Under federal law, states are eligible for an enhanced federal matching rate of 90 percent for the design, development, or installation of Medicaid claims processing and information retrieval systems. Historically, CMS had allowed states to claim this 90 percent matching rate for the design, development, or installation of system changes to MMIS, which includes Medicaid claims processing, among other things, but such a match was not available for Medicaid eligibility IT systems changes. However, in 2011, CMS extended the availability of the 90 percent matching rate for which includes undertaking changes to Medicaid eligibility IT systems,efforts to implement the “no wrong door” policy. Under this policy, individuals can apply for health coverage through an exchange or a state’s Medicaid agency, and regardless of which “door” they choose, their eligibility will be determined for coverage under Medicaid, CHIP, or the exchange, including any income-based subsidies available through the exchange. To this end, applications are then to be routed to the program for which the individual is eligible. Along with the “no wrong door” policy, CMS envisioned streamlined enrollment processes that include the real-time transfer of applications between state Medicaid agencies and the FFE, and immediate eligibility determinations. States are eligible to use 90/10 funding for changes they make to their Medicaid IT systems regardless of whether they are operating their own exchanges or using the FFE. States may also receive a 75 percent matching rate for the maintenance and any ongoing costs of operating an upgraded Medicaid eligibility system. The 75 percent FFP is generally available when the Medicaid eligibility system changes become operational, and unlike 90/10 funding, does not expire. To access 90/10 funding, states must first submit advanced planning documents (APDs) to CMS—the federal agency that oversees the Medicaid program and provides guidance and technical assistance to states related to Medicaid eligibility system changes. CMS reviews the APDs to ensure that certain technical and operational criteria are met before states are eligible for 90/10 funding. To receive CMS approval, states must develop IT systems that meet technical standards and conditions, which require states to develop IT systems that are flexible, advance the Medicaid Information Technology Architecture principles, and promote data exchanges and the reuse of Medicaid technologies across systems and states, among other things. In addition to these technical requirements, CMS specified operational requirements—known as critical success factors—to help states prioritize the many changes that they were making to their eligibility systems to comply with PPACA. Due to differences among states in their approaches to establishing an exchange, not all states needed to implement all critical success factors. For example, states running their own exchanges would not need to implement the factor relating to sending and receiving applications to and from the FFE. That particular factor would only apply to the states that were using the FFE. (See table 1.) To claim the federal share of state costs for these eligibility system changes, states report their expenditures on the form CMS-64, which states complete quarterly to obtain federal reimbursement for services or administrative costs under the Medicaid program. State Medicaid agencies submit expenditure information 30 days after a quarter has ended, and CMS reviews these submissions to authorize and compute the applicable federal share of expenditures claimed. Even after reporting, states are permitted to adjust previously reported expenditures on the CMS-64 for up to 2 years from the quarter of their initial reporting. Any adjustments that a state makes will appear in the quarter in which the state made it, but will not be applied retroactively to the state’s initial report. Reported spending of 90/10 funding across all 50 states and the District of Columbia totaled more than $1.8 billion for Medicaid eligibility IT system changes as of September 30, 2014, with the federal government contributing more than $1.6 billion and states contributing about $200 million. Over three quarters of states’ reported spending of 90/10 funding—$1.4 billion—was for contractors selected by states to implement changes to their eligibility IT systems. Although 90/10 funding was available to states beginning in April 2011, only 2 states reported spending funds on Medicaid eligibility IT system changes by September 30, 2011. Over the next year, however, the number of states reporting such spending increased dramatically; and by March 2014, all 50 states and the District of Columbia had reported related spending. Similarly, the amount of spending reported for each quarter has also grown steadily, with the most significant increases reported over the most recent quarters. (See fig. 1.) Appendix I includes information on 90/10 funding by state. Across the country, states’ changes to Medicaid eligibility IT systems ranged from full system replacements to more limited modifications, with the scope of a state’s changes dependent on a number of factors, including the age of their system and the extent of integration among state programs. According to CMS, 34 states implemented full system replacements, while 17 states implemented system modifications. State- reported spending of 90/10 funding varied widely, ranging from $1.8 million in South Dakota to $180 million in North Carolina, as of June 30, 2014. (See fig. 2.) Although there were spending differences among individual states, the median amount spent on eligibility IT systems in states modifying their systems was about one half of the median amount spent in states that were undertaking full system replacements during this time. Among the six states we reviewed, the prior Medicaid eligibility IT systems in five of the states were 20 to 30 years old, and varied in terms of the extent of integration with other state programs and overall function, as illustrated by the following two examples. North Carolina’s prior Medicaid eligibility IT system was a state-based system that was over 30 years old, and was used to determine eligibility and process enrollment for 17 programs run by the state’s Department of Health and Human Services, according to state officials. The state had begun development of a new integrated IT system in 2009, and was continuing to work on its implementation when 90/10 funding became available. Hawaii’s Medicaid eligibility IT system was a state-wide system that was over 25 years old, and was also used to determine eligibility for the Supplemental Nutrition Assistance Program, Temporary Assistance to Needy Families, and other human service programs, according to state officials. However, the state separately contracted with the Arizona Medicaid program to conduct program enrollment activities, and Hawaii officials noted that they expected this arrangement to continue for the foreseeable future. The state officials added that Hawaii had needed a new eligibility IT system for quite some time, but was not able to pursue IT improvements until 90/10 funding became available. Differences in state-reported spending could reflect other factors, such as a state’s readiness to implement a new eligibility IT system. For example, two states we reviewed—New Mexico and North Carolina—were able to obtain approval and claim expenditures for 90/10 funding soon after it became available, because they were already working on eligibility IT system improvements. As previously noted, states’ spending on the maintenance and operation of these new systems is eligible for a federal match of 75 percent. Through September 30, 2014, 27 states reported spending an additional $205 million on maintenance and operation activities, about 79 percent of which was paid to contractors.state spending for maintenance and operation costs. Selected states implemented most of the critical success factors using alternative approaches, which often reflected unique program aspects. However, all states using the FFE faced challenges transferring applications to and from the FFE, and those challenges contributed to enrollment delays. Officials from the selected states reported that they were largely able to implement three critical success factors that applied to all states—the abilities to (1) accept a single, streamlined application; (2) verify applicant eligibility based on electronic data sources, such as the federal data services hub; and (3) convert existing income standards to MAGI, and process Medicaid applications based on these rules—by the beginning of the initial open enrollment period, October 1, 2013. The six states we reviewed often used alternative approaches, which CMS approved, to implement each of these three critical success factors. (See table 2.) In some states, the use of these alternative approaches reflected unique program aspects of states’ Medicaid programs or IT systems, as illustrated by the following examples. To implement the factor related to accepting a single, streamlined application, four states we reviewed (Kansas, New Mexico, North Carolina, and Pennsylvania) developed alternative applications that were tailored to their specific programs.developed an alternative application to reflect the integration of its Medicaid eligibility and enrollment system with its Supplemental Food and Nutrition Program and its Temporary Assistance to Needy Families program, according to state officials. In particular, New Mexico For the critical success factor relating to verifying applicant income, three states we reviewed (Kansas, New Mexico, and North Carolina) used existing state sources to verify applicant eligibility instead of relying on the federal data services hub. In North Carolina, for example, officials indicated that the state received approval for an alternative to the hub, and chose to rely on its existing link to the Social Security Administration, as well as other sources for verification. For the critical success factor relating to MAGI criteria, five states we reviewed opted to convert their eligibility rule systems to MAGI, and one state—Kansas—opted instead to use CMS’s MAGI-in-the-Cloud to determine eligibility because its new eligibility system, the Kansas Eligibility Enforcement System, is not expected to be operational until November 2014, according to state officials. The remaining two critical success factors—the minimum essential coverage (MEC) check and the application transfer function—apply to the 36 states using the FFE and involve transmitting information between state and federal data sources, which we refer to as IT connections. For the MEC check, states’ Medicaid IT systems were to respond to electronic inquiries from the FFE on applicants’ current Medicaid or CHIP coverage, a one-way transmission of information from the FFE to the state.