```

[Federal Register Volume 78, Number 63 (Tuesday, April 2, 2013)]
[Rules and Regulations]
[Pages 19917-19947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07599]

[[Page 19917]]

Vol. 78

Tuesday,

No. 63

April 2, 2013

Part IV

Department of Health and Human Services

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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

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

[[Page 19918]]

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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.

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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 Sec.  
433.10(c)(8), Sec.  433.206(c)(4), Sec.  433.206(d), Sec.  433.206(e), 
Sec.  433.206(f), and Sec.  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

[[Page 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:

Sec.  433.10(c)(8)--Expansion State FMAP
Sec.  433.206(c)(4)--Components of Threshold Methodology; Treatment of 
Disability
Sec.  433.206(d)--Optional Resource Criteria Proxy Adjustment
Sec.  433.206(e)--Enrollment Caps Adjustment
Sec.  433.206(f)--Application of Spend-down Income Eligibility Criteria
Sec.  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 benchmark-equivalent 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 Sec.  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 MAGI-based equivalent. It then describes, and in some cases, 
offers states options, regarding the treatment of other factors

[[Page 19920]]

that may be relevant for purposes of claiming the appropriate FMAP. To 
complete the transition to the MAGI-based methodology, CMS is also 
working with states to develop MAGI-based 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 FMAP-related provisions that were 
discussed in more detail in the Medicaid Eligibility proposed rule (76 
FR 51172 through 51178):
     Newly Eligible Increased FMAP Sec.  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 Sec.  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 Sec.  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 Sec.  433.204. 
Indicated the definition of newly eligible individual for purposes of 
the availability of the newly eligible FMAP referenced in Sec.  
433.10(c)(6) for the medical assistance expenditures of such 
individuals.
     Methodology Sec.  433.206. Described three possible 
approaches in Sec.  433.208, Sec.  433.210, or Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  435.119. 
Therefore, for example, former foster care children enrolled in the new 
group described in proposed regulation at Sec.  435.150 (78 FR 4687) 
are not eligible for the newly eligible FMAP because they will not be 
enrolled under Sec.  435.119. As our proposed regulation explains (78 
FR

[[Page 19921]]

4604), we proposed that eligibility under the adult group at Sec.  
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 Sec.  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 Sec.  435.119, effective January 1, 2014, but they will 
not be newly eligible (as defined in Sec.  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 Sec.  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 Sec.  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 
Sec.  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 
Sec.  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 (Sec.  433.10)

    The August 17, 2011 proposed rule would have amended part 433 to 
add new provisions at Sec.  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 (Sec.  433.10(c)(6))
    In Sec.  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

[[Page 19922]]

to be newly eligible as defined in section 1905(y)(2)(A) of the Act.
    Comment: Several commenters noted, in their comments on Sec.  
433.10(c)(6), that the definition of ``newly eligible'' in proposed 
Sec.  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 Sec.  433.10(c)(6).
    Response: We agree with the commenters, as is described below under 
comments regarding Sec.  433.204, and have made changes to the 
regulation text accordingly to ensure that the increased FMAP described 
at Sec.  433.10(c)(6) can be applied properly. Please see the 
discussion below on the revised Sec.  433.204.
    Comment: One commenter noted a typographical error in Sec.  
433.10(c)(6)(ii), observing that a reference to Sec.  422.206 should be 
to Sec.  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 
Sec.  433, Sec.  433.206 now describes the threshold methodology and it 
remains the correct cross-reference.
2. Expansion State FMAP (Sec.  433.10(c)(7) and Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  433.204, below), 
also suggest that the proposed definition of ``expansion state'' in 
Sec.  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 Sec.  
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 Sec.  
433.10(c)(8)(iii), to Sec.  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 Sec.  433.10(c)(8)(i) and (iv). Several commenters 
noted that language in proposed Sec.  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 (Sec.  435.119) who are not determined to be newly eligible.
    Response: To clarify the availability of the expansion state FMAP, 
we have restructured Sec.  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 (Sec.  433.204)

    In the August 17, 2011 proposed rule, CMS proposed only one new 
FMAP-related 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 Sec.  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 Sec.  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 Sec.  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 Sec.  433.206(e), as revised. In addition, 
Sec.  433.204(a)(2) now includes a

[[Page 19923]]

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 Sec.  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 Sec.  435.119'' to the definition of newly eligible 
proposed in Sec.  433.204. The commenter suggested that this revision 
would clarify the reference in our proposed definition to the new adult 
group, as defined in Sec.  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 Sec.  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 Sec.  
435.119. Including this cross-reference also addresses the suggestion 
that we include age ranges in the definition of ``newly eligible'' 
since Sec.  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 Sec.  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 Sec.  433.10(c)(6) 
is only available for expenditures of individuals enrolled in the new 
adult group described in Sec.  435.119 who meet the definition of newly 
eligible codified in Sec.  433.204(a)(1). Under the related statute at 
section 1902(a)(10)(A)(i)(VIII) of the Act, and the regulation at Sec.  
435.119, individuals such as parents and caretaker relatives who are 
eligible under Sec.  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 Sec.  
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 (Sec.  433.206 through Sec.  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, Sec.  433.206 set out 
principles for these methodologies; enumerated the methodologies 
described in more detail in proposed Sec.  433.208, Sec.  433.210, and 
Sec.  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 Sec.  435.119 of this chapter.

[[Page 19924]]

    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-Policy-Guidance/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 Sec.  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 Sec.  433.206 are inapplicable. Below is a 
summary of the public comments that we received with respect to 
proposed Sec.  433.206 through Sec.  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 (Sec.  433.206)
    Comment: Some commenters supported the flexibility offered by the 
three proposed approaches in the proposed Sec.  433.208, Sec.  433.210, 
and Sec.  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 individual-specific 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 Sec.  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 Sec.  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 Sec.  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

[[Page 19925]]

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 
take-up 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 Sec.  
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 Sec.  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 
Sec.  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-Policy-Guidance/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 (Sec.  433.208, redesignated Sec.  433.206)
    Proposed Sec.  433.208, which is being redesignated as Sec.  
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.

[[Page 19926]]

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 Sec.  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 Sec.  433.206(b)(1), language (originally 
proposed at Sec.  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 Sec.  
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 Sec.  433.206(b)(1) that was originally included 
at proposed Sec.  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 Sec.  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 one-time 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,

[[Page 19927]]

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 Sec.  
435.907(c), which set out the standards for a streamlined eligibility 
application. Several commenters suggested strengthening proposed Sec.  
433.206(d) by reinforcing the requirements to not unduly burden 
applicants with a cross-reference to Sec.  435.907 (and to rely on data 
matching as required by Sec.  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 Sec.  
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 Sec.  
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 Sec.  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, Sec.  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 MAGI-
based 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 Sec.  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-Policy-Guidance/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) MAGI-based 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 Sec.  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, Sec.  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

[[Page 19928]]

method for assigning the FMAP and further the simplification goals of 
the Affordable Care Act, we significantly revised the original Sec.  
433.208(b)(2), now redesignated as Sec.  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 
self-declaration 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 
Sec.  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 Sec.  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 Sec.  435.119. The threshold methodology 
provides for states to use the applicable state plan or demonstration 
eligibility income standard converted to a MAGI-equivalent 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 Sec.  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

[[Page 19929]]

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 Sec.  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 Sec.  
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 Sec.  435.119. The approach we outline in 
this rule provides states with greater flexibility and is consistent 
with MAGI-based income determinations that will be in effect starting 
January 1, 2014. States may continue to use AVS for non-MAGI 
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  435.119.
f. Timeframes and Parameters for Notice to CMS
    In light of the proposed rules that identified potential alternate 
FMAP claiming methodologies, Sec.  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 Sec.  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 Sec.  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 Sec.  
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

[[Page 19930]]

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 Sec.  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 Sec.  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 Sec.  
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 non-federal 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 (Sec.  433.210)
    As originally proposed in Sec.  433.210, one methodology to assign 
FMAP would

[[Page 19931]]

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 (Sec.  433.212)
    As originally proposed in Sec.  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 state-by-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

[[Page 19932]]

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 (Sec.  433.10(c)).

1. Newly Eligible FMAP (Sec.  433.10(c)(6))
    The provisions of Sec.  433.10(c)(6) describe the availability and 
amounts of the increased FMAP for newly eligible adults, as defined in 
Sec.  433.204(a)(i), who are enrolled in the new adult group described 
in Sec.  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 Sec.  
433.10(c)(8)(iii) in the proposed rule and codifies at Sec.  
433.204(b)) may receive the newly eligible FMAP, we revised Sec.  
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 (Sec.  433.10(c)(7)).
    In accordance with section 1905(z)(1)(A) of the Act, Sec.  
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 Sec.  
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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
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 Sec.  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 (Sec.  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 Sec.  433.204(b)(1).
    In response to comments and for purposes of clarification, proposed 
Sec.  433.10(c)(8)(iv) was deleted as redundant. As discussed above, 
Sec.  433.10(c)(6)(i) as revised clarifies that the newly eligible FMAP 
is available for newly eligible individuals in an expansion state. 
However, Sec.  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 Sec.  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 (Sec.  433.202).

    Section 433.202, which sets out the scope of the FMAP provisions 
for the new adult eligibility category in Sec.  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 Sec.  433.10(b) 
and (c).

C. Definitions (Sec.  433.204).

1. Newly Eligible Individual (Sec.  433.204(a)(1)).
    Section 433.204 is revised to include the definition of newly 
eligible individual in the renumbered Sec.  433.204(a)(1), which now 
indicates that the determination of an individual as newly eligible is 
in accordance with the requirements of Sec.  433.206, the revised and 
renumbered threshold methodology.
     The definition of newly eligible individual in Sec.  
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 
Sec.  440.330 and Sec.  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 
Sec.  435.119 who could have previously received full

[[Page 19933]]

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 Sec.  433.204(a)(1) and their 
medical assistance expenditures will not be matched at the newly 
eligible FMAP provided in Sec.  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 Sec.  
433.10(c)(7) or (8).
    As described in Sec.  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/State-Resource-Center/Frequently-Asked-Questions/Downloads/ACA-FAQ-BHP.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 Sec.  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 Sec.  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 (Sec.  433.204(a)(2)).
    Section 433.204 is revised to add a new Sec.  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 (Sec.  433.204(b)).
    A new Sec.  433.204(b)(1) is added to include the definition of 
``expansion state,'' moving the definition from the proposed Sec.  
433.10(c)(8)(iii). We also clarified in a new Sec.  433.204(b)(2), for 
purposes of applying the expansion state FMAP in Sec.  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 Sec.  435.4.

D. Choice of Methodology (Sec.  433.206 in proposed rule)

    In the proposed rule Sec.  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 (Sec.  433.206, was Sec.  433.208 in proposed 
rule)

    Previously numbered as Sec.  433.208 ``Threshold Methodology'' in 
the proposed rule, this final rule redesignates this section of the 
regulation as Sec.  433.206. Under the threshold methodology, for 
individuals enrolled under Sec.  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: Sec.  433.206(c)(4), Sec.  433.206(d), 
Sec.  433.206(e), Sec.  433.206(f), and Sec.  433.206(g).
1. Overview (Sec.  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 Sec.  433.10(b) and (c). The threshold methodology encompasses an 
individualized analysis of whether individuals determined eligible 
under Sec.  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 Sec.  
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 Sec.  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 Sec.  435.119 can be 
matched at the

[[Page 19934]]

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 (Sec.  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 (Sec.  433.206(c)).
    To clarify the threshold methodology, the final Sec.  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 Sec.  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 Sec.  435.916, or until the individual 
has been otherwise determined not to be covered under the adult group 
set forth at Sec.  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 Sec.  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.

[[Page 19935]]

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 (Sec.  433.206(d)).
    In this final rule, a new Sec.  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 Sec.  433.204(a)(1)).
    For the new adult group under Sec.  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, Sec.  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 Sec.  
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

[[Page 19936]]

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 Sec.  
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 (Sec.  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 Sec.  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 Sec.  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, Sec.  
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 Sec.  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 
Sec.  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, Sec.  433.206(e) includes flexibility for 
states to reflect enrollment

[[Page 19937]]

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 Sec.  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 Sec.  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 x E x F = 25% x $10 million x 60.00% = $1.5 million.
Newly Eligible Claims for Childless Adults (at 100% newly eligible
 FMAP):
    = (100% -P) x E x Newly Eligible FMAP
    = 75% x $10 million x 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 Sec.  433.206(h), described below.

[[Page 19938]]

6. Application of Spend-down Income Eligibility Criteria (Sec.  
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 spend-down) 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 Sec.  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 Sec.  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 Sec.  433.204 and the availability of the 
appropriate FMAP under Sec.  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 Sec.  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 Sec.  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 (Sec.  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 Sec.  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 (Sec.  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 (Sec.  
433.206(d));
     Treatment of enrollment caps or waiting lists, in 
accordance with (Sec.  433.206(e));
     Any applicable special circumstances, as approved by CMS 
((Sec.  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 (Sec.  433.210))

    In the proposed rule, Sec.  433.210 referred to the statistically 
valid sampling methodology. This regulatory provision is deleted in 
this final rule.

G. CMS Established FMAP Proportion (Sec.  433.212)

    In the proposed rule, Sec.  433.212 referred to the CMS established 
FMAP proportion. This regulatory provision is deleted in this final 
rule.

[[Page 19939]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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

[[Page 19940]]

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/Federal-Policy-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 Sec.  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

[[Page 19941]]

FMAP proportion methodology (originally described in Sec.  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 Sec.  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 Sec.  433.208 and being finalized in Sec.  
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-Policy-Guidance/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

[[Page 19942]]

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

0
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).

0
2. Section 433.10 is amended by--
0
A. In paragraph (a), removing the phrase ``and 1905(b),'' and adding in 
its place the phrase ``1905(b), 1905(y), and 1905(z)''.
0
B. Adding new paragraphs (c)(6), (c)(7), and (c)(8).
    The additions read as follows:

Sec.  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 Sec.  433.204(b), for amounts expended 
by such State for medical assistance for newly eligible individuals, as 
defined in Sec.  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;

[[Page 19943]]

    (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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
433.204(b), for amounts expended by such State for medical assistance 
for individuals described in Sec.  435.119 of this chapter who are not 
newly eligible as defined in Sec.  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.
    [GRAPHIC] [TIFF OMITTED] TR02AP13.029
    
    (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.

0
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

Sec.  433.202  Scope.

    This subpart sets forth the requirements and procedures that are 
applicable to support State claims for the increased FMAP specified at 
Sec.  433.10(c)(6) for the medical assistance expenditures for 
individuals determined eligible as specified in Sec.  435.119 of this 
chapter who meet the definition of newly eligible individual specified 
in Sec.  433.204(a)(1). These procedures will also identify individuals 
determined eligible as specified in Sec.  435.119 of this chapter for 
whom the State may claim the regular FMAP rate specified at Sec.  
433.10(b) or the increased FMAP rate specified at Sec.  433.10(c)(7) or 
(8), as applicable.

Sec.  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 Sec.  435.119 of this chapter, and who, as 
determined by the State in accordance with the requirements of Sec.  
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 Sec.  
440.330(a), (b), or (c) of this chapter or benchmark equivalent 
coverage described in Sec.  440.335 of this chapter that has an 
aggregate actuarial value that is at least actuarially equivalent to 
benchmark coverage described in Sec.  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.

[[Page 19944]]

    (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 Sec.  
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 Sec.  435.4 of this chapter.

Sec.  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 Sec.  433.10(b) 
and (c) for medical assistance provided with respect to individuals who 
have been determined eligible for the Medicaid program under Sec.  
435.119 of this chapter. Subject to the provisions of this paragraph, 
States must apply the CMS-approved State specific threshold methodology 
to determine and distinguish such individuals as newly or not newly 
eligible individuals in accordance with the definition in Sec.  
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 Sec.  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 Sec.  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 income-based 
determination and population-based 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 Sec.  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 Sec.  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 Sec.  433.204(a)(1).
    (3) Individual income-based determination. The individual income-
based determination shall be a comparison of the individual's MAGI-
based 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 
Sec.  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

[[Page 19945]]

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 Sec.  433.10(b) or (c) for the medical 
assistance expenditures of an individual in applying the definition of 
newly eligible under Sec.  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 Sec.  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 Sec.  
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 Sec.  433.10(c)(6) is applicable 
for the medical assistance expenditures for individuals determined to 
be newly eligible, as defined in Sec.  433.204(a)(1).
    (ii) The applicable FMAP under Sec.  433.10(b) or Sec.  
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 MAGI-based income has been made in accordance with 
Sec.  435.916 of this chapter, or the individual has been otherwise 
determined not to be covered under the adult group set forth at Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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

[[Page 19946]]

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 Sec.  435.119 must 
be included in a one-time 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 Sec.  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 Sec.  433.204(a)(1), such States must 
consider as newly eligible those individuals eligible under Sec.  
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 
Sec.  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 Sec.  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 Sec.  435.119 of this chapter for the applicable 
claiming period.
    (ii) The total State medical assistance expenditures for 
individuals eligible and enrolled under Sec.  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 Sec.  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 spend-down) 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 Sec.  435.119 of this chapter 
meets the definition of newly eligible under Sec.  433.204(a)(1), and 
for purposes of applying the appropriate FMAP under Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  433.206(h).
    (h) Threshold methodology State plan requirements. To claim 
expenditures at the increased FMAPs described in

[[Page 19947]]

Sec.  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 Sec.  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 MAGI-based 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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