Vol. 78 Tuesday, 

No. 63 April 2, 2013 

Part IV 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 433 

Medicaid Program; Increased Federal Medical Assistance Percentage 

Changes Under the Affordable Care Act of 2010; Rule 


tkelley on DSK3SPTVN1PROD with RULES2
19918 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 433 

[CMS–2327–FC] 

RIN 0938–AR38 

Medicaid Program; Increased Federal 

Medical Assistance Percentage 

Changes Under the Affordable Care 

Act of 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule with request for 

comments. 

SUMMARY: This final rule implements 

the 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) 

relating to the availability of increased 

Federal Medical Assistance Percentage 

(FMAP) rates for certain adult 

populations under states’ Medicaid 

programs. This final rule implements 

and interprets the increased FMAP rates 

that will be applicable beginning 

January 1, 2014 and sets forth 

conditions for states to claim these 

increased FMAP rates. 

DATES: Effective Date: These regulations 

are effective June 3, 2013. 

Comment Date: To be assured of 

consideration, comments on 

§ 433.10(c)(8), § 433.206(c)(4), 

§ 433.206(d), § 433.206(e), § 433.206(f), 

and § 433.206(g) must be received at one 

of the addresses provided below, no 

later than 5 p.m. on June 3, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–2327–FC. 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– 

2327–FC, 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– 

2327–FC, 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: 

Richard Strauss, (410) 786–2019. 

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. 

We are providing additional 

opportunity for comment on the 

threshold methodology. In order to 

operationalize the methodology, the 

final rule contains significantly more 

detail about various aspects of the 

threshold methodology than originally 

included in the August 17, 2011 

proposed rule. For example, the 

proposed rule included basic language 

regarding the treatment of disability 

status, resource (or asset) criteria, 

enrollment caps in states with section 

1115 demonstrations, and spend-down 

eligibility provisions and we solicited 

public comments on how to account for 

these factors in assigning the 

appropriate FMAP. This increased 

detail in this final rule resulted in large 

part from our consideration of 

comments received from the public, 

including requests for additional clarity 

with respect to some of these matters. 

While we believe that this additional 

detail will assist states in implementing 

the threshold methodology, we 

recognize the complexity surrounding 

these issues. We are seeking additional 

comment on these provisions so that we 

can determine whether additional 

clarification would assist states to 

implement these aspects of the 

threshold methodology more effectively. 

Although this final rule is effective 60 

days from publication, the increased 

FMAPs authorized by the Affordable 

Care Act and codified here do not 

become effective until January 1, 2014. 

We are proceeding with the issuance of 

a final rule in light of the time 

constraints for states to implement 

system changes to implement the FMAP 

claiming methodology described in this 

rule. To the extent that any revisions to 

the final rule are warranted by new 

public comment, we will make 

necessary revisions well before the 

effective date. 

In summary, while we are issuing 

these rules as final, we are providing the 

opportunity for further comment on 

parts of this rule to ensure transparency 

and allow for further clarifications that 

might be necessary. We are thus issuing 

certain provisions as final but are 

soliciting comments. These provisions 


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Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Rules and Regulations 19919 

are specifically listed in the ‘‘Comment 

Date’’ section of this final rule. 

Table of Contents 

I. Executive Summary 

II. Background 

III. Summary of Proposed Provisions and 

Analysis of and Responses to Public 

Comments 

IV. Provisions of the Final Rule 

V. Collection of Information Requirements 

VI. Summary of Regulatory Impact Analysis 

VII. Federalism 

I. Executive Summary 

This final rule implements sections 

2001(a)(3)(B) and 10201(c) of 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). 

Specifically, this final rule 

implements the provisions of the 

Affordable Care Act related to the 

availability of increased FMAP rates 

under the Medicaid program with 

respect to the new adult eligibility 

group. The rule also describes a 

temporary general increase in FMAP 

rates for certain expansion states that 

meet required statutory criteria. 

Although this rule is being issued in 

final, we remain interested in 

considering comments from the public 

on the following provisions: 

§ 433.10(c)(8)—Expansion State FMAP 

§ 433.206(c)(4)—Components of 

Threshold Methodology; Treatment of 

Disability 

§ 433.206(d)—Optional Resource 

Criteria Proxy Adjustment 

§ 433.206(e)—Enrollment Caps 

Adjustment 

§ 433.206(f)—Application of Spenddown Income Eligibility Criteria 

§ 433.206(g)—Special Circumstances 

II. Background 

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’’ (Medicaid 

Eligibility proposed rule). After 

considering public comments, we 

finalized many provisions of the 

proposed rule in the March 23, 2012 

Federal Register (77 FR 17144). That 

final rule, in conjunction with other 

proposed and final rules published by 

the Department of Health and Human 

Services implemented provisions of the 

Affordable Care Act that expand access 

to health coverage through 

improvements in Medicaid and the 

Children’s Health Insurance Program 

(CHIP) and the establishment of the new 

Affordable Insurance Exchanges (also 

called Health Insurance Marketplaces). 

In addition, those rules simplified and 

streamlined the enrollment and renewal 

processes for Medicaid and CHIP and 

created alignment and coordination 

across insurance affordability programs. 

This final rule addresses certain 

provisions that were included in the 

August 17, 2011 Medicaid Eligibility 

proposed rule but not included in the 

March 23, 2012 final rule. These 

provisions include implementation of 

statutory increases in the FMAP rates 

for state medical assistance 

expenditures relating to certain 

individuals described in the new adult 

eligibility group (new adult group) set 

forth at section 1902(a)(10)(A)(i)(VIII) of 

the Social Security Act (the Act), as 

amended by the Affordable Care Act, 

and a temporary general increase in 

FMAP rates in certain states that meet 

the definition of ‘‘expansion states.’’ 

In particular, amendments made by 

section 2001(a)(3) of the Affordable Care 

Act added section 1905(y) to the Act 

effective January 1, 2014 to provide for 

an increased FMAP rate for 

expenditures for medical assistance for 

individuals who are defined as ‘‘newly 

eligible.’’ The statutory definition of 

newly eligible individuals at section 

1905(y)(2) of the Act requires that such 

individuals be: (1) described in the new 

adult eligibility group at section 

1902(a)(10)(A)(i)(VIII) of the Act and not 

under age 19 or such higher age as the 

state may have elected; (2) not eligible 

for full benefits, benchmark coverage 

described in subparagraphs (A), (B) or 

(C) of section 1937(b)(1) or benchmarkequivalent coverage under section 

1937(b)(2) under the provisions of the 

state plan or under a waiver of the plan 

as of December 1, 2009; or (3) eligible 

but not enrolled (or on a waiting list) for 

such benefits or coverage under a 

waiver under the plan that has capped 

or limited enrollment that is full. 

Therefore, not all individuals enrolled 

in the eligibility group described in 

section 1902(a)(10)(A)(i)(VIII) of the Act 

(and in our corresponding regulation at 

§ 435.119) will be ‘‘newly eligible’’ for 

FMAP purposes. Note that the newly 

eligible FMAP is available only for the 

50 states and the District of Columbia; 

the United States territories are not 

included in the scope of the newly 

eligible FMAP under section 1905(y)(1) 

of the Act, which provides that the 

increased FMAP is at 100 percent for 

calendar years (CYs 2014, 2015, and 

2016) and gradually declines to 90 

percent by 2020, where it remains 

permanently. 

Furthermore, amendments made by 

section 10201(b) of the Affordable Care 

Act added section 1905(z) to the Act 

effective January 1, 2014 to provide for 

an increased FMAP for expenditures for 

childless nonpregnant individuals in 

the new adult eligibility group in a 

defined ‘‘expansion state.’’ The 

expansion state FMAP is initially lower 

than the newly eligible FMAP; however 

it increases to be the same as the newly 

eligible FMAP effective January 1, 2019. 

Section 1905(z) also provides for certain 

expansion states to receive a 2.2 

percentage point increase in FMAP rates 

for the medical assistance expenditures 

of all individuals who are not 

considered newly eligible (under the 

definition at section 1905(y) as 

summarized above) during the period 

January 1, 2014 through December 31, 

2015. The August 17, 2011 proposed 

rule included provisions to implement 

these increased FMAP rates, and set 

forth options for states to quantify 

expenditures that would qualify for the 

increased FMAP rate. 

The August 17, 2011 proposed rule 

included three possible methodologies 

for states to use in documenting claims 

for the increased FMAP for medical 

assistance expenditures for newly 

eligible individuals. The purpose of 

these proposed methodologies was to 

ensure that states would not need to 

operate dual eligibility determination 

systems, one to determine Modified 

Adjusted Gross Income (MAGI)-based 

financial eligibility, and the other to 

determine the appropriate FMAP based 

on the pre-2014 eligibility rules. Each of 

these three methods was intended to 

capture the expenditures that would be 

claimed in accordance with the 

requirements of the statute. We also 

solicited comment on whether other 

methods would accomplish these goals. 

In this issuance, we discuss our 

consideration of public comments on 

the FMAP calculation issues included 

in the August 17, 2011 proposed rule, 

and set forth final rules to define the 

increased FMAP rates and set out the 

threshold methodology which states 

will be required to use to document 

claims for the increased FMAP rates. As 

described in more detail below, the 

threshold methodology begins with a 

simplified method for determining the 

individuals who are and are not newly 

eligible, comparing their MAGI-based 

income (as calculated for purposes of 

eligibility determination) to the effective 

income thresholds for relevant 

eligibility categories in effect in 

December 2009, converted to a MAGIbased equivalent. It then describes, and 

in some cases, offers states options, 

regarding the treatment of other factors 


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19920 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Rules and Regulations 

that may be relevant for purposes of 

claiming the appropriate FMAP. To 

complete the transition to the MAGIbased methodology, CMS is also 

working with states to develop MAGIbased income eligibility standards for 

the applicable eligibility groups that are 

not less than the effective income levels 

that were used to determine Medicaid 

and CHIP income eligibility as of the 

enactment of the Affordable Care Act, 

and as of December 1, 2009 for 

Medicaid for FMAP determination 

purposes for the new adult eligibility 

group. The conversion of income 

eligibility standards to equivalent 

MAGI-based income eligibility 

standards should take into account 

income disregards that factor into the 

effective income eligibility standard. 

III. Summary of Proposed Provisions 

and Analysis of and Responses to 

Public Comments 

The following summarizes the FMAPrelated provisions that were discussed 

in more detail in the Medicaid 

Eligibility proposed rule (76 FR 51172 

through 51178): 

• Newly Eligible Increased FMAP 

§ 433.10(c)(6). Indicated the increased 

FMAP rates applicable for states’ 

medical assistance expenditures in their 

Medicaid program for individuals in the 

new adult group who meet the 

definition of ‘‘newly eligible’’ 

individual for the period beginning 

January 1, 2014. 

• Temporary Increase to FMAP 

§ 433.10(c)(7). Indicated the conditions 

applicable for a state to be eligible for 

a 2.2 percentage point increase in its 

FMAP rates for the medical assistance 

expenditures of individuals who are not 

newly eligible during the period January 

1, 2014 through December 31, 2015. 

• Increased Expansion State FMAP 

§ 433.10(c)(8). Indicated the conditions, 

requirements, rate calculation formula, 

and the applicable ‘‘expansion state’’ 

definition for states to be eligible for an 

increase in their FMAP rates for certain 

childless adults in the new adult group 

who do not meet the definition of newly 

eligible individual for the period 

beginning January 1, 2014. 

• Definition of Newly Eligible 

Individual § 433.204. Indicated the 

definition of newly eligible individual 

for purposes of the availability of the 

newly eligible FMAP referenced in 

§ 433.10(c)(6) for the medical assistance 

expenditures of such individuals. 

• Methodology § 433.206. Described 

three possible approaches in § 433.208, 

§ 433.210, or § 433.212 for states to use 

for purposes of claiming federal funding 

for the expenditures for individuals in 

the new adult eligibility group at the 

appropriate FMAPs. The rule proposed 

that a state could choose one of the 

three indicated alternative methods and 

indicated that in the final rule we might 

modify, narrow, or combine these 

approaches based on comments 

received and the results of a feasibility 

study. 

• Threshold Methodology § 433.208. 

Described the ‘‘threshold methodology’’ 

under which there would be a 

determination of ‘‘newly eligible’’ and 

not ‘‘newly eligible’’ on an individual 

specific basis through the application of 

simplified eligibility criteria, including 

income eligibility standards for each 

eligibility group in effect in each state’s 

December 1, 2009 Medicaid program, 

and as appropriate, proxies for disability 

and resources, if applicable to such 

eligibility groups. 

• Statistically Valid Sampling 

Methodology § 433.210. Described an 

alternative methodology under which 

states would use sampling to extrapolate 

the amount of expenditures to be 

claimed at the applicable FMAPs for 

newly and not newly eligible 

individuals in the new adult group. 

• CMS Established FMAP Proportion 

§ 433.212. Described an alternative 

methodology under which states would 

develop appropriate applicable 

proportions based on reliable data 

sources; this would provide a basis for 

determining the amount of expenditures 

for the adult group to be claimed at the 

applicable FMAPs for newly and not 

newly eligible individuals. 

Responses to General Comments 

We received 813 comments from state 

Medicaid and CHIP agencies, policy and 

advocacy organizations, health care 

providers and associations, Tribes, 

Tribal organizations, and individual 

citizens regarding the August 17, 2011 

eligibility proposed rule, including 87 

comments on the FMAP provisions. In 

addition, to support the goal of 

transparency, we conducted a number 

of webinar and other consultation 

sessions with states and interested 

parties in which we presented the 

FMAP provisions of the proposed rule 

and participants 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 August 2011 

Medicaid Eligibility proposed rule. In 

addition, we worked more intensively 

with 10 pilot states to discuss and test 

different elements of the proposed 

regulation, with a particular emphasis 

on income conversion and application 

of appropriate FMAP claiming 

methodologies. Because of the technical 

aspects of the FMAP provisions related 

to the new adult group, in addition to 

evaluating the comments received on 

the proposed rule, we performed 

additional research on this topic to 

better understand which approaches 

would maximize the accuracy of the 

increased FMAP and further the 

simplification goals of the Affordable 

Care Act. We have revised the proposed 

regulation to respond to public 

comments and reflect our final policies. 

We received a number of comments 

concerning the proposed FMAP 

methodologies for newly eligible 

individuals and for the expansion state 

provisions. The majority of comments 

on the three methodologies described in 

the proposed rule supported the 

‘‘threshold methodology,’’ described in 

section IV of this final rule, and did not 

support certain aspects of the other 

proposed methodologies. Consistent 

with these comments, as discussed 

below, this final rule adopts the 

threshold methodology as the 

methodology to be used to document 

claims for the increased FMAPs. 

Summaries of the public comments that 

are within the scope of the proposals 

and our responses to those comments 

follow; more detailed summaries of the 

key changes in the final regulation are 

also included in section IV of this final 

rule, ‘‘Provisions of the Final Rule.’’ 

Some of the comments received were 

outside the scope of the FMAP 

provisions contained in 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. 

A. Comments on General Issues 

Some commenters addressed items of 

a general nature in their comments, as 

described below. Numerous 

commenters requested clarification 

about whether expenditures for certain 

categories of individuals will be 

matched at the increased newly eligible 

or expansion state FMAP. We reiterate 

in the preamble and in the provisions of 

this final rule that under the statute the 

increased newly eligible and expansion 

state FMAPs are only available to 

individuals enrolled in the new adult 

group described at § 435.119. Therefore, 

for example, former foster care children 

enrolled in the new group described in 

proposed regulation at § 435.150 (78 FR 

4687) are not eligible for the newly 

eligible FMAP because they will not be 

enrolled under § 435.119. As our 

proposed regulation explains (78 FR 


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4604), we proposed that eligibility 

under the adult group at § 435.119 will 

not take precedence over coverage 

under the mandatory group of former 

foster care children. This position was 

in accordance with subclause (XVII) in 

the matter following subparagraph (G) of 

section 1902(a)(10) of the Act, as added 

by section 10201(a)(2) of the Affordable 

Care Act, which states that individuals 

eligible for both the former foster care 

group and the adult group should be 

enrolled in the former foster care group. 

Similarly, in general individuals who 

receive Supplemental Security Income 

benefits based on a determination of a 

disability would not be enrolled under 

§ 435.119 and would not receive the 

newly eligible FMAP. Finally, 

individuals who could have been 

eligible for an optional Medicaid 

eligibility category of coverage as of 

December 1, 2009 may in some cases 

become eligible for the new adult group 

at § 435.119, effective January 1, 2014, 

but they will not be newly eligible (as 

defined in § 433.204(a)(1)). This is 

because they were previously eligible 

for full state plan benefits as of 

December 1, 2009. These and other 

scenarios are discussed in more detail 

below. 

Comment: Many commenters 

endorsed the goal that CMS articulated 

in the August 17, 2011 proposed rule to 

avoid creating a shadow eligibility 

system that states would have to 

implement to determine who was and 

who was not newly eligible. 

Commenters opposed any methodology 

or system that would require applicants 

to provide information that is not 

necessary to determine their eligibility 

under the new Affordable Care Act 

eligibility criteria. 

Response: As described in more detail 

below, the threshold methodology 

which we are adopting in the final rule 

is designed to provide for a simplified 

methodology for determining the 

appropriate FMAP that does not require 

states to maintain two sets of eligibility 

rules or to solicit information from 

applicants that is not necessary to 

determine eligibility. 

Comment: One commenter noted that 

the proposed definition of ‘‘newly 

eligible’’ at § 433.204 only refers to 

individuals eligible under the new adult 

group, even though the Affordable Care 

Act expanded Medicaid eligibility from 

100 percent of the Federal Poverty Level 

(FPL) to 133 percent of the FPL for 

children aged 6–18, making some 

children newly eligible for Medicaid in 

2014. As such, the commenter suggested 

that the increased newly eligible FMAP 

also should be available to children who 

may not have been covered by Medicaid 

before January 1, 2014 (including 

children previously eligible under 

CHIP). Another commenter requested 

clarification with respect to the 

applicable FMAP for children between 

100 and 133 percent FPL who were not 

eligible for Medicaid prior to 2014. 

Response: The commenter is correct 

that the Affordable Care Act increased 

the minimum eligibility income 

standard for children in Medicaid, 

although in all states these children 

were already eligible for Medicaid or 

CHIP. The Affordable Care Act did not 

provide for the same increased FMAP 

for the expanded population of children 

since the newly eligible FMAP is 

available only for individuals enrolled 

in the new adult group (as codified at 

§ 435.119), which does not include 

individuals eligible under mandatory 

coverage groups previously listed in the 

statute, including groups for children. 

For children, the Affordable Care Act 

revised section 1902(l)(2)(C) of the Act 

to extend Medicaid coverage of children 

aged 6–18 from 100 to 133 percent of 

the FPL, making them eligible for 

coverage under section 

1902(a)(10)(A)(i)(VII) of the Act, a 

mandatory coverage group. However, 

states may be able to claim the 

enhanced FMAP available through CHIP 

under Title XXI of the Act for 

expenditures relating to children. The 

state will be able to claim the CHIP 

enhanced match, consistent with 

§ 433.11, for children who would not 

have been covered under Medicaid 

before July 1, 1997 (including children 

covered by a separate CHIP before 2014 

who will move to Medicaid) to the 

extent that the state has available CHIP 

allotment funding. 

Comment: One commenter requested 

clarification as to whether the newly 

eligible FMAP would be available for 

childless adults who were eligible for 

Medicaid prior to 2014 based upon 

disability but in 2014 choose to apply 

for Medicaid under the new adult 

group. 

Response: In general, individuals with 

disabilities who are eligible for 

Medicaid under a mandatory eligibility 

category based on receipt of 

Supplemental Security Income (SSI), are 

not within the definition of the new 

adult group, and should not be enrolled 

in that group. Some states may have 

covered individuals with disabilities 

under an optional Medicaid category as 

of December 1, 2009 but may choose to 

eliminate such categories after January 

1, 2014. In these cases, individuals with 

disabilities who were enrolled in the 

optional eligibility group would retain 

Medicaid eligibility under the new adult 

group (assuming they met the eligibility 

standards for the new adult group), but 

expenditures for their coverage would 

not be subject to the newly eligible 

FMAP. Individuals who would have 

been eligible for full benefits, 

benchmark benefits, or benchmark 

equivalent benefits under Title XIX of 

the Act as of December 1, 2009 are not 

newly eligible under the definition in 

1905(y)(2)(A) of the Act, which is 

codified in § 433.204(a)(1) (as revised in 

this final rule). CMS will be providing 

technical assistance to states to identify 

relevant disability groups for FMAP 

claiming purposes, based on states’ 

optional disability categories in effect in 

2009. 

Comment: Several commenters raised 

issues related to American Indian and 

Alaska Native (AI/AN) populations 

enrolled in Medicaid. First, the 

commenters requested that the 

regulation explicitly state that all 

existing AI/AN specific protections 

continue to apply (such as for cost 

sharing). Second, the commenters 

suggested that the regulation explicitly 

indicate that services provided through 

an IHS facility are claimed at 100 

percent FMAP, whether or not they are 

provided as part of an expansion. 

Response: The final eligibility rule 

published on March 23, 2012 as well as 

a proposed rule published on January 

22, 2013 both address beneficiary 

protections for AI/AN populations and, 

as they do not relate to FMAP 

specifically, are outside the scope of this 

regulation. We understand that the 

commenters are concerned about the 

continued availability of the 100 percent 

FMAP for services provided through an 

IHS facility for individuals eligible 

under the new adult eligibility group. 

We are currently reviewing this issue 

and intend to issue guidance on this at 

a later date. 

B. Rates of FFP for Program Services 

(§ 433.10) 

The August 17, 2011 proposed rule 

would have amended part 433 to add 

new provisions at § 433.10(c) to indicate 

the increases to the FMAPs available to 

states under the Affordable Care Act. 

We received numerous comments on 

these provisions and are revising the 

final rule to account for many of the 

comments. 

1. Newly Eligible FMAP (§ 433.10(c)(6)) 

In § 433.10(c)(6), we proposed to add 

a new paragraph to indicate the 

increased FMAP rates available to states 

beginning January 1, 2014 for the 

medical assistance expenditures of 

individuals determined eligible under 

the new adult group who are considered 


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19922 Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Rules and Regulations 

to be newly eligible as defined in 

section 1905(y)(2)(A) of the Act. 

Comment: Several commenters noted, 

in their comments on § 433.10(c)(6), that 

the definition of ‘‘newly eligible’’ in 

proposed § 433.204 did not accurately 

reflect the language of the Act, omitting 

key elements of the statutory definition. 

They urged revisions to resolve 

ambiguity with respect to the 

application of the newly eligible FMAP 

described in § 433.10(c)(6). 

Response: We agree with the 

commenters, as is described below 

under comments regarding § 433.204, 

and have made changes to the 

regulation text accordingly to ensure 

that the increased FMAP described at 

§ 433.10(c)(6) can be applied properly. 

Please see the discussion below on the 

revised § 433.204. 

Comment: One commenter noted a 

typographical error in § 433.10(c)(6)(ii), 

observing that a reference to § 422.206 

should be to § 433.206 (choice of 

methodology). 

Response: We acknowledge the 

typographical error. Because this final 

rule is not finalizing all proposed 

sections of new subpart E of § 433, 

§ 433.206 now describes the threshold 

methodology and it remains the correct 

cross-reference. 

2. Expansion State FMAP (§ 433.10(c)(7) 

and § 433.10(c)(8)) 

CMS proposed new regulatory text to 

indicate the availability of additional 

FMAP rates for states that expanded 

eligibility prior to enactment of the 

Affordable Care Act. CMS did not 

receive any comments about the 

temporary increased FMAP reflected in 

proposed § 433.10(c)(7), which 

describes a 2.2 percentage point 

increase available only to a state that 

meets very specific criteria established 

in section 1905(z)(1) of the Act. CMS 

received numerous comments regarding 

the definition and methodology to apply 

the expansion state FMAP set forth in 

§ 433.10(c)(8), which seeks to codify 

section 1905(z)(2) of the Act. The 

expansion state FMAP is available for 

expansion states for the expenditures of 

certain nonpregnant childless adults 

who are determined eligible under the 

adult group, and who are not considered 

to be newly eligible, as defined in 

section 1905(y)(2)(A) of the Act. For this 

purpose, in this final rule, we define a 

nonpregnant, childless adult as an 

individual who is not determined 

eligible for Medicaid on the basis of 

pregnancy and who does not meet the 

definition of a parent caretaker relative 

in § 435.4. 

Comment: Several commenters, in 

noting the aforementioned omissions of 

statutory language in the proposed 

newly eligible definition (described in 

more detail in the discussion of 

§ 433.204, below), also suggest that the 

proposed definition of ‘‘expansion 

state’’ in § 433.10(c)(8)(iii) be revised to 

include a reference to enrollment caps 

and/or freezes. 

Response: We are revising the 

proposed definition at § 433.204(a)(1) to 

reflect the statutory language regarding 

both the scope of benefits and 

enrollment caps and/or freezes. 

However, we do not agree with the 

commenters that the definition of 

expansion states needs to be revised to 

include similar language regarding 

enrollment caps. Such language is not 

included in the statutory definition of 

expansion states and we do not think it 

is necessary to revise the proposed 

definition. We have moved that 

definition, proposed in 

§ 433.10(c)(8)(iii), to § 433.204(b) in this 

final rule, so that all definitions are 

grouped together for ease of reference. 

Comment: Several comments urged 

CMS to strike the phrase ‘‘who are 

nonpregnant childless adults for whom 

the state may require enrollment in 

benchmark coverage under section 1937 

of the Act’’ from proposed regulation 

text at § 433.10(c)(8)(i) and (iv). Several 

commenters noted that language in 

proposed § 433.10(c)(8)(iv) could be 

interpreted to permit the expansion 

state FMAP only in states that provide 

section 1937 benchmark benefits, and 

not for non-benchmark medical 

assistance expenditures. The 

commenters asserted that this 

interpretation would improperly limit 

the availability of the expansion state 

FMAP to a narrow subset of individuals 

not deemed newly eligible. They suggest 

striking the language to align with 

congressional intent to provide the 

expansion state FMAP to all individuals 

in the new adult group (§ 435.119) who 

are not determined to be newly eligible. 

Response: To clarify the availability of 

the expansion state FMAP, we have 

restructured § 433.10(c)(8) of the final 

rule to explicitly reflect section 1905(z) 

of the Act, including the provisions 

related to benchmark coverage. With 

respect to the concern expressed by the 

commenters, section 1902(k)(1) of the 

Act provides that benchmark coverage, 

for individuals in the adult group who 

would otherwise be considered exempt 

from the limits on such coverage, is not 

defined by the requirements of section 

1937 of the Act. States will provide state 

plan benefits or they can allow such 

individuals to voluntarily enroll in 

benchmark coverage, consistent with 

our rules. As a result, the provision in 

section 1905(z) of the Act relating to 

individuals for whom the state may 

require enrollment in benchmark 

coverage does not limit the availability 

of the expansion FMAP for the 

expenditures for such individuals. 

C. Definitions (§ 433.204) 

In the August 17, 2011 proposed rule, 

CMS proposed only one new FMAPrelated definition, that of ‘‘newly 

eligible.’’ We proposed to define ‘‘newly 

eligible’’ to mean an ‘‘individual eligible 

for Medicaid in accordance with the 

requirements of the new adult group 

and who would not have been eligible 

for Medicaid under the state’s eligibility 

standards and methodologies for the 

Medicaid state plan, waiver or 

demonstration programs in effect in the 

state as of December 1, 2009.’’ 

Numerous commenters suggested 

revisions to our proposed definition to 

more accurately reflect the statutory 

definition and to avoid improperly 

denying certain states the increased 

FMAP. In this final rule, we are revising 

the proposed definition and providing 

other related definitions in final 

§ 433.204 as described below. 

Comment: Numerous commenters 

noted correctly that the proposed 

‘‘newly eligible’’ definition omitted 

statutory language included in section 

1905(y)(2)(A) of the Act. Commenters 

recommended that the proposed 

regulatory definition of newly eligible at 

§ 433.204 be revised to correct these 

omissions and follow the statutory 

definition found at 1905(y)(2)(A); in 

particular, they recommended two 

changes: (1) specify that a newly eligible 

individual could not have been eligible 

for full benefits, benchmark, or 

benchmark-equivalent coverage as of 

December 1, 2009; and (2) specify that 

if the state had a cap or limitation on 

enrollment through a section 1115 

demonstration, those who could have 

been eligible but were not enrolled in 

coverage as a result of the cap should be 

considered as newly eligible. 

Response: The final rule has been 

revised to include the statutory language 

that was omitted in the proposed rule. 

The definition of newly eligible at 

§ 433.204(a)(1) now includes a reference 

to eligibility for full benefits, benchmark 

benefits, or benchmark equivalent 

benefits, as well as a reference to an 

individual who may have been ‘‘eligible 

but not enrolled (or is on a waiting list) 

for such benefits or coverage through a 

waiver under the plan that has a capped 

or limited enrollment that is full.’’ 

Additional information about applying 

the threshold methodology in states that 

had capped or limited enrollment is 

included in § 433.206(e), as revised. In 

addition, § 433.204(a)(2) now includes a 


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definition of ‘‘full benefits’’ (consistent 

with section 1905(y)(2)(B) of the Act) 

and clarifies that individuals who were 

eligible to receive ‘‘full benefits’’ (or 

benchmark or benchmark equivalent 

benefits) are not considered to be 

‘‘newly eligible.’’ Thus, in the event that 

a state covered an optional Medicaid 

eligibility category as of December 1, 

2009 but eliminates that category after 

January 1, 2014, individuals previously 

eligible for the optional category will be 

eligible for the new adult group 

described in § 435.119 of this chapter 

but will not be eligible to receive the 

newly eligible FMAP because they 

would previously have been eligible for 

full state plan benefits. These changes 

should ensure that the increased newly 

eligible FMAP is available as set forth in 

the Affordable Care Act. 

Comment: One commenter suggested 

adding the phrase ‘‘under the provisions 

of § 435.119’’ to the definition of newly 

eligible proposed in § 433.204. The 

commenter suggested that this revision 

would clarify the reference in our 

proposed definition to the new adult 

group, as defined in § 435.119 in the 

March 23, 2012 final rule. Another 

commenter suggested that the definition 

should be revised to explicitly reference 

the age requirements of the new adult 

group. 

Response: We have revised 

§ 433.204(a)(1) to more accurately link 

the definition of newly eligible to the 

new adult group created by section 

1902(a)(10)(A)(i)(VIII) of the Act and 

defined in § 435.119. Including this 

cross-reference also addresses the 

suggestion that we include age ranges in 

the definition of ‘‘newly eligible’’ since 

§ 435.119 explicitly defines the new 

adult group as including individuals age 

19 or older and under age 65. 

Comment: One commenter suggested 

that CMS should clarify that individuals 

whose coverage is funded under a Title 

XXI demonstration project will be 

considered ‘‘newly eligible’’ for 

Medicaid in 2014. The commenter 

stated that the fact that a state’s CHIP 

program operates through a Medicaid 

state plan or demonstration program 

does not convert CHIP to Medicaid and 

that, therefore, adults whose coverage is 

so funded must be considered newly 

eligible. 

Response: Under section 1905(y)(2) of 

the Act, in general, if through the 

application of a state’s Title XIX 

Medicaid state plan or demonstration as 

in effect on December 1, 2009 an 

individual would be considered eligible 

under Medicaid, the individual will not 

be considered to be a newly eligible 

individual. However, the commenter 

refers to a situation in which through a 

state plan or demonstration under Title 

XXI, certain adults were made eligible 

and funded under Title XXI as of 

December 1, 2009. If through the 

application of such demonstration(s) an 

individual would not be considered 

eligible under Title XIX as of December 

1, 2009, such individual would be 

considered to be a newly eligible 

individual. CMS will work with states 

for which this may be an issue to 

address unique circumstances and 

application of the requirements of the 

state plans and demonstrations. 

Comment: One commenter requested 

clarification about whether parents and 

caretaker relatives with income at or 

below 133 percent of the FPL who are 

eligible under the mandatory eligibility 

category for parents and other caretaker 

relatives at § 435.110 can qualify for the 

newly eligible FMAP if it is determined 

that they would not have been eligible 

as of December 1, 2009. 

Response: The newly eligible FMAP 

described in § 433.10(c)(6) is only 

available for expenditures of individuals 

enrolled in the new adult group 

described in § 435.119 who meet the 

definition of newly eligible codified in 

§ 433.204(a)(1). Under the related statute 

at section 1902(a)(10)(A)(i)(VIII) of the 

Act, and the regulation at § 435.119, 

individuals such as parents and 

caretaker relatives who are eligible 

under § 435.110 are precluded from 

eligibility under the new adult group. 

If effective January 1, 2014 the state 

lowers the eligibility income standards 

used to determine eligibility for the 

parent and caretaker relative group 

below the levels in effect on December 

1, 2009 for that group, resulting in 

certain individuals who would have 

been eligible for the group as of 

December 1, 2009, having income 

greater than the revised standard, such 

individuals may become eligible under 

the new adult group and some could 

potentially be newly eligible. For 

example, if the state’s eligibility 

category for parent/caretaker relatives 

had a resource test in December 2009, 

and such individuals would have failed 

that test, the state could factor such 

individuals into its claim for newly 

eligible FMAP in accordance with 

§ 433.206(d). 

In addition, if the state had raised its 

income standard for its mandatory 

eligibility category for parents and other 

caretaker relatives after December 2009, 

the individuals now covered in the new 

adult group whose incomes are above 

the December 2009 standards would be 

newly eligible. 

D. FMAP Methodology (§ 433.206 

through § 433.212) 

The August 17, 2011 proposed rule 

(76 FR 51148) provided for three 

possible methodologies that could 

potentially be available to states to 

claim expenditures at the appropriate 

FMAP for individuals determined 

eligible in the new adult group. As 

proposed, § 433.206 set out principles 

for these methodologies; enumerated the 

methodologies described in more detail 

in proposed § 433.208, § 433.210, and 

§ 433.212; proposed to permit states to 

select any of these methodologies; and 

set out a process for states to make their 

initial and subsequent selections of 

methodology. The proposed rule 

indicated the possibility that these three 

approaches could be modified, 

narrowed, or combined based on 

comments received and the results of a 

feasibility study, including site visits to, 

and discussions with, 10 pilot states. 

We requested comment on the 

methodologies themselves, whether 

other options should be considered, and 

whether states should be able to choose 

from such alternatives or different 

methods, or whether a single method 

should be used by all states. We 

received numerous comments on these 

issues. After assessment of the 

comments received, we are continuing 

to apply the following principles as 

expressed in the proposed rule: 

• Any methodology must provide as 

accurate and valid application of the 

applicable FMAPs to actual 

expenditures as possible in the 

determination of the appropriate 

amounts of federal payments for such 

expenditures. The methodology must 

not include a systemic bias in favor of 

either the states or the federal 

government. 

• Any allowable methodology should 

minimize administrative burdens and 

costs to states, the federal government, 

individuals, and the health care system. 

• Any methodology must be 

developed and applied transparently by 

both the federal government and states. 

• Any methodology must take into 

consideration the practical, 

programmatic and operational goals of 

the Medicaid program. 

• To ensure that the states claim 

expenditures at the correct FMAP, any 

methodologies should include sufficient 

data to identify, associate and reconcile 

expenditures with the related eligibility 

group to which the FMAPs apply. The 

increased newly eligible and expansion 

state FMAPs are only available for 

individuals enrolled under § 435.119 of 

this chapter. 


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On the basis of the comments 

received and the analysis of the 

feasibility of each of the alternatives, 

including input from pilot states and 

analyses of pilot states’ information, we 

believe that the threshold methodology 

best addresses these principles and is 

the method identified in this final rule 

as the one that shall be used by states 

for purposes of claiming expenditures at 

the appropriate FMAP for individuals 

determined eligible in the new adult 

group. 

As described briefly above and in 

more detail in section IV of this rule, in 

general, under the threshold 

methodology, states will compare 

income levels of individuals eligible for 

the new adult group to equivalent 

December 2009 standards to determine 

if that individual could have qualified 

for Medicaid under the State’s 

December 2009 income standards. More 

specifically, the threshold methodology 

proposed using MAGI-converted income 

thresholds (as described in CMS’ 

December 28, 2012 letter to State 

Medicaid Directors and Health Officials 

(SHO #12–003, available at: http:// 

www.medicaid.gov/Federal-PolicyGuidance/downloads/SHO12003.pdf)) 

across categorical eligibility groups, 

taking into account the December 2009 

eligibility standards under state plans, 

waivers or demonstrations and 

applicable disregards and adjustments, 

to approximate, in the aggregate, the 

December 2009 standards for each such 

group. After individuals are determined 

eligible for the new adult group 

described in § 435.119 of this chapter, 

their current income will be compared 

to these eligibility group or 

demonstration MAGI-converted 

standards to determine if such 

individual could have been income 

eligible, as of December 1, 2009, for an 

eligibility group for which they would 

have otherwise been eligible (for 

example, mandatory coverage for 

parents and caretaker relatives, or an 

optional eligibility category). 

Since we are finalizing only one 

methodology, some of the provisions of 

the proposed § 433.206 are inapplicable. 

Below is a summary of the public 

comments that we received with respect 

to proposed § 433.206 through 

§ 433.212. The discussion begins with 

the general comments about the choice 

of methodology, focusing on the 

threshold methodology since that is the 

methodology being finalized and is 

relevant to our responses to other 

comments discussed throughout this 

section. 

1. General Comments on Choice of 

Methodology (§ 433.206) 

Comment: Some commenters 

supported the flexibility offered by the 

three proposed approaches in the 

proposed § 433.208, § 433.210, and 

§ 433.212, and, noting that Medicaid 

programs vary from state to state, urged 

CMS not to implement only one 

approach. Other commenters suggested 

that states should have the flexibility to 

propose an alternative methodology and 

that each state should be allowed to 

establish its best and least biased 

methodology for application of the 

appropriate FMAP rates, in 

collaboration with CMS. Other 

commenters instead urged CMS to 

finalize one approach so that a single, 

consistent approach will be used to 

determine which adult enrollees qualify 

as newly eligible. Commenters noted 

that applying a single methodology 

would also help ensure that audits and 

other program integrity activities could 

assess whether payments were 

determined accurately. 

Response: We have determined that it 

is more administratively feasible and 

consistent with the guiding principles to 

adopt a uniform methodology for 

applying the applicable FMAP. 

Although some commenters supported 

flexibility in concept, the overall 

position favored in the comments and 

other analyses and input from states 

supported the use of the threshold 

methodology. An essential characteristic 

of the threshold methodology is that, in 

general, it allows states to determine the 

appropriate FMAP on an individualspecific basis. In that regard, the 

threshold methodology most directly 

addresses the explicit statutory 

definition of newly eligible individual 

and allows for the most accurate 

application of FMAP as it relies on 

actual data related to the individual. For 

example, the FMAP for expenditures for 

an individual determined during the 

eligibility process to be a parent or 

caretaker relative will be assessed 

relative to the MAGI-converted income 

level in effect in 2009 for parents and 

caretaker relatives. We note flexibilities 

given to states in establishing the 

threshold under both the MAGI 

conversion process under § 435.603 and 

the options given to states in this final 

rule. As we discuss below, we have 

modified our proposed threshold 

methodology to include certain 

population-based adjustments to reflect 

factors such as resource limits or 

enrollment caps in effect on December 

1, 2009. 

Comment: Numerous commenters 

wrote to support the threshold 

methodology. One commenter stated 

that the threshold methodology could be 

the most accurate and efficient of the 

options provided in the proposed rule. 

The commenter noted that for states that 

can create clear upper thresholds and 

proxies for non-income related criteria, 

the newly eligible adult population 

could be categorized for the proper 

FMAP under this methodology. 

Response: Based on comments, 

consultation with states, and other 

analyses, we agree that the threshold 

methodology, modified to clarify 

adjustments to increase accuracy, is the 

most accurate and efficient method and 

least burdensome for states to 

implement. Therefore, we are finalizing 

the threshold methodology in a revised 

§ 433.206. That methodology begins 

with a simplified method for 

determining the individuals who are 

and are not newly eligible based on 

MAGI-based income (as already 

determined for purposes of establishing 

eligibility under § 435.119) and then 

offers states options for how they will 

address other factors. In this final rule, 

as part of the threshold methodology we 

include alternatives for states to address 

criteria that are not directly related to 

income but that may have an impact on 

the validity of the threshold results, 

such as criteria related to resources and 

section 1115 demonstration enrollment 

caps that will permit a simplified 

application of the methodology. We will 

work with states to facilitate their 

proper application of the methodology. 

Comment: One commenter suggested 

that, when finalizing a methodology to 

determine FMAP, CMS consider the 

potential for each of the alternatives to 

impose additional burdens on 

beneficiaries, Medicaid health plans, 

and states in determining whether these 

or other alternatives should be included 

in the final rule. 

Response: Our choice to finalize the 

threshold methodology reflects our 

assessment, consistent with the 

comments received, that it is the least 

burdensome of the proposed options for 

both states and beneficiaries, for the 

reasons described throughout this 

section and in section IV of this rule, 

which provides more details about the 

provisions of the final rule. 

Comment: One commenter criticized 

all of the proposed methodologies, 

noting that the proposed regulations 

contemplate an apparent estimation of 

the population and associated 

expenditures in perpetuity. The 

commenter suggested that at some point 

both CMS and states need to move away 

from using estimates in the FMAP 

methodologies. The commenter 

suggested that CMS convene a group of 


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state stakeholders to develop best 

practices on this issue. 

Response: The threshold methodology 

is not based on estimates but is instead 

based on individualized comparisons to 

December 1, 2009 eligibility standards. 

Therefore, it best addresses the goals of 

accuracy and simplicity. We are 

adopting the threshold methodology in 

this final rule because it provides a 

simplified yet largely individualized 

way to apply the appropriate FMAP to 

expenditures for those enrolled in the 

new adult group. While the final 

threshold methodology includes 

population-based adjustments that are 

not the result of individualized 

determinations, those adjustments are to 

increase the accuracy of the result. 

Comment: One commenter raised 

concerns about one of the principles 

that CMS articulated as the basis for any 

methodology to be used to assign 

FMAP. The commenter finds the fifth 

principle, ‘‘sufficient data to identify, 

associate and reconcile expenditures 

with the related eligibility group to 

which the FMAPs apply,’’ to be 

potentially problematic. Instead of 

retrospective reconciliation of 

expenditures, the commenter urged that 

states will need to be held harmless in 

any reconciliation if subsequently 

determined FMAP discrepancies are 

within a reasonable range. 

Response: We understand the 

commenter’s concern about financial 

stability and predictability and we have 

determined that the threshold 

methodology will provide states with 

the most certainty in part because it will 

generally not require retroactive 

reconciliations. Moreover, we believe 

the threshold methodology will best 

serve the interests of beneficiaries by 

avoiding dual eligibility rules and the 

unnecessary questions and procedures 

that dual rules would entail. 

Comment: One commenter expressed 

concern that states will attempt to shift 

costs to the federal government by 

reducing or eliminating optional 

Medicaid groups. The commenter stated 

that the three proposed methodologies 

would not prevent such cost-shifting 

because there are too many subjective 

aspects of pre-Affordable Care Act 

eligibility determinations (including 

disability determinations) to expect that 

the proposed methods would result in 

unbiased identification of the newly 

eligible. Instead, the commenter 

suggested that HHS should define a 

population-based method that compares 

pre-Affordable Care Act Medicaid takeup rates with post-Affordable Care Act 

Medicaid take-up rates (excluding the 

Affordable Care Act adult group). 

Response: A key goal of the 

Affordable Care Act is to simplify 

eligibility for Medicaid and collapsing 

various Medicaid coverage categories 

helps achieve that goal. As described 

above, the newly eligible FMAP is only 

available for expenditures for 

individuals who would not have been 

eligible for full benefits, benchmark 

benefits, or benchmark-equivalent 

benefits (as further described in 

§ 433.204(a)) in either a mandatory or 

optional Medicaid eligibility category as 

of December 1, 2009 (or were unable to 

enroll in such coverage through a 

demonstration that had capped or 

limited enrollment that was full). 

Therefore, we do not share the 

commenter’s concern that this method 

promotes cost-shifting. As described in 

more detail in section IV of this final 

rule, we believe that the threshold 

methodology will appropriately identify 

individuals and expenditures that are 

and are not subject to the newly eligible 

FMAP. 

Comment: As an alternative to the 

approaches described in the proposed 

regulation, one commenter asked 

whether states could use a single 

‘‘blended FMAP’’ rate across the entire 

population, similar to the method 

proposed under § 433.212. Noting the 

implementation obstacles associated 

with the three proposed methodologies, 

the commenter suggested mitigating the 

associated burdens by permitting a 

blended FMAP combined with annual 

floors on any downward adjustments to 

state rates, and 15 months advance 

notice of annual changes to the model. 

Response: We considered the blended 

FMAP, and related methodologies, but 

concluded that the threshold 

methodology is preferable for the 

reasons described throughout this 

preamble. 

Comment: One commenter suggested 

that CMS should allow states to 

determine their own methodologies and 

procedures for tracking FMAP for the 

new adult population, noting that some 

states already have the capacity to do so. 

Response: We believe it is important, 

and in the interest of efficient 

administration of the Medicaid program, 

to promote consistency in FMAP 

determinations. Therefore, we are 

finalizing an approach that will 

minimize the administrative burden on 

states while also ensuring accuracy and 

consistency across the country, and 

permit CMS oversight and review. We 

note flexibilities given to states in 

establishing the threshold under both 

the MAGI conversion process under 

§ 435.603 and the options given to states 

in this final rule as described below for 

resources and enrollment caps, for 

example. As we explain in our 

December 28, 2012 letter to State 

Medicaid Directors and Health Officials 

(SHO #12–003, available at: http:// 

www.medicaid.gov/Federal-PolicyGuidance/downloads/SHO12003.pdf) 

regarding MAGI conversion, states will 

have flexibility with respect to the 

methodology they choose to adopt for 

income conversions. 

Comment: A number of identical 

comments were submitted to urge CMS 

to adopt, for all states, a hybrid 

methodology based on the threshold 

and proportion methods. These 

commenters suggested that in the initial 

years of the availability of the increased 

newly eligible FMAP (CYs 2014–2016), 

the threshold methodology be used to 

determine which individuals are newly 

or not newly eligible. For 2017 and 

years thereafter, they suggested that the 

federal government would coordinate a 

proportion method using data from 

previous years related to each state’s 

unique experience. The first 3 years’ 

experience would represent and provide 

‘‘benchmark’’ data for the future and 

would give states time to develop the 

administrative structure necessary for 

implementation. The commenters also 

suggested that HHS should establish 

approval criteria including estimated 

accuracy of the method and limits 

burdens on enrollees. 

Response: To provide for a consistent 

approach nationally, we are adopting 

the proposed threshold methodology 

under which states have certain options 

that help ensure that it reflects and 

claims expenditures at the appropriate 

FMAP. Using the elections available 

under these options, states will have the 

ability to amend their threshold 

methodology to further refine the 

methodology. As described under the 

provisions of the regulation, states will 

need to submit state plan amendments 

to make such elections. 

2. Threshold Methodology (§ 433.208, 

redesignated § 433.206) 

Proposed § 433.208, which is being 

redesignated as § 433.206 in this final 

rule, described the first of three 

proposed approaches to identify newly 

eligible individuals for purposes of 

applying the correct enhanced FMAP 

rate. We sought comment on the 

methodology as proposed and on the 

use of proxies of eligibility criteria in 

place prior to CY 2014 that are not 

related to income, such as disability 

status and resource value. 


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a. Comments Related to Dual Eligibility 

Systems, Burdens on States and 

Applicants, and Streamlined Eligibility 

Procedures 

In the proposed rule, CMS articulated 

several principles that would drive our 

selection of a methodology (or 

methodologies) to accurately reflect the 

appropriate FMAP. One principle was 

to minimize the administrative burdens 

and costs to states, the federal 

government, individuals, and the health 

care system. We also noted that 

requiring states to run two distinct 

eligibility systems—one for purposes of 

eligibility using new MAGI 

methodologies and one that would 

exactly retain all of the eligibility 

requirements of states’ Medicaid 

programs as in effect on December 1, 

2009 for purposes of determining which 

individuals are newly and not newly 

eligible—would pose challenges and 

create unnecessary burdens, 

inefficiencies, and administrative costs 

to applicants, states, and the federal 

government. Because retaining and 

applying two different sets of eligibility 

rules is burdensome and costly to states 

and the federal government, a barrier to 

enrollment for eligible individuals and 

families, and would likely lead to 

inaccurate determinations, we identified 

possible alternative approaches for 

determining the appropriate FMAP rate. 

We proposed not to permit FFP for the 

costs of maintaining dual eligibility 

systems for the adult group and instead 

proposed methodologies to enable states 

to determine FMAP without needing to 

run dual eligibility systems. We remain 

committed to that principle in this final 

rule, which establishes the threshold 

methodology as a simplified approach 

to apply the eligibility criteria effective 

on December 1, 2009. 

Comment: Numerous commenters 

wrote in support of the principle 

articulated in the proposed rule that 

eschewed requiring states to evaluate 

every applicant under both the pre-and 

post-Affordable Care Act eligibility 

criteria for purposes of both identifying 

individuals as newly eligible and 

assigning FMAP accordingly. Some 

commenters, however, expressed 

concern that the threshold methodology, 

as proposed in § 433.208, would require 

dual eligibility screening for every 

applicant. They therefore recommended 

that states not be required to evaluate 

every applicant under both the old and 

new eligibility rules, nor be permitted to 

require every applicant to submit 

information not required to determine 

the eligibility of the applicant under the 

new adult category solely for the 

purpose of determining the appropriate 

FMAP for that individual. Commenters 

expressed concern that questions or 

requests for an individual to provide 

information related to FMAP that are 

not needed for the basic eligibility 

determination would be a burden for the 

applicant and the case worker and, as 

such could potentially be a disincentive 

for the individual in applying for 

Medicaid. To the extent that CMS 

permits such actions, however, 

commenters recommend that CMS 

require states first to make every effort 

to gather all supplemental information 

through electronic data matching or 

other processes that require no 

additional input from the applicant. 

This would require applicants to 

provide as little information as possible. 

Response: We appreciate the support 

for the principle that dual eligibility 

systems are neither fair nor efficient. 

This rule finalizes the threshold 

methodology to enable states to apply a 

methodology for purposes of the FMAP 

application that does not require the 

application of December 2009 eligibility 

rules. Rather, the threshold 

methodology provides for a method for 

applying the FMAP provisions based on 

the characteristics associated with each 

individual that will be determined 

during the newly designed eligibility 

process, such as whether an individual 

is a parent or caretaker relative or a 

childless adult, and the associated 

relevant eligibility group. The threshold 

methodology can be applied by 

employing the new MAGI-based income 

rules, rather than the old December 

2009 income rules, and comparing 

MAGI-based income to the converted 

MAGI eligibility standards. Finally, note 

that the final rule includes, at 

§ 433.206(b)(1), language (originally 

proposed at § 433.206(d)) that specifies 

that the threshold methodology must 

not impact the timing or approval of an 

individual’s eligibility for Medicaid. 

Comment: Numerous commenters 

urged CMS not to require applicants to 

submit additional information, beyond 

what would be required for eligibility 

determinations, solely for the purpose of 

FMAP determinations. Commenters 

noted that this point applied regardless 

of which method is adopted; one 

commenter noted that any proposed 

methodology that asks additional 

questions of applicants works against 

the expressed goal of simplification and 

is not preferable. Other commenters 

wrote that any additional questions 

regarding FMAP should not unduly 

burden applicants. Some commenters 

urged CMS to require states to inform 

applicants that failing to answer any 

such additional questions will not 

impact eligibility. Other commenters 

suggested that the threshold 

methodology regulation text should be 

revised to explicitly require states first 

to gather all necessary supplemental 

information through electronic data 

matching (as required by § 435.949), or 

other processes that require no 

additional information from the 

applicant. Other commenters 

recommended adding explicit language 

to the regulation directing states that 

they may not ‘‘include a request for 

information from an individual unless 

such request is essential to determining 

that individual’s current eligibility.’’ 

Other commenters suggested that the 

proposed regulation be revised to 

require CMS to establish standards for 

additional application questions and 

approve any additional questions asked 

during the application process for the 

purpose of the newly eligible 

determination. 

Response: We remain committed to 

creating the least burdensome system— 

for applicants and states—to determine 

the appropriate FMAP. The threshold 

methodology generally will not require 

any supplemental information from 

applicants, beyond the information that 

will already be collected for purposes of 

the eligibility determination. For 

example, certain information, such as 

that related to income and categorical 

eligibility status, may be needed for 

both eligibility and FMAP 

determinations both to properly 

determine eligibility for the new adult 

group and to assign the applicable 

FMAP once the individual is 

determined eligible for the group. As 

noted above, in the final rule we 

retained language at § 433.206(b)(1) that 

was originally included at proposed 

§ 433.206(d), which specifies that the 

threshold methodology must not impact 

the timing or approval of an individual’s 

eligibility for Medicaid. We do not think 

any additional revisions are necessary to 

§ 433.206 because these principles are 

already reflected in the March 23, 2012 

eligibility rule. 

As described below, this rule provides 

states with the option to develop onetime sampling data to help determine 

the proportion of individuals enrolled 

under the new adult group who would 

qualify as newly eligible because they 

would have been found ineligible for 

Medicaid in 2009 due to excess 

resources. To the extent that states take 

advantage of a time-limited opportunity 

(described below) to gather sampling 

data to develop an accurate resource 

proxy, those questions will not be 

permissible as part of the application, 

cannot affect the application, and 

cannot delay determinations of 

eligibility. Effective January 1, 2014, 


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when resources are no longer a relevant 

eligibility criterion for many categories 

of eligibility, only a post-eligibility 

sample (which would be for a period 

ending no later than December 31, 2014 

with respect to states’ new adult 

eligibility groups that are effective on 

January 1, 2014) would be permissible. 

States taking this option must notify 

beneficiaries that a nonresponse would 

not impact their continuing eligibility. 

Comment: Related to concerns that 

the methodology for claiming FMAP not 

unduly burden applicants, several 

commenters suggested that CMS revise 

the FMAP methodology regulation text 

to capture the intent that applicants 

would not be asked to provide 

additional information for purposes of 

assigning FMAP. Commenters 

recommended that the regulations 

describing the selected FMAP 

methodology cross-reference those at 

§ 435.907(c), which set out the 

standards for a streamlined eligibility 

application. Several commenters 

suggested strengthening proposed 

§ 433.206(d) by reinforcing the 

requirements to not unduly burden 

applicants with a cross-reference to 

§ 435.907 (and to rely on data matching 

as required by § 435.949). 

Response: The final March 23, 2012 

eligibility rule contained various 

provisions regarding a single 

streamlined application and data 

matching. We affirm those provisions 

and the principles they embody. 

b. Comments Related to Application of 

and Refinements to the Threshold 

Methodology 

Comment: Several commenters wrote 

to support the proposal in 

§ 433.208(c)(2) that determinations 

under this Part remain in effect for the 

entire 12-month eligibility period. 

Response: Both the proposed rule and 

the final rule now at § 433.206(c)(7) 

indicate that for an individual who is 

eligible under the new adult group, the 

individual’s status as newly or not 

newly eligible continues to apply until 

a new determination of MAGI-based 

income has been made in accordance 

with § 435.916; in general, this could 

occur at the next scheduled periodic 

redetermination, or it could occur at 

other times related to the availability of 

other information, for example, as 

discussed in the provisions related to 

disability status. Additionally, 

§ 433.206(c)(7) also indicates that 

changes to an individual’s eligibility 

group would require changes in the 

status for FMAP purposes. This 

approach will generally avoid any need 

to reassign FMAP should an 

individual’s income change within the 

year. 

Comment: Several commenters 

suggested that the regulation should be 

explicit in using MAGI-equivalent 

standards under the threshold 

methodology. They note that the 

preamble to the proposed rule suggests 

this as an option but that the proposed 

regulatory language does not. They 

further note that the MAGI-equivalent 

standards will appropriately take into 

account disregards and deductions that 

states use in determining Medicaid 

eligibility currently, and could therefore 

be used to implement the threshold 

methodology. 

Response: We agree with the 

commenters that the converted MAGIbased thresholds will serve as the basis 

for the threshold methodology. 

Individuals in the new adult group with 

MAGI income that is above the relevant 

converted MAGI-based threshold 

standard that is determined to apply as 

of December 1, 2009 would be 

considered as newly eligible. We do not 

think it is necessary to further clarify 

the regulation text now included at 

§ 433.206. 

Comment: One commenter notes that 

the threshold methodology requires that 

many income standards would have to 

be applied to each eligibility category 

that was in effect on December 1, 2009 

for purposes of determining the 

availability of the newly eligible FMAP 

rate. Therefore, the commenter asks 

whether the upper income standard is a 

blended rate or will the state be required 

to maintain many classes of newly 

eligible categories. 

Response: The commenter is 

observing that the threshold 

methodology will require states to 

compare the income of individuals 

found eligible for the new adult group 

to the converted MAGI income levels for 

relevant eligibility groups for which the 

individual could have been eligible as of 

December 1, 2009. CMS has worked and 

continues to work extensively with 

states to establish converted MAGI 

income thresholds. We published a 

letter to State Medicaid Directors and 

Health Officials on December 28, 2012 

(SHO #12–003, available at http:// 

www.medicaid.gov/Federal-PolicyGuidance/downloads/SHO12003.pdf) to 

provide guidance about the conversion 

of net income standards to MAGI 

equivalent income standards. As 

described in this regulation, in addition 

to income conversion required for 

eligibility for certain eligibility groups, 

these converted standards will be used 

as a reference point for the income 

eligibility levels that were applicable for 

eligibility groups in effect as of 

December 1, 2009 explicitly for the 

purposes of the FMAP determination. 

The converted standards will be 

applied, by eligibility group, to make 

FMAP determinations. 

Comment: One commenter wrote to 

request clarification as to whether 

eligibility under the threshold 

methodology is based on the current 

income and household size 

composition, regardless of changes since 

December 1, 2009. 

Response: Under the statute, for 

purposes of determining the availability 

of the appropriate FMAP for the 

expenditures of newly and not newly 

eligible individuals, the issue is whether 

the individual who is found to be 

eligible for the new adult group would 

have been eligible for full benefits, 

benchmark benefits, or benchmark 

equivalent benefits under the state’s 

eligibility standards as of December 1, 

2009. Therefore, under the threshold 

methodology the individual’s current 

(that is, post-December 31, 2013) MAGIbased income would be compared to the 

state’s applicable converted December 1, 

2009 MAGI-based eligibility standards. 

An individual’s income and household 

composition from December 2009 is not 

relevant for FMAP determinations. 

Comment: In setting income 

thresholds for 2009, one commenter 

urged CMS to adjust the 2009 levels to 

adjust for cost of living increases, 

inflation, and other factors. 

Response: We are currently working 

with states to convert December 1, 2009 

income standards to the applicable 

MAGI-based income standards and 

these converted income standards will 

be used to determine whether 

individuals in the adult group qualify as 

newly eligible. Under the threshold 

methodology those MAGI-based income 

standards, as applicable for the relevant 

eligibility groups in effect in 2009 when 

expressed as a percentage of the FPL, 

will be adjusted annually as the FPL 

adjusts annually for inflation. Income 

eligibility standards in effect on 

December 1, 2009 that were expressed 

as fixed dollar amounts will continue to 

be expressed in fixed dollar amounts 

after being converted. 

Comment: One commenter suggested 

that the final regulation should strike 

the proposed paragraph 

§ 433.208(b)(2)(i), which permits states 

to claim the enhanced federal matching 

funds based on ‘‘self-declaration’’ from 

an applicant. 

Response: As proposed, § 433.208(b) 

included a number of criteria to 

establish thresholds. As a result of 

public comments and our additional 

research to better understand which 

approaches will ensure an accurate 


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method for assigning the FMAP and 

further the simplification goals of the 

Affordable Care Act, we significantly 

revised the original § 433.208(b)(2), now 

redesignated as § 433.206(b), ‘‘General 

Principles,’’ to revise several of the 

criteria included in the proposed rule. 

The final rule affirms that FMAP 

determinations will rely on information 

derived from the regular eligibility 

determination process, consistent with 

regulations finalized in our March 2012 

final rule; in that regard, we struck the 

language regarding the reliance on selfdeclaration data in this regulation. 

c. Application of Disability Criteria 

In the proposed rule (76 FR 51148, 

51175), we indicated we were 

considering using either a disability 

proxy methodology or using only actual 

disability determinations under the 

threshold methodology to determine if 

an individual may have been eligible 

under the state’s December 1, 2009 

standards based on disability. The 

disability status of an individual may be 

relevant in two ways. First, a disabled 

individual may be eligible under section 

1902(a)(10)(A)(i)(II) of the Act for 

Medicaid based on receipt of 

supplemental security income (SSI) or 

such more stringent standards that a 

state may have under the election at 

section 1902(f) of the Act (the ‘‘209(b)’’ 

option), in which case the individual 

would not be eligible under the new 

adult group and should be excluded 

from the universe to which the 

threshold methodology applies. Second, 

a disabled individual may have been 

eligible in an optional eligibility 

category in effect under a state’s 

December 1, 2009 Medicaid program at 

higher income levels than adults 

without disabilities, which would mean 

that they would not be considered 

newly eligible. 

We received numerous comments in 

response to our request for feedback on 

this issue. In general, commenters 

encouraged CMS to avoid asking 

applicants additional questions and 

urged CMS to clarify expectations in the 

regulation. Based on comments 

received, we are not finalizing a 

disability proxy. Rather, only an actual 

disability determination will be used for 

purposes of determining whether an 

individual enrolled in the new adult 

group will be newly eligible. This 

approach is described in more detail in 

section IV and is reflected in 

§ 433.206(c)(4). 

Comment: One commenter suggested 

that the initial question for disability 

should be whether an individual has 

actually been determined to be disabled. 

The commenter asserted that the other 

proxies suggested in the proposed rule 

will disadvantage the state by counting 

as ‘‘disabled’’ individuals who never 

would have qualified for Medicaid but 

for the new adult eligibility group. 

Another commenter affirmed the 

reasonableness of using actual disability 

determinations to ascertain the 

appropriate FMAP. Numerous 

commenters suggested that the 

regulations should indicate that no 

additional information should be 

required from individuals with respect 

to disability status for purposes of an 

FMAP determination. Rather, they 

suggested that the state could draw from 

existing data. Other commenters 

specifically asked whether individuals 

would be permitted to opt not to answer 

such questions. 

Response: We are finalizing this rule 

to specify that for purposes of applying 

the appropriate FMAP under the 

threshold methodology, as well as for 

determining whether an individual 

could be considered eligible under 

another eligibility category for which 

disability is a criteria, only an actual 

disability determination will be used to 

establish whether an individual is 

disabled. For individuals actually 

determined disabled, the state would 

need to apply the status for such 

individuals for any December 1, 2009 

eligibility category for which such status 

is applicable for purposes of 

determining if the individual is newly 

eligible; under the threshold 

methodology, the state would also need 

to apply the income test specific for 

such disability related eligibility 

categories. If the individual’s income 

exceeds such December 1, 2009 income 

eligibility level for the applicable 

eligibility category, the individual 

would be considered newly eligible 

with respect to such eligibility category. 

The revised approach is described in 

more detail in section IV of this rule and 

in regulation text at § 433.206(c)(4). 

d. Population Adjustments to the 

Threshold Methodology; Application of 

Resource Criteria and Section 1115 

Demonstration Enrollment Caps 

In general, the threshold methodology 

is designed to properly assign the 

applicable FMAP to the expenditures of 

individuals eligible in the new adult 

group under § 435.119. The threshold 

methodology provides for states to use 

the applicable state plan or 

demonstration eligibility income 

standard converted to a MAGIequivalent for each eligibility group as 

in effect in the state on December 1, 

2009 to determine whether an 

individual is considered to be newly 

eligible for purposes of assigning a 

federal matching rate. Although the 

threshold methodology is 

individualized, we are finalizing this 

rule to include certain population-based 

adjustments, or proxies, to account for 

resource standards and, as applicable, 

enrollment caps or limits. 

In the proposed eligibility rule, we 

proposed several ways in which the 

threshold methodology could account 

for a resource (or asset) test that was 

applied to the applicants’ coverage 

category as of December 2009, since 

resources will no longer be part of the 

eligibility determination for populations 

whose income will be determined using 

MAGI rules. We solicited comments on 

these various alternatives, as well as on 

the feasibility of using the Asset 

Verification System (AVS) as a tool to 

obtain resource information, as 

necessary. We received a variety of 

comments on these varied approaches. 

Comment: Several commenters noted 

that, when comparing individuals’ 

eligibility against the December 2009 

criteria, only income eligibility and not 

resource information should be 

considered. One commenter stated that 

resources should not be considered 

since verification would be confusing 

and burdensome to applicants, 

particularly since a significant 

proportion of low-income individuals 

do not have resources in excess of 2009 

Medicaid resource standards. Thus, they 

stated that the threshold method should 

not include a resource test. Another 

commenter stated that the final 

regulation should clearly state that 

individuals who were ineligible on the 

basis of resources under rules in effect 

as of December 1, 2009 are considered 

to be newly eligible. 

Response: As described in more detail 

in section IV of this rule and 

§ 433.206(d), we are giving states a 

choice whether or not to consider 

resources; for states that elect to 

consider resources, this rule directs the 

use of a proxy methodology that 

minimizes the need to seek information 

about resources from applicants. 

Further, to the extent that information is 

requested the response (or lack of a 

response) is not a basis for denying 

eligibility. 

Comment: Another commenter 

suggested that since resources may 

make an individual ineligible (based on 

December 2009 rules), the threshold 

method must include a question 

regarding resources; otherwise the 

threshold methodology will not provide 

accurate results. 

Response: As explained above, the 

existence of a resource test in 2009 may 

have made individuals ineligible for 

coverage, even if they met Medicaid 


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income criteria, so these individuals 

should be characterized as newly 

eligible in 2014. To determine whether 

such newly eligible individuals qualify 

for the newly eligible FMAP, states may 

apply the resource methodology as 

described in § 433.206(d) and in more 

detail below. However, a state may 

forego the application of a resource 

proxy test as part of the threshold 

methodology as some states have 

advised CMS that very small numbers of 

individuals were determined ineligible 

due to resources. States that choose to 

consider their December 2009 resource 

tests may apply the resource proxy 

methodology described in § 433.206(d) 

and in more detail below. 

Comment: We received numerous 

comments in response to our request for 

feedback about using the Asset 

Verification System (AVS). Multiple 

commenters suggested using the AVS 

for electronic resource verification and 

one commenter suggested that the 

regulation be revised to explicitly 

require use of the AVS. Other 

commenters suggested that the 

threshold methodology regulation 

should be revised to indicate that 

resources will be determined using the 

AVS. One commenter noted that using 

the AVS for electronic verification 

would help permit a resource test while 

maintaining the Affordable Care Act 

goal of a simplified streamlined process. 

Response: We agree that the AVS can 

be a good tool to verify resources but we 

are not requiring its use for individuals 

enrolled in the new adult group under 

§ 435.119. The approach we outline in 

this rule provides states with greater 

flexibility and is consistent with MAGIbased income determinations that will 

be in effect starting January 1, 2014. 

States may continue to use AVS for nonMAGI populations. 

Comment: One commenter requested 

clarification about how to account for 

the current resource tests in Medicaid 

eligibility determinations. The 

commenter noted that states will need 

to adjust the threshold methodology to 

reflect relative resource values and 

recommended freezing resource levels 

at the 2009 threshold. 

Response: Subject to the requirements 

of § 433.206(d) of this final rule with 

comment period, to the extent a state 

elects to incorporate a resource proxy 

methodology under its applied 

threshold methodology, the resource 

criteria should reflect the states’ 

December 1, 2009 resource eligibility 

levels. Referencing resource levels at the 

2009 value will most accurately reflect 

eligibility as of December 1, 2009, 

which is the relevant criterion for 

determining whether or not an applicant 

shall be considered newly eligible. 

e. Application of Spend-down Income 

Eligibility Criteria 

The August 17, 2011 proposed rule 

stated that CMS does not believe that, 

for FMAP determination purposes, 

states need to consider whether an 

individual enrolled in the new adult 

group would have been eligible under a 

spend-down for a medically needy 

category under section 1902(a)(10)(C) of 

the Act in considering whether someone 

would have been eligible under 

standards in effect in December 1, 2009. 

We explained that this is because we 

believe there is an inherent uncertainty 

in determining whether and when a 

spend-down would have been met. An 

individual who is eligible for the new 

adult group and whose income is above 

the December 1, 2009 medically needy 

income standard would be considered 

newly eligible. If an individual would 

have qualified by meeting the medically 

needy income standard without a 

spend-down, the state could not claim 

newly eligible FMAP for that 

individual. We requested comment on 

this analysis and received numerous 

responses, which we have used to add 

more detail to the final threshold 

methodology regulation at § 433.206(f). 

Comment: Multiple commenters 

raised issues with respect to how the 

threshold methodology will account for 

medically needy determinations. Some 

noted that the final rule should 

explicitly indicate that if spend-down 

criteria are not met, the individual 

should be considered newly eligible. 

Commenters noted that this principle 

should also extend to ‘‘209(b)’’ states, 

which are states in which the Medicaid 

eligibility criteria for the elderly and 

people with disabilities are more 

restrictive than the federal SSI program 

standards. We take these comments to 

mean that if an individual’s income is 

above the medically needy income 

level, he or she would be assumed not 

to be eligible under the December 2009 

standards and therefore newly eligible 

for purposes of FMAP, even if it might 

have been possible for that person to 

spend-down and qualify in a medically 

needy eligibility category. 

Response: In section IV below, and 

§ 433.206(f), we address how the 

threshold methodology will account for 

the treatment of individuals in 209(b) 

states. Individuals eligible for SSI are 

enrolled in the eligibility group 

specified in § 435.120, and, as such, are 

not eligible for the newly eligible 

FMAP, which is only available to 

individuals enrolled in the new adult 

group at § 435.119. 

f. Timeframes and Parameters for Notice 

to CMS 

In light of the proposed rules that 

identified potential alternate FMAP 

claiming methodologies, § 433.206(b) of 

the August 2011 proposed rule 

proposed that a state provide notice to 

CMS of which methodology it plans to 

use at least two calendar years prior to 

the first day of the calendar year in 

which the state would have used the 

particular method. For 2014, we 

proposed that states would give notice 

to CMS no later than one year prior to 

the beginning of the CY, which is 

January 1, 2013. 

Comment: Numerous commenters 

expressed concern about the amount of 

notice that CMS proposed states must 

give CMS with respect to choice of 

methodology or with respect to changes 

in methodology. They requested 

additional time to notify CMS of the 

selected methodology and noted that the 

proposed timeframe is insufficient to 

make an informed decision. 

Response: As indicated in responses 

to previous comments and in section IV 

of this rule, the threshold methodology 

is the selected permissible methodology 

and, as such, there is no longer the need 

for states to provide notice to CMS as to 

their choice of methodology. We 

provide, at § 433.206(h), that states must 

revise their state plans under the 

provisions of subpart B of part 430. 

States will submit, as an attachment to 

their state plan, a threshold 

methodology plan that outlines how the 

threshold methodology will be applied. 

CMS will review and approve this plan 

pursuant to the timeframes that 

otherwise govern review of state plan 

amendments. 

Comment: Several commenters noted 

that the regulations should define a 

timeline for states to submit and CMS to 

approve the threshold methodology 

prior to implementation. One 

commenter wrote to support proposed 

§ 433.208(b), which proposed that each 

state submit a proposed methodology to 

CMS and receive CMS approval for that 

methodology prior to its 

implementation. 

Response: As discussed previously 

and as indicated in revised § 433.206(h), 

states must amend their state plans 

under the provisions of subpart B of part 

430 to reflect the threshold methodology 

the state implements in accordance with 

the provisions of this part 433. The 

threshold methodology, which will be 

reviewed and approved by CMS, will be 

included as an attachment to the state 

plan and will include details about the 

manner in which the state will apply 


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the methodology to FMAP 

determinations. 

g. Comments Regarding Need for 

Technical Assistance for States 

Comment: Several commenters 

suggested that CMS should provide 

technical assistance to states as they 

implement approaches to properly 

identify the FMAP associated with 

individuals in the new adult group. One 

commenter suggested that CMS should 

assist states upon request with 

determining individuals newly eligible 

for Medicaid as of 2014, particularly 

with respect to treatment of previously 

excluded income in determining 

Medicaid eligibility. Another 

commenter believes that states need 

specific guidance from CMS to 

operationalize the approach used to 

determine the appropriate FMAP. 

Another commenter requested more 

examples to illustrate how the three 

alternate methods would work and 

requested additional guidance about the 

appropriate sample size necessary to 

test each methodology. 

Response: We will be working to 

provide states with technical assistance 

as they implement the final 

methodology and are already providing 

technical assistance in the context of the 

conversion process which is a 

component of the methodology. One of 

the concerns raised by commenters 

about the treatment, under MAGI rules, 

of income previously excluded in 

determining Medicaid eligibility, has 

been addressed by a legislative change 

included in section 401 of Public Law 

112–56, which revised the MAGI rules 

to include as income an amount equal 

to the portion of the taxpayer’s social 

security benefits (as defined in section 

86(d) of the Internal Revenue Code) that 

is not included in gross income under 

section 86 for the taxable year. 

h. Comments Regarding Transparency 

Comment: Multiple commenters 

suggested that states should use an open 

and transparent process to determine 

the methodology they will use to claim 

the appropriate FMAP. Another 

commenter noted that given the 

significant budgetary and beneficiary 

implications of any methodology, 

negotiations between states and CMS on 

the proposed methodological approach 

should be public (including any 

documents submitted by the state and 

any question posed by CMS in 

response). In addition, the process 

should allow for input from 

beneficiaries and consumer advocates to 

ensure that the proposals do not unduly 

burden applicants. 

Response: CMS is adopting the 

threshold methodology in this final 

regulation, in part to support the goals 

of transparency and simplicity. The 

methodology does offer states certain 

options and states that take them must 

clearly and transparently describe to 

CMS how they will implement the 

threshold methodology. The proposed 

rule, at § 433.208(b) indicated that to 

implement the threshold methodology, 

states must submit a methodology and 

receive CMS approval of such 

methodology prior to its application to 

new FMAP determinations. As 

described in more detail in section IV of 

this final rule, we have revised that 

provision, now included at § 433.206(h), 

to instead require states to submit a state 

plan amendment reflecting the manner 

in which they will implement the 

threshold methodology. This will 

achieve the goals of transparency that 

commenters supported. 

i. Other General Methodology 

Comments 

Comment: One commenter suggests 

that CMS should require states to take 

into account whether public entities 

other than the state, such as counties, 

provide the non-federal share of 

Medicaid payments when developing an 

FMAP methodology. The commenter 

further suggested that CMS could 

require the state to demonstrate that its 

methodology results in a distribution of 

funds among the public entities 

providing the non-federal share that 

reflect the actual enrollment of newly 

eligible adults. 

Response: States have significant 

flexibility to finance their Medicaid 

programs consistent with existing 

federal laws and regulations. This final 

rule does nothing to change the 

regulatory requirements set forth in 

subpart B of part 433, including 

§ 433.53, which permits entities other 

than the state to contribute up to 60 

percent of the non-federal share of total 

expenditures under the plan and 

requires state and federal funds to be 

apportioned among political 

subdivisions of the state on a basis that 

ensures that individuals in similar 

circumstances will be treated similarly 

and that a lack of local financial 

participation will not result in lowering 

the amount, duration, scope, or quality 

of services available to beneficiaries. 

Nor does this rule address the 

provisions of section 1905(cc) of the 

Act, added by section 10201(c)(6) of the 

Affordable Care Act, which offer some 

protection to political subdivisions from 

increased requirements to contribute the 

non-federal share. We further note that 

due to the significantly increased FMAP 

rates available for the newly eligible 

adults, there will be no non-federal 

share for the medical assistance 

expenditures for such adults in calendar 

years 2014–2016 and a small nonfederal share (no more than 10 percent 

of costs) thereafter. 

Comment: Commenters recommended 

that CMS require that any claiming 

methodology include the total cost of 

providing care to patients, including 

supplemental payments such as 

disproportionate share hospital (DSH) or 

upper payment limit payments (UPL). 

The commenter notes that the proposed 

rule described the statistically valid 

sampling methodology as excluding 

Medicaid supplemental payments from 

medical expenditures paid to providers 

when providers are paid under a 

managed care capitated payment 

arrangement. The commenter believes 

that all payments should be in the 

claiming methodologies including costs 

associated with patients for whom 

supplemental payments such as DSH or 

UPL are made to reflect providers’ total 

cost of care. 

Response: The threshold methodology 

as contained in this final rule with 

comment period is not intended to 

revise the definition of or requirements 

for determining the amounts of the 

expenditures that may be claimed by a 

state as medical assistance provided to 

individuals. In that regard, Medicaid 

DSH payments are considered payments 

that are required under section 1923 of 

the Act and are payments made to 

hospitals to take into account the 

situation of hospitals which serve a 

disproportionate number of low income 

patients. Accordingly, DSH payments 

are not considered to be medical 

assistance expenditures for an eligible 

individual such as those in the new 

adult group. Therefore, the new 

increased FMAPs would not be 

available for any DSH payments. 

Supplemental payments made by a 

state under its Medicaid state plan that 

are based on the upper payment limit 

(UPL) are always identifiable with 

specific services furnished to 

individuals not enrolled in managed 

care. Accordingly, a state could claim 

the new increased FMAPs for such 

supplemental payments when identified 

with a service furnished to a newly 

eligible individual (or a qualified 

nonpregnant childless adult in 

expansion states). We note that a state 

may need to work with CMS to develop 

such a UPL demonstration. 

3. Statistically Valid Sampling 

Methodology (§ 433.210) 

As originally proposed in § 433.210, 

one methodology to assign FMAP would 


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have used a sampling methodology 

across individuals in the adult group 

and related Medicaid expenditures to 

make a statistically valid extrapolation 

of who is newly eligible and their 

related expenditures. 

Comment: Numerous commenters 

criticized the sampling methodology as 

unworkable. Among the objections 

provided by states, advocates, and other 

Medicaid stakeholders is the concern 

that sampling would create a scenario 

under which a state would operate a 

shadow eligibility system, requiring 

actual eligibility determinations under 

2009 rules and would thus be counter 

to HHS’ principle of avoiding two 

separate eligibility systems. 

Other commenters noted that the 

sampling methodology would be 

administratively burdensome to develop 

and would place additional burdens on 

enrollees, including requests for 

information not required for eligibility. 

Other commenters noted that the 

proposed regulation appropriately 

required verification of the sampling 

results, but it is not clear how results 

can be verified without states retaining 

December 1, 2009 standards. 

Commenters also noted that if enrollees 

refused to undergo a full eligibility 

determination for purposes of FMAP, 

states would face additional 

administrative burdens in creating the 

statistically valid sample. Furthermore, 

other commenters noted that, at least for 

states that had not previously expanded 

Medicaid using section 1115 

demonstrations, the statistically valid 

sampling methodology would not be 

applicable during the initial years of the 

Medicaid expansion (2014 through 

2019) because states would not have 

applicable data for sampling purposes. 

Another commenter noted that the level 

of accuracy of the sampling method 

would depend on whether or not 

‘‘newly eligibles’’ are more or less 

expensive than other adults. 

One commenter noted that the 

sampling methodology would require a 

highly complex system to create a 

readily reviewable audit trail between 

the individual claim transaction and 

corresponding disposition on the CMS– 

64. Another commenter also noted that 

use of data sources like the Medical 

Expenditure Panel Survey (MEPS) or 

Medicaid Statistical Information 

Statistics (MSIS) will take some time to 

establish as reliable data elements. 

Response: CMS agrees with 

commenters’ concerns about 

administrative feasibility and accuracy, 

and therefore, we are not finalizing the 

proposed sampling methodology. 

Comment: Commenters note that 

because the sampling results would 

apply retroactively, this methodology 

creates the potential for sizeable 

retroactively adjusted federal payments, 

which would make it difficult for states 

to budget. One commenter expressed 

concern about such retroactive 

adjustments to correct federal funds and 

noted that the proposed rule did not 

include any language that would hold 

states harmless from retroactive 

adjustments. The state also noted that 

the proposed rule could be revised to 

design an approach to create an 

incentive for states to correct the federal 

claiming if to their advantage to claim 

additional federal funds. Other 

commenters noted the statistically valid 

sampling methodology would hinder 

state budget planning and that it is not 

feasible to retroactively adjust the 

FMAP rates and adjust prior period 

CMS–64 claims. 

Response: We understand the 

commenters’ concerns about retroactive 

adjustments and this concern 

contributed to our decision not to 

finalize the sampling methodology. 

Comment: One commenter supports 

the use of statistical sampling to ensure 

that the expanded Medicaid population 

is accounted for in the sampling 

methodology. Absent this basic 

statistical tool, the commenter is 

concerned that states may 

underestimate the significant numbers 

of Latinos who are expected to 

participate in the Affordable Care Act’s 

various insurance affordability 

programs. 

Response: We share the commenter’s 

interest in promoting and accurately 

tracking participation in the Medicaid 

program. The purpose of the proposed 

methodologies is to properly designate 

the FMAP, and we believe that the 

threshold methodology does this most 

efficiently. 

Comment: One commenter endorsed 

the sampling methodology as the best 

option available at this time, despite 

concerns about the burden for 

applicants/beneficiaries and the 

financial risk to states due to potentially 

inaccurate sampling. Nonetheless, the 

commenter concluded that the sampling 

method could be the least burdensome 

to states. 

Response: We agree with the 

commenter’s concerns and reach a 

different conclusion after weighing the 

considerations. Therefore, we are 

finalizing the threshold methodology 

instead of the sampling methodology. 

4. CMS-Established FMAP Proportion 

Methodology (§ 433.212) 

As originally proposed in § 433.212, 

the proportion methodology would have 

used an extrapolation from available 

data sources to determine the 

proportion of individuals covered under 

the new adult group who would not 

have been eligible under the eligibility 

category in effect under the state plan or 

applicable waiver as of December 1, 

2009, validating and adjusting the 

estimate, based on sampling or some 

other mechanism going forward. 

Comment: Several commenters 

opposed the use of the proportion 

methodology, noting that reliable data 

sources have limited experience with 

newly eligible populations and new 

rules under the Affordable Care Act, 

making it difficult to accurately estimate 

the proportion of individuals covered 

under the new adult group who would 

have been eligible under eligibility 

categories that would have been in 

effect as of December 1, 2009. 

Furthermore, the commenter noted that 

many newly eligible individuals will 

have insurance coverage for the first 

time and their actual utilization will be 

varied. Another commenter noted 

concerns about the proportion 

methodology in light of uncertainty 

regarding the fundamental restructuring 

of the Medicaid program resulting from 

the Affordable Care Act. Therefore, the 

commenter noted that it would be 

difficult for any model to accurately 

predict allocation of expenses on a stateby-state basis. This uncertainty would 

lead to the need for large annual 

adjustments of state-specific rates, 

particularly once the proportion 

methodology is tested in 2016. A 

commenter questioned the reliability of 

the estimates of proportions of enrollees 

who would be newly eligible, especially 

because this methodology would not 

provide an opportunity for retroactive 

adjustments. 

Response: We agree with the 

commenters and for these reasons we 

are not including the proportion 

methodology in the final rule. 

Comment: Many commenters noted 

that the proportion methodology could 

provide a consistent and 

administratively simple approach to 

determine the newly eligible FMAP, 

especially if statistical modeling cannot 

provide a reliable basis for FMAP 

determinations. Commenters 

specifically encouraged CMS to 

consider the Congressional Budget 

Office, the Urban Institute, and the 

Agency for Healthcare Research and 

Quality as credible sources of 

information on effective modeling 

techniques. Several other commenters 

supported the proportion methodology 

as the most appropriate since it appears 

to best fit the requirements of a 

streamlined process and is least likely to 


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place an undue and unnecessary burden 

on applicants, states, and CMS. 

Some commenters further qualified 

their support for the proportion 

methodology by noting some data 

concerns. They noted that while they 

support the use of Medical Expenditure 

Panel Survey (MEPS), MSIS and Current 

Population Survey (CPS) data as the 

foundation for the implementation of 

the proportion method, they had 

concerns, especially for smaller states, 

with MEPS and CPS data. One 

commenter warned about survey 

margins of error and noted that the 

MEPS does not provide individual 

estimates for the 50 states, thus 

requiring additional imputation of the 

survey. 

Response: We appreciate the 

commenters’ thoughtful concerns about 

methodology and data related to the 

proportion methodology. Because we 

are not adopting the proportion 

methodology for the reasons stated in 

our prior response, we have not pursued 

these recommendations. 

IV. Provisions of the Final Rule 

This final rule incorporates certain 

provisions set forth in the Medicaid 

Eligibility proposed rule and reflects 

revisions made based on comments 

received on the proposed rule. The 

following describes the provisions of 

this final rule: 

A. Availability of FMAP Rates for the 

Adult Group (§ 433.10(c)). 

1. Newly Eligible FMAP (§ 433.10(c)(6)) 

The provisions of § 433.10(c)(6) 

describe the availability and amounts of 

the increased FMAP for newly eligible 

adults, as defined in § 433.204(a)(i), who 

are enrolled in the new adult group 

described in § 435.119 of this chapter. In 

response to comments and questions 

from the public about whether states 

that meet the definition of expansion 

states (which this rule redesignates from 

§ 433.10(c)(8)(iii) in the proposed rule 

and codifies at § 433.204(b)) may receive 

the newly eligible FMAP, we revised 

§ 433.10(c)(6)(i) to clarify that the 

increased FMAP for newly eligible 

individuals can be applied in states that 

meet the definition of expansion state. 

As discussed in the proposed rule (76 

FR 51147, 51173 (August 17, 2011)), if 

a population covered by a state that 

qualifies as an expansion state meets the 

criteria for the newly eligible matching 

rate, the state will receive the newly 

eligible matching rate for expenditures 

for that population. The expansion state 

match is designed to help states that 

expanded coverage to adults prior to 

enactment of the Affordable Care Act to 

the extent that a particular expansion 

population does not qualify as newly 

eligible. 

2. Temporary FMAP Increase 

(§ 433.10(c)(7)). 

In accordance with section 

1905(z)(1)(A) of the Act, § 433.10(c)(7) 

describes the availability of a temporary 

2.2 percentage point increase in the 

regular FMAP for a state that meets 

three conditions specified in the 

regulation: 

• The state meets the definition of 

expansion state in § 433.204(b); 

• The state does not qualify for any 

payments for the medical assistance 

expenditures of newly eligible 

individuals under the newly eligible 

FMAP in § 433.10(c)(6); and 

• The state has not been approved to 

divert a portion of its disproportionate 

share hospital allotment under a 

demonstration in effect on July 1, 2009. 

Although in this final rule we are not 

making any substantive revisions to 

§ 433.10(c)(7) as was contained in the 

proposed rule, the following provides 

clarification regarding this provision. If 

a state meets the three indicated 

conditions, then the regular FMAP in 

§ 433.10(b) is increased as follows: 

• Medical assistance expenditures for 

individuals who are not eligible under 

the new adult group. The regular FMAP 

in § 433.10(b), which is available for the 

medical assistance expenditures of 

individuals eligible under any eligibility 

group other than the new adult group, 

would be increased by 2.2 percentage 

points. 

• Medical assistance expenditures of 

individuals who are eligible under the 

new adult group, but who do not meet 

the definition of newly eligible 

individual in § 433.204(a)(1). For these 

individuals: 

++ Increase in Expansion State 

FMAP. The regular FMAP component of 

the expansion state FMAP formula is 

increased by 2.2 percentage points for 

the medical assistance expenditures of 

individuals in the new adult group who 

are not newly eligible and for whom the 

expansion state FMAP is available. 

++ Increase in Regular FMAP. The 

2.2 percentage point increase in the 

regular FMAP would also be available 

for the medical assistance expenditures 

of individuals in the new adult group 

who are not newly eligible and for 

whom the expansion state FMAP is not 

available, for example pregnant women 

or parents. 

• Expansion State FMAP 

(§ 433.10(c)(8)). Section 433.10(c)(8) in 

general refers to the availability of the 

expansion state FMAP for certain 

individuals who are not newly eligible. 

This FMAP is only available for 

expenditures in states that meet the 

definition of an expansion state in 

§ 433.204(b)(1). 

In response to comments and for 

purposes of clarification, proposed 

§ 433.10(c)(8)(iv) was deleted as 

redundant. As discussed above, 

§ 433.10(c)(6)(i) as revised clarifies that 

the newly eligible FMAP is available for 

newly eligible individuals in an 

expansion state. However, 

§ 433.10(c)(8)(iv), as contained in the 

proposed rule, also referred to the 

availability of the newly eligible FMAP 

for certain individuals in an expansion 

state. We believe the reference in the 

revised § 433.10(c)(6)(i) makes clear that 

the newly eligible FMAP is available for 

newly eligible individuals in expansion 

states. 

B. Scope of Regulation (§ 433.202). 

Section 433.202, which sets out the 

scope of the FMAP provisions for the 

new adult eligibility category in 

§ 435.119, is revised to indicate 

explicitly in regulation the increased or 

regular FMAP rates that are potentially 

available, as applicable, for the medical 

assistance expenditures associated with 

individuals in the new adult eligibility 

group: the regular FMAP, the increased 

newly eligible FMAP, or the increased 

expansion state FMAP, as indicated in 

§ 433.10(b) and (c). 

C. Definitions (§ 433.204). 

1. Newly Eligible Individual 

(§ 433.204(a)(1)). 

Section 433.204 is revised to include 

the definition of newly eligible 

individual in the renumbered 

§ 433.204(a)(1), which now indicates 

that the determination of an individual 

as newly eligible is in accordance with 

the requirements of § 433.206, the 

revised and renumbered threshold 

methodology. 

• The definition of newly eligible 

individual in § 433.204(a)(1) is clarified 

to follow the statutory definition in 

section 1905(y)(2)(A) of the Act and, in 

particular, to refer to individuals who 

would not have been eligible for full 

benefits, benchmark coverage, or 

benchmark equivalent coverage as of 

December 1, 2009. Section 433.204(a)(1) 

as revised refers to the regulations in 

§ 440.330 and § 440.335, referring to 

benchmark and benchmark equivalent 

coverage, respectively. These changes 

were necessary to more accurately 

reflect the statutory language of the 

Affordable Care Act, which was not 

included in the proposed rule. 

Individuals enrolled in § 435.119 who 

could have previously received full 


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Medicaid state plan benefits (either 

under an optional coverage category 

under the Medicaid state plan or a 

waiver of the plan), benchmark benefits, 

or benchmark equivalent benefits will 

not satisfy the definition of newly 

eligible in § 433.204(a)(1) and their 

medical assistance expenditures will 

not be matched at the newly eligible 

FMAP provided in § 433.10(c)(6)(i). 

Medical assistance expenditures for 

other populations in these states, 

however, may be matched at either of 

the increased FMAP rates described in 

§ 433.10(c)(7) or (8). 

As described in § 433.204(a)(3), states 

with section 1115 demonstrations that 

provided benefits to adult populations 

that are more limited than standard state 

plan benefits will need to analyze the 

benefit package that was offered so that 

CMS can determine the appropriate 

FMAP to apply to specific populations 

who were enrolled in Medicaid as of 

December 1, 2009. As CMS explained in 

FAQ guidance issued in February 2013 

at http://www.medicaid.gov/StateResource-Center/Frequently-AskedQuestions/Downloads/ACA-FAQBHP.pdf and in letters to states 

following this guidance, CMS will work 

with each state to ensure that the correct 

FMAP is applied to medical assistance 

expenditures for individuals enrolled 

under § 435.119. We are requesting that 

states that expanded eligibility through 

section 1115 demonstrations provide 

CMS with an analysis of the eligibility 

levels and scope of benefits available 

under demonstrations as of December 1, 

2009 to enable CMS to confirm the 

applicable FMAP. CMS has provided 

states with guidance about the manner 

in which benefits should be analyzed to 

substantiate claims for the increased 

newly eligible FMAP; states are 

expected to utilize a consistent 

methodology and provide CMS with 

sufficient data to substantiate the states’ 

analyses. In addition, states’ benchmark 

equivalence analyses must be certified 

by a qualified actuary and must include 

information on the data, assumptions, 

and methodology used to calculate 

actuarial values. CMS will use the 

benefit analysis provided by states to 

determine the appropriate FMAP. States 

that do not qualify for the newly eligible 

FMAP but appear to meet the criteria to 

be an expansion state should provide 

CMS with information about coverage in 

effect as of the date of enactment of the 

Affordable Care Act, if they wish to 

claim the expansion state FMAP for 

qualified populations. 

• The definition of newly eligible at 

§ 433.204(a)(1) has also been clarified to 

include the provision in statute that 

describes as newly eligible those 

individuals in the new adult group who, 

as of December 1, 2009, would have 

been eligible but not enrolled (or could 

have been on a waiting list) for benefits 

or coverage through a waiver under the 

plan that has a capped or limited 

enrollment that is full. 

2. Full Benefits (§ 433.204(a)(2)). 

Section 433.204 is revised to add a 

new § 433.204(a)(2) to include the 

statutory definition of ‘‘full benefits’’ 

from section 1905(y)(2)(B) of the Act, 

which describes ‘‘full benefits’’ to mean 

those benefits required to be provided to 

mandatory adult populations under the 

state plan, or such benefits that are not 

less in amount, duration, or scope than 

the benefits offered to the mandatory 

populations, or benefits that are 

determined by the Secretary to be 

substantially equivalent to the medical 

assistance available for the mandatory 

populations. Adult populations covered 

by a state under a section 1115 

demonstration under which any 

associated waivers of state plan 

requirements did not provide for any 

reduction of the benefits relative to 

those offered to the mandatory 

populations under the state plan are 

presumed to have received full benefits 

under the demonstration; that is, full 

benefits are presumed unless approved 

terms and conditions of the 

demonstration explicitly provided for a 

lesser benefit package. 

3. Expansion State (§ 433.204(b)). 

A new § 433.204(b)(1) is added to 

include the definition of ‘‘expansion 

state,’’ moving the definition from the 

proposed § 433.10(c)(8)(iii). We also 

clarified in a new § 433.204(b)(2), for 

purposes of applying the expansion 

state FMAP in § 433.10(c)(8) that a 

‘‘nonpregnant childless adult’’ is an 

individual who is not eligible based on 

pregnancy and who does not meet the 

definition of a caretaker relative in 

§ 435.4. 

D. Choice of Methodology (§ 433.206 in 

proposed rule) 

In the proposed rule § 433.206 

referred to the ‘‘Choice of 

Methodology.’’ This regulatory 

provision is deleted in this final rule 

and the remaining sections are 

renumbered accordingly. 

E. Threshold Methodology (§ 433.206, 

was § 433.208 in proposed rule) 

Previously numbered as § 433.208 

‘‘Threshold Methodology’’ in the 

proposed rule, this final rule 

redesignates this section of the 

regulation as § 433.206. Under the 

threshold methodology, for individuals 

enrolled under § 435.119, the 

applicability of the newly eligible 

FMAP is determined, in part, by 

comparing individuals’ MAGI-based 

income to converted MAGI-based 

income eligibility levels for each 

appropriate eligibility group as in effect 

on December 1, 2009 (this conversion 

process was described in a State Health 

Official letter #12–003, dated December 

28, 2012). 

The following highlights, by section, 

revisions to provisions of the proposed 

rule and, as appropriate, provides 

further description of revised 

provisions. The following provisions are 

being issued as final with an 

opportunity for comment: 

§ 433.206(c)(4), § 433.206(d), 

§ 433.206(e), § 433.206(f), and 

§ 433.206(g). 

1. Overview (§ 433.206(a)). 

This paragraph specifies that the 

threshold methodology must be used by 

states to document claims for the newly 

eligible FMAP specified in § 433.10(b) 

and (c). The threshold methodology 

encompasses an individualized analysis 

of whether individuals determined 

eligible under § 435.119 are newly or 

not newly eligible individuals for 

purposes of determining the appropriate 

federal share of medical assistance 

expenditures. We note that for certain 

aspects of the threshold methodology, 

such as the treatment of resources and 

enrollment caps, states have options in 

applying the methodology, which may 

be based on either population or total 

medical assistance expenditures. Such 

options are addressed in the related 

regulation sections. 

In general, this rule clarifies that the 

threshold methodology is designed to 

assign the applicable FMAP to the 

medical assistance expenditures only 

for individuals determined eligible 

under § 435.119. The methodology 

begins with a simplified method for 

determining the individuals who are 

and are not newly eligible based on 

MAGI-based income (as already 

determined for purposes of establishing 

eligibility under § 435.119) and 

disability status, and then offers states 

options for how they will adjust the 

results to take into account other factors 

that may be relevant to assess the 

appropriate FMAP; in particular, 

resources, and enrollment caps and 

limits to the extent that a cap or limit 

was in effect in a state for an applicable 

eligibility group in December 2009. 

These factors will not be accounted for 

in MAGI-converted income standards 

but have bearing on determining 

whether claims for individuals enrolled 

under § 435.119 can be matched at the 


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newly eligible FMAP. Therefore, 

although the threshold methodology is 

individual based, to ensure a simplified 

procedure, we are finalizing a rule to 

include some population-based 

adjustments, or proxies, to account for 

certain eligibility factors that may have 

been in place in a state in December 

2009. As noted, the final rule includes 

options for how states might calculate or 

apply these adjustments and proxies. 

2. General Principles (§ 433.206(b)). 

This section of the threshold 

methodology regulation indicates 

general principles underlying the 

establishment and application of the 

threshold methodology. In accordance 

with these principles, the threshold 

methodology: must not affect the timing 

of any individual’s eligibility 

determination; must not be biased; must 

provide for a valid and accurate 

accounting of medical assistance 

expenditures and claims for federal 

funding for Medicaid claims; and 

operate efficiently, without further 

review, once an individual has been 

determined not to be newly eligible 

based on the December 1, 2009 

standards for any eligibility category. 

3. Components for Threshold 

Methodology (§ 433.206(c)). 

To clarify the threshold methodology, 

the final § 433.206(c) now indicates the 

basic components of the methodology. 

This section references the use of 

individuals’ MAGI-based income 

determinations as established under the 

2014 eligibility requirements; the 

threshold methodology does not require 

determining individuals’ income under 

the income rules in effect as of 

December 1, 2009: 

• The threshold methodology applies 

for individuals determined eligible and 

enrolled under § 435.119; the regulation 

clarifies that the threshold methodology 

is not applicable for individuals who 

have been determined eligible and 

enrolled under any other mandatory or 

optional Medicaid eligibility category. 

• Under the threshold methodology, 

the individuals’ MAGI-based income (as 

determined under the rules in effect as 

of January 1, 2014) is compared to 

converted MAGI-based income 

eligibility levels for each appropriate 

eligibility group as in effect on 

December 1, 2009. Appropriate 

eligibility groups include, for example, 

parent/caretaker relative groups, section 

1115 demonstration expansion 

populations, and optional disabled 

groups. CMS is currently working with 

states to convert those standards. If an 

individual in the new adult group 

would only have qualified for a 

December 1, 2009 eligibility group 

which did not offer full benefits, 

benchmark coverage, or benchmark 

equivalent coverage, they will be 

considered newly eligible for FMAP 

determination purposes regardless of 

income; 

• Finally, states must ensure that for 

purposes of the availability and 

applicability of the applicable FMAPs 

for individuals, the determination of 

such individuals’ status as newly or not 

newly eligible continues until a new 

determination of MAGI-based income 

has been made, in accordance with 

§ 435.916, or until the individual has 

been otherwise determined not to be 

covered under the adult group set forth 

at § 435.119 of this chapter. Section 

433.206(c)(4) describes, for example, the 

treatment of individuals for whom a 

determination of disability alters the 

applicable FMAP. 

Under this process, an individual 

enrolled in the new adult group with 

income at or below the converted 

MAGI-based income eligibility standard 

for a relevant December 1, 2009 

eligibility group related to that 

individual’s characteristics and who 

would have been eligible to receive full 

benefits, benchmark benefits, or 

benchmark-equivalent benefits as of 

December 1, 2009 would be considered 

as not newly eligible and the FMAP 

applicable to such individuals would 

apply; this would be the regular FMAP 

or the expansion FMAP for applicable 

individuals, in expansion states. An 

individual in the new adult group 

whose income is greater than the 

converted income eligibility standard 

for December 1, 2009 for the relevant 

eligibility group related to that 

individual’s characteristics would be 

considered as newly eligible and the 

newly eligible FMAP applicable to such 

individuals may apply. 

Disability Status. A new 

§ 433.206(c)(4) is included in the 

components of the threshold 

methodology section of the regulation to 

clarify the role an individual’s disability 

status plays in determining the 

availability of increased FMAP for the 

expenditures of the new adult eligibility 

group under the definition of newly 

eligible. This final rule with comment 

period clarifies that to the extent 

disability status is applicable to the 

determination of newly eligible, an 

individual will not be considered to be 

disabled during the period of a pending 

disability determination, and would be 

considered disabled for purposes of 

determining FMAP availability only 

effective with the actual determination 

of disability. 

The disability status of an individual 

may be relevant with respect to 

establishing whether the individual 

would have been eligible under an 

eligibility category that was in effect on 

December 1, 2009 for which disability is 

a criteria. In that case, if the individual 

could be determined eligible based on 

disability and the financial criteria 

applicable for such December 1, 2009 

eligibility category, the individual 

would not be considered to be newly 

eligible for purposes of applying the 

appropriate FMAP for the expenditures 

associated with such individual. For 

this reason, to establish the applicable 

FMAP, it is necessary to establish 

whether the individual met the 

appropriate definition of disability 

applicable for a state. 

For purposes of establishing disability 

status with respect to determining 

whether an individual meets the 

definition of newly eligible, in the 

proposed rule we indicated we were 

considering using either a disability 

proxy methodology or using actual 

disability determinations under the 

threshold methodology. In recognition 

of the disability determination process 

currently used by states and the Social 

Security Administration, we have 

concluded that for purposes of applying 

the appropriate FMAP under the 

threshold methodology, only an actual 

disability determination can be used to 

establish whether an individual should 

be considered to be disabled as relates 

to meeting the definition of newly 

eligible. That is, absent an actual 

determination of disability made in 

accordance with the disability 

definition applicable for the state under 

Title XIX of the Act, an individual 

enrolled in the new adult group should 

be considered not disabled for any 

FMAP determination purpose, 

regardless of any indication of disability 

provided by the individual. Therefore, 

in general, with respect to any eligibility 

categories in effect on December 1, 2009 

for which a disability determination was 

required, individuals eligible for the 

new adult group who do not have an 

actual determination of disability would 

be considered newly eligible. 

Individuals who are disabled have an 

incentive to seek a disability 

determination to receive financial 

support based on disability; therefore, 

an actual disability determination under 

the established disability determination 

process may be initiated by and for such 

individuals. In circumstances in which 

a disability determination process is 

initiated, the individual will be 

considered not to be disabled for FMAP 

determination purposes while the 

disability determination is pending. 


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This means that the newly eligible 

FMAP will apply until the date on 

which the individual is actually 

determined to be disabled. On the date 

of the disability determination, the 

individual may shift, if eligible, to an 

eligibility category other than the new 

adult group, in which case the 

determination of newly or not newly 

eligible would no longer be relevant; or, 

if still enrolled in the new adult 

eligibility group, the individual might 

then be considered as not newly eligible 

(depending on the individual’s income 

level), and, if no longer newly eligible, 

the state must adjust FMAP claiming 

from the date the disability 

determination is made. The 

determination relative to newly eligible 

status will depend on both the disability 

status and the individual’s income: if 

the individual’s income exceeds the 

converted MAGI threshold for any 

December 1, 2009 category of coverage 

related to disability status, expenditures 

for the individual would continue to be 

matched at the newly eligible FMAP. 

In determining which expenditures 

can be claimed under the newly eligible 

matching rate relative to expenses for an 

individual who eventually is 

determined disabled, the application of 

the FMAP methodology is not intended 

to revise existing claiming rules. In 

particular, the FMAP applicable for 

provider claims paid by a state is 

generally determined based on when the 

state made the payment to the service 

provider; the application of the 

appropriate FMAP is not generally 

based on the date the service is 

provided. Therefore, the FMAP 

applicable for payments made by a state 

subsequent to the date of the disability 

determination would reflect any change 

in the individual’s status as newly 

eligible and/or the individual’s actual 

eligibility status; for example, if 

receiving a disability determination 

results in the individual becoming 

eligible under an eligibility category 

other than the new adult group, any 

FMAPs associated with the new adult 

group would not be applicable to claims 

paid after the change in status. 

We developed this approach to 

support our general principle of 

providing states with certainty and 

avoiding retroactive recoupment of 

dollars from states. Numerous 

commenters also reinforced the concept 

that any selected methodology should 

minimize the need for retroactive 

financial adjustments to avoid 

subjecting states to financial 

uncertainty; this approach is consistent 

with those comments. While current 

practice requires states to adjust 

claiming back to the date of onset of the 

disability determination, we think 

creation of the new adult group gives us 

an alternative because individuals have 

a way to receive services during the 

period of the pending disability 

determination. 

Finally, although we recognize that 

under normal circumstances the 

disability process may take a significant 

period of time to be completed, we do 

not wish to incentivize states to prolong 

this process—to the extent they play a 

role in conjunction with the Social 

Security Administration in determining 

disability—by providing the increased 

newly eligible FMAP during the period 

when the disability determination is 

pending. Therefore, to ensure timely 

determinations of disability status, we 

will closely monitor state 

implementation of the threshold 

methodology and develop safeguards, 

such as performance standards related 

to timeliness of disability 

determinations and work with states to 

ensure that such performance standards 

are satisfied. We will work with the 

Social Security Administration to 

continue to consider ways to expedite 

such determinations. 

4. Application of Resource Criteria 

(§ 433.206(d)). 

In this final rule, a new § 433.206(d) 

is added to indicate how resource 

criteria may be applied for purposes of 

determining the availability of an 

increased FMAP for the expenditures of 

newly eligible individuals (as described 

in § 433.204(a)(1)). 

For the new adult group under 

§ 435.119, which is effective beginning 

January 1, 2014, there is no resource test 

(sometimes called an ‘‘asset test’’) 

applied in determining individuals’ 

eligibility. However, some individuals 

in the new adult group might have had 

income below the applicable income 

standards in effect in December 2009 

but would not have been eligible due to 

resources. Under the threshold 

methodology, for FMAP purposes a state 

can account for the effect of resource 

standards in effect in December 2009. 

To promote simplification and 

flexibility, in this final rule CMS is 

providing states the option of not 

applying a resource proxy. A number of 

states have indicated that resources did 

not keep many individuals from 

qualifying for Medicaid, and imposing a 

resource proxy for purposes of 

determining the applicable FMAP might 

be administratively burdensome and yet 

not yield a very different result than if 

no resource proxy were used. Therefore, 

§ 433.206(d)(1) allows states to choose 

whether to apply a resource proxy 

methodology under the threshold 

methodology. For a state that elects not 

to impose a resource proxy 

methodology, the increased FMAP 

under § 433.10(c)(6)(i) would not apply 

to the medical assistance expenditures 

of individuals determined eligible under 

the adult group whose incomes are at or 

below the applicable income levels for 

the eligibility categories in effect on 

December 1, 2009. 

For states that elect to apply a 

resource proxy methodology, as 

described in greater detail below, this 

rule also provides for two options for 

states to address the application of 

resource criteria which were applied to 

applicable eligibility groups under a 

state’s Medicaid program as in effect on 

December 1, 2009: 

• A state could elect to collect and 

use existing state data prior to January 

1, 2014 related to denials of eligibility 

explicitly due to excess resources; or 

• A state could elect to obtain similar 

data through sampling of beneficiaries 

in eligibility categories relevant to the 

adult group (for periods prior to January 

1, 2014), or eligible and enrolled in the 

new adult group (for periods on or after 

January 1, 2014). 

A state may elect to apply a resource 

proxy methodology under the threshold 

methodology with respect to a particular 

eligibility category that had a resource 

test in effect on December 1, 2009, or 

the state could apply the resource proxy 

methodology to all relevant eligibility 

categories that had a resource test in 

effect on December 1, 2009. 

Consistent with previously issued 

regulations, the development of a 

resource proxy methodology must not 

delay or interfere with the eligibility 

determination for an individual nor rely 

on information from applicants or 

beneficiaries if such information is 

available electronically. Particularly for 

states that undertake a resource proxy 

sample on or after January 1, 2014, 

when new MAGI methodologies are in 

effect and resources are no longer a 

criteria for eligibility determinations, 

states may not require individuals to 

provide information that is not 

necessary for the determination of 

eligibility, such as resource information 

for purposes of determining FMAP. 

However, states are not precluded from 

asking for such information, if it is not 

available electronically through an 

accessible data base or through 

electronic means, for example, after an 

applicant has completed an application. 

Such requests may not be part of the 

formal application process, and states 

must provide applicants or beneficiaries 

with clear notice that the information 

solicited is not required for purposes of 


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eligibility determination and will not 

affect such determination. 

Section 433.206(d)(2) describes the 

standards for the resource proxy 

methodology. In particular, the resource 

proxy methodology must be based on 

state-level data, which would be used to 

identify the percentage of denials of 

Medicaid eligibility over a period of 

time due to excess resources. The state 

data must either be existing data from 

and for periods before January 1, 2014 

related to denials of eligibility explicitly 

due to excess resources, or data 

obtained through a statistically valid 

sample of beneficiaries in eligibility 

categories relevant to the new adult 

group (for periods prior to January 1, 

2014) or eligible and enrolled in the 

new adult group (for periods on or after 

January 1, 2014). 

Whether the state data is based on 

actual resource criteria determinations 

prior to January 1, 2014 or based on 

statistically valid post-eligibility 

sampling (whether prior to or on or after 

January 1, 2014), the data that will be 

used for the resource criteria proxy must 

represent sampling results for a period 

of sufficient length to be statistically 

valid. States who use data based on 

actual resource criteria determinations 

prior to January 1, 2014 must ensure the 

data validly reflects eligibility denials 

explicitly due to excess resources. 

Eligibility denials that were not 

explicitly related to excess resources, 

such as denials based on failure to 

return paperwork or other 

administrative issues, shall not be 

included as they would inappropriately 

inflate the number of people for whom 

the resource requirement was a bar to 

eligibility. 

States that have not changed their 

resource eligibility criteria since 

December 1, 2009, that have valid state 

data, as described above, available from 

and for a statistically valid period prior 

to January 1, 2014 or that can collect 

such state data before January 1, 2014 

(when resource tests will no longer be 

permissible), may rely on that data for 

the resource proxy. Alternatively, for 

states that do not have such data or 

cannot collect it before January 1, 2014, 

this rule permits states to develop a 

resource proxy based on data derived 

through a post-eligibility review of the 

resource information for a one-time 

sample of beneficiaries. Such sample 

would be with respect to applicable 

resources as assessed against standards 

for eligibility groups in effect on 

December 1, 2009, collected through a 

statistically valid sample obtained 

during the one year period that begins 

on the first day of the quarter in which 

eligibility for individuals under the new 

adult group is initially effective for the 

state (for example, by December 31, 

2014, for states that adopt the new adult 

group effective January 1, 2014), and 

ends on the last day of the one year 

period. For example, denial data for a 

determined statistically valid period 

January to March 2014 could be used for 

claims beginning with January 1, 2014, 

subject to CMS approval of an 

amendment to the state plan submitted 

during the first calendar quarter of 2014, 

retroactive to the beginning of such 

quarter in which the SPA was 

submitted. 

Because we believe that it is 

important to have consistent processes, 

we would provide for a one-time 

opportunity to elect to implement a 

resource proxy methodology. States may 

elect to implement a resource proxy 

methodology through submission of a 

state plan amendment no later than one 

year from the first day of the quarter in 

which eligibility for individuals under 

the new adult group under § 435.119 is 

initially effective for the state. For 

example, for states choosing to adopt 

the new adult group effective January 1, 

2014, this would be by December 31, 

2014. State claims for federal funding in 

accordance with the resource proxy 

could be allowable no earlier than the 

beginning of the quarter in which the 

state plan was submitted, subject to 

CMS approval. The state plan 

amendment would describe the data 

upon which the resource proxy is based. 

CMS will review such amendments to 

ensure all requirements both 

methodological and related to data are 

met. 

Under the resource proxy, states 

would apply the proportion of denials 

with respect to the expenditures of 

individuals in the new adult group who 

would otherwise be considered not to be 

newly eligible based only on their 

income being at or below the applicable 

converted MAGI standard; this would 

allow such expenditures to be claimed 

at the increased newly eligible FMAP. 

To illustrate this approach, if based on 

the state data there was a 5 percent 

denial rate due to excess resources for 

an applicable eligibility group or groups 

in effect on December 1, 2009 for which 

resource criteria was applicable, then 5 

percent of the new adult eligibility 

group expenditures related to such 

applicable group or groups, which 

would otherwise have been claimed at 

the FMAP for individuals who were not 

newly eligible, would be claimed at the 

newly eligible FMAP rate. That is, the 

amounts of such expenditures would be 

considered to be newly eligible 

expenditures. CMS will work with the 

states to ensure that the resource proxy 

methodology is appropriately 

determined and applied. 

5. Enrollment Cap Adjustment 

(§ 433.206(e)). 

Under section 1905(y)(2)(A) of the 

Act, the definition of a newly eligible 

individual includes individuals who 

would be eligible for full benefits, 

benchmark coverage, or benchmark 

equivalent coverage provided through a 

demonstration under the authority of 

section 1115 of the Act (1115 

demonstration) as in effect on December 

1, 2009 but would not have been 

enrolled (or would have been placed on 

a waiting list) based on the application 

of an enrollment cap or limit 

determined in accordance with such 

demonstration. As discussed above, the 

definition of newly eligible individual 

in § 433.204(a)(1) is clarified in this 

final rule to include a reference to this 

enrollment cap provision. For purposes 

of applying an enrollment cap, limit, or 

waiting list provision under the 

threshold methodology, individuals 

who would have been on a waiting list 

are considered as not enrolled under the 

demonstration. Proposed § 433.208(a)(2) 

of the August 17, 2011 proposed rule 

required the threshold methodology to 

incorporate any enrollment caps under 

section 1115 demonstrations programs 

that were in place in the state on 

December 1, 2009. In this final rule, 

§ 433.206(e) is added to more fully 

describe the treatment of enrollment 

caps under the threshold methodology. 

Section 433.206(e) indicates the 

underlying principles for applying an 

enrollment cap provision under the 

threshold methodology and describes 

how these principles are used for 

calculating the amount of federal 

funding to be claimed by states that had 

an enrollment cap or limit in effect on 

December 1, 2009, subject to the 

definition of newly eligible individual 

in § 433.204(a)(1). The main objective of 

the enrollment cap provision, added 

here to reflect the previously described 

revision to the definition of ‘‘newly 

eligible’’ contained in § 433.204(a)(1), is 

to establish the appropriate amount of 

federal funding available for the medical 

assistance expenditures that would be 

claimed at the FMAP applicable for 

individuals enrolled in the new adult 

group who are newly eligible 

individuals due to enrollment caps, and 

the amount of such expenditures that 

would be claimed at the FMAP 

applicable for individuals who are not 

newly eligible. Recognizing that 

enrollment limits or caps were designed 

differently in different section 1115 

demonstrations, § 433.206(e) includes 

flexibility for states to reflect enrollment 


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caps in a manner consistent with the 

demonstration terms and conditions and 

with the policies in place in the state as 

of December 1, 2009. 

In accordance with the goal of 

administrative simplicity, and as 

described below, for purposes of 

determining the applicable FMAP and 

appropriate level of federal funding for 

the medical assistance expenditures of 

the new adult group, under the 

threshold methodology the treatment of 

enrollment caps is based on the 

following three elements associated 

with the eligibility categories of 

individuals for which an enrollment 

cap/limit provision was applicable on 

December 1, 2009: 

• Beginning in quarters ending after 

January 1, 2014, the total unduplicated 

number of individuals eligible and 

enrolled under the adult eligibility 

group for the applicable claiming 

period, that is, the period for which 

expenditures are being made. 

• Beginning in quarters ending after 

January 1, 2014, the total state medical 

assistance expenditures for the new 

adult group for the applicable claiming 

period. 

• The enrollment cap or limit in 

effect on December 1, 2009. 

For purposes of the third element 

above, this final rule indicates that the 

enrollment cap/limit would be the level 

of such enrollment cap/limit as 

authorized under the approved 

demonstration in effect on December 1, 

2009; or, if the state had affirmatively 

set the cap at a lower level consistent 

with flexibility provided by the 

demonstration terms and conditions, the 

state may elect to apply the lower cap 

as in effect in the state on December 1, 

2009. To the extent that states imposed 

enrollment limits in accordance with 

the approved terms and conditions, this 

regulation seeks to assure that the newly 

eligible FMAP will be available to states 

for enrollment above such defined 

limits, as verified by CMS. Whether the 

state uses the enrollment cap 

specifically authorized in the 

demonstration or a lower, verifiable cap 

as in effect in the state that was 

consistent with the demonstration 

special terms and conditions, under the 

methodology described here, the 

amount of expenditures multiplied by 

the proportion of the 2009 enrollment 

cap to the total number of currently 

enrolled people in the group would be 

claimed at the regular FMAP (or, if 

applicable, at the expansion state 

FMAP); and the amount of expenditures 

multiplied by 100 percent minus the 

proportion (expressed as a percentage) 

would be claimed at the newly eligible 

FMAP. 

In § 433.206(e)(2), under the threshold 

methodology, states may simplify 

application of enrollment caps/limits by 

electing to combine such enrollment 

caps as were in effect on December 1, 

2009, unless such treatment would 

preclude claiming of federal funding at 

the applicable FMAP rates required 

under § 433.10(b) or (c). Combining 

enrollment caps would be precluded in 

certain circumstances when separate 

treatment of enrollment caps is 

necessary to distinguish claims for 

which different FMAP rates apply. For 

example, in an expansion state the 

applicable FMAP for childless adults 

who are not newly eligible is the 

expansion state FMAP, and the 

applicable FMAP for parents who are 

not newly eligible is the regular FMAP. 

This difference in the FMAP rates for 

individual who are not newly eligible in 

an expansion state necessitates 

separately capturing the number of 

parents and childless adults to whom 

the expansion state FMAP would apply. 

In all cases, all states can elect to apply 

the enrollment caps separately, even 

when combining such caps/limits is not 

precluded. 

Whether the treatment is to combine 

or separate the applicable enrollment 

caps, for states that had enrollment caps 

in effect on December 1, 2009, using the 

three elements listed above, federal 

funding will be determined based on the 

proportion of the enrollment cap to the 

total number of individuals in the 

applicable demonstration coverage 

group who are eligible under the adult 

eligibility group. In particular, the total 

expenditures multiplied by the 

proportion would be claimed at the 

FMAP for individuals who are not 

newly eligible individuals; and the total 

expenditures multiplied by the 

difference between 100 percent and the 

proportion would be claimed at the 

increased newly eligible FMAP. 

EXAMPLE 1 

On December 1, 2009 the State had in effect a demonstration applicable only for childless adults for individuals with incomes up to 133 percent 

of FPL; the approved enrollment cap (C) for such childless adults in effect on December 1, 2009 under the demonstration was 1,000. The 

State is not an expansion state. The regular FMAP (F) for the State is 60.00 percent. 

For the quarter ending after January 1, 2014, there are $10 million in total expenditures for the new adult group consisting of 4,000 childless 

adults with incomes up to 133 percent of FPL. Since the state is not an expansion State, the 60.00 percent regular FMAP would be applied 

for the amount of the total expenditures of individuals who are not newly eligible. The enrollment cap (C) for this group as applicable on December 1, 2009 is 1,000. Since all of the individuals have income up to 133 percent of FPL, they would otherwise be considered as not newly 

eligible. However, in accordance with the FMAP methodology for enrollment caps, the following describes how these expenditures would be 

claimed: 

P = C/T = 1,000/4,000 = 25% 

E = $10 million total expenditures 

F = 60.00% 

(100% ¥P) = 75% 

Not Newly Eligible Claims for Childless Adults (at 60.00% regular FMAP): 

= P × E × F = 25% x $10 million × 60.00% = $1.5 million. 

Newly Eligible Claims for Childless Adults (at 100% newly eligible FMAP): 

= (100% ¥P) × E × Newly Eligible FMAP 

= 75% × $10 million × 100.00% = $7.5 million 

SUMMARY: The total federal dollars for the new adult group comprised of childless adults in this example is $9.0 million, calculated as $1.5 million (not newly eligible) + $7.5 million (newly eligible). 

Section 433.206(e)(4)specifies that 

each state for which the enrollment cap/ 

limit provision applies will be required 

to indicate the treatment of such 

provisions in the state plan amendment 

submission required by new 

§ 433.206(h), described below. 


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6. Application of Spend-down Income 

Eligibility Criteria (§ 433.206(f)). 

States’ Medicaid programs as in effect 

on December 1, 2009 may have included 

eligibility categories for which 

deduction of incurred medical expenses 

from income (referred to as spenddown) under the provisions of sections 

1902(a)(10)(C) and/or 1902(f) of the Act 

was applied in determining individuals’ 

Medicaid eligibility. Under the 

provisions of section 1902(a)(10(C) of 

the Act, and in regulations at part 435, 

subparts D and I, states had and 

continue to have the option of 

establishing a ‘‘medically needy’’ 

program under which the income of an 

individual above the spend-down 

income eligibility standard (referred to 

as the medically needy income level) 

could become eligible for Medicaid by 

applying incurred medical expenses to 

reduce the excess income to the 

medically needy income level. States 

could choose the categories of 

individuals who would be covered by 

the medically needy program. Under the 

authority of section 1902(f) of the Act, 

and in regulations at § 435.121, a similar 

eligibility spend-down process is also 

applied under which certain states 

(referred to as ‘‘209(b) states’’), in 

determining the Medicaid eligibility of 

aged, blind and disabled individuals, 

may apply certain more restrictive 

requirements than are applied under the 

Supplemental Security Income program 

to provide mandatory categorically 

needy coverage to such individuals. In 

certain circumstances, 209(b) states 

must use a spend-down process to 

determine eligibility of such affected 

individuals whose income is in excess 

of the applicable 209(b) mandatory 

categorically needy income level. 209(b) 

states may also elect to have a medically 

needy program in addition to covering 

the mandatory categorically needy aged, 

blind, and disabled individuals. 

In general, the medically needy 

spend-down process and the 209(b) 

state spend-down process are the same 

with respect to the application of 

incurred medical expenses to reduce the 

excess income of individuals to the 

respective income eligibility levels. In 

that regard, as indicated in the August 

17, 2011 proposed rule, for purposes of 

the determination of the applicable 

FMAP for individuals in the new adult 

group, individuals whose income is 

greater than the applicable respective 

medically needy or 209(b) spend-down 

levels as in effect on December 1, 2009 

would be considered to be newly 

eligible individuals. Essentially, a state 

will only consider the income level of 

individuals in the new adult group, and 

not their potential spend-down 

amounts, in determining if they are 

newly eligible or not. However, based 

on comments received on the proposed 

rule on this issue, there continues to be 

confusion about the application of the 

spend-down provision in determining 

the appropriate FMAP for the adult 

group. Accordingly, to clarify the 

application of the spend-down 

provision under the threshold 

methodology, a new § 433.206(f) is 

being added in this final rule. 

Section 433.206(f)(1) generally 

describes the spend-down process as 

applied in determining eligibility. 

Section 433.206(f)(2) and (3) describe 

the determination under the threshold 

methodology of an individual as not 

newly eligible or newly eligible, 

respectively, under the definition 

indicated in § 433.204 and the 

availability of the appropriate FMAP 

under § 433.10(b) or (c) for the medical 

assistance expenditures of such 

individual for which a spend-down 

eligibility category of a state effective on 

December 1, 2009 is applicable. As 

indicated in § 433.206(f)(2), if an 

individual’s income before any 

deductions for incurred medical 

expenses are made is less than or equal 

to the applicable spend-down income 

level in the state, whether a medically 

needy or 209(b) spend-down level, the 

individual would be considered as not 

newly eligible and the medical 

assistance expenditures related to such 

individual would be claimed at the 

FMAP applicable to not newly eligible 

individuals in the state. As indicated in 

§ 433.206(f)(3), if an individual’s income 

before any deductions for incurred 

medical expenses is greater than the 

applicable spend-down income level in 

the state, whether a medically needy or 

209(b) spend-down level, the individual 

would be considered as newly eligible, 

and the medical assistance expenditures 

related to such individual would be 

claimed at the newly eligible FMAP. 

7. Special Circumstances (§ 433.206(g)). 

As states implement the threshold 

methodology, we recognize and 

anticipate that special circumstances 

may necessitate the potential need to 

consider additional adjustments to 

provide a basis for states to properly 

claim federal funding for the 

expenditures of individuals enrolled in 

the new adult group at the appropriate 

FMAP. The final rule provides a basis 

at new § 433.206(g) for addressing such 

circumstances and to assure efficient 

transitions to the new eligibility and 

FMAP provisions. Subject to CMS 

approval, this provision will apply such 

as in the case of the operation of a 

waiver authorized under section 

1902(e)(14)(A) of the Act or, to the 

extent that a section 1115 demonstration 

in effect as of December 1, 2009 applied 

non-financial eligibility criteria for 

demonstration eligibility that are 

otherwise not accounted for in the 

general rule. To the extent that such 

criteria are difficult to verify or 

unknowable in 2014 and beyond, this 

approach is intended to provide a basis 

for states to claim federal funding for 

the expenditures of individuals enrolled 

in the adult group at the appropriate 

FMAP. CMS will work with states to 

develop an appropriate proxy 

methodology, process, and the 

appropriate documentation for 

submission to and approval by CMS. 

8. Threshold Methodology State Plan 

Requirements (§ 433.206(h)). 

The proposed rule generally indicated 

that states would submit a threshold 

methodology plan to CMS for approval. 

In this final rule, states are directed to 

submit a threshold methodology state 

plan amendment to their Medicaid state 

plan for approval by CMS. The 

threshold methodology plan, which will 

be included as an attachment to the 

state plan, would indicate that the state 

will implement such methodology in 

accordance with the provisions of this 

section and include details about the 

methodology. The threshold 

methodology attachment to the state 

plan will include any options or 

alternatives the state elects with respect 

to: 

• Treatment of resources, in 

accordance with (§ 433.206(d)); 

• Treatment of enrollment caps or 

waiting lists, in accordance with 

(§ 433.206(e)); 

• Any applicable special 

circumstances, as approved by CMS 

((§ 433.206(g)); and 

• Treatment of other aspects of the 

threshold methodology as approved by 

the CMS. 

The process for submission and the 

format of the threshold methodology 

plan will be provided through guidance 

issued by CMS. 

F. Statistically Valid Sampling 

Methodology (§ 433.210)) 

In the proposed rule, § 433.210 

referred to the statistically valid 

sampling methodology. This regulatory 

provision is deleted in this final rule. 

G. CMS Established FMAP Proportion 

(§ 433.212) 

In the proposed rule, § 433.212 

referred to the CMS established FMAP 

proportion. This regulatory provision is 

deleted in this final rule. 


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V. Collection of Information 

Requirements 

In the Medicaid Eligibility proposed 

rule (RIN 0938–AQ62, 76 FR 51148), we 

solicited public comments for 60 days 

on the rule’s information collection 

requirements but none were received. 

As described in this final rule, we are 

clarifying and finalizing the provisions 

of the threshold methodology for states 

to use in the claiming of federal funding 

at the appropriate FMAP rates for 

expenditures related to the new adult 

eligibility group. In that regard, and as 

previously explained, states will need to 

submit state plan amendments to reflect 

their implementation of the threshold 

methodology. States will also need to 

submit expenditure and other 

information in their submissions of their 

quarterly Medicaid expenditure reports. 

Any information collection 

requirements for states related to the 

state plan amendment or expenditure 

report submission will be described 

separately. 

This final rule implements provisions 

of the Affordable Care Act that relate to 

the availability of increased FMAP rates 

under states’ Medicaid programs. This 

final rule codifies the increased FMAP 

rates and the related conditions and 

requirements that will be applicable 

beginning January 1, 2014, for the 

expenditures of certain individuals 

determined eligible under the new adult 

eligibility group. In particular, with 

respect to the new adult eligibility 

group, increased FMAP rates will be 

available for state Medicaid 

expenditures associated with medical 

assistance for two groups of adults: 

certain individuals who are ‘‘newly 

eligible’’ and certain individuals who 

are in defined ‘‘expansion states’’ and 

are not ‘‘newly eligible.’’ This final rule 

selected one of the three methodologies 

described in the proposed rule and 

finalizes it as the methodology that 

states will use to determine the 

appropriate FMAP in claiming federal 

funding for the expenditures related to 

individuals determined eligible in the 

new adult group. In general, the 

threshold methodology offers a 

simplified approach that compares 

individuals’ MAGI-based income, as 

already established through the basic 

eligibility process, to the income levels 

as were in effect under states’ Medicaid 

programs on December 1, 2009. To 

further ease and simplify 

administration, the threshold 

methodology also provides for potential 

population-based adjustments in the 

federal claims to account for resources 

and enrollment caps that may have 

applied in the states’ December 1, 2009, 

Medicaid programs. As specified in 

§ 433.206(h), states must amend their 

state plans to reflect the threshold 

methodology the states will implement. 

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 by 

simplifying the determinations of the 

applicable FMAP. The policies finalized 

in this final rule are intended to reduce 

or eliminate the burden on states 

seeking to determine the appropriate 

FMAP for claims as well as on 

individuals applying for Medicaid. The 

regulation makes clear that any 

additional information potentially 

requested from individuals for FMAP 

purposes cannot delay or otherwise 

affect the eligibility determination; nor 

can any individual be required to 

provide such information needed solely 

for FMAP purposes. 

We recognize that there are 

information collection requirements 

related to the implementation of this 

regulation, particularly with respect to 

the state plan amendments required by 

§ 433.206(h). CMS will seek OMB 

approval of those amendments at a later 

time under OCN 0938–1148. In 

addition, CMS will be making changes 

to its quarterly financial reporting form 

(CMS–64) to facilitate claiming under 

this final rule. CMS will seek public 

comment and OMB approval of those 

changes at a later time under OCN 

0938–0067. 

VI. Regulatory Impact Analysis 

A. Introduction 

We have examined the impact of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104–4), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). This 

final rule does not reach the economic 

threshold and thus is not considered a 

major rule. In accordance with the 

provisions of Executive Order 12866, 

this regulation was reviewed by the 

Office of Management and Budget. 

This final rule concerns the technical 

aspects of applying the appropriate 

FMAP to the expenditures of 

individuals in the new adult group 

(described at § 435.119) who are either 

newly eligible or, if not, meet the 

criteria for the increased expansion state 

FMAP. This final rule simply provides 

guidelines and a process by which states 

can claim the appropriate FMAP in a 

streamlined manner. The economic 

impacts of the Medicaid expansion are 

entirely attributable to the Affordable 

Care Act; the economic impact of this 

rule concerns the additional costs of the 

methodology described in § 433.206, but 

not the costs of the expansion or the IT 

costs of the systems, which are 

contained in other implementation 

rules. As such, the costs of this rule are 

not economically significant, 

particularly when considered relative to 

the alternatives CMS considered in 

developing this rule; the process 

described here is less costly and more 

equitable than the alternatives described 

below. 

This final rule sets out a simplified 

methodology and process for 

determining the applicable FMAP, 

which will lessen the burden on states 

implementing the provisions described 

in the Affordable Care Act. In the 

absence of the threshold methodology 

being finalized by this regulation, states 

would have to conduct an 

individualized determination based on 

the eligibility rules in effect in 2009, or 

would be subject to uncertainty (and 

potentially ongoing and costly disputes) 

in their efforts to claim the increased 

FMAP. Instead, under this final rule, the 

threshold methodology simply requires 

a basic comparison of an individual’s 

current income against converted MAGI 

income thresholds for applicable 

categories of eligibility, subject to a 

limited number of adjustments that 

states may elect to increase the accuracy 

of the methodology. Therefore, the 

approach being finalized in this rule 

provides relief from the burden that 

would otherwise accrue to states 

seeking to determine the applicable 

FMAP. Indeed, the key objective of this 

final rule, as described in the preamble 

to the proposed rule and as reaffirmed 


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here, is to alleviate the need to conduct 

complicated and unnecessary eligibility 

determinations simply for the purpose 

of applying the appropriate FMAP. The 

costs of implementing other aspects of 

the Affordable Care Act have been 

accounted for elsewhere and the 

impacts described here reflect the 

incremental costs of applying a process 

to claim the increased FMAPs available 

to individuals enrolled in the new adult 

group. We do not find this final rule to 

be economically significant because 

states are already undertaking related 

activity pursuant to the March 23, 2012 

final eligibility rule and the December 

28, 2012 letter to State and Health 

Officials (SHO #12–003, available at 

http://www.medicaid.gov/FederalPolicy-Guidance/downloads/ 

SHO12003.pdf), regarding the 

conversion of net income standards to 

MAGI equivalent income standards. 

These converted income standards will 

provide the basis for applying the 

threshold methodology described in this 

rule; states will then use standard 

Medicaid claiming procedures (using 

the CMS–64 and MBES systems as 

modified by CMS) to claim the 

applicable FMAP. 

B. Statement of Need 

This final rule will implement 

provisions of the Affordable Care Act 

related to Medicaid, specifically 

provisions about the increased FMAPs 

and related provisions. It provides states 

with a simplified, less burdensome 

approach by which to identify the 

appropriate FMAP and alleviates the 

need for states to maintain a shadow 

eligibility system based on eligibility 

rules in effect in 2009. Instead, the 

regulation sets out a fair and accurate 

methodology by which to assess 

whether individuals seeking coverage in 

2014 and beyond could have qualified 

for coverage under the state’s eligibility 

standards as of December 1, 2009. 

Applying this methodology, individuals 

for whom it is determined could not 

have been eligible for specified coverage 

as of December 1, 2009 will be deemed 

newly eligible and the higher FMAP 

will apply. 

C. Anticipated Effects 

1. Effects on State Medicaid Programs 

The final rule sets out standards for 

claiming the increased FMAPs created 

by the Affordable Care Act. Following 

the process and methodology outlined 

in this final rule will provide states that 

elect to expand coverage to the new 

adult group access to the increased 

FMAPs, resulting in a significant 

economic benefit to states. The 

threshold methodology approach will 

require minimal incremental increases 

in states’ spending relative to the 

alternatives we considered in finalizing 

this rule, as described below. 

Although state Medicaid programs 

will have to invest in administrative 

costs to implement the threshold 

methodology described in this rule, they 

will ultimately receive significant 

federal matching payments for the costs 

of new Medicaid beneficiaries. As 

described elsewhere in this section, the 

threshold methodology will minimize 

the costs to state Medicaid agencies 

relative to the costs that they would 

otherwise bear in claiming the increased 

Affordable Care Act FMAPs. For 

example, this rule provides a 

transparent and uniform process for 

states to use, eliminating the uncertainty 

they would experience with respect to 

federal funds claiming in the absence of 

this guidance. Most significantly, the 

threshold methodology provides an 

efficient and streamlined alternative to 

avoid indefinitely applying 2009 

eligibility standards to every applicant 

(in addition to current standards) 

simply for the purposes of determining 

the applicable FMAP. Numerous state 

and other commenters wrote to express 

particular concern about the burden that 

any methodology might impose on 

states and on applicants if additional 

information is requested for FMAP 

purposes. 

D. Alternatives Considered 

We considered various alternative 

methodologies to determine the 

applicable FMAP in developing the 

proposed rule and in finalizing the 

provisions of this regulation, ultimately 

revising our approach from the 

proposed rule to finalize the threshold 

methodology. First, with regard to the 

increased FMAP rates available for state 

medical assistance expenditures relating 

to ‘‘newly eligible’’ individuals, in 

developing the proposed rule we 

considered requiring all states to 

complete a second, full eligibility 

determination on all Medicaid eligibles 

using the state’s December 2009 

eligibility standards to determine the 

appropriate FMAP rate based upon 

whether or not each individual was 

newly eligible. We determined that such 

a requirement would be overly 

burdensome to states and to 

beneficiaries and would likely lead to 

errors and unnecessary costs. We do not 

believe such an approach would result 

in an economic and efficient outcome in 

administering the program; rather, it 

would be significantly more 

burdensome than the approach we are 

adopting. In addition, such a 

requirement would directly contradict 

the principles of the Affordable Care Act 

to streamline and simplify eligibility 

and enrollment into health care 

programs. We did not propose this 

approach in the proposed rule and are 

not revisiting that decision in this final 

rule to avoid imposing unnecessary and 

unwarranted burdens on states or 

beneficiaries. 

Second, we considered as an 

alternative approach the statistically 

valid sampling methodology (originally 

proposed in § 433.210). This alternative 

approach would use a sampling 

methodology across individuals in the 

adult group and related Medicaid 

expenditures to derive a statistically 

valid extrapolation of who is newly 

eligible and their related expenditures. 

We received numerous comments about 

the potential burdens associated with 

this methodology and concluded that it 

could require states to make actual 

eligibility determinations under 2009 

rules and therefore maintain precisely 

the type of shadow eligibility system 

that the rule seeks to avoid. We also 

shared commenters’ concerns that this 

alternative could place additional 

burdens on enrollees, including requests 

for information not required for 

eligibility. Such a result would not only 

be burdensome to beneficiaries but also 

inconsistent with standards established 

in the March 23, 2012 final rule that 

prevent states from asking applicants 

additional questions, when they apply 

for Medicaid, that are not related to the 

eligibility determination. Furthermore, 

we concluded that addressing concerns 

about burden on applicants could 

compromise the accuracy of the 

statistical sampling methodology. 

We also determined that the 

statistically valid sampling methodology 

would not produce accurate results in 

states that had not expanded coverage 

through section 1115 demonstrations 

prior to 2014 because those states would 

not have applicable data for sampling 

purposes. Finally, we agreed with 

commenters’ concerns that, because the 

sampling results would apply 

retroactively, this methodology would 

create the potential for sizeable 

retroactively adjusted federal payments, 

which would make it difficult for states 

to budget accurately and would 

introduce financial uncertainty for 

states. Given all of these concerns, we 

determined that the statistically valid 

sampling methodology would be more 

burdensome, less administratively 

feasible, and less accurate than the 

approach we elected, the threshold 

methodology. 

A third alternative methodology 

considered was the CMS-established 


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FMAP proportion methodology 

(originally described in § 433.212). This 

alternative approach would have used 

an extrapolation from available data 

sources to determine the proportion of 

individuals covered under the new 

adult group who would not have been 

eligible under the eligibility category in 

effect under the state plan or applicable 

waiver as of December 1, 2009, 

validating and adjusting the estimate, 

based on sampling or some other 

mechanism going forward. Public 

comments and our ongoing analysis cast 

doubt on the accuracy of this 

methodology, in part because available 

data sources have limited experience 

with newly eligible populations and 

new rules under the Affordable Care 

Act, making it difficult to accurately 

estimate the proportion of individuals 

covered under the new adult group who 

would have been eligible under the 

eligibility category that would have 

been in effect as of December 1, 2009. 

Some commenters particularly noted 

data accuracy concerns for smaller 

states. Finally, other commenters 

pointed out that the proportion 

methodology could require large annual 

adjustments of state-specific rates, 

introducing uncertainty and potentially 

fiscal burden to states. Although some 

commenters supported this alternative 

methodology, we concluded that equity, 

accuracy, and administrative simplicity 

mitigated against its selection and that 

the threshold methodology would be a 

less burdensome alternative. 

Finally, numerous commenters 

provided comments with respect to the 

provision (included in the proposed 

rule at § 433.206) regarding the choice of 

FMAP methodologies. Some 

commenters urged us to select one 

methodology for nationwide use while 

other commenters urged flexibility. In 

response to the various comments, 

particularly those noting concerns with 

the accuracy, equity, burden, and lack of 

certainty related to the statistically valid 

sampling methodology and the 

proportion methodology, we are 

finalizing one methodology, the 

threshold methodology. Our view is that 

the threshold methodology (originally 

proposed in § 433.208 and being 

finalized in § 433.206), particularly as 

modified in this final rule, is the least 

burdensome, most transparent, and 

most accurate approach relative to the 

other alternatives. We have worked and 

continue to work extensively with states 

to develop the converted MAGI income 

thresholds that will be the basis of this 

methodology. As noted above, we 

published a letter to State and Health 

Officials on December 28, 2012 (SHO 

#12–003, available at: http:// 

www.medicaid.gov/Federal-PolicyGuidance/downloads/SHO12003.pdf) to 

provide guidance about the conversion 

of net income standards to MAGI 

equivalent income standards. The 

threshold methodology builds on this 

work and, relative to the other 

alternatives that we considered, will be 

less burdensome to implement. 

In finalizing the threshold 

methodology, we accounted for various 

comments about specific elements of the 

threshold methodology, including how 

the methodology should account for 

past denials based on resources and 

how the methodology should treat 

individuals eligible for Medicaid based 

on disability status and/or spend-down 

rules. We revised this final rule to 

provide states with various options to 

account for these adjustments to the 

threshold methodology to enable 

accurate FMAP claiming. With respect 

to resources, for example, states may— 

but are not required to—undertake 

additional data analysis to develop a 

resource proxy to help determine 

additional expenditures eligible for the 

increased newly eligible FMAP. Rather 

than require all states adopting the new 

adult group to develop and apply a 

resource proxy, only states wishing to 

claim additional FMAP for populations 

that might not appear to be newly 

eligible in the absence of the 

consideration of resources will pursue 

the additional (but time-limited and 

minimal) administrative costs of doing 

so. We believe this approach strikes an 

appropriate balance that avoids 

increasing the burden on all states. 

E. 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 2013, that threshold is approximately 

$141 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. 

Because of the favorable Affordable 

Care Act increased FMAPs and the 

availability of 90 percent federal match 

for systems improvements to facilitate 

upgrades to accommodate the 

Affordable Care Act eligibility changes, 

we believe that states can take actions 

that will have limited effects on state 

costs. The extensive consultation with 

states we describe below was aimed at 

the requirements of both UMRA and 

Executive Order 13132 on Federalism. 

1. State and Local Governments 

As noted previously, the Affordable 

Care Act creates a new mandatory 

eligibility group to cover adults with 

incomes below 133 percent of the FPL. 

The recent Supreme Court decision 

gives states the option not to cover this 

eligibility group but, for states that elect 

to provide such coverage, Title XIX now 

provides substantial new federal 

support to nearly offset the costs of 

covering that population. States will 

have to undertake some work to 

properly apply the threshold 

methodology, including developing 

procedures to properly identify and 

claim the appropriate FMAP for newly 

eligible and/or certain non-newly 

eligible populations in expansion states, 

but this work builds on existing work 

they are already undertaking as part of 

the conversion of income standards to 

MAGI-based standards. Furthermore, 

claiming expenditures will be done in 

accordance with current claiming 

requirements. 

The Affordable Care Act changes the 

Medicaid and CHIP programs to 

improve coordination between programs 

and reduce the administrative burden 

on states by simplifying and 

streamlining systems. Following 

publication of the August 17, 2011 

proposed eligibility rule, we received 

input from states about the FMAP 

provisions in that rule. In addition to 

analyzing the feasibility of each of the 

proposed alternatives, we solicited 

input from a group of states working 

intensively to prepare to implement the 

new Medicaid adult group, including 

the transition to MAGI, and analyzed 

the data from these states. 

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 

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 


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the process described in the Medicaid 

Eligibility proposed rule were required). 

Based on the input we received, we 

believe that the threshold methodology 

best addresses state concerns about 

burden and simplification for those 

states that elect to adopt the new adult 

coverage group. 

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 

this final rule deal with FMAP rates for 

individuals in the new adult group, 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. 

F. 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. We 

are not preparing an RFA because the 

Secretary has determined that this final 

rule would not 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. 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, 

especially beginning in 2017 when the 

newly eligible FMAP is no longer 100 

percent. However, nothing in this rule 

will constrain states from making 

changes to alleviate any adverse effects 

on small jurisdictions. 

Because this final rule is focused on 

the appropriate FMAP to reimburse the 

expenditures of individuals enrolled in 

Medicaid, 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, like the 

provisions in the final March 23, 2012 

eligibility 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, and Medicaid 

reimbursement for, 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 

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. 

G. Conclusion 

In conclusion, we are not preparing 

analysis for either the RFA or section 

1102(b) of the Act, because we have 

determined that this final rule will not 

have a direct significant economic 

impact on states, small entities, or small 

rural hospitals. Relative to the 

alternatives considered, we determined 

the threshold methodology to be less 

burdensome to states and beneficiaries, 

more equitable, and more transparent 

than other approaches considered. The 

threshold methodology provides a 

uniform, streamlined process for states 

that adopt to extend Medicaid to the 

new adult group to claim the higher 

FMAPs provided by the Affordable Care 

Act. Finalizing this methodology 

thereby eliminates the comparatively 

more burdensome approaches of either 

uncertainty about federal claiming 

standards or requiring states to 

indefinitely determine new applicants’ 

eligibility using new standards as well 

as the eligibility rules in effect in 2009 

simply for the purposes of assigning the 

FMAP. The incremental costs of 

implementing the threshold 

methodology process are therefore 

relatively small compared to the 

alternatives considered. This analysis, 

together with the remainder final rule, 

provides a final Regulatory Impact 

Analysis. 

VIII. 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. 

We have reviewed this rule under the 

threshold criteria of Executive Order 

13132, Federalism, and have 

determined it will not have substantial 

direct effects on the rights, rules, and 

responsibilities of states, local or tribal 

governments. 

List of Subjects in 42 CFR Part 433 

Administrative practice and 

procedure, Child support Claims, Grant 

programs-health, Medicaid, Reporting 

and recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amend 42 CFR 

chapter IV as set forth below: 

PART 433—STATE FISCAL 

ADMINISTRATION 

■ 1. The authority citation for part 433 

continues to read as follows: 

Authority: Section 1102 of the Social 

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

■ 2. Section 433.10 is amended by— 

■ A. In paragraph (a), removing the 

phrase ‘‘and 1905(b),’’ and adding in its 

place the phrase ‘‘1905(b), 1905(y), and 

1905(z)’’. 

■ B. Adding new paragraphs (c)(6), 

(c)(7), and (c)(8). 

The additions read as follows: 

§ 433.10 Rates of FFP for program 

services. 

* * * * * 

(c) * * * 

(6)(i) Newly eligible FMAP. Beginning 

January 1, 2014, under section 1905(y) 

of the Act, the FMAP for a State that is 

one of the 50 States or the District of 

Columbia, including a State that meets 

the definition of expansion State in 

§ 433.204(b), for amounts expended by 

such State for medical assistance for 

newly eligible individuals, as defined in 

§ 433.204(a)(1), will be an increased 

FMAP equal to: 

(A) 100 percent, for calendar quarters 

in calendar years (CYs) 2014 through 

2016; 

(B) 95 percent, for calendar quarters 

in CY 2017; 

(C) 94 percent, for calendar quarters 

in CY 2018; 


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(D) 93 percent, for calendar quarters 

in CY 2019; 

(E) 90 percent, for calendar quarters in 

CY 2020 and all subsequent calendar 

years. 

(ii) The FMAP specified in paragraph 

(c)(6)(i) of this section will apply to 

amounts expended by a State for 

medical assistance for newly eligible 

individuals in accordance with the 

requirements of the methodology 

applied by the State under § 433.206. 

(7)(i) Temporary FMAP increase. 

During the period January 1, 2014, 

through December 31, 2015, under 

section 1905(z)(1) of the Act for a State 

described in paragraph (c)(7)(ii) of this 

section, the FMAP determined under 

paragraph (b) of this section will be 

increased by 2.2 percentage points. 

(ii) A State qualifies for the targeted 

increase in the FMAP under paragraph 

(c)(7)(i) of this section, if the State: 

(A) Is an expansion State, as described 

in § 433.204(b) of this section; 

(B) Does not qualify for any payments 

on the basis of the increased FMAP 

under paragraph (c)(6) of this section, as 

determined by the Secretary; and 

(C) Has not been approved by the 

Secretary to divert a portion of the 

disproportionate share hospital 

allotment for the State under section 

1923(f) of the Act to the costs of 

providing medical assistance or other 

health benefits coverage under a 

demonstration that is in effect on July 1, 

2009. 

(iii) The increased FMAP under 

paragraph (c)(7)(i) of this section is 

available for amounts expended by the 

State for medical assistance for 

individuals that are not newly eligible 

as defined in § 433.204(a)(1). 

(8) Expansion State FMAP. Beginning 

January 1, 2014, under section 

1905(z)(2) of the Act, the FMAP for an 

expansion State defined in § 433.204(b), 

for amounts expended by such State for 

medical assistance for individuals 

described in § 435.119 of this chapter 

who are not newly eligible as defined in 

§ 433.204(a)(1), and who are 

nonpregnant childless adults with 

respect to whom the State may require 

enrollment in benchmark coverage 

under section 1937 of the Act, will be 

determined in accordance with the 

expansion State FMAP formula in 

paragraph (c)(8)(i). 

(i) Expansion State FMAP. 

(ii) Transition percentage. For 

purposes of paragraph (c)(8)(i) of this 

section, the transition percentage is 

equal to: 

(A) 50 percent, for calendar quarters 

in CY 2014; 

(B) 60 percent, for calendar quarters 

in CY 2015; 

(C) 70 percent, for calendar quarters 

in CY 2016; 

(D) 80 percent, for calendar quarters 

in CY 2017; 

(E) 90 percent, for calendar quarters in 

CY 2018; and 

(F) 100 percent, for calendar quarters 

in CY 2019 and all subsequent calendar 

years. 

■ 3. Subpart E is added to part 433 to 

read as follows: 

Subpart E—Methodologies for Determining 

Federal Share of Medicaid Expenditures for 

Adult Eligibility Group 

Sec. 

433.202 Scope. 

433.204 Definitions. 

433.206 Threshold methodology. 

Subpart E—Methodologies for 

Determining Federal Share of Medicaid 

Expenditures for Adult Eligibility 

Group 

§ 433.202 Scope. 

This subpart sets forth the 

requirements and procedures that are 

applicable to support State claims for 

the increased FMAP specified at 

§ 433.10(c)(6) for the medical assistance 

expenditures for individuals determined 

eligible as specified in § 435.119 of this 

chapter who meet the definition of 

newly eligible individual specified in 

§ 433.204(a)(1). These procedures will 

also identify individuals determined 

eligible as specified in § 435.119 of this 

chapter for whom the State may claim 

the regular FMAP rate specified at 

§ 433.10(b) or the increased FMAP rate 

specified at § 433.10(c)(7) or (8), as 

applicable. 

§ 433.204 Definitions. 

(a)(1) Newly eligible individual means 

an individual determined eligible for 

Medicaid in accordance with the 

requirements of the adult group 

described in § 435.119 of this chapter, 

and who, as determined by the State in 

accordance with the requirements of 

§ 433.206, would not have been eligible 

for Medicaid under the State’s eligibility 

standards and methodologies for the 

Medicaid State plan, waiver or 

demonstration programs in effect in the 

State as of December 1, 2009, for full 

benefits or for benchmark coverage 

described in § 440.330(a), (b), or (c) of 

this chapter or benchmark equivalent 

coverage described in § 440.335 of this 

chapter that has an aggregate actuarial 

value that is at least actuarially 

equivalent to benchmark coverage 

described in § 440.330(a), (b), or (c) of 

this chapter, or would have been 

eligible but not enrolled (or placed on 

a waiting list) for such benefits or 

coverage through a waiver under the 

plan that had a capped or limited 

enrollment that was full. 

(2) Full benefits means, for purposes 

of paragraph (a)(1) of this section, with 

respect to an adult individual, medical 

assistance for all services covered under 

the State plan under Title XIX of the Act 

that is not less in amount, duration, or 

scope, or is determined by the Secretary 

to be substantially equivalent, to the 

medical assistance available for an 

individual described in section 

1902(a)(10)(A)(i) of the Act. 


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(3) For purposes of establishing under 

paragraphs (a)(1) and (2) of this section 

whether an individual would not have 

been eligible for full benefits, 

benchmark coverage, or benchmark 

equivalent coverage under a waiver or 

demonstration program in effect on 

December 1, 2009, the State must 

provide CMS with its analysis, in 

accordance with guidance issued by 

CMS, about whether the benefits 

available under such waiver or 

demonstration constituted full benefits, 

benchmark coverage, or benchmark 

equivalent coverage. CMS will review 

such analysis and confirm the 

applicable FMAP. Individuals for whom 

such benefits or coverage would have 

been available under such waiver or 

demonstration are not newly eligible 

individuals. 

(b)(1) Expansion State means a State 

that, as of March 23, 2010, offered 

health benefits coverage statewide to 

parents and nonpregnant, childless 

adults whose income is at least 100 

percent of the Federal Poverty Level. A 

State that offers health benefits coverage 

to only parents or only nonpregnant 

childless adults described in the 

preceding sentence will not be 

considered to be an expansion State. 

Such health benefits coverage must: 

(i) Have included inpatient hospital 

services; 

(ii) Not have been dependent on 

access to employer coverage, employer 

contribution, or employment; and 

(iii) Not have been limited to 

premium assistance, hospital-only 

benefits, a high deductible health plan, 

or benefits under a demonstration 

program authorized under section 1938 

of the Act. 

(2) For purposes of paragraph (b)(1) of 

this section and for § 433.10(c)(8), a 

nonpregnant childless adult means an 

individual who is not eligible based on 

pregnancy and does not meet the 

definition of a caretaker relative in 

§ 435.4 of this chapter. 

§ 433.206 Threshold methodology. 

(a) Overview. Effective January 1, 

2014, States must apply the threshold 

methodology described in this 

paragraph for purposes of determining 

the appropriate claiming for the Federal 

share of expenditures at the applicable 

FMAP rates described in § 433.10(b) and 

(c) for medical assistance provided with 

respect to individuals who have been 

determined eligible for the Medicaid 

program under § 435.119 of this chapter. 

Subject to the provisions of this 

paragraph, States must apply the CMSapproved State specific threshold 

methodology to determine and 

distinguish such individuals as newly 

or not newly eligible individuals in 

accordance with the definition in 

§ 433.204(a)(1), and in accordance with 

States’ Medicaid eligibility criteria as in 

effect on December 1, 2009 and to 

attribute their associated medical 

expenditures with the appropriate 

FMAP. The threshold methodology 

must not be applied by States for the 

purpose of determining the applicable 

FMAP for individuals under any other 

eligibility category other than § 435.119 

of this chapter. 

(b) General principles. The threshold 

methodology should: 

(1) Not impact the timing or approval 

of an individual’s eligibility for 

Medicaid. 

(2) Not be biased in such a manner as 

to inappropriately establish the numbers 

of, or medical assistance expenditures 

for, individuals determined to be newly 

or not newly eligible. 

(3) Provide a valid and accurate 

accounting of individuals who would 

have been eligible in accordance with 

the December 1, 2009 eligibility 

standards and applicable eligibility 

categories for the benefits described in 

§ 433.204(a)(1), and subject to 

paragraphs (d), (e), and (g) of this 

section, by incorporating simplified 

assessments of resources, enrollment 

cap requirements in place at that time, 

and other special circumstances as 

approved by CMS, respectively. 

(4) Operate efficiently, without further 

review once an individual has been 

determined not to be newly eligible 

based on the December 1, 2009 

standards for any eligibility category. 

(c) Components of the threshold 

methodology. Subject to the submission 

of a threshold methodology State plan 

amendment as specified in paragraph 

(h) of this section, the provisions of the 

threshold methodology consist of two 

components, the individual incomebased determination and populationbased non-income adjustments to reflect 

resource criteria, enrollment caps in 

effect on December 1, 2009, and other 

factors in accordance with paragraph (g) 

of this section. 

(1) Scope. The threshold methodology 

shall apply with respect to the 

population, and the associated 

expenditures for such population, 

which has been determined eligible for 

Medicaid under section 

1902(a)(10)(A)(i)(VIII) of the Act and in 

accordance with § 435.119 of this 

chapter. This population and associated 

expenditures must not include 

individuals who have been determined 

eligible for Medicaid under any other 

mandatory or optional eligibility 

category. 

(2) Benefit criteria for newly eligible. 

An individual eligible for and enrolled 

under § 435.119 of this chapter is 

considered newly eligible if, with 

respect to the applicable eligibility 

category in effect on December 1, 2009, 

the benefits did not meet the criteria 

described in the newly eligible 

definition at § 433.204(a)(1). 

(3) Individual income-based 

determination. The individual incomebased determination shall be a 

comparison of the individual’s MAGIbased income to the income standard in 

effect on December 1, 2009, as 

converted to an equivalent MAGI-based 

income standard for each applicable 

eligibility category as in effect on that 

date, as follows. 

(i) The amount of an individual’s 

income under the threshold 

methodology is the MAGI-based income 

determined in accordance with 

§ 435.603 of this chapter. 

(ii) For each individual, the 

equivalent MAGI-based income 

eligibility standard is the applicable 

income eligibility standard for the 

applicable category of eligibility as in 

effect on December 1, 2009 that is 

converted to an equivalent MAGI-based 

income standard. For example, as 

applicable, a separate MAGI-based 

income standard will be applied for 

individuals determined to be disabled 

who would have been eligible under an 

optional eligibility category in effect on 

December 1, 2009 that was based on 

disability. For these purposes, the 

applicable equivalent MAGI-based 

standard is the standard as submitted by 

the State and approved by CMS in 

accordance with CMS guidance. 

(iii) With respect to income eligibility 

criteria, if the individual’s MAGI-based 

income is at or below the applicable 

converted MAGI-based income standard 

for the relevant eligibility category or 

group, then the individual is included 

in the population that is not newly 

eligible; 

(iv) With respect to income eligibility 

criteria, if the individual’s MAGI-based 

income is greater than the applicable 

converted MAGI-based income standard 

for the relevant eligibility category or 

group, then the individual is included 

in the population that is newly eligible; 

(v) Treatment of spend-down 

programs. Treatment of medically needy 

or spend-down programs under the 

threshold methodology is described in 

paragraph (f) of this section. 

(vi) For purposes of comparing the 

individual’s MAGI-based income to the 

applicable converted MAGI-based 

income standard in effect on December 

1, 2009, an individual will not be 

considered disabled absent an actual 


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disability determination for the 

individual that is in accordance with 

the disability definition applicable for 

the State under Title XIX of the Act. 

(4) Treatment of disability. For 

purposes of applying the appropriate 

FMAP under § 433.10(b) or (c) for the 

medical assistance expenditures of an 

individual in applying the definition of 

newly eligible under § 433.204(a)(1), for 

eligibility categories or groups as in 

effect on December 1, 2009 for which 

disability was an eligibility criteria: 

(i) During the period of a disability 

determination. During the period for 

which a disability determination is 

pending, including during the period of 

any appeal process, and absent an actual 

disability determination for the 

individual that is in accordance with 

the disability definition applicable for 

the State under Title XIX of the Act, the 

individual is not considered to be 

disabled. 

(ii) Following a disability 

determination. With respect to an 

individual for which a disability 

determination was pending, following 

the actual determination of disability, 

the individual will be considered 

disabled effective with the date of the 

disability determination, or, if later, the 

disability onset date, as determined. 

(5) Population-based adjustments to 

the populations of newly eligible and 

not newly eligible. 

(i) The State may elect a resource 

criteria proxy adjustment described in 

paragraph (d) of this section. 

(ii) States that had a waiver or 

demonstration program with an 

enrollment cap in effect as of December 

1, 2009 must apply an adjustment based 

on enrollment caps, subject to the 

definition of newly eligible individual 

in § 433.204(a)(1) and paragraph (e) of 

this section. 

(iii) States that have special 

circumstances may need to submit 

associated proxy methodologies to CMS 

for approval by CMS as described in 

paragraph (g) of this section. 

(6) Application of FMAP rates to adult 

group expenditures. Subject to 

population adjustments under 

paragraphs (d), (e), or (g) of this section, 

federal funding for a State’s 

expenditures for medical assistance 

provided to individuals determined 

eligible under § 435.119 of this chapter, 

including individuals determined 

eligible under that eligibility group 

during the evaluation for another 

eligibility category, must be claimed 

using the applicable FMAP as follows: 

(i) The newly eligible FMAP under 

§ 433.10(c)(6) is applicable for the 

medical assistance expenditures for 

individuals determined to be newly 

eligible, as defined in § 433.204(a)(1). 

(ii) The applicable FMAP under 

§ 433.10(b) or § 433.10(c)(7) or (8) is 

applicable for the medical assistance 

expenditures for individuals determined 

not to be newly eligible. 

(7) Status as newly or not newly 

eligible. Under the threshold 

methodology States must provide that 

once individuals are determined under 

the threshold methodology to be either 

newly or not newly eligible individuals 

in accordance with the applicable 

December 1, 2009 eligibility criteria, the 

State would apply that determination 

until a new determination of MAGIbased income has been made in 

accordance with § 435.916 of this 

chapter, or the individual has been 

otherwise determined not to be covered 

under the adult group set forth at 

§ 435.119 of this chapter. 

(d) Optional resource criteria proxy 

adjustment. (1) General. Under an 

election under this paragraph (d), the 

State may use a resource proxy 

methodology for purposes of adjusting 

the claims for the expenditures of the 

population enrolled under § 435.119 of 

this chapter to account for individuals 

who would not have been eligible for 

Medicaid because of the application of 

resource criteria as in effect for such 

population as of December 1, 2009, and 

therefore would meet the newly eligible 

individual definition at § 433.204(a)(1). 

Under this paragraph (d), a State may 

elect to apply a resource proxy 

methodology with respect to the 

resource criteria as in effect on 

December 1, 2009 and applied to the 

expenditures for a specific eligibility 

category or categories of individuals as 

in effect on December 1, 2009, or 

applied to the expenditures of the entire 

population enrolled under § 435.119 of 

this chapter. As provided in paragraph 

(d)(4) of this section, the State must 

indicate any resource proxy election in 

the threshold methodology State plan 

amendment submitted under paragraph 

(h) of this section. The use of a resource 

proxy methodology must not delay or 

interfere with the eligibility 

determination for an individual. 

(2) A State’s resource proxy 

methodology must: 

(i) Describe each eligibility group or 

groups for which an individual eligible 

under § 435.119 would have been 

eligible on December 1, 2009, subject to 

resource criteria, and a methodology to 

apply those resource criteria as an 

adjustment to the total expenditures to 

adjust determinations of the newly 

eligible population under paragraph (c) 

of this section. 

(ii) Be auditable. 

(iii) Be based on statistically valid 

data, which is either: 

(A) Existing State data from and for 

periods before January 1, 2014 on the 

resources of individuals who had 

applied and received a determination 

with respect to Medicaid eligibility, 

including resource eligibility under the 

State’s applicable December 1, 2009 

eligibility criteria. The existing State 

data must be specifically related to 

resource eligibility determinations, 

indicate the number and types of 

individuals for whom resource 

determinations were made, and 

establish the denial rates specifically 

identified as due to excess resources; or 

(B) Post-eligibility State data on the 

resources of individuals described in 

paragraph (d)(2)(iii)(B)(1) and (2) of this 

section, based on and obtained through 

a post-eligibility statistically valid 

sample of such individuals with respect 

to the applicable Medicaid eligibility 

categories and resource eligibility 

criteria under the State’s applicable 

December 1, 2009 eligibility criteria: 

(1) State data from and for periods 

before January 1, 2014 must be for 

individuals in eligibility categories 

relevant to § 435.119 of this chapter who 

apply and receive a determination with 

respect to Medicaid eligibility, 

including both approvals and denials, to 

establish denial rates specifically due to 

excess resources and identify numbers 

and types of individuals. 

(2) State data from and for periods on 

or after January 1, 2014 must only be for 

individuals determined eligible and 

enrolled under § 435.119 of this chapter, 

must compare individuals’ resources to 

the applicable December 1, 2009 

resource criteria to establish denial rates 

specifically due to excess resources, and 

identify numbers and types of 

individuals. 

(iv) Describe the State data on 

individuals’ resources used and the 

application of such data. Whether such 

State data is based on data described in 

paragraph (d)(2)(iii)(A) or (B) of this 

section, such State data must represent 

sampling results for a period of 

sufficient length to be statistically valid. 

(v) Provide that the resource proxy 

methodology will account for the 

treatment of resources in a statistically 

valid manner when there is a lack of 

sufficient information to make a 

resource determination for a particular 

individual in a sampled population. 

(vi) Describe the application of the 

resource proxy methodology in 

establishing the amount and submission 

of claims for Federal funding by the 

State for the medical assistance 

expenditures of the applicable eligibility 

group(s). Such claims submitted under 


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the resource proxy methodology must 

reflect the appropriate FMAP for the 

medical assistance expenditures of the 

affected eligibility group(s). 

(vii) As appropriate, describe and 

demonstrate the statistical validity of 

the resource proxy methodology and the 

use of data under such methodology. 

(3) Effective date for application of 

resource proxy. The resource proxy 

shall not be effective prior to the 

beginning of the quarter in which such 

resource proxy is submitted to CMS 

under the threshold methodology State 

plan in paragraph (h) of this section. 

(4) One time election for resource 

proxy. The election, application, and 

description of a resource proxy 

methodology under this paragraph for 

individuals determined eligible under 

§ 435.119 must be included in a onetime submission of a State plan 

amendment submitted under paragraph 

(h) of this section no later than one year 

from the first day of the quarter in 

which eligibility for individuals under 

§ 435.119 of this chapter is initially 

effective for the State. 

(e) Enrollment caps adjustment. (1) 

Scope. Certain States may have applied 

enrollment caps, limits, or waiting lists 

in their Medicaid programs as in effect 

on December 1, 2009. Under the 

definition of newly eligible individual 

in § 433.204(a)(1), such States must 

consider as newly eligible those 

individuals eligible under § 435.119 of 

this chapter who would otherwise be 

eligible for full benefits, benchmark 

coverage, or benchmark equivalent 

coverage provided through a 

demonstration under the State plan 

effective December 1, 2009, but would 

not have been enrolled (or would have 

been on a waiting list) based on the 

application of an enrollment cap or 

limit determined in accordance with the 

approved demonstration as in effect on 

that date. Such States must only apply 

such enrollment cap, limit or waiting 

list provisions with respect to eligibility 

category or categories for which such 

provisions were applicable (for 

example, nonpregnant childless adults 

or parents/caretaker relatives) and in 

effect under the State’s Medicaid 

program on December 1, 2009. For this 

purpose, individuals who would have 

been on a waiting list are considered as 

not enrolled under the demonstration. 

(2) A State for which multiple 

enrollment caps or limits were in effect 

under its December 1, 2009 Medicaid 

program may elect to combine such 

enrollment caps or limits, unless such 

treatment would preclude claiming of 

Federal funding at the applicable FMAP 

rate required under § 433.10(b) or (c) 

(for example, to distinguish claims for 

childless adults and parents in an 

expansion State) for the medical 

assistance expenditures of individuals 

determined eligible and enrolled under 

§ 435.119 of this chapter; a State with 

enrollment cap or limit provisions that 

would preclude combining enrollment 

caps or limit provisions must use 

separate caps; or, the State, at its option, 

may elect to use separate caps. 

(3) For purposes of claiming Federal 

funding, with respect to each claiming 

period for which the State claims 

Federal funding for an eligibility 

category for which an enrollment cap or 

limit is applicable and in effect on 

December 1, 2009, the State must 

account for: 

(i) The total unduplicated number of 

individuals eligible and enrolled under 

§ 435.119 of this chapter for the 

applicable claiming period. 

(ii) The total State medical assistance 

expenditures for individuals eligible 

and enrolled under § 435.119 of this 

chapter for the applicable claiming 

period. 

(iii) The enrollment cap or limit in 

effect on December 1, 2009 for the 

eligibility category, determined in 

accordance with the approved 

demonstration as in effect on December 

1, 2009. 

(A) For States that elect under 

paragraph (e)(2) of this section to 

combine the enrollment caps, the 

enrollment cap is the sum of the 

enrollment caps for each eligibility 

group which is being combined. 

(B) For States that elect to treat the 

enrollment caps separately under 

paragraph (e)(2) of this section, each 

enrollment cap will be accounted for 

separately. 

(C) The level of the enrollment cap 

will be as authorized under the 

demonstration in effect on December 1, 

2009; or, if the State had affirmatively 

set the cap at a lower level consistent 

with flexibility provided by the 

demonstration terms and conditions, the 

State may elect to apply the lower cap 

as in effect in the State on December 1, 

2009. If a State elects to use such an 

alternate State-specified enrollment cap, 

the State will provide CMS with 

evidence, in its State plan amendment 

submitted to CMS under paragraph (h) 

of this section, that it had affirmatively 

implemented such a cap. Whether the 

State uses the authorized cap or a lower, 

verifiable cap as in effect in the State 

consistent with the demonstration 

special terms and conditions, the 

amount of expenditures up to the 

proportion of the 2009 enrollment cap 

to the total number of currently enrolled 

people in the group would not be 

claimed at the newly eligible FMAP. 

(4) States for which an enrollment 

cap, limit, or waiting list was applicable 

under their Medicaid programs as in 

effect on December 1, 2009, must 

describe the treatment of such provision 

or provisions in the submission to CMS 

for approval by CMS in accordance with 

the State plan requirements outlined in 

§ 433.206(h). 

(f) Application of spend-down income 

eligibility criteria. (1) General. Certain 

States’ Medicaid programs as in effect 

on December 1, 2009 may have included 

eligibility categories for which 

deduction of incurred medical expenses 

from income (referred to as spenddown) under the provisions of sections 

1902(a)(10)(C) or 1902(f) of the Act was 

applied in determining individuals’ 

Medicaid eligibility. Paragraphs (f)(2) 

and (3) of this section apply, for 

purposes of determining whether an 

individual enrolled under § 435.119 of 

this chapter meets the definition of 

newly eligible under § 433.204(a)(1), 

and for purposes of applying the 

appropriate FMAP under § 433.10(b) or 

(c) for the medical assistance 

expenditures of the individual for 

which a spend-down eligibility category 

of a State effective on December 1, 2009 

is applicable. 

(2) Not newly eligible individual. For 

purposes of a State’s spend-down 

provision, an individual enrolled under 

§ 435.119 of this chapter whose income 

before the deduction of incurred 

medical expenses is less than or equal 

to the applicable December 1, 2009 State 

spend-down eligibility income level that 

would have resulted in full benefits is 

considered not newly eligible. The 

FMAP applicable for the medical 

assistance expenditures of such an 

individual is the appropriate FMAP 

under § 433.10(b) and (c) as applicable 

for an individual who is not newly 

eligible. 

(3) Newly eligible individual. For 

purposes of a State’s spend-down 

provision, an individual enrolled under 

§ 435.119 of this chapter whose income 

before the deduction of incurred 

medical expenses is greater than the 

applicable State spend-down eligibility 

income level is considered newly 

eligible. The FMAP applicable for the 

medical assistance expenditures of such 

an individual is the appropriate FMAP 

under § 433.10(b) and (c) as applicable 

for an individual who is newly eligible. 

(g) Special circumstances. States may 

submit additional proxy methodologies 

to CMS for approval by CMS in 

accordance with the State plan 

requirements outlined in § 433.206(h). 

(h) Threshold methodology State plan 

requirements. To claim expenditures at 

the increased FMAPs described in 


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Federal Register / Vol. 78, No. 63 / Tuesday, April 2, 2013 / Rules and Regulations 19947 

§ 433.210(c)(6) of (c)(8), the State must 

amend its State plan under the 

provisions of subpart B of part 430 to 

reflect the threshold methodology the 

State implements in accordance with 

the provisions of this section. The 

threshold methodology will be included 

as an attachment to the State plan and, 

explicitly and by reference, must: 

(1) Specify that the threshold 

methodology the State implements is in 

accordance with this section; 

(2) Specify that the threshold 

methodology the State implements 

accounts for the individuals determined 

eligible under the adult group in 

§ 435.119 of this chapter as a newly 

eligible individual or not newly eligible 

individual; and, on that basis, the State 

implements appropriate tracking for 

purpose of claiming Federal Medicaid 

funding for the associated medical 

assistance expenditures. 

(3) Reference the converted MAGIbased December 1, 2009 income 

eligibility standards and the associated 

eligibility groups, describe how the 

State will apply such standards and 

methodologies, and include other 

relevant criteria in the assignment of 

FMAP. 

(4) Indicate any required provisions, 

or options and alternatives the State 

elects, with respect to: 

(i) Treatment of resources, in 

accordance with paragraph (d) of this 

section; 

(ii) Treatment of enrollment caps or 

waiting lists, in accordance with 

paragraph (e) of this section; and 

(iii) Special circumstances as 

approved by CMS in accordance with 

paragraph (g) of this section. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: March 20, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: March 26, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–07599 Filed 3–29–13; 11:15 am] 

BILLING CODE 4120–01–P 


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