This document is scheduled to be published in the

Federal Register on 05/11/2012 and available online at

http://federalregister.gov/a/2012-11421, and on FDsys.gov

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 438, 441, and 447 

[CMS-2370-P] 

RIN 0938-AQ63 

Medicaid Program; Payments for Services Furnished by Certain Primary Care 

Physicians and Charges for Vaccine Administration Under the Vaccines for Children 

Program 

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

ACTION: Proposed rule. 

SUMMARY: This proposed rule would implement new requirements in sections 

1902(a)(13), 1902(jj), 1932(f), and 1905(dd) of the Social Security Act, as amended by 

the Patient Protection and Affordable Care Act of 2010 (the Affordable Care Act). It 

implements Medicaid payment for primary care services furnished by certain physicians 

in calendar years (CYs) 2013 and 2014 at rates not less than the Medicare rates in effect 

in those CYs or, if greater, the payment rates that would be applicable in those CYs using 

the CY 2009 Medicare physician fee schedule conversion factor (CF). This minimum 

payment level applies to specified primary care services furnished by a physician with a 

specialty designation of family medicine, general internal medicine, or pediatric 

medicine, and also applies to services paid through Medicaid managed care plans. It 

would also provide for a 100 percent Federal matching rate for any increase in payment 

above the amounts that would be due for these services under the provisions of the State 

plan as of July 1, 2009. In this proposed rule, we specify which services and types of 

physicians qualify for the minimum payment level in CYs 2013 and 2014, and the 

method for calculating the payment amount and any increase for which increased Federal 
CMS-2370-P 2 

funding is due. 

 In addition, this proposed rule would update the interim regional maximum fees 

that providers may charge for the administration of pediatric vaccines to federally 

vaccine-eligible children under the Pediatric Immunization Distribution Program, more 

commonly known as the Vaccines for Children (VFC) program. 

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

addresses provided below, no later than 5 p.m. on [OFR--insert date 30 days after date 

of publication in the Federal Register]. 

ADDRESSES: In commenting, please refer to file code CMS-2370-P. Because of staff 

and resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

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

ways listed): 

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

http://www.regulations.gov. 

Follow the "Submit a comment" instructions. 

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

ONLY: 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-2370-P, 

P.O. Box 8016, 

Baltimore, MD 21244-8016. 

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

of the comment period. 
CMS-2370-P 3 

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-2370-P, 

Mail Stop C4-26-05, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

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

written comments before the close of the comment period to either of the following 

addresses: 

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.) 
CMS-2370-P 4 

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, please call 

telephone number (410) 786-7195 in advance to schedule your arrival with one of our 

staff members. 

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

delivery may be delayed and received after the comment period. 

Submission of comments on paperwork requirements. You may submit comments 

on this document's paperwork requirements by following the instructions at the end of the 

"Collection of Information Requirements" section in this document. 

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

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Mary Cieslicki, (410) 786-4576, or Linda Tavener, (410) 786-3838, for issues 

related to payments for primary care physicians. 

Mary Beth Hance, 410-786-4299, for issues related to charges for the 

administration of pediatric vaccines. 

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 
CMS-2370-P 5 

all comments received before the close of the comment period on the following Web site 

as soon as possible after they have been received: http://www.regulations.gov. Follow 

the search instructions on that Web site to view public comments. 

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

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

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

Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-

3951. 

I. Executive Summary and Background 

A. Executive Summary

1. Purpose 

This proposed rule implements new requirements in sections 1902(a)(13), 

1902(jj), 1905(dd) and 1932(f) of the Social Security Act requiring payment by State 

Medicaid agencies of at least the Medicare rates in effect in CYs 2013 and 2014 or, if 

higher, the rate using the CY 2009 conversion factor (CF) for primary care services 

furnished by a physician with a specialty designation of family medicine, general internal 

medicine, or pediatric medicine. Also, this proposed rule implements the statutory 

payment provisions uniformly across all States, defines, for purposes of enhanced Federal 

match, eligible primary care physicians, identifies eligible primary care services, and 

specifies how the increased payment should be calculated. Finally, this proposed rule 

provides general guidelines for implementing the increased payment for primary care 

services delivered by managed care plans. 

This proposed rule also proposes updates to vaccine rates that have not 
CMS-2370-P 6 

been updated since the VFC program was established in 1994. We propose to 

update these rates due to inflation and we are proposing to use the Medicare 

Economic Index (MEI). 

2. Summary of the Major Provisions 

a. Payments to Physicians for Primary Care Services

This proposed rule would implement Medicaid payment for primary care 

services furnished by certain physicians in calendar years (CYs) 2013 and 2014 at 

rates not less than the Medicare rates in effect in those CYs or, if greater, the 

payment rates that would be applicable in those CYs using the CY 2009 conversion 

factor (CF). It would also provide for a 100 percent Federal matching rate for any 

increase in payment above the amounts that would be due for these services under 

the provisions of the State plan as of July 1, 2009. This proposed rule is necessary to 

promote access to primary care services in the Medicaid program before and during 

the expansion of coverage that begins in 2014. These proposals implement the 

Affordable Care Act. 

b. Vaccine Administration under the Vaccines for Children (VFC) Program

This proposed rule proposes to update the interim regional maximum fees 

that providers may charge for the administration of pediatric vaccines to federally 

vaccine-eligible children under the Pediatric Immunization Distribution Program, 

more commonly known as the Vaccines for Children (VFC) program. We are 

proposing to use the MEI which is a price index that is used by CMS to update 

Medicare physician payments. We believe the MEI is the best tool to update these 

rates because: (1) it reflects input price inflation faced by physicians inclusive of the 

time period when the national average was established in 1994, and (2) we believe 
CMS-2370-P 7 

that input prices associated with this specific type of physician-provided service are 

consistent with overall input prices. The MEI was most recently updated at the end 

of 2011. 

3. Summary of the Costs and Benefits 
CMS-2370-P 8 

Provision Description Total Costs Total Benefits 

Payments to Physicians for 

Primary Care Services 

The overall economic impact 

of this proposed rule is an 

estimated $5.52 billion in CY 

2013 and $5.66 billion in CY 

2014. In CY 2013, the 

Federal cost is approximately 

$5.74 billion with $225 

million in State savings. In 

CY 2014, the Federal cost is 

approximately $5.96 billion 

with $300 million in State 

savings. Of this amount, the 

aggregate economic impact, 

as a result of this proposed 

rule requiring States to 

reimburse specified 

physicians for vaccine 

administration at the lesser of 

the Medicare rate or the VFC 

regional maximum during 

CYs 2013 and 2014, is 

estimated at an additional 

$970 million in Federal costs. 

The Federal costs for funding 

that increase, in State 

payments during CYs 2013 

and 2014, are estimated at 

$490 million and $480 

million, respectively. 

The overall benefit of this 

rule is the expected 

increase in provider 

participation by primary 

care physicians resulting 

in better access to primary 

and preventive health 

services by Medicaid 

beneficiaries. 
CMS-2370-P 9 

Provision Description Total Costs Total Benefits 

Increase in Vaccine for 

Children Program 

Maximum Ceiling 

This rule raises the maximum 

rate that States could pay 

providers for the 

administration of vaccines 

under the VFC program in 

subsequent years after CY 

2014. States are not 

anticipated to raise their VFC 

ceilings in 2013 and 2014 

because of the 

implementation of the 

primary care payment 

increase. 

The overall benefit of this 

provision is that it gives 

States the ability to 

increase their VFC vaccine 

administration rates. 

C. Background

1. Payments to Physicians for Primary Care Services: Statutory and Regulatory 

Framework 

a. Improving Primary Care 

On March 23, 2010, the Patient Protection and Affordable Care Act (Pub. L. 

111-148) was enacted and on March 30, 2010, the Health Care and Education 

Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152) was enacted; together they are 

known as the Affordable Care Act. This proposed rule would implement the new 

requirements in sections 1902(a)(13), 1902(jj), 1932(f), and 1905(dd) of the Act, as 

amended by the Affordable Care Act. Section 1902(a)(13) of the Act requires payment 

by State Medicaid agencies of at least the Medicare rates in effect in calendar years (CYs) 

2013 and 2014 or, if higher, the rate that would be applicable using the CY 2009 

Medicare conversion factor (CF), for primary care services furnished by a physician with 

a specialty designation of family medicine, general internal medicine, or pediatric 

medicine. 
CMS-2370-P 10 

Primary care for any population is critical to ensuring continuity of care, as well 

as to providing necessary preventive care, which improves overall health and can reduce 

health care costs. The availability of primary care is particularly important for Medicaid 

enrollees to establish a regular source of care and to provide care to a population that is 

more prone to chronic health conditions that can be appropriately managed by primary 

care physicians. Primary care physicians provide services that are considered to be a core 

part of the Medicaid benefit package. Additionally, these physicians can perform the 

vital function of coordinating care, including specialty care. 

As we move towards CY 2014 and the expansion of Medicaid eligibility, it is 

critical that a sufficient number of primary care physicians participate in the program. 

Section 1902(a)(13) of the Act will encourage primary care physicians to participate in 

Medicaid by increasing payment rates. 

b. Medicaid Payment to Providers 

Section 1902(a)(30)(A) of the Act requires that Medicaid payments be consistent 

with efficiency, economy, and quality of care and be sufficient to enlist enough providers 

so that care and services are available under the plan at least to the extent that such care 

and services are available to the general population in the geographic area. In meeting 

these requirements, States have broad discretion in establishing and updating Medicaid 

service payment rates to primary care providers. For instance, many States reimburse 

based on the cost of providing the service, a review of the amount paid by commercial 

payers in the private market, or as a percentage of rates paid under the Medicare program 

for equivalent services. States may update rates based on specific trending factors such 

as the MEI or a Medicaid specific trend factor that incorporates a State-determined 

inflation adjustment rate. Increasingly, States are providing medical assistance through 
CMS-2370-P 11 

managed care plans under contracts with managed care organizations (MCOs) and other 

organized delivery systems, such as prepaid inpatient health plans (PIHPs) and prepaid 

ambulatory health plans (PAHPs). The contract between the State and the managed care 

plan requires the plan to provide access to and make payments to primary care physicians 

using the funds the State pays to the managed care plan. Indeed, according to the 

Medicaid and CHIP Payment and Access Commission (MACPAC), 49 million Medicaid 

beneficiaries receive care through some form of Medicaid managed care. 

Section 1902(a)(13)(C) of the Act requires that States pay a minimum payment 

amount for certain primary care services delivered by designated primary care physicians. 

Primary care services are defined in new section 1902(jj) of the Act and include certain 

specified procedure codes for evaluation and management (E&M) services and certain 

vaccine administration codes. Under this provision, States must reimburse at least as 

much as the Medicare physician fee schedule (MPFS) rate in CYs 2013 and 2014 or, if 

greater, the payment rate that would apply using the CY 2009 Medicare CF. The 

requirement for payment at the Medicare rate extends to primary care services paid on a 

fee-for-service (FFS) basis, as well as to those paid by Medicaid managed care plans. 

This proposed regulation would specify which services and physicians qualify for the 

increased payment amount in CYs 2013 and 2014, and the method for calculating that 

payment. 

Section 1905(dd) of the Act provides for a higher FMAP for the required increase 

in physician payment. For FFS expenditures, the FMAP rate will be 100 percent of the 

difference between the Medicaid State plan rate in effect on July 1, 2009, and the amount 

required to be paid under section 1902(a)(13)(C) of the Act. That means that States will 

be fully reimbursed for these increased payments by the Federal government. 
CMS-2370-P 12 

One goal of this proposed rule is to define the payment provisions further so that 

States may uniformly identify the rate differential. Specifically, we propose a payment 

methodology that would take into account potential changes in Medicare rates between 

CYs 2013 and 2014 and CY 2009 that is independent of the legislatively required 

payment reductions caused by Medicare’s sustainable growth rate mechanism. 

Furthermore, this proposed rule would address Medicare’s use of different fee schedules 

that take into account the site of service (for example, physician’s office, or outpatient 

department of a hospital) and geographical location of the provider. 

The Affordable Care Act amended section 1932(f) of the Act to clarify that States 

must incorporate the requirement for increased payment to primary care providers into 

contracts with managed care organizations. We propose general guidelines for States to 

follow when identifying the amounts by which MCOs must increase existing payments 

to primary care providers, and any additional capitation costs to the State attributable to 

such required increases in existing payments. We are also proposing to extend this same 

treatment to PIHPs and PAHPs through regulations at part 438, to the extent that primary 

care provider payments are made by these entities. 

We seek comments on how best to implement through regulation the requirement 

that managed care plans (whether capitated, partially capitated or on a FFS basis) pay 

primary care providers at the Medicare rate for primary care services, consistent with 

those paid on a FFS basis. Additionally, we seek comments from States and others on the 

best way to adequately identify the increase in managed care capitation payments made 

by the State that is attributable to the increased provider payment, for the purpose of 

claiming 100 percent FFP. We are particularly interested in ensuring that primary care 

physicians receive the benefit of the increased payment. Section 1932(f) of the Act, as 
CMS-2370-P 13 

amended by the Affordable Care Act, requires that the managed care contracts pay 

providers at the applicable Medicare rate levels. We propose to review managed care 

contracts to ensure that this requirement is imposed on managed care plans by the State. 

We also propose to require managed care plans to report to the State the payments made 

to physicians under this provision to justify any adjustments to the capitation rates paid 

by the State under the contract. In proposing this approach, we are mindful of balancing 

the need for adequate documentation of the payment with the administrative burden it 

places on States and managed care plans. We are requesting comment on these 

provisions and additional suggestions on how to ensure that managed care plans provide 

the necessary data to the State, as well as how to ensure and monitor that managed care 

plans appropriately pass on to physicians the portion of the increased capitation rate that 

is attributable to the primary care rate increase. 

This proposed rule also addresses identification of the rate differential eligible for 

100 percent Federal matching funds for vaccine administration, as set forth in section 

1905(dd) of the Act. In 2011, the vaccine administration billing codes were changed so it 

is not possible to track the Medicaid State plan rate in CY 2009 directly to the rates 

applicable in CYs 2013 and 2014. We are requesting comment on our proposal for 

imputing the CY 2009 rate. 

c. Medicare Payment to Primary Care Providers 

Medicare provides health insurance coverage to people who are aged 65 and over, 

or who meet other special criteria, under title XVIII of the Act. For institutional care, 

such as hospital and nursing home care, Medicare makes payments to providers using 

prospective payment systems. Payment for physicians’ services under Medicare is based 

on the MPFS. The MPFS assigns relative value units (RVUs) for each procedure, as well 
CMS-2370-P 14 

as practice cost indices (GPCIs) for geographic variations in payments, and a global CF, 

which converts RVUs into dollars. Individual fee schedule amounts for the MPFS are the 

product of the geographic adjustment, RVUs, and CF. Site of service (for example, 

physician office or outpatient hospital) is reflected as an adjustment to the RVUs. We 

generally issue the MPFS final rule for the subsequent calendar year on or before 

November 1st each year. The MPFS final rule includes the RVUs and CF for the 

upcoming calendar year, which permits the calculation of rates. Updates may occur 

throughout the year, but normally occur quarterly. 

2. Vaccine Administration Under the Vaccines for Children (VFC) Program 

The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), (Pub. L. 

103-66), created the Vaccines for Children (VFC) Program), which became effective 

October 1, 1994. Section 13631 of OBRA 1993 added section 1902(a)(62) to the Act to 

require that States provide for a program for the purchase and distribution of pediatric 

vaccines to program-registered providers for the immunization of vaccine-eligible 

children in accordance with section 1928 of the Act. Section 1928 of the Act requires 

each State to establish a VFC Program (which may be administered by the State 

Department of Health) under which certain specified groups of children are entitled to 

receive qualified pediatric immunizations without charge for the cost of the vaccine. 

Under the VFC Program, a provider, in administering a qualified pediatric 

vaccine to a federally vaccine-eligible child, may not impose a charge for the cost of the 

vaccine. Section 1928(c)(2)(C)(ii) of the Act allows a provider to impose a fee for the 

administration of a qualified pediatric vaccine as long as the fee, in the case of a federally 

vaccine-eligible child, does not exceed the costs of such administration (as determined by 

the Secretary based on actual regional costs for such administration). However, a 
CMS-2370-P 15 

provider may not deny administration of a qualified pediatric vaccine to a vaccineeligible child due to the inability of the child's parents or legal guardian to pay the 

administration fee. 

II. Provisions of the Proposed Regulation 

A. Payments to Physicians for Primary Care Services

1. Primary Care Services Furnished by Physicians with Specified Specialty and 

Subspecialty (§447.400) 

a. Specified Specialties and Subspecialties 

Section 1902(a)(13)(C) of the Act specifies that physicians with a specialty 

designation of family medicine, general internal medicine, and pediatric medicine qualify 

as primary care providers for purposes of increased payment. This proposed rule 

provides that services provided by subspecialists related to the primary care specialists 

designated in the statute would also qualify for higher payment. These subspecialists 

would be recognized in accordance with the American Board of Medical Specialties 

designations. For example, a pediatric cardiologist would qualify for payment if he or 

she rendered one of the specified primary care services by virtue of that physician’s 

subspecialty within the qualifying specialty of internal medicine. Additionally, this 

proposed rule would specify a method for States to use in identifying practitioners who 

may receive the increased payment. 

The inclusion of subspecialists is based on three factors. We first considered that 

many primary care subspecialists render the primary care services specified in this rule. 

Stakeholders, including physicians, States, and independent policy makers strongly 

emphasized this point in their engagement with CMS on this proposed rule. Many 

stressed the importance of subspecialists, particularly pediatric subspecialists, in the 
CMS-2370-P 16 

provision of primary care and strongly recommended that they be eligible for the higher 

payment. Additionally, we see no justification for including only subspecialists in one 

specialty designation and, therefore, we are proposing that all subspecialists within the 

three specialty designations be eligible for increased payment for primary care services. 

Finally, we believe the statute provides the latitude to include related subspecialists 

within these specialty designations. 

Therefore, we are proposing that all subspecialists recognized by the American 

Board of Medical Specialties within the three specialty designations be eligible for 

increased payment for primary care services. That is, we propose that all subspecialists 

within the specialty designations of family medicine, general internal medicine, and 

pediatric medicine as recognized by the American Board of Medical Specialties be 

eligible for increased payment. In this rule, we propose to specify how States would 

identify the specialists and subspecialists eligible for increased payment. Identification of 

eligible physicians is critical to ensure that only specified physicians receive increased 

payment. 

Under our proposal, States would be required to establish a system to require 

physicians to identify to the Medicaid agency their specialty or subspecialty before an 

increased payment is made. For program integrity purposes, the State will be required to 

confirm the self-attestation of the physician before paying claims from that provider at 

the higher Medicare rate. We propose that this be done either by verifying that the 

physician is Board certified in an eligible specialty or subspecialty or through a review of 

physician’s practice characteristics. 

Specifically, for a physician who attests that he or she is an eligible primary care 

specialist or subspecialist but who is not Board certified (including those who are Board-
CMS-2370-P 17 

eligible, but not certified), a review of the physician’s billing history must be performed 

by the Medicaid agency. We are proposing that at least 60 percent of the codes billed by 

the physician for all of CY 2012 must be for the E&M codes and vaccine administration 

codes specified in this regulation. For a new physician who enrolls during either CY 

2013 or CY 2014 and who attests that he or she is within one of the eligible specialties or 

subspecialties and who is not Board certified, we propose that following the end of the 

CY in which enrollment occurs, the State would review the physician’s billing history to 

confirm that 60 percent of codes billed during the CY of enrollment were for primary 

care services eligible for payment under sections 1902(a)(13)(C) and 1902(jj) of the Act. 

To summarize, we would not limit specified providers to physicians who are 

Board certified. States would be required to verify the eligibility of non-Board certified 

physicians through a review of the physician’s practice characteristics. 

We developed this proposal for the use of a supporting history of codes billed to 

qualify physicians for increased payment after reviewing the statutory requirements for 

the Medicare Incentive Payments for Primary Care Services payments authorized by 

section 5501(a) of the Affordable Care Act, which amended section 1833 of the Act. That 

provision specifically requires that primary care services account for at least 60 percent 

of the allowed charges billed by a practitioner for services to be eligible for increased 

payment. We propose that the same standard be applied to the Medicaid payments under 

section 1902(a)(13)(C) of the Act although we propose that verification would be based 

on the number of codes billed for the specified primary care services, rather than charges. 

The use of billing codes rather than allowed charges helps to assure that physicians 

providing a certain volume of primary care services are uniformly recognized for higher 

payment across States, regardless of variations in service charges. 
CMS-2370-P 18 

We are seeking comment on whether 60 percent or some other percentage 

threshold would be more appropriate to determine whether a non Board certified 

physician qualifies for increased payment. 

In developing the overall requirements for verification of physician 

self-attestation, we considered that there are no pre-existing Federal Medicaid 

requirements concerning provider designation of a specialty or subspecialty. Because 

State practices vary on recognizing specialty or subspecialty designations for different 

purposes, reliance solely on self-attestation would result in a lack of uniformity in the 

application of minimum payment levels. Self-attestation alone would not provide an 

objective and auditable standard to document that a provider is one of the types of 

primary care physicians designated in statute. For this reason, we believe imposing the 

requirement for either Board certification in a nationally-recognized specialty or 

subspecialty or a supporting history of codes billed using the Medicare standard is 

merited. 

When making a payment, the State would have the choice of initially reimbursing 

a newly enrolled physician at the Medicare rate or the Medicaid State plan rate used for 

services provided by physicians who do not qualify for the increased payment. If the 

State chooses to reimburse a physician initially at the higher Medicare rate and later finds 

through the review of codes billed that the physician did not qualify, increased payments 

to which the provider was not entitled under the State plan would be considered as 

overpayments. Conversely, the State could choose to reimburse the newly enrolled 

physician at the Medicaid State plan rate applicable to services provided by physicians 

who do not qualify for increased payment, and then make supplemental payments 

promptly upon determining qualification for the increased payments. 
CMS-2370-P 19 

We are soliciting comments on whether the proposed timeframes, or something 

else, for establishing a supporting history of codes billed for a physician who is not Board 

certified is appropriate. We are attempting to minimize any implementation burden while 

also ensuring that proper audit controls are in place to prevent inappropriate application 

of this provision. 

b. Furnished by a Specified Physician 

Section 1902(a)(13)(c)of the Act requires increased payment for “primary care 

services furnished in CYs 2013 and 2014 by a physician with a primary specialty 

designation of family medicine, general internal medicine, or pediatric medicine.” This 

regulation would specify that the increased payment applies only for services under the 

“physicians’ services” benefit at section 1905(a)(5)(A) of the Act and in regulations at 

§440.50. 

Increased payment would not be available for services provided by a physician 

delivering services under any other benefit under section 1905(a) of the Act such as, but 

not limited to, the FQHC or RHC benefits because, in those instances, payment is made 

on a facility basis and is not specific to the physician’s services. Section 1902(a)(13)(c) 

of the Act requires payment “for primary care services... furnished by a physician with a 

primary specialty designation of family medicine, general internal medicine, or pediatric 

medicine at a rate no less than 100 percent of the payment rate that applies to such 

services and physicians under Part B of Title XVIII.” Therefore, we believe that the 

statute limits payment to physicians who, if Medicare providers, would be reimbursed 

using the MPFS. The MPFS is not used to reimburse physicians in settings such as 

FQHCs or RHCs; therefore, we believe physicians delivering primary care services at 

FQHCs and RHCs are not eligible for increased payments under section 1902(a)(13) of 
CMS-2370-P 20 

the Act. Furthermore, we note that the Medicaid statute already provides a payment 

methodology for FQHCs and RHCs that is designed to reimburse those providers at cost. 

In specifying that payment is made for qualified primary care services under the 

physicians’ services benefit at §440.50, the increased payment for primary care services 

would be required for services furnished “by or under the personal supervision” of a 

physician who is one of the primary care specialty or subspecialty types designated in the 

regulation. In Medicaid, many primary care physician services are actually furnished 

under the personal supervision of a physician by nonphysician practitioners, such as 

nurse practitioners and physician assistants. Such services are billed under the 

supervising physician’s program enrollment number and are treated in both Medicare and 

Medicaid as services of the supervising physician. Consistent with that treatment, we 

propose that primary care services would be paid at the higher rates if properly billed 

under the provider number of a physician who is enrolled as one of the specified primary 

care specialists or subspecialists, regardless of whether furnished by the physician 

directly, or under the physician’s personal supervision. This would align with Medicaid’s 

longstanding practice in providing physician services, as well as Medicare’s Part B FFS 

payment methodology for professional services. Additionally, this policy would 

recognize the important role that nonphysician practitioners working under the 

supervision of physicians have in the delivery of primary care services. 

c. Eligible Primary Care Services (§447.400(b)) 

We propose that Healthcare Common Procedure Coding System (HCPCS) E&M 

codes 99201 through 99499 and vaccine administration codes 90460, 90461, 90471, 

90472, 90473 and 90474 or their successors would be eligible for higher payment and 
CMS-2370-P 21 

FFP. These codes are specified by the statute and include those primary care E&M codes 

not reimbursed by Medicare. 

We believe that non-Medicare covered primary care services should be included 

because these services represent a core component of services commonly delivered in the 

Medicaid program. We reviewed Medicaid payment data from 2007, 2008, and 2009 for 

these services as a percentage of primary care expenditures, and found that they represent 

6 percent of primary care payments (as distinguished from service volume). We believe 

this percentage warrants the inclusion of these non-Medicare reimbursed codes to achieve 

the purpose of encouraging primary care providers to serve the Medicaid population. 

Where there are differences in codes reimbursed by Medicaid and Medicare we 

attribute this mostly to the fact that children represent a population not typically served 

by the Medicare program. As a result, the scope of primary care services is not 

equivalent between the two programs. We believe that the statute provides the latitude to 

include codes for which the Medicare program sets and publishes RVUs, even if 

Medicare payment is not actually made for the service. 

Specifically, we are proposing to include as primary care services the following 

E&M codes that are not reimbursed by Medicare: 

● New Patient/Initial Comprehensive Preventive Medicine--codes 99381 through 

99387; 

● Established Patient/Periodic Comprehensive Preventive Medicine--codes 

99391 through 99397; 

● Counseling Risk Factor Reduction and Behavior Change Intervention--codes 

99401 through 99404, 99408, 99409, 99411, 99412, 99420 and 99429; 

● E&M/Non Face-to-Face physician Service--codes 99441 through 99444. 
CMS-2370-P 22 

2. Amount of Required Minimum Payments (§447.405) 

Section 1902(a)(13)(C) of the Act requires payment not less than the amount that 

applies under the MPFS in CYs 2013 and 2014 or, if greater, the payment rate that would 

be applicable if the 2009 CF were used to calculate the MPFS. 

a. Use of Fee Schedule Amount Applicable to the Geographic Location of Service 

We are proposing that States be required to use the MPFS rate applicable to the 

site of service and geographic location of the service at issue. The Medicare Part B rates 

vary by geographic location and site of service. For example, rates are higher for 

services provided in an office setting as opposed to the outpatient hospital setting. We 

propose that States would be required to use the MPFS payment amounts applicable to 

the site of service and geographic location because we believe these are integral to the 

MPFS payment system. Individual fee schedule amounts for the MPFS are the product 

of the geographic adjustment, RVUs, and CF that converts adjusted RVUs into dollar 

amounts. Site of service is reflected as an adjustment to the RVUs used to set the rate. 

 We are proposing that States be required to use the MPFS as published by CMS. 

Medicare primary care incentive payments made pursuant to section 5501 of the 

Affordable Care Act, which amended section 1833 of the Act, would not be included. 

Section 5501(a) provides for incentive payments for a subset of the codes covered by this 

regulation. The payments are not made as increases in fee schedule amounts and are not 

reflected in the MPFS. 

b. Payment for Services Unique to Medicaid 

For services reimbursed by Medicaid but not Medicare, we propose that payment 

would be made under a fee schedule developed by CMS and issued prior to the beginning 

of CYs 2013 and 2014. We propose that rates for non-Medicare reimbursed services 
CMS-2370-P 23 

would be established using the Medicare CF in effect in CYs 2013 and 2014 (or the CY 

2009 CF, if higher) and the RVUs recommended by the American Medical Association’s 

(AMA) Specialty Society Relative Value Update Committee (RUC) and published by 

CMS for CYs 2013 and 2014. We are specifically seeking comments from States and 

others on the most appropriate way to set payment rates for services not reimbursed by 

Medicare. 

c. Updates to Medicare Part B Fee Schedule 

We recognize the potential for multiple updates to the MPFS in CYs 2013 and 

2014. Those rates are published by CMS on or before November 1st of the preceding 

calendar year, but are subject to periodic adjustments or updates throughout the calendar 

year. In addition, the Medicare Part B rates vary by geographic location and site of 

service. 

We propose to permit States the option of complying with the requirements of 

section 1902(a)(13)(C) of the Act by either adopting annual rates or by using a 

methodology to update rates to reflect changes made by Medicare during the year. That 

is, States could adopt the MPFS in effect at the beginning of CYs 2013 and 2014 (or, if 

the CY 2009 CF is higher, the CY 2013 or CY 2014 RVUs multiplied by the CY 2009 

MPFS CF), and apply those rates throughout the applicable calendar year without 

adjustments or updates. Using this methodology, mid-year updates made to the MPFS 

during the respective calendar year would not be reflected in Medicaid payments. 

Alternatively, a State could elect to adjust Medicaid payments to reflect mid-year updates 

made to the MPFS, but the State’s methodology would have to specify the timing for 

such adjustments. 
CMS-2370-P 24 

In consulting with State Medicaid agencies and other stakeholders, we were urged 

not to require multiple rate adjustments based on fluctuations in the MPFS, but to identify 

the MPFS for each year as of a single point in time. That annual fee schedule would 

serve as the basis of the rates paid by Medicaid during each of the 2 years that section 

1902(a)(13)(C) of the Act is in effect. Based on the feedback, we propose giving States 

the choice to apply or not apply mid-year updates. 

3. State Plan Requirements (§447.410) 

Under the proposed rule, States would be required to submit a State plan 

amendment (SPA) to reflect the fee schedule rate increases for eligible primary care 

physicians under section 1902(a)(13)(A) of the Act. The purpose of this proposed 

requirement is to assure that when States make the increased reimbursement to 

physicians, they have State plan authority to do so and they have notified physicians of 

the change in reimbursement as required by Federal regulations. 

4. Availability of Federal Financial Participation (FFP) (§447.415) 

Section 1905(dd) of the Act allows States to receive 100 percent FFP for 

expenditures equal to the difference between the Medicaid State plan rate for primary 

care services in effect on July 1, 2009, and the Medicare rates in effect in CYs 2013 and 

2014 or, if greater, the payment rate that would be applicable using the CY 2009 

Medicare CF. To claim the enhanced Federal match, States must make payments to 

specified physicians at the appropriate MPFS rate and must develop a method of 

identifying both the rate differential and eligible physicians for services reimbursed on an 

FFS for service basis and through managed care plans. States must be able to document 

the difference between the July 1, 2009 Medicaid rate and the applicable Medicare rate 

for specified providers that is claimable at the 100 percent matching rate. This 
CMS-2370-P 25 

requirement applies also to services provided to individuals eligible for both Medicaid 

and Medicare. This means that increased FFP will be available also for higher Medicaid 

payments for Medicare cost sharing for individuals who are eligible for both programs. 

a. FFP in Payments for Individuals Eligible for Both Medicare and Medicaid 

When a service is provided to an individual who is eligible for Medicare and 

Medicaid, Medicare reimburses the physician 80 percent of its fee schedule rate while 

Medicaid pays the remaining cost. Currently, States have two options for such payments 

consistent with section 1902(n) of the Act. A State may pay the provider the full amount 

necessary to result in aggregate payment to the provider equal to the MPFS rate (the full 

Medicare cost sharing amount), or only the amount (if any) to result in aggregate 

payment equal to the State’s Medicaid rate. For example, under the second option, if the 

Medicare allowed amount is $100 and the Medicaid rate is $75, then Medicare pays $80 

and there is no additional amount paid by Medicaid. Historically, most States have 

chosen to pay providers only up to the lower Medicaid rate. 

In CYs 2013 and 2014, the Medicaid rate for primary care services by the 

specified physicians will equal the Medicare rate. As a result, these physicians should 

receive payment up to the full Medicare rate for primary care services and 100 percent 

FFP will be available for the full amount of the Medicare cost sharing amount that 

exceeds the amount that would have been payable under the State plan in effect on July 1, 

2009. 

b. Identifying the July 1, 2009 Payment Rate 

For the purpose of identifying the differential between the Medicaid rate and the 

Medicare rate, we propose to define the Medicaid “rate” under the approved Medicaid 

State plan as the final rate paid to a provider inclusive of all supplemental or increased 
CMS-2370-P 26 

payments paid to that provider. For example, many States currently pay physicians 

affiliated with academic medical centers the Medicaid State plan rate plus a supplemental 

amount that together equal the average amount paid by commercial third party payers. 

Therefore, in calculating the rate differential, these States would determine the CY 2009 

rate inclusive of any supplemental payment. 

c. Federal Funding for Increased Payments for Vaccine Administration 

There are a number of factors affecting the identification of the cost of vaccine 

administration eligible for 100 percent FFP. They include the following issues: 

● The structure of the billing codes for vaccine administration changed in 2011 

such that four of the codes used in 2009 were replaced by two codes. 

● Some States did not use the designated billing codes in effect in 2009. 

• Prior to CY 2011, billing codes for vaccine administration did not permit 

payment for additional vaccine/toxoid components. 

● Vaccines for Children (VFC) program requirements do not permit payment for 

each vaccine/toxoid component administered and limit provider charges to the regional 

VFC ceiling amount. 

Prior to CY 2011 vaccine administration billing codes did not permit additional 

vaccine administration payments for vaccines with more than one vaccine/toxoid 

component. All providers, including those participating in the VFC program, received 

one payment per vaccine regardless of the number of vaccine/toxoid components. In this 

rule, we clarify that qualifying physicians, excluding those participating in the VFC 

program, must receive additional payments during CYs 2013 and 2014 for vaccines with 

multiple vaccine/toxoid components administered to Medicaid beneficiaries. 
CMS-2370-P 27 

The vaccine administration billing codes recognized for reimbursement under the 

statute are: 90465, 90466, 90567, 90568, 90471, 90472, 90473 and 90474 or their 

successor codes. In 2011, the coding structure for vaccine administration changed such 

that four pediatric billing codes specified in section 1902(jj) of the Act (90465, 90466, 

90767, and 90468) were replaced by just two billing codes (90460 and 90461). 

Moreover, the four deleted codes represented vaccine administrations by various routes 

(for example, intranasal vs. injectable) to children under age 8. However, new code 

90460 represents the initial vaccine/toxoid administered through all routes to children 

under 18 while code 90461 represents additional vaccines/toxoids administered. As a 

result, States will not be able to identify the rate differential by comparing payments for 

the codes used in CY 2009 to those in use in CYs 2013 and 2014. 

Immunization Codes Before and After 2011

Prior to 2011 Effective 2011 

90465, 90466, 90467, 90468 90460, 90461 

90471 90471 

90472 90472 

90473 90473 

90474 90474 

We propose that the State impute the CY 2009 rate for code 90460 based on the 

average payment amount for the deleted codes weighted by service volume. That is, each 

of the four CY 2009 rates for vaccine administration would be multiplied by their 

respective percentages of service volume and then added to determine one payment 

amount as demonstrated in the following example: 

● 90465 = $10 x 0.50 service volume = $5.00 
CMS-2370-P 28 

• 90466 = $10 x 0.10 service volume = $1.00 

● 90467 = $8 x 0.30 service volume = $2.40 

• 90468 = $8 x 0.10 service volume = 0.80 

● Total cost equals $9.20 for the new, single code, 90460. 

Code 90461 represents payment for the administration of additional 

vaccine/toxoid components in a vaccine. Code 90461 is an add-on code that cannot be 

used without code 90460. Because there were only single payments for vaccines prior to 

2011, we believe the rate for code 90461 should be $0. We believe that this is an 

equitable method of setting the 2009 Medicaid base for code 90460, but welcome 

comments. For VFC providers, if the rate paid in July 2009 was lower than the regular 

Medicaid State plan administration fee for non-VFC providers, then the rate for VFC 

providers should be used as the 2009 base for code 90460. The majority of vaccines 

administered to Medicaid-eligible children under the age of 18 are administered as part of 

the Vaccines for Children (VFC) program. Section 1928(c)(2)(ii) of the Act provides that 

administration fees for vaccines provided under the VFC program cannot exceed the cost 

of administration as determined by the Secretary for that program. An additional concern 

for VFC vaccines is that, under the terms of the VFC program, providers can still only 

bill a flat fee per vaccine given by injection or by intranasal or oral routes, regardless of 

the number of vaccines/toxoid components, and must use only code 90460. In order to 

permit providers participating in the VFC program to benefit from the provisions of the 

Affordable Care Act, this rule proposes that States be required to reimburse VFC 

providers at the lesser of the 2013 and 2014 Medicare rates or the maximum regional 

VFC amount in those years. States should qualify for 100% FFP for these increased 

reimbursements. This policy is consistent with Medicare which limits provider payment 
CMS-2370-P 29 

to the lesser of the fee schedule amount or provider charges, since VFC provider charges 

are limited to the regional maximum administration fee. Since the VFC statute prohibits 

payment for additional vaccines/toxoids, VFC providers would only receive payment for 

administration fees billed using code 90460. We invite comment on whether these 

proposed provisions give sufficient effect to the legislative intent to increase provider 

payments to Medicare levels, or whether we should instead adopt policies that we 

describe below as alternatives considered in developing this proposed rule. 

In proposing a method to determine the CY 2009 rate for code 90460, our goal is 

to identify a uniform methodology that is not administratively burdensome. We are 

seeking comments on this proposal and encourage States and other stakeholders to 

provide additional options for identifying the rate differential. 

An additional issue related to the changes made by the Affordable Care Act for 

vaccine administration is that, in CY 2009, some States did not reimburse providers using 

the designated vaccine administration billing codes. Rather, some States paid providers 

on the basis of non standard billing codes developed for the purpose of identifying the 

type of vaccine being administered. In instances where both the vaccine and 

administration fee were billed using the vaccine code, States will be required to identify 

the CY 2009 payment for vaccine administration separate from the vaccine itself. 

5. Primary Care Service Payments Made by Managed Care Plans, and Enhanced 

Federal Match (§438.6 and §438.804) 

As amended by the Affordable Care Act, section 1932(f) of the Act requires that 

the managed care plans pay physicians at the applicable Medicare rates. We propose to 

implement the managed care requirements through a State-by-State review of managed 

care contracts and applicable procedures. We will review managed care contracts to 
CMS-2370-P 30 

ensure that they-- 

• Provide for payment at the minimum Medicare primary care payment levels; 

• Require that eligible physicians receive direct benefit of the payment increase 

for each of the primary care services specified in this rule. This requirement must be met 

regardless of whether a physician is salaried, or receives a fee for service or capitated 

payment. We emphasize that increased payment must correspond directly to the volume 

and payment amounts associated with the primary care services specified in this rule; 

• Require that all information needed to adequately document expenditures 

eligible for 100 percent FFP is reported by MCOs, PIHPs, and PAHPs to the States 

which, in turn, will report these data to CMS; and 

• Specify that States must receive from MCOs, PIHPs and PHAPs data on 

primary care services which qualify for payment under this rule. The managed care 

reporting requirements would ensure that States have data on increased provider 

payments necessary to justify any adjustments to the capitation rates paid by the State 

under the contract. 

Additionally, we will review each State’s proposed methodology for identifying 

the discrete amount paid for each of the eligible primary care services that qualifies for 

100 percent FFP. Both the managed care contracts and the State’s methodology for 

identifying payment amounts made for each primary care services must be submitted to 

CMS for review prior to the start of CY 2013. 

We acknowledge the diversity of payment arrangements between managed care 

plans and primary care physicians, and we will not require that managed care plans 

modify the terms of their payments to eligible primary care physicians beyond the 

increase in payments for primary care services required by the statute. 
CMS-2370-P 31 

In proposing this approach, we are mindful of balancing the need for adequate 

documentation of the payment with the administrative burden it places on States and 

managed care plans. We are requesting comment on these provisions and additional 

suggestions on how to ensure that managed care plans provide the necessary data to the 

State, as well as how to ensure and monitor that managed care plans appropriately pass 

on to physicians the portion of the increased capitation rate that is attributable to the 

primary care rate increase. 

States have expressed concern about their ability to align capitated payment made 

as of July 1, 2009 to payment made for services provided in CYs 2013 and 2014 for the 

purpose of claiming increased FFP. We recognize the particular challenges inherent in 

identifying the payment differential eligible for 100 percent FFP for primary care 

services provided by managed care plans because such payments are not necessarily 

linked to individual services and physicians. We believe that the most reasonable way to 

apply this provision for managed care rates is to do the following: 

Step I: Identify the proportion of total capitation linked to primary care. 

Step II: Identify the fee schedule amount incorporated into the actuarial model 

for primary care services represented by the proportion of payment for primary care 

services. Here, we assume the visit rate equals $25. 

Step III: Determine the annualized cost built into the actuarial model for primary 

care. Here we assume 8 visits annually. $25 per visit rate X 8 visits annually = $200 

Step IV: Determine the per visit cost discounted for volume. $200/12 = $16.67 

In this example, $16.67 equals the imputed amount of the payment made on a fee for 

services basis for an individual primary care service. The State would compare this 

amount to the Medicare rate paid in CYs 2013 and 2014 to determine the payment 
CMS-2370-P 32 

differential eligible for 100 percent Federal matching funds. In proposing this 

methodology, we realize there may be multiple ways to achieve implementation and 

specifically request comments on this portion of the proposed rule. 

To be clear, we are proposing that States would be required to submit the 

methodology they intend to use to identify the increment of the capitation payment 

attributable to increased provider rates to CMS for approval prior to the beginning of CY 

2013. Further, we propose that, absent approval of its methodology from CMS, States 

would not be able to claim the enhanced Federal match for capitation payments to 

managed care plans. 

This proposal was developed with input from States. During a 

January 27, 2011 all-State call specific to the impact of the amended section 1932(f) of 

the Act on managed care, States reported that the amount and type of data managed care 

plans report to them varies greatly both across and within States. States expressed the 

need to be able to identify the rate differential for the purpose of claiming 100 percent 

FFP and to do so in a manner that is reasonable and documented. We are seeking 

additional comments on how States might best meet these requirements. 

B. Vaccine Administration Under the Vaccines for Children (VFC) Program

1. General Statement 

At this time, we are proposing to add 42 CFR part 441 subpart K to codify the 

requirements of the Vaccines for Children Program. The general requirements of the 

VFC program will be found at §441.510, and state that federally-purchased vaccines 

under the VFC Program are made available to children who are 18 years of age or 

younger and who are any of the following: 

● Eligible for Medicaid. 
CMS-2370-P 33 

● Not insured. 

● Not insured for the vaccine and who are administered pediatric vaccines by a 

federally-qualified health center (FQHC) or rural health clinic (RHC). 

● An Indian, as defined in section 4 of the Indian Health Care Improvement Act. 

Under the VFC program, vaccines must be administered by program-registered 

providers. Section 1928(c) of the Act defines a program-registered provider as any health 

care provider that -- 

● Is licensed or authorized to administer pediatric vaccines under the law of the 

State in which the administration occurs without regard to whether or not the provider is 

a Medicaid-participating provider. 

● Submits to the State an executed provider agreement in the form and manner 

specified by the Secretary. 

● Has not been found, by the Secretary or the State to have violated the provider 

agreement or other applicable requirements established by the Secretary or the State. 

Section 1928 of the Act requires each State to establish a VFC Program (which 

may be administered by the State Department of Health) and include this program in the 

State plan (§441.505) under which certain specified groups of children are entitled to 

receive qualified pediatric immunizations without charge for the cost of the vaccine. 

In the October 3, 1994 Federal Register, we published a notice with comment 

period entitled, “Charges for Vaccine Administration Under the Vaccines for Children 

(VFC) Program” (59 FR 50235) (hereinafter referred to as the “October 1994 VFC 

notice”) that set forth, by State, the interim regional maximum charges for the VFC 

program. These charges represented the maximum amount that a provider in a State 

could charge for the administration of qualified pediatric vaccines to federally vaccine-
CMS-2370-P 34 

eligible children under the VFC Program. This proposed rule would announce updates to 

those fees for use on an interim basis. This is the first proposed update of the interim 

regional maximum administration fees since 1994. We received comments in response to 

the October 1994 VFC notice and we have reviewed them. We expect to address those 

comments in a separate document. We will respond to public comments provided in 

response to this proposed rule. We are interested in receiving comments on this proposed 

rule and suggestions for potential updates that could be made to the administration fees to 

ensure that the VFC regional maximum rates are increased to reflect a more current cost 

of vaccine administration. As discussed in the October 1994 VFC notice, the interim 

maximum administration fees apply to all VFC program-registered providers that 

administer pediatric vaccines to federally vaccine-eligible children. The fees do not 

apply to children receiving free vaccines under State purchase programs or any other 

arrangement. 

In accordance with section 1928(c)(2)(C)(ii)of the Act, we are proposing 

§441.500 to state that physicians participating in the VFC program can charge federally 

vaccine-eligible children who are not enrolled in Medicaid the maximum administration 

fee (if that fee reflects the provider's cost of administration) regardless of whether the 

State has established a lower administration fee under the Medicaid program. Families of 

children who are enrolled in the VFC program because they are either uninsured or do 

not have insurance that covers vaccines would be impacted by this proposed regulation. 

Providers can bill the families of those children at the State’s regional maximum rate for 

the administration of a vaccine. Therefore, if the proposed updated rates were to become 

effective, those families could be billed at the published rate for that State. However, 

section 1928(c)(2)(B)(iii) of the Social Security Act says that “[t]he provider will not 
CMS-2370-P 35 

deny administration of a qualified pediatric vaccine to a vaccine-eligible child due to the 

inability of the child’s parent to pay an administration fee.” A recent survey of providers 

participating in VFC shows that approximately 37 percent of those providers actually 

charge the State’s maximum administration fee to families of children who are uninsured 

or who do not have insurance that covers vaccines. The remaining 61 percent of 

providers surveyed either write off the charge or charge a lesser amount. We solicit 

comments specifically on the impact of the increased fees on uninsured and underinsured 

VFC-eligible children. However, as discussed in the October 1994 VFC notice, and as 

proposed in new §441.515(e), there would be no Federal Medicaid matching funds 

available for administration since these children are not eligible for Medicaid. Although 

the cost of the vaccines for the VFC program is funded under Title XIX of the Act, 

Medicaid will not pay for the administration of vaccines provided to children under the 

VFC program who are not Medicaid-eligible. A provider may only bill Medicaid for the 

administration of a vaccine if the child is eligible under Medicaid. 

2. Methodology Used to Establish Administration Charges 

In 1994, to obtain national average rates for the administration of vaccines, we 

contracted with the American Academy of Pediatrics (AAP) to purchase data on the 

normal fee charged by its members for administering the vaccines covered by this 

program. This was because there was no reliable data available on physicians’ actual cost 

that would provide a valid base for setting these maximum charges on a nationwide scale. 

The final national average administration charge we obtained from the AAP was $15.09. 

The national average was then adjusted for regional variations, using indices established 

for the MPFS. 
CMS-2370-P 36 

Before the publication of this proposed rule, we attempted to determine the 

availability of Medicaid cost data; however, just as in 1994, there is no data readily 

available on physician’s actual costs that would provide a valid basis for recalculating 

these maximum fees. Therefore, in §441.515, we are proposing to update the maximum 

administration fees based on the data and formula established in the October 1994 VFC 

notice. We continue to believe, given the nature of the program and the requirements 

applicable to participating providers, that charge data, adjusted for regional variations, is 

a reasonable proxy for calculating these maximum fees. To adjust the administration 

charge of $15.09 for inflation, we are proposing to use the Medicare Economic Index 

(MEI), which is a price index that is used by CMS to update Medicare physician 

payments. We are proposing to use the MEI because: (1) it reflects input price inflation 

faced by physicians inclusive of the time period when the national average was 

established in 1994, and (2) we believe that input prices associated with this specific type 

of physician-provided service are consistent with overall input prices. The MEI was most 

recently updated at the end of 2011 (76 FR 73275 through 73276, November 28, 2011). 

Therefore, we have calculated the proposed update based on the MEI up through and 

including CY 2012. Using that index, we have determined that the updated national 

average administration charge would be $21.80. 

As in the October 1994 VFC notice, we would adjust the national average for 

regional variations, using indices established for the MPFS. The national average was 

weighted by the geographic adjustment factors (GAF), which reflects a weighted sum of 

the three geographic practice cost indexes (GPCIs) (work, practice expense, and 

malpractice insurance) for a given Medicare PFS locality. 
CMS-2370-P 37 

The GAF is a proxy for differences in the cost of operating a medical practice 

among various geographic areas, and is used as a comparison among Medicare PFS 

localities (73 FR 69726, 69740 November 19, 2008). Consistent with the methodology in 

the October 1994 VFC notice, when there was more than one GAF per State, we would 

select the highest GAF within the State and use that GAF to adjust the average national 

vaccination administration charge for the entire State to assure that administration 

charges would fall within our established maximum rates. 

The MPFS localities (and corresponding GAFs) are grouped by State and 

sub-State areas. As discussed in the October 1994 VFC notice, we developed the 

regional maximum charges for each “State” because the geographic area of a State is 

clearly identifiable by boundary lines recognized nationwide, as opposed to a sub-State 

area. In this proposed rule, we see no reason to change that interpretation. 

We are also proposing to revise the national average for each State to reflect the 

fully implemented sixth comprehensive update to the MPFS GPCIs and updated GAFs. 

For more information on the methodology used for the most recent GPCI update, we 

refer readers to the CY 2012 MPFS final rule with comment period (76 FR 73026 

through 73474). Consistent with that rule, the cost share weights for determining the 

GAF equation are 48.266 percent for physician work, 47.439 percent for practice 

expense, and 4.295 percent for malpractice insurance. 

We derived the proposed interim amounts specified in the chart under section II 

of this proposed rule as the maximum allowable charges for the administration of 

qualified pediatric vaccines for each State on the basis of the formula: National charge 

data x updated GAFs = maximum VFC fee. (See Table 1.) 
CMS-2370-P 38 

TABLE 1: Example of the Application of the Formula for Ohio 

 Average national administration charge = $21.80 

 Work expense = 0.998; practice expense = 0.927 

 Malpractice expense = 1.24 

Using Medicare weights to weigh components of-- 

 Work expense = 48.266 percent 

 Practice expense = 47.439 percent 

 Malpractice expense = 4.295 percent 

Calculation: 

 Work expense......... 0.998 x 48.266 percent = 0.482 

 Practice expense..... 0.927 x 47.439 percent = 0.439 

 Malpractice expense.. 1.24 x 4.295 percent = 0.053 

 Total expense = 0.975 

Ohio’s updated maximum fee for administration of the vaccine 

is: $21.80 x 0.975 = $21.25. 

The maximum updated administration fee would be effective with the publication 

of a final notice or regulation. We request comments on the methodology used to 

calculate this administration fee update and will consider revisions to the regional 

maximum fees in response to public comments. The proposed updated maximum fees 

are set forth in Table 2. 

TABLE 2: Regional Maximum Administration Fee by State 

State 

Current Regional 

Maximum Fee 

Updated Regional 

Maximum Fee 

Alabama $14.26 $19.79 

Alaska $17.54 $27.44 

Arizona $15.43 $21.33 

Arkansas $13.30 $19.54 

California $17.55 $26.03 

Colorado $14.74 $21.68 

Connecticut $16.56 $23.41 

Delaware $16.55 $22.07 

District of Columbia $15.13 $24.48 

Florida $16.06 $24.01 

Georgia $14.81 $21.93 

Guam $23.11 

Hawaii $15.71 $23.11 

Idaho $14.34 $20.13 

Illinois $16.79 $23.87 

Indiana $14.47 $20.32 

Iowa $14.58 $19.68 

Kansas $14.80 $20.26 

Kentucky $14.17 $19.93 

Louisiana $15.22 $21.30 
CMS-2370-P 39 

State 

Current Regional 

Maximum Fee 

Updated Regional 

Maximum Fee 

Maine $14.37 $21.58 

Maryland $15.49 $23.28 

Massachusetts $15.78 $23.29 

Michigan $16.75 $23.03 

Minnesota $14.69 $21.22 

Mississippi $13.92 $19.79 

Missouri $15.07 $21.53 

Montana $14.13 $21.32 

Nebraska $13.58 $19.82 

Nevada $16.13 $22.57 

New Hampshire $14.51 $22.02 

New Jersey $16.34 $24.23 

New Mexico $14.28 $20.80 

New York $17.85 $25.10 

North Carolina $13.71 $20.45 

North Dakota $13.90 $20.99 

Ohio $14.67 $21.25 

Oklahoma $13.89 $19.58 

Oregon $15.19 $21.96 

Pennsylvania $15.76 $23.14 

Puerto Rico $12.24 $16.80 

Rhode Island $14.93 $22.69 

South Carolina $13.62 $20.16 

South Dakota $13.56 $20.73 

Tennessee $13.70 $20.00 

Texas $14.85 $22.06 

Utah $14.52 $20.72 

Vermont $13.86 $21.22 

Virginia $14.71 $21.24 

Virgin Islands $15.09 $21.81 

Washington $15.60 $23.44 

West Virginia $14.49 $19.85 

Wisconsin $15.02 $20.83 

Wyoming $14.31 $21.72 

As noted in the October 1994 VFC notice, these fees are intended as guidance for 

Universal Purchase States (that is, where the vaccines are purchased by the State for all 

children in the State). These States may use the maximum charges listed or develop their 

own maximum fees. 

In addition, as stated in the October 1994 VFC notice, State Medicaid agencies 

would not be obligated to set the Medicaid payment for vaccine administration at the 

level of the maximum fees set forth in this proposed rule. Therefore, if these proposed 

maximum fees were to go into effect, the amount that a State pays a provider under the 
CMS-2370-P 40 

Medicaid program would not increase unless a State were to submit a SPA to CMS that 

increases the rate. In accordance with sections 1902(a)(30) and 1928(c)(2)(C)(ii) of the 

Act, States have the flexibility to set their payment rates at a lower level than the State’s 

regional maximum fee. State Medicaid agencies typically take a variety of factors into 

consideration when setting payment rates, including the need to assure adequate 

participation by providers.

III. Collection of Information Requirements 

Under the Paperwork Reduction Act of 1995, we are required to provide 60-day 

notice in the Federal Register and solicit public comment before a collection of 

information requirement is submitted to the Office of Management and Budget (OMB) 

for review and approval. To fairly evaluate whether an information collection should be 

approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 

requires that we solicit comment on the following issues: 

● The need for the information collection and its usefulness in carrying out the 

proper functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The quality, utility, and clarity of the information to be collected. 

● Recommendations to minimize the information collection burden on the 

affected public, including automated collection techniques. 

To derive average costs, we used data from the U.S. Bureau of Labor Statistics for 

all salary estimates. The salary estimates include the cost of fringe benefits, calculated at 

approximately 35 percent of salary, which is based on the June 2011 Employer Costs for 

Employee Compensation report by the Bureau. 
CMS-2370-P 41 

We are soliciting public comment on each of the section 3506(c)(2)(A)-required 

issues for the following information collection requirements (ICRs): 

A. ICR's Regarding Contract Requirements (§438.6)

In §438.6(c)(3)(v) and (c)(5)(vi), States would be required to implement managed 

care contracts for payment to a MCO, PIPH or PAHP to comply with the requirements at 

section 1202 of the HCERA. There is a one-time burden to the State for amending such 

contracts for the following provisions: (1) To assure that the level of payment is 

consistent with part 447, subpart G; (2) to assure that the specified physicians (whether 

directly or through a capitated arrangement) receive an amount at least equal to the 

amount set for and required under part 447; and (3) to assure that the State receive 

documentation regarding those payments. 

The burden associated with the requirements under §438.6(c)(3)(v) and (c)(5) (vi) 

is the time and effort it would take each of the 35 State Medicaid programs with managed 

care plan payments and the District of Columbia (36 total respondents) to amend an 

average of three managed care contracts. We estimate it will take three hours to complete 

this task per contract at an estimated cost of $441.63 per respondent ($49.07/hr x 3 hr x 3 

contracts) or $15,898.68 total ($441.63 per respondent x 36 respondents). In deriving 

this figure, we used a labor rate of $49.07/hr for a State’s management, professional and 

related staff to amend each contract. 

B. ICR's Regarding Provider Agreements (§441.505(b))

This requirement is exempt from OMB review and approval since we expect to 

receive fewer than 10 submissions (annually) from providers, if any. The requirement 

that providers must have provider agreements in place in order to participate in the VFC 

program has been in effect since the program was implemented in 1994. The provision in 
CMS-2370-P 42 

this regulation is merely codifying the requirement and no further action is necessary in 

regard to providers who are currently participating in the VFC program. 

C. ICR's Regarding State Plan Amendments for the Vaccines for Children Program 

(§§441.510 and 441.515(d))

 This requirement is exempt from the OMB review process as we expect to receive 

fewer than 10 submissions from States. The requirement that a State submit a State plan 

was a requirement when the VFC program was first established in 1994, and all States 

submitted State Plans at that time. A State now only submits a State plan amendment 

related to the VFC program when it makes a change to the State’s administration fee. In 

2011, only two States submitted State plans that made changes to the State’s 

administration fee under the VFC program. Even with the publication of the updated fee 

schedule, we do not anticipate that many States will make changes to their State’s 

administration fee. 

D. ICR's Regarding Eligible Services (§447.400(a))

In §447.400(a), States would be required to ensure that physicians identify their 

specialty to the Medicaid agency before an increased payment is made. Initial 

identification may be made by self-attestation, but for program integrity purposes the 

State will be required to verify the physician’s claimed specialty status by reviewing the 

Board certification status of the physician, or reviewing the physician’s practice 

characteristics, before paying for services at the Medicare rate. 

The burden associated with the requirements under §447.400(a) is the time and 

effort it would take each of the 50 Medicaid Programs and the District of Columbia (51 

total respondents) to establish that a physician is qualified, either through Board 

certification or a supporting history of codes billed, to receive payment under section 
CMS-2370-P 43 

1202 of the HCERA. We estimate that it will take 0.5 hours to determine whether a 

physician may receive payment under section 1202 of the HCERA. We used data from 

the Medicaid Statistical Information System (MSIS) to identify the number of physicians 

claiming for the E&M codes specified in this regulation during the fourth quarter of FY 

2008 and FY 2009 (the most recent data available). Based on that data, there is an 

average of 2,245 physicians per State who currently bill, but whose eligibility for 

increased payment will need to be verified by the Medicaid agency. We increased this 

number by 10 percent to account for participation by new physicians for a total of 2,470 

physicians. 

We used the following hourly labor rates and estimated the time to complete each 

task: 0.5 hours for a State’s Medicaid office and support staff working in the medical 

billing area to retrieve and assess claims for an individual physician; or 0.5 hours for 

administrative staff to review the Board certification status of a physician. Costs 

associated with these staff are reported at a cost of $14.12 for each half-hour derived 

from $28.24/hr each and 2,470 physicians for an estimated cost of $14.12 per response or 

$34,876.40 (total). 

E. ICR's Regarding State Plan Requirements (§447.410) 

In §447.410, States would be required to submit a SPA to reflect the fee schedule 

rate increases for eligible primary care physicians under section 1902(a)(13)(C) of the 

Act. The purpose of this proposed requirement is to assure that when States make the 

increased reimbursement to providers, they have State Plan authority to do so and they 

have notified providers of the change in reimbursement as required by Federal 

regulations. 
CMS-2370-P 44 

The burden associated with the one-time requirement under §447.410 is the time 

and effort it would take each of the 50 State Medicaid Programs and the District of 

Columbia (51 total respondents) to modify the Medicaid State plan to reflect payment 

consistent with the requirements in section 1902(a)(13)(C) of the Act. This will require 

the preparation and submission of a SPA. We estimate that it will take State staff working 

4 hours to complete all of the tasks associated with the preparation of an SPA. The 

estimated cost is $107.13 ($35.71/hr x 3 hr) per State or $5,463.63 total ($107.13 * 51) 

for tasks completed by non-management staff working on SPA preparation. We estimate 

that this task will also require 1 hour for State-employed legal staff at $49.07/hr or $49.07 

(per response) for a total of $2,502.57 ($49.07 x 51). The combined total for cost 

associated with SPA preparation, including non-legal and legal staff employed by the 

State, is $7,966.20 ($5,463.63 + $2,502.57). 

F. ICR's Regarding Additional Requirements (Methodology to Identify Rate Differential) 

for FFP for Managed Care Payments (§438.804(a)(2) and (3))

In §438.804(a)(3), States would be required to submit the methodology they 

intend to use to identify the rate differential for managed care payments to CMS for 

approval 6 months prior to the beginning of CY 2013. Further, we propose that, absent 

approval from CMS, States would not be able to claim the enhanced Federal match for 

managed care payments. 

The burden associated with the requirements under §438.804(a)(2) and (3) is the 

time and effort it would take each of the 35 State Medicaid Programs with managed care 

plan payments and the District of Columbia (36 total respondents) to develop a 

methodology for the identification of payment made for primary care services through 

managed care contracts eligible for 100 percent Federal matching funds. This task will 
CMS-2370-P 45 

involve a one-time effort on the part of financial, legal and information technology staff. 

We estimate that it will take 14 hours per respondent at a cost of $637.42 to develop the 

identification methodology at a total cost of $22,947.12 (36 x $637.42). In deriving these 

figures, we used the following hourly labor rates and estimated the time to complete this 

task: $49.07/hr and 2 hours for legal staff to review the methodology for compliance 

with the statute ($98.14); $48.09/hr and 8 hours for managerial staff to assess the 

feasibility of implementing the methodology ($384.72); and $38.64/hr and 4 hours for 

information technology/public administration staff to assess the feasibility of the 

methodology ($154.56). 

TABLE 3: Proposed Annual Recordkeeping and Reporting Requirements 

Regulation 

Section(s) 

Responden

ts 

Response

s 

Burden 

per 

Response 

(hours) 

Total Annual 

Burden 

(hours) 

Labor 

Cost of 

Reporting 

($) 

Total Cost 

($) 

§438.6(c)(3)(v) 

and (c)(5)(vi) 

36 108 3 324 $15,898.68 $15,898.68 

§447.400(a) 51 2,470 .50 1,235 $34,876.40 $34,876.40 

§447.410 51 51 4 204 $7,966.20 $7,966.20 

§438.804(a)(2) 

and (3) 

36 36 14 504 $22,947.12 $22,947.12 

Total -- -- -- 2,267 $81,688.40 $81,688.40 

Note 1: All of the proposed collections are new. Therefore, OMB control numbers have not been assigned 

and the control number column has been omitted from the table. 

Note 2: There are no capital or maintenance costs incurred by any of the proposed collections. Therefore, 

the capitol cost column has been omitted from the table. 

We have submitted a copy of this proposed rule to OMB for its review of the 

rule’s information collection and recordkeeping requirements. These requirements are 

not effective until they have been approved by the OMB. 

To obtain copies of the supporting statement and any related forms for the 

proposed paperwork collections referenced above, access our Web site at 

http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the Reports Clearance Office 

at 410–786–1326. 
CMS-2370-P 46 

 We invite public comments on these potential information collection 

requirements. If you comment on these information collection and recordkeeping 

requirements, please do either of the following: 

 1. Submit your comments electronically as specified in the ADDRESSES 

section of this proposed rule; or 

 2. Submit your comments to the Office of Information and Regulatory 

Affairs, Office of Management and Budget, Attention: CMS Desk Officer, (CMS–2370–

P) Fax: (202) 395–6974; or E-mail: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public comments we normally receive on 

Federal Register documents, we are not able to acknowledge or respond to them 

individually. We will consider all comments we receive by the date and time specified in 

the "DATES" section of this preamble, and, when we proceed with a subsequent 

document, we will respond to the comments in the preamble to that document. 

V. Regulatory Impact Statement 

A. Introduction

We have examined the impacts of this proposed rule as required by Executive 

Order 12866 (September 30, 1993, Regulatory Planning and Review), Executive Order 

13563 on Improving Regulation and Regulatory Review (January 18, 2011), the 

Regulatory Flexibility Act (September 19, 1980; Pub. L. 96-354) (RFA), section 1102(b) 

of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism 

(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). 
CMS-2370-P 47 

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. This rule has been designated an 

"economically" significant rule, under section 3(f)(1) of Executive Order 12866. 

Accordingly, we have prepared a Regulatory Impact Analysis (RIA) that, to the best of 

our ability, presents the costs and benefits of the rulemaking. We solicit comment on the 

RIA analysis provided. In accordance with the provisions of Executive Order 12866, this 

regulation was reviewed by the Office of Management and Budget. 

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 

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 2012, that threshold is approximately $139 million. This rule 

does not contain mandates that will impose spending costs on State governments in the 

aggregate of $139 million. The cost for increasing payment for primary care services in 

CYs 2013 and 2014 will be borne by the Federal government, which will provide 

100 percent matching funds equal to the difference between the Medicaid State plan rate 

in effect July 1, 2009 and the Medicare rate implemented in CY 2013 and 2014, or the 

rate using the CY 2009 CF, if higher. Section 1202 of the HCERA requires higher 

payment to physicians for primary care services but does not impose increased costs on 

States. For the provisions associated with the charges for vaccine administration under 
CMS-2370-P 48 

the VFC program, the proposals will have no consequential effect on State, local, or tribal 

governments or on the private sector. 

Executive Order 13132 establishes certain requirements that an agency must meet 

when it promulgates a proposed rule (and subsequent final rule) that imposes substantial 

direct requirement costs on State and local governments, preempts State law, or otherwise 

has Federalism implications. As indicated, this proposed rule will not have a substantial 

effect on State and local governments. 

B. Statement of Need

This proposed rule implements section 1202 of the HCERA requiring payment by 

State Medicaid agencies of at least the Medicare rates in effect in CYs 2013 and 2014 or, 

if higher, the rate using the CY 2009 CF for primary care services furnished by a 

physician with a specialty designation of family medicine, general internal medicine, or 

pediatric medicine. Also, this proposed rule implements the statutory payment provisions 

uniformly across all States, defines, for purposes of enhanced Federal match, eligible 

primary care physicians, identifies eligible primary care services, and specifies how the 

increased payment should be calculated. Finally, this proposed rule provides general 

guidelines for implementing the increased payment for primary care services delivered by 

managed care plans. 

C. Overall Impact

The aggregate economic impact of this proposed rule is an estimated $5.52 billion 

in CY 2013 and $5.66 billion in CY 2014. In CY 2013, the Federal cost is approximately 

$5.74 billion with $225 million in State savings. In CY 2014, the Federal cost is 

approximately $5.96 billion with $300 million in State savings. The State savings are 

derived from the projected increases in reimbursement rates expected to occur prior to 
CMS-2370-P 49 

passage of this legislation between years 2009 and 2013 through 2014, which will now be 

paid for by the Federal government. Absent the legislation, the projected increases in the 

reimbursement rates would be split between the Federal government and States. This 

aggregate economic impact estimate includes the requirement that States reimburse 

specified physicians for vaccine administration at the lesser of the Medicare rate or the 

VFC regional maximum during CYs 2013 and 2014, which is estimated at $970 million 

in Federal costs. The Federal costs for funding that increase, in State payments during 

CYs 2013 and 2014, are estimated at $490 million and $480 million, respectively. 

Overall, the estimated economic impacts are a result of this proposed rule 

providing States the ability to increase payment for primary care services without 

incurring additional costs. We anticipate higher payment will result in greater 

participation by primary care physicians, including primary care subspecialists, in 

Medicaid thereby helping to promote overall access to care. At this time it is not known 

whether States will be willing or have the ability to sustain this level of payment to 

providers beyond CY 2014. For managed care plans, this proposed rule would require 

documentation of the primary care services that are provided in order for States to claim 

100 percent FFP. Currently, many States do not receive complete data on individual 

services provided by managed care plans. We believe, as result of this proposed rule, 

there will be improved documentation and reporting of primary care services provided by 

managed care plans. This, in turn, may serve to inform future managed care rate setting. 

D. Detailed Economic Analysis

1. Anticipated Effects on Medicaid Recipients 

We anticipate this proposed rule will have a positive effect on Medicaid recipients 

by increasing the availability of services through financial incentives to primary care 
CMS-2370-P 50 

physicians. The exact number of beneficiaries that will benefit is not known, however, 

we believe it will be substantial because this rule directly affects payment for a type of 

service which is a key component of the Medicaid program. Additionally, we believe 

primary care physicians will be encouraged to accept more Medicaid beneficiaries into 

their practices as a result of increased payment. 

We believe that this regulation will positively affect the availability of vaccination 

services as well. Currently, only 5 States reimburse the regional maximum for vaccine 

administration set by the VFC program. This proposed rule would require States to 

reimburse specified physicians for vaccine administration at the lesser of the Medicare 

rate or the VFC regional maximum during CYs 2013 and 2014. 

Finally, this rule will positively affect patients who are dually eligible for benefits 

under the Medicare and Medicaid programs by increasing payment to physicians who 

serve this population. Specifically, Medicaid will pay higher amounts to providers. We 

anticipate that increased payment will promote greater access to primary care services for 

dually eligible beneficiaries. 

2. Anticipated Effects on Other Providers 

We anticipate this proposed rule would increase physician participation in 

Medicaid as most States reimburse physicians at well below the Medicare rates. 

Recently, as States have experienced budgetary constraints, they have sought to address 

this by reducing payments to providers, including physicians. This proposed rule would 

ensure that in CYs 2013 and 2014, physicians receive the higher Medicare rate for the 

specified primary care services. 

In addition, this proposed rule would impact States and providers who provide 

immunizations under the Medicaid program because it will require that such providers be 
CMS-2370-P 51 

reimbursed at the lesser of the 2013 or 2014 Medicare rate or the Regional Maximum 

VFC Administration Fee in CYs 2013 and 2014. This rule also raises the maximum rate 

that States could pay providers for the administration of vaccines under the VFC program 

in subsequent years. The proposed updated Regional Maximum Administration Fees 

included in this proposed rule are the maximum amounts that a State could choose to 

reimburse a provider for the administration of a vaccine under the VFC program after the 

provisions of the primary care payment increase expire at the end of CY 2014. States 

have the flexibility to set the rate that they will reimburse providers, and can therefore 

choose to set it at the State’s regional maximum fee or at any other amount below the 

regional maximum amount. It is not expected that all States will choose to implement the 

increase. 

The impact of this proposed rule on the Federal Government is therefore 

connected to States decisions as to whether to increase the amount that they pay providers 

for the administration of vaccines after CY 2014. That is, if no States choose to increase 

the administration fee for providers, there would be no additional costs incurred by the 

Federal Government. 

The same is true for States. There would be no impact of this proposed rule on a 

State unless the State chooses to increase the amount that it reimburses providers for the 

administration of vaccines under the VFC program. 

Children enrolled in the VFC program who are Medicaid eligible would not incur 

any additional costs as a result of this proposed rule as there are no out-of-pocket 

expenses related to the VFC program for Medicaid eligible children. 

Families of children who are enrolled in the VFC program because they are either 

uninsured or do not have insurance that covers vaccines would be impacted by this 
CMS-2370-P 52 

proposed regulation. The Affordable Care Act does not make any changes to the VFC 

program and therefore uninsured and underinsured individuals receiving vaccines 

through the VFC program will continue to pay a single administration fee for any vaccine 

provided. The provider will also receive a single administration fee for any vaccine 

provided, regardless of the number of vaccine/toxoid components, and will not receive 

the Medicare administration rate for those services. Providers can bill the families of 

those children at the State’s regional maximum rate for the administration of a vaccine. 

As a result, if the proposed updated rates were to become effective, those families could 

be billed at the published rate for that State. However, section 1928(c)(2)(B)(iii) of the 

Social Security Act says that “[t]he provider will not deny administration of a qualified 

pediatric vaccine to a vaccine-eligible child due to the inability of the child’s parent to 

pay an administration fee.” 

 Therefore, providers could benefit from the proposed regulation as they could 

charge and receive the State’s regional maximum rate for their patients who are enrolled 

in the VFC program because they are either uninsured or do not have insurance that 

covers immunizations. A provider would not receive an increased administration fee for 

Medicaid-eligible children unless a State chose to increase the amount that it pays 

providers under the Medicaid program. 

3. Anticipated Effects on the Medicaid Program Expenditures 

Table 4 provides estimates of the anticipated Medicaid program expenditures 

associated with increasing payment for primary care services. CMS’ Office of the 

Actuary (OACT) developed estimates for the impact of this section of the Affordable 

Care Act, which were initially published in April 2010, 

(https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf). Initially, 
CMS-2370-P 53 

projections of Medicaid spending on primary care physician services by FFS Medicaid 

and Medicaid managed care plans were created. For this, OACT developed assumptions 

of (1) what share of Medicaid physician spending was for primary care and (2) what 

share of managed care spending was for physician services, relying on several studies on 

physician service utilization and expenditures. OACT then projected spending for 2013 

and 2014 based on the projections of Medicaid physician spending in the President’s 

Fiscal Year 2010 Budget Mid-Session Review. To determine the impact of using 

Medicare physician payment rates for Medicaid payments, OACT compared the ratio of 

Medicaid rates to Medicare rates, based on a study of Medicare and Medicaid physician 

payment rates across all States. Finally, OACT projected growth in Medicaid physician 

payments and the rates prescribed by section 1202 of the HCERA, based on Medicare 

payment rates; these estimates were revised to incorporate the actual CY 2011 CF, (75 FR 

73169). OACT assumed that physician services covered by Medicaid would increase 

over 2013 and 2014 as a result of higher payments and expected increases in physician 

participation in Medicaid. Additionally, these changes were estimated to result in a slight 

decrease to projected State spending as future projected Medicaid payment rate increases 

would be covered by increased Federal matching funds in 2013 and 2014. The studies 

and data sources used for developing these estimates included: S. Zuckerman, “Trends in 

Medicaid Physician Fees, 2003-2008,” Health Affairs, 28 April 2009; the American 

Medical Association; the Medical Group Management Association; and the Bureau of 

Labor Statistics. 

TABLE 4: Federal and State Medicaid Impacts for Payment Increases to Primary 

Care Providers during Calendar Years 2013 through 2014 (Millions of 2012 dollars) 

CY 2013 CY 2014

Federal Share* $5,740 $5,960

State Share –$225 -$300
CMS-2370-P 54 

Total $5,515 $5,660

(* Federal cost estimates reflect the additional $490 million and $480 

million in CYs 2013 and 2014, respectively, as a result of States 

reimbursing specified physicians for vaccine administration at the lesser 

of the Medicare rate or the VFC regional maximum.) 

The Medicare payment rates used in this estimate were the actual 2009 MPFS and 

the current statute projections of the CYs 2013 and 2014 MPFS. 

In addition, it should be noted that these estimates are based on the current statute 

which includes a significant projected reduction to payment rates in the CY 2013 MPFS 

under the Sustainable Growth Rate (SGR) formula. Every year since 2003, the Congress 

has passed legislation overriding projected cuts that otherwise would have resulted from 

the SGR formula. Furthermore, it is possible that the Congress may enact legislation that 

averts the currently projected reduction in MPFS rates for 2013 which would affect the 

CYs 2013, and 2014 rates that are being used to estimate the payment impacts in this 

rule. Consequently, if the Congress enacts legislation resulting in increased payment 

rates to replace the payment rate reduction called for under the SGR formula in CYs 

2013, and 2014, and in turn the CYs 2013 or 2014 rates exceed the rates calculated using 

the CY 2009 CF, then this would result in higher costs for the CYs 2013 and 2014 

Medicaid physician payments presented in this rule. Additionally, other changes to the 

CF in these years may also affect the costs of this section. Therefore, currently it is not 

possible to accurately estimate the impact of these potential future changes, since 

definitive action, if any, by the Congress regarding the MPFS CF is unknown. 

4. Anticipated Effects on States 

The Federal government would provide 100 percent matching funds for the 

difference between the Medicaid State plan rate in effect July 1, 2009 and the Medicare 

rate in CYs 2013 and 2014 or the rate using the CY 2009 Medicare CF, if higher. 
CMS-2370-P 55 

Therefore, we believe this proposed rule would result in a positive effect on States, since 

it reduces their expenditures for primary care services. State savings are estimated at 

$225 million and $300 million in CYs 2013 and 2014, respectively. However, for 

Medicaid State plan rates below the 2009 level, States would be required to reimburse the 

non-Federal share of that portion, so as to return to the 2009 level of payment. We are 

unable to accurately quantify the impact of this effect on States, since there is not a 

precise relationship between any of the Medicaid State plan rates and the Medicare rates. 

5. Anticipated Effects on Small Entities 

The RFA requires agencies to analyze options for regulatory relief of small entities, 

if a rule has a significant impact on a substantial number of small entities. For purposes of 

the RFA, small entities include small businesses, nonprofit organization, and small 

governmental jurisdictions. The great majority of hospitals and most other health care 

providers and suppliers are small entities, either by being nonprofit organizations or by 

meeting the SBA definition of a small business and having revenues of less than $7.0 

million to $34.5 million in any 1 year. (For details, see the Small Business 

Administration’s Table of Size Standards at

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.) For purposes of the 

RFA, approximately 95 percent of physicians are considered to be small entities. 

Individuals and States are not included in the definition of a small entity. 

We anticipate that this regulation would primarily impact individual physicians and 

State Medicaid agencies. This proposed rule requires States to increase payment for 

primary care services without incurring additional State cost. As previously noted, we 

anticipate that this higher payment would impact physicians by encouraging greater 
CMS-2370-P 56 

participation by primary care physicians, including primary care subspecialists, in 

Medicaid, thereby helping to promote overall access to care. Therefore, the Secretary has 

determined that this proposed rule would not have a significant impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a rule may have a significant impact on the operations of a substantial number 

of small rural hospitals. This analysis must conform to the provisions of section 603 of 

the RFA. 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. This rule would not have a significant impact on small rural hospitals because it 

only affects physicians. We are not preparing an analysis for section 1102(b) of the Act 

because the Secretary has determined that none of the provisions in this proposed rule 

would have a significant impact on the operations of a substantial number of small rural 

hospitals. 

E. Alternatives Considered

This section provides an overview of the issues addressed in the proposed rule 

and the regulatory alternatives considered. In identifying the issues and developing 

alternatives, we consulted with States and other interested stakeholders such as primary 

care specialists and policy makers. We solicit comment on the assumptions and analyses 

presented in the Alternatives Considered section. 

1. Eligible Providers 

The statute specifies that increased payment may be made for primary care 

services furnished by a physician with a primary specialty designation of family 

medicine, general internal medicine or pediatric medicine. Because States have varying 
CMS-2370-P 57 

methods of identifying a physician’s specialty this poses a challenge to the uniform 

implementation of the increased payment. Currently, there are no Federal requirements 

surrounding how States must enroll Medicaid providers. In this rule, we propose to use 

Board certification and a supporting history of codes billed in the absence of Board 

certification as a means of identifying eligible primary care physicians but seek comment 

on the time period from which claimed codes would be drawn. We considered permitting 

physicians to qualify for payment based solely on self attestation in the absence of Board 

certification but were concerned that without an objective measure, such as a supporting 

history of codes billed, certain physicians could be unfairly advantaged or disadvantaged 

in receiving the increased payment. We also believe that an objective measure is more 

supportive of program integrity. 

This proposed rule clarifies that subspecialists related to the specialty designations 

identified in the statute would be eligible for payment. We considered extending 

eligibility for increased payment to only those physicians with a primary care specialty 

designation of family medicine, general internal medicine or pediatric medicine and not 

to subspecialists within those categories. However, through our engagement with the 

provider community we learned that pediatric subspecialists routinely deliver primary 

care services. Therefore, we propose to make all subspecialists within the primary care 

specialties designated in the statute eligible for the enhanced payment. Due to the limited 

data available, including the lack of discrete data on physician specialty or subspecialty, 

we are unable to accurately estimate the impacts representing the exclusion of 

subspecialties relative to this proposed regulation. The analysis is further complicated by 

the observation that some types of subspecialists may provide a significant amount of 

primary care services, while other types of subspecialists may provide very little primary 
CMS-2370-P 58 

care services, thereby limiting any sound assumptions presented including the entailed 

impact modeling. 

2. Payment Made Under the Physician Benefit as a Physician Service 

This rule clarifies physician services to mean any service delivered under the 

physicians’ services benefit at 1905(a)(5)(A) of the Act. First, we considered whether 

the statute limited increased payment to services provided only by physicians. In the 

Medicaid program, a significant proportion of primary care services are actually 

rendered by advance practice nurses, and other types of independently practicing nonphysicians. We recognize the importance of these non-physician practitioners in the 

provision of primary care services in many States. However, section 1902(a)(13)(c) of 

the Act limits eligibility for higher payment to services provided by physicians. Next we 

considered whether the statute limited increased payment to services provided directly 

by physicians. Medicaid regulations at 42 CFR 440.50 define “physician services” as 

services provided by or under the personal supervision of a physician. Therefore, we 

concluded that, in light of the important role of these practitioners in delivering primary 

care to Medicaid beneficiaries and the regulatory definition of a “physician service,” 

those services delivered under the personal supervision of a specified primary care 

physician could qualify for the increased payment. This means that specified primary 

care services rendered by non physicians such as advanced practice nurses and other 

mid-level professionals qualify for payment when billed under the Medicaid enrollment 

number of any designated primary care specialist or subspecialist. 

Due to the limited data available, we are unable to accurately estimate the 

impacts representing the inclusion of services provided by practitioners under the 

supervision of a physician. All such services are billed under the supervising physician’s 
CMS-2370-P 59 

billing number and are reported as physician services to CMS making it impossible to 

determine the impact of this proposal. 

We also considered whether services provided by physicians in settings such as 

FQHCs, RHCs, or clinics would be eligible for increased payment. In Medicaid 

“physician services” is a distinct benefit from other benefits such as the FQHC, RHC or 

clinic benefits. We believe that the statute limits payment to physicians who, if 

Medicare providers, would be reimbursed using the MPFS. The MPFS is not used to 

reimburse physicians in settings such as FQHCs and RHCs and we believe that 

enhanced payment should not be extended to physicians under other Medicaid benefit 

categories. Furthermore, the Medicaid statute already requires that FQHCs and RHCs 

be reimbursed at cost. 

 We estimate that the inclusion of services provided by physicians in settings such 

as FQHCs, RHCs, or clinics for increased payment would result in an aggregate Federal 

cost of approximately $820 million for CYs 2013 and 2014. The limitations of this 

impact estimate to more accurately reflect clinic participation include, 1) determining 

whether the services provided in the various clinic types are in fact performed by a 

qualifying physician, and 2) determining the direct link between Medicaid clinic payment 

rates, as they vary substantially across codes and states, and Medicaid physician rates. 

3. Eligible E&M Services 

The statute requires enhanced payment for E&M services/codes. The proposed 

rule specifies the E&M Codes eligible for the increased payment. They include all 

primary care E&M codes, including some codes not recognized for payment by 

Medicare. Because the statute requires payment at the Medicare rate, we considered not 

extending the requirement for increased payment to codes not reimbursed by Medicare. 
CMS-2370-P 60 

However, many of those codes represent services provided to children. While Medicare 

covers relatively few children, payments for services provided to children constitute a 

larger proportion of Medicaid expenditures. We therefore include these additional codes 

because they represent core primary care services that are important to the Medicaid 

program. 

We estimate that approximately 6 to 7 percent of all expenditures on services 

eligible for the increased payment rates are for services not covered by Medicare. 

Furthermore, we believe that a corresponding amount of the Federal costs associated with 

this proposed regulation would be related to these services, reflecting an impact range of 

$670 million to $780 million over the two CYs 2013 and 2014. 

The eligible codes are listed in the regulatory text. We propose to set rates for 

codes not covered by Medicare based on a calculation of the CF and RVUs that are 

published by CMS. We establish RVUs based on recommendations from the AMA RUC 

and clinical review by Medicare. We considered setting rates for these codes by looking 

at rates paid by Medicare for comparable services. However, each code is designed to 

represent a distinct service and we could not find codes that we were comfortable 

substituting on a one for one basis for purposes of rate setting. We seek comment on the 

proposed rate setting methodology for codes not reimbursed by Medicare. 

4. Eligible Vaccine Administration Services 

The statute specifies payment at the CY 2013 and 2014 Medicare rate for certain 

vaccine administration billing codes or their successor codes. A State may receive 

100 percent FMAP for the difference between the Medicaid rate as of July 1, 2009 and 

the Medicare rates in CYs 2013 and 2014 or the rate using the CY 2009 CF, if higher. In 

2011, the coding structure for vaccine administration changed such that two codes 
CMS-2370-P 61 

replaced four of the specified codes. Moreover, the four deleted codes represented 

vaccine administrations by various routes (e.g., intranasal vs. injectable) to children under 

8. However, new code 90460 represents the initial vaccine/toxoid administered through 

all routes to children under 18 while code 90461 represents payment for additional 

vaccines/toxoids administered. This rule proposes a method for imputing a vaccine 

administration rate in 2009for code 90460. The proposed 2009 would equal the average 

payment amount weighted by volume of the four codes used in 2009. The 2009 value for 

code 90461 would be $0, since there was no payment for additional vaccines/toxoids 

prior to 2011. We seek comment from States and other stakeholders on this proposed 

methodology. 

In 2009, approximately 20 States used a bundled rate to reimburse vaccines and 

vaccine administration, complicating the identification of the rate differential. This rule 

clarifies that, for any bundled rate payments such as this, States must correctly identify 

the rate differential for the included primary care service only (in this case, vaccine 

administration). We added this provision in the interest of promoting program payment 

integrity but defer to the States to develop a methodology. 

In this rule, we propose that providers administering vaccines under the VFC 

program be reimbursed the lesser of the Medicare rates in 2013 or 2014 or the Regional 

Maximum Administration Fee per vaccine, with no payment for additional vaccine/toxoid 

components. We considered proposing that States be required to pay VFC physicians for 

vaccine administration associated with the VFC program the amounts required by 

sections 1902(a)(13)(c) and 1932(f) of the Act, notwithstanding limitations on provider 

billing for vaccine administration under the VFC program. Free vaccine is made 

available through the VFC program to “program registered providers” who have entered 
CMS-2370-P 62 

into a VFC provider agreement. Under section 1928(c)(2)(C)(ii) of the Act, one of the 

requirements of that agreement is that program registered providers limit administration 

fees to an amount that “does not exceed the costs of such administration (as determined 

by the Secretary based on actual regional costs for such administration).” 

This rule would not have changed the statutory requirement in section 

1928(c)(2)(C) of the Act that a qualified physician administering a vaccine obtained from 

the VFC program is limited under the VFC provider agreement to charging an amount for 

vaccine administration that is no more than the VFC maximum allowable charge. 

However, we considered proposing that States comply with the requirements of sections 

1902(a)(13)(c) and 1932(f) of the Act and pay the designated Medicare amount despite 

the fact that this amount might have been higher than the amount that was billed by the 

provider. To meet this requirement we considered proposing that States re-price vaccine 

administration billing codes, resulting in payment equal to the applicable Medicare-based 

rate. 

We considered this alternative to fully reflect the requirement in section 1202 of 

the HCERA that Medicaid payment for primary care services be not less than the MPFS 

payment rate. While Medicare provider payment is limited to the lesser of provider 

charges or the fee schedule amount, we considered that allowing provider payment to 

exceed provider charges in this instance could be allowable in order to achieve the 

objectives of sections 1902(a)(13)(c) and 1932(f) of the Act. We also considered 

proposing that VFC providers account for the payment in excess of the billed amount as a 

Medicaid receipt for vaccine administration and that they ensure that it was not 

considered as an increase in the billed amount, or as a credit toward either the beneficiary 

account or toward payment for other services. 
CMS-2370-P 63 

The primary benefit of this alternative is higher reimbursement for vaccine 

administration fees associated with the VFC program. Although the VFC ceilings have 

not been modified since 1994, the majority of States have paid for vaccine 

administrations at rates well below the ceilings. For example, California’s maximum rate 

was $17.55, but the State paid $9.00. Approximately five States reimbursed vaccine 

administration fees within close proximity to the ceiling. Medicare’s 2011 

reimbursement rate for the first vaccine was $23.10 and for subsequent vaccines was 

$11.55. Therefore, we believe that requiring VFC administrations be reimbursed at the 

Medicare rate will help to ensure adequate compensation for VFC providers. However, 

we were concerned about the potential Federal budget impact of this proposal, with initial 

estimates indicating a potential cost impact of approximately $970 million over CYs 

2013 and 2014, and the administrative burden it would place on States to reprice claims 

for these services. 

We also considered whether the requirements of the VFC statute preclude 

application of sections 1902(a)(13)(c) and 1932(f) of the Act to vaccine administration 

under the VFC program. However, this would mean that participating providers would 

be limited to the State-specific VFC rates in the Medicaid State plan as well as to 

payment per vaccine administered. 

Another alternative was to require payment at the DHHS VFC regional maximum 

fee schedule amount but to also require reimbursement for each vaccine/toxoid 

administered. This would comply with VFC requirements that providers charge no more 

than the regional maximum amount, but would permit providers to benefit from the 

coding change that requires payment per vaccine/toxoid administered. 
CMS-2370-P 64 

We recognize the complexity of the issues surrounding the interplay of the VFC 

statutory requirements and the requirements of the Affordable Care Act and specifically 

request comment on these proposals. 

5. Method of Payment 

Section 1902(a)(13)(C) of the Act requires payment in CYs 2013 and 2014 of the 

current Medicare rate, unless the rate set using the CY 2009 CF was higher. Historically, 

Medicare has issued multiple updates to its MPFS within a single year. 

Based on input from States, and to assure the feasibility of implementation, we 

propose to permit States the option to either adopt the MPFS in effect at the beginning of 

CYs 2013 and 2014 or the rate using the CY 2009 CF, if higher or a methodology to 

update rates to reflect changes made my Medicare during the year. If the State chooses to 

reflect changes made by Medicare, the methodology for those updates must be specified. 

States would be required to use the MPFS applicable to the place of service and 

geographic location. We considered requiring States to make changes throughout the 

year, as Medicare changed its MPFS. However, our proposal to permit States to use a 

single version of the MPFS reflects extensive comment received from States concerned 

about balancing the need for administrative ease with meeting the requirements to make 

this payment. 

We also propose that payment not be made inclusive of Medicare’s incentive 

payment as authorized under section 5501(a) of the Affordable Care Act. We considered 

defining the Medicare “rate” as being inclusive of the incentive payments. However, the 

Medicare incentive payments are supplements made to specific providers based on total 

Medicare allowed charges and do not represent increases to the MPFS rates for specific 

CPT codes. Moreover, even if the same providers qualified for both the Medicare 
CMS-2370-P 65 

incentive payment and this Medicaid payment, it would be administratively difficult for 

State Medicaid agencies to determine the Medicare “rate” for purposes of the increased 

Medicaid payment since States do not have access to Medicare payment data. 

For the purpose of identifying the differential between the Medicaid rate and the 

Medicare rate, this proposed rule would define the Medicaid “rate” under the approved 

Medicaid State plan as the final rate paid to a provider inclusive of all supplemental or 

enhanced payments made to that provider. For example, many States reimburse 

physicians affiliated with academic medical centers the Medicaid State plan rate plus a 

supplemental amount that together equal the average amount paid by commercial third 

party payers. Therefore, in calculating the rate differential, these States would determine 

the CY 2009 Medicaid rate inclusive of this type of supplemental payment. We 

considered not defining “rate” but, recognizing the wide variety of ways in which States 

characterize their payments, we chose to make this clarification to promote uniform and 

fair implementation of this payment. 

6. VFC Administration Fee Increase 

 We considered a number of options when determining to update the average 

national administration charge portion of the formula used to calculate the VFC 

administration fee. These options included using the Medicare Economic Index (MEI), 

Consumer Price Index (CPI) or the Gross Domestic Product Deflator. We have 

determined the best option is to utilize the MEI, which is a price index used by CMS to 

update Medicare physician payments. The MEI reflects input price inflation experienced 

by physicians inclusive of the time period when the national average was established in 

1994. Therefore, we believe that input prices associated with this specific type of 

physician-provided service are consistent with overall input prices. 
CMS-2370-P 66 

The overall economic impact, as a result of this proposed rule announcing updates 

to the regional maximum charges for the VFC program for use on an interim basis, is 

estimated at $75 million per year. The Federal cost of this total is approximately $45 

million per year. These estimates assume that every State would increase its 

reimbursement rate to the new VFC maximum fee.

F. Accounting Statement and Table

As required by OMB’s Circular A-4 (available at 

http://www.whitehouse.gov/omb//circulars_a004_a-4/), in Table 5 we have prepared an 

accounting statement illustrating the classification of the Federal and State expenditures 

associated with this proposed rule. 
CMS-2370-P 67 

TABLE 5: Accounting Statement: Classification of Estimated Expenditures 

for Payment Increases to Primary Care Providers during Calendar Years 2013 

through 2014 (Millions of 2012 Dollars) 

Category Transfers 

Annualized 

Monetized 

Transfers 

Discount Rate Period 

Covered 

 7% 3% 

 Primary 

Estimate $5,846 $5,848 

CYs 2013-

2014 

From/To Federal Government to Medicaid Providers. 

Category Transfers 

Annualized 

Monetized 

Transfers 

Discount Rate Period 

Covered 

7% 3% 

Primary 

Estimate -$261 -$262 

CYs 2013-

2014 

From/To State Governments to Medicaid Providers. 
CMS-2370-P 68 

List of Subjects 

42 CFR Part 438

Grant programs-health, Medicaid, Reporting and recordkeeping requirements. 

42 CFR Part 441

Aged, Family planning, Grant programs-health, Infants and children, Medicaid, 

Penalties, Reporting and recordkeeping requirements. 

42 CFR Part 447 

Accounting, Administrative practice and procedure, Drugs, Grant programshealth, Health facilities, Health professions, Medicaid, Reporting and recordkeeping 

requirements, Rural areas. 
CMS-2370-P 69 

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid 

Services proposes to amend 42 CFR chapter IV as set forth below: 

PART 438 — MANAGED CARE 

1. The authority citation for part 438 continues to read as follows: 

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

2. Section 438.6 is amended by adding new paragraphs (c)(3)(v) and (c)(5)(vi) to 

read as follows: 

§438.6 Contract requirements. 

* * * * * 

(c) * * * 

(3) * * * 

(v) For rates covering CYs 2013 and 2014, complying with minimum payment for 

physician services under paragraph (c)(5)(vi) of this section, and part 447, subpart G, of 

this chapter. 

* * * * * 

(5) * * * 

(vi) For CYs 2013 and 2014, and payments to an MCO, PIHP or PAHP for 

primary care services furnished to enrollees under part 447, subpart G, of this chapter, the 

contract must require that the MCO, PIHP or PAHP meet the following requirements: 

(A) Make payments to those specified physicians (whether directly or through a 

capitated arrangement) at least equal to the amounts set forth and required under part 447, 

subpart G, of this chapter. 

(B) Provide sufficient documentation to the State, as determined by the State, 

regarding the amount provider payments increase as a result of meeting the requirement 

of paragraph (c)(5)(vi)(A) of this section. 
CMS-2370-P 70 

* * * * * 

3. Section 438.804 is added to read as follows: 

§438.804 Primary care provider payment increases. 

(a) For MCO, PIHP or PAHP contracts that cover calendar years 2013 and 2014, 

FFP is available at an enhanced rate of 100 percent for the portion of the expenditures for 

capitation payments made under those contracts to comply with the contractual 

requirement under §438.6(c)(5)(vi) only if the following requirements are met: 

(1) The State makes a reasonable estimate of the increased amounts paid for 

specified primary care services provided by eligible primary care physicians resulting 

from the contractual requirement under §438.6(c)(5)(vi), based on information received 

from the managed care provider for services furnished as of July 1, 2009. 

(2) The State develops a methodology for identifying the differential in payment 

between the provider payments that would have been made by the managed care provider 

on July 1, 2009 and the amount needed to comply with the contractual requirement under 

§438.6(c)(5)(vi). 

(3) The State must submit the methodology in paragraph (a)(2) of this section to 

CMS for approval before the beginning of CY 2013. 

(b) [Reserved] 

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO 

SPECIFIC SERVICES 

4. The authority citation of part 441 is revised to read as follows: 

Authority: Secs. 1102, 1902, and 1928 of the Social Security Act (42 U.S.C. 

1302). 

5. Subpart K is added to read as follows: 

Subpart K--Vaccines for Children Program 
CMS-2370-P 71 

Sec. 

441.500 Basis and purpose. 

441.505 General requirements. 

441.510 State plan requirements. 

441.515 Administration fee requirements. 

Subpart K--Vaccines for Children Program 

§441.500 Basis and purpose. 

This subpart implements sections 1902(a)(62) and 1928 of the Act by requiring 

States to provide for a program for the purchase and distribution of pediatric vaccines to 

program-registered providers for the immunization of vaccine-eligible children. 

§441.505 General requirements. 

(a) Federally-purchased vaccines under the VFC Program are made available to 

children who are 18 years of age or younger and who are any of the following: 

(1) Eligible for Medicaid. 

(2) Not insured. 

(3) Not insured with respect to the vaccine and who are administered pediatric 

vaccines by a federally qualified health center (FQHC) or rural health clinic. 

(4) An Indian, as defined in section 4 of the Indian Health Care Improvement Act. 

(b) Under the VFC program, vaccines must be administered by programregistered providers. Section 1928(c) of the Act defines a program-registered provider as 

any health care provider that meets the following requirements: 

(1) Is licensed or authorized to administer pediatric vaccines under the law of the 

State in which the administration occurs without regard to whether or not the provider is 

a Medicaid-participating provider. 
CMS-2370-P 72 

(2) Submits to the State an executed provider agreement in the form and manner 

specified by the Secretary. 

(3) Has not been found, by the Secretary or the State to have violated the provider 

agreement or other applicable requirements established by the Secretary or the State. 

§441.510 State plan requirements. 

A State plan must provide that the Medicaid agency meets the requirements of 

this subpart. 

§441.515 Administration fee requirements. 

(a) Under the VFC Program, a provider who administers a qualified pediatric 

vaccine to a federally vaccine-eligible child, may not impose a charge for the cost of the 

vaccine. 

(1) A provider can impose a fee for the administration of a qualified pediatric 

vaccine as long as the fee does not exceed the costs of the administration (as determined 

by the Secretary based on actual regional costs for the administration). 

(2) A provider may not deny administration of a qualified pediatric vaccine to a 

vaccine-eligible child due to the inability of the child's parents or legal guardian to pay 

the administration fee. 

(b) The Secretary must publish each State’s regional maximum charge for the 

VFC program, which represents the maximum amount that a provider in a State could 

charge for the administration of qualified pediatric vaccines to federally vaccine-eligible 

children under the VFC program. 

(c) An interim formula has been established for the calculation of a State’s 

regional maximum administration fee. That formula is as follows: National charge data 

x updated geographic adjustment factors (GAFs) = maximum VFC fee. 

(d) The Medicaid Agency must submit a State plan amendment that identifies the 
CMS-2370-P 73 

amount that the State will pay providers for the administration of a qualified pediatric 

vaccine to a Medicaid-eligible child under the VFC program. The amount identified by 

the State cannot exceed the State’s regional maximum administration fee. 

(e) Physicians participating in the VFC program can charge federally vaccineeligible children who are not enrolled in Medicaid the maximum administration fee (if 

that fee reflects the provider’s cost of administration) regardless of whether the State has 

established a lower administration fee under the Medicaid program. However, there 

would be no Federal Medicaid matching funds available for the administration since 

these children are not eligible for Medicaid.

PART 447 – PAYMENTS FOR SERVICES 

6. The authority citation for part 447 continues to read as follows: 

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

7. Subpart G is added to read as follows: 

Subpart G – Payments for Primary Care Services Furnished by Physicians 

Sec. 

447.400 Primary care services furnished by physicians with a specified specialty 

or subspecialty. 

447.405 Amount of required minimum payments. 

447.410 State plan requirements. 

447.415 Availability of Federal financial participation (FFP). 

Subpart G – Payments for Primary Care Services Furnished by Physicians 

§447.400 Primary care services furnished by physicians with a specified specialty or 

subspecialty. 

(a) States pay for services furnished by a physician as defined in §440.50 of this 

chapter, or under the personal supervision of a physician who self-attests to a specialty 
CMS-2370-P 74 

designation of family medicine, general internal medicine or pediatric medicine or a 

subspecialty recognized by the American Board of Medical Specialties and is verified by 

the Medicaid agency as meeting one of the following requirements: 

(1) Is Board certified with such a specialty or subspecialty. 

(2) Has furnished evaluation and management services and vaccine 

administration services under codes described in paragraph (b) of this section that equal 

at least 60 percent of the Medicaid codes billed during the most recently completed CY. 

(3) For physicians who do not have 12 months of paid Medicaid claims history, 

data on codes billed must be reviewed from the date of enrollment through the end of the 

enrollment CY. 

(b) Primary care services designated in the Healthcare Common Procedure 

Coding System (HCPCS) are as follows: 

(1) Evaluation and Management (E&M) codes 99201 through 99499. 

(2) Current Procedural Terminology (CPT) vaccine administration codes 90460, 

90461, 90471, 90472, 90473 and 90474, or their successor codes. 

§447.405 Amount of required minimum payments.

(a) For CYs 2013 and 2014, a State must pay for physician services described in 

§447.400 based on the lesser of: 

(1) The Medicare Part B fee schedule rate that is applicable to the site of service 

and geographic location of the service of, if there is no applicable rate the rate specified 

in a fee schedule established and announced by CMS (that is, the product of multiplying 

the Medicare CF in effect at the beginning of CYs 2013 or 2014 (or the CY 2009 CF, if 

higher) and the CY 2013 and 2014 relative value units (RVUs). 

(2) The provider’s actual billed charge for the service. 
CMS-2370-P 75 

 (b) For vaccines provided under the Vaccines for Children Program in CYs 2013 

and 2014, a State must pay the lesser of: 

(1) The Regional Maximum Administration Fee; or, 

(2) The Medicare fee schedule rate in CY 2013 or 2014 (or, if higher, the rate 

using the 2009 conversion factor and the 2013 and 2014 RVUs) for code 90460. 

§447.410 State plan requirements. 

The State must amend its plan to reflect the increase in fee schedule payments in 

CYs 2013 and 2014 unless, for each of the billing codes eligible for payment, the State 

currently reimburses at least as much as the higher of the CY 2013 and CY 2014 

Medicare rate or the rate that would be derived using the CY 2009 conversion factor and 

the CY 2013 and 2014 Medicare relative value units (RVUs). 

§447.415 Availability of Federal financial participation (FFP) 

(a) For primary care services furnished by physicians specified in §447.400, FFP 

will be available at the rate of 100 percent for the amount by which the payment required 

to comply with §447.405 exceeds the Medicaid payment that would have been made 

under the approved State plan in effect on July 1, 2009. 

(b) For purposes of calculating the payment that would have been made under the 

approved State plan in effect on July 1, 2009, the State must consider all supplemental 

and increased payments made for the individually billed codes, including any incentive 

payments and other supplemental payment in effect at that time. 

(c) For vaccine administration, the State must impute the payment that would 

have been made under the approved Medicaid State plan in effect on July 1, 2009 by 

calculating the average payment for codes 90465, 90466, 90467 and 90468 weighted by 

volume. 
CMS-2370-P 76 

(d) For any payment made under a bundled rate methodology, including bundled 

rates for vaccines and vaccine administration, the amount directly attributable to the 

applicable primary care service must be isolated for purposes of determining the 

availability of the 100 percent FFP rate. 
CMS-2370-P 

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

Assistance Program) 

Dated: April 17, 2012. 

 _______________________________ 

 Marilyn Tavenner, 

 Acting Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: April 18, 2012. 

 __________________________________ 

Kathleen Sebelius, 

Secretary, 

Department of Health and Human Services. 

 

BILLING CODE 4120-01-P 
CMS-2370-P 

[FR Doc. 2012-11421 Filed 05/09/2012 at 11:15 am; Publication Date: 

05/11/2012]