibles'' who are not required to file an application described in 
Sec.  435.907--for example, individuals who are automatically eligible 
for Medicaid due to receipt of SSI or benefits under title IV-E of the 
Act and newborns deemed eligible under section 1902(e)(4) of the Act 
and Sec.  435.117 of the regulations.
    We are revising Sec.  435.911(c)(1) to provide that the State must 
furnish Medicaid promptly and without undue delay, consistent with 
timeliness standards established under Sec.  435.912, to individuals 
(including children, pregnant women, parents and caretaker relatives 
and certain adults under age 65 not eligible for Medicare) who are at 
or below the applicable MAGI standard. In the case of individuals who 
may be eligible on a basis other than the applicable MAGI standard (for 
example, based on disability), the obligation under Sec.  435.911(c)(1) 
can be met either by promptly determining an individual eligible based 
on the applicable MAGI standard and providing benefits on such basis 
and then exploring eligibility for other eligibility categories 
excepted from MAGI methods, as appropriate, or, if possible to achieve 
promptly and without undue delay, by first determining eligibility on 
the MAGI-excepted basis.
    Paragraph (c)(2) of Sec.  435.911 is revised to ensure that States 
also determine eligibility for Medicaid on a basis other than the 
applicable MAGI standard in the case of the following individuals, 
described in a new paragraph (d) which includes: (1) Individuals whom 
the agency identifies on the basis of information contained in the 
single streamlined application used for all insurance affordability 
programs or renewal form described in Sec.  435.916(a)(3), or on the 
basis of other information available to the State, as potentially 
eligible on a basis other than the applicable MAGI standard; (2) 
Individuals who submit an alternative application designed for MAGI-
excepted

[[Page 17168]]

populations; and (3) Individuals who otherwise request a determination 
of eligibility on a basis other than the applicable MAGI standard. 
Under Sec.  435.911(c)(2), the Medicaid agency will need to collect 
such additional information as may be needed to determine eligibility 
on such other basis in accordance with our regulations at Sec.  
435.907(c). Note that Sec.  435.911(c)(2) applies to both individuals 
with MAGI-based household income at or below the applicable MAGI 
standard, as well as to those with MAGI-based household income above 
the applicable MAGI standard. In the case of individuals with income 
above the applicable MAGI standard, paragraph (c)(2) also applies to 
the determination of eligibility under optional eligibility groups 
subject to MAGI-based methods--for example, optional coverage of 
children receiving State adoption assistance in families with income 
above the applicable MAGI standard for children in the State, as well 
as optional groups excepted from MAGI methods.
    Finally, although the comments received and the discussion above 
focus on the implications of Sec.  435.911 for individuals with 
disabilities and those needing long-term services and supports, we note 
that Sec.  435.911(c) applies also in the case of individuals who may 
be excepted from the application of MAGI-based methodologies on other 
bases, including medically needy individuals eligible under section 
1902(a)(10)(C) of the Act and 42 CFR part 435, subparts D and I of the 
regulations, excepted from MAGI-based methods at Sec.  435.603(j)(6) 
and women screened under the Centers for Disease Control and Prevention 
(CDC) breast and cervical cancer early detection program, eligible 
under sections 1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act, 
excepted from MAGI-based methods at Sec.  435.603(j)(1).
    Section Sec.  435.911(c)(3), redesignated from Sec.  
435.911(c)(2)(iii), relates to coordination of eligibility with the 
Exchange when an individual is ineligible for Medicaid based on the 
applicable MAGI standard, but is undergoing a Medicaid determination on 
another basis. In paragraph (c)(3), we have revised the cross-reference 
to our regulations at Sec.  435.1200(e) to reflect revisions to Sec.  
435.1200 in this final rule, and the text at paragraph (c)(3) is not 
substantively modified.
    Comment: Some commenters requested that State Medicaid agencies be 
required to screen for the Part D Low-Income Subsidy (LIS) program, 
although they acknowledged that LIS is not included in the insurance 
affordability program definition. One commenter stated that required 
screenings should include potential Medicare Savings Program (MSP) 
eligibility.
    Response: Since LIS is not defined in the Affordable Care Act as an 
insurance affordability program, these rules cannot require a State to 
screen for it. In addition, nothing in our regulation changes already 
existing requirements for States to determine an individual's 
eligibility on the most advantageous basis including eligibility for 
Medicare Savings Programs.
    Comment: One commenter suggested the final rule should require 
States to screen for pregnancy-related coverage, eligibility for women 
with breast or cervical cancer, eligibility for family planning 
services, and that States otherwise should provide information to 
individuals about all of the available coverage options.
    Response: Eligibility for pregnant women with income below the 
applicable MAGI standard is included in determination of eligibility 
under Sec.  435.911(c)(1). As noted above, Sec.  435.911 applies to all 
individuals described in Sec.  435.911(d), including individuals such 
as women with breast or cervical cancer, and States will be expected in 
accordance with Sec.  435.905, to provide individuals with sufficient 
information to make an informed choice about requesting a determination 
on a basis other than the applicable MAGI standard.
    Comment: A few commenters requested clarification regarding the 
treatment of parents and caretaker relatives who may be eligible under 
an optional group for parent or caretaker relatives or for better 
benefits under section 1931 of the Act and Sec.  435.110 than the 
benchmark benefits that may be offered to individuals in the adult 
group.
    Response: In furnishing medical assistance to individuals whose 
MAGI-based income is at or below the applicable MAGI standard in 
accordance with Sec.  435.911(b) and (c)(1), States will need to ensure 
that individuals are enrolled in the categories for which they are 
eligible and covered for the relevant benefits. Parents and caretaker 
relatives with income below the standard applied by the State under 
Sec.  435.110, should be enrolled for coverage in accordance with that 
section. Parents and caretaker relatives who meet both the eligibility 
requirements for coverage under an optional group for parents and 
caretaker relatives and for coverage under the new mandatory adult 
group will be enrolled under the new adult group. If the State covers 
optional parents and caretaker relatives up to an income standard 
higher than 133 percent of the FPL, such individuals would be enrolled 
in the optional group in accordance with Sec.  435.911(c)(2).
    Comment: Several commenters also requested clarification on how 
eligibility under the new optional group for individuals above 133 
percent of the FPL under section 1902(a)(10)(A)(ii)(XX) of the Act, 
codified at Sec.  435.218 of the regulations, fits into the MAGI screen 
in Sec.  435.911.
    Response: If a State has elected to cover the optional group 
codified at Sec.  435.218 for individuals with income above 133 percent 
FPL, the income standard applied by the State to this group is 
incorporated into the applicable MAGI standard under Sec.  
435.911(b)(1)(iv).
    Comment: One commenter asked for clarification of whether proposed 
Sec.  435.911(b)(1)(i) contradicts Sec.  435.110(c) that describes the 
income standard for parents and caretaker relatives.
    Response: Parents and caretaker relatives certainly will be 
eligible if their MAGI-based income is below 133 percent of the FPL--
under either the new adult group at Sec.  435.119 or under the 
mandatory group for parents and caretaker relatives at Sec.  435.110. 
Typically, the income standard for coverage of parents and caretaker 
relatives under Sec.  435.110(c) will be less than 133 percent of the 
FPL, but if higher, the applicable MAGI standard under Sec.  
435.911(b)(1) will be such higher standard.
    Comment: Some commenters stated that the proposed regulations have 
constructed two different doors to access health care which will result 
in different outcomes for the applicant depending on which door the 
applicant enters through. The commenters stated that the proposed rules 
for the Exchange generally require a basic screening for Medicaid on 
bases other than the applicable MAGI standard, whereas the proposed 
Medicaid rules at Sec.  435.911 require a full Medicaid eligibility 
determination only when an applicant is not found eligible for ``MAGI-
based Medicaid,'' by which we assume the commenters mean that the 
applicant's income exceeds the applicable MAGI standard. The commenters 
question the utility of the ``basic screen'' by the Exchange, since all 
cases in which the Exchange screens individuals as potentially eligible 
on a basis other than the applicable MAGI standard will be referred to 
Medicaid for further evaluation, but the Medicaid agency will not 
evaluate eligibility on such other bases if the individual has income 
at or below the applicable MAGI

[[Page 17169]]

standard. In addition, the commenters stated that even if the 
Exchange's screening questions are identical to Medicaid's eligibility 
questions, a person who could have been found Medicaid eligible may not 
complete the Medicaid eligibility determination process after he or she 
has enrolled in a QHP with subsidized premiums.
    Response: The ``basic screen'' is designed to allow a streamlined 
eligibility process by which individuals applying through the Exchange 
can get real-time eligibility determinations, either by the Exchange or 
the Medicaid agency, without having to wait for the Medicaid agency to 
review and make a determination based on disability or other MAGI-
excepted bases that may take longer to complete. Regardless of which 
entity initially handles the application, all individuals will be 
treated the same. Under Sec.  435.911 and Sec.  435.1200(d) and the 
Exchange final regulation at 45 CFR 155.345, both individuals with 
income at or below the applicable MAGI standard as well as those with 
income above the applicable MAGI standard will be considered on other 
bases by the Medicaid agency, consistent with Sec.  435.911(c)(2). 
Under the Exchange final regulation at 45 CFR 155.345, for an applicant 
who is not eligible for Medicaid based on the applicable MAGI-based 
standard, using the single streamlined application, the Exchange will 
assess the information provided by the applicant on his or her 
application for potential Medicaid eligibility based on factors other 
than the applicable Medicaid MAGI-based income standard. In accordance 
with 45 CFR 155.345(e) of the Exchange regulation and Sec.  
435.911(c)(3) and Sec.  435.1200(e)(2) of the Medicaid regulation, such 
individuals will be permitted to enroll in a QHP through the Exchange 
and receive APTCs until Medicaid notifies the Exchange that the 
applicant is eligible for and enrolled in Medicaid. Similarly, under 
Sec.  435.911(c)(3) and Sec.  435.1200(e)(2), individuals who submit a 
streamlined application to the Medicaid agency and who have MAGI-based 
income above the applicable MAGI standard, but who may be eligible for 
Medicaid on another basis, will be able to enroll through the Exchange 
and receive APTCs pending completion of the Medicaid determination on 
bases other than the applicable MAGI standard. Individuals with MAGI-
based income at or below the applicable MAGI standard also will be 
treated the same regardless of which program receives the initial 
application, as the Medicaid agency will be responsible, under Sec.  
435.1200(c)(2) and (d)(3) of this final rule, for ensuring that 
individuals who apply to the Exchange but have income at or below the 
MAGI standard are evaluated for coverage on other bases in accordance 
with Sec.  435.911(c)(2) to the same extent as similarly-situated 
individuals who submit an application directly to the Medicaid agency.
    Comment: One commenter requested clarification of the retention of 
the provisions at Sec.  435.608 that require applicants to take 
necessary steps to obtain other benefits such as any annuities, 
pensions, retirement, and disability benefits, to which they are 
entitled. The commenter requests that CMS consider these requirements 
when creating the single, streamlined application.
    Response: There is nothing in this rule that changes Sec.  435.608, 
but we note that States may not delay approval of an individual's 
eligibility for the Medicaid program based on this provision.
    Comment: Several commenters asked who bears the financial liability 
for benefits costs incurred for individuals incorrectly determined 
eligible for Medicaid by another insurance affordability program.
    Response: Nothing in this rule affects the financial liability 
requirements under the Medicaid program. The Medicaid agency is 
responsible for assuring quality in the Medicaid program, including 
exercising oversight and taking any necessary actions to correct errors 
in the program, as affirmed in the single State agency regulation at 
Sec.  431.10. For more discussion of the oversight responsibilities of 
a State agency, see the discussion in section III.K. of this preamble. 
Regulations governing the MEQC or PERM programs also remain in effect 
and, as noted, we will be reviewing these rules to ensure alignment 
with the rules issued under this regulation and the development of a 
coordinated eligibility and enrollment system involving all insurance 
affordability programs. There is no recoupment of funds between 
insurance affordability programs for individuals placed in the 
incorrect program.
    Comment: One commenter understands that individuals with household 
income at or below the applicable MAGI standard could be declared 
presumptively eligible for Medicaid benefits promptly and without undue 
delay. One commenter asked about costs incurred during a presumptive 
eligibility period.
    Response: Coverage provided to an individual based on MAGI who 
might then be moved to a different eligibility category, for example 
based on disability, is not based on presumptive eligibility. These 
individuals are fully eligible for Medicaid based on MAGI standards, 
even if they ultimately might be found eligible under another 
eligibility category. These rules do not modify the presumptive 
eligibility rules that currently apply under the Medicaid program, or 
address new rules relating to presumptive eligibility enacted under the 
Affordable Care Act.
    Comment: Many commenters requested clarification as to whether the 
term ``as needed'' in Sec.  435.911(c)(2) is meant to limit what 
additional information may be collected from an applicant to that 
information that is required to make a determination of eligibility on 
a basis other than the applicable MAGI standard, as opposed to limiting 
States' discretion to request information that is not relevant to the 
determination of Medicaid eligibility on such bases.
    Response: Information that is not necessary to make an eligibility 
determination cannot be required. The phrase ``as needed'' in Sec.  
435.911(c)(2) (revised to read, ``as may be needed'' in the final rule) 
refers specifically to information that the agency does not have--for 
example, based on the information received through the single, 
streamlined application used by all insurance affordability programs--
but which is needed to determine eligibility on a basis other than the 
applicable MAGI standard. Collection of additional information needed 
to determine eligibility on a basis other than the applicable MAGI 
standard, in accordance with Sec.  435.907(c), would be appropriate.
    Comment: A number of commenters requested further guidance on what 
``promptly and without undue delay'' means, and how such standard 
relates to the current 45 and 90 days application processing timeframes 
set forth in existing regulations at Sec.  435.911 (redesignated as 
Sec.  435.912 in this rule), and of the impact on the MAGI-exempt 
populations.
    Response: Existing regulations at Sec.  435.911 (redesignated at 
Sec.  435.912 in this rule as interim final for which we soliciting 
comments), provide that State Medicaid agencies establish timeliness 
standards for determining eligibility, not to exceed 90 days in the 
case of individuals applying for coverage on the basis of disability, 
and 45 days in the case of all other applicants. As discussed in 
section III.D. of this preamble, we are revising Sec.  435.912 to 
provide further parameters on the standards regarding the adjudication 
of eligibility which States are directed to establish under the 
regulations. Revised

[[Page 17170]]

Sec.  435.912(b) and (c) provide that such standards both may not 
exceed the current 90 and 45 day limit for any individual applicant and 
must also provide for prompt eligibility determinations across the pool 
of individuals seeking coverage.
    Comment: One commenter requested clarification of whether States 
still need to determine eligibility for emergency services for non-
qualified immigrants who do not qualify for full Medicaid benefits but 
are eligible for enrollment in coverage through the Exchange with APTC. 
The commenter stated that it is inappropriate for taxpayers to cover 
both Federal emergency services and subsidized insurance premiums for 
non-qualified immigrants.
    Response: Nothing in the Affordable Care Act changes the 
requirement that States provide emergency services to individuals not 
eligible for full Medicaid benefits due to their immigration status, 
and States will still need to determine eligibility for emergency 
services for such populations. To the extent that any such individuals 
have insurance, either through the Exchange or otherwise, Medicaid 
would pay secondary to that insurance, so there would be no duplication 
of coverage. Whether immigrants who are enrolled in Medicaid for 
coverage of emergency services only can qualify for APTC is a separate 
question relating to the definition of ``minimum essential coverage'' 
under section 5000A(f) of the IRC, and is beyond the scope of this 
rulemaking.

G. Coverage Month (Sec.  435.917)

    In the Medicaid Eligibility proposed rule, we noted that under the 
Exchange proposed rule at Sec.  155.410, enrollment in the Exchange for 
individuals terminated from Medicaid would begin at the earliest on the 
first day of the month following the date the individual loses Medicaid 
eligibility and is determined Exchange-eligible. Under the Exchange 
proposed rule, if the individual was terminated from Medicaid or CHIP 
after the 22nd of the month, Exchange enrollment would begin at the 
earliest on the first day of the second month after the termination 
date. To help address the potential for a gap in coverage, the final 
Exchange rule at 45 CFR 155.420(b)(2)(ii) will allow individuals 
enrolling through a special enrollment period, including those losing 
Medicaid or CHIP, to enroll by the first day of the following month, 
provided plan selection is completed by the end of the month of 
termination from Medicaid or CHIP. Therefore, beneficiaries terminated, 
for example, on the 31st of the month may be able to enroll as early as 
the next day in Exchange coverage. Nonetheless, for beneficiaries 
terminated earlier, a gap in coverage could still occur for a period 
that could last close to a full month if States do not extend Medicaid 
or CHIP coverage until the end of the month.
    We noted that directing State Medicaid and CHIP programs to extend 
coverage until the end of the month in which coverage is terminated 
could help promote continuity of coverage, and requested comments on 
whether the benefits of doing so outweigh the costs of imposing such a 
requirement. Current Medicaid and CHIP regulations are silent regarding 
whether a State must end eligibility on the day that an individual is 
determined no longer eligible for assistance, subject to the Medicaid 
and CHIP notice provisions, or whether coverage may continue until the 
end of the month, although in practice we believe many States continue 
coverage until the end of the month.
    Comment: Comments on this issue were mixed, with some commenters 
expressing support for and others opposition to a policy requiring 
coverage to the end of the month in which eligibility otherwise would 
terminate. Numerous commenters voiced strong support for a policy of 
extending coverage to align with Exchange coverage months to prevent 
gaps in coverage. The commenters noted that even small disruptions in 
coverage can have significant medical and financial consequences, 
especially for individuals with chronic conditions and/or needing 
medication. Some commenters stated that additional time would also 
allow States to correct for inaccurate terminations (for example, if a 
pre-populated renewal form goes to the wrong address). A few commenters 
noted that many States already operate in this manner for managed care 
enrollees. One commenter stated that there are precedents for such a 
policy, already including pregnant women, whose coverage extends at 
least 60 days post-partum; parents who are provided Transitional 
Medical Assistance (TMA) for several months after becoming ineligible; 
and children in States with continuous eligibility policies. Some 
commenters familiar with States that already have a health insurance 
exchange urged extending the coverage month, citing communication and 
systems problems for individuals moving between Medicaid and an 
Exchange and urged that Medicaid coverage be extended until the 
individual is actually enrolled in the Exchange. Several commenters 
cited to churning studies. One commenter suggested that extending 
coverage was consistent with Medicaid's role as a safety net provider.
    Conversely, several commenters stated that States must have 
flexibility to end coverage at any time during the month. They were 
concerned that the costs could be significant if we required otherwise. 
One commenter urged that the Federal government provide 100 percent FFP 
for gaps in coverage if Medicaid is extended to smooth transitions. 
Another commenter suggested we adopt exceptions to any coverage month 
requirement in the event of beneficiary death, fraud (allowing 
termination with a 5-day notice as in current policy), extension of 
eligibility pending appeal if the beneficiary does not prevail in the 
appeal (immediate termination), incarceration, when an individual moves 
out of State has been determined eligible in the new State, and if 
private insurance is available and the person can be enrolled in such 
coverage.
    Finally, some commenters gave alternative suggestions to solve the 
potential gap in coverage. Some commenters suggested extending the 
notice period for termination--so that termination does not take effect 
until at least the last day of the current month, if such notice is 
provided prior to the 12th, or the last day of the subsequent month if 
notice is on the 12th or later. One commenter also suggested that CMS 
offer to defray medical expenses for patients who experience gaps in 
coverage when they move from Medicaid to the Exchange. The same 
commenter also suggested requiring Exchange coverage to begin the day 
after Medicaid coverage terminates, rather than the first day of the 
subsequent month--even if the individual forgoes premium credits or 
cost-sharing until the following month. Another commenter suggested 
allowing individuals ineligible for Medicaid but eligible for premium 
subsidies to continue enrollment in their Medicaid health plan on an 
opt-out basis, even after a determination of ineligibility for 
Medicaid, without requiring the plan to meet Exchange requirements to 
minimize disruptions in coverage.
    Response: The final Exchange rule has been revised at 45 CFR 
155.420(b)(2)(ii) to allow an individual to enroll in an Exchange plan, 
regardless of what point in the prior month the individual has been 
terminated, will partially close the coverage gap. In this final rule, 
we will not require the extension of Medicaid and CHIP through the end 
of the month, but we encourage States to fill the gap by providing 
coverage through the end

[[Page 17171]]

of the month that an individual is terminated from coverage, as many 
States do today. We note that for States that choose to do this, FFP at 
the applicable match rate will be available for this extended coverage.
    Comment: One commenter requested that CMS consider allowing 
extensions of coverage through the end of the month for individuals 
terminated from Exchange coverage who become Medicaid eligible. 
Allowing a recipient to remain in the Exchange until the end of the 
month and permitting Medicaid to start at the beginning of the next 
calendar month would prevent duplication in eligibility periods and 
possible double payment of Federal funds.
    Response: The Exchange final rule at 45 CFR 155.430(d)(2)(iv) 
provides that the last day of coverage is the day before coverage in 
Medicaid, CHIP, or the BHP if applicable begins. This rule is intended 
to minimize gaps in coverage for individuals moving from Exchange 
coverage to Medicaid.
    Comment: One commenter suggested that retroactive coverage is no 
longer needed and that CMS should remove this requirement.
    Response: The Affordable Care Act did not make any change to the 
retroactive coverage provisions in the Act. For MAGI populations 
applying for Medicaid coverage, retroactive eligibility means that the 
effective date of such coverage can be up to three months prior to the 
date of the application if covered services have been rendered at any 
time during that time period, in accordance with Sec.  435.914.

H. Verification of Income and Other Eligibility Criteria (Sec.  
435.940, Sec.  435.945, Sec.  435.948, Sec.  435.949, Sec.  435.952, 
and Sec.  435.956)

    In the Medicaid Eligibility proposed rule, we proposed amendments 
to 42 CFR part 435 subpart J to make verification processes more 
efficient, modern, and also coordinated with the Exchange policies in 
proposed 45 CFR 155.315 and 155.320 (76 FR 51231 through 51234). In 
general, our proposed rules maximized reliance on electronic data 
sources, shifted certain verification responsibilities to the Federal 
government, and provided States flexibility in how and when they verify 
information needed to determine Medicaid eligibility. The proposed 
changes drew from successful State verification systems and strategies. 
The major changes proposed included:
    <bullet> In accordance with section 1413(c) of the Affordable Care 
Act, all insurance affordability programs will use an electronic 
service established by the Secretary (``Federal data services hub'') 
through which they 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).
    <bullet> Consistent with current policy, State Medicaid agencies 
may accept self-attestation of all eligibility criteria, with the 
exception of citizenship and immigration status. States would continue 
to comply with the requirements of section 1137 of the Act to request 
information from data sources when determined useful by the State to 
verifying financial eligibility. (In this final rule, we also clarify 
that self-attestation would not be permitted in contravention of any 
legal requirement.)
    <bullet> In verifying eligibility States would rely, to the maximum 
extent possible, on electronic data matches with trusted third party 
data sources rather than on documentation provided by applicants and 
beneficiaries. Additional information, including documentation, may be 
requested from individuals only when information cannot be obtained 
through an electronic data source or is not ``reasonably compatible'' 
with information provided by the individual.
    <bullet> A new provision at Sec.  435.956 relating to verification 
of non-financial eligibility criteria was added that similarly places 
primacy on electronic third party data sources.
    <bullet> A number of prescriptive provisions 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 were deleted.
    These and other proposed revisions are discussed in more detail at 
76 FR 51162 through 51165.
    Comment: One commenter believed that the verification requirements 
for predictable changes in income in Sec.  435.603(h) should be no more 
cumbersome than those required for income at initial application or 
redetermination, and recommended that individuals be able to provide 
verification through such means as a signed employment contract or a 
history of fluctuations (for example, past small-business revenue 
statements).
    Response: The verification regulations apply both to current, as 
well as predictable future changes in income so States should apply the 
same standards to both. In appropriate circumstances, and depending on 
State policies, the verification suggested by the commenter would be 
permitted under the regulation.
    Comment: One commenter suggested that the final regulations should 
expressly permit States to use Express Lane eligibility for adults, as 
well as children, and that there should be no sunset to the option.
    Response: Section 1902(e)(13) of the Act provides States with an 
option to accept findings relating to a factor of eligibility made by 
an ``Express Lane agency'' in determining the eligibility of a child 
for Medicaid. Findings of income made by an Express Lane agency under 
this option are excepted from application of MAGI-based methodologies 
in section 1902(e)(14)(D)(i)(I) of the Act, codified at Sec.  
435.603(j)(1) in the final rule. The authority under section 
1902(e)(13) of the Act is scheduled to sunset on September 30, 2013. 
Extending this authority to adults or beyond the sunset date provided 
in the Act is not authorized by the statute, and therefore, is beyond 
the scope of this regulation; however, subject to CMS approval, States 
may be able to develop a process similar to that provided under section 
1902(e)(13) of the Act through a demonstration if the requirements of 
section 1115 of the Act are met.
    Comment: We received many comments that paragraph (a) under Sec.  
435.945 should be removed because restating the objective of program 
integrity in such broad terms weakens the regulation by allowing a 
broad and vague exception to all provisions of the regulation if any 
program integrity interest can be identified by a State. While the 
commenters support program integrity, they are concerned that a State 
could use proposed Sec.  435.945(a) to justify creating burdensome 
barriers in enrollment procedures, such as requiring paper 
documentation, which may result in preventing even larger numbers of 
eligible individuals from obtaining coverage. A number of other 
commenters suggested that any State which chooses to not implement 
provisions in the verification regulations to maintain program 
integrity should be required to demonstrate that program integrity is 
threatened, document how the alternative process will improve program 
integrity, and get approval from the Secretary.
    Response: Compliance with the verification regulations is not at 
State option and we do not believe reference to existing program 
integrity provisions in these regulations will in any way undermine the 
verification regulations. However, to make it clear that program 
integrity regulations apply broadly and

[[Page 17172]]

independently and do not undermine the regulations relating to 
verification, we have moved the reference to program integrity to Sec.  
435.940 in the final rule and redesignated the paragraphs in Sec.  
435.945 accordingly. We also added language at Sec.  435.940 that 
States must provide for methods of administration that are in the best 
interest of applicants and beneficiaries and are necessary for the 
proper and efficient operation of the plan, consistent with Sec.  
431.15 of this subchapter and section 1902(a)(19) of the Act. We also 
have added provisions to clarify the intent of the Medicaid Eligibility 
proposed rule that electronic sources be consulted where possible and 
available--this policy limits use of documentation only to situations 
when necessary and appropriate and we revised Sec.  435.952 
accordingly, as discussed below.
    Comment: Some commenters believed that the Medicaid Eligibility 
proposed rule requires reliance on self-attestation and electronic data 
sources to a greater extent than is required today and that this will 
undermine program integrity and impede States' ability to achieve local 
policy and operational objectives, as well as meet Federal error rate 
standards. Other commenters support the express permission to rely on 
self-attestation provided in the proposed regulations, and many 
believed that the regulations did not go far enough in limiting the use 
of paper or other documentation, especially for vulnerable populations, 
and that States should have to show a program integrity concern before 
requesting paper documentation. One commenter urged that we provide 
guidance on how a highly automated eligibility system can function in 
the absence of a considerable degree of self-attestation.
    Response: Within the boundaries established under the statute and 
these regulations, States retain flexibility to establish verification 
procedures to be applied in their States. However, self-attestation 
should not be permitted where the law would not permit it. We have 
modified our regulations so that States would have the option, but are 
not mandated to accept self-attestation unless the statute requires 
other procedures (such as in the case of citizenship and immigration 
status). As explained further below, self-attestation would be required 
for pregnancy, for which a State may seek additional information only 
if it has information not reasonably compatible with the individual's 
attestation.
    The proposed regulations would place greater reliance on data-based 
verification as opposed to documentation required from individuals, 
consistent with the direction that many States have been taking and the 
requirements in the Affordable Care Act for a streamlined and efficient 
eligibility determination system. The increased availability of 
electronic data matching together with the 90 percent Federal match 
that may be available if certain conditions are met for systems 
investment under 75 FR 21950, and the provisions in the Affordable Care 
Act to create a coordinated and efficient eligibility and enrollment 
system across insurance affordability programs, all support increased 
reliance on electronic verification. States that simply fail to access 
or pay for access to electronic data sources, even when cost effective 
and efficient, may undermine this policy of electronic primacy, and 
continue a reliance on paper documentation in a way that was not 
envisioned by either our Medicaid Eligibility proposed rule or section 
1413 of the Affordable Care Act and section 1943 of the Act.
    Therefore, in this final rule, we are revising Sec.  435.952(c)(2) 
to clarify that requests for documentation from the individual, whether 
in hard (paper) copy or in other formats, are to be limited to cases 
where the State has determined that verification using an electronic 
data match, (including with another State agency) would not be 
effective, considering such factors as the administrative costs 
associated with establishing and using the data match, the 
administrative costs associated with relying on documentation, and the 
impact on program integrity and error rates in terms of the potential 
both for ineligible individuals to be approved, as well as for eligible 
individuals to be denied coverage. We have also removed the reference 
to ``paper'' in Sec.  435.945(a), as redesignated in the final rule. 
These modifications are consistent with the policies we proposed to 
modernize verification systems and align them with the systems used to 
verify eligibility for APTC.
    Comment: Many commenters recommended that the regulation provide 
specific protections, such as requiring States to accept self-
attestation, for vulnerable populations who may not have documents and 
for whom the State may not be able to verify information using 
electronic sources.
    Response: Under the regulations, States may accept self-
attestation, except for where the law would require a separate set of 
procedures (such as in the case of citizenship and immigration status) 
for individuals who do not have documentation and the State cannot 
verify the individual's information using electronic data sources.
    Comment: A number of commenters were concerned about the 
interaction of these regulations with PERM. The commenters believed 
that, absent audit and quality control protection being afforded in 
these regulations, States often would need to verify income using paper 
documentation. One commenter recommended that States submit a plan to 
notify the Secretary of the data sources it will use in verifying 
eligibility, which the commenter believed would help to address State 
concerns about compliance with PERM.
    Response: As noted above, we intend to ensure alignment of PERM and 
other program integrity rules and procedures with the new eligibility 
rules. As explained in the State Exchange Implementation Question and 
Answers published on November 29, 2011, available at http://www.medicaid.gov/Federal-Policy-Guidance/CIB-11-29-2011.pdf, under the 
recently modified PERM rules, as long as federally-approved State 
procedures are followed, the PERM rules classify the case as an 
accurate determination. Thus, if a State relies on self-attestation to 
establish certain facts regarding eligibility consistent with Federal 
rules, PERM audits also rely on the self-attestations provided. If 
federally-approved State policies require additional verifications and 
data collection, auditors will review cases against those standards.
    We also are adding a new paragraph Sec.  435.945(j), under which 
State Medicaid agencies will develop, and update as appropriate, a 
verification plan describing the agency's verification policies and 
procedures, including the standards applied by the State in determining 
the usefulness of the financial information described in Sec.  
435.948(a). The verification plans must be available to the Secretary 
upon request, thereby enabling appropriate oversight of State 
implementation of the standards established in the regulations and 
assuring policies adopted by the State will serve as the basis of PERM 
reviews.
    Comment: One commenter questioned if States are expected to 
maintain electronic information from the data match from trusted third 
party sources for income verification for some period of time for PERM/
MEQC verification of eligibility determination.
    Response: Current regulations at Sec.  435.913(a) require the 
Medicaid agency to include in each applicant's case record facts to 
support the agency decision on the application, which would include 
information obtained from a data match.

[[Page 17173]]

    Comment: Two commenters suggested that accepting self-attestation 
could result in retroactive liability for States and managed care 
organizations if, later, some eligibility determinations were found to 
be erroneous. One commenter recommended that CMS hold States harmless 
through 2014 for all quality control and audit errors in the event that 
the annual reconciliation for the APTC conducted by the IRS uncovers 
inconsistencies about which the State had no way of knowing. Another 
commenter suggested that if States accept self-attestation, they should 
be allowed to recover funds if subsequent verification shows the 
individual was not eligible for Medicaid. One commenter expressed 
concern that applicants will be approved, without delay, pending 
receipt of verifications, and if later are determined ineligible, the 
agency must give them proper notice while receiving coverage at the 
taxpayer expense.
    Response: States are accountable to ensure that eligibility 
determinations are made accurately and in accordance with State and 
Federal policies, and their success in doing so is measured in 
accordance with the MEQC and PERM programs. Under our regulations at 
Sec.  431.980(d), States are not held liable for eligibility 
determinations made in accordance with the State's documented policies 
and procedures, including self-attestation, and supported by 
information in the case record. This rulemaking does not alter these 
regulations or establish any new liability for States for FFP claimed 
on behalf of individuals erroneously determined eligible for Medicaid 
and enrolled in the program because the State did not take into account 
information not available to it at the time of the determination. For 
individuals' rights and responsibilities, under current regulations, 
once an individual is determined eligible, the agency must provide 
proper notice and hearing rights prior to termination in accordance 
with 42 CFR part 431 subpart E. Recovery from individuals erroneously 
determined eligible is generally not permitted, with the possible 
exception of fraud on the part of the individual, or in the case listed 
under Sec.  431.230(b). In the case of potential fraud, the regulations 
at 42 CFR part 455 subpart A would continue to apply. Regulations at 42 
CFR part 431 subpart E and part 455 subpart A are not affected by this 
rulemaking.
    Comment: One commenter indicated that the rules are not clear as to 
whether the Medicaid agency may make a determination based on self-
attested information or whether the self-attested financial information 
must first be verified through the data matches described in Sec.  
435.948 and Sec.  435.949. The commenters requested clarification that 
a determination may be made based on self-attested information subject 
to a later request for further information if financial information 
cannot otherwise be verified. Another commenter suggested that data 
resources be utilized at initial application to support self-attested 
statements.
    Response: The regulations provide States with the flexibility to 
decide the usefulness, frequency and time-frame for conducting 
electronic data matches. Thus, a State may approve eligibility based on 
self-attested financial information without requesting further 
information (including documentation from the individual) and follow up 
with data matching in accordance with Sec.  435.948 after enrollment, 
or the State can choose to conduct the match prior to finalizing the 
eligibility determination, subject to timeliness standards established 
in accordance with Sec.  435.912. Section 435.945(a) permits States to 
accept self-attestation of most elements of Medicaid eligibility; Sec.  
435.945(b) provides that States must request and use information 
relevant to determining eligibility in accordance with Sec.  435.948 
through Sec.  435.956. (See our above response regarding our amendments 
to clarify that self-attestation will not be permitted when the law 
would require a separate set of procedures.)
    Comment: Another commenter had concerns regarding the level of 
subjectivity that will be permissible if the applicant is not required 
to enter any specific income information into an application as a first 
step in the verification process. The commenter was concerned that the 
income retrieved from the Federal data services hub or other electronic 
data sources no longer would be verified against data entered by 
applicant.
    Response: We are working to develop tools for individuals and 
States to use to determine current MAGI-based income based on the 
information obtained as part of the application process. We anticipate 
that the process and sequence by which this occurs could be structured 
in different ways, including by asking an individual for income 
information up front and confirming it with electronic sources 
afterward, or by asking an individual to confirm information that the 
agency obtains electronically.
    Comment: One commenter indicated that the 90-day timeframe for 
resolving discrepancies conflicts with rules for other public 
assistance programs, and could have a significant administrative impact 
on States. One commenter recommended that the rule should specify that 
Medicaid is to be considered correctly paid and no recovery should be 
sought during the time period that the Medicaid agency enrolls an 
applicant for 90 days while awaiting information to resolve an 
incompatibility through to the effective date of proper notification in 
instances resulting in a discontinuance of coverage.
    Response: There is no 90-day reasonable opportunity period 
addressed in this regulation. The 90-day reasonable opportunity period 
related to the APTCs is addressed in the Exchange final rule at 45 CFR 
155.315(f).
    Comment: A number of commenters suggested that the regulations 
encourage States to explore alternatives such as self-attestation of 
income and/or assets for applicants whose eligibility is not based on 
MAGI methodologies. A few commenters also suggested that the data 
matching required under Sec.  435.948 apply to applicants being 
evaluated for eligibility on a basis other than MAGI.
    Response: The verification regulations at Sec.  435.940 through 
Sec.  435.956 apply to the determination of eligibility of all 
individuals; they are not specific to individuals whose financial 
eligibility is based on MAGI methodologies.
    Comment: A few commenters recommended allowing for acceptance of 
self-attestation of citizenship and immigration status. One commenter 
expressed concern that the Medicaid and Exchange regulations were 
inconsistent with regards to verification of citizenship.
    Response: Verification of citizenship and immigration status were 
not addressed in our Medicaid Eligibility proposed rule. However, we 
note that such verification is governed by sections 1902(a)(46), 
1903(x), and 1137(d) of the Act, which require verification of 
citizenship and immigration status. Also, under our final rule, where 
citizenship and immigration status can be verified with the SSA or DHS 
through the electronic service to be established by the Secretary under 
Sec.  435.949, the rule requires use of that service.
    Comment: One commenter believed that proposed Sec.  435.945(b) 
implied that paper documentation of citizenship and satisfactory 
immigration status is always required for Medicaid when, in fact, 
citizenship may be established based on data matches with SSA or State 
birth certificate records, without the applicant providing any paper 
documentation.

[[Page 17174]]

    Response: Section 435.945(a), as redesignated in this final rule 
states that self-attestation alone can never be used for citizenship or 
immigration status, verification of which are governed by sections 
1137, 1902(a)(46) and 1903(x) of the Act which require either 
electronic verification or other documentation (not paper documentation 
exclusively).
    Comment: We received many comments that the regulation should 
clarify that, while electronic data matching is required at initial 
application and redeterminations, such data matching is not required on 
an on-going basis, as this could be burdensome for States. One 
commenter suggested that State Medicaid agencies only be required to 
act on changes in household size, State residency and loss or gain of 
employment that impact eligibility.
    Response: The regulations do not change current policy, under which 
States have flexibility to determine the frequency of data matches 
between regular eligibility renewals. States are not required to 
conduct data matches on an ongoing basis. States are subject to all the 
verification requirements of Sec.  435.952 when responding to changes 
in an individual's circumstances. Under Sec.  435.916(d), for MAGI-
based determinations, when an individual reports a change in 
circumstance that affects their eligibility, the State must limit its 
review of third-party data sources to eligibility factors affected by 
the changed circumstances.
    Comment: One commenter recommended that proposed Sec.  435.945(d) 
be modified to allow the child support enforcement unit more freedom to 
share information with the Medicaid agency, and that other necessary 
changes be made to permit the Office of Child Support Enforcement 
(OCSE) to release information from the National Directory of New Hires 
to the agency, as intended by the CHIPRA legislation.
    Response: While our final regulations allow State Medicaid agencies 
to rely on additional data from other agencies, as long as the 
requirements of Sec.  435.945(e) through (i), as redesignated in the 
final rule, are met, we believe that rules governing release of 
information by the OCSE are beyond the scope of this rule.
    Comment: One commenter questioned whether Sec.  435.945(e) ensures 
that beneficiaries will not bear the costs of any information matching 
conducted by the State Medicaid agency.
    Response: Section 435.945(e) relates to the financial 
responsibility of different agencies to bear the cost of data matching 
requested by them. Beneficiaries cannot be asked to bear any of the 
costs for data matching; this is an administrative cost.
    Comment: One commenter questioned why the States must reimburse 
another agency for reasonable costs incurred for furnishing information 
to another agency.
    Response: The reimbursement is for costs incurred by the other 
agencies in providing information to the Medicaid agency, and is 
required under section 1137 of the Act.
    Comment: Many commenters inquired or made specific recommendations 
about the content and format of the information that must be provided 
to individuals under proposed Sec.  435.945(f) prior to initiating an 
electronic request for data. The recommendations included providing 
written information in plain language, providing an explanation of the 
alternative data sources (if any) and consequences should the 
individual choose not to have one of the data sources contacted, and 
that notices be easily accessible. Another commenter requested 
clarification about how States are supposed to notify individuals prior 
to initiating an electronic data match.
    Response: The regulation requires that individuals be informed of 
the ways and circumstance in which the agency may be requesting 
information, as is the case under current regulations. This information 
must be provided in a manner that is simple and accessible. States are 
not required under the regulation to provide the required information 
to individuals every time the State wants to initiate a data match. A 
State could, for example, provide the required information at 
application and regular renewals of eligibility.
    Comment: One commenter asked if an individual can decline to have 
States check IRS data because they know it is inaccurate or want to 
keep it private and instead provide income verification to the agency.
    Response: As part of the application process, under section 1137 of 
the Act, applicants must provide their SSN and must be advised how the 
SSN will be used, including obtaining IRS data. Applicants do not have 
an opportunity to decline that process, but do have an opportunity to 
present alternative documentation if IRS data do not reflect their 
current circumstances. Non-applicants are not required to provide an 
SSN to enable an IRS match, although they may do so voluntarily. 
Statutory privacy and confidentiality protections apply to the 
disclosure, use, and maintenance of the IRS data.
    Comment: Many commenters were concerned that individuals would not 
have an opportunity to review and either validate or correct data that 
is imported into their application.
    Response: Under Sec.  435.952(d), States may not deny or terminate 
eligibility based on information obtained through data matches without 
providing the individual with an opportunity to validate or dispute 
such information.
    Comment: Many commenters supported the requirement in proposed 
Sec.  435.945(h) regarding information exchanged between the Medicaid 
agency and other agencies and programs, but recommended that the 
regulation specify that information can only be requested, shared or 
used for purposes strictly relevant to eligibility verifications, and 
that the use of such information meet existing requirements relating to 
the confidentiality, disclosure and maintenance of information 
regardless of the source from which it is received. Another commenter 
strongly recommended that any confidential or especially sensitive 
information sought, such as information relating to specific diagnoses, 
illnesses, treatments or disability, should have protections built in 
and an exceptions process for the individual to avoid having that 
information accessed and potentially subject to wider data sharing. 
Another commenter recommended that the obligation to provide secure 
interfaces for data-matching be explicitly codified by reference to 
specific statutes that prohibit requesting unnecessary information, 
such as the Privacy Act of 1974, throughout these regulations. Many 
commenters commended the requirement under Sec.  435.945(i) that States 
establish formal agreements to protect information but recommended that 
information can only be used for narrow and relevant verification 
purposes, and meet confidentiality thresholds to earn trust in the 
system.
    Response: Confidentiality of information is essential. Existing 
regulations at 42 CFR part 431 subpart F protect the confidentiality 
and safeguarding of applicant, non-applicant and beneficiary 
information, including medical information, and we have added a cross 
reference to these regulations in Sec.  435.945(c). Recognizing the 
specific confidentiality and security requirements that attach to MAGI 
information obtained from the IRS under section 6103(l)(21) of the IRC, 
as added by section 1414 of the Affordable Care Act, we have also 
revised Sec.  431.305(b)(6) to clarify that data from SSA and IRS must 
be safeguarded according to the requirements of the agency that 
furnished the data, which includes provisions of section 6103 of

[[Page 17175]]

the IRC as applicable. We also update the basis for the regulations at 
42 CFR part 431 in Sec.  431.300 (adding a new paragraph (d)) and 
clarify that the reference to section 6103(l) of the IRC in Sec.  
431.300(c)(1), as redesignated in this final rule, is limited to 
section 6103(l)(7). Finally we updated the cross references in Sec.  
431.300(c) and Sec.  431.305(b)(6) to Sec.  435.945 through Sec.  
435.956 to reflect all the relevant regulations. We are issuing the 
revisions to Sec.  431.300(c)(1), Sec.  431.300(d), and Sec.  
431.305(b)(6) as an interim final rule and are soliciting comments on 
these provisions.
    Section 435.945(h) requires that information exchanged 
electronically between programs must be sent and received through a 
secure electronic interface. In addition, Sec.  435.945(i), as 
redesignated in the final rule, requires the Medicaid agency and other 
entities to enter into written agreements which must provide for 
appropriate safeguards limiting the use and disclosure of information 
as is required by State and Federal law or regulations, including, as 
applicable, the requirements under the Health Insurance Portability and 
Accountability Act of 1996 (Pub. L. 104-191, enacted on August 21, 
1996) (HIPAA), the Privacy Act, and section 1942 of the Act, as well as 
42 CFR part 431 subpart F and the Exchange final regulations at 45 CFR 
155.260.
    Comment: Many commenters recommended that the reporting required by 
Sec.  435.945(g) for the purposes of determining compliance with 
regulations and evaluating the effectiveness of the income and 
eligibility verification system be made publicly available and include 
a consumer and consumer advocate survey component as to the 
effectiveness of the verification process. One commenter suggested that 
the reported information also address whether the income and 
eligibility verification system results in eligible persons being 
denied eligibility as a result of gaps, omissions, time lags or other 
failings or inaccuracies of the queried databases.
    Response: We will take the comments under advisement in considering 
what information can and should be made available to the public.
    Comment: One commenter questioned why the regulations require 
written agreements under proposed Sec.  435.945(i). Instead, they 
recommended that protections could be built into the regulations. 
Another commenter questioned if the written agreements between the 
Medicaid agency and the Exchange will allow both entities to exchange 
taxpayer information or other information, such as protected health 
information, for the purposes of administering eligibility for the 
programs.
    Response: Use of written agreements between agencies exchanging 
information is a commonly accepted way to ensure that required 
confidentiality and privacy protections are provided, including those 
set forth in existing regulations in part 431 subpart F. The written 
agreements between the Medicaid agency and Exchange should allow both 
entities to share information which is needed to determine eligibility 
or for other purposes directly related to the administration of the 
respective programs. Section 1137 of the Act ensures that necessary 
safeguards are in place for information exchanged among agencies. In 
addition, 45 CFR 155.260 in the Exchange final rule provides for 
privacy, information security, and data sharing requirements for 
Exchanges.
    Comment: Many commenters commended the requirement under Sec.  
435.948(a) that State agencies must request financial eligibility 
information from other agencies. However, they expressed concern that 
by providing States with discretion to not make these requests if the 
State deems that they are not ``useful,'' the rule creates too broad an 
exception and places undue burden on individuals. Some recommended that 
the authority to determine usefulness should remain with the Secretary. 
Others recommended that States be required to collect information from 
other agencies ``unless there is no information materially relevant to 
an eligibility determination'' and that the language ``relating to 
financial eligibility'' be changed to ``necessary for financial 
eligibility determinations.'' Still other commenters recommended that 
the final rule provide stronger parameters or minimum standards for 
States in determining when to use data sources to process eligibility 
so that States do not define ``useful'' in such a way that all 
available databases are not tapped. Some commenters recommended 
replacing the word ``useful'' in paragraph (a) with ``available, 
accurate, and timely.'' One other commenter was concerned that many 
eligible individuals will be denied coverage in real time simply 
because the databases to be used in verifying wages and other income do 
not rely on ``point in time'' information, are out-of-date, incomplete, 
or inaccurate. Other commenters supported the flexibility afforded by 
the regulations for States to determine what is ``useful.''
    Response: We do not believe it is possible or preferable for the 
Secretary to prescribe all the situations in which financial data 
sources are useful and believe that States are in the best position to 
make such a determination. States currently use wage data that lags 
behind in making eligibility determinations and the data often is 
sufficient, notwithstanding the time lag, for the State to confirm the 
information provided by the applicant. The requirements at Sec.  
435.952(d) ensure that individuals will not be denied eligibility 
simply because available wage data may not be up to date, as States 
must request additional information if necessary before denying or 
terminating eligibility based upon a data match.
    The time lag in the availability of quarterly wage data would not 
justify a State concluding that such data is not useful to verifying 
income eligibility and routinely relying instead on documentation 
provided by the individual. Conversely, a State could determine that 
accessing quarterly wage data is not useful if income data received 
from the IRS is reasonably compatible with information provided by the 
individual. In that situation, the agency would have obtained reliable 
verification of income.
    Comment: One commenter sought confirmation that States may consider 
the cost effectiveness of a data match in determining its usefulness 
under Sec.  435.948(a).
    Response: We agree that cost-effectiveness is an appropriate 
consideration in determining the usefulness of electronic data matches 
under Sec.  435.948(a) of the regulations. States cannot be expected to 
obtain all possible electronic data, but, at the same time, State 
agencies should rely on electronic data when it is cost-effective to do 
so. Under proposed Sec.  435.952(c) documentation from an individual is 
permitted only when electronic data are not available or information 
obtained from an electronic data source is not reasonably compatible 
with information provided by or on behalf of an individual. In the 
final rule, we are clarifying this provision to provide that, in 
determining whether electronic data are available, States need to 
consider the costs of establishing and using the matching capability 
against the cost of requiring, receiving, and reviewing documentation, 
as well as the impact on program integrity in terms of the potential 
for ineligible individuals to be approved, as well as for eligible 
individuals to be denied coverage.
    Comment: One commenter believed that Sec.  435.948 is unduly narrow 
because it limits data-based verification required of States to 
financial elements of Medicaid eligibility, rather than

[[Page 17176]]

including all other eligibility elements, such as State residence. The 
commenter believed that this limitation is inconsistent with section 
1413(c)(3)(A) of the Affordable Care Act, which requires the use of 
data matches to establish eligibility to the maximum extent 
practicable, without any limitation to the financial components of 
eligibility.
    Response: Section 435.948 codifies section 1137 of the Act, which 
requires specific data matching arrangements in verifying financial 
eligibility for several Federal means-tested benefit programs, 
including for purposes of Medicaid. Section 435.956 of our regulations 
addresses verification of non-financial criteria. Section Sec.  435.952 
applies to both financial and non-financial verification, and section 
(c) of the Medicaid Eligibility proposed rule required that, if self-
attestation is not accepted for criteria other than citizenship/
immigration status, States must access available electronic data bases 
prior to requiring additional information (including documentation) in 
verifying all factors of eligibility.
    Comment: A few commenters recommended that States be required to 
accept income information verified by SNAP to determine Medicaid income 
eligibility.
    Response: Section 435.948(a)(2) requires States to request 
information related to financial eligibility from SNAP when useful to 
verifying financial eligibility. The standards set out in these rules 
establish an appropriate basis for States to assess the usefulness of 
SNAP, as well as other data in verifying financial eligibility. We note 
that the reference to the Title IV-A program (TANF) was inadvertently 
admitted from Sec.  435.945(a)(2) in the Medicaid Eligibility proposed 
rule so we have added it back in this final rule.
    Comment: One commenter proposed that the data sources under Sec.  
435.948(a) include the Breast and Cervical Cancer Prevention and 
Treatment Act (BCCPTA).
    Response: The Medicaid agency does not need to conduct an income 
determination for individuals eligible for Medicaid as a result of 
being covered under the BCCPTA eligibility group (see section 1902(aa) 
of the Act). Therefore, this would be an unnecessary addition to Sec.  
435.948(a).
    Comment: One commenter believed it is confusing to include Public 
Assistance Reporting Information System (PARIS) in Sec.  435.948(a) in 
the list of possible data sources. Since States must conduct data 
matching with PARIS, they have no discretion to determine it is not 
useful to do so.
    Response: PARIS is not necessarily related to income verification. 
Therefore, we have moved the requirement related to PARIS to a new 
Sec.  435.945(d).
    Comment: One commenter noted that changes that affect eligibility 
must still be reported within 10 calendar days but there is no 
electronic database that will provide current income.
    Response: We are unsure of what 10-day requirement the commenter is 
referring to; perhaps this relates to a particular State's rules. Under 
existing Federal regulations, States need to establish procedures to 
ensure that beneficiaries make timely and accurate reports of changes 
that may affect their eligibility; this is retained in Sec.  
435.916(c). Under Sec.  435.952, States must evaluate any such 
information received, consistent with the standards and protections 
established in that section.
    Comment: Many commenters suggested that proposed Sec.  435.948(c) 
be revised to reflect that the agency ``must'' obtain the information 
directly from the appropriate agency or program consistent with the 
requirements in Sec.  435.945 of this subpart when such information is 
not available through the Federal data services hub described at Sec.  
435.949.
    Response: Information needed to verify eligibility which is 
available through the Federal data services hub described in Sec.  
435.949 must be obtained through that service. If needed information is 
not available through that service but can be obtained through an 
electronic match directly from another agency or program, as is the 
case with the information described in Sec.  435.948, the State must 
obtain the information from such agency or program. To avoid any 
confusion that the proposed regulation may have caused, we have deleted 
proposed Sec.  435.948(c), as we believe these requirements are already 
included in other parts of the regulation (that is if information 
cannot be obtained through the hub, then it would be obtained directly 
from the agency or program). We also have moved the provisions at 
proposed Sec.  435.948(d) and proposed Sec.  435.949(c) to a new Sec.  
435.945(k) in the final rule, which allows, subject to Secretarial 
approval, States to adopt alternative data sources to those listed in 
Sec.  435.948(a), or to obtain needed information through a mechanism 
other than the Federal data services hub described in Sec.  435.949(a), 
to ensure that the goals of maximizing administrative accuracy and 
efficiency, minimizing consumer burden, meeting confidentiality 
requirements, and promoting coordination.
    Comment: We received a number of comments related to the provision 
of an SSN by non-applicant household members. One commenter believed it 
would be difficult to verify the dependent status of a child without 
the parent's SSN. A few commenters were also concerned that if non-
applicant SSNs may not be required it will be difficult to verify 
income and suggested that proof of income by non-applicants be 
required. Others were concerned about undue burden on applicants if 
non-applicant household members do not provide an SSN.
    Response: We are codifying this current policy at Sec.  435.907(e) 
and as discussed in section III.E. of the preamble, States are 
prohibited from requiring non-applicants' SSNs as a condition of 
another household member's eligibility for Medicaid or CHIP. In the 
case of non-applicant household members, such as a parent, who do not 
provide an SSN and whose income is material to the eligibility 
determination of the applicant, States are directed in Sec.  435.948(c) 
to use other personally identifying information in conducting data 
matches if it is possible to do so. In order for the IRS to return 
income information relating to any individual, including a non-
applicant, the individual's SSN is required. If data matches are not 
possible, States may accept self-attestation or request additional 
information to verify income or tax dependency status, consistent with 
the regulations. The IRS will not return information which can be used 
to verify the dependent status of a child.
    Comment: One commenter questioned how discrepancies will be 
resolved when an SSN cannot be validated through a data match or is 
validated as someone else's SSN.
    Response: The requirement to validate an applicant's SSN with the 
SSA is not new and is currently codified at Sec.  435.910(g), though 
States must utilize the Federal data services hub described in Sec.  
435.949 for this purpose if the information is available through such 
service. The Affordable Care Act did not change the process for 
resolving inconsistencies. Individuals may also continue to contact SSA 
to resolve any discrepancies with their SSN that could not be resolved 
by the State Medicaid agency.
    Comment: Many commenters recommended that we provide in the 
regulation text a reference to Sec.  435.910, which requires States to 
assist individuals in obtaining an SSN. One commenter suggested that 
the requirement to furnish an SSN only apply to those who are eligible 
for an SSN, and that the State not be required

[[Page 17177]]

to assist individuals who are not eligible for SSNs because the 
requirement to apply for an SSN creates an administrative burden. Many 
commenters believed States should be required to assist lawfully-
residing individuals not eligible for a regular SSN with obtaining a 
``non-work'' SSN.
    Response: Under existing regulations at Sec.  435.910, individuals 
seeking coverage are required, as a condition of eligibility, to 
furnish an SSN, unless the individual has a well-established religious 
objection to obtaining an SSN. States have long had the responsibility 
under Sec.  435.910(e) to assist individuals who do not have an SSN 
with obtaining one, and may not deny or delay benefits pending the 
issuance of such a number. To clarify, we have revised the cross-
reference to Sec.  435.910 in Sec.  435.956(d) to clarify that States 
not only must verify SSNs in accordance with Sec.  435.910(f) and (g), 
but are subject to all the requirements in Sec.  435.910.
    The requirement to furnish and verify an SSN only applies to 
individuals eligible for an SSN, and note that individuals not eligible 
for an SSN cannot be denied eligibility on that basis, and have revised 
Sec.  435.910 accordingly in the final rule, but still must meet the 
requirements related to citizenship. States have long been permitted to 
provide an exception to the SSN requirement for individuals with a 
well-established religious objection to obtaining an SSN. While SSA 
will issue an SSN for a non-work reason, in accordance with 20 CFR 
422.104, to individuals not otherwise eligible for a ``work-related'' 
or ``regular'' SSN, the purpose of requiring an SSN is to facilitate 
verification of income, citizenship and other eligibility criteria. 
Since an SSN issued for a non-work reason cannot be used to obtain data 
from other programs or agencies needed to verify eligibility for 
Medicaid, there is no practical purposes to requiring that individuals 
eligible only for a non-work SSN obtain such an SSN, or that State 
Medicaid agencies assist the individual in doing so. Therefore, based 
on our understanding of current practice in many States, we are 
codifying in this final rule that the exception to furnishing an SSN 
set forth in paragraph (h) of Sec.  435.910 applies also in the case of 
individuals who are not eligible to receive any SSN as well as to 
individuals who do not have an SSN and are only eligible to receive an 
SSN issued for a non-work reason. We have also revised the language in 
paragraph (h) to clarify that the exceptions in paragraph (h) mean, not 
only that the agency may issue a different identification number to 
someone excepted from the requirement to provide an SSN, but also that 
individuals described in paragraph (h) are excepted from the 
requirement to furnish an SSN as a condition of eligibility, as 
otherwise required in Sec.  435.910(a). (The current regulation at 
Sec.  435.910(h) only references the permissibility of the agency to 
issue a different identification number for the individuals described.) 
Conforming revisions are made to the general requirement to furnish an 
SSN in Sec.  435.910(a). In addition, we have made small modifications 
to Sec.  435.910(f) and (g) to clarify that such an individual would 
not need an SSN verified and that the general rule that a State should 
not delay or deny an otherwise eligible individual for Medicaid, would 
also apply to an individual who is not eligible for an SSN or who does 
not have an SSN and may only be issued an SSN for a valid non-work 
reason. We have also clarified in Sec.  435.910(g) that a State is only 
required to verify the SSN of those who must furnish one. We are not 
changing or limiting the responsibility of States to assist individuals 
seeking coverage in applying for an SSN that can be used for work. Nor 
does this change affect the requirement that citizenship and 
immigration status be verified.
    Comment: A few commenters recommended that the regulation explain 
how alternative sources under proposed Sec.  435.948(d) would be used. 
A number of commenters also indicated that it is unclear whether 
agencies would be approved to use alternative data sources under Sec.  
435.948(d) for all applicants, on a case-by-case basis, or only when 
other data sources do not yield useable results. Some recommended that 
the regulation explicitly allow the agency to contact the individual's 
employer to obtain financial information when such information is not 
available through the Federal data services hub or through the sources 
mentioned in Sec.  435.948(a). Others also recommended that proposed 
Sec.  435.948(d) include and cross-reference proposed Sec.  435.945(f), 
which requires individuals be notified of the information States will 
request from other agencies and how it will be used.
    Many commenters recommended that the regulation at proposed Sec.  
435.949(c) clarify that States should not be able to use an alternative 
process to verify information available through the hub if doing so 
would be more burdensome for individuals. Other commenters believed 
that States should be able to use alternative processes or sources as 
long as the information is as accurate and timely as, or can be 
obtained more efficiently than, that provided through the Federal data 
services hub described in Sec.  435.949. One commenter recommended that 
the process for obtaining Secretary approval to use alternative data 
sources required under Sec.  435.948(d) be streamlined and efficient.
    Response: As mentioned above, we have moved the proposed 
regulations at Sec.  435.948(d) and Sec.  435.949(c) to a new Sec.  
435.945(k). States may utilize alternative sources in lieu of those 
listed in Sec.  435.948(a) or an alternative mechanism other than the 
Federal data services hub described in Sec.  435.949(a) if such 
alternative source or mechanism 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, and use of information, and 
promoting coordination with other insurance affordability programs.
    States may seek approval to use such alternative sources either 
across-the-board or in specific circumstances. Under Sec.  435.945(j), 
States would describe the circumstances for using alternative sources 
or mechanisms in their verification plans. States are not required to 
seek approval from the Secretary to access data sources in addition to 
those identified in Sec.  435.948. The notice required under Sec.  
435.945(f) of this final rule applies to the entire subpart--that is, 
to all data matching conducted by the agency. We do not believe it is 
necessary to include a specific cross-reference to Sec.  435.945(f) in 
Sec.  435.945(k).
    Comment: One commenter suggested that, given the uncertainty 
regarding the information that will be available to States through the 
Federal data services hub and States' experience using alternative data 
sources, we should not issue further regulations, but should permit 
States maximum flexibility in utilizing data sources of their choice. 
One commenter believed that States should be permitted to continue to 
use existing electronic interfaces with SSA and DHS that provide the 
necessary data matches and should not be required to use the Federal 
data services hub.
    Response: We are establishing a federally-managed data services hub 
to support information exchanges between States (Exchanges, Medicaid 
and CHIP agencies) and relevant Federal agencies. In many cases, 
Federal agencies other than CMS will be providing information through 
the hub. Additional information about the services available through 
the hub and the terms for accessing those services is under 
development. Under

[[Page 17178]]

the regulations, if verification of particular information is not 
available through the Federal data services hub, States may continue to 
utilize existing electronic interfaces. We have revised the regulation 
text to clarify that, should the data services hub establish a secure 
interface with other Federal, State or other data bases, States would 
then use such interface to access such additional data sources when 
needed. We will provide additional guidance should such additional 
electronic interfaces be established.
    Comment: A few commenters asked whether the mandated use of the 
Federal data services hub established by the Secretary will be provided 
free of charge to the States. One commenter indicated that the 
development of the electronic transfer by the States could be very 
costly so CMS should provide reimbursement or a cost-effective 
mechanism to States. Two commenters questioned how the Federal data 
services hub will affect existing State agreements to access 
information from SSA or from DHS through SAVE.
    Response: While the agency is considering the treatment of charges 
for fiscal year 2014, we do not anticipate charging Exchanges or State 
Medicaid or CHIP programs for the use of the hub. Section 435.949(a) 
clearly delineates the agencies (IRS, SSA and DHS) with which States 
will obtain certain electronic information through the Federal data 
services hub, under section 1413(c) of the Affordable Care Act.
    Comment: Many commenters asked us to clarify whether the Federal 
data services hub would provide all the necessary income and household 
composition information for States to determine an applicant's MAGI. 
One questioned whether IRS data can be used to verify residency. One 
commenter also requested further guidance regarding IRS security 
requirements, and whether these may limit States' access to and 
utilization of the data.
    Response: As explained in the State Exchange Implementation 
Questions and Answers issued November 29, 2011, available at http://www.medicaid.gov/Federal-Policy-Guidance/CIB-11-29-2011.pdf, the IRS 
will provide the MAGI of parents or other head of household and for 
certain dependents who had enough income to have been required to file 
a tax return. This information will be taken from the most recent 
return (within the 2 previous years) on file. The IRS will also provide 
information about the size of the household shown on the returns and 
coding to help the State understand the information being provided and 
instances in which information may not be available. The IRS will not 
return information which can be used to verify the dependent status of 
a child.
    In the Medicaid Eligibility proposed rule, we proposed to codify 
widespread State practice of accepting attestation of household 
composition, to promote coordination of eligibility rules and 
procedures with the Exchange. Due to the uncertainty flagged by the 
commenters, which may sometimes exist regarding the tax filing and tax 
dependency status of individuals for the tax year in which Medicaid is 
sought, we are removing the requirement that States must accept self-
attestation of household size. Instead, verification of household size 
is now contained in Sec.  435.956(f) with age and date of birth. An 
individual's address is not among the information which will be 
provided by the IRS. Return information, as such term is defined by 
section 6103(b)(2) of the IRC, is kept confidential under section 6103 
of the IRC. The disclosure, use, and maintenance of return information 
is strictly governed by section 6103.
    Comment: One commenter believed that States should not be required 
to continue reconciling PARIS matches because this process currently 
must be done manually and is burdensome for States and PARIS does not 
return information about whether Medicaid eligibility is correctly 
established in other States.
    Response: Data matches with PARIS are required as a condition of 
FFP under section 1903(r) of the Act.
    Comment: One commenter interpreted Sec.  435.952(a) to mean that 
eligibility must be determined promptly using electronic verifications 
identified under sections Sec.  435.940 through Sec.  435.960 and that 
Sec.  435.945 of the proposed regulation appears to allow self-
attestation for identity, whereas, Sec.  435.407(e) of the current 
regulations requires verification of identity other than by self-
attestation. One commenter questioned whether the use of electronic 
data matches removes the requirement for applicants to verify identity.
    Response: Section 435.407 pertains to verification of identity when 
it is a component of verifying citizenship. Reliance on self-
attestation of citizenship is not permitted under Sec.  435.945(a), as 
redesignated in the final rule, or the underlying statutory provision 
at section 1902(a)(46)(B) of the Act. States will be required to verify 
citizenship in the first instance through the Federal data services hub 
under Sec.  435.949. To the extent that such verification fails, States 
would employ the verification processes established under sections 
1902(ee) or 1903(x) of the Act and Sec.  435.407 of the regulations. 
Changes to these statutory and regulatory provisions enacted in CHIPRA 
will be addressed in subsequent rulemaking.
    Comment: Many commenters expressed concern with the deletion of the 
requirement in Sec.  435.952 for States to request verification within 
45 days of when new information is received. Commenters are concerned 
that without timeliness standards, access to coverage could be delayed 
and there will be no accountability for States. Some commenters asked 
what it means to ``promptly evaluate information received'' in the 
context of real-time eligibility determinations. A few commenters 
recommended that the States be required to complete verifications as 
quickly as possible, not to exceed 30 days. One commenter questioned 
whether deletion of the 45-day requirement would preclude States from 
setting their own timeliness requirements, and whether States will be 
able to set different time standards for different populations or 
circumstances. One commenter requested that CMS define parameters 
within which States would have flexibility to establish policies and 
procedures for real-time eligibility determinations.
    Response: First, we note that 45 and 90 days relating to timely 
eligibility determinations at redesignated Sec.  435.912 remains, and 
that additional parameters relating to the timely determination of 
eligibility are included in the final rule (see discussion in section 
III.D. of the preamble). However, we removed the 45-day standard to 
request verification and determine whether the information affects 
eligibility from Sec.  435.952 because we expect the verification 
process to occur faster, often in real time where electronic 
verification is available. Beyond the timeliness standards which States 
establish in accordance with Sec.  435.912, we are not providing 
additional specific timeliness standards in these regulations for the 
verification of new information received by States under Sec.  435.952, 
but will consider, with input from States and stakeholders, such 
standards in developing broader performance metrics relative to State 
eligibility and enrollment systems.
    Comment: One commenter questioned how Medicaid requirements 
regarding third party liability can be operationalized in the context 
of ``real time'' eligibility and enrollment determinations.
    Response: Third party liability is primarily governed by sections

[[Page 17179]]

1902(a)(25) and 1912 of the Act, and 42 CFR part 433 subpart D and 
Sec.  435.610 of the regulations. The Affordable Care Act did not alter 
these provisions, which will remain in effect in 2014. Based on State 
experience today, compliance with third party liability rules, which 
can be handled following a determination of eligibility, should not 
impede prompt processing of applications.
    Comment: Many commenters including States, as well as consumer 
advocates, supported the concept of reasonable compatibility in Sec.  
435.952(b) but recommended that CMS further define how this concept 
should be applied. Some commenters were concerned that the language in 
the Medicaid Eligibility proposed rule was too broad, and that States 
could interpret it in an overly restrictive way. Many of these 
commenters recommended that when the information provided by or on 
behalf of the individual is different from that obtained through 
electronic sources, but does not affect the eligibility, the 
information should be considered reasonably compatible. One commenter 
emphasized the need to interpret the reasonable compatibility standard 
consistently across States and insurance affordability programs to 
facilitate administrative simplicity and ensure comparable treatment of 
applicants regardless of where they submit their application.
    Response: To maintain State flexibility while providing greater 
consistency, we have revised Sec.  435.952(c) to provide that household 
income information obtained through an electronic data match is 
reasonably compatible with income information provided by or on behalf 
of an individual if both are above or both are at or below the 
applicable income standard or other relevant income threshold. As 
discussed above, we also are adding a new paragraph Sec.  435.945(j), 
under which Medicaid agencies will set forth their policies in 
verification plans which will include the circumstances in which 
information obtained through an electronic data match is considered by 
the State to be reasonably compatible with information provided by or 
on behalf of an applicant or beneficiary, or obtained through another 
source. We will be working with States to develop a template for such 
plans.
    Comment: A few commenters recommended that States should not be 
permitted to ask individuals for additional information if the State's 
data match that triggered the apparent incompatibility is more than 90 
days old.
    Response: Data that is more than 90 days old (such as IRS data) may 
be relied upon to verify eligibility criteria if reasonably compatible 
with an individual's attestation. Where such data is not reasonably 
compatible, the regulations do not require States to accept the 
attested information. Instead, States may accept a reasonable 
explanation provided by the individual explaining the discrepancy (for 
example, that there has been a change in circumstances) or, where other 
electronic data is not available under the standard set forth at Sec.  
435.952(c)(2)(ii), the State may request additional information from 
the individual.
    Comment: A number of commenters urged that otherwise eligible 
individuals be provided benefits during a ``reasonable opportunity 
period'' in which the agency works with the individual to resolve any 
discrepancies when information obtained through electronic data 
matching is not reasonably compatible with that provided on the 
application. Some suggested that the ``reasonable period'' referenced 
in Sec.  435.952 be 90 days to be consistent with the Exchange; one 
commenter recommended 30 days. A number of commenters indicated the 
Medicaid and Exchange verification rules should be identical in 
allowing for a good-faith extension.
    Response: Section 1411(e)(3) and (4) of the Affordable Care Act 
requires that to the extent there is an inconsistency between the data 
obtained by the Exchange and applicant information, the Exchange 
provide an applicant with a ``reasonable opportunity period'' of 90 
days during which he or she may present documentation to resolve such 
inconsistency, and provide the applicant with advance payments of the 
premium tax credit and cost-sharing reductions to which he or she has 
attested.
    However, for purposes of Medicaid eligibility, this ``reasonable 
opportunity period'' does not apply to all eligibility criteria.
    The reasonable period referenced in our proposed Sec.  435.952 does 
not require the provision of benefits pending receipt of additional 
information requested by the agency from the individual nor does it 
specify a 90-day period. We do not believe it is necessary for inter-
program coordination to align the length of this period with the 90-day 
``reasonable opportunity'' provided in the Exchange regulations at 45 
CFR 155.315(f), and therefore, are retaining the discretion afforded 
States to determine the length of this period.
    Comment: A few commenters recommended that when attestation is not 
possible, Medicaid agencies need to accept different types of 
documentation, such as letters from employers, or applicant-approved 
telephone contact with a reliable third party, and applicants must be 
able to submit documentation online, by phone, mail or fax, in person, 
or other electronic means such as sending photographs of documents from 
a smart phone.
    Response: In accordance with section 1943 of the Act, section 1413 
of the Affordable Care Act, and sections 1902(a)(4) and 1902(a)(19) of 
the Act, individuals must be able to submit documents needed for 
verification purposes in the same manner as the application. We have 
revised Sec.  435.907(a) accordingly.
    Comment: One commenter believed that proposed Sec.  435.952(d) 
means that the States cannot use the electronic verification sources as 
true verification if it results in eligibility because this section 
states that an agency may not deny or terminate eligibility based on an 
electronic verification source unless the agency has requested 
additional information from the individual and provided proper notice.
    Response: Section Sec.  435.952(d) cites all the verification 
regulations, not just the ones requiring matches with electronic data 
sources. This section provides that States may not deny or terminate an 
individual's eligibility based on the information obtained through the 
verification process unless and until the State has provided an 
opportunity for the individual to provide additional information, and 
proper notice and hearing rights to the individual in accordance with 
part 431. It does not preclude States from approving eligibility based 
on electronic data sources.
    Comment: Many commenters recommended that the word ``delay'' be 
added to Sec.  435.952(d), so that this paragraph would provide, ``The 
agency may not deny, reduce, delay or terminate eligibility * * * for 
any individual on the basis of information received * * * unless the 
agency has sought additional information from the individual * * * and 
provided proper notice and hearing rights * * *'' The commenters 
believed this is particularly important given the proposed change to 
the 45-day eligibility determination timeline and to allow States very 
broad flexibility in the verification process.
    Response: We have provided additional guidance at redesignated 
Sec.  435.912 regarding the timeliness standards which States are 
required to establish. We note also that current

[[Page 17180]]

regulations at Sec.  435.911(e), redesignated at paragraph (g) of Sec.  
435.912 in this final rule, already provide that any time standards 
adopted by the State agency may not be used as a waiting period to 
delay eligibility. Therefore, we do not think it is necessary to add 
``delay'' to the Sec.  435.952(d).
    Comment: Many commenters recommended maintaining language from the 
deleted Sec.  435.955(f)--that ``the agency must certify to the Federal 
agency that it will not take adverse action against an individual until 
the information has been independently verified and until 10 days (or 
sooner if permitted by Sec.  431.213 or Sec.  431.214) after the 
individual has been notified of the findings and given an opportunity 
to contest.''
    Response: The language cited by the commenters is maintained in 
Sec.  435.952(d), which provides that the agency may not deny or 
terminate eligibility or reduce benefits for any individual unless it 
has sought information from the individual, and provided proper notice 
and hearing rights in accordance with subpart E of part 431 of the 
regulations. Section Sec.  431.211 of that subpart contains the 
protection at issue in the comment.
    Comment: A few commenters recommended that when applicants or 
beneficiaries fail to respond to a request for information in 
accordance with Sec.  435.952(d), they should be suspended rather than 
terminated from eligibility.
    Response: The appropriate process is outlined in this provision and 
also through the notice and hearing provisions in 42 CFR part 431 
subpart E. We do not believe it is appropriate to require States to 
suspend rather than terminate Medicaid eligibility once timely and 
appropriate notice has been provided. If a beneficiary seeks a timely 
hearing, benefits are continued in accordance with Sec.  431.230.
    Comment: Many commenters supported the prohibition on State 
agencies from relying on immigration status to determine lack of State 
residency. To avoid confusion many commenters further recommended that 
we delete the word ``alone'' from Sec.  435.956(c)(2).
    Response: We have struck the word ``alone'' from Sec.  
435.956(c)(2) of this final rule. We also clarify that this provision 
applies generally to evidence of immigration status, removing the 
reference to ``a document,'' as a State may obtain such information 
from an electronic data match or other source. We have also revised the 
language to clarify that, although a State cannot use such evidence to 
determine someone is not a State resident, nothing in these regulations 
prevents an individual from being able to present evidence of 
immigration status to prove their State residency, for example, by 
providing an immigration document that indicates their address. States 
may request additional information in accordance with Sec.  435.952 to 
verify residency if an immigration document gives a State reason to 
question an individual's residency.
    Comment: Some commenters expressed concern that Sec.  435.956(c) 
allows parents in a shared custody situation to attest to where a child 
resides. The commenters were concerned that parents who live in 
different States both could attest to the child residing in their 
State, potentially resulting in Medicaid eligibility being approved in 
two States.
    Response: Self-attestation of residency is permitted today and is 
currently utilized in many States, even in shared custody situations. 
States may enter into interstate agreements and access data sources, 
such as PARIS. Further as, permitted under the regulations, States may 
seek further information if the State has information indicating 
potential residency in another State.
    Comment: Many commenters supported self-attestation for pregnancy; 
however, one commenter suggested that for States that provide full 
Medicaid benefits to this population, verification of pregnancy should 
be an option. One commenter disagreed with allowing self-attestation 
for pregnancy.
    Response: To promote a streamlined system, we maintain self-
attestation of pregnancy as a requirement for States regardless of the 
benefit package provided by the State; however under Sec.  435.956(e) 
if a State has information that is not reasonably compatible with the 
attestation, the State may verify pregnancy in a manner consistent with 
Sec.  435.952. States have flexibility whether to accept self-
attestation of multiple births which relates to household size, 
verification of which is codified at Sec.  435.956(f) of this final 
rule.
    Comment: One commenter noted that the proposed Exchange regulation 
requires the Exchange to verify through electronic data sources that an 
applicant is not incarcerated, but the Medicaid rule is silent on this 
topic. The commenter urged that self-attestation of incarceration of a 
family member be sufficient so that children will not be subject to 
delays in coverage due to a parent's incarceration.
    Response: Incarceration is not a factor of eligibility which needs 
to be verified for purposes of determining eligibility, and therefore, 
is not addressed in the verification rules. However, as discussed 
below, payment for medical services provided to individuals during 
incarceration is generally prohibited under subparagraph (A) of the 
matter following section 1905(a)(29) of the Act.

I. Periodic Renewal of Medicaid Eligibility (Sec.  435.916)

    In the Medicaid Eligibility proposed rule, we proposed to amend the 
provision entitled ``Periodic Redetermination of Medicaid Eligibility'' 
to establish simplified, data-driven renewal policies and procedures 
for individuals whose eligibility is based on MAGI, consistent with 
assuring program integrity. In this final rule, we have altered the 
title of this section by replacing the word ``redetermination'' with 
the word ``renewal'' and making corresponding language edits in the 
regulation text. The use of the word renewal rather than 
redetermination is consistent with the usage in many States. We also 
received the following comments concerning the proposed periodic 
renewal of Medicaid eligibility provisions.
    Comment: Many commenters supported the requirement for an annual 
redetermination no more often than once every 12 months. One commenter 
wrote that States should have discretion to decide how often to 
evaluate newly eligible individuals. Some commenters suggested that we 
be more explicit by adding the word ``only'' to Sec.  435.916(a)(1).
    Response: As explained in the preamble of the Medicaid Eligibility 
proposed rule, scheduling regular renewals no more often than once 
every 12 months for beneficiaries whose eligibility is based on MAGI is 
consistent with current practice for parents and children in most 
States and aligns with the annual renewal process for individuals who 
are eligible for APTCs through the Exchange. We have revised Sec.  
435.916(a) to clarify that the renewal policy described in that 
paragraph applies to all Medicaid beneficiaries whose eligibility is 
based on MAGI methods, rather than just those beneficiaries described 
in Sec.  435.911(c)(1) who are eligible on the basis of the applicable 
MAGI standard.
    In response to comments, we have revised the regulation text at 
Sec.  435.916(a)(1) to clarify that eligibility must be renewed once 
every 12 months, and no more frequently than once every 12 months under 
that paragraph. We chose this wording to clarify that renewals do need 
to occur on an annual basis. We note that as provided in Sec.  
435.916(d), eligibility should be renewed more frequently if a 
beneficiary reports a change in circumstance that

[[Page 17181]]

may affect eligibility, or if the agency receives information that 
suggests the need to review eligibility.
    Comment: Many commenters supported the proposed annual renewal 
process in Sec.  435.916(a)(2), which requires Medicaid agencies to use 
electronic data to renew eligibility if sufficient information is 
available. Some commenters expressed concerns about the reliability of 
the data sources available to the State for this purpose. Others 
expressed concern that if renewals are performed on the basis of data-
matching without requiring a response from the individual, the State is 
more likely to be liable for inappropriate costs or experience poor 
results on quality control measures and audits. Two commenters wrote 
that, for all beneficiaries, State Medicaid agencies should pre-
populate renewal forms and ask for response annually, to match up with 
the process proposed for the Exchange. Some commenters requested that 
the Medicaid Eligibility proposed rule clarify the interaction of the 
renewal process with program integrity measures such as PERM.
    Response: Proposed Sec.  435.916(a)(2) sought to codify a 
longstanding policy, explained in a letter to State Medicaid Directors 
on April 7, 2000, available at http://www.cms.gov/smdl/downloads/smd040700.pdf, that States must rely on information that is available 
and that the State considers to be accurate to renew eligibility. 
However, if available information suggests that a beneficiary is no 
longer eligible, if information is subject to change is missing, or if 
the State has information that suggests that available information is 
inaccurate, then a State must seek information from the individual 
before renewing eligibility. For example, if a family has recently 
verified income, household size, and residency as part of a recent SNAP 
review, then the Medicaid agency would typically use that information 
to renew Medicaid eligibility. However, if the SNAP review indicates a 
different household size, or income information is not available from 
SNAP or another human service program, State wage reporting or IRS data 
the State would follow the process in Sec.  435.916(a)(3) to request 
needed information from the individual. As stated in the Medicaid 
Eligibility proposed rule, a State's decision on whether to conduct a 
renewal without requesting further information from the individual may 
depend on the State's verification policy on certain eligibility 
criteria, such as residency. States that follow procedures outlined in 
the regulations will not be cited for a PERM error for lack of further 
documentation. As discussed in section III.H. of the preamble, PERM 
regulations issued in 2010 provide that PERM will measure errors 
relative to the State's own policies and procedures as long as those 
policies and procedures are consistent with Federal policy and 
regulations. As also noted, we will continue to review and analyze all 
of our error rate measurement programs to ensure consistency between 
these programs and regulations covering eligibility and enrollment.
    Comment: Many commenters supported the proposal at Sec.  
435.916(a)(3) that, in cases where sufficient electronic information is 
unavailable, States must send a renewal notice that is pre-populated 
with any information already known to the agency and require Medicaid 
beneficiaries to respond with information that is missing or incorrect. 
Some commenters requested State flexibility on the timelines and 
procedures for sending a pre-populated form, as well as flexibility on 
what that form may include. One commenter inquired whether States may 
require individuals to provide information regarding third party 
liability at renewal.
    Response: We have added language to Sec.  435.916(a)(3)(i)(A) to 
clarify that the pre-populated renewal forms may only request 
additional information needed to renew eligibility. Information and 
documentation of eligibility criteria subject to change need not be 
requested if it can be obtained from a reliable data source available 
to the State. For example, a State would not request additional income 
information from the beneficiary if income information at the initial 
determination was verified fully by a quarterly wage report, and the 
quarterly wage report for the most recent quarter remains reasonably 
compatible with income at the initial determination. Nothing related to 
assignment of rights and third party liability is altered by the 
Affordable Care Act nor by these regulations. Today, many States use 
contractors to determine information regarding third party liability 
and such an approach may facilitate a State's ability to limit the 
information asked of beneficiaries at renewal. We will be providing 
additional guidance.
    Comment: Many commenters supported our proposal that beneficiaries 
have the option to respond to renewals via any of the submission modes 
used at initial application. Some commenters requested clarification on 
when a signature is required and the submission modes that can be used. 
Some commenters requested additional flexibility for States to require 
signatures from all applicants at renewal.
    Response: We are retaining the proposed policy that if the agency 
has data available that are sufficient to continue eligibility, then no 
signature may be required. If available data is not sufficient to 
continue eligibility, then the beneficiary must sign and return a form 
with missing or corrected information. The individual must be able to 
submit and sign the renewal form via the same modes available at 
application-that is, through the internet Web site, mail, telephone, in 
person, or other electronic means as described in Sec.  435.907(a).
    Comment: Some commenters suggested that specific information be 
included in notices sent to beneficiaries in advance of a renewal. 
Several commenters advised that an eligibility worker's name and a 
telephone number to call for information or questions should be 
required on the notice. One commenter wrote that if an individual is 
determined ineligible for Medicaid at renewal, the individual should be 
notified of his or her eligibility for other insurance affordability 
programs. Some commenters recommended specifically that agencies should 
request health status updates on renewal forms to screen for non-MAGI 
categories at renewal, while another commenter requested that no 
protected health information be contained in a pre-populated renewal 
form. One commenter also inquired about the effect on the appeals 
process of using the data-driven renewal system.
    Response: We will take these suggestions into account in future 
guidance we are developing on notices and appeals. We have added Sec.  
435.916(e) to clarify that the agency may not request information at 
renewal which is not necessary to redetermine eligibility. We have 
added a new paragraph to Sec.  435.916(f)(1), to clarify that, in 
accordance with longstanding policy the agency must consider all bases 
of eligibility when conducting a renewal of eligibility. To meet this 
requirement, renewal forms will need to include basic screening 
questions, similar to those that will need to be on the single 
streamlined application, to indicate potential eligibility based on 
disability or other basis other than the applicable MAGI standard. We 
note that the addition of paragraph (f)(1) to Sec.  435.916 is 
consistent with the application in the final rule of the MAGI screen 
regulations at Sec.  435.911 to the eligibility renewal process, 
discussed in section III.E of the preamble.
    Comment: We received comments that there should be a specified

[[Page 17182]]

reconsideration period following a termination of Medicaid eligibility 
at renewal. Most commenters supported the codification of the 90-day 
reconsideration period suggested in the preamble to the Medicaid 
Eligibility proposed rule. Some commenters requested a 120-day 
reconsideration period, while other commenters suggested making the 
definition of a time period a State option. One commenter questioned 
whether a reconsideration period would be required even when 
discontinuance was for ``good cause.''
    Response: We have altered the proposed Sec.  435.916(a)(3)(iii) to 
provide a minimum of 90 days as a period when the State would 
reconsider eligibility without a new application and renew eligibility 
if necessary information is provided. States may adopt a longer 
reconsideration period if desired. Reconsideration periods are only 
required for beneficiaries who did not return the pre-populated renewal 
form as described in Sec.  435.916(a)(3) or the required documentation 
and are terminated on that basis. At State option, agencies may adopt 
reconsideration periods for other types of terminations as well.
    Comment: Some commenters asked questions about termination and 
retroactive eligibility during the reconsideration period. One 
commenter suggested that eligibility be suspended, rather than 
terminated, during a reconsideration period.
    Response: During a reconsideration period, an individual may not be 
required to submit a full new application to be determined eligible for 
benefits, which avoids unnecessary application processing for the 
individual, as well as the agency. During the 90-day period (or a 
longer period at State option), the individual only needs to supply the 
information requested in the pre-populated renewal form (including 
missing documentation, if any), and may do so by mail, phone, in 
person, or through electronic means. The renewal form in this case 
serves as an application, and an individual who regains coverage during 
a reconsideration period is entitled to retroactive coverage under 
Sec.  435.915 (redesignated from Sec.  435.914 prior to issuance of 
this final rule) to the same extent and in the same way as if a new 
application had been filed. With a 90 day reconsideration period, we 
would expect that in most cases, retroactive coverage will extend back 
to the date of the termination. States have flexibility in how they 
design their eligibility systems to implement this provision for the 
suspension versus termination of eligibility during the reconsideration 
period.
    Comment: Some commenters recommended that the final rule clarify 
that States continue to be subject to the current requirement that 
Medicaid agencies are required to screen any individual who loses 
Medicaid coverage for eligibility under any other Medicaid eligibility 
categories. Some commenters suggested that for individuals 
transitioning out of MAGI eligibility, the State should be required to 
continue Medicaid coverage during the pendency of a Medicaid 
application for non-MAGI Medicaid coverage. Several commenters asked 
questions about transfers to other programs when Medicaid eligibility 
is terminated, and suggested that Medicaid coverage continue until 
enrollment in another program can be implemented.
    Response: In response to these comments, we are finalizing Sec.  
435.916(f) to codify our longstanding policy that beneficiaries must be 
considered for all Medicaid categories prior to termination. This 
addition also conforms to the policy for executing appropriate 
eligibility determinations as established at Sec.  435.911. For 
example, when an individual loses eligibility under a MAGI-based 
Medicaid eligibility group due to an increase in income, the individual 
must not be terminated from Medicaid before it is determined whether 
the individual is eligible under another eligibility group. If it is 
determined that the individual is not eligible under other Medicaid 
categories and Medicaid eligibility is terminated, then Sec.  
435.916(f) provides that the agency must assess potential eligibility 
for other insurance affordability programs and transmit data pertaining 
to potentially eligible individuals to the appropriate program. As 
noted above, the renewal form will need to contain basic screening 
questions to enable such assessment.
    The rules regarding transfers of beneficiaries' electronic accounts 
to other insurance affordability programs are at Sec.  435.1200. As 
described in regulations at 45 CFR 155.420(b)(2)(ii), the Exchange must 
ensure coverage on the first day of the next month for qualified 
individuals who have selected a QHP. Medicaid agencies are allowed to 
extend Medicaid coverage to the end of the month in which notice of 
termination is given and note that State agencies can receive FFP to do 
so. States have broad flexibility to design their process for renewals 
and terminations in ways that promote seamless coverage among eligible 
individuals.
    Comment: Some commenters noted that some populations, such as 
people who are homeless may need an extended deadline to return the 
forms. Another commenter noted that some beneficiaries may need 
agencies to send their renewal forms to authorized representatives.
    Response: Section 435.916(a)(3)(i) provides that beneficiaries must 
be provided a minimum of 30 days to return the pre-populated renewal 
form. States have the authority to increase that time period for all 
beneficiaries or for particular populations and to design other 
strategies to assure ongoing coverage of eligible individuals. As noted 
in Section III. E of the preamble, applicants may designate an 
authorized representative who may act on behalf of the applicant 
including through receipt and submission of renewal forms.
    Comment: Though the Medicaid Eligibility proposed rule did not make 
substantial changes to existing provisions regarding change reporting 
and agency action on available data between annual renewals, we 
received many comments on whether such reporting and action should be 
limited. Many commenters suggested that Medicaid beneficiaries should 
continue to be required to report all changes to household size and 
residency, but that Medicaid beneficiaries should not need to report 
all income changes. Some suggested that the State should notify the 
beneficiary that he or she only needs to report income changes that 
cause household income to exceed a threshold in the form of a dollar 
amount specified by the agency. One commenter suggested that reports 
should not be required until income changes substantially. Another 
commenter recommended that if the State's initial income determination 
was based on an annual income prediction, then it should not be 
necessary to report actual changes that have already been accounted for 
at the time of the initial eligibility determination.
    Response: We believe we have struck the appropriate balance in 
Sec.  435.916(c), which provides that beneficiaries must report changes 
that affect their eligibility. It would be reasonable for States to 
identify a dollar threshold or other general rule as a way to help 
families know when to report material changes in income. However, the 
agency may not discourage reporting of a change in income that could 
affect a beneficiary's eligibility, benefits, or cost-sharing. In 
addition, States should not remove all change reporting requirements, 
except with respect to circumstances that cannot affect eligibility, 
such as income changes for children in States which have adopted 
continuous eligibility for children. We note that some changes, such as 
a

[[Page 17183]]

change in address, or addition of a family member, are critical to 
ensuring that the family remains eligible and is able to access 
services. To be consistent with the new 12-month renewal policy, in 
between regular renewals, States must limit any review triggered by a 
change in circumstance to the eligibility factor(s) affected by the 
changed circumstances, and additional factors for which information is 
readily available. The agency must wait until the next regularly 
scheduled renewal to request information from beneficiaries regarding 
eligibility factors not related to the change in circumstance, as 
provided in Sec.  435.916(d)(1) of this final rule. For example, if a 
parent reports new earnings 3 months after the family's most recent 
renewal, the State must assess whether the individuals in the family 
continue to be eligible for Medicaid in light of the new earnings. It 
must wait until the next regularly scheduled renewal to review other 
factors of eligibility if it does not have sufficient information 
available to it to review those other factors. However, if the agency 
does have enough information to adjudicate all factors of eligibility 
at the time when the change in circumstances is reported without 
seeking more information from the family, the State may conduct a full 
renewal and, if the individuals in the family remain eligible, schedule 
the next regular renewal to occur 12 months later.
    Comment: Some commenters expressed concern about the requirement at 
proposed Sec.  435.916(d)(2) that agencies act on information they have 
received when it indicates a change to eligibility or anticipated 
changes to eligibility. We received many comments requesting limits on 
data matching, or elimination of the requirements at Sec.  435.916(d). 
Some commenters requested that the rule specify that data must be used 
when available, timely, and accurate. Other commenters wrote that if a 
State conducts data matching in addition to the 12-month renewal, it 
must be required to use the same third-party sources to verify income 
as it uses as part of the annual renewal process.
    Response: Section 435.916(d) requires the agency to act on 
information that becomes available that may affect eligibility, in 
accordance with regulations at Sec.  435.952. States must have 
flexibility to determine whether it is useful to obtain electronic data 
as described in Sec.  435.948 between regularly-scheduled renewals, and 
whether some sources of data are useful at different times, although 
States should check data sources both at and between scheduled renewals 
when there is an indication of fraud.
    Comment: Some commenters suggested a continuous eligibility model 
wherein changes may be reported but not acted upon. A few commenters 
believed that there was authority to do so because section 1137 of the 
Act does not specify the frequency of the use of data from the sources 
identified in the statute. The commenters also believed the Secretary 
has rulemaking authority under section 1102 of the Act to authorize a 
State plan option for continuous eligibility for adults. One commenter 
referenced SNAP rules, which provide that the State may choose not to 
act on a change that reduces benefits, but must act on a change that 
increases benefits. Another commenter requested clarification on 
whether or not States are required to use point-in time income 
verifications for annual renewals.
    Response: Continuous eligibility is a State plan option for 
maintaining continuous coverage and retention for eligible children in 
Medicaid and CHIP and remains in effect under the Affordable Care Act, 
but there is no statutory authority for providing continuous 
eligibility for adults. We also note the option, discussed in section 
III.B of the preamble, that under Sec.  435.603(h)(2), a State agency 
may choose to base continued financial eligibility for current 
beneficiaries on either projected annual income or on current monthly 
income.
    Comment: We received many comments on whether renewal of 
eligibility for individuals whose Medicaid eligibility is determined on 
a basis other than MAGI should follow the procedures outlined in Sec.  
435.916(a). Many commenters wrote that these simplified processes are 
beneficial to beneficiaries and State agencies and should be extended 
to all Medicaid beneficiaries. Other commenters suggested such an 
extension should be a State option or should only apply to certain 
categories of non-MAGI eligibles. Some commenters wrote that portions 
of the process, including the need to check databases and the right to 
reconsideration without a new application, should apply to all 
beneficiaries.
    Response: We have revised Sec.  435.916(b) to codify the 
longstanding policy that the agency must renew eligibility for all 
beneficiaries using information available to the agency without asking 
for additional information from the individual, if that available 
information is sufficient to support continued eligibility. We also 
have revised Sec.  435.916(b) to provide that, in cases where 
sufficient information is not available to continue eligibility, the 
State has the option to adopt the same procedures set forth at Sec.  
435.916(a)(3) applicable to individuals eligible on the basis of MAGI 
to beneficiaries eligible on non-MAGI bases.
    Comment: One commenter expressed a concern that a data-driven 
renewal process will not be possible because a data matching system is 
as yet undeveloped, and the system may not be functional at the time of 
the implementation of the new rules.
    Response: Data matching is not new and many States have data-driven 
enrollment and renewal processes. States currently are required to 
conduct data matching, in accordance with section 1137 of the Act, and 
most States already do much of the data matching that will be needed to 
implement data-driven processes, including matches with CHIP, SNAP, 
TANF, SSA, and State Unemployment Compensation and Wage Reporting. 
However, systems modernization will be needed in many States, and we 
note that any State expenditures before the end of 2015 for system 
changes necessary to adopt the renewal procedures described in Sec.  
435.916 are eligible for the 90 percent Federal matching rate outlined 
in the 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.
    Comment: One commenter suggested that States create systems that 
enable beneficiaries to opt for on-going income reporting on a weekly 
or monthly basis by phone or online.
    Response: The regulation text at Sec.  435.916(c) states that 
individuals must report changes that affect their eligibility, and must 
be able to do so through all the submission modes described at Sec.  
435.907(a). States may not routinely require monthly or weekly income 
reporting, but individuals have the obligation to submit changes that 
may affect eligibility. We will be working with States and the Exchange 
to explore ways for simple reporting.
    Comment: One commenter wrote that to prevent wrongful terminations, 
an automatic termination should not be allowed without a human touch 
review by the agency.
    Response: We believe that the regulations set forth in Sec.  
435.916 and Sec.  435.952 provide beneficiaries with appropriate 
protections against wrongful termination. In addition, under current 
rules at Sec.  431.210 and

[[Page 17184]]

Sec.  431.211, States must provide advance notice of termination and 
the reason. Under Sec.  431.10(c)(3) published in this rule, the 
Medicaid agency must assure that eligibility determinations are made 
properly and timely and are consistent with the Medicaid agency's 
rules. If there is a pattern of incorrect terminations, the Medicaid 
agency is responsible for taking corrective action. Beneficiaries also 
have the right to appeal any termination that they believe is 
erroneous, as described in Sec.  431.220. We note that the coordinated 
streamlined system calls for an increased use of technology and that 
with proper oversight automated processes can be a part of an 
eligibility system that works well for both agencies and beneficiaries.
    Comment: One commenter wrote that the final rule should also 
provide safeguards to ensure that Medicaid enrollees do not lose 
coverage for failure to comply with requirements of another program, 
such as SNAP.
    Response: Under longstanding policy and Medicaid regulations, 
States are required to maintain eligibility for beneficiaries who meet 
Medicaid eligibility criteria. While a change in circumstances 
affecting eligibility under another program may also affect ongoing 
Medicaid eligibility, an individual's decision not to receive benefits 
from another program or his or her noncompliance with the requirements 
of another program may not serve as grounds for termination of Medicaid 
eligibility.
    Comment: One commenter questioned whether it will be acceptable for 
the State to assume that no changes to household composition have 
occurred unless the household has contacted the agency. A few 
commenters expressed questions and concerns about the liability for 
recovery from beneficiaries who do not report changes and no longer 
meet Medicaid eligibility criteria.
    Response: Our rules do not prescribe if or when a State must 
conduct data matching between scheduled renewals. Nothing in the 
Affordable Care Act changes Medicaid rules regarding liability and 
recovery for overpayments, which are outside the scope of this 
regulation.

J. Coordination of Eligibility and Enrollment Among Insurance 
Affordability Programs--Medicaid Agency Responsibilities (Sec.  
435.1200)

    We proposed to implement section 1943 of the Act and sections 
2102(b)(3)(B) and (c)(2) of the Affordable Care Act that involve 
coordination between Medicaid and other insurance affordability 
programs, including a new requirement to delineate the State Medicaid 
agency's responsibilities in effectuating such coordination. This new 
provision also included policies previously included in Sec.  431.636, 
Coordination of Medicaid with the State CHIP. These and other proposed 
revisions are discussed in more detail in the Medicaid Eligibility 
proposed rule (76 FR 51166 through 51169).
    Comment: Many commented on the responsibility of the Medicaid 
agency for determining individuals' Medicaid eligibility based on MAGI 
when the single, streamlined application is submitted to the Exchange 
and many supported the coordination policies outlined in the Medicaid 
Eligibility proposed rule. Some commenters believed that State Medicaid 
agencies should retain responsibility over all Medicaid determinations. 
Others emphasized the importance of the Medicaid agency exercising 
supervision and oversight over Exchange determinations of Medicaid 
eligibility, at times focusing particularly on situations involving an 
Exchange operated by a private agency. Other commenters supported a 
fully integrated system in which all eligibility determinations are 
performed by a single entity.
    Response: As discussed in the State Exchange Implementation 
Questions and Answers issued by CMS on November 29, 2011, and 
consistent with the Exchange final rule at 45 CFR 155.305 and 45 CFR 
155.345, State Medicaid and CHIP agencies and Exchanges will have two 
ways of coordinating eligibility determinations. State Medicaid and 
CHIP agencies may make the final Medicaid and CHIP eligibility 
determination based on the Exchange's initial review; or the State 
Medicaid and CHIP agencies may accept a final eligibility determination 
made by an Exchange that uses State eligibility rules and standards.
    We are revising Sec.  435.1200(c), accordingly, to reflect this new 
flexibility and to establish the standards and guidelines to ensure a 
simple, coordinated and timely eligibility determination process and 
accurate eligibility determinations regardless of the option elected by 
the State. Consistent with the discussion in the preamble to Sec.  
431.10 and Sec.  431.11, we are revising paragraph (c) to require, in 
States in which the Exchange will make Medicaid eligibility 
determinations, that the State Medicaid agency shall comply with 
provisions at revised Sec.  435.10 to ensure it maintains the oversight 
for the Medicaid program. We also are revising paragraph (c), 
consistent with revised Sec.  435.911 to ensure that individuals 
determined eligible for Medicaid by the Exchange based on the 
applicable MAGI standard are considered by the agency for eligibility 
on other bases which may be more advantageous to the individual, as 
appropriate.
    To ensure a highly coordinated system of eligibility and enrollment 
regardless of whether the Exchange or the Medicaid agency makes the 
final eligibility determination, we are amending paragraphs (b) and (d) 
of Sec.  435.1200. Specifically, we are amending paragraph (b)(3), 
which requires an agreement between the agency and the Exchange and 
other insurance affordability programs, to include a delineation of the 
responsibilities of each program to minimize burden on individuals, as 
well as to ensure timely determinations of eligibility and enrollment 
in the appropriate program based on the date the application is 
submitted to any insurance affordability program and compliance with 
paragraphs (d) through (f) and, if applicable, Sec.  435.1200(c) to 
achieve a coordinated system of eligibility and enrollment among the 
programs. Paragraph (d), which describes the transfer of applications 
from an insurance affordability program to the State Medicaid agency, 
includes procedures to ensure that the Medicaid agency benefits from 
the information already collected by the other program and does not 
request information or documentation already provided, determines 
Medicaid eligibility of the individual promptly and without undue 
delay, consistent with the timeliness standards established under Sec.  
435.912 and in accordance with Sec.  435.911, without requiring 
submission of another application; accepts findings of specific 
eligibility criteria made by the other insurance affordability program 
without further verification if such findings were made in accordance 
with the same policies and procedures applied by the agency (as would 
be the case where the Exchange makes a finding based on verification 
received through the hub) or approved by it; and notifies the insurance 
affordability program of the receipt of the individual's account 
information.
    Because coordination between insurance affordability programs is 
equally important at renewals of eligibility, we have amended Sec.  
435.1200 to clarify its applicability to renewal processes. We also 
have added a definition of ``eligibility determination'' at Sec.  435.4 
to include an initial determination of eligibility for applicants, a 
renewal of eligibility for beneficiaries, and a redetermination of

[[Page 17185]]

eligibility for beneficiaries based on a change reported or identified. 
Consequently, the provisions set forth in paragraphs (b) and (d) apply 
not only to eligibility determination at initial application, but also 
at renewal and when a change in eligibility criteria is reported or 
identified.
    For the reasons set forth in section V. of the preamble, Sec.  
435.1200 is being published as an interim final rule. We are soliciting 
comments on the provisions in this section to ensure a seamless and 
coordinated eligibility determination process regardless of the 
implementation choices exercised by the State.
    Comment: One commenter wrote that the Exchange should consider all 
categories of potential Medicaid eligibility, including working 
disabled, medically needy, and transitional Medicaid, before 
determining that the applicant should not be enrolled in Medicaid. 
Other commenters believed that the Exchange should not make Medicaid 
determinations on a basis other than MAGI. One commenter stated that a 
basic screening by the Exchange for non-MAGI eligibility is futile 
because it will either be too broad or too narrow. One commenter wrote 
that any individual who submits an application to the Exchange should 
receive the same basic screening as would occur if the application were 
submitted to the Medicaid agency, including individuals who are 
ineligible for subsidies such as applicants over the age of 65.
    Response: Under the final rule, the Exchange would not be required 
to perform a detailed evaluation of all Medicaid eligibility categories 
even if the Exchange is making final Medicaid eligibility 
determinations based on the applicable MAGI standard. However, these 
rules do not prevent States from designing its system in a way that 
enables one entity to make all eligibility determinations for all 
insurance affordability programs. Otherwise the Exchange will be 
responsible for transferring the electronic account of an individual 
whom it screens as potentially eligible for Medicaid on a basis other 
than MAGI to the State Medicaid agency for a full assessment, as 
described in 45 CFR 155.345(b). In addition, per 45 CFR 155.345(c), 
applicants who submit a single, streamlined application to the Exchange 
will be informed of the option to undergo a full Medicaid evaluation, 
and assisted in doing so using the same coordinated and streamlined 
procedures and without the need to submit duplicate information.
    Comment: A few commenters wrote that Medicaid and CHIP agencies 
should be able to make binding eligibility decisions for all insurance 
affordability determinations.
    Response: There is no statutory authority to require Medicaid and 
CHIP agencies to make binding determinations of Exchange and APTC 
eligibility; however the Exchange may contract with the Medicaid or 
CHIP agency to make such determinations per 45 CFR 155.110(a)(2).
    Comment: A few commenters wrote that Medicaid agencies should be 
required to enter into agreements with other insurance affordability 
programs. Some commenters asked for CMS to provide model agreements. 
Others requested clarification on Sec.  435.1200(c)(3), under which 
Sates must certify criteria needed by the Exchange to determine 
Medicaid eligibility. Some commenters requested that we articulate the 
importance of a ``CMS compliance review'' when other insurance 
affordability programs are determining potential Medicaid eligibility.
    Response: The Medicaid agency must enter into an agreement with the 
Exchange operating in the State under Sec.  435.1200(c). We have moved 
the requirement that the agency certify eligibility criteria needed by 
the Exchange to determine Medicaid eligibility to paragraph (b). We 
note that this provision is also identified in the Exchange final rule 
at 45 CFR 155.305(c). Ensuring assessments of potential eligibility for 
all insurance affordability programs will be considered in the 
development of process standards and measures for the coordinated 
eligibility system.
    Comment: Two commenters recommended that States be able to set an 
annual open enrollment period for Medicaid to align with the Exchange.
    Response: The statute does not permit restricting enrollment in 
Medicaid to an annual open enrollment period. Individuals have the 
right to apply for Medicaid and can be determined eligible for Medicaid 
at any time.
    Comment: A number of commenters suggested that, to ensure that 
beneficiaries do not get lost in the transition between programs, the 
program to which the beneficiary is transferred should be required to 
acknowledge receipt of the information and enrollment of the 
individual, once completed.
    Response: In the case where one eligibility system is being used to 
support adjudication for all programs, such acknowledgment may be 
unnecessary. However, where the system for adjudicating eligibility for 
Medicaid, CHIP, and the Exchange are not fully integrated, is 
important. Accordingly, we are amending Sec.  435.1200(d) to 
incorporate the recommendation.
    Comment: One commenter suggested that if the State Medicaid or CHIP 
agency determines an individual is ineligible for coverage based on 
evidence of fraud, no further eligibility screening for other insurance 
affordability programs need be completed for that individual.
    Response: States are required to terminate eligibility in 
situations involving erroneous determinations of eligibility based on 
inaccurate information, as in cases involving fraud. In such 
circumstances, the agency would be able to reliably assess potential 
eligibility for another insurance affordability program, and therefore, 
it would not be consistent with the regulations for it to transfer the 
individual's application to another program.
    Comment: We received several comments supporting the required 
coordination among insurance affordability programs, but also 
advocating that we require adoption of a shared eligibility service to 
eliminate the need for electronic transferring of an individual's 
account information among programs.
    Response: In accordance with Sec.  435.1200, States must adopt a 
coordinated business process and supporting systems to permit an 
efficient and seamless evaluation of an individual's eligibility for 
APTCs and reduced cost sharing through the Exchange, Medicaid, CHIP and 
the Basic Health Plan if applicable. This could be accomplished through 
the use of a common system or shared eligibility service to adjudicate 
placement of most individuals. We have issued guidance about how 
programs should allocate costs for shared systems and services. We are 
supporting multiple architectures and pathways which reflect both 
States' intentions regarding their Exchanges, the current architecture 
and performance of existing eligibility systems, desire for integrated 
solutions that include other State programs, and other considerations.
    Comment: One commenter requested that States be required to obtain 
permission from an individual before any individual information is 
transferred to another insurance affordability program for evaluation 
of eligibility for such program.
    Response: Applicants filing a single, streamlined application have 
the option of applying only for enrollment in a qualified plan in an 
Exchange without an APTC. If the applicant seeks a

[[Page 17186]]

determination of eligibility for an insurance affordability program, he 
or she must apply for all insurance affordability programs and will be 
informed that information may be shared with such programs.
    Comment: Many commenters supported providing the opportunity for 
applicants to enroll in other insurance affordability programs while a 
determination of Medicaid eligibility on a non-MAGI basis is pending. A 
few commenters opposed this policy and a few others requested 
clarification of the interaction of Exchange coverage pending 
determination of Medicaid eligibility based on disability with 
retroactive Medicaid eligibility. One commenter questioned whether an 
insurer could recoup payments made on behalf of an individual and bill 
Medicaid for those costs when someone who has been enrolled through the 
Exchange is subsequently determined to be eligible for Medicaid and is 
eligible for retroactive eligibility.
    Response: Individuals who are eligible for Medicaid on the basis of 
MAGI but may be eligible on another basis should have access to 
coverage pending completion of a sometimes more time-consuming process 
of determining Medicaid based on such basis. Therefore, we are 
retaining the policy at Sec.  435.1200(e)(2) of this final rule to 
enable individuals who are otherwise eligible for coverage through the 
Exchange and other insurance affordability programs to enroll in such 
coverage while a determination of Medicaid eligibility is pending. Once 
determined, the effective date of Medicaid eligibility is defined in 
accordance with current regulations at renumbered Sec.  435.915, 
including up to 3 months of retroactive eligibility prior to the month 
of application, as applicable under current law. During such period of 
retroactive coverage, customary rules regarding third party liability 
apply and Medicaid would serve as a secondary payer to the coverage 
provided through the Exchange. The QHP in which the individual has been 
enrolled will not be able to recoup payments from the Medicaid program.
    Comment: Some commenters wrote that the proposal to provide 
Exchange coverage pending a determination based on disability should be 
extended to all pending determinations of Medicaid eligibility on a 
basis other than the applicable MAGI standard.
    Response: We have revised Sec.  435.1200(e)(2) to permit State 
agencies to transmit to other insurance affordability programs the 
electronic accounts of individuals undergoing eligibility 
determinations on any basis other than the applicable MAGI standard as 
appropriate.
    Comment: One commenter wrote that we should issue guidance that any 
``insurance affordability assistance,'' including APTCs and cost 
sharing subsidies, be counted toward meeting spend down requirements 
under Medicaid.
    Response: Incurred medical expenses are defined as Medicare and 
other health insurance premiums, deductibles and coinsurance charges, 
as well as medical and remedial care, that are not subject to payment 
by a third party. In other words, an incurred medical expense is an 
expense the individual has a legal obligation to pay. The only 
exception is for expenses paid entirely with State or local program 
funds, which can be considered to be incurred medical expenses for 
spend-down purposes. Assistance such as APTCs and cost-sharing 
subsidies are not expenses for which an individual has incurred an 
obligation to pay. However, expenses for premiums and other cost 
sharing obligations that an individual is liable to pay for obtaining 
coverage through the Exchange may be considered an incurred medical 
expense for purposes of spend-down.
    Comment: We received many comments on the Internet Web site 
described at proposed Sec.  435.1200(d), redesignated as Sec.  
435.1200(f). Many commenters wrote that we should require a single 
enrollment Web site with information on all insurance affordability 
programs rather than allow multiple Web sites with information from an 
array of entities. Some commenters suggested specific Web site 
functions such as portals to personalized application assistance and 
plan enrollment capacity. Another commenter requested model Web site 
content. One commenter suggested that our regulation should include all 
functions listed in section 1561 of the Affordable Care Act.
    Response: The Affordable Care Act provides that Web sites shall be 
accessible and support the range of applicant and beneficiary services 
required, including accessing information on the insurance 
affordability programs available in the State, and applying for and 
renewing coverage. States can and are encouraged to operate a single 
Web site, but are not required to do so as long as the Web sites of the 
different insurance affordability programs are linked to enable 
individuals to access the information and range of services required. 
We believe that States can adhere to the regulations in Sec.  
435.1200(f) in conjunction with complying with the recommendations 
adopted by the Secretary in September 2010 on the interoperable and 
secure standards and protocols that facilitate electronic enrollment, 
as required by section 1561 of the Act. Additional guidance will be 
released on standards. We also note that Sec.  435.908(b) requires 
States to make application assistance available through an Internet Web 
site, among other venues.
    Comment: Some commenters expressed preferences for the plan 
enrollment process after Medicaid eligibility had been determined. One 
commenter suggested that the Exchange be required to support informed 
choice of a Medicaid health plan if it has made the Medicaid 
eligibility determination. A few commenters requested that agencies be 
required to provide an online plan enrollment option, regardless of 
which entity makes the Medicaid determination. Some commenters 
requested that the enrollment process be clearly separated from the 
application process.
    Response: The responsibility of the Medicaid agency over enrollment 
activities is addressed at Sec.  431.10. While we encourage States to 
maximize the accessibility and simplicity of the plan enrollment 
process, plan enrollment activities are beyond the scope of this rule.
    Comment: One commenter suggested that because Exchanges do not 
require SSNs of non-applicants, the agency would not have an 
appropriate personal identifier, complicating the ability to establish 
interfaces to share data between different insurance affordability 
programs.
    Response: The requirements for a transfer of an electronic account 
as described in Sec.  435.1200(f) and (g)(2) are to transmit all 
relevant information related to an applicant which is obtained by the 
agency through the application, including information obtained through 
the verification process and any relevant non-applicant information. 
The lack of an SSN for a non-applicant member of the applicant's 
household should not affect the transfer of applicant information.
    Comment: A number of commenters noted the importance of readability 
and understandability particularly for the Web site in our Medicaid 
Eligibility proposed rule at Sec.  435.1200(d), and suggested that the 
Web site should be written at no greater than a 4-5th grade reading 
level.
    Response: We will consider it as we develop guidance that will 
address readability and literacy standards.

[[Page 17187]]

    Comment: Many commenters articulated the importance of 
accessibility of the Web site for persons who are limited English 
proficient, as well as people with a disability in accordance with the 
Americans with Disabilities Act and section 504 of the Rehabilitation 
Act. Many commenters recommended that the Web site should be available 
in languages other than English, including Spanish, and the second most 
prevalent language in service area. Commenters also suggested that 
vital documents should be translated, depending on the numbers of 
limited English proficient persons served and importance of the 
information provided, and that the Web site include tag lines to obtain 
oral interpretation of what is on the Web site. Other commenters stated 
that Web sites and kiosks should meet disability accessibility 
standards.
    Response: We have provided that information be conveyed accessibly 
for individuals who are limited English proficient and individuals with 
disabilities in Sec.  435.1200(f) by referencing revised language at 
Sec.  435.905(b), discussed in section III.E. of the preamble We had 
noted in the preamble of the Medicaid Eligibility proposed rule that 
Web sites, interactive kiosks and other information systems would be 
viewed as being in compliance with section 504 if such technologies 
meet or exceed section 508 of the Rehabilitation Act standards. We 
encourage States to review Web Content Accessibility Guidelines (WCAG) 
2.0 level AA Web site standards when designing their Web sites and 
other systems. These standards promote increased accessibility in 
information and communication technology for people with disabilities 
and thus, have been considered for adoption as section 508 standards in 
the recent proposed rule issued by the Architectural and Transportation 
Barriers Compliance Board (Access Board) (76 FR 76640, December 8, 
2011). See http://www.gpo.gov/fdsys/pkg/FR-2011-12-08/pdf/2011-31462.pdf#page=1.
    Comment: A number of commenters expressed concern about the 
treatment of incarcerated individuals. Some commenters believed that 
greater alignment between the eligibility of incarcerated individuals 
under the Medicaid and Exchange regulations should be achieved. Several 
commenters noted that incarceration is not a factor of eligibility, and 
suggested that State Medicaid agencies be required to suspend Medicaid 
eligibility rather than terminate individuals who are incarcerated. One 
commenter suggested States be required to automatically reinstate 
eligibility once incarcerated individuals are discharged. Other 
commenters believed that we should achieve alignment with the Exchange 
rules by amending Sec.  435.1010 to provide that an individual is not 
considered to be ``an inmate of a public institution'' for purposes of 
Sec.  435.1009 if he or she is in a public institution pending 
disposition of charges. One commenter requested clarification on the 
availability of FFP in expenditures for treatment provided to 
incarcerated individuals outside of the prison system.
    Response: The issues raised by the commenters are beyond the scope 
of this rulemaking. Subparagraph (A) of the matter following section 
1905(a)(29) of the Act excludes from the definition of ``medical 
assistance'' payments for care or services for any individual who is an 
inmate of a public institution, except as a patient in a medical 
institution. Therefore, FFP is available only for inpatient services in 
a medical institution that is not part of the penal system. An 
individual is considered an inmate when serving time for a criminal 
offense or confined involuntarily in State or Federal prisons, jails, 
detention facilities, or other penal facilities, regardless of 
adjudication status. Nothing in the Affordable Care Act alters this 
section of the Act.
    Comment: Several commenters suggested that we amend Sec.  435.907 
to expressly provide that ``other authorized persons acting on behalf 
of an applicant'' includes corrections department employees and others 
working on behalf of incarcerated individuals.
    Response: Corrections department employees and others working on 
behalf of incarcerated individuals are not precluded from serving as an 
authorized representative of incarcerated individuals for purposes of 
submitting an application on such individual's behalf. Sec.  435.908 of 
the regulations provides that the agency must allow any individual of 
the applicant's choice to assist in the application or renewal process.
    Comment: One commenter requested clarification regarding the 
inclusion of incarcerated individuals in the household of other family 
members.
    Response: Incarcerated individuals are treated no differently than 
non-incarcerated individuals in determining the household composition 
of individuals seeking coverage.

K. Single State Agency (Sec.  431.10 and Sec.  431.11)

    We proposed to allow Medicaid agencies to delegate to Exchanges 
that are public agencies authority to make Medicaid eligibility 
determinations as long as the single State Medicaid agency retains 
authority to issue policies, rules and regulations on program matters 
and to exercise discretion in the administration or supervision of the 
plan. Our proposal was based in part on the Exchange proposed rule, 
which provided that Exchanges would make Medicaid eligibility 
determinations to implement section 1943(b)(1)(B) of the Act. We note 
that this is still a relevant consideration although in the Exchange 
final rule, Exchanges may make Medicaid eligibility determinations, or 
Medicaid agencies may make such determinations, subject to certain 
policies designed to ensure a timely and coordinated eligibility 
determination that are set forth in Sec.  435.1200 of our final rule.
    In the Medicaid Eligibility proposed rule (76 FR 51169), we noted 
that if Exchanges are established as a non-governmental entity as 
allowed by the Affordable Care Act, the coordination provisions in the 
law may be more challenging and, for example, could require the co-
location of Medicaid State workers at Exchanges or other accommodations 
to ensure coordination is accomplished. We solicited 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.
    Comment: Commenters provided a wide spectrum of comments regarding 
the single State agency requirement. In general, commenters supported 
some delegation to Exchanges of authority to make Medicaid eligibility 
determinations. However, many commenters expressed the view that 
eligibility determinations are inherently governmental (involving 
confidential information and having fiscal implications) and that the 
final rule should prohibit non-profit Exchanges, or any private 
entities under contract to Exchanges, from making Medicaid eligibility 
determinations. They stated that the eligibility and enrollment 
function should be conducted by State or county agencies utilizing 
merit system personnel protections and/or that non-profit Exchanges 
should contract with State Medicaid agencies to conduct Medicaid 
eligibility determinations. They commented that if a Medicaid agency 
delegates eligibility to private entities, it will not be in a position 
to resume the function if anything goes acutely wrong; and that 
eligibility determinations necessarily

[[Page 17188]]

require worker discretion. One commenter advocated that for program 
integrity and fairness, only government employees should make Medicaid 
eligibility determinations. However, other commenters advocated 
modifying the current single State agency policy to allow non-
governmental entities, including nonprofits, to make Medicaid 
eligibility determinations. They sought maximum flexibility for State 
Exchanges to use private contractors. They further wanted clarification 
that the single State agency responsibility does not compromise the 
ability of Exchanges, including quasi-governmental entities, to make 
eligibility determinations. These commenters strongly endorsed a 
coordinated system such as having one application, and one verification 
process for multiple programs and noted that not allowing Exchanges 
operating as a nonprofit to make Medicaid eligibility determinations 
would undermine coordination. One commenter requested that we delete 
the requirement for merit system protection employees to make 
eligibility determinations. Another urged HHS to consider options for 
allowing nonprofit operated Exchanges and other third parties to make 
final Medicaid eligibility determinations without the requirement of 
State employee co-location.
    Response: We anticipate that States that are establishing Exchanges 
will employ various organizational structures, including non-profits 
and quasi-governmental organizations, and that those entities may 
employ private contractors that are ``eligible entities'' in accordance 
with section 1311(f)(3) of the Affordable Care Act and 45 CFR 
155.110(a) for some eligibility functions. To promote coordination and 
a positive customer experience and ensure that Exchanges are able to 
make Medicaid eligibility determinations, even when they are non-
governmental, we are adding a new Sec.  431.10(c)(3) to allow the 
delegation of Medicaid eligibility determinations to Exchanges, whether 
they are governmental or non-governmental organizations. However, if 
the Exchange is operated by a non-governmental entity, the authority to 
delegate Medicaid eligibility determinations is limited to MAGI cases 
only. Similarly, we are also extending authority for Exchanges that 
contract with private entities in Sec.  431.10(c)(3) to conduct 
eligibility determinations for MAGI cases. We believe that the 
simplified eligibility policies and processes applicable to MAGI 
determinations support this policy, particularly as we anticipate that 
much of the process will be automated.
    As is true whenever a single State agency delegates authority to 
another entity to make eligibility determinations, we continue to 
require that the single State agency must supervise the administration 
of the plan, is responsible for making the rules and regulations for 
administering the plan, and is accountable for the proper 
administration of the program. These are inherently governmental 
aspects of Medicaid program administration. In light of the new types 
of delegations that may arise and the importance of oversight and 
protections, we have also added provisions to the regulation that 
require the single State agency to assure that eligibility 
determinations are made consistent with State policies and in the best 
interests of applicants and beneficiaries, including by prohibiting 
improper incentives and avoiding conflict of interests. For example, 
compensation for entities making such determinations may not be linked 
to a pre-set target for eligibility determinations. The delegation 
authority also applies to any Exchange operated by the Federal 
government, in which case the federally-facilitated Exchange (FFE), 
like any other entity with delegated authority, would follow the single 
State agency's eligibility rules. If the Exchange is a public entity, 
the single State agency will be allowed to delegate eligibility 
determination to the Exchange for MAGI-excepted individuals. 
Alternatively, whether the Exchange is a public or nongovernmental 
entity, the single State agency may arrange to have the Exchange screen 
for possible Medicaid eligibility for MAGI-excepted individuals as set 
forth in Sec.  435.911 and coordinate the transfer of the application 
to the Medicaid agency, as set forth in Sec.  435.1200.
    To conform the rules, we also broaden the requirement in Sec.  
431.10(e) to include nongovernmental entities (including contractors 
and agents) performing services for the Medicaid agency.
    Comment: The overwhelming majority of commenters sought rules that 
strengthen the oversight role of the single State agency in any 
delegation situations, whether Medicaid delegated eligibility 
determination functions to another governmental or to a non-
governmental entity. They noted that even when determinations are made 
by government-operated Exchanges, it will be important for the single 
State agency to set the policies and to assume responsibility for 
accurate determinations in accordance with its policies and urge the 
Secretary to assure that this happens. They sought regulatory language 
that ensures that the single State agency ban fiscal incentives that 
discourage enrollment (including standards to ensure that eligibility 
is not influenced by differences in available Federal matching rates), 
ensure that improper incentives/outcomes are not permitted to monitor 
the entities' performance to identify any such improprieties, and if 
found, that they be properly addressed. They sought co-location 
requirements for public employees if eligibility functions are being 
conducted by non-governmental entities. They urged requirements that 
Medicaid eligibility determinations be made by State merit system 
personnel, and that there be transparency regarding staff making 
determinations, as well as for any guidance issued by the single State 
agency for a delegated entity.
    In addition, many commenters wanted to see a larger role for CMS 
oversight in cases where the single State agency delegates its 
eligibility function to another entity, including ensuring that CMS 
review compliance with this provision in its oversight and audits of 
States, as well as including compliance with this provision in future 
performance standards CMS will be issuing. One commenter sought a 
requirement for the single State agency to obtain HHS approval of a 
plan that details how eligibility determinations will be made. Several 
commenters sought a requirement that States submit all contracts with a 
value exceeding $5 million to CMS for approval as is done by SNAP. 
Commenters further sought mechanisms for advocates to provide 
information to CMS on the status of State compliance with the Federal 
requirements.
    Response: We are strengthening applicable safeguards in Sec.  
431.10, which would apply whether governmental or non-governmental 
entities are making eligibility determinations. The regulations intend 
to ensure that State agencies maintain their responsibility to oversee 
eligibility activities and ensure that Medicaid eligibility rules are 
implemented properly. These provisions apply not just when Exchanges 
conduct Medicaid eligibility determinations, but also when State 
Medicaid agencies allow other State agencies or county agencies, for 
example, to make eligibility determinations. In particular, Sec.  
431.10(c)(4) will require the single State agency to be responsible for 
ensuring that eligibility determinations are made consistent with its 
policies, and if there is a pattern of incorrect, inconsistent, or 
delayed determinations

[[Page 17189]]

that corrective actions are promptly instituted and/or the delegation, 
or contract, is terminated. In this context, oversight and corrective 
actions would pertain to the overall implementation of the single State 
agency's rules by the entity making eligibility determinations, not to 
case-by-case reviews. This could include corrective action plans, 
financial sanctions, and even termination of agreements if warranted.
    As previously described, Sec.  431.10(c)(5) will require that the 
single State agency be responsible for assuring eligibility 
determinations will be made in the best interest of applicants and 
beneficiaries and specifically for assuring that there is no conflict 
of interest by any entity making eligibility determinations, whether by 
delegation or contract; and improper incentives and/or outcomes are 
prohibited, monitored, and if found properly and promptly addressed 
through corrective actions. Thus, the rule is prohibiting any 
arrangements that link the results of eligibility determination 
dispositions to remuneration. Moreover, the agreement between the 
Medicaid agency and Federal or State and local agencies is being 
broadened to include agreements with ``entities'' as well, to account 
for non-governmental entities. To ensure accountability, we are 
requiring that such agreements be in writing and available upon 
request. Such agreements may be subject to State FOIA laws that require 
disclosure, but to ensure uniform accountability for such arrangements, 
we are including this requirement in our regulation. We believe that 
transparency will strengthen program operations. To ensure that each 
parties' responsibilities are clearly designated, we are setting out 
the following minimum components of such agreements:
    <bullet> The relationships and respective responsibilities of the 
parties (including responsibilities regarding identification of 
potential and transfer of non-MAGI cases);
    <bullet> The quality control and oversight plans by the single 
State agency to review determinations made by the delegee to ensure 
that overall determinations are made consistent with the State 
agencies' eligibility polices;
    <bullet> The reporting requirements from the delegee making 
Medicaid eligibility determinations to the single State agency to 
permit such oversight.
    <bullet> An assurance that the delegee will comply with all 
confidentiality and security requirements in accordance with sections 
1902(a)(7) and 1942 of the Act and part 431, subpart F, for all 
applicant and beneficiary data; and
    <bullet> An assurance that merit system personnel protection 
principles are employed by the entity responsible for the Medicaid 
eligibility determination.
    In light of the provisions described above, which will support the 
integrity and accuracy of the Medicaid eligibility process, we do not 
agree that requiring physical co-location for public employees is 
necessary. However, States may provide for co-location if they choose 
to do so. While we are not requiring that public employees review each 
determination, coordination between other entities and the single State 
agency staff can help the State agency implement its oversight role 
when it delegates eligibility determinations. Moreover, we are adding a 
requirement to the agreements between the single State agency and the 
entity that has been delegated eligibility for ``an assurance that 
applicants and beneficiaries are made aware of how they can directly 
contact and obtain information from the single State agency'' to 
respond to commenters concerns about applicant and beneficiary access 
to public employees.
    Finally, we are making conforming changes at Sec.  431.11(d) to 
already existing requirements to include situations when eligibility 
has been delegated to non-governmental Exchanges and/or private 
contractors that are providing eligibility services. State plans will 
still require explicit descriptions of the staff and functions of the 
entity that is being delegated eligibility determinations as they must 
today.
    Comment: Some commenters questioned the rules regarding using 
automated eligibility systems to make Medicaid eligibility 
determinations. They sought clarification that States be permitted to 
use automated systems to apply Medicaid validated logic through system-
based eligibility algorithms to make Medicaid eligibility 
determinations based on MAGI. One commenter opposed using ``co-location 
policies'' and wanted Medicaid agencies to have the flexibility to 
employ the merit protection principles by approving a system-based 
eligibility algorithm developed and implemented by a private or non-
profit entity contracting for eligibility determinations with periodic 
sampling of Medicaid determinations by public employees.
    Response: Whether conducted by a public or private entity, we 
anticipate that eligibility determinations using MAGI-based standards 
will be highly automated, utilizing business rules developed by the 
State Medicaid agency. In the most simplified cases, which can be 
determined without human intervention or discretion, we are clarifying 
that automated systems can generate Medicaid eligibility 
determinations, without suspending the case and waiting for an 
eligibility worker (public or private) to finalize the determination, 
provided that the Medicaid agency retains oversight responsibilities 
for all decisions made through the automated system. We will be issuing 
future guidance on this topic.
    Comment: One commenter requested clarification on the range of 
public agencies that can perform MAGI and non-MAGI eligibility 
determinations.
    Response: Our regulations provide that public agencies, including 
Exchanges, may make MAGI and non-MAGI eligibility determinations. 
Longstanding Medicaid regulations have allowed Medicaid agencies to 
delegate to other State agencies (such as agencies administering TANF 
and SNAP programs) as well as to local Medicaid offices (such as those 
administered by counties). These delegations will continue to be 
permitted under our final rule, although the Single State agency's 
authority and oversight responsibilities are identified with greater 
specificity.
    Comment: One commenter requested that we clarify what ``best 
interest'' of the applicant/beneficiaries and ``improper outcomes'' 
mean in Sec.  431.10(c)(4). Another requested detail on the term 
``corrective action'' and ``conflict of interest.''
    Response: ``Best interest of applicants and beneficiaries,'' and 
``corrective action'' are not new terms for the Medicaid program. They 
are not used as technical terms but to connote their plain meaning. How 
these terms apply may depend on circumstances. ``Improper outcomes'' 
and ``conflict of interest'' are intended to convey certain specific 
circumstances that are not in the best interest of applicants and 
beneficiaries, and may require corrective action. We believe States 
have experience with and are able to properly interpret these 
provisions but will continue to work with States in the context of 
implementing this final rule.
    Comment: One commenter requested that CMS resolve the conflict with 
SNAP that prohibits private eligibility determinations.
    Response: We will work with States and the SNAP program to consider 
ways to promote coordination.
    Comment: One commenter sought a clearer statement that FFEs would 
be required to follow State eligibility rules and policies.
    Response: Under the Exchange eligibility rule at Sec.  155.305, 
Exchanges will be able to make final Medicaid eligibility 
determinations, provided that

[[Page 17190]]

they follow the policies set forth by the single State agency. This 
applies equally to State-based Exchanges and to FFEs.

L. Implementing Application of MAGI to CHIP (Sec.  457.10, Sec.  
457.301, Sec.  457.305, Sec.  457.315, and Sec.  457.320)

    We proposed that States base income eligibility for CHIP on MAGI 
consistent with section 1902(e)(14) of the Act. Because section 
2107(e)(1)(F) of the Affordable Care Act applies MAGI methodologies to 
CHIP ``in the same manner'' as they are applied to Medicaid, we 
proposed applying the Medicaid MAGI methodologies to CHIP without 
modification.
    We outlined proposed changes to following existing sections of the 
CHIP regulations:
    <bullet> Definitions and use of terms (Sec.  457.10).
    <bullet> Definitions and use of terms (Sec.  457.301).
    <bullet> State plan provisions (Sec.  457.305).
    <bullet> Other eligibility standards (Sec.  457.320).
    In addition, we proposed the addition of new ``Application of MAGI 
and household'' section (Sec.  457.315), to implement the CHIP MAGI 
components of the law. These proposed revisions are discussed in more 
detail in the Medicaid Eligibility proposed rule (76 FR 51170 through 
51171).
    Comment: We received several general comments concerning the 
proposed application of MAGI to CHIP that mirrored comments concerning 
the proposed application of MAGI to Medicaid. Some commenters expressed 
support for the proposed MAGI definitions, including the exception to 
MAGI provided for Express Lane eligibility determinations. One 
commenter noted a general concern about the complexity of the MAGI 
definition, and other commenters raised concerns about the potential 
impact of the proposed MAGI rules on families in particular 
circumstances, such as families with stepparent income.
    Response: Our responses to general comments on the application of 
MAGI to Medicaid apply also to CHIP. See section III.B of this 
preamble.
    Comment: We received several comments requesting that the proposed 
grace period for applying the MAGI methodology to current Medicaid 
enrollees described in Sec.  435.603(a) should equally apply to CHIP 
enrollees.
    One commenter requested clarification about whether CHIP children 
who become eligible for Medicaid in 2014 would be entitled to 12 months 
of continuous eligibility if the CHIP plan offers continuous 
eligibility, but the Medicaid plan does not.
    Response: We are adding a paragraph to Sec.  457.315 to clarify 
that the MAGI grace period for Medicaid described in Sec.  
435.603(a)(3) applies equally to CHIP. This section clarifies that 
ongoing eligibility for children determined eligible for CHIP on or 
before December 31, 2013, will not be determined according to MAGI 
until March 31, 2014 or the next regularly-scheduled renewal, whichever 
is later.
    Regarding 12 months of continuous eligibility, a child who is 
enrolled in CHIP with 12- month continuous eligibility as of January 1, 
2014 would be able to retain CHIP coverage until the end of their 12 
month continuous eligibility period, as that is when the child's next 
regular renewal would occur.
    Subsequent renewals for Medicaid-eligible children would be 
conducted in accordance with Sec.  435.916.
    Comment: We received several comments regarding the conversion of 
CHIP income standards to a MAGI-based income standard. Some commenters 
recommended that CMS limit the ability of States to set their own 
income standards and that the income standard conversion ensure that no 
child who would have been eligible under current CHIP income standards 
would become ineligible under the new MAGI standard.
    Additionally, a few commenters recommended that CMS indicate that 
the Affordable Care Act's maintenance of effort (MOE) provision 
requires that the CHIP MAGI standard be greater than or equal to the 
income level applied as of March 23, 2010. Some commenters also 
recommended that the CHIP regulations include a provision to clarify 
that the Medicaid MAGI standard must be greater than or equal to the 
standard applied on March 23, 2010.
    Response: Guidance regarding the process for converting current 
income standards under Medicaid and CHIP to MAGI-equivalent standards 
is beyond the scope of this rule and will be provided in future 
guidance, which will require States to convert net income standards to 
MAGI-equivalent standards in a manner that ensures that affected 
populations, in the aggregate, do not lose coverage. Issues around 
applicability of the MOE are outside the scope of this Medicaid 
Eligibility proposed rule.
    Comment: We received some general comments about the provision of 
continued coverage for children made ineligible for Medicaid as a 
result of the MAGI conversion under section 2101(f) of the Affordable 
Care Act, as proposed in Sec.  457.310(b)(1)(iv). Some commenters 
recommended that pre-MAGI coverage levels be continued indefinitely, 
but one commenter felt that this approach would undermine the 
consistency in eligibility standards and methods envisioned under the 
Affordable Care Act.
    Response: Section 2101(f) of the Affordable Care Act provides that 
States maintain coverage under a separate CHIP program for children who 
lose Medicaid eligibility due to the elimination of income disregards 
as a result of the conversion to MAGI. The statute limits the 
application of section 2101(f) of the Affordable Care Act to 
individuals who are made ineligible for Medicaid directly ``as a 
result'' of the elimination of income disregards under MAGI-based 
financial methods. We interpret this provision as relating to children 
enrolled in Medicaid as of December 31, 2013, so that the protection 
afforded under section 2102(f) will take effect on the date of the 
child's Medicaid first renewal, after the MAGI grace period described 
in Sec.  435.603(b)(3). This provision does not apply to individuals 
made ineligible for a separate CHIP as a result of the elimination of 
income disregards. Thus, the eligibility of children who become 
eligible for CHIP under section 2101(f) of the Affordable Care Act will 
be protected from the impact of the elimination of disregards under 
MAGI methods until the child's first renewal of CHIP eligibility in 
accordance with Sec.  457.343 (that is, one year after the child's 
enrollment in CHIP).
    We have deleted Sec.  457.310(b)(1)(iv) and added a new paragraph 
Sec.  457.310(d) to provide additional clarification regarding the 
protection afforded by section 2101(f) of the Affordable Care Act.
    Comment: We received a few comments requesting clarification about 
the applicability of the CHIP enhanced FMAP rate after the conversion 
to MAGI. Several commenters requested clarification on whether States 
that currently claim the CHIP enhanced FMAP for child health 
expenditures for children with incomes above 300 percent of the FPL may 
continue to do so after the MAGI conversion or whether these States 
will be subject to the requirements at section 2105(c)(8) of the Act, 
which limits the CHIP FMAP rate for expansions of CHIP above 300 
percent of the FPL after February 4, 2009.
    One commenter asked CMS to clarify whether block of income 
disregards applied to the CHIP income standard prior to 2014 will be 
incorporated into a State's MAGI CHIP income standard,

[[Page 17191]]

and whether this would be considered permissible in light of the 
preclusion of block of income disregards under the Affordable Care Act 
after 2014.
    One commenter recommended that all CHIP children who become 
eligible for Medicaid as a result of the conversion to MAGI and the 
expansion of Medicaid coverage for children up to 133 percent of the 
FPL should be eligible for CHIP enhanced FMAP. Another commenter 
specifically recommended that CHIP children made eligible for Medicaid 
because of changes in Sneede vs. Kizer budgeting should retain Title 
XXI funds.
    Response: States that currently claim the CHIP enhanced matching 
rate for coverage of children with effective family income above 300 
percent of the FPL, based on State plan provisions in effect on 
February 4, 2009, will continue to be eligible for CHIP enhanced FMAP 
for such children after the conversion to MAGI even if the converted 
MAGI income standard exceeds 300 percent of the FPL. States that have 
expanded CHIP through the use of block of income disregards prior to 
2014 will continue to cover these children because the law requires 
that the MAGI-converted income standard take into account existing 
disregards, including block of income disregards.
    In terms of the claiming of Title XXI funds for separate CHIP 
children who become eligible for Medicaid, CHIP enhanced FMAP will 
continue to be available for children whose income is greater than the 
Medicaid applicable income level (defined in Sec.  457.301 and based on 
the 1997 Medicaid income standard for children), regardless of whether 
those children are enrolled in Medicaid or CHIP. This standard will be 
converted for MAGI and States will qualify for CHIP enhanced FMAP for 
expenditures on behalf of children whose MAGI-based household income is 
above the converted MAGI standard. Guidance about the conversion of the 
Medicaid applicable income level for MAGI will be provided in the 
future.

M. Residency for CHIP Eligibility (Sec.  457.320)

    We proposed to modify the definition of residency under CHIP for 
non-institutionalized children who are not wards of the State to 
reference the Medicaid definition for children at proposed Sec.  
435.403(i) for individuals under age 21. Aligning residency standards 
was proposed to ensure coordination between all insurance affordability 
programs, including advanced premium tax credits.
    Comment: Many commenters supported our efforts to align residency 
definitions for all insurance affordability programs. Some commenters 
provided suggestions similar to those made regarding the Medicaid 
residency definition to achieve further alignment. One commenter 
specifically recommended more clarity on how the residency definition 
would be applied in States that adopted 12-month continuous eligibility 
in CHIP.
    Response: We have kept residency definitions aligned in the final 
rule. To promote further alignment, we have also adopted the Medicaid 
residency standards for adults for any adult pregnant women determined 
eligible under the CHIP State plan. Our responses to general comments 
on residency regulations for Medicaid also apply to CHIP. See section 
III.C of this preamble.
    Changes in State residency (that is, a move out of State) are an 
acceptable exception to a 12-month continuous eligibility period, as 
described in our December 16, 2009 State Health Official Letter 
regarding CHIPRA Performance Bonus Payments, available at http://www.cms.gov/smdl/downloads/sho09015.pdf.
    Comment: One commenter recommended that we use the term ``in the 
custody and care of a State'' rather than ``ward of the State'' to 
align our terminology with the Administration for Children and 
Families.
    Response: We do not believe this change is necessary and we are 
concerned that it could be seen as reflecting an unintended change in 
the current meaning of the regulation. Thus, we will be retaining the 
term ``ward of the State'' to avoid any confusion.

N. CHIP Coordinated Eligibility and Enrollment Process (Sec.  457.330, 
Sec.  457.340, Sec.  457.343, Sec.  457.348, Sec.  457.350, Sec.  
457.353, and Sec.  457.380)

    We proposed to implement section 2107(e)(1)(O) of the Affordable 
Care Act which applies to CHIP the same enrollment simplification 
standards described for Medicaid under the new section 1943 of the Act, 
including standards for applications, coordination with other insurance 
affordability programs, renewals, and verification. These standards 
build on existing practices and provisions in section 2102(b)(3)(B) of 
the Affordable Care Act relating to coordinated eligibility and 
enrollment between Medicaid and CHIP. The regulatory amendments 
proposed correspond to proposed changes and additions to Medicaid at 
Sec.  435.905 through Sec.  435.908, Sec.  435.916, Sec.  435.940 
through Sec.  435.956, and Sec.  435.1200 (these proposed provisions 
are discussed fully in the Medicaid Eligibility proposed rule (76 FR 
51160 through 51162; 51165 through 51166; and 51170)).
    We note that any references to ``State'' in this section refer to 
the CHIP agency, and that any references to ``enrollee'' in CHIP have 
the same meaning as ``beneficiary'' in Medicaid.
    Comment: We received several comments about the application and 
enrollment process in CHIP that mirrored comments concerning the 
application and enrollment process for Medicaid, including comments 
about meaningful access for individuals with limited English 
proficiency, the Internet Web site, use of the single, streamlined 
application for multi-benefit applications, and the timeliness of 
application processing. Many commenters supported the overall 
establishment of a unified application and enrollment process for all 
insurance affordability programs.
    Response: We recognize the value of clear guidance and consistent 
standards and procedures to support this alignment without limiting 
State flexibility to design implementation strategies, and in this 
final rule, we retained alignment of the application and enrollment 
procedures between insurance affordability programs. Our responses to 
general comments on application and enrollment procedures for Medicaid 
apply also to CHIP. See sections III.D and H of this preamble.
    Changes that have been made to the Medicaid standards for 
applications and enrollment in the final rule generally apply to CHIP 
through cross-reference, but we have also updated CHIP language where 
appropriate to ensure continued alignment. Specifically, we have added 
and/or revised definitions for ``Advance payments of the premium tax 
credit (APTC),'' ``application,'' ``eligibility determination,'' and 
``non-applicant.'' Moreover, we have adopted the term ``renewal'' 
instead of ``redetermination,'' consistent with Medicaid. Also, we have 
added cross-references to Sec.  435.906 and Sec.  435.908 to replace 
proposed text at Sec.  457.340(a) and have moved Sec.  457.335 to Sec.  
457.340(a) to further clarify the alignment of standards for 
application and renewal assistance. As described in section III.D of 
this preamble, we are adding additional standards for timely 
eligibility determinations for Medicaid at Sec.  435.912. These also 
are adopted for CHIP by cross-reference in Sec.  457.340(d) in the 
final rule.
    Consistent with our request for comments on the interim final 
Medicaid regulations at Sec.  435.912 and Sec.  435.1200, we are 
soliciting additional comment and issuing as an interim final rule

[[Page 17192]]

paragraphs (c)(1) and (d) of Sec.  431.300, paragraph (b)(6) of Sec.  
431.305, paragraph (d) of Sec.  457.340, Sec.  457.348, and the 
paragraphs (a), (b), (c), (f), (i), (j), and (k) of Sec.  457.350 that 
are added or revised in this rule.
    Comment: Several commenters expressed concerns with the proposal in 
Sec.  457.340(b) to require SSNs as a condition of eligibility in CHIP 
because of the potential barriers it could impose on some individuals. 
A few commenters noted that this requirement may be problematic for 
States that have elected the CHIP option to provide prenatal care for 
pregnant women. Commenters recommended that CMS continue to retain 
State flexibility regarding the SSN requirements in CHIP, or at a 
minimum, that CMS clarify that SSN requirements only apply to 
individuals who have SSNs. One commenter supported the requirement for 
an SSN and expressed concern that data systems might not be able to 
process applications in real time without this information. We also 
received comments about the use of SSNs for non-applicants in CHIP, 
which mirrored comments about the use of SSNs for non-applicants in 
Medicaid.
    Response: We do not believe that aligning the SSN policy for CHIP 
with the policy in Medicaid will pose a significant burden on families 
or States. In fact, many separate CHIPs have successfully implemented 
SSN requirements without imposing a significant burden on families. The 
Medicaid regulations at Sec.  435.910(e) and (f), incorporated by 
cross-references in the CHIP regulations at Sec.  457.340(b), clarify 
procedures for applicants who have not yet been issued an SSN and 
emphasize that the State may not deny or delay services to otherwise 
eligible applicants pending the issuance of a SSN. SSNs are not 
required from individuals who are not eligible for an SSN.
    Our responses to general comments on the use of SSNs of non-
applicants in Medicaid apply also to CHIP. See section III.D of this 
preamble. Changes that have been made to the Medicaid regulations 
regarding non-applicant SSNs in the final rule are adopted for CHIP via 
cross-reference at Sec.  457.340(b).
    Comment: We received one comment concerning our proposal to remove 
the mention of enrollment caps in Sec.  457.340(a). The commenter 
requested confirmation that States are able to retain their authority 
to implement enrollment caps and recommended that CMS issue additional 
clarification about the extent of application assistance that CHIP 
agencies are required to provide if CHIP enrollment is capped.
    Response: Nothing in the Medicaid Eligibility proposed rule 
addresses a State's ability to implement enrollment caps. However, the 
existence of an enrollment cap does not relieve a CHIP agency to accept 
the single streamlined application and screen for all insurance 
affordability programs regardless of whether CHIP enrollment is capped, 
or to otherwise comply with the regulations regarding CHIP's role in 
the coordinated eligibility and enrollment system.
    Comment: We received several general comments about coordination 
between insurance affordability programs, including concerns about the 
process for transferring application data, suggestions for screening 
metrics and requests for clarification about the implication of the 
Medicaid Eligibility proposed rule on a State's PERM. These comments 
mirrored comments that were received on the corresponding Medicaid 
provisions and are addressed in section III.J. of the preamble.
    In addition, we received several CHIP-specific comments. Some 
commenters requested that CMS require CHIP agencies to allow Medicaid 
agencies to make CHIP determinations to reduce potential gaps in 
coverage. One commenter was concerned about the allocation of the CHIP 
enhanced FMAP for children who were enrolled in CHIP but subsequently 
determined eligible for Medicaid on a basis other than MAGI, according 
to the process outlined in Sec.  457.350(j). One commenter recommended 
a slight rewording of Sec.  457.350(i) and (j) to clarify that 
screening for Medicaid eligibility is required before an individual is 
found potentially eligible for other insurance affordability programs. 
One commenter questioned whether States needed to give applicants a 
choice to enroll in CHIP or the Exchange.
    Response: Our responses to general comments on the coordination 
among other insurance affordability programs for Medicaid apply also to 
CHIP. See section III.J of this preamble. We have also revised the 
final CHIP regulations where appropriate to ensure continued alignment 
with Medicaid regulations, including revisions to Sec.  457.348 to 
provide further flexibility for States in developing their 
implementation strategies with respect to the determination of 
eligibility for CHIP by the Exchange. As we noted, we are soliciting 
additional comment and issuing as interim final Sec.  457.348 and the 
paragraphs of Sec.  457.350 that are added or revised in this rule.
    States already permit Medicaid agencies to make CHIP eligibility 
determinations to promote coordination between programs. We do not have 
the authority to require that States must enable their Medicaid 
agencies to make final CHIP eligibility determinations and, under the 
final regulation, States will continue to have flexibility in this 
regard. Other provisions of the regulation will help to ensure seamless 
coordination between Medicaid and CHIP.
    Regarding the Federal reimbursement rates for children enrolled in 
a separate CHIP who are identified according to Sec.  457.350(j) as 
potentially eligible for Medicaid on a basis other than MAGI, States 
are able to claim the CHIP enhanced FMAP for these children pending 
final determination of Medicaid eligibility.
    We have also revised Sec.  457.350(i) and (j) for improved clarity 
and alignment with Medicaid and the Exchange. As noted in the Medicaid 
Eligibility proposed rule, these provisions apply not only to children 
but also to all parents and other household members applying for 
coverage on the single, streamlined application.
    Finally, regarding the coordination between CHIP and the Exchange, 
the Affordable Care Act does not permit giving applicants a choice 
between receiving the APTC available for coverage obtained through the 
Exchange and receiving CHIP coverage. Individuals who are eligible for 
CHIP are not eligible for APTCs although, individuals who are eligible 
for CHIP may choose to enroll into a QHP in an Exchange without an 
APTC. We also note that there are several ways that States can promote 
the ability of families to enroll in the same plan. States may contract 
with the same plans that participate as QHPs in the Exchange to deliver 
covered services in their CHIP programs. States also may offer CHIP 
eligible individuals the choice of receiving premium assistance through 
a QHP offered in the Exchange consistent with the standards and 
requirements of section 2105(c)(3) of the Act. Guidance about the use 
of premium assistance and coordination of coverage with QHPs in 
Exchanges is forthcoming.
    Comment: We received comments about our proposal for CHIP to adopt 
the coverage month policy proposed in 45 CFR 155.410 of the Exchange 
proposed rule, which mirrored comments related to coverage months in 
Medicaid. Some commenters offered specific recommendations regarding 
our proposal to update the definition of the effective date of coverage 
in CHIP in Sec.  457.340(f) to promote better coordination across 
insurance affordability programs. One commenter recommended that we 
explicitly require

[[Page 17193]]

that the application date be the effective date of coverage, rather 
than retain flexibility for States. One commenter recommended that we 
delete the word ``unnecessary'' from Sec.  457.340(f) and Sec.  
457.80(c), and add additional clarifying language to emphasize that 
gaps in eligibility or coverage are not permissible. This commenter 
also wanted CMS to clarify that in addition to eligibility, CHIP 
coverage must be furnished promptly.
    Response: Our responses to general comments on coverage month for 
Medicaid also apply to CHIP. See section III.G of this preamble. We 
encourage CHIP programs to continue to use existing flexibility to 
continue coverage until the end of the month to reduce gaps in 
coverage, but we are not requiring a specific approach at this time.
    We note that some States use this flexibility to minimize gaps in 
coverage in different ways. For example, some States retroactively 
enroll children to the beginning of the month of application. The 
phrase ``furnish CHIP promptly'' in Sec.  457.348 refers to both CHIP 
eligibility and CHIP benefits.
    Comment: One commenter raised several concerns related to coverage 
of pregnant women and deemed newborns covered in CHIP. First, the 
commenter requested that CMS clarify that part 457 applies in full when 
CHIP services are received by a pregnant women through the CHIP State 
plan or a waiver of the plan. The commenter also expressed concern that 
the deletion of existing Sec.  457.350(b)(2) could create problems for 
determining eligibility for families with deemed newborns. Lastly, the 
commenter recommended that Sec.  457.343 be modified to require that 
States routinely renew eligibility near the expected delivery date of a 
pregnant woman to avoid gaps in coverage, or retroactive disenrollment, 
particularly for pregnant women eligible for CHIP coverage under the 
prenatal expansion option.
    Response: The option to provide CHIP to pregnant women under the 
CHIP State plan or waiver of the State plan is beyond the scope of this 
rule. However, we direct readers to our May 11, 2009 State Health 
Official Letter, available at http://www.cms.gov/SMDL/downloads/SHO051109.pdf, for guidance on this issue.
    The specific screening objectives identified in existing 
regulations at Sec.  457.350(b) are encompassed in the broader 
screening objectives reflected in Sec.  457.340(b) of this final rule, 
which direct CHIP agencies to conduct broader screening for potential 
Medicaid eligibility both based on the applicable MAGI standard for 
children, pregnant women, parents, and other non-elderly adults as well 
as on other bases. Deemed newborn eligibility for babies born to 
mothers eligible for CHIP will be addressed in future guidance.
    Finally, as suggested, we would expect States to routinely renew 
eligibility near the expected delivery date of a pregnant women based 
on the standard in Sec.  435.916(d)(2), as cross referenced to CHIP at 
Sec.  457.343, which requires States to renew eligibility at the 
appropriate time if the agency has information about anticipated 
changes in an enrollee's circumstances that may affect her eligibility.
    Comment: We received several general comments about verification of 
eligibility for CHIP that mirrored comments received on the 
verification process in Medicaid, such as concerns about the ability to 
access data through the electronic service established by the 
Secretary, requests for clarification regarding the time period to 
furnish documentation, and questions regarding the use of alternative 
data sources.
    Many commenters expressed strong support for our proposed policy to 
allow States to accept self-attestation of most eligibility 
information, and some commenters recommended that we require all States 
to accept self-attestation of income. One commenter recommended that 
the CHIP regulation text regarding self-attestation be more closely 
aligned with proposed Sec.  435.945(b). Other commenters wanted CMS to 
clarify that self-attestation of pregnancy was acceptable. One 
commenter requested that CMS clarify whether it was necessary for 
States to accept self-attested data if subsequent third-party data 
contradicted the applicant's statement.
    We also received some comments about Sec.  457.380(h), regarding 
the interaction between our verification policies and program integrity 
requirements. Some commenters indicated that this paragraph was 
unnecessary and other commenters thought that this policy could have 
adverse consequences for enrollees.
    Response: Our responses to general comments on verification for 
Medicaid also apply to CHIP. See section III.H of this preamble. 
Changes that have been made to the Medicaid standards in the final rule 
generally apply to CHIP via cross-reference, but we have also updated 
CHIP language where appropriate to ensure alignment. Specifically, we 
have revised the language of Sec.  457.380(e) to remove the requirement 
to accept self-attestation of household size, consistent with revisions 
to the Medicaid regulations at Sec.  435.956; we have cross-referenced 
paragraph (f) to Sec.  435.952 to ensure an alignment of standards 
between Medicaid and CHIP; and we have added paragraph (j) to Sec.  
457.380 to require States to develop a verification plan similar to the 
verification plan required by Medicaid agencies in Sec.  435.945(j).
    We are modifying our regulation text to mirror Medicaid to further 
ensure consistency. The acceptance of self-attestation is an option for 
States (unless not permitted by law), with the one exception that 
States must accept self-attestation of pregnancy for purposes of 
Medicaid and CHIP eligibility unless the State has information that is 
not reasonably compatible with the attestation.
    As discussed in section III.H of this preamble, we will be 
reviewing and analyzing all of our error rate measurement program rules 
and procedures to ensure consistency with the streamlined eligibility 
and enrollment rules established in this regulation, and will provide 
additional guidance as needed. We are revising Sec.  457.380(h) to 
reflect the changes made to proposed Sec.  435.945(a) (moved to Sec.  
435.940 in this final rule) and will work with States to ensure that 
program integrity policies at the Federal and State levels support the 
goals of minimizing consumer and State administrative burden while also 
ensuring accurate eligibility determinations.
    Comment: We received several comments expressing concern that the 
Department of Treasury's proposed rules for the premium tax credit 
could adversely affect families with children in CHIP. These commenters 
noted that Treasury's definition of affordable employer-based coverage, 
in which the affordability test for the entire family would be 
determined based on the premium cost for self-only coverage for the 
primary taxpayer, would result in many families not qualifying for 
premium tax credits. Also, commenters noted that the Treasury's rules 
for calculating the premium tax credit do not consider the cost of CHIP 
premiums and would consequently impose an additional premium burden on 
families that are split between CHIP and the Exchange. Some commenters 
recommended that if the Department of Treasury does not modify its 
proposed rule, then CMS should require States to waive CHIP premiums 
for children whose parents are enrolled in the Exchange or take other 
measures to minimize the financial burden placed on families with 
children in CHIP.
    Response: Under the existing CHIP statute and regulations, States 
may vary

[[Page 17194]]

premiums for different groups of children and may elect not to impose 
premiums for children who have parents that are enrolled in the 
Exchange, consistent with Sec.  457.530, and we encourage States to 
consider the impact of all premiums paid by the family in designing 
their CHIP premium policies. However, consistent with the flexibility 
accorded States under the Act, we are not requiring this approach. 
Rules relating to the calculation of the premium tax credit are beyond 
the scope of this rule, but will be discussed in the final rule to be 
promulgated by the Department of the Treasury.
    Comment: Several commenters noted a variety of CHIP specific issues 
that were not addressed in this regulation, such as the policy for 
waiting periods, maintenance of effort requirements, essential health 
benefits, the increase in the CHIP FMAP in 2014, and the possibility 
for future expansions in CHIP coverage after 2014.
    Response: These comments are outside the scope of this rule, but we 
will consider the comments in future guidance.

O. FMAP for Newly Eligible Individuals and for Expansion States (Sec.  
433.10, Sec.  433.206, Sec.  433.210, and Sec.  433.212)

    In the Medicaid Eligibility proposed rule, we proposed to implement 
section 1905(y) of the Act that provides for a significant increase in 
the Federal Medical Assistance Percentage (FMAP) for medical 
expenditures for individuals determined eligible under the new adult 
group in the State and who will be considered to be ``newly eligible'' 
in 2014, as defined in section 1905(y)(2)(A) of the Act. Specifically, 
we proposed to add new provisions for the ``Rates of FFP for program 
services'' to indicate the increases to the FMAPs as available to 
States under the Affordable Care Act. We also proposed that States may 
elect one of three options as a methodology for calculating the newly 
eligible FMAP:
    (1) 2009 Eligibility Standard Threshold.
    (2) Statistically Valid Sampling Methodology (Sec.  433.210).
    (3) Use of a FMAP Methodology Based on Reliable Data Sources (Sec.  
433.212).
    These and other proposed provisions are discussed in more detail in 
the Medicaid Eligibility proposed rule (76 FR 51172 through 51178). We 
received a number of comments concerning the proposed FMAP 
methodologies for newly eligible individuals and for expansion States 
provisions.
    We are in the process of performing additional research on this 
topic and are working with States to better understand which approaches 
will ensure an accurate method for implementing the FMAP and further 
the simplification goals of the Affordable Care Act. Given that this 
work is continuing, we will finalize the FMAP methodology for newly 
eligibles in future rulemaking.

IV. Provisions of the Final Regulations

    This final rule incorporates many of the provisions set forth in 
the Medicaid Eligibility proposed rule. The provisions of this final 
rule that substantively differ from the Medicaid Eligibility proposed 
rule are as follows:

A. Revised Sec.  435.4 as follows:

    <bullet> Revised the definition of the following terms: ``advance 
payment of the premium tax credit (APTC),'' ``Affordable Insurance 
Exchanges (Exchanges),'' ``agency,'' and ``tax dependent.''
    <bullet> Added the definition of the following terms: ``Affordable 
Care Act,'' ``applicable modified adjusted gross income (MAGI) 
standard,'' ``applicant,'' ``application,'' ``beneficiary,'' 
``eligibility determination,'' ``family size,'' ``Federal Poverty Level 
(FPL),'' ``non-applicant,'' and ``shared eligibility service.''
    <bullet> Revised the definition of ``caretaker relative'' to 
specify the degree of relationship to the dependent child, for 
consistency with section 406(a) of the Act as in effect prior to 
enactment of the PRWORA and to provide the option for States to 
consider other relatives to be caretaker relatives.
    <bullet> Revised the definition of ``caretaker relative'' to 
provide the option for States to include the domestic partner of the 
parent or other caretaker relative or to include another adult with 
whom the child is living and who assumes primary responsibility for the 
dependent child's care.
    <bullet> Revised the definition of ``dependent child'' to add 
another reason for a child to be considered deprived of parental 
support. Clarified which 18 year old, full-time students are included 
under this definition, for consistency with the definition of 
``dependent child'' in section 406(a) of the Act as in effect prior to 
passage of PRWORA, and clarified that it is a State option rather than 
a requirement to consider 18 year old full-time students as dependent 
children.

B. Other Revisions

    <bullet> Revised Sec.  431.10 to allow the Medicaid agency to 
delegate eligibility determinations to an Exchange (whether operated by 
a public authority, non-governmental entity or private contractor) or 
to a private entity, for MAGI populations and strengthens safeguards 
that the single State agency must have in place when it delegates or 
contracts eligibility.
    <bullet> Clarified in Sec.  431.10 certain terms for agreements 
with delegees/contractors. Adds a requirement that the Medicaid 
agreements with delegees and/or with its private contractors be 
available to the public upon request.
    <bullet> Revised language at Sec.  431.300(b) to clarify that non-
applicant information is protected under confidentiality rules, just as 
information concerning applicants and beneficiaries is protected.
    <bullet> Removed subparts A and E from part 433-State Fiscal 
Administration, ``FMAP for Newly Eligible Individuals and for Expansion 
States (Sec.  433.10, Sec.  433.206, Sec.  433.210, and Sec.  
433.212)'' from the final rule. These issues will be addressed in 
future rulemaking.
    <bullet> Revised the description of pregnancy-related services at 
Sec.  435.116(d)(3) by referencing Sec.  440.210(a)(2), which defines 
the requirements for coverage of pregnancy-related services.
    <bullet> Revised Sec.  435.218(b)(1)(iii) to clarify that an 
individual is not eligible under this optional group if the individual 
is eligible and enrolled for optional coverage under sections 
1902(a)(10)(A)(ii)(I) through (XIX) of the Act.
    <bullet> Revised Sec.  435.403 to confirm that an individual must 
be living in the State to be eligible for Medicaid and to clarify that 
State residency for individuals who receive State supplementary 
payments or title IV-E assistance are addressed in paragraphs (f) and 
(g) of this section, respectively.
    <bullet> Revised Sec.  435.603 (and Sec.  435.911) regarding how 
MAGI rules apply to individuals with disabilities and those needing 
long-term services and supports to enable them to enroll under an 
optional Medicaid eligibility group which better meets their needs if 
they meet eligibility requirements.
    <bullet> Revised Sec.  435.603(a)(3) to clarify that MAGI does not 
apply to beneficiaries eligible and enrolled for Medicaid on or before 
December 31, 2013 until the later of March 31, 2014 or the next 
regularly-scheduled renewal.
    <bullet> Revised Sec.  435.603(b) to specify that the family size 
for pregnant women includes the woman plus the number of children she 
is expecting and that the family size of other individuals when a 
pregnant women is included in their household counts the pregnant 
woman, at State option, as either one or two person(s) or as herself 
plus the number of children she is expected to deliver.

[[Page 17195]]

    <bullet> Revised Sec.  435.603(d)(2) to add a heading for this 
paragraph of ``Income of children and tax dependents'' and to add 
paragraphs (i) and (ii) with revised policy for consideration of income 
of children and tax dependents who are not expected to be required to 
file a tax return and are included in the household of the individual's 
parent or a taxpayer other than the individual's parent or spouse. Also 
revised the language to replace ``is not required'' with ``is not 
expected to require'' to file a tax return for the taxable year in 
which eligibility for Medicaid is determined.
    <bullet> Revised Sec.  435.603(d)(3) to make counting cash support, 
exceeding nominal amounts, a State option rather than a requirement for 
tax dependents receiving such support from a taxpayer other than the 
individual's parent.
    <bullet> Revised Sec.  435.603(e)(2) to add awards as a type of 
income excluded from MAGI-based income, if used for education purposes.
    <bullet> Revised Sec.  435.603(e)(3) to clarify the types of income 
received by American Indians and Alaska Natives excluded from MAGI-
based income.
    <bullet> Revised Sec.  435.603(f)(1), (f)(2), and (f)(3) to replace 
the language ``file'' with ``expects to file'' a tax return and 
``claimed as a tax dependent'' with ``expects to claim as a tax 
dependent'' for the taxable year in which an initial determination or 
renewal of eligibility is being made.
    <bullet> Revised Sec.  435.603(f)(2)(ii) to address children who 
expect to be claimed by one parent as a tax dependent and are living 
with both parents who do not expect to file a joint tax return, 
regardless of whether the parents are married.
    <bullet> Added definition of ``custodial parent'' to Sec.  
435.603(f)(2)(iii) to resolve ambiguity of rules for children claimed 
as a tax dependent by a non-custodial parent in cases involving shared 
custody. This definition is the same as that used by the IRS for 
purposes of claiming a child as a qualifying child.
    <bullet> Revised Sec.  435.603(f)(3)(ii) and (iii) and (f)(3)(ii) 
and (iii) and added a new (f)(3)(iv) to provide States with the option 
to include under these policies for children, 19 and 20-year old full-
time students living in their parents' household.
    <bullet> Added new Sec.  435.603(f)(5) relating to household 
composition to provide that, when tax dependency for purposes of 
applying 36B rules at the point of application cannot be determined 
with reasonable certainty, non-filer rules at paragraph (f)(3) are 
applied.
    <bullet> Revised Sec.  435.603(h)(2) to clarify that beneficiaries' 
projected annual household income, if a State elects this option, is 
determined for the remainder of the current calendar year, not for the 
full calendar year.
    <bullet> Revised Sec.  435.603(h)(3) to clarify that a State may 
also adopt a reasonable method to project a reasonably predictable 
future increase or decrease in income and/or family size.
    <bullet> Added a new paragraph (i) to Sec.  435.603 to use 36B 
financial methodologies and determine an individual Medicaid-eligible 
if the individual is ineligible for Medicaid using MAGI-based household 
income and also ineligible for APTC based on MAGI income below 100 
percent FPL.
    <bullet> Renumbered Sec.  435.603(i) as (j), which specifies the 
eligibility categories for which MAGI-based methods do not apply.
    <bullet> Revised Sec.  435.603(j)(2) to exempt individuals age 65 
or older from application of MAGI-based methods in determinations of 
eligibility for which age is a condition of eligibility.
    <bullet> Added language at Sec.  435.905(b) clarifying that 
information must be provided accessibly and in a timely manner for 
persons who are limited English proficient and persons who have a 
disability. We made small modifications to Sec.  435.907, Sec.  
435.916, and Sec.  435.1200 to ensure that the application, renewal 
form, web sites, kiosks, or other information systems will be provided 
accessibly.
    <bullet> Removed the requirement for agencies to accept 
applications via facsimile in Sec.  435.907(a), and signatures via 
facsimile in Sec.  435.907(g) in favor of acceptance via other commonly 
available electronic means.
    <bullet> Revised Sec.  435.907(c)(2)(i) to provide that 
applications and forms for non-MAGI populations must be submitted to 
the Secretary and meet the criteria established by the Secretary for 
such applications and forms, but do not need approval prior to use.
    <bullet> Added language to Sec.  435.907(d) and Sec.  435.916 to 
specify that the agency may not require individuals to complete an in-
person interview as part of an application or renewal process for an 
eligibility determination based on MAGI methods.
    <bullet> Modified language at Sec.  435.907(e) to clarify that a 
State may only require information that is necessary to make an 
eligibility determination or that is directly related to the 
administration of the State plan.
    <bullet> Revised Sec.  435.910(a) and (h) to clarify the SSN 
requirement for applicants that individuals who are not eligible for an 
SSN or do not have one and are only able to be issued an SSN for a non-
work purpose, do not need to provide it. Modified Sec.  435.910(f) and 
(g) to clarify that such an individual would not need an SSN verified, 
but would need citizenship or immigration status verified, and that the 
general rule that a State should not delay or deny an otherwise 
eligible individual for Medicaid, also applies to such individuals.
    <bullet> Added Sec.  435.912 to specify timeliness standards for 
making eligibility determinations. The revised regulations at Sec.  
435.912 are published as an interim final regulation, and we welcome 
comments on them.
    <bullet> In Sec.  435.916, added a provision to generally allow but 
not require States to adopt renewal simplifications for applicants 
being determined using financial methods other than MAGI; codified at 
Sec.  435.916(f) the agency must renew eligibility on the basis of 
available information for non-MAGI based renewals as well as MAGI-based 
renewals.
    <bullet> Added provisions to Sec.  435.916(a)(3)(iii) and Sec.  
435.916(f) to clarify that the agency must consider all bases of 
eligibility in accordance with Sec.  435.911.
    <bullet> Added language at Sec.  435.916 (d)(1) to clarify that for 
Medicaid beneficiaries whose financial eligibility is based on MAGI 
methods when a State receives new information between regular renewals 
that relates to an eligibility factor, the State may request additional 
information from the individual only with respect to such factor to 
determine ongoing eligibility. However, if the State otherwise has 
access to information needed to recertify all other eligibility 
criteria, the State may begin a new 12-month renewal period for that 
individual.
    <bullet> Clarified at Sec.  435.916(e), that agencies may only ask 
for information necessary for renewal; also added a provision at Sec.  
435.907(e) to apply the limitations related to non-applicants to 
renewals.
    <bullet> Added a new paragraph to Sec.  435.945(j) that directs to 
describe, update, and submit, upon request, verification policies and 
procedures adopted by the State agency to implement the provisions set 
forth in Sec.  435.940 through Sec.  435.956.
    <bullet> Moved the language in Sec.  435.948(a) related to program 
integrity to Sec.  435.940 and added language that a State must provide 
for methods of administration that are in the best interest of 
applicants and beneficiaries and are necessary for the proper and 
efficient operation of the Medicaid State plan. Redesignated the 
paragraphs in Sec.  435.945 accordingly.
    <bullet> Added paragraphs to Sec.  435.952(c)(2) to clarify that 
paper documentation may

[[Page 17196]]

be requested by the State only to the extent electronic data are not 
available and establishing a data match would not be effective.
    <bullet> Removed the word ``alone'' from Sec.  435.956(c)(2) to 
clarify that States cannot rely on immigration status to determine lack 
of State residency. States may request additional information in 
accordance with Sec.  435.952 to verify residency if evidence of 
immigration status gives the State reason to question an individual's 
residency.
    <bullet> Removed the requirement in Sec.  435.956(e) that States 
must accept self-attestation of household size. Moved verification of 
household size to Sec.  435.956(f) along with age and date of birth, 
which may be verified in accordance with Sec.  435.945(a), including 
the option to accept self-attestation, or through other reasonable 
verification procedures consistent with requirements in Sec.  435.952.
    <bullet> In Sec.  435.1200(b), added that the agreement between the 
Medicaid agency and the Exchange must include a clear delineation of 
the responsibilities of each program to (i) minimize the burden on 
individuals; (ii) ensure compliance with the other requirements 
established in paragraphs (d) through (f) of this section, and if 
applicable paragraph (c); and (iii) ensure prompt determinations of 
eligibility and enrollment in the appropriate program without undue 
delay, consistent with timeliness standards established under Sec.  
435.912.
    <bullet> In Sec.  435.1200, specified that if an agency accepts a 
determination of Medicaid eligibility by another insurance 
affordability program, the agency must comply with the provisions of 
Sec.  435.911 to the same extent as if the individual had submitted an 
application directly to the Medicaid agency and comply with the 
provision of Sec.  435.10 to ensure it maintains the oversight for the 
Medicaid program.
    <bullet> In Sec.  435.1200, added provisions to address cases where 
an agency makes the final determination of Medicaid eligibility for 
applications submitted to the Exchange or other insurance affordability 
programs.
    <bullet> Modified all relevant CHIP provisions in subpart 457 to 
align with Medicaid policy changes and final provisions.
    <bullet> Modified Sec.  457.310 to specify that the scope and 
applicability of separate CHIP coverage for children who lose Medicaid 
due to the elimination of income disregards under MAGI.
    <bullet> Added to Sec.  457.315 to clarify that the MAGI grace 
period described in Sec.  435.603(a)(3) applies to CHIP.
    <bullet> At Sec.  457.320, for CHIP, added a definition of 
residency for a targeted low-income pregnant woman enrolling in CHIP to 
mirror Medicaid residency definition for adults.
    <bullet> Clarified at Sec.  457.340 that enrollment assistance for 
CHIP should be provided at application and renewal. Clarified the SSN 
requirement with Medicaid regulation at Sec.  435.910.
    <bullet> At Sec.  457.348, clarified that the State may accept 
final determinations of CHIP eligibility made by the Exchange and set 
standards regarding agreements with other insurance affordability 
programs, consistent with Medicaid.
    <bullet> At Sec.  457.350, streamlined language regarding screen 
and enroll standards to promote clarity and better coordination with 
Medicaid.
    <bullet> At Sec.  457.380, made changes to CHIP to align with the 
changes in Medicaid verification, including the standards for a State 
verification plan.

V. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. However, this procedure can be waived if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    In light of the magnitude and scope of the Medicaid expansion and 
the changes in the eligibility determination system required by the 
Affordable Care Act, and the statutory implementation date of January 
1, 2014, it is critical to provide final rules to guide States in 
making necessary program changes to prepare for implementation. States 
will need to make changes to their electronic and manual systems, will 
need to amend their Medicaid State plans, and may need to enact 
authorizing legislation on the State level. Because of the short time 
needed to make necessary changes, we find that it would be contrary to 
the public interest to delay issuance of comprehensive final rules.
    In considering the public comments received in response to the 
Medicaid Eligibility proposed rule, however, we found that the 
commenters identified options and policies that we did not specifically 
address in the proposed rule, in the areas of eligibility 
determination, coordination with the Affordable Insurance Exchanges, 
and timeliness and performance standards. While the comments indicated 
that these options and policies were a logical outgrowth of the 
proposed rule, we are concerned that there could be a perception that 
we did not provide a full and fair opportunity for public input since 
the issues were not specifically addressed in the proposed rule. We 
have thus determined to provide an additional opportunity for public 
comment by issuing the affected provisions as an interim final rule 
with opportunity for comment within the context of the overall 
comprehensive rule. We are adopting this approach because we find that 
it would be contrary to the public interest to delay issuance of 
comprehensive final rules in order to issue a new proposed rule to 
address issues that we may not have specifically addressed in the 
proposed rule. We believe that the public interest is served by issuing 
a single consolidated rule instead of issuing a separate proposed rule, 
to enable readers to see the context and interrelationships in the 
overall regulatory framework. There will be no adverse effect from this 
approach because the new requirements will not be effective until 
January 1, 2014. And there will be a full and fair opportunity prior to 
the effective date for public comment and any necessary revisions to 
the interim final provisions. As this approach will provide an 
equivalent opportunity for public comment, we also believe that 
issuance of a separate proposed rule is unnecessary.
    In sum, in light of the time constraints for States to implement 
system changes to implement the required Medicaid expansion, we have 
found that it would be contrary to the public interest to delay the 
issuance of comprehensive final rules, and to fragment the regulatory 
framework, to address potential concerns that certain policies or 
options were not specifically addressed in the Medicaid Eligibility 
proposed rule. We also have found that issuance of a new proposed rule 
would be unnecessary in light of the approach we have adopted, which 
will provide a full and fair opportunity for public comment, and any 
necessary revisions, prior to the effective date of new regulatory 
requirements. We are thus instead issuing certain provisions as an 
interim final rule, and are soliciting comments on the specific issues 
listed in the ``Comment Date'' section of this final rule.
    Therefore, for the reasons stated above, we find good cause to 
waive the notice of proposed rulemaking and to issue a portion of this 
final rule as an interim final rule. Certain provisions of this final 
rule are being issued as

[[Page 17197]]

interim final, and we will consider comments that we receive by May 7, 
2012.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval to 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the Medicaid Eligibility proposed rule, we solicited public 
comments for 60 days on the information collection requirements (ICRs). 
No PRA-related comments were received. This final rule implements 
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 included in a separate final rule under RIN 0938-AR25); and 
simplify the enrollment and renewal processes. Although there are 
short-term burdens associated with implementation of these provisions, 
over time the Medicaid program will 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.
    Information collection requirements (ICRs) are outlined below that 
involve Medicaid and CHIP eligibility determinations and enrollment. 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.
    The following provisions of this final rule will have their PRA 
implications reviewed under CMS-10398, OMB 0938-1148:
    Medicaid and CHIP State Plans: Sec. Sec.  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); 435.908, 435.916, 457.305(a) and (b); 
457.310(b); 457.315, 457.320(d); 457.340(f); 457.343; and 457.350.
    We will also be addressing items related to the development and 
adoption of the single streamlined application as well as alternate 
applications and supplemental forms for the Exchanges, Medicaid and 
CHIP under a separate PRA package. Provisions of this final rule that 
will be addressed in that package include, Sec.  435.907, Sec.  
435.910, Sec.  457.330; Sec.  457.340. Information collection requests 
for these sections are under development and there will be a separate 
opportunity for public notice and comment on these materials once they 
have been developed.

A. ICRs Regarding Disclosure of Program Information (Sec. Sec.  
435.1200(f) and 457.340(a))

    Amendments to Sec.  435.1200(f) for Medicaid and Sec.  457.340(a) 
for CHIP 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 currently have Web sites for Medicaid and CHIP and 
that nearly every State already provides the information specified in 
this final 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 under 5 CFR 
1320.3(b)(2) and, as such, the burden associated with it is exempt from 
the PRA. 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 and Verification Plans (Sec. Sec.  
435.945, 435.948, 435.949, 435.952, 435.956, and 457.380)

    This final rule includes guidelines for the verification of certain 
financial and non-financial information to determine Medicaid and CHIP 
eligibility (for example, income, State residency, and SSNs). These 
amendments in Sec. Sec.  435.945, 435.948, 435.949, 435.952, 435.956, 
and 457.380 are necessary to facilitate the determination of 
eligibility with minimal paper documentation required from individuals. 
States will need to analyze current verification procedures to 
determine the policy and systems modifications that will be needed in 
order for States to achieve this streamlined verification process.
    In Sec.  435.945(j) and Sec.  457.380(j) the agency must develop, 
and update as modified, a verification plan that describes the 
verification policies and procedures adopted by the State agency to 
implement the provisions set forth in Sec.  435.940-Sec.  435.956 for 
Medicaid and in Sec.  457.380 for CHIP. The Secretary will prescribe 
the format and elements of the plan, and such plans must be submitted 
to the Secretary upon request. These amendments are necessary to 
facilitate the determination of eligibility with minimal documentation 
required from individuals.
    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.
    We estimate that it will take each Medicaid and CHIP agency 20 
hours to analyze current verification procedures, make policy and 
systems modifications, and develop, review, and submit the verification 
plan. For the purpose of the cost burden, we estimate it will take a 
health policy analyst 17 hours at $43 an hour, and a senior manager 3 
hours at $77 an hour, to complete the verification plan. The estimated 
cost for each agency is $962 ([17 x 43] + [3 x $77]). The total 
estimated cost is $92,352 (96 x $962). Taking into account the Federal 
contribution, the total estimated State costs would be $46,176 ($92,352 
x 50 percent).

C. ICRs Regarding Periodic Renewal of Medicaid and CHIP Eligibility 
(Sec. Sec.  435.916, 457.343 and 457.350)

    The final rule sets out the renewal process for individuals whose 
eligibility is based on MAGI. These provisions are

[[Page 17198]]

necessary to facilitate the accurate and efficient renewal 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 provision is the time and effort 
necessary for the State to develop and automate renewal notices and 
perform the revised recordkeeping related to renewing 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 renewed using the information already available to the 
agency.
    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 information. For the 
purpose of the cost, 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 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. We estimate that it will take an individual 20 minutes 
to complete the 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. Note that this is shorter than 
the time taken to complete the renewal process in most States today.
    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. In 
addition, States will have to program and distribute the pre-populated 
renewal form every year at renewal time. We estimate that it will take 
the State agency 15 minutes (0.25 hours) 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 12,750,000 hours or 132,812.5 hours per agency 
[12,750,000/96]. At a rate of $25 per hour the total estimated cost for 
recordkeeping is $318,750,000 [12,750,000 x $25] or $3,320,312.5 per 
agency [$318,750,000/96]. Taking into account the Federal contribution, 
the total estimated State share of the costs would be $159,375,000 
[$318,750,000 x 50 percent].

D. ICRs Regarding Web Sites (Sec.  435.1200 and Sec.  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 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 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 
these 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 network/computer administrators or programmers 185 hours (at 
$54 an hour) to meet the reporting requirements under this subpart. We 
estimate the total cost 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. 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, 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 of two notices for each agency is 
$1,784 [$892 x 2]. The total estimated cost 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 for each agency is $8,100 [150 x $54]. The 
total estimated cost 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 of the provisions described above is 
$1,451,087 [$927,235 + $94,552 + $429,300], and the total annual hour 
burden is 26,606 hours [16,960 + 1,696 + 7,950].

[[Page 17199]]



                                                Table 1--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Burden per
     Regulation section(s)          Respondents         Responses         response        Total annual     Labor cost of  Total cost ($)  State share of
                                                                           (hours)       burden (hours)    reporting ($)                     costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicaid and CHIP State Plan provisions regarding Sec.  Sec.   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); 435.908; 435.916; 457.305(a) and (b); 457.310(b); 457.315; 457.320(d); 457.340(f); 457.343; and 457.350 are under
                        development and will be submitted to OMB for review/approval under control number 0938-1148 (CMS-10398).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.  Sec.   435.907, 457.330,     These information collections are currently under development. A separate notice and comment process for information
 and 457.340(b).                                       collections required under these sections will be conducted at a later date.
                                ------------------------------------------------------------------------------------------------------------------------
Sec.  Sec.   435.945, 435.948,   96...............  1................              20  1,060............             962          92,352          46,176
 435.956, 457.350, and 457.380.
Sec.  Sec.   435.916 and         96...............  1................              16  1,536............             892          85,632          46,816
 457.343.
Sec.  Sec.   435.916 and         25.5 million.....  1................             .33  8.5 million......  ..............  ..............  ..............
 457.343.
Sec.  Sec.   435.916 and         96...............  51 million.......             .25  12,750,000.......       3,320,313     318,750,000     159,375,000
 457.343.
Sec.  Sec.   435.1200 and        53...............  1................             502  26,606...........          27,379       1,451,087         725,543
 457.335.
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................  .................  .................  ..............  .................  ..............     320,379,071     160,193,535
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: All collections are new therefore the OMB Control Number is omitted from the table.
There are no capital or maintenance costs incurred by the 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.

    We have submitted a copy of this final 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 paperwork collections referenced above, access CMS' Web site at 
http:<a href="/cdn-cgi/l/email-protection#527d7d2525257c313f217c3a3a217c353d247d0233223720253d203912313f217c3a3a217c353d24">//www.cms.hhs.gov/<span class="__cf_email__" data-cfemail="431322332631342c312803202e306d2b2b306d242c35">[email protected]</span></a>, or call the Reports 
Clearance Office at 410-786-1326.

VII. Summary of Regulatory Impact Analysis

    The summary analysis of benefits and costs included in this final 
rule is drawn from the detailed Regulatory Impact Analysis (RIA), 
available at www.Medicaid.gov/AffordableCareAct/downloads/CMS-2349-F-RegulatoryImpactAnalysis.pdf.

A. Summary of Comments and Changes

    We received no comments on the anticipated effects of the Medicaid 
Eligibility proposed rule. Overall, the major provisions included in 
the Medicaid Eligibility proposed rule are maintained in the final 
rule. The only significant change in this impact statement reflects the 
enactment of Public Law 112-56, signed into law on November 21, 2011, 
changing the MAGI definition of income to include all Social Security 
benefits. Previously, nontaxable Social Security benefits were not 
included when calculating MAGI for Medicaid eligibility. In addition, 
this RIA utilizes revised estimates from the CMS Office of the Actuary 
(OACT). These estimates have been updated with the most recent economic 
and health care expenditure and enrollment data and projected trends 
and with further refinements to the methodology.

B. 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 an RIA that presents the costs and 
benefits of this rulemaking.

C. Need for This Regulation

    This final rule will 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 complexity of and barriers to enrollment in 
Medicaid and CHIP which contributes to millions of eligible low-income 
Americans remaining uninsured.

D. Summary of Costs and Benefits

    The RIA uses the estimates of 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 final rule will result 
in an estimated additional 24 million newly eligible and currently 
eligible individuals enrolling in Medicaid by 2016, including 
approximately 2-3 million individuals with primary health insurance 
coverage through employer-sponsored plans who would enroll in Medicaid 
for supplemental coverage.\1\ This is the same estimate as was in the 
regulatory impact analysis of the Medicaid Eligibility proposed rule 
(August 2011). 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 Exchanges will affect enrollment and costs. The 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, less 
500,000 to 1 million due to the change in the definition of

[[Page 17200]]

MAGI to include Social Security income.\2\
---------------------------------------------------------------------------

    \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.
    \2\ 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. See also CBO Cost Estimate. H.R. 
2576: A bill to amend the Internal Revenue Code of 1986 to modify 
the calculation of modified adjusted gross income for purposes of 
determining eligibility for certain healthcare-related programs. 
October 14, 2011. http://cbo.gov/ftpdocs/124xx/doc12484/hr2576.pdf.
---------------------------------------------------------------------------

    Overall, we do not expect that the conversion to MAGI rules will 
result in many currently eligible individuals losing eligibility. 
However, there may be a relatively small number of currently eligible 
individuals who would no longer be eligible based on the MAGI 
methodology. For these individuals, there will be a cost of obtaining 
coverage through Exchanges, but this cost could be mitigated by premium 
tax credits and cost-sharing reductions. At the same time, the use of 
the MAGI definition of income may have the effect of increasing 
Medicaid eligibility for a small number of individuals and families who 
would not have been previously eligible. We anticipate no substantial 
net gain or loss in enrollment due to conversion to MAGI rules.
    For new enrollees, eligibility for Medicaid will improve access to 
medical care, resulting in improved health outcomes and greater 
financial security. Research demonstrates that when uninsured 
individuals obtain coverage (including Medicaid), the rate at which 
they obtain needed care increases substantially.<SUP>3 4 5</SUP> 
Individuals with insurance coverage are more likely to have regular 
checkups, recommended health screenings, and a usual source of care to 
help manage their health.\6\ In addition, people with health insurance 
coverage have less out of pocket costs and are less likely to have 
unpaid medical bills.\7\
---------------------------------------------------------------------------

    \4\ SK Long, et al., ``How Well Does Medicaid Work in Improving 
Access to Care?'' HSR: Health Services Research 40:1 (February 
2005).
    \5\ Henry J. Kaiser Family Foundation, ``Children's Health--Why 
Health Insurance Matters.'' Washington, DC: KFF, 2002.
    \5\ C. Keane, et al., ``The impact of Children's Health 
Insurance Program by age,'' Pediatrics 104:5 (1999).
    \6\ Institute of Medicine, Care without coverage: too little, 
too late (National Academies Press, 2002).
    \7\ Amy Finkelstein, et al, ``The Oregon Health Insurance 
Experiment: Evidence from the First Year,'' National Bureau of 
Economic Research Working Paper No. 17190, July 2011.
---------------------------------------------------------------------------

    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 $164 
billion from FY 2012 through 2016.\8\ Reflecting different data, 
assumptions, and methodology, CBO estimates an increase in Federal 
spending of $162 billion over the same period of time, less $7.9 
billion resulting from the November 2011 legislative changes to the 
definition of MAGI.<SUP>9 10</SUP> OACT estimates that State 
expenditures for individuals, who choose to enroll as a result of 
changes implemented by the Affordable Care Act, will total 
approximately $14 billion for FYs 2012 through 2016.\11\ (While the 
increased FMAP for expansion States is not included in this final rule, 
it is estimated that $9.1 billion will be transferred from the Federal 
government to the relevant States between FY 2012 and 2016, reducing 
the net impact of the Medicaid coverage provisions on those 
States.\12\) These estimates do not consider offsetting savings to 
States that will result, to a varying degree depending on the State, 
from this final rule.
---------------------------------------------------------------------------

    \8\ FY 2013 President's Budget.
    \9\ 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.
    \10\ CBO Cost Estimate. H.R. 2576: A bill to amend the Internal 
Revenue Code to modify the calculation of modified adjusted gross 
income for purposes of determining eligibility for certain 
healthcare-related programs. October 14, 2011. http://cbo.gov/ftpdocs/124xx/doc12484/hr2576.pdf.
    \11\ CBO did not publish the impact on States by year, so 
estimates for a comparable period are not available.
    \12\ FY 2013 President's Budget. We note that these estimates 
are dependent upon which States are ultimately determined to be 
expansion States under the Affordable Care Act.
---------------------------------------------------------------------------

    This final rule will benefit States and providers by improving the 
health of their residents and patients, reducing uncompensated care 
costs, and allowing States to receive FFP on spending for health 
coverage that currently is paid for with State and local funds. In 
addition, the simplified Medicaid eligibility policies will, over time, 
reduce administrative burdens on State Medicaid agencies. An Urban 
Institute analysis estimates that the costs to States from Medicaid 
expansion will be more than fully offset by other effects of the 
legislation, for net savings to States of $92 to $129 billion from 2014 
to 2019.\13\
---------------------------------------------------------------------------

    \13\ M. Buettgens et al., ``Consider savings as well as costs: 
State governments would spend at least $90 billion less with the 
Affordable Care Act than without it from 2014 to 2019,'' The Urban 
Institute, July 2011. Available at www.urban.org/uploadedpdf/412361-consider-savings.pdf.
---------------------------------------------------------------------------

E. Methods of Analysis

    OACT prepared its estimate using data on individuals and families, 
together with their income levels and insured status, from the Current 
Population Survey and the Medical Expenditure Panel Survey. In 
addition, OACT 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 Exchanges. The 
estimated Medicaid coverage and financial effects are particularly 
sensitive to these latter assumptions. Among those newly-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. Researchers have 
approximated the participation rate assumed by CBO at a much lower 
level.\14\
---------------------------------------------------------------------------

    \14\ 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 those currently eligible. This scenario assumes 
57 percent participation among the newly eligible uninsured and 
lower participation across other coverage groups.'' J. Holahan and 
I. Headen, ``Medicaid coverage and spending in health reform: 
National and State-by-State results for adults at or below 133 
percent 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-State-By-State-Results-for-Adults-at-or-Below-133-FPL.pdf.
---------------------------------------------------------------------------

F. Regulatory Options Considered

    Alternative approaches to implementing the Medicaid eligibility, 
enrollment and coordination requirements in the Affordable Care Act 
were considered in developing this final rule. Because the majority of 
provisions in this rule are statutorily required, we did not have 
significant flexibility to choose alternative policies. However, based 
on comments, we did revise the policy regarding the relationship 
between Medicaid and the Exchange

[[Page 17201]]

give States additional flexibility for eligibility determinations based 
on MAGI.

G. Accounting Statement

    For full documentation and discussion of these estimated costs and 
benefits, see the detailed RIA, available at www.Medicaid.gov/AffordableCareAct/downloads/CMS-2349-F-RegulatoryImpactAnalysis.pdf.

          Table 2--Accounting Statement: Classification of Estimated Net Costs, From FY 2012 to FY 2016
                                                  (In millions)
----------------------------------------------------------------------------------------------------------------
                                                                    Transfers
                               ---------------------------------------------------------------------------------
           Category                Year dollar             Units discount rate
                               --------------------------------------------------------      Period covered
                                      2012                7%                 3%
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers  Primary Estimate            $30,211            $31,705  FYs 2012-2016.
 from Federal Government to
 States on Behalf of
 Beneficiaries.
Annualized Monetized Transfers  Primary Estimate             $2,568             $2,694  FYs 2012-2016.
 from States on Behalf of
 Beneficiaries.
----------------------------------------------------------------------------------------------------------------
Source: CMS Office of the Actuary.

H. 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, that 
threshold is approximately $136 million. However, it is important to 
understand 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 RIA 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.
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 RIA. 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 final rule will 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 final rule deal with eligibility and enrollment for 
the Medicaid and CHIP programs, and as such are directed toward State 
governments rather than toward the private sector. Since the final rule 
will 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 is not needed for Tribal governments since 
the final rules will not impose mandates on Tribal governments.

I. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities if a final rule will 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) will 
be impacted directly by this final 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 FY 2012 and FY 2016 the Federal government will 
pay about 92 percent of the costs of benefits for new Medicaid 
enrollees with the States paying the remaining 8 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.\15\ To the extent that States require counties to share in these 
costs, some small jurisdictions could be affected by the requirements 
of this final rule. However, nothing in this rule will constrain States 
from making changes to alleviate any adverse effects on small 
jurisdictions.
---------------------------------------------------------------------------

    \15\ J. Holahan and I. Headen, ``Medicaid coverage and spending 
in health reform: National and State-by-State results for adults at 
or below 133 percent 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-State-By-State-Results-for-Adults-at-or-Below-133-FPL.pdf.
---------------------------------------------------------------------------

    Because this final 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 final 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.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a final 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 604. For

[[Page 17202]]

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 final rule will 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.

J. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a 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 final rule have significant direct effects on States.
    The Affordable Care Act requires major changes in the Medicaid and 
CHIP programs, which will 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 received input from States on how the various Affordable 
Care Act provisions codified in this final rule will affect them. 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 and meetings 
also furnished opportunities for State Medicaid Directors to comment 
informally on implementation issues and plans (although to be 
considered comments on the Medicaid Eligibility proposed rule, written 
comments using the process described in the Medicaid Eligibility 
proposed rule were required).
    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 
Medicaid and CHIP officials that convene to discuss issues that affect 
children enrolled in those programs. Through meetings 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.

List of Subjects

42 CFR Part 431

    Grant programs--health, Health facilities, Medicaid, Privacy, 
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.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
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).


0
2. Section 431.10 is amended by--
0
A. Adding paragraphs (c)(3), (c)(4), and (c)(5).
0
B. Revising paragraphs (d) and (e)(3).
    The revisions and additions read as follows:


Sec.  431.10  Single State agency.

* * * * *
    (c) * * *
    (3) The plan must specify whether the entity that determines 
eligibility is an Exchange established under sections 1311(b)(1) or 
1321(c)(1) of the Affordable Care Act (Pub. L. 111-148), provided that 
if the Exchange is operated as a nongovernmental entity as permitted 
under 45 CFR 155.110(c), or contracts with a private entity for 
eligibility services, as permitted under 1311(f)(3) of the Affordable 
Care Act and 45 CFR 155.110(a), final determinations of eligibility are 
limited to determinations using MAGI-based methods as set forth in 
Sec.  435.603 of this subchapter.
    (4) The single State agency is responsible for ensuring eligibility 
determinations are made consistent with its policies, and if there is a 
pattern of incorrect, inconsistent, or delayed determinations for 
ensuring that corrective actions are promptly instituted.
    (5) The single State agency is responsible for ensuring that 
eligibility determinations are made in the best interest of applicants 
and beneficiaries, and specifically ensuring that:
    (i) There is no conflict of interest by any entity delegated the 
responsibility to make eligibility determinations or performing 
eligibility services; and
    (ii) Improper incentives and/or outcomes are prohibited, monitored, 
and if found, properly and promptly addressed through corrective 
actions.
    (d) Agreement with Federal or State and local entities. The plan 
must provide for agreements between the Medicaid agency and the Federal 
or other State or local agencies or nongovernmental entities that 
determine Medicaid eligibility on behalf of the Medicaid agency. Such 
agreements, which shall be in writing and available upon request, must 
include provisions for:
    (1) The relationships and respective responsibilities of the 
parties;
    (2) The quality control and oversight plans by the single State 
agency to review determinations made by the delegee or its contractor 
to ensure that overall determinations are made consistent with the 
State agencies' eligibility policies;
    (3) The reporting requirements from the delegee making Medicaid 
eligibility determinations to the single State agency to permit such 
oversight;
    (4) An assurance that the delegee and its contractors will comply 
with the confidentiality and security requirements in accordance with 
sections 1902(a)(7) and 1942 of the Act and subpart F of this part for 
all applicant and beneficiary data;
    (5) An assurance that merit system personnel protection principles 
are employed by the entity responsible for the Medicaid eligibility 
determination and for any contractor performing eligibility services; 
and
    (6) An assurance that applicants and beneficiaries are made aware 
of how they can directly contact and obtain information from the single 
State agency.
    (e) * * *
    (3) If other Federal, State, local agencies or offices or non-
governmental entities (including their contractors) perform services 
for the Medicaid agency, they must not have the

[[Page 17203]]

authority to change or disapprove any administrative decision of, or 
otherwise substitute their judgment for that of the Medicaid agency 
with respect to the application of policies, rules and regulations 
issued by the Medicaid agency.

0
3. Section 431.11 is amended by revising paragraph (d) to read as 
follows:


Sec.  431.11  Organization for administration.

* * * * *
    (d) Eligibility determined by other entities. 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, or 
by nongovernmental entities, or if eligibility functions are performed 
by an Exchange contractor, the plan must include a description of the 
staff designated by those other entities and the functions they perform 
in carrying out their responsibilities.

0
4. Section 431.300 is amended by:
0
A. Redesignating paragraph (b) as paragraph (c).
0
B. Adding a new paragraph (b).
0
C. Revising newly designated paragraphs (c) introductory text and 
(c)(1).
0
D. Adding a new paragraph (d).
    The revisions and additions read as follows:


Sec.  431.300  Basis and purpose.

* * * * *
    (b) For purposes of this subpart, information concerning an 
applicant or beneficiary includes information on a non-applicant, as 
defined in Sec.  435.4 of this subchapter.
    (c) Section 1137 of the Act, which requires agencies to exchange 
information to verify the income and eligibility of applicants and 
beneficiaries (see Sec.  435.940 through Sec.  435.965 of this 
subchapter), requires State agencies to have adequate safeguards to 
assure that--
    (1) Information exchanged by the State agencies is made available 
only to the extent necessary to assist in the valid administrative 
needs of the program receiving the information, and information 
received under section 6103(l)(7) of the Internal Revenue Code is 
exchanged only with agencies authorized to receive that information 
under that section of the Code; and
* * * * *
    (d) Section 1943 of the Act and section 1413 of the Affordable Care 
Act.

0
5. Section 431.305 is amended by--
0
A. Revising paragraph (b)(6).
0
B. Adding paragraph (b)(8).
    The revisions and addition read as follows:


Sec.  431.305  Types of information to be safeguarded.

* * * * *
    (b) * * *
    (6) Any information received for verifying income eligibility and 
amount of medical assistance payments (see Sec.  435.940 through Sec.  
435.965 of this subchapter). Income information received from SSA or 
the Internal Revenue Service must be safeguarded according to the 
requirements of the agency that furnished the data, including section 
6103 of the Internal Revenue Code, as applicable.
* * * * *
    (8) Social Security Numbers.

0
6. Section 431.306 is amended by revising paragraph (g) to read as 
follows:


Sec.  431.306  Release of information.

* * * * *
    (g) Before requesting information from, or releasing information 
to, other agencies to verify income, eligibility and the amount of 
assistance under Sec.  435.940 through Sec.  435.965 of this 
subchapter, the agency must execute data exchange agreements with those 
agencies, as specified in Sec.  435.945(i) of this subchapter.
* * * * *


Sec.  431.636  [Removed]

0
7. Remove Sec.  431.636.

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

0
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).


0
9a. Remove the term ``family income'' wherever it appears in part 435 
and add in its place the term ``household income''.
0
9b. Section 435.4 is amended by--
0
A. Adding the definitions of ``Advance payments of the premium tax 
credit (APTC),'' ``Affordable Care Act,'' ``Affordable Insurance 
Exchanges (Exchanges),'' ``Agency,'' ``Applicable modified adjusted 
gross income (MAGI) standard,'' ``Applicant,'' ``Application,'' 
``Beneficiary,'' ``Caretaker relative,'' ``Dependent child,'' 
``Effective income level,'' ``Electronic account,'' ``Eligibility 
determination,'' ``Family size,'' ``Federal poverty level (FPL),'' 
``Household income,'' ``Insurance affordability program,'' ``MAGI-based 
income,'' ``Minimum essential coverage,'' ``Modified adjusted gross 
income (MAGI),'' ``Non-applicant,'' ``Pregnant woman,'' ``Secure 
electronic interface,'' ``Shared eligibility service,'' and ``Tax 
dependent'' in alphabetical order.
0
B. Removing the definition of ``Families and children.''
    The additions read as follows:


Sec.  435.4  Definitions and use of terms.

* * * * *
    Advance payments of the premium tax credit (APTC) has the meaning 
given the term in 45 CFR 155.20.
* * * * *
    Affordable Care Act means the Patient Protection and Affordable 
Care Act of 2010 (Pub. L. 111-148), as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended by 
the Three Percent Withholding Repeal and Job Creation Act (Pub. L. 112-
56).
    Affordable Insurance Exchanges (Exchanges) has the meaning given 
the term ``Exchanges'' in 45 CFR 155.20.
    Agency means a single State agency designated or established by a 
State in accordance with Sec.  431.10(b) of this subchapter.
    Applicable modified adjusted gross income (MAGI) standard has the 
meaning provided in Sec.  435.911(b)(1) of this part.
    Applicant means an individual who is seeking an eligibility 
determination for himself or herself through an application submission 
or a transfer from another agency or insurance affordability program.
    Application means the single streamlined application described at 
Sec.  435.907(b) of this part or an application described in Sec.  
435.907(c)(2) of this part submitted by or on behalf of an individual.
* * * * *
    Beneficiary means an individual who has been determined eligible 
and is currently receiving Medicaid.
    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 tax purposes), and who is one of the following--
    (1) The child's father, mother, grandfather, grandmother, brother, 
sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, 
first cousin, nephew, or niece.
    (2) The spouse of such parent or relative, even after the marriage 
is terminated by death or divorce.
    (3) At State option, another relative of the child based on blood 
(including those of half-blood), adoption, or marriage; the domestic 
partner of the

[[Page 17204]]

parent or other caretaker relative; or an adult with whom the child is 
living and who assumes primary responsibility for the dependent child's 
care.
* * * * *
    Dependent child means a child who meets both of the following 
criteria:
    (1) Is under the age of 18, or, at State option, is age 18 and a 
full-time student in secondary school (or equivalent vocational or 
technical training), if before attaining age 19 the child may 
reasonably be expected to complete such school or training.
    (2) Is deprived of parental support by reason of the death, absence 
from the home, physical or mental incapacity, 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 applied in determining 
financial eligibility for such group.
    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 Sec.  435.914 of this part.
    Eligibility determination means an approval or denial of 
eligibility in accordance with Sec.  435.911 as well as a renewal or 
termination of eligibility in accordance with Sec.  435.916 of this 
part.
    Family size has the meaning provided in Sec.  435.603(b) of this 
part.
    Federal poverty level (FPL) means the Federal poverty level updated 
periodically in the Federal Register by the Secretary of Health and 
Human Services under the authority of 42 U.S.C. 9902(2), as in effect 
for the applicable budget period used to determine an individual's 
eligibility in accordance with Sec.  435.603(h) of this part.
    Household income has the meaning provided in Sec.  435.603(d) of 
this part.
    Insurance affordability program means a program that is one of the 
following:
    (1) A State Medicaid program under title XIX of the Act.
    (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) A program that makes 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 available to 
qualified individuals.
    (5) A program that makes available 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 Sec.  435.603(e) of 
this part.
* * * * *
    Minimum essential coverage means coverage defined in section 
5000A(f) of subtitle D of the Internal Revenue Code, 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 at 
26 CFR 1.36B-1(e)(2).
    Non-applicant means an individual who is not seeking an eligibility 
determination for himself or herself and is included in an applicant's 
or beneficiary's household to determine eligibility for such applicant 
or beneficiary.
* * * * *
    Pregnant woman means a woman during pregnancy and the post partum 
period, which begins on the date the pregnancy ends, extends 60 days, 
and then ends on the last day of the month in which the 60-day period 
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.
    Shared eligibility service means a common or shared eligibility 
system or service used by a State to determine individuals' eligibility 
for insurance affordability programs.
* * * * *
    Tax dependent has the same meaning as the term ``dependent'' under 
section 152 of the Internal Revenue Code, as an individual for whom 
another individual claims a deduction for a personal exemption under 
section 151 of the Internal Revenue Code for a taxable year.

Subpart B--Mandatory Coverage

0
10. The heading for subpart B is revised as set forth above.
0
11. Section 435.110 is revised to read as follows:


Sec.  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 Sec.  435.4, and, if living with 
such parent or other caretaker relative, his or her spouse, 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 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
    (ii) A State's AFDC income standard in effect as of July 16, 1996 
for 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.

0
12. Revise the undesignated center heading that is immediately before 
Sec.  435.116 to read as follows:

Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn 
Children

0
13. Section 435.116 is revised to read as follows:


Sec.  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 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

[[Page 17205]]

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 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 consists of all services which the State 
is required to cover under Sec.  440.210(a)(1) of this subchapter and 
all services which it has opted to cover under Sec.  440.225 and Sec.  
440.250(p) of this subchapter.
    (3) Pregnancy-related services consists of services covered under 
the State plan consistent with Sec.  440.210(a)(2) and Sec.  440.250(p) 
of this subchapter.
    (4) Applicable income limit for full Medicaid coverage of pregnant 
women. For purposes of paragraph (d)(1) of this section--
    (i) The minimum applicable income limit is the State's AFDC income 
standard in effect as of May 1, 1988 for 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.

0
14. Section 435.118 is added to read as follows:


Sec.  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 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;
    (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 paragraph (a) of this section 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.

0
15. Revise the undesignated center heading that is before Sec.  435.119 
to read as follows:

Mandatory Coverage for Individuals Age 19 Through 64

0
16. Section 435.119 is revised to read as follows:


Sec.  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 
the applicable family size.
    (c) Coverage for dependent children. (1) A State may not provide 
Medicaid under this section 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 minimum 
essential coverage as defined in Sec.  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 Sec.  
435.222 of this part, in which case the age specified is such higher 
age.

Subpart C--Options for Coverage

0
17. The heading for subpart C is revised to read as set forth above.
0
18. Section 435.218 is added to read as follows:


Sec.  435.218  Individuals with MAGI-based income 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 section 
1902(a)(10)(A)(ii)(I) through (XIX) of the Act and subpart C of this 
part, based on information available to the State from the application 
filed by or on behalf of the individual; and
    (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 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 eligibility of parents and other caretaker 
relatives specified in Sec.  435.119(c) of this section also applies to 
eligibility 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

[[Page 17206]]

plan amendment to and approved by the Secretary.

0
19. Section 435.403 is amended by--
0
A. Redesignating paragraphs (h) and (i) as paragraphs (i) and (h), 
respectively.
0
B. Adding introductory text for newly redesignated paragraphs (h) and 
(i).
0
C. Further redesignating newly redesignated paragraphs (h)(2), (h)(3), 
and (h)(4) as paragraphs (h)(3), (h)(4), and (h)(5), respectively.
0
D. Adding new paragraph (h)(2).
0
E. Revising newly redesignated paragraphs (h)(1) and (h)(5).
0
F. Revising newly redesignated paragraphs (i)(1) and (i)(2).
0
G. Removing newly redesignated paragraph (i)(3).
0
H. Further redesignating newly redesignated paragraph (i)(4) as 
paragraph (i)(3).
0
I. Amending paragraph (l)(2) by removing the phrase ``paragraph (h)'' 
and adding the phrase ``paragraph (i)'' in its place.
    The revisions and addition read as follows:


Sec.  435.403  State residence.

* * * * *
    (h) Individuals age 21 and over. Except as provided in paragraph 
(f) of this section, with respect to 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 is living and--
    (i) Intends to reside, including without a fixed address; or
    (ii) Has entered the State with a job commitment or seeking 
employment (whether or not currently employed).
    (2) For an individual not residing in an institution as defined in 
paragraph (b) of this section who is not capable of stating intent, the 
State of residency is the State where the individual is living.
* * * * *
    (5) For any other institutionalized individual, the State of 
residence is the State where the individual is living and intends to 
reside.
    (i) Individuals under age 21. For an individual under age 21 who is 
not eligible for Medicaid based on receipt of assistance under title 
IV-E of the Act, as addressed in paragraph (g) of this section, and is 
not receiving a State supplementary payment, as addressed in paragraph 
(f) of this section, the State of residence is as follows:
    (1) For an individual 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 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, and is not receiving a State supplementary payment, as 
addressed in paragraph (f) of this section, the State of residence is:
    (i) The State where the individual resides, including without a 
fixed address; or
    (ii) The State of residency of the parent or caretaker, in 
accordance with paragraph (h)(1) of this section, with whom the 
individual resides.
* * * * *


Sec.  435.407  [Amended]

0
20. Amend Sec.  435.407(k) by removing the reference ``and 435.911'' 
and adding in its place the reference ``and 435.912''.


Sec.  435.541  [Amended]

0
21. Amend Sec.  435.541(a)(2) by removing the reference ``Sec.  
435.911'' and adding in its place the reference ``Sec.  435.912''.

0
22. Section 435.603 is added to read as follows:


Sec.  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 (j) 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 coverage to begin on or 
before December 31, 2013, application of the financial methodologies 
set forth in this section will not be applied until March 31, 2014 or 
the next regularly-scheduled renewal of eligibility for such individual 
under Sec.  435.916 of this part, whichever is later.
    (b) Definitions. For purposes of this section--
    Code means the Internal Revenue Code.
    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 herself plus the 
number of children she is expected to deliver. In the case of 
determining the family size of other individuals who have a pregnant 
woman in their household, the pregnant woman is counted, at State 
option, as either 1 or 2 person(s) or as herself plus the number of 
children she is expected to deliver.
    Tax dependent has the meaning provided in Sec.  435.4 of this part.
    (c) Basic rule. Except as specified in paragraph (i) and (j) 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) General rule. 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) Income of children and tax dependents. (i) 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 expected to be required to 
file a tax return under section 6012(a)(1) 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.
    (ii) The MAGI-based income of a tax dependent described in 
paragraph (f)(2)(i) of this section who is not expected to be required 
to file a tax return under section 6012(a)(1) of the Code for the 
taxable year in which eligibility for Medicaid is being determined is 
not included in the household income of the taxpayer whether or not 
such tax dependent files a tax return.
    (3) In the case of individuals described in paragraph (f)(2)(i) of 
this section, household income may, at State option, also include 
actually available cash support, exceeding nominal amounts, 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, with the following exceptions--
    (1) An amount received as a lump sum is counted as income only in 
the month received.
    (2) Scholarships, awards, or fellowship grants used for education

[[Page 17207]]

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, subject to 
Federal restrictions, located within the most recent boundaries of a 
prior Federal reservation, or otherwise under the supervision of the 
Secretary of the Interior;
    (iii) Distributions and payments from rents, leases, rights of way, 
royalties, usage rights, or natural resource extraction and harvest 
from--
    (A) Rights of ownership or possession in any lands described in 
paragraph (e)(3)(ii) of this section; or
    (B) Federally protected rights regarding off-reservation hunting, 
fishing, gathering, or usage of natural resources;
    (iv) 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;
    (v) 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;
    (vi) 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 who expects to file a tax 
return for the taxable year in which an initial determination or 
renewal of eligibility is being made, and who does not expect to be 
claimed as a tax dependent by another taxpayer, the household consists 
of the taxpayer and, subject to paragraph (f)(5) of this section, all 
persons whom such individual expects to claim as a tax dependent.
    (2) Basic rule for individuals claimed as a tax dependent. In the 
case of an individual who expects to be claimed as a tax dependent by 
another taxpayer for the taxable year in which an initial determination 
or renewal of eligibility is being made, 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 expect to be claimed as a tax dependent by another 
taxpayer;
    (ii) Individuals under the age specified by the State under 
paragraph (f)(3)(iv) of this section who expect to be claimed by one 
parent as a tax dependent and are living with both parents but whose 
parents do not expect to file a joint tax return; and
    (iii) Individuals under the age specified by the State under 
paragraph (f)(3)(iv) of this section who expect to be claimed as a tax 
dependent by a non-custodial parent. For purposes of this section--
    (A) A court order or binding separation, divorce, or custody 
agreement establishing physical custody controls; or
    (B) If there is no such order or agreement or in the event of a 
shared custody agreement, the custodial parent is the parent with whom 
the child spends most nights.
    (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 
expect to file a Federal tax return and do not expect to be claimed as 
a tax dependent for the taxable year in which an initial determination 
or renewal of eligibility is being made, or who are described in 
paragraph (f)(2)(i), (f)(2)(ii), or (f)(2)(iii) of this section, 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 the 
age specified in paragraph (f)(3)(iv) of this section; and
    (iii) In the case of individuals under the age specified in 
paragraph (f)(3)(iv) of this section, the individual's natural, adopted 
and step parents and natural, adoptive and step siblings under the age 
specified in paragraph (f)(3)(iv) of this section.
    (iv) The age specified in this paragraph is either of the 
following, as elected by the agency in the State plan--
    (A) Age 19; or
    (B) Age 19 or, in the case of full-time students, 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 expect to file a joint tax return 
under section 6013 of the Code or whether one spouse expects to be 
claimed as a tax dependent by the other spouse.
    (5) For purposes of paragraph (f)(1) of this section, if, 
consistent with the procedures adopted by the State in accordance with 
Sec.  435.956(f) of this part, a taxpayer cannot reasonably establish 
that another individual is a tax dependent of the taxpayer for the tax 
year in which Medicaid is sought, the inclusion of such individual in 
the household of the taxpayer is determined in accordance with 
paragraph (f)(3) of this section.
    (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--
    (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, 
except as provided in paragraph (d)(1) of this section.
    (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 income based on projected annual household income and 
family size for the remainder of the current calendar year.
    (3) In determining current monthly or projected annual household 
income and family size under paragraphs (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 increase or 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 or 
family size must be verified in the same manner as other income and 
eligibility factors, in accordance with the income and eligibility 
verification requirements at Sec.  435.940 through Sec.  435.965, 
including by self-attestation if reasonably compatible with other 
electronic data obtained by the agency in accordance with such 
sections.
    (i) If the household income of an individual determined in 
accordance with this section results in financial ineligibility for 
Medicaid and the

[[Page 17208]]

household income of such individual determined in accordance with 26 
CFR 1.36B-1(e) is below 100 percent FPL, Medicaid financial eligibility 
will be determined in accordance with 26 CFR 1.36B-1(e).
    (j) Eligibility Groups for which MAGI-based methods do not apply. 
The financial methodologies described in this section are not applied 
in determining the Medicaid eligibility of individuals described in 
this paragraph. The agency must use the financial methods described in 
Sec.  435.601 and Sec.  435.602 of this subpart.
    (1) Individuals whose eligibility for Medicaid does not require a 
determination of income by the agency, including, but not limited to, 
individuals receiving Supplemental Security Income (SSI) eligible for 
Medicaid under Sec.  435.120 of this part, individuals deemed to be 
receiving SSI and eligible for Medicaid under Sec.  435.135, Sec.  
435.137 or Sec.  435.138 of this part 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 when age is a condition of 
eligibility.
    (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 Sec.  435.121, Sec.  435.232 or Sec.  435.234 of this part or 
under section 1902(e)(3) of the Act, but only for the purpose of 
determining eligibility on such basis.
    (4) Individuals who request coverage for long-term services and 
supports for the purpose of being evaluated for an eligibility group 
under which long-term services and supports are covered. ``Long-term 
services and supports'' include nursing facility services, a level of 
care in any institution equivalent to nursing facility services; home 
and community-based services furnished under a waiver or State plan 
under sections 1915 or 1115 of the Act; home health services as 
described in sections 1905(a)(7) of the Act and personal care services 
described in sections 1905(a)(24) 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 D and I of this part, but only for the purpose of 
determining eligibility on such basis.


Sec.  435.831  [Amended]

0
23. Amend Sec.  435.831(a)(2) by removing the reference ``Sec.  
435.914'' and adding in its place the reference ``Sec.  435.915''.

0
24. Section 435.905 is revised to read as follows:


Sec.  435.905  Availability of program information.

    (a) The agency must furnish the following information in electronic 
and paper formats (including through the Internet Web site described in 
Sec.  435.1200(f) of this part), 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 to applicants and 
beneficiaries in plain language and in a manner that is accessible and 
timely to--
    (1) Individuals who are limited English proficient through the 
provision of language services at no cost to the individual; and
    (2) Individuals living with disabilities through the provision of 
auxiliary aids and services at no cost to the individual in accordance 
with the Americans with Disabilities Act and section 504 of the 
Rehabilitation Act.

0
25. Section 435.907 is revised to read as follows:


Sec.  435.907  Application.

    (a) Basis and implementation. In accordance with section 
1413(b)(1)(A) of the Affordable Care Act, the agency must accept an 
application from the applicant, an adult who is in the applicant's 
household, as defined in Sec.  435.603(f), or family, as defined in 
section 36B(d)(1) of the Code, an authorized representative, or if the 
applicant is a minor or incapacitated, someone acting responsibly for 
the applicant, and any documentation required to establish 
eligibility--
    (1) Via the internet Web site described in Sec.  435.1200(f) of 
this part;
    (2) By telephone;
    (3) Via mail;
    (4) In person; and
    (5) Through other commonly available electronic means.
    (b) The application must be--
    (1) The single, streamlined application for all insurance 
affordability programs developed by the Secretary; or
    (2) An alternative single, streamlined application for all 
insurance affordability programs, which may be no more burdensome on 
the applicant than the application described in paragraph (b)(1) of 
this section, approved by the Secretary.
    (c) For individuals applying, or who may be eligible, for 
assistance on a basis other than the applicable MAGI standard in 
accordance with Sec.  435.911(c)(2) of this part, the agency may use 
either--
    (1) An application described in paragraph (b) of this section and 
supplemental forms to collect additional information needed to 
determine eligibility on such other basis; or
    (2) An application designed specifically to determine eligibility 
on a basis other than the applicable MAGI standard. Such application 
must minimize burden on applicants.
    (3) Any MAGI-exempt applications and supplemental forms in use by 
the agency must be submitted to the Secretary.
    (d) The agency may not require an in-person interview as part of 
the application process for a determination of eligibility using MAGI-
based income.
    (e) Limits on information. (1) The agency may only require an 
applicant to provide the information necessary to make an eligibility 
determination or for a purpose directly connected to the administration 
of the State plan.
    (2) The agency may request information necessary to determine 
eligibility for other insurance affordability or benefit programs.
    (3) The agency may request a non-applicant's SSN provided that--
    (i) Provision of such SSN is voluntary;
    (ii) Such SSN is used only to determine an applicant's or 
beneficiary's eligibility for Medicaid or other insurance affordability 
program or for a purpose directly connected to the administration of 
the State plan; and
    (iii) At the time such SSN is requested, the agency provides clear 
notice to the individual seeking assistance, or person acting on such 
individual's behalf, that provision of the non-applicant's SSN is 
voluntary and information regarding how the SSN will be used.
    (f) The agency must require that all initial applications are 
signed under penalty of perjury. Electronic, including telephonically 
recorded, signatures and handwritten signatures transmitted via any 
other electronic transmission must be accepted.
    (g) Any application or supplemental form must be accessible to 
persons who are limited English proficient and persons who have 
disabilities, consistent with Sec.  435.905(b) of this subpart.

0
26. Section 435.908 is revised to read as follows:

[[Page 17209]]

Sec.  435.908  Assistance with application and renewal.

    (a) The agency must provide assistance to any individual seeking 
help with the application or renewal 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, consistent with Sec.  435.905(b) of this subpart.
    (b) The agency must allow individual(s) of the applicant or 
beneficiary's choice to assist in the application process or during a 
renewal of eligibility.

0
27. Section 435.910 is amended by--
0
A. Redesignating paragraphs (h)(2) and (h)(3), as (h)(3) and (h)(4), 
respectively.
0
B. Adding a new paragraph (h)(2).
0
C. Revising paragraphs (a), (f), (g), and (h)(1) to read as follows:


Sec.  435.910  Use of Social Security number.

    (a) Except as provided in paragraph (h) of this section, the agency 
must require, as a condition of eligibility, that each individual 
(including children) seeking Medicaid furnish each of his or her Social 
Security numbers (SSN).
* * * * *
    (f) The agency must not deny or delay services to an otherwise 
eligible individual pending issuance or verification of the 
individual's SSN by SSA or if the individual meets one of the 
exceptions in paragraph (h) of this section.
    (g) The agency must verify the SSN furnished by an applicant or 
beneficiary to insure the SSN was issued to that individual, and to 
determine whether any other SSNs were issued to that individual.
    (h) Exception. (1) The requirement of paragraph (a) of this section 
does not apply and a State may give a Medicaid identification number to 
an individual who--
    (i) Is not eligible to receive an SSN;
    (ii) Does not have an SSN and may only be issued an SSN for a valid 
non-work reason in accordance with 20 CFR 422.104; or
    (iii) Refuses to obtain an SSN because of well-established 
religious objections.
    (2) The identification number may be either an SSN obtained by the 
State on the applicant's behalf or another unique identifier.
* * * * *

0
28. Redesignate Sec.  435.911 through Sec.  435.914 as Sec.  435.912 
through Sec.  435.915 respectively.

0
29. Add new Sec.  435.911 to read as follows:


Sec.  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 Sec.  435.110(b) of this part, the income standard established in 
accordance with Sec.  435.110(c) of this part;
    (ii) In the case of pregnant women, the income standard established 
in accordance with Sec.  435.116(c) of this part;
    (iii) In the case of individuals under age 19, the income standard 
established in accordance with Sec.  435.118(c) of this part;
    (iv) The income standard established under Sec.  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 
in Sec.  435.907 or whose eligibility is being renewed in accordance 
with Sec.  435.916 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) The agency must, promptly and without undue delay consistent 
with timeliness standards established under Sec.  435.912, furnish 
Medicaid to 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 of title XVIII of the Act, and 
whose household income is at or below the applicable modified adjusted 
gross income standard.
    (2) For each individual described in paragraph (d) of this section, 
the agency must collect such additional information as may be needed 
consistent with Sec.  435.907(c), to determine whether such individual 
is eligible for Medicaid on any basis other than the applicable 
modified adjusted gross income standard, and furnish Medicaid on such 
basis.
    (3) For individuals not eligible on the basis of the applicable 
modified adjusted gross income standard, the agency must comply with 
the requirements set forth in Sec.  435.1200(e) of this part.
    (d) For purposes of paragraph (c)(2) of this section, individuals 
described in this paragraph include:
    (1) Individuals whom the agency identifies, on the basis of 
information contained in an application described in Sec.  435.907(b) 
of this part, or renewal form described in Sec.  435.916(a)(3) of this 
part, or on the basis of other information available to the State, as 
potentially eligible on a basis other than the applicable MAGI 
standard;
    (2) Individuals who submit an alternative application described in 
Sec.  435.907(c) of this part; and
    (3) Individuals who otherwise request a determination of 
eligibility on a basis other than the applicable MAGI standard as 
described in Sec.  435.603(j) of this part.

0
30. Newly redesignated Sec.  435.912 is amended by--
0
A. Revising paragraphs (a) and (b).
0
B. Redesignating paragraphs (c), (d), and (e) as paragraphs (e), (f), 
and (g), respectively.
0
C. Adding new paragraphs (c) and (d).
    The revisions and additions read as follows:


Sec.  435.912  Timely determination of eligibility.

    (a) For purposes of this section--
    (1) ``Timeliness standards'' refer to the maximum period of time in 
which every applicant is entitled to a determination of eligibility, 
subject to the exceptions in paragraph (e) of this section.
    (2) ``Performance standards'' are overall standards for determining 
eligibility in an efficient and timely manner across a pool of 
applicants, and include standards for accuracy and consumer 
satisfaction, but do not include standards for an individual 
applicant's determination of eligibility.
    (b) Consistent with guidance issued by the Secretary, the agency 
must establish in its State plan timeliness and performance standards 
for, promptly and without undue delay--
    (1) Determining eligibility for Medicaid for individuals who submit 
applications to the single State agency or its designee.
    (2) Determining potential eligibility for, and transferring 
individuals' electronic accounts to, other insurance affordability 
programs pursuant to Sec.  435.1200(e) of this part.
    (3) Determining eligibility for Medicaid for individuals whose 
accounts are transferred from other insurance affordability programs, 
including at initial application as well as at a regularly-scheduled 
renewal or due to a change in circumstances.

[[Page 17210]]

    (c)(1) The timeliness and performance standards adopted by the 
agency under paragraph (b) of this section must cover the period from 
the date of application or transfer from another insurance 
affordability program to the date the agency notifies the applicant of 
its decision or the date the agency transfers the individual to another 
insurance affordability program in accordance with Sec.  435.1200(e) of 
this part, and must comply with the requirements of paragraph (c)(2) of 
this section, subject to additional guidance issued by the Secretary to 
promote accountability and consistency of high quality consumer 
experience among States and between insurance affordability programs.
    (2) Timeliness and performance standards included in the State plan 
must account for--
    (i) The capabilities and cost of generally available systems and 
technologies;
    (ii) The general availability of electronic data matching and ease 
of connections to electronic sources of authoritative information to 
determine and verify eligibility;
    (iii) The demonstrated performance and timeliness experience of 
State Medicaid, CHIP and other insurance affordability programs, as 
reflected in data reported to the Secretary or otherwise available; and
    (iv) The needs of applicants, including applicant preferences for 
mode of application (such as through an internet Web site, telephone, 
mail, in-person, or other commonly available electronic means), as well 
as the relative complexity of adjudicating the eligibility 
determination based on household, income or other relevant information.
    (3) Except as provided in paragraph (e) of this section, the 
determination of eligibility for any applicant may not exceed--
    (i) Ninety days for applicants who apply for Medicaid on the basis 
of disability; and
    (ii) Forty-five days for all other applicants.
    (d) The agency must inform applicants of the timeliness standards 
adopted in accordance with this section.
* * * * *

0
31. Section 435.916 is revised to read as follows:


Sec.  435.916  Periodic renewal of Medicaid eligibility.

    (a) Renewal of individuals whose Medicaid eligibility is based on 
modified adjusted gross income methods (MAGI). (1) Except as provided 
in paragraph (d) of this section, the eligibility of Medicaid 
beneficiaries whose financial eligibility is determined using MAGI-
based income must be renewed once every 12 months, and no more 
frequently than once every 12 months.
    (2) Renewal on basis of information available to agency. 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 Sec.  435.948, Sec.  435.949 and Sec.  435.956 of this part. If 
the agency is able to renew eligibility based on such information, the 
agency must, consistent with the requirements of this subpart and 
subpart E of part 431 of this chapter, notify the individual--
    (i) Of the eligibility determination, and basis; and
    (ii) That the individual must inform the agency, through any of the 
modes permitted for submission of applications under Sec.  435.907(a) 
of this subpart, if any of the information contained in such notice is 
inaccurate, but that the individual is not required to sign and return 
such notice if all information provided on such notice is accurate.
    (3) Use of a pre-populated renewal form. If the agency cannot renew 
eligibility in accordance with paragraph (a)(2) of this section, the 
agency must--
    (i) Provide the individual with--
    (A) A renewal form containing information, as specified by the 
Secretary, available to the agency that is needed to renew eligibility.
    (B) At least 30 days from the date of the renewal form to respond 
and provide any necessary information through any of the modes of 
submission specified in Sec.  435.907(a) of this part, and to sign the 
renewal form in a manner consistent with Sec.  435.907(f) of the part;
    (C) Notice of the agency's decision concerning the renewal of 
eligibility in accordance with this subpart and subpart E of part 431 
of this chapter;
    (ii) Verify any information provided by the beneficiary in 
accordance with Sec.  435.945 through Sec.  435.956 of this part;
    (iii) Reconsider in a timely manner the eligibility of an 
individual who is terminated for failure to submit the renewal form or 
necessary information, if the individual subsequently submits the 
renewal form within 90 days after the date of termination, or a longer 
period elected by the State, without requiring a new application;
    (iv) Not require an individual to complete an in-person interview 
as part of the renewal process.
    (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 Sec.  435.603(j) of 
this part, for circumstances that may change, at least every 12 months. 
The agency must make a redetermination of eligibility in accordance 
with the provisions of paragraph (a)(2) of this section, if sufficient 
information is available to do so. The agency may adopt the procedures 
described at Sec.  435.916(a)(3) for individuals whose eligibility 
cannot be renewed in accordance with paragraph (a)(2) of this section.
    (1) The agency may consider blindness as continuing until the 
reviewing physician under Sec.  435.531 of this part determines that a 
beneficiary's vision has improved beyond the definition of blindness 
contained in the plan; and
    (2) The agency may consider disability as continuing until the 
review team, under Sec.  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 through any of the 
modes for submission of applications described in Sec.  435.907(a) of 
this part.
    (d) Agency action on information about changes. (1) Consistent with 
the requirements of Sec.  435.952 of this part, the agency must 
promptly redetermine eligibility between regular renewals of 
eligibility described in paragraphs (b) and (c) of this section 
whenever it receives information about a change in a beneficiary's 
circumstances that may affect eligibility.
    (i) For renewals of Medicaid beneficiaries whose financial 
eligibility is determined using MAGI-based income, the agency must 
limit any requests for additional information from the individual to 
information relating to such change in circumstance.
    (ii) If the agency has enough information available to it to renew 
eligibility with respect to all eligibility criteria, the agency may 
begin a new 12-month renewal period under paragraphs (a) or (b) of this 
section.
    (2) If the agency has information about anticipated changes in a

[[Page 17211]]

beneficiary's circumstances that may affect his or her eligibility, it 
must redetermine eligibility at the appropriate time based on such 
changes.
    (e) The agency may request from beneficiaries only the information 
needed to renew eligibility. Requests for non-applicant information 
must be conducted in accordance with Sec.  435.907(e) of this part.
    (f) Determination of ineligibility and transmission of data 
pertaining to individuals no longer eligible for Medicaid.
    (1) Prior to making a determination of ineligibility, the agency 
must consider all bases of eligibility, consistent with Sec.  435.911 
of this part.
    (2) For individuals determined ineligible for Medicaid, the agency 
must determine potential eligibility for other insurance affordability 
programs and comply with the procedures set forth in Sec.  435.1200(e) 
of this part.
    (g) Any renewal form or notice must be accessible to persons who 
are limited English proficient and persons with disabilities, 
consistent with Sec.  435.905(b) of this subpart.

0
32. Section 435.940 is revised to read as follows:


Sec.  435.940  Basis and scope.

    The income and eligibility verification requirements set forth at 
Sec.  435.940 through Sec.  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. Nothing in the 
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 
parts 431 and 455 of this subchapter, or its obligation to provide for 
methods of administration that are in the best interest of applicants 
and beneficiaries and are necessary for the proper and efficient 
operation of the plan, consistent with Sec.  431.15 of this subchapter 
and section 1902(a)(19) of the Act.

0
33. Section 435.945 is revised to read as follows:


Sec.  435.945  General requirements.

    (a) Except where the law requires other procedures (such as for 
citizenship and immigration status information), the agency may accept 
attestation of information needed to determine the eligibility of an 
individual for Medicaid (either self-attestation by the individual or 
attestation by an adult who is in the applicant's household, as defined 
in Sec.  435.603(f) of this part, or family, as defined in section 
36B(d)(1) of the Internal Revenue Code, an authorized representative, 
or, if the individual is a minor or incapacitated, someone acting 
responsibly for the individual) without requiring further information 
(including documentation) from the individual.
    (b) The agency must request and use information relevant to 
verifying an individual's eligibility for Medicaid in accordance with 
Sec.  435.948 through Sec.  435.956 of this subpart.
    (c) The agency must furnish, in a timely manner, income and 
eligibility information, subject to regulations at part 431 subpart F 
of this chapter, needed for verifying eligibility to the following 
programs:
    (1) To other agencies in the State and other States and to the 
Federal programs both listed in Sec.  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.
    (d) All State eligibility determination systems must conduct data 
matching through the Public Assistance Reporting Information System 
(PARIS).
    (e) The agency must, as required under section 1137(a)(7) of the 
Act, and upon request, reimburse another agency listed in Sec.  
435.948(a) of this subpart or paragraph (c) of this section for 
reasonable costs incurred in furnishing information, including new 
developmental costs.
    (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) Consistent with Sec.  431.16 of this subchapter, the agency 
must report information as prescribed by the Secretary for purposes of 
determining compliance with Sec.  431.305 of this subchapter, subpart P 
of part 431, Sec.  435.910, Sec.  435.913, and Sec.  435.940 through 
Sec.  435.965 of this subpart and of evaluating the effectiveness of 
the income and eligibility verification system.
    (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 Sec.  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.
    (j) Verification plan. The agency must develop, and update as 
modified, and submit to the Secretary, upon request, a verification 
plan describing the verification policies and procedures adopted by the 
State agency to implement the provisions set forth in Sec.  435.940 
through Sec.  435.956 of this subpart in a format and manner prescribed 
by the Secretary.
    (k) Flexibility in information collection and verification. Subject 
to approval by the Secretary, the agency may request and use 
information from a source or sources alternative to those listed in 
Sec.  435.948(a) of this subpart, or through a mechanism other than the 
electronic service described in Sec.  435.949(a) of this subpart, 
provided that such alternative source or mechanism 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.

0
34. Section 435.948 is revised to read as follows:


Sec.  435.948  Verifying financial information.

    (a) The agency must in accordance with this section request the 
following information relating to financial eligibility from other 
agencies in the State and other States and Federal programs to the 
extent the agency determines such information is useful to verifying 
the financial eligibility of an individual:
    (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 
(IRS), the Social Security Administration (SSA), 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 
Supplemental Nutrition Assistance Program, the State

[[Page 17212]]

program funded under part A of title IV of the Act, and other insurance 
affordability programs.
    (b) To the extent that the information identified in paragraph (a) 
of this section is available through the electronic service established 
in accordance with Sec.  435.949 of this subpart, the agency must 
obtain the information through such service.
    (c) The agency must request the information by SSN, or if an SSN is 
not available, using other personally identifying information in the 
individual's account, if possible.

0
35. Section 435.949 is added to read as follows:


Sec.  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 and other data sources, including 
SSA, the Department of Treasury, and the Department of Homeland 
Security.
    (b) To the extent that information related to eligibility for 
Medicaid 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, 
except as provided for in Sec.  435.945(k) of this subpart.

0
36. Section 435.952 is revised to read as follows:


Sec.  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 Sec.  435.940 
through Sec.  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 Sec.  
435.948, Sec.  435.949 or Sec.  435.956 of this subpart, the agency 
must determine or renew 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 Sec.  435.948, Sec.  435.949 or Sec.  435.956 of this 
subpart cannot be obtained electronically or the information obtained 
electronically is not reasonably compatible, as provided in the 
verification plan described in Sec.  435.945(j) with information 
provided by or on behalf of the individual.
    (1) Income information obtained through an electronic data match 
shall be considered reasonably compatible with income information 
provided by or on behalf of an individual if both are either above or 
at or below the applicable income standard or other relevant income 
threshold.
    (2) If information provided by or on behalf of an individual is not 
reasonably compatible with information obtained through an electronic 
data match, the agency must seek additional information from the 
individual, including--
    (i) A statement which reasonably explains the discrepancy; or
    (ii) Other information (which may include documentation), provided 
that documentation from the individual is permitted only to the extent 
electronic data are not available and establishing a data match would 
not be effective, considering such factors as the administrative costs 
associated with establishing and using the data match compared with the 
administrative costs associated with relying on paper documentation, 
and the impact on program integrity in terms of the potential for 
ineligible individuals to be approved as well as for eligible 
individuals to be denied coverage;
    (iii) The agency must provide the individual a reasonable period to 
furnish any additional information required under paragraph (c) of this 
section.
    (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 Sec.  435.940 through Sec.  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.


Sec.  435.953  [Removed]

0
37. Section 435.953 is removed.


Sec.  435.955  [Removed]

0
38. Section 435.955 is removed.

0
39. Section 435.956 is added to read as follows:


Sec.  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 Sec.  435.945(a) of this subpart or through other 
reasonable verification procedures consistent with the requirements in 
Sec.  435.952 of this subpart.
    (2) Evidence of immigration status may not be used to determine 
that an individual is not a State resident.
    (d) Social Security numbers. The agency must verify Social Security 
numbers (SSNs) in accordance with Sec.  435.910 of this subpart.
    (e) Pregnancy. The agency must accept self-attestation of pregnancy 
unless the State has information that is not reasonably compatible with 
such attestation, subject to the requirements of Sec.  435.952 of this 
subpart.
    (f) Age, date of birth and household size. The agency may verify 
date of birth and the individuals that comprise an individual's 
household, as defined in Sec.  435.603(f) of this part, in accordance 
with Sec.  435.945(a) of this subpart or through other reasonable 
verification procedures consistent with the requirements in Sec.  
435.952 of this subpart.


Sec.  435.1002  [Amended]

0
40. Amend Sec.  435.1002(b) by removing the reference ``Sec. Sec.  
435.914 and'' and adding in its place the reference ``Sec. Sec.  
435.915 and''.


Sec.  435.1102  [Amended]

0
41. Amend Sec.  435.1102(a) by removing the term ``family income'' and 
adding in its place the term ``household income''.

0
42. Subpart M is added to read as follows:

Subpart M--Coordination of Eligibility and Enrollment Between 
Medicaid, CHIP, Exchanges and Other Insurance Affordability 
Programs


Sec.  435.1200  Medicaid agency responsibilities.

    (a) Statutory basis and purpose. This section implements sections 
1943 and 2102(b)(3)(B) of the Affordable Care Act to ensure coordinated 
eligibility and enrollment among insurance affordability programs.
    (b) General requirements. The State Medicaid agency must--
    (1) Fulfill the responsibilities set forth in paragraphs (d) and 
(e) and, if applicable, paragraph (c) of this section in partnership 
with other insurance affordability programs.
    (2) Certify for the Exchange and other insurance affordability 
programs the criteria applied in determining Medicaid eligibility.
    (3) Enter into and, upon request, provide to the Secretary one or 
more agreements with the Exchange and the agencies administering other 
insurance

[[Page 17213]]

affordability programs as are necessary to fulfill the requirements of 
this section, including a clear delineation of the responsibilities of 
each program to--
    (i) Minimize burden on individuals;
    (ii) Ensure compliance with paragraphs (d) through (f) of this 
section and, if applicable, paragraph (c) of this section;
    (iii) Ensure prompt determinations of eligibility and enrollment in 
the appropriate program without undue delay, consistent with timeliness 
standards established under Sec.  435.912, based on the date the 
application is submitted to any insurance affordability program.
    (c) Provision of Medicaid for individuals found eligible for 
Medicaid by another insurance affordability program. If the agency has 
entered into an agreement in accordance with Sec.  431.10(d) of this 
subchapter under which the Exchange or other insurance affordability 
program makes final determinations of Medicaid eligibility, for each 
individual determined so eligible by the Exchange or other program, the 
agency must--
    (1) Establish procedures to receive, via secure electronic 
interface, the electronic account containing the determination of 
Medicaid eligibility;
    (2) Comply with the provisions of Sec.  435.911 of this part to the 
same extent as if the application had been submitted to the Medicaid 
agency; and
    (3) Comply with the provisions of Sec.  431.10 of this subchapter 
to ensure it maintains oversight for the Medicaid program.
    (d) Transfer from other insurance affordability programs to the 
State Medicaid agency. For individuals for whom another insurance 
affordability program has not made a determination of Medicaid 
eligibility, but who have been screened as potentially Medicaid 
eligible, the agency must--
    (1) Accept, via secure electronic interface, the electronic account 
for the individual;
    (2) Not request information or documentation from the individual 
already provided to another insurance affordability program and 
included in the individual's electronic account or other transmission 
from the other program.
    (3) Promptly and without undue delay, consistent with timeliness 
standards established under Sec.  435.912, determine the Medicaid 
eligibility of the individual, in accordance with Sec.  435.911 of this 
part, without requiring submission of another application.
    (4) Accept any finding relating to a criterion of eligibility made 
by such program, without further verification, if such finding was made 
in accordance with policies and procedures which are the same as those 
applied by the agency or approved by it in the agreement described in 
paragraph (b) of this section;
    (5) Notify such program of the receipt of the electronic account.
    (6) Notify such program of the final determination of eligibility 
made by the agency for individuals who enroll in the other insurance 
affordability program pending completion of the determination of 
Medicaid eligibility.
    (e) Evaluation of eligibility for other insurance affordability 
programs--(1) Individuals determined not eligible for Medicaid. For 
each individual who submits an application or renewal form to the 
agency which includes sufficient information to determine Medicaid 
eligibility, or whose eligibility is being renewed pursuant to a change 
in circumstance in accordance with Sec.  435.916(d) of this part, and 
whom the agency determines is not eligible for Medicaid, the agency 
must, promptly and without undue delay, consistent with timeliness 
standards established under Sec.  435.912 of this part, determine 
potential eligibility for, and, as appropriate, transfer via a secure 
electronic interface the individual's electronic account to, other 
insurance affordability programs.
    (2) Individuals undergoing a Medicaid eligibility determination on 
a basis other than MAGI. In the case of an individual with household 
income greater than the applicable MAGI standard and for whom the 
agency is determining eligibility in accordance with Sec.  
435.911(c)(2) of this part, the agency must promptly and without undue 
delay, consistent with timeliness standards established under Sec.  
435.912 of this part, determine potential eligibility for, and as 
appropriate transfer via secure electronic interface, the individual's 
electronic account to, other insurance affordability programs and 
provide timely notice to such other program--
    (i) 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
    (ii) Of the agency's final determination of eligibility or 
ineligibility for Medicaid.
    (3) The agency may enter into an agreement with the Exchange to 
make determinations of eligibility for advance payments of the premium 
tax credit and cost sharing reductions, consistent with 45 CFR 
155.110(a)(2).
    (f) Internet Web site. (1) The State Medicaid agency must make 
available to current and prospective Medicaid applicants and 
beneficiaries a Web site that--
    (i) Operates in conjunction with or is linked to the Web site 
described in Sec.  457.340(a) of this subchapter and to the Web site 
established by the Exchange under 45 CFR 155.205; and
    (ii) 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.
    (2) Such Web site, any interactive kiosks and other information 
systems established by the State to support Medicaid information and 
enrollment activities must be in plain language and be accessible to 
individuals with disabilities and persons who are limited English 
proficient, consistent with Sec.  435.905(b) of this subpart.

PART 457--ALLOTMENTS AND GRANTS TO STATES

0
43. The authority citation for part 457 continues to read as follows:

    Authority:  Section 1102 of the Social Security Act (42 U.S.C. 
1302)

0
44a. In part 457, remove the term ``family income'' wherever it appears 
and add in its place the term ``household income''.
0
44b. In part 457, remove the term ``Family income'' wherever it appears 
and add in its place the term ``Household income''.

0
45. In part 457 remove ``SCHIP'' wherever it appears and add in its 
place ``CHIP''.

0
46. Section Sec.  457.10 is amended by--
0
A. Removing the definition of ``Medicaid applicable income level.''
0
B. Adding the following definitions in alphabetical order ``Advanced 
payments of the premium tax credit (APTC),'' ``Affordable Insurance 
Exchange (Exchange),'' ``Application,'' ``Electronic account,'' 
``Household income,'' ``Insurance affordability program,'' ``Secure 
electronic interface,'' and ``Shared eligibility service.''
    The additions read as follows:


Sec.  457.10  Definitions and use of terms.

* * * * *
    Advanced payments of the premium tax credit (APTC) has the meaning 
given the term in 45 CFR 155.20.
    Affordable Insurance Exchange (Exchange) has the meaning given the 
term ``Exchange'' in 45 CFR 155.20.
    Application means the single, streamlined application form that is 
used by the State in accordance with

[[Page 17214]]

Sec.  435.907(b) of this chapter and 45 CFR 155.405 for individuals to 
apply for coverage for all insurance affordability programs.
* * * * *
    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 Sec.  457.380 of this part.
* * * * *
    Household income is defined as provided in Sec.  435.603(d) of this 
chapter.
    Insurance affordability program is defined as provided in Sec.  
435.4 of this chapter.
* * * * *
    Secure electronic interface is defined as provided in Sec.  435.4 
of this chapter.
    Shared eligibility service is defined as provided in Sec.  435.4 of 
this chapter.
* * * * *

0
47. Section Sec.  457.80 is amended by revising paragraph (c)(3) to 
read as follows:


Sec.  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 all eligible individuals are enrolled in the appropriate 
program, including through use of the procedures described in Sec.  
457.305, Sec.  457.348 and Sec.  457.350 of this part.

0
48. Section 457.300 is amended by--
0
A. Republishing paragraph (a) introductory text.
0
B. Adding paragraphs (a)(4) and (a)(5)
0
C. Revising paragraph (c).
    The addition and revision reads as follows:


Sec.  457.300  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
* * * * *
    (4) Section 2107(e)(1)(O) of the Affordable Care Act, which relates 
to coordination of CHIP with the Exchanges and the State Medicaid 
agency.
    (5) Section 2107(e)(1)(F) of the Affordable Care 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 Sec.  435.4, Sec.  435.229, Sec.  435.905 through Sec.  
435.908, Sec.  435.1102, Sec.  435.940 through Sec.  435.958, Sec.  
435.1200, Sec.  436.3, Sec.  436.229, and Sec.  436.1102 of this 
chapter.

0
49. Section 457.301 is amended by--
0
A. Adding the definitions of ``Eligibility determination,'' ``Family 
size,'' ``Medicaid applicable income level,'' and ``Non-applicant'' in 
alphabetical order.
0
B. Removing the definition of ``Joint application.''
    The additions read as follows:


Sec.  457.301  Definitions and use of terms.

* * * * *
    Eligibility determination means an approval or denial of 
eligibility in accordance withSec.  457.340 as well as a renewal or 
termination of eligibility under Sec.  457.343 of this subpart.
    Family size is defined as provided in Sec.  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 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, or under a section 1115 waiver authorized by the 
Secretary (taking into consideration any applicable income 
methodologies adopted under the authority of section 1902(r)(2) of the 
Act).
    Non-applicant means an individual who is not seeking an eligibility 
determination for him or herself and is included in an applicant's or 
enrollee's household to determine eligibility for such applicant or 
enrollee.
* * * * *
0
50. Section 457.305 is revised to read as follows:


Sec.  457.305  State plan provisions.

    The State plan must include a description of--
    (a) The standards, consistent with Sec.  457.310 and Sec.  457.320 
of this subpart, and financial methodologies consistent with Sec.  
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).

0
51. Section 457.310 is amended by--
0
A. Republishing paragraph (b) introductory text.
0
B. Revising paragraphs (b)(1)(i), (b)(1)(ii), (b)(1)(iii) introductory 
text, and (b)(1)(iii)(B).
0
C. Adding paragraph (d).
    The revisions and addition read as follows:


Sec.  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 Sec.  
457.315 of this subpart, 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.
* * * * *
    (d) A targeted low-income child must also include any child 
enrolled in Medicaid on December 31, 2013 who is determined to be 
ineligible for Medicaid as a result of the elimination of income 
disregards as specified under Sec.  435.603(g) of this chapter, 
regardless of any other standards set forth in this section except 
those in paragraph (c) of this section. Such a child shall continue to 
be a targeted low-income child under this paragraph until the date of 
the child's next renewal under Sec.  457.343 of this subpart.

0
52. Section 457.315 is added to read as follows:


Sec.  457.315  Application of modified adjusted gross income and 
household definition.

    (a) Effective January 1, 2014, the State must apply the financial 
methodologies set forth in paragraphs (b) through (i) of Sec.  435.603 
of this chapter in determining the financial 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 Sec.  435.603(j)(1) of this subpart also 
applies.
    (b) In the case of determining ongoing eligibility for enrollees 
determined

[[Page 17215]]

eligible for CHIP on or before December 31, 2013, application of the 
financial methodologies set forth in this section will not be applied 
until March 31, 2014 or the next regularly-scheduled renewal of 
eligibility for such individual under Sec.  457.343, whichever is 
later.

0
53. Section 457.320 is amended by--
0
A. Removing paragraphs (a)(4) and (a)(6).
0
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.
0
C. Revising paragraph (d).
0
D. Removing and reserving paragraph (e)(2).
    The revisions read as follows:


Sec.  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 Sec.  
435.403(i) of this chapter.
    (2) Residency for a targeted low-income pregnant woman defined at 
2112 of the Act must be determined in accordance with Sec.  435.403(h) 
of this chapter.
    (3) 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
    (4) In cases of disputed residency, the State must follow the 
process described in Sec.  435.403(m) of this chapter.
    (e) * * *
    (2) [Reserved]

0
54. Section 457.330 is added to read as follows:


Sec.  457.330  Application.

    The State shall use the single, streamlined application used by the 
State in accordance with paragraph (b) of Sec.  435.907 of this 
chapter, and otherwise comply with such section, except that the terms 
of Sec.  435.907(c) of this chapter (relating to applicants seeking 
coverage on a basis other than modified adjusted gross income) do not 
apply.

0
55. Section 457.340 is amended by--
0
A. Revising the section heading.
0
B. Revising paragraphs (a), (b), (d), and (f).
    The revisions read as follows:


Sec.  457.340  Application for and enrollment in CHIP.

    (a) Application and renewal assistance, availability of program 
information, and Internet Web site. The terms of Sec.  435.905, Sec.  
435.906, Sec.  435.908, and Sec.  435.1200(f) of this chapter apply 
equally to the State in administering a separate CHIP.
    (b) Use of Social Security number. The terms of Sec.  435.910 and 
Sec.  435.907(e) of this chapter regarding the provision and use of 
Social Security Numbers and non-applicant information apply equally to 
the State in administering a separate CHIP.
* * * * *
    (d) Timely determination of eligibility. (1) The terms in Sec.  
435.912 of this chapter apply equally to CHIP, except that standards 
for transferring electronic accounts to other insurance affordability 
programs are pursuant to Sec.  457.350 and the standards for receiving 
applications from other insurance affordability programs are pursuant 
to Sec.  457.348 of this part.
    (2) In applying timeliness standards, the State must define ``date 
of application'' and must count each calendar day from the date of 
application to the day the agency provides notice of its eligibility 
decision.
* * * * *
    (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 CHIP and other insurance affordability programs as family 
circumstances change and avoids gaps or overlaps in coverage.

0
56. Section 457.343 is added to read as follows:


Sec.  457.343  Periodic renewal of CHIP eligibility.

    The renewal procedures described in Sec.  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 Sec.  457.380 of this subpart, shall 
provide notice regarding the State's determination of renewed 
eligibility or termination in accordance with Sec.  457.340(e) of this 
subpart and shall comply with the requirements set forth in Sec.  
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.

0
57. Section 457.348 is added to read as follows:


Sec.  457.348  Determinations of Children's Health Insurance Program 
eligibility by other insurance affordability programs.

    (a) Agreements with other insurance affordability programs. The 
State must enter into and, upon request, provide to the Secretary one 
or more agreements with the Exchange and the agencies administering 
other insurance affordability programs as are necessary to fulfill the 
requirements of this section, including a clear delineation of the 
responsibilities of each program to--
    (1) Minimize burden on individuals;
    (2) Ensure compliance with paragraph (c) of this section, Sec.  
457.350, and if applicable, paragraph (b) of this section;
    (3) Ensure prompt determination of eligibility and enrollment in 
the appropriate program without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d), based on the 
date the application is submitted to any insurance affordability 
program.
    (b) Provision of CHIP for individuals found eligible for CHIP by 
another insurance affordability program. If a State accepts final 
determinations of CHIP eligibility made by another insurance 
affordability program, for each individual determined so eligible by 
the other insurance affordability program, the State must--
    (1) Establish procedures to receive, via secure electronic 
interface, the electronic account containing the determination of CHIP 
eligibility; and
    (2) Comply with the provisions of Sec.  457.340 of this subpart to 
the same extent as if the application had been submitted to the State.
    (3) Maintain proper oversight of the eligibility determinations 
made by the other program.
    (c) Transfer from other insurance affordability programs to CHIP. 
For individuals for whom another insurance affordability program has 
not made a determination of CHIP eligibility, but who have been 
screened as potentially CHIP eligible, the State must--
    (1) Accept, via secure electronic interface, the electronic account 
for the individual.
    (2) Not request information or documentation from the individual 
already provided to the other insurance affordability program and 
included in the individual's electronic account or other transmission 
from the other program;
    (3) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this 
subpart, determine

[[Page 17216]]

the CHIP eligibility of the individual, in accordance with Sec.  
457.340 of this subpart, without requiring submission of another 
application;
    (4) Accept any finding relating to a criterion of eligibility made 
by such program, without further verification, if such finding was made 
in accordance with policies and procedures which are the same as those 
applied by the State in accordance with Sec.  457.380 of this subpart 
or approved by it in the agreement described in paragraph (a) of this 
section;
    (5) Notify such program of the receipt of the electronic account.
    (d) Certification of eligibility criteria. The State must certify 
for the Exchange and other insurance affordability programs the 
criteria applied in determining CHIP eligibility.

0
58. Section 457.350 is amended by--
0
A. Revising the section heading.
0
B. Revising paragraphs (a), (b), (c), and (f).
0
C. Removing and reserving paragraph (d).
0
D. Adding paragraphs (i), (j), and (k).
    The additions and revisions read as follows:


Sec.  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 an initial 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 and enrollees found to 
be potentially eligible for other insurance affordability programs in 
accordance with this section.
    (b) Screening objectives. A State must promptly and without undue 
delay, consistent with the timeliness standards established under Sec.  
457.340(d) of this subpart, identify any applicant, enrollee, or other 
individual who submits an application or renewal form to the State 
which includes sufficient information to determine CHIP eligibility, or 
whose eligibility is being renewed under a change in circumstance in 
accordance with Sec.  457.343 of this subpart, and whom the State 
determines is not eligible or CHIP, but 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 
Sec.  435.911(b) of this chapter;
    (2) Medicaid on another basis, as indicated by information provided 
on the application or renewal form provided;
    (3) Eligibility for other insurance affordability programs.
    (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 Sec.  
457.315 of this subpart or such methodologies as are applied by such 
other programs.
    (d) [Reserved]
* * * * *
    (f) Applicants found potentially eligible for Medicaid based on 
modified adjusted gross income. For individuals identified in paragraph 
(b)(1) of this section, the State must--
    (1) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this 
subpart, transfer the individual's electronic account to the Medicaid 
agency via a secure electronic interface; and
    (2) Except as provided in Sec.  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 Sec.  457.340(d) of this 
subpart, if--
    (i) The State is notified, in accordance with Sec.  435.1200(d)(5) 
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 no longer potentially 
eligible for Medicaid.
* * * * *
    (i) Applicants found potentially eligible for other insurance 
affordability programs. For individuals identified in paragraph (b)(3) 
of this section, the State must promptly and without undue delay, 
consistent with the timeliness standards established under Sec.  
457.340(d) of this subpart, transfer the electronic account to the 
applicable program via a secure electronic interface.
    (j) Applicants potentially eligible for Medicaid on a basis other 
than modified adjusted gross income. For individuals identified in 
paragraph (b)(2) of this section, the State must--
    (1) Promptly and without undue delay, consistent with the 
timeliness standards established under Sec.  457.340(d) of this 
subpart, transfer the electronic account to the Medicaid agency via a 
secure electronic interface;
    (2) Complete the determination of eligibility for CHIP in 
accordance with Sec.  457.340 of this subpart; and
    (3) Disenroll the enrollee from CHIP if the State is notified in 
accordance with Sec.  435.1200(d)(5) of this chapter that the applicant 
has been determined eligible for Medicaid.
    (k) A State may enter into an arrangement with the Exchange for the 
entity that determines eligibility for CHIP to make determinations of 
eligibility for advanced premium tax credits and cost sharing 
reductions, consistent with 45 CFR 155.110(a)(2).

0
59. Section 457.353 is revised to read as follows:


Sec.  457.353  Monitoring and evaluation of screening process.

    States must establish a mechanism and monitor to evaluate the 
screen and enroll process described at Sec.  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.

0
60. Section 457.380 is revised to read as follows:


Sec.  457.380  Eligibility verification.

    (a) General requirements. Except where law requires other 
procedures (such as for citizenship and immigration status 
information), the State may accept attestation of information needed to 
determine the eligibility of an individual for CHIP (either self-
attestation by the individual or attestation by an adult who is in the 
applicant's household, as defined in Sec.  435.603(f) of this 
subchapter, or family, as defined in section 36B(d)(1) of the Internal 
Revenue Code, an authorized representative, or if the individual is a 
minor or incapacitated, someone acting responsibly for the individual) 
without requiring further information (including documentation) from 
the individual.
    (b) [Reserved]
    (c) State residents. If the State does not accept self-attestation 
of residency, the State must verify residency in accordance with Sec.  
435.956(c) of this chapter.
    (d) Income. If the State does not accept self-attestation of 
income, the State must verify the income of an individual by using the 
data sources and

[[Page 17217]]

following standards and procedures for verification of financial 
eligibility consistent with Sec.  435.945(a), Sec.  435.948 and Sec.  
435.952 of this chapter.
    (e) Verification of other factors of eligibility. For eligibility 
requirements not described in paragraphs (c) or (d) of this section, a 
State may adopt reasonable verification procedures, consistent with the 
requirements in Sec.  435.952 of this chapter, except that the State 
must accept self-attestation of pregnancy unless the State has 
information that is not reasonably compatible with such attestation.
    (f) Requesting information. The terms of Sec.  435.952 of this 
chapter apply equally to the State in administering a separate CHIP.
    (g) Electronic service. Except to the extent permitted under 
paragraph (i) of this section, to the extent that information sought 
under this section is available through the electronic service 
described in Sec.  435.949 of this chapter, the State must obtain 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 or its obligation to provide 
for methods of administration that are in the best interest of 
applicants and enrollees and are necessary for the proper and efficient 
operation of the plan.
    (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.
    (j) Verification plan. The State must develop, and update as 
modified, and submit to the Secretary, upon request, a verification 
plan describing the verification policies and procedures adopted by the 
State to implement the provisions set forth in this section in a format 
and manner prescribed by the Secretary.

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

    Dated: March 2, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: March 5, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-6560 Filed 3-16-12; 11:15 am]
BILLING CODE 4120-01-P


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