42 C.F.R. PART 433—STATE FISCAL ADMINISTRATION
Title 42 - Public Health
Authority: Sec. 1102 of the Social Security Act, (42 U.S.C. 1302).
Source: 43 FR 45201, Sept. 29, 1978, unless otherwise noted.
This part specifies the rates of FFP for services and administration, and prescribes requirements, prohibitions, and FFP conditions relating to State fiscal activities. (a) Basis. Sections 1903(a)(1), 1903(g), and 1905(b) provide for payments to States, on the basis of a Federal medical assistance percentage, for part of their expenditures for services under an approved State plan. (b) Federal medical assistance percentage (FMAP)—Computations. The FMAP is determined by the formula described in section 1905(b) of the Act. Under the formula, if a State's per capita income is equal to the national average per capita income, the Federal share is 55 percent. If a State's per capita income exceeds the national average, the Federal share is lower, with a statutory minimum of 50 percent. If a State's per capita income is lower than the national average, the Federal share is increased, with a statutory maximum of 83 percent. The formula used in determining the State and Federal share is as follows:
State Share = [(State per capita income)2 /(National per capita income)2 ] × 45 percent Federal share=100 percent minus the State share (with a minimum of 50 percent and a maximum of 83 percent) The formula provides for squaring both the State and national average per capita incomes; this procedure magnifies any difference between the State's income and the national average. Consequently, Federal matching to lower income States is increased, and Federal matching to higher income States is decreased, within the statutory 50–83 percent limits. The FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is set by statute at 50 percent and is subject to dollar limitations specified in section 1108 of the Act. (c) Special provisions. (1) Under section 1903(a)(5) of the Act, the Federal share of State expenditures for family planning services is 90 percent. (2) Under section 1905(b), the Federal share of State expenditures for services provided through Indian Health Service facilities is 100 percent. (3) Under section 1903(g), the FMAP is reduced if the State does not have an effective program to control use of institutional services. (4) Under section 1905(b) of the Social Security Act, the Federal share of State expenditures described in §433.11(a) for services provided to children, is the enhanced FMAP rate determined in accordance with §457.622(b) of this chapter, subject to the conditions explained in §433.11(b). (5)(i) Under section 1933(d) of the Act, the Federal share of State expenditures for Medicare Part B premiums described in section 1905(p)(3)(A)(ii) of the Act on behalf of Qualifying Individuals described in section 1902(a)(10)(E)(iv) of the Act, is 100 percent, to the extent that the assistance does not exceed the State's allocation under paragraph (c)(5)(ii) of this section. To the extent that the assistance exceeds that allocation, the Federal share is 0 percent. (ii) Under section 1933(c)(2) of the Act and subject to paragraph (c)(5)(iii) of this section, the allocation to each State is equal to the total allocation specified in section 1933(c)(1) of the Act multiplied by the Secretary's estimate of the ratio of the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act in the State to the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating that ratio, the Secretary will use data from the U.S. Census Bureau. (iii) If, based on projected expenditures for a fiscal year, the Secretary determines that the expenditures described in paragraph (c)(5)(i) of this section for one or more States are projected to exceed the allocation made to the State, the Secretary may adjust each State's fiscal year 2005, 2006, or 2007 allocation, as follows: (A) The Secretary will compare each State's projected total expenditures for the expenses described in paragraph (c)(5)(i) of this section to the State's initial allocation determined under paragraph (c)(5)(ii) of this section, to determine the extent of each State's projected surplus or deficit. (B) The surplus of each State with a projected surplus, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Surplus. (C) The deficit of each State with a projected deficit, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Deficit. (D) Each State with a projected deficit will receive an additional allocation equal to the amount of its projected deficit. The amount to be reallocated from each State with a projected surplus will be equal to A × B, where A equals the Total Projected Deficit and B equals the amount of the State's projected surplus as a percentage of the Total Projected Surplus. (iv) CMS will notify States of any changes in allotments resulting from any reallocations. (v) The provisions of this paragraph (c)(5) will be in effect through the end of calendar year 2007. (Sections 1902(a)(10), 1933 of the Social Security Act (42 U.S.C. 1396a), and Pub. L. 105–33) [43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48559, Oct. 1, 1981; 51 FR 41350, Nov. 14, 1986; 54 FR 21066, May 16, 1989; 66 FR 2666, Jan. 11, 2001; 70 FR 50220, Aug. 26, 2005; 71 FR 25092, Apr. 28, 2006] (a) Subject to the conditions in paragraph (b) of this section, the enhanced FMAP determined in accordance with §457.622 of this chapter will be used to determine the Federal share of State expenditures, except any expenditures pursuant to section 1923 of the Act for payments to disproportionate share hospitals for— (1) Services provided to optional targeted low-income children described in §435.4 or §436.3 of this chapter; and (2) Services provided to children born before October 1, 1983, with or without group health coverage or other health insurance coverage, who would be described in section 1902(l)(1)(D) of the Act (poverty-level-related children's groups) if— (i) They had been born on or after that date; and (ii) They would not qualify for medical assistance under the State plan in effect on March 31, 1997. (b) Enhanced FMAP is not available if— (1) A State adopts income and resource standards and methodologies for purposes of determining a child's eligibility under the Medicaid State plan that are more restrictive than those applied under policies of the State plan (as described in the definition of optional targeted low-income children at §435.4 of this chapter) in effect on June 1, 1997; or (2) No funds are available in the State's title XXI allotment, as determined under part 457, subpart F of this chapter for the quarter enhanced FMAP is claimed; or (3) The State fails to maintain a valid method of identifying services provided on behalf of children listed in paragraph (a) of this section. [66 FR 2666, Jan. 11, 2001] (a) Basis. Section 1903(a) (2) through (5) and (7) of the Act provide for payments to States, on the basis of specified percentages, for part of their expenditures for administration of an approved State plan. (b) Activities and rates. (1) [Reserved] (2) Administration of family planning services: 90 percent. (Section 1903 (a)(5); 42 CFR 432.50(b)(5).) (3) Design, development, or installation of mechanized claims processing and information retrieval systems: 90 percent. (Section 1903(a)(3)(A)(i); 42 CFR part 433, subpart C, and §432.50 (b)(3).) (4) Operation of mechanized claims processing and information retrieval systems: 75 percent. (Section 1903(a) (3)(B); 42 CFR part 433, subpart C and §432.50(b)(2).) (5) Compensation and training of skilled professional medical personnel and staff directly supporting those personnel if the criteria specified in §432.50 (c) and (d) are met: 75 percent. (Section 1903(a)(2); 42 CFR 432.50(b)(1).) (6)(i) Funds expended for the performance of medical and utilization review by a QIO under a contract entered into under section 1902(d) of the Act: 75 percent (section 1903(a)(3)(C) of the Act). (ii) If a State contracts for medical and utilization review with any individual or organization not designated under Part B of Title XI of the Act, funds expended for such review will be reimbursed as provided in paragraph (b)(7) of this section. (7) All other activities the Secretary finds necessary for proper and efficient administration of the State plan: 50 percent. (Section 1903(a)(7).) (See also §455.300 of this subchapter for FFP at 90 percent for State Medicaid fraud control units under section 1903(a)(6).) (8) Nurse aide training and competency evaluation programs and competency evaluation programs described in 1919(e)(1) of the Act: for calendar quarters beginning on or after July 1, 1988 and before July 1, 1990: The lesser of 90% or the Federal medical assistance percentage plus 25 percentage points; for calendar quarters beginning on or after October 1, 1990: 50%. (Section 1903(a)(2)(B) of the Act.) (9) Preadmission screening and annual resident review (PASARR) activities conducted by the State: 75 percent. (Sections 1903(a)(2)(C) and 1919(e)(7); 42 CFR part 483, subparts C and E.) (10) Funds expended for the performance of external quality review or the related activities described in §438.358 of this chapter when they are performed by an external quality review organization as defined in §438.320 of this chapter: 75 percent. [43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 46 FR 54744, Nov. 4, 1981; 50 FR 15327, Apr. 17, 1985; 50 FR 46664, Nov. 12, 1985; 56 FR 48918, Sept. 26, 1991; 57 FR 56506, Nov. 30, 1992; 68 FR 3635, Jan. 24, 2003] A State plan must provide that the Medicaid agency and, where applicable, local agencies administering the plan will— (a) Maintain an accounting system and supporting fiscal records to assure that claims for Federal funds are in accord with applicable Federal requirements; (b) Retain records for 3 years from date of submission of a final expenditure report; (c) Retain records beyond the 3-year period if audit findings have not been resolved; and (d) Retain records for nonexpendable property acquired under a Federal grant for 3 years from the date of final disposition of that property. [44 FR 17935, Mar. 23, 1979] A State plan under Title XIX of the Social Security Act must provide that the single or appropriate Agency will have an approved cost allocation plan on file with the Department in accordance with the requirements contained in subpart E of 45 CFR part 95. Subpart E also sets forth the effect on FFP if the requirements contained in that subpart are not met. [47 FR 17490, Apr. 23, 1982] Claims for Federal financial participation in the cost of equipment under the Medicaid Program are determined in accordance with subpart G of 45 CFR part 95. Requirements concerning the management and disposition of equipment under the Medicaid Program are also prescribed in subpart G of 45 CFR part 95. [47 FR 41564, Sept. 21, 1982] (a) Basis and purpose. This section implements sections 1902(a)(18) and 1917(a) and (b) of the Act, which describe the conditions under which an agency may impose a lien against a recipient's property, and when an agency may make an adjustment or recover funds in satisfaction of the claim against the individual's estate or real property. (b) Definition of property. For purposes of this section, “property” includes the homestead and all other personal and real property in which the recipient has a legal interest. (c) State plan requirement. If a State chooses to impose a lien against an individual's real property (or as provided in paragraph (g)(1) of this section, personal property), the State plan must provide that the provisions of paragraphs (d) through (i) of this section are met. (d) Procedures. The State plan must specify the process by which the State will determine that an institutionalized individual cannot reasonably be expected to be discharged from the medical institution and return home as provided in paragraph (g)(2)(ii) of this section. The description of the process must include the type of notice to be given the individual, the process by which the individual will be given the opportunity for a hearing, the hearing procedures, and by whom and on what basis the determination that the individual cannot reasonably be expected to be discharged from the institution will be made. The notice to the individual must explain what is meant by the term lien, and that imposing a lien does not mean that the individual will lose ownership of the home. (e) Definitions. The State plan must define the following terms used in this section: (1) Individual's home. (2) Equity interest in home. (3) Residing in the home for at least 1 (or 2) year(s). (4) On a continuing basis. (5) Discharge from the medical institution and return home. (6) Lawfully residing. (f) Exception. The State plan must specify the criteria by which a son or daughter can establish to the agency's satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution, as provided in paragraph (h)(2)(iii)(B) of this section. (g) Lien provisions—(1) Incorrect payments. The agency may place a lien against an individual's property, both personal and real, before his or her death because of Medicaid claims paid or to be paid on behalf of that individual following a court judgement which determined that benefits were incorrectly paid for that individual. (2) Correct payments. Except as provided in paragraph (g)(3) of this section, the agency may place a lien against the real property of an individual at any age before his or her death because of Medicaid claims paid or to be paid for that individual when–– (i) An individual is an inpatient of a medical institution and must, as a condition of receiving services in the institution under the State plan, apply his or her income to the cost of care as provided in §§435.725, 435.832 and 436.832; and (ii) The agency determines that he or she cannot reasonably be expected to be discharged and return home. The agency must notify the individual of its intention to make that determination and provide an opportunity for a hearing in accordance with State established procedures before the determination is made. The notice to an individual must include an explanation of liens and the effect on an individual's ownership of property. (3) Restrictions on placing liens. The agency may not place a lien on an individual's home under paragraph (g)(2) of this section if any of the following individuals is lawfully residing in the home: (i) The spouse; (ii) The individual's child who is under age 21 or blind or disabled as defined in the State plan; or (iii) The individual's sibling (who has an equity interest in the home, and who was residing in the individual's home for at least one year immediately before the date the individual was admitted to the medical institution). (4) Termination of lien. Any lien imposed on an individual's real property under paragraph (g)(2) of this section will dissolve when that individual is discharged from the medical institution and returns home. (h) Adjustments and recoveries. (1) The agency may make an adjustment or recover funds for Medicaid claims correctly paid for an individual as follows: (i) From the estate of any individual who was 65 years of age or older when he or she received Medicaid; and (ii) From the estate or upon sale of the property subject to a lien when the individual is institutionalized as described in paragraph (g)(2) of this section. (2) The agency may make an adjustment or recovery under paragraph (h)(1) of this section only: (i) After the death of the individual's surviving spouse; and (ii) When the individual has no surviving child under age 21 or blind or disabled as defined in the State plan; and (iii) In the case of liens placed on an individual's home under paragraph (g)(2) of this section, when there is no— (A) Sibling of the individual residing in the home, who has resided there for at least one year immediately before the date of the individual's admission to the institution, and has resided there on a continuous basis since that time; or (B) Son or daughter of the individual residing in the home, who has resided there for at least two years immediately before the date of the individual's admission to the institution, has resided there on a continuous basis since that time, and can establish to the agency's satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution. (i) Prohibition of reduction of money payments. No money payment under another program may be reduced as a means of recovering Medicaid claims incorrectly paid. [43 FR 45201, Sept. 29, 1978, as amended at 47 FR 43647, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982] (a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes requirements concerning— (1) Identification of providers; and (2) Compliance with the information reporting requirements of the Internal Revenue Code. (b) Identification of providers. A State plan must provide for the identification of providers by— (1) Social security number if— (i) The provider is in solo practice; or (ii) The provider is not in solo practice but billing is by the individual practitioner; or (2) Employer identification number for all other providers. (c) Compliance with section 6041 of the Internal Revenue Code. The plan must provide that the Medicaid agency complies with the information reporting requirements of section 6041 of the Internal Revenue Code (26 U.S.C. 6041). Section 6041 requires the filing of annual information returns showing amounts paid to providers, who are identified by name, address, and social security number or employer identification number. (a) Basis and scope. This section is based on section 1903(d)(5) of the Act, which requires that the Secretary charge a State interest on the Federal share of claims that have been disallowed but have been retained by the State during the administrative appeals process under section 1116(d) of the Act and the Secretary later recovers after the administrative appeals process has been completed. This section does not apply to— (1) Claims that have been deferred by the Secretary and disallowed within the time limits of §430.40 of this chapter. Deferral of claims for FFP; or (2) Claims for expenditures that have never been paid on a grant award; or (3) Disallowances of any claims for services furnished before October 1, 1980, regardless of the date of the claim submitted to CMS. (b) General principles. (1) CMS will charge a State interest on FFP when— (i) CMS has notified the Medicaid agency under 45 CFR 74.304 that a State claim for FFP is not allowable; (ii) The agency has appealed the disallowance to the Grant Appeals Board under 45 CFR Part 16 and has chosen to retain the FFP during the administrative appeals process in accordance with paragraph (c)(2) of this section; and (iii)(A) The Board has made a final determination upholding part or all of the disallowance; (B) the agency has withdrawn its appeal on all or part of the disallowance; or (C) the agency has reversed its decision to retain the funds without withdrawing its appeal and the Board upholds all or part of the disallowance. (2) If the courts overturn, in whole or in part, a Board decision that has sustained a disallowance, CMS will return the principal and the interest collected on the funds that were disallowed, upon the completion of all judicial appeals. (3) Unless an agency decides to withdraw its appeal on part of the disallowance and therefore returns only that part of the funds on which it has withdrawn its appeal, any decision to retain or return disallowed funds must apply to the entire amount in dispute. (4) If the agency elects to have CMS recover the disputed amount, it may not reverse that election. (c) State procedures. (1) If the Medicaid agency has appealed a disallowance to the Board and wishes to retain the disallowed funds until the Board issues a final determination, the agency must notify the CMS Regional Administrator in writing of its decision to do so. (2) The agency must mail its notice to the CMS Regional Administrator within 30 days of the date of receipt of the notice of the disallowance, as established by the certified mail receipt accompanying the notices. (3) If the agency withdraws either its decision to retain the FFP or its appeal on all or part of the FFP or both, the agency must notify CMS in writing. (4) If the agency does not notify the CMS Regional Administrator within the time limit set forth in paragraph (c)(2) of this section. CMS will recover the amount of the disallowed funds from the next possible Medicaid grant award to the State. (d) Amount of interest charged. (1) If the agency retains funds that later become subject to an interest charge under paragraph (b) of this section, CMS will offset from the next Medicaid grant award to the State the amount of the funds subject to the interest charge, plus interest on that amount. (2) The interest charge is at the rate CMS determines to be the average of the bond equivalent of the weekly 90-day Treasury bill auction rates during the period for which interest will be charged. (e) Duration of interest. (1) The interest charge on the amount of disallowed FFP retained by the agency will begin on the date of the disallowance notice and end— (i) On the date of the final determination by the Board; (ii) On the date CMS receives written notice from the State that it is withdrawing its appeal on all of the disallowed funds; or (iii) If the agency withdraws its appeal on part of the funds, on (A) the date CMS receives written notice from the agency that it is withdrawing its appeal on a specified part of the disallowed funds for the part on which the agency withdraws its appeal; and (B) the date of the final determination by the Board on the part for which the agency pursues its appeal; or (iv) The date CMS receives written notice from the agency that it no longer chooses to retain the funds. (2) CMS will not charge interest on FFP retained by an agency for more than 12 months for disallowances of FFP made between October 1, 1980 and August 13, 1981. [48 FR 29485, June 27, 1983] (a) Purpose. This section provides the rules to ensure that States refund the Federal portion of uncashed or cancelled (voided) checks under title XIX. (b) Definitions. As used in this section— Cancelled (voided) check means a Medicaid check issued by a State or fiscal agent which prior to its being cashed is cancelled (voided) by the State or fiscal agent, thus preventing disbursement of funds. Check means a check or warrant that a State or local agency uses to make a payment. Fiscal agent means an entity that processes or pays vendor claims for the Medicaid State agency. Uncashed check means a Medicaid check issued by a State or fiscal agent which has not been cashed by the payee. Warrant means an order by which the State agency or local agency without the authority to issue checks recognizes a claim. Presentation of a warrant by the payee to a State officer with authority to issue checks will result in release of funds due. (c) Refund of Federal financial participation (FFP) for uncashed checks—(1) General provisions. If a check remains uncashed beyond a period of 180 days from the date it was issued; i.e., the date of the check, it will no longer be regarded as an allowable program expenditure. If the State has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received. (2) Report of refund. At the end of each calendar quarter, the State must identify those checks which remain uncashed beyond a period of 180 days after issuance. The State agency must refund all FFP that it received for uncashed checks by adjusting the Quarterly Statement of Expenditures for that quarter. If an uncashed check is cashed after the refund is made, the State may file a claim. The claim will be considered to be an adjustment to the costs for the quarter in which the check was originally claimed. This claim will be paid if otherwise allowed by the Act and the regulations issued pursuant to the Act. (3) If the State does not refund the appropriate amount as specified in paragraph (c)(2) of this section, the amount will be disallowed. (d) Refund of FFP for cancelled (voided) checks—(1) General provision. If the State has claimed and received FFP for the amount of a cancelled (voided) check, it must refund the amount of FFP received. (2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks which were cancelled (voided). The State must refund all FFP that it received for cancelled (voided) checks by adjusting the Quarterly Statement of Expenditures for that quarter. (3) If the State does not refund the appropriate amount as specified in paragraph (d)(2) of this section, the amount will be disallowed. [51 FR 36227, Oct. 9, 1986] Source: 57 FR 55138, Nov. 24, 1992, unless otherwise noted.
(a) Basis. This subpart interprets and implements— (1) Section 1902(a)(2) of the Act, which requires States to share in the cost of medical assistance expenditures and permits both State and local governments to participate in the financing of the non-Federal portion of medical assistance expenditures. (2) Section 1903(a) of the Act, which requires the Secretary to pay each State an amount equal to the Federal medical assistance percentage of the total amount expended as medical assistance under the State's plan. (3) Section 1903(w) of the Act, which specifies the treatment of revenues from provider-related donations and health care-related taxes in determining a State's medical assistance expenditures for which Federal financial participation (FFP) is available under the Medicaid program. (b) Scope. This subpart— (1) Specifies State plan requirements for State financial participation in expenditures for medical assistance. (2) Defines provider-related donations and health care-related taxes that may be received without a reduction in FFP. (3) Specifies rules for revenues received from provider-related donations and health care-related taxes during a transition period. (4) Establishes limitations on FFP when States receive funds from provider-related donations and revenues generated by health care-related taxes. (c) Applicability. The provisions of this subpart apply to the 50 States and the District of Columbia, but not to any State whose entire Medicaid program is operated under a waiver granted under section 1115 of the Act. [57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993] (a) Public funds may be considered as the State's share in claiming FFP if they meet the conditions specified in paragraphs (b) and (c) of this section. (b) The public funds are appropriated directly to the State or local Medicaid agency, or transferred from other public agencies (including Indian tribes) to the State or local agency and under its administrative control, or certified by the contributing public agency as representing expenditures eligible for FFP under this section. (c) The public funds are not Federal funds, or are Federal funds authorized by Federal law to be used to match other Federal funds. [57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993] As used in this subpart— Entity related to a health care provider means— (1) An organization, association, corporation, or partnership formed by or on behalf of a health care provider; (2) An individual with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act; (3) An employee, spouse, parent, child, or sibling of the provider, or of a person with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act; or (4) A supplier of health care items or services or a supplier to providers of health care items or services. Health care provider means the individual or entity that receives any payment or payments for health care items or services provided. Provider-related donation means a donation or other voluntary payment (in cash or in kind) made directly or indirectly to a State or unit of local government by or on behalf of a health care provider, an entity related to such a health care provider, or an entity providing goods or services to the State for administration of the State's Medicaid plan. (1) Donations made by a health care provider to an organization, which in turn donates money to the State, may be considered to be a donation made indirectly to the State by a health care provider. (2) When an organization receives less than 25 percent of its revenues from providers and/or provider-related entities, its donations will not generally be presumed to be provider-related donations. Under these circumstances, a provider-related donation to an organization will not be considered a donation made indirectly to the State. However, if the donations from providers to an organization are subsequently determined to be indirect donations to the State or unit of local government for administration of the State's Medicaid program, then such donations will be considered to be health care related. (3) When the organization receives more than 25 percent of its revenue from donations from providers or provider-related entities, the organization always will be considered as acting on behalf of health care providers if it makes a donation to the State. The amount of the organization's donation to the State, in a State fiscal year, that will be considered health care related, will be based on the percentage of donations the organization received from the providers during that period. A State plan must provide that— (a) State (as distinguished from local) funds will be used both for medical assistance and administration; (b) State funds will be used to pay at least 40 percent of the non-Federal share of total expenditures under the plan; and (c) State and Federal funds will be apportioned among the political subdivisions of the State on a basis that assures that— (1) Individuals in similar circumstances will be treated similarly throughout the State; and (2) If there is local financial participation, lack of funds from local sources will not result in lowering the amount, duration, scope, or quality of services or level of administration under the plan in any part of the State. [57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993] (a) A bona fide donation means a provider-related donation, as defined in §433.52, made to the State or unit of local government, that has no direct or indirect relationship, as described in paragraph (b) of this section, to Medicaid payments made to— (1) The health care provider; (2) Any related entity providing health care items and services; or (3) Other providers furnishing the same class of items or services as the provider or entity. (b) Provider-related donations will be determined to have no direct or indirect relationship to Medicaid payments if those donations are not returned to the individual provider, the provider class, or related entity under a hold harmless provision or practice, as described in paragraph (c) of this section. (c) A hold harmless practice exists if any of the following applies: (1) The amount of the payment received (other than under title XIX of the Act) is positively correlated either to the amount of the donation or to the difference between the amount of the donation and the amount of the payment received under the State plan; (2) All or any portion of the payment made under Medicaid to the donor, the provider class, or any related entity, varies based only on the amount of the total donation received; or (3) The State or other unit of local government receiving the donation provides for any payment, offset, or waiver that guarantees to return any portion of the donation to the provider. (d) CMS will presume provider-related donations to be bona fide if the voluntary payments, including, but not limited to, gifts, contributions, presentations or awards, made by or on behalf of individual health care providers to the State, county, or any other unit of local government does not exceed— (1) $5,000 per year in the case of an individual provider donation; or (2) $50,000 per year in the case of a donation from any health care organizational entity. (e) To the extent that a donation presumed to be bona fide contains a hold harmless provision, as described in paragraph (c) of this section, it will not be considered a bona fide donation. When provider-related donations are not bona fide, CMS will deduct this amount from the State's medical assistance expenditures before calculating FFP. This offset will apply to all years the State received such donations and any subsequent fiscal year in which a similar donation is received. (a) A health care-related tax is a licensing fee, assessment, or other mandatory payment that is related to— (1) Health care items or services; (2) The provision of, or the authority to provide, the health care items or services; or (3) The payment for the health care items or services. (b) A tax will be considered to be related to health care items or services under paragraph (a)(1) of this section if at least 85 percent of the burden of the tax revenue falls on health care providers. (c) A tax is considered to be health care related if the tax is not limited to health care items or services, but the treatment of individuals or entities providing or paying for those health care items or services is different than the tax treatment provided to other individuals or entities. (d) A health care-related tax does not include payment of a criminal or civil fine or penalty, unless the fine or penalty was imposed instead of a tax. (e) Health care insurance premiums and health maintenance organization premiums paid by an individual or group to ensure coverage or enrollment are not considered to be payments for health care items and services for purposes of determining whether a health care-related tax exists. (a) For purposes of this subpart, each of the following will be considered as a separate class of health care items or services: (1) Inpatient hospital services; (2) Outpatient hospital services; (3) Nursing facility services (other than services of intermediate care facilities for the mentally retarded); (4) Intermediate care facility services for the mentally retarded, and similar services furnished by community-based residences for the mentally retarded, under a waiver under section 1915(c) of the Act, in a State in which, as of December 24, 1992, at least 85 percent of such facilities were classified as ICF/MRs prior to the grant of the waiver; (5) Physician services; (6) Home health care services; (7) Outpatient prescription drugs; (8) Services of health maintenance organizations and health insuring organizations; (9) Ambulatory surgical center services, as described for purposes of the Medicare program in section 1832(a)(2)(F)(i) of the Social Security Act. These services are defined to include facility services only and do not include surgical procedures; (10) Dental services; (11) Podiatric services; (12) Chiropractic services; (13) Optometric/optician services; (14) Psychological services; (15) Therapist services, defined to include physical therapy, speech therapy, occupational therapy, respiratory therapy, audiological services, and rehabilitative specialist services; (16) Nursing services, defined to include all nursing services, including services of nurse midwives, nurse practitioners, and private duty nurses; (17) Laboratory and x-ray services, defined as services provided in a licensed, free-standing laboratory or x-ray facility. This definition does not include laboratory or x-ray services provided in a physician's office, hospital inpatient department, or hospital outpatient department; (18) Emergency ambulance services; and (19) Other health care items or services not listed above on which the State has enacted a licensing or certification fee, subject to the following: (i) The fee must be broad based and uniform or the State must receive a waiver of these requirements; (ii) The payer of the fee cannot be held harmless; and (iii) The aggregate amount of the fee cannot exceed the State's estimated cost of operating the licensing or certification program. (b) Taxes that pertain to each class must apply to all items and services within the class, regardless of whether the items and services are furnished by or through a Medicaid-certified or licensed provider. [57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993] Effective January 1, 1992, CMS will deduct from a State's expenditures for medical assistance, before calculating FFP, funds from provider-related donations and revenues generated by health care-related taxes received by a State or unit of local government, in accordance with the requirements, conditions, and limitations of this subpart, if the donations and taxes are not— (a) Donations and taxes that meet the requirements specified in §433.58, except for certain revenue received during a specified transition period; (b) Permissible provider-related donations, as specified in §433.66(b); or (c) Health care-related taxes, as specified in §433.68(b). (a) General rule. During the State's transition period specified in paragraph (b) of this section, a State may receive certain provider-related donations and health care-related taxes without a reduction in FFP. These provider-related donations and health care-related taxes must meet the conditions specified in this section and are subject to limitations specified in §433.60. (b) Transition periods for States. (1) Except as provided in paragraph (b)(2) of this section, the provisions of this section apply for the period beginning January 1, 1992 and ending— (i) September 30, 1992, for States whose State fiscal year begins on or before July 1, 1992; or (ii) December 31, 1992, for States whose State fiscal year begins after July 1, 1992. (2) The provisions of this section apply for the period beginning January 1, 1992 and ending June 30, 1993 for States that— (i) Are not scheduled to have a regular legislative session in calendar year 1992; (ii) Are not scheduled to have a regular legislative session in calendar year 1993; or (iii) Had enacted a health care-related tax program on November 4, 1991. (c) Provider-related donations during the transition period. Subject to the limitations specified in §433.60, a State may receive, without a reduction in FFP, provider-related donations described in paragraph (d)(3) of this section during the applicable transition period. (d) Permissible donations. To be permissible donations, the donations must be— (1) Bona fide donations, as defined in §433.54; (2) Donations made by a hospital, clinic, or similar entity (such as a Federally-qualified health center) for the direct costs of State or local agency personnel who are stationed at that facility to determine the eligibility (including eligibility redeterminations) of individuals for Medicaid and/or to provide outreach services to eligible (or potentially eligible) Medicaid individuals. Direct costs of outstationed eligibility workers refers to the costs of training, salaries and fringe benefits associated with each outstationed worker and similar allocated costs of State or local agency support staff, and a prorated cost of outreach activities applicable to the outstationed workers at these sites. The prorated costs of outreach activities will be calculated taking the percent of State outstationed eligibility workers at a facility to total outstationed eligibility workers in the State, and multiplying the percent by the total cost of outreach activities in the State. Costs for such items as State agency overhead and provider office space are not allowable for this purpose; or (3) Provider-related donations, even if the donations do not qualify under the provisions of paragraph (d) (1) or (2) of this section, that meet the following conditions: (i) The donation program was in effect on September 30, 1991, described in State plan amendments or related documents submitted to CMS by that date, or substantiated by written documentary evidence (as described in paragraph (e) of this section) that was in existence as of that date; and (ii) The donation program is applicable to the State's fiscal year 1992, as demonstrated by written documentary evidence as described in paragraph (e) of this section. (e) Written documentary evidence. The State must have written documentation, which was in existence on September 30, 1991, of a donation program described in paragraph (d)(3) of this section that includes the dollar amounts it received in State fiscal year 1992 and the amounts it intended to receive, as evidenced by one or more of the following: (1) Reference to a donation program in a State plan amendment or related documents, including a satisfactory response, as determined by CMS, to a CMS request for additional information; (2) State budget documents identifying the amounts States expected to be received in donations; (3) Written agreements with the parties donating the funds; and/or (4) Other written documents that identify amounts that the States planned to receive in donations from specified organizations during that period. (f) Application of rules to State fiscal year 1993. For any portion of a State's fiscal year 1993 that occurs during the transition period, the State may receive, without a reduction in FFP, the amount of provider-related donations that it received in the corresponding period in State fiscal year 1992, including the 5 days after the end of that period, subject to the limitations specified in §433.60(a). (g) Health care-related taxes during the transition period. (1) Subject to the limitations specified in §433.60, States may receive, without a reduction in FFP, health care-related taxes during the State's transition period if: (i) The health care-related taxes are broad-based and uniformly imposed, and the taxpayer will not be held harmless, as specified in §433.68; or (ii) The health care-related taxes are imposed under— (A) A tax program that was in effect as of November 22, 1991; or (B) Legislation or regulations that were enacted or adopted as of November 22, 1991. (2) A State may not modify health care-related taxes in existence as of November 22, 1991, without a reduction of FFP, unless the modification only— (i) Extends a tax program that was scheduled to expire before the end of the State's transition period; (ii) Makes technical changes that do not alter the rate of the tax or the base of the tax (for example, the providers on which the tax is imposed) and do not otherwise increase the proceeds of the tax; (iii) Decreases the rate of the tax, without altering the base of the tax; or (iv) Modifies the tax program to bring it into compliance with §433.68(f). [57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993, as amended at 58 FR 43180, Aug. 13, 1993] (a) Maximum amounts. The maximum amount of total provider-related donations, as specified in §433.58(d)(3), and health care-related taxes that a State may receive without a reduction in FFP during a State fiscal year in the State's transition period specified in §433.58(b) is calculated by multiplying— (1) The State's total medical assistance expenditures for the fiscal year; by (2) The greater of: (i) 25 percent; or (ii) The “State base percentage” (as described in paragraph (b) of this section). (b) State base percentage. (1) The State's base percentage is calculated by dividing the amount of the provider-related donations and health care-related taxes identified in §433.58 and estimated by CMS to be received in the State's fiscal year 1992 by the total non-Federal share of medical assistance expenditures (including administrative costs) in that fiscal year based on the best available CMS data. (2) In calculating the amount of taxes specified in paragraph (b)(1) of this section, taxes (including the tax rate or base) that were not in effect for the entire State fiscal year, but for which legislation or regulations imposing such taxes were enacted or adopted as of November 22, 1991, will be estimated as if they were in effect for the entire fiscal year. (c) Deductions before calculating FFP. Before calculating FFP, CMS will deduct from a State's medical assistance expenditures the total amount of any provider-related donations described in §433.58(d)(3), and health care-related taxes in excess of the limit calculated under paragraph (a) of this section. [57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993] (a) General rule. (1) Except as specified in paragraph (a)(2) of this section, subsequent to the end of a State's transition period, as defined in §433.58(b), a State may receive revenues from provider-related donations without a reduction in FFP, only in accordance with the requirements of this section. (2) The provisions of this section relating to provider-related donations for outstationed eligibility workers are effective on October 1, 1992, whether or not the State's transition period continues beyond that date. (b) Permissible donations. Subject to the limitations specified in §433.67, a State may receive, without a reduction in FFP, provider-related donations that meet at least one of the following requirements: (1) The donations must be bona fide donations, as defined in §433.54; or (2) The donations are made by a hospital, clinic, or similar entity (such as a Federally-qualified health center) for the direct costs of State or local agency personnel who are stationed at the facility to determine the eligibility (including eligibility redeterminations) of individuals for Medicaid or to provide outreach services to eligible (or potentially eligible) Medicaid individuals. Direct costs of outstationed eligibility workers refers to the costs of training, salaries and fringe benefits associated with each outstationed worker and similar allocated costs of State or local agency support staff, and a prorated cost of outreach activities applicable to the outstationed workers at these sites. The prorated costs of outreach activities will be calculated taking the percent of State outstationed eligibility workers at a facility to total outstationed eligibility workers in the State, and multiplying the percent by the total cost of outreach activities in the State. Costs for such items as State agency overhead and provider office space are not allowable for this purpose. [57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993] (a)(1) Limitations on bona fide donations. There are no limitations on the amount of bona fide provider-related donations that a State may receive without a reduction in FFP, as long as the bona fide donations meet the requirements of §433.66(b)(1). (2) Limitations on donations for outstationed eligibility workers. Effective October 1, 1992, regardless of when a State's transition period ends, the maximum amount of provider-related donations for oustationed eligibility workers, as described in §433.66(b)(2), that a State may receive without a reduction in FFP may not exceed 10 percent of a State's medical assistance administrative costs (both the Federal and State share), excluding the costs of family planning activities. The 10 percent limit for provider-related donations for outstationed eligibility workers is not included in the limit in effect through September 30, 1995, for health care-related taxes as described in §433.70. (b) Calculation of FFP. CMS will deduct from a State's quarterly medical assistance expenditures, before calculating FFP, any provider-related donations received in that quarter that do not meet the requirements of §433.66(b)(1) and provider donations for outstationed eligibility workers in excess of the limits specified under paragraph (a)(2) of this section. [57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993] (a) General rule. Beginning on the day after a State's transition period, as defined in §433.58(b), ends, a State may receive health care-related taxes, without a reduction in FFP, only in accordance with the requirements of this section. (b) Permissible health care-related taxes. Subject to the limitations specified in §433.70, a State may receive, without a reduction in FFP, health care-related taxes if all of the following are met: (1) The taxes are broad based, as specified in paragraph (c) of this section; (2) The taxes are uniformly imposed throughout a jurisdiction, as specified in paragraph (d) of this section; and (3) The tax program does not violate the hold harmless provisions specified in paragraph (f) of this section. (c) Broad based health care-related taxes. (1) A health care-related tax will be considered to be broad based if the tax is imposed on at least all health care items or services in the class or providers of such items or services furnished by all non-Federal, non-public providers in the State, and is imposed uniformly, as specified in paragraph (d) of this section. (2) If a health care-related tax is imposed by a unit of local government, the tax must extend to all items or services or providers (or to all providers in a class) in the area over which the unit of government has jurisdiction. (3) A State may request a waiver from CMS of the requirement that a tax program be broad based, in accordance with the procedures specified in §433.72. Waivers from the uniform and broad-based requirements will automatically be granted in cases of variations in licensing and certification fees for providers if the amount of such fees is not more than $1,000 annually per provider and the total amount raised by the State from the fees is used in the administration of the licensing or certification program. (d) Uniformly imposed health care-related taxes. A health care-related tax will be considered to be imposed uniformly even if it excludes Medicaid or Medicare payments (in whole or in part), or both; or, in the case of a health care-related tax based on revenues or receipts with respect to a class of items or services (or providers of items or services), if it excludes either Medicaid or Medicare revenues with respect to a class of items or services, or both. The exclusion of Medicaid revenues must be applied uniformly to all providers being taxed. (1) A health care-related tax will be considered to be imposed uniformly if it meets any one of the following criteria: (i) If the tax is a licensing fee or similar tax imposed on a class of health care services (or providers of those health care items or services), the tax is the same amount for every provider furnishing those items or services within the class. (ii) If the tax is a licensing fee or similar tax imposed on a class of health care items or services (or providers of those items or services) on the basis of the number of beds (licensed or otherwise) of the provider, the amount of the tax is the same for each bed of each provider of those items or services in the class. (iii) If the tax is imposed on provider revenue or receipts with respect to a class of items or services (or providers of those health care items or services), the tax is imposed at a uniform rate for all services (or providers of those items or services) in the class on all the gross revenues or receipts, or on net operating revenues relating to the provision of all items or services in the State, unit, or jurisdiction. Net operating revenue means gross charges of facilities less any deducted amounts for bad debts, charity care, and payer discounts. (iv) The tax is imposed on items or services on a basis other than those specified in paragraphs (d)(1) (i) through (iii) of this section, e.g., an admission tax, and the State establishes to the satisfaction of the Secretary that the amount of the tax is the same for each provider of such items or services in the class. (2) A tax imposed with respect to a class of health care items or services will not be considered to be imposed uniformly if it meets either one of the following two criteria: (i) The tax provides for credits, exclusions, or deductions which have as its purpose, or results in, the return to providers of all, or a portion, of the tax paid, and it results, directly or indirectly, in a tax program in which— (A) The net impact of the tax and payments is not generally redistributive, as specified in paragraph (e) of this section; and (B) The amount of the tax is directly correlated to payments under the Medicaid program. (ii) The tax holds taxpayers harmless for the cost of the tax, as described in paragraph (f) of this section. (3) If a tax does not meet the criteria specified in paragraphs (d)(1)(i) through (iv) of this section, but the State establishes that the tax is imposed uniformly in accordance with the procedures for a waiver specified in §433.72, the tax will be treated as a uniform tax. (e) Generally redistributive. A tax will be considered to be generally redistributive if it meets the requirements of this paragraph. If the State desires waiver of only the broad-based tax requirement, it must demonstrate compliance with paragraph (e)(1) of this section. If the State desires waiver of the uniform tax requirement, whether or not the tax is broad-based, it must demonstrate compliance with paragraph (e)(2) of this section. (1) Waiver of broad-based requirement only. This test is applied on a per class basis to a tax that is imposed on all revenues but excludes certain providers. For example, a tax that is imposed on all revenues (including Medicare and Medicaid) but excludes teaching hospitals would have to meet this test. This test cannot be used when a State excludes any or all Medicaid revenue from its tax in addition to the exclusion of providers, since the test compares the proportion of Medicaid revenue being taxed under the proposed tax with the proportion of Medicaid revenue being taxed under a broad-based tax. (i) A State seeking waiver of the broad-based tax requirement only must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by: (A) Calculating the proportion of the tax revenue applicable to Medicaid if the tax were broad based and applied to all providers or activities within the class (called P1); (B) Calculating the proportion of the tax revenue applicable to Medicaid under the tax program for which the State seeks a waiver (called P2); and (C) Calculating the value of P1/P2. (ii) If the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 1, CMS will automatically approve the waiver request. (iii) If a tax is enacted and in effect prior to August 13, 1993, and the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 0.90, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met: (A) The value of P1/P2 is at least 0.90; and (B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxed: (1) Providers that furnish no services within the class in the State; (2) Providers that do not charge for services within the class; (3) Rural hospitals (defined as any hospital located outside of an urban area as defined in §412.62(f)(1)(ii) of this chapter); (4) Sole community hospitals as defined in §412.92(a) of this chapter; (5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act; (6) Financially distressed hospitals if: (i) A financially distressed hospital is defined by the State law; (ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and (iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax; (7) Psychiatric hospitals; or (8) Hospitals owned and operated by HMOs. (iv) If a tax is enacted and in effect after August 13, 1993, and the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 0.95, CMS will review the waiver request. Such a waiver request will be approved only if the following two criteria are met: (A) The value of P1/P2 is at least 0.95; and (B) The tax complies with the provisions of §433.68(e)(1)(iii)(B). (2) Waiver of uniform tax requirement. This test is applied on a per class basis to all taxes that are not uniform. This includes those taxes that are neither broad based (as specified in §433.68(c)) nor uniform (as specified in §433.68(d)). (i) A State seeking waiver of the uniform tax requirement (whether or not the tax is broad based) must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by: (A) Calculating, using ordinary least squares, the slope (designated as (B) (that is. the value of the x coefficient) of two linear regressions, in which the dependent variable is each provider's percentage share of the total tax paid by all taxpayers during a 12-month period, and the independent variable is the taxpayer's “Medicaid Statistic”. The term “Medicaid Statistic” means the number of the provider's taxable units applicable to the Medicaid program during a 12-month period. If, for example, the State imposed a tax based on provider charges, the amount of a provider's Medicaid charges paid during a 12-month period would be its “Medicaid Statistic”. If the tax were based on provider inpatient days, the number of the provider's Medicaid days during a 12-month period would be its “Medicaid Statistic”. For the purpose of this test, it is not relevant that a tax program exempts Medicaid from the tax. (B) Calculating the slope (designated as B1) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State's tax program, if it were broad based and uniform. (C) Calculating the slope (designated as B2) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State's tax program, as proposed. (ii) If the State demonstrates to the Secretary's satisfaction that the value of B1/B2 is at least 1, CMS will automatically approve the waiver request. (iii) If the State demonstrates to the Secretary's satisfaction that the value of B1/B2 is at least 0.95, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met: (A) The value of B1/B2 is at least 0.95; and (B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxes: (1) Providers that furnish no services within the class in the State; (2) Providers that do not charge for services within the class; (3) Rural hospitals (defined as any hospital located outside of an urban area as defined in §412.62(f)(1)(ii) of this chapter; (4) Sole community hospitals as defined in §412.92(a) of this chapter; (5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act; (6) Financially distressed hospitals if: (i) A financially distressed hospital is defined by the State law; (ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and (iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax; (7) Psychiatric hospitals; or (8) Providers or payers with tax rates that vary based exclusively on regions, but only if the regional variations are coterminous with preexisting political (and not special purpose) boundaries. Taxes within each regional boundary must meet the broad-based and uniformity requirements as specified in paragraphs (c) and (d) of this section. (iv) A B1/B2 value of 0.70 will be applied to taxes that vary based exclusively on regional variations, and enacted and in effect prior to November 24, 1992, to permit such variations. (f) Hold harmless. A taxpayer will be considered to be held harmless under a tax program if any of the following conditions applies: (1) The State (or other unit of government) imposing the tax provides directly or indirectly for a non-Medicaid payment to those providers or others paying the tax and the amount of the payment is positively correlated to either the amount of the tax or to the difference between the Medicaid payment and the total tax cost. (2) All or any portion of the Medicaid payment to the taxpayer varies based only on the amount of the total tax payment. (3) The State (or other unit of local government) imposing the tax provides, directly or indirectly, for any payment, offset, or waiver that guarantees to hold taxpayers harmless for all or a portion of the tax. (i) An indirect guarantee will be determined to exist under a two prong “guarantee” test. This specific hold harmless test is effective September 13, 1993. In this instance, if the health care-related tax or taxes on each health care class are applied at a rate that produces revenues less than or equal to 6 percent of the revenues received by the taxpayer, the tax or taxes are permissible under this test. When the tax or taxes are applied at a rate that produces revenues in excess of 6 percent of the revenue received by the taxpayer, CMS will consider a hold harmless provision to exist if 75 percent or more of the taxpayers in the class receive 75 percent or more of their total tax costs back in enhanced Medicaid payments or other State payments. The second prong of the hold harmless test is applied in the aggregate to all health care taxes applied to each class. If this standard is violated, the amount of tax revenue to be offset from medical assistance expenditures is the total amount of the taxpayers' revenues received by the State. (ii) If, as of August 13, 1993, a State has enacted a tax in excess of 6 percent that does not meet the requirements in paragraph (f)(3)(i) of this section, CMS will not disallow funds received by the State resulting from the tax if the State modifies the tax to comply with this requirement by September 13, 1993. If, by September 13, 1993, the tax is not modified, funds received by States on or after September 13, 1993 will be disallowed. [57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43181, Aug. 13, 1993; 62 FR 53572, Oct. 15, 1997] (a) Limitations. (1) Subsequent to the end of a State's transition period (as defined in §433.58(b)), and extending through September 30, 1995, the maximum amount of health care-related taxes specified in §433.68 that a State may receive during a State fiscal year (or portion thereof), without a reduction in FFP, is limited to— (i) The greater of 25 percent or the State base percentage as described in §433.60(b); multiplied by (ii) The State's share of total medical assistance expenditures for the State fiscal year, less all health care-related taxes other than those described in §433.68 that are deducted separately pursuant to paragraph (b) of this section. (2) Beginning October 1, 1995, there is no limitation on the amount of health care-related taxes that a State may receive without a reduction in FFP, as long as the health care-related taxes meet the requirements specified in §433.68. (b) Calculation of FFP. CMS will deduct from a State's medical assistance expenditures, before calculating FFP, revenues from health care-related taxes that do not meet the requirements of §433.68 and any health care-related taxes in excess of the limits specified in paragraph (a)(1) of this section. (a) Bases for requesting waiver. (1) A State may submit to CMS a request for a waiver if a health care-related tax does not meet any or all of the following: (i) The tax does not meet the broad based criteria specified in §433.68c); and/or (ii) The tax is not imposed uniformly but meets the criteria specified in §433.68(d)(2) or (d)(3). (2) When a tax that meets the criteria specified in paragraph (a)(1) of this section is imposed on more than one class of health care items or services, a separate waiver must be obtained for each class of health care items and services subject to the tax. (b) Waiver conditions. In order for CMS to approve a waiver request that would permit a State to receive tax revenue (within specified limitations) without a reduction in FFP, the State must demonstrate, to CMS's satisfaction, that its tax program meets all of the following requirements: (1) The net impact of the tax and any payments made to the provider by the State under the Medicaid program is generally redistributive, as described in §433.68(e); (2) The amount of the tax is not directly correlated to Medicaid payments; and (3) The tax program does not fall within the hold harmless provisions specified in §433.68(f). (c) Effective date. A waiver will be effective: (1) The date of enactment of the tax for programs in existence prior to August 13, 1993 or; (2) For tax programs commencing on or after August 13, 1993, on the first day in the quarter in which the waiver is received by CMS. [57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993] (a) Beginning with the first quarter of Federal fiscal year 1993, each State must submit to CMS quarterly summary information on the source and use of all provider-related donations (including all bona fide and presumed-to-be bona fide donations) received by the State or unit of local government, and health care-related taxes collected. Each State must also provide any additional information requested by the Secretary related to any other donations made by, or any taxes imposed on, health care providers. States' reports must present a complete, accurate, and full disclosure of all of their donation and tax programs and expenditures. (b) Each State must provide the summary information specified in paragraph (a) of this section on a quarterly basis in accordance with procedures established by CMS. (c) Each State must maintain, in readily reviewable form, supporting documentation that provides a detailed description and legal basis for each donation and tax program being reported, as well as the source and use of all donations received and taxes collected. This information must be made available to Federal reviewers upon request. (d) If a State fails to comply with the reporting requirements contained in this section, future grant awards will be reduced by the amount of FFP CMS estimates is attributable to the sums raised by tax and donation programs as to which the State has not reported properly, until such time as the State complies with the reporting requirements. Deferrals and/or disallowances of equivalent amounts may also be imposed with respect to quarters for which the State has failed to report properly. Unless otherwise prohibited by law, FFP for those expenditures will be released when the State complies with all reporting requirements. (a) This subpart implements the following sections of the Act: (1) Section 1903(a)(3) of the Act, which provides for FFP in State expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures for implementing these regulations are in 45 CFR part 74, 45 CFR part 95, subpart F, and part 11, State Medicaid Manual; and (2) Section 1903(r) of the Act, which—(i) Requires reductions in FFP otherwise due a State under section 1903(a) if a State fails to meet certain deadlines for operating a mechanized claims processing and information retrieval system or if the system fails to meet certain conditions of approval or conditions of reapproval; (ii) Requires a Federal performance review at least every three years of the mechanized claims processing and information retrieval systems; and (iii) Allows waivers of conditions of approval, conditions of reapproval, and FFP reductions under certain circumstances. (b) The requirements under section 1903(r) of the Act do not apply to Puerto Rico, Guam, the Virgin Islands, American Samoa and the Northern Mariana Islands. [50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] For purposes of this section: (a) The following terms are defined at 45 CFR part 95, subpart F §95.605:
“Advance Planning Document”; “Design” or “System Design”; “Development”; “Enhancement”; “Hardware”; “Installation”; “Operation”; and, “Software”. (b) “Mechanized claims processing and information retrieval system” or “system” means the system of software and hardware used to process Medicaid claims from providers of medical care and services for the medical care and services furnished to recipients under the medical assistance program and to retrieve and produce service utilization and management information required by the Medicaid single State agency and Federal Government for program administration and audit purposes. The system consists of (1) Required subsystems specified in the State Medicaid Manual; (2) Required changes to the required system or subsystem that are published in accordance with §433.123 of this subpart and specified in the State Medicaid Manual; and (3) Approved enhancements to the system. Eligibility determination systems are not part of mechanized claims processing and information retrieval systems or enhancements to those systems. [51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989] (a) FFP is available at the 90 percent rate in State expenditures for the design, development, installation, or enhancement of a mechanized claims processing and information retrieval system only if the APD is approved by CMS prior to the State's expenditure of funds for these purposes. (b) CMS will approve the system described in the APD if the following conditions are met: (1) CMS determines the system is likely to provide more efficient, economical, and effective administration of the State plan. (2) The system meets the system requirements and performance standards in Part 11 of the State Medicaid Manual, as periodically amended. (3) The system is compatible with the claims processing and information retrieval systems used in the administration of Medicare for prompt eligibility verification and for processing claims for persons eligible for both programs. (4) The system supports the data requirements of quality improvement organizations established under Part B of title XI of the Act. (5) The State owns any software that is designed, developed, installed or improved with 90 percent FFP. (6) The Department has a royalty free, non-exclusive, and irrevocable license to reproduce, publish, or otherwise use and authorize others to use, for Federal Government purposes, software, modifications to software, and documentation that is designed, developed, installed or enhanced with 90 percent FFP. (7) The costs of the system are determined in accordance with 45 CFR 74.171. (8) The Medicaid agency agrees in writing to use the system for the period of time specified in the advance planning document approved by CMS or for any shorter period of time that CMS determines justifies the Federal funds invested. (9) The agency agrees in writing that the information in the system will be safeguarded in accordance with subpart F, part 431 of this subchapter. (c) Eligibility determination systems are not part of mechanized claims processing and information retrieval systems and are not eligible for 75 percent FFP under this subpart. These systems are also not eligible for 90 percent FFP for any APD approved after November 13, 1989. [43 FR 45201, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 45 FR 14213, Mar. 5, 1980; 50 FR 30846, July 30, 1985; 51 FR 45330, Dec. 18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 55 FR 4375, Feb. 7, 1990] (a) Except as waived under §433.130 or 433.131, FFP will be reduced as specified in paragraph (b) of this section unless the Medicaid agency has in continuous operation a mechanized claims processing and information retrieval system that meets the following conditions: (1) The APD for the system was approved by CMS; (2) The system is operational by September 30, 1985; and (3) The system is initially approved by the last day of the fourth quarter that begins after the date the system became operational as determined by CMS. (b) CMS will reduce FFP in expenditures for compensation and training of skilled professional medical personnel and support staff under section 1903(a)(2) of the Act, and for general administration under section 1903(a)(7) of the Act, by the following increments applied separately to those two categories of expenditures: (1) Five percentage points for the first two quarters beginning after a deadline in paragraph (a) of this section; (2) An additional five percentage points during each additional two-quarter period, through the quarter in which the State achieves compliance with the conditions for initial operation or initial approval of an operating system. FFP reductions will not exceed 25 percentage points for each type of reduction. (c) The amount of FFP (determined under section 1903(a)(3)(B)) that would be available retroactively for operating a system that later receives initial approval will be reduced by CMS by the same percentage points for the identical periods of time described in subparagraph (b)(1) of this section, until the system is initially approved. No reduction will be made after the first quarter during which the system is initially approved. [50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] (a) To obtain initial approval, the Medicaid agency must inform CMS in writing that the system meets the conditions specified in §433.116(c) through (h). (b) If CMS disapproves the system, or determines that the system met requirements for initial approval on a date later than the date required under §433.113(a)(3), the notice will include— (1) The findings of fact upon which the determination was made; and (2) The procedures for appeal of the determination in the context of a reconsideration of the resulting disallowance, to the Departmental Appeals Board. [50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] (a) Subject to 42 CFR 433.113(c), FFP is available at 75 percent of expenditures for operation of a mechanized claims processing and information retrieval system approved by CMS, from the first day of the calendar quarter after the date the system met the conditions of initial approval, as established by CMS (including a retroactive adjustment of FFP if necessary to provide the 75 percent rate beginning on the first day of that calendar quarter). Subject to 45 CFR 95.611(a), the State shall obtain prior written approval from CMS when it plans to acquire ADP equipment or services, when it anticipates the total acquisition costs will exceed thresholds, and meets other conditions of the subpart. (b) CMS will approve the system operation if the conditions specified in paragraphs (c) through (h) of this section are met. (c) The conditions of §433.112(b) (1) through (4) and (7) through (9), as periodically modified under §433.112(b)(2), must be met. (d) The system must have been operating continuously during the period for which FFP is claimed. (e) The system must provide individual notices, within 45 days of the payment of claims, to all or a sample group of the persons who received services under the plan. (f) The notice required by paragraph (e) of this section— (1) Must specify— (i) The service furnished; (ii) The name of the provider furnishing the service; (iii) The date on which the service was furnished; and (iv) The amount of the payment made under the plan for the service; and (2) Must not specify confidential services (as defined by the State) and must not be sent if the only service furnished was confidential. (g) The system must provide both patient and provider profiles for program management and utilization review purposes. (h) If the State has a Medicaid fraud control unit certified under section 1903(q) of the Act and §455.300 of this chapter, the Medicaid agency must have procedures to assure that information on probable fraud or abuse that is obtained from, or developed by, the system is made available to that unit. (See §455.21 of this chapter for State plan requirements.) [45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, July 30, 1985; 55 FR 4375, Feb. 7, 1990] (a) A replacement system must meet all conditions of initial approval of a mechanized claims processing and information retrieval system. (b) The agency must submit a APD that includes— (1) The date the replacement system will be in operation; and (2) A plan for orderly transition from the system being replaced to the replacement system. (c) FFP is available at— (1) 90 percent in expenditures for design, development, and installation in accordance with the provisions of §433.112; and (2) 75 percent in expenditures for operation of an approved replacement system in accordance with the provisions of §433.116(b) through (h), from the date that the system met the conditions of initial approval, as established by CMS. (d) FFP is available at 75 percent in expenditures for the operation of an approved system that is being replaced (or at a reduced rate determined under §433.120 of this subpart for a system that has been disapproved) until the replacement system is in operation and approved. [50 FR 30847, July 30, 1985] (a) CMS will review at least once every three years each system operation initially approved under §433.114 and reapprove it for FFP at 75 percent of expenditures if the following conditions are met: (1) The system meets the conditions of §433.112(b) (1), (3), (4), and (7) through (9). (2) The system meets the conditions of §433.116 (d) through (h). (3) The system meets the performance standards for reapproval and the system requirements in part 11 of the State Medicaid Manual as periodically amended. (4) Automated eligibility determination systems approved or operating on or before November 13, 1989, will not qualify for FFP at 75 percent of expenditures after November 13, 1989. (b) CMS may review an entire system operation or focus its review on parts of the operation. However, at a minimum, CMS will review standards, system requirements and other conditions of reapproval that have demonstrated weakness in a previous review or reviews. (c) CMS will issue to each Medicaid agency, by the end of the first quarter after the review period, a written notice informing the agency whether its system is reapproved or disapproved. If the system is disapproved, the notice will also include— (1) CMS's decision to reduce FFP for system operations, and the percentage to which it is reduced, beginning with the next calender quarter; (2) The findings of fact upon which the determination was made; and (3) A statement that State claims in excess of the reduced FFP rate will be disallowed and that any such disallowance will be appealable to the Departmental Appeals Board. [54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990] (a) If CMS determines after the reapproval review that the system no longer meets the conditions of reapproval in §433.119, CMS will reduce FFP for system operations for at least four quarters. However, no system will be subject to reduction of FFP for at least the first four quarters after the quarter in which the system is initially approved as eligible for 75 percent FFP. (b) CMS will reduce FFP in expenditures for system operations from 75 percent to no more than 70 percent and no less than 50 percent; however, CMS will not reduce FFP by more than 10 percentage points in any four-quarter period. The percentage to which the FFP is reduced will depend primarily on the following criteria: (1) The number of conditions judged unsatisfactory; (2) The extent to which conditions were not met; (3) The significance of the unsatisfactory conditions in overall mechanized claims processing and information retrieval system operations; and (4) The actual and potential program impact attributable to the unsatisfactory conditions. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989] (a) The agency may appeal to the Departmental Appeals Board under 45 CFR part 16, a disallowance concerning a reduction in FFP claimed for system operation caused by a disapproval of the State's system. If the Board finds such a disallowance to be appropriate, the discretionary determination to reduce FFP by a particular percentage amount (instead of by a lesser percentage) is not subject to review by the Board unless the percentage reduction exceeds the range authorized by section 1903(r)(4)(B) of the Act. (b) The decisions concerning whether to restore any FFP retroactively and the actual number of quarters for which FFP will be restored under §433.122 of this subpart are not subject to administrative appeal to the Departmental Appeals Board under 45 CFR part 16. (c) An agency's request for a reconsideration before the Board under paragraph (a) of this section does not delay implementation of the reduction in FFP. However, any reduction is subject to retroactive adjustment if required by the Board's determination on reconsideration. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990] When FFP has been reduced under §433.120(a), and CMS determines upon subsequent review that the system meets all current performance standards, system requirements and other conditions of reapproval, the following provisions apply: (a) CMS will resume FFP in expenditures for system operations at the 75 percent level beginning with the quarter following the review determination that the system again meets conditions of reapproval. (b) CMS may retroactively waive a reduction of FFP in expenditures for system operations if CMS determines that the waiver could improve the administration of the State Medicaid plan. However, CMS cannot waive this reduction for any quarter before the fourth quarter immediately preceding the quarter in which CMS issues the determination (as part of the review process) stating that the system is reapproved. [54 FR 41974, Oct. 13, 1989] (a) Whenever CMS modifies system requirements or other conditions for approval under §433.112 or §433.116, CMS will— (1) Publish a notice in the (2) Respond in a subsequent (3) Issue the new or modified requirements or conditions in the State Medicaid Manual. (b) For changes in system requirements or other conditions for approval, CMS will allow an appropriate period for Medicaid agencies to meet the requirement determining this period on the basis of the requirement's complexity and other relevant factors. (c) Whenever CMS modifies performance standards and other conditions for reapproval under §433.119, CMS will notify Medicaid agencies at least one calendar quarter before the review period to which the new or modified standards or conditions apply. [57 FR 38782, Aug. 27, 1992] CMS will terminate FFP at any time if the Medicaid agency fails to provide State and Federal representatives with full access to the system, including on-site inspection. CMS may request such access at any time to determine whether the conditions in this subpart are being met. [43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 and 30848, July 30, 1985] (a) CMS will waive requirements for initial operation and approval of systems under §433.113 for a State meeting the requirements of paragraph (b) of this section and that had a 1976 population of less than one million and made total Federal and State Medicaid expenditures of less than $100 million in fiscal year 1976. Population figures are those reported by the Bureau of the Census. Expenditures for fiscal year 1976 are those reported by the State for that year. (b) To be eligible for this waiver, the agency must submit its reasons to CMS in writing and demonstrate to CMS's satisfaction that a system will not significantly improve the efficiency of the administration of the State plan. (c) If CMS denies the waiver request, the notice of denial will include— (1) The findings of fact upon which the denial was made; and (2) The procedures for appeal of the denial. (d) If CMS determines, after granting a waiver, that a system would significantly improve the administration of the State Medicaid program, CMS may withdraw the waiver and require that a State obtain initial approval of a system within two years of the date of waiver withdrawal. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989] If a State is unable to comply with the conditions of approval or of reapproval and the noncompliance will cause a percentum reduction in FFP, CMS will waive the FFP reduction in the following circumstances: (a) Good cause. If CMS determines that good cause existed, CMS will waive the FFP reduction attributable to those items for which the good cause existed. A waiver of FFP consequences of the failure to meet the conditions of approval or reapproval based upon good cause will not extend beyond two consecutive quarters. (b) Circumstances beyond the control of a State. The State must satisfactorily explain the circumstances that are beyond its control. When CMS grants the waiver, CMS will also defer all other system deadlines for the same length of time that the waiver applies. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989] Source: 45 FR 8984, Feb. 11, 1980, unless otherwise noted.
This subpart implements sections 1902(a)(25), 1902(a)(45), 1903(d)(2), 1903(o), 1903(p), and 1912 of the Act by setting forth State plan requirements concerning— (a) The legal liability of third parties to pay for services provided under the plan; (b) Assignment to the State of an individual's rights to third party payments; and (c) Cooperative agreements between the Medicaid agency and other entities for obtaining third party payments. [50 FR 46664, Nov. 12, 1985] For purposes of this subpart— Private insurer means: (1) Any commercial insurance company offering health or casualty insurance to individuals or groups (including both experience-rated insurance contracts and indemnity contracts); (2) Any profit or nonprofit prepaid plan offering either medical services or full or partial payment for services included in the State plan; and (3) Any organization administering health or casualty insurance plans for professional associations, unions, fraternal groups, employer-employee benefit plans, and any similar organization offering these payments or services, including self-insured and self-funded plans. Third party means any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan. Title IV-D agency means the organizational unit in the State that has the responsibility for administering or supervising the administration of a State plan for child support enforcement under title IV-D of the Act. [49 FR 8984, Feb. 11, 1980, as amended at 50 FR 46664, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985] (a) A State plan must provide that the requirements of §§433.138 and 433.139 are met for identifying third parties liable for payment of services under the plan and for payment of claims involving third parties. (b) A State plan must provide that— (1) The requirements of §§433.145 through 433.148 are met for assignment of rights to benefits, cooperation with the agency in obtaining medical support or payments, and cooperation in identifying and providing information to assist the State in pursuing any liable third parties; and (2) The requirements of §§433.151 through 433.154 are met for cooperative agreements and incentive payments for third party collections. (c) The requirements of paragraph (b)(1) of this section relating to assignment of rights to benefits and cooperation in obtaining medical support or payments and paragraph (b)(2) of this section are effective for medical assistance furnished on or after October 1, 1984. The requirements of paragraph (b)(1) of this section relating to cooperation in identifying and providing information to assist the State in pursuing liable third parties are effective for medical assistance furnished on or after July 1, 1986. [50 FR 46665, Nov. 12, 1985, as amended at 55 FR 48606, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990; 60 FR 35502, July 10, 1995] (a) Basic provisions. The agency must take reasonable measures to determine the legal liability of the third parties who are liable to pay for services furnished under the plan. At a minimum, such measures must include the requirements specified in paragraphs (b) through (k) of this section, unless waived under paragraph (l) of this section. (b) Obtaining health insurance information: Initial application and redetermination processes for Medicaid eligibility. (1) If the Medicaid agency determines eligibility for Medicaid, it must, during the initial application and each redetermination process, obtain from the applicant or recipient such health insurance information as would be useful in identifying legally liable third party resources so that the agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f). Health insurance information may include, but is not limited to, the name of the policy holder, his or her relationship to the applicant or recipient, the social security number (SSN) of the policy holder, and the name and address of insurance company and policy number. (2) If Medicaid eligibility is determined by the Federal agency administering the supplemental security income program under title XVI in accordance with a written agreement under section 1634 of the Act, the Medicaid agency must take the following action. It must enter into an agreement with CMS or must have, prior to February 1, 1985, executed a modified section 1634 agreement that is still in effect to provide for— (i) Collection, from the applicant or recipient during the initial application and each redetermination process, of health insurance information in the form and manner specified by the Secretary; and (ii) Transmittal of the information to the Medicaid agency. (3) If Medicaid eligibility is determined by any other agency in accordance with a written agreement, the Medicaid agency must modify the agreement to provide for— (i) Collection, from the applicant or recipient during the initial application and each redetermination process, of such health insurance information as would be useful in identifying legally liable third party resources so that the Medicaid agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f). Health insurance information may include, but is not limited to, those elements described in paragraph (b)(1) of this section; and (ii) Transmittal of the information to the Medicaid agency. (c) Obtaining other information. Except as provided in paragraph (l) of this section, the agency must, for the purpose of implementing the requirements in paragraphs (d)(1)(ii) and (d)(4)(i) of this section, incorporate into the eligibility case file the names and SSNs of absent or custodial parents of Medicaid recipients to the extent such information is available. (d) Exchange of data. Except as provided in paragraph (l) of this section, to obtain and use information for the purpose of determining the legal liability of the third parties so that the agency may process claims under the third party liability payment procedures specified in §433.139(b) through (f), the agency must take the following actions: (1) Except as specified in paragraph (d)(2) of this section, as part of the data exchange requirements under §435.945 of this chapter, from the State wage information collection agency (SWICA) defined in §435.4 of this chapter and from the SSA wage and earnings files data as specified in §435.948(a)(2) of this chapter, the agency must— (i) Use the information that identifies Medicaid recipients that are employed and their employer(s); and (ii) Obtain and use, if their names and SSNs are available to the agency under paragraph (c) of this section, information that identifies employed absent or custodial parents of recipients and their employer(s). (2) If the agency can demonstrate to CMS that it has an alternate source of information that furnishes information as timely, complete and useful as the SWICA and SSA wage and earnings files in determining the legal liability of third parties, the requirements of paragraph (d)(1) of this section are deemed to be met. (3) The agency must request, as required under §435.948(a)(6)(i), from the State title IV-A agency, information not previously reported that identifies those Medicaid recipients that are employed and their employer(s). (4) Except as specified in paragraph (d)(5) of this section, the agency must attempt to secure agreements (to the extent permitted by State law) to provide for obtaining— (i) From State Workers' Compensation or Industrial Accident Commission files, information that identifies Medicaid recipients and, (if their names and SSNs were available to the agency under paragraph (c) of this section) absent or custodial parents of Medicaid recipients with employment-related injuries or illnesses; and (ii) From State Motor Vehicle accident report files, information that identifies those Medicaid recipients injured in motor vehicle accidents, whether injured as pedestrians, drivers, passengers, or bicyclists. (5) If unable to secure agreements as specified in paragraph (d)(4) of this section, the agency must submit documentation to the regional office that demonstrates the agency made a reasonable attempt to secure these agreements. If CMS determines that a reasonable attempt was made, the requirements of paragraph (d)(4) of this section are deemed to be met. (e) Diagnosis and trauma code edits. (1) Except as specified under paragraph (e)(2) or (l) of this section, or both, the agency must take action to identify those paid claims for Medicaid recipients that contain diagnosis codes 800 through 999 International Classification of Disease, 9th Revision, Clinical Modification, Volume 1 (ICD–9–CM) inclusive, for the purpose of determining the legal liability of third parties so that the agency may process claims under the third party liability payment procedures specified in §433.139(b) through (f). (2) The agency may exclude code 994.6, Motion Sickness, from the edits required under paragraph (e)(1) of this section. (f) Data exchanges and trauma code edits: Frequency. Except as provided in paragraph (l) of this section, the agency must conduct the data exchanges required in paragraphs (d)(1) and (d)(3) of this section in accordance with the intervals specified in §435.948 of this chapter, and diagnosis and trauma edits required in paragraphs (d)(4) and (e) of this section on a routine and timely basis. The State plan must specify the frequency of these activities. (g) Followup procedures for identifying legally liable third party resources. Except as provided in paragraph (l) of this section, the State must meet the requirements of this paragraph. (1) SWICA, SSA wage and earnings files, and title IV-A data exchanges. With respect to information obtained under paragraphs (d)(1) through (d)(3) of this section— (i) Except as specified in §435.952(d) of this chapter, within 45 days, the agency must followup (if appropriate) on such information in order to identify legally liable third party resources and incorporate such information into the eligibility case file and into its third party data base and third party recovery unit so the agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f); and (ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(1)(i) of this section. (2) Health insurance information and workers' compensation data exchanges. With respect to information obtained under paragraphs (b) and (d)(4)(i) of this section— (i) Within 60 days, the agency must followup on such information (if appropriate) in order to identify legally liable third party resources and incorporate such information into the eligibility case file and into its third party data base and third party recovery unit so the agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f); and (ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(2)(i) of this section. (3) State motor vehicle accident report file data exchanges. With respect to information obtained under paragraph (d)(4)(ii) of this section— (i) The State plan must describe the methods the agency uses for following up on such information in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f); (ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and (iii) The State plan must specify timeframes for incorporation of the information. (4) Diagnosis and trauma code edits. With respect to the paid claims identified under paragraph (e) of this section— (i) The State plan must describe the methods the agency uses to follow up on such claims in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in §433.139 (b) through (f) (Methods must include a procedure for periodically identifying those trauma codes that yield the highest third party collections and giving priority to following up on those codes.); (ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and (iii) The State plan must specify the timeframes for incorporation of the information. (h) Obtaining other information and data exchanges: Safeguarding information. (1) The agency must safeguard information obtained from and exchanged under this section with other agencies in accordance with the requirements set forth in part 431, subpart F of this chapter. (2) Before requesting information from, or releasing information to other agencies to identify legally liable third party resources under paragraph (d) of this section the agency must execute data exchange agreements with those agencies. The agreements, at a minimum, must specify— (i) The information to be exchanged; (ii) The titles of all agency officials with the authority to request third party information; (iii) The methods, including the formats to be used, and the timing for requesting and providing the information; (iv) The safeguards limiting the use and disclosure of the information as required by Federal or State law or regulations; and (v) The method the agency will use to reimburse reasonable costs of furnishing the information if payment is requested. (i) Reimbursement. The agency must, upon request, reimburse an agency for the reasonable costs incurred in furnishing information under this section to the Medicaid agency. (j) Reports. The agency must provide such reports with respect to the data exchanges and trauma code edits set forth in paragraphs (d)(1) through (d)(4) and paragraph (e) of this section, respectively, as the Secretary prescribes for the purpose of determining compliance under §433.138 and evaluating the effectiveness of the third party liability identification system. However, if the State is not meeting the provisions of paragraph (e) of this section because it has been granted a waiver of those provisions under paragraph (l) of this section, it is not required to provide the reports required in this paragraph. (k) Integration with the State mechanized claims processing and information retrieval system. Basic requirement—Development of an action plan. (1) If a State has a mechanized claims processing and information retrieval system approved by CMS under subpart C of this part, the agency must have an action plan for pursuing third party liability claims and the action plan must be integrated with the mechanized claims processing and information retrieval system. (2) The action plan must describe the actions and methodologies the State will follow to— (i) Identify third parties; (ii) Determine the liability of third parties; (iii) Avoid payment of third party claims as required in §433.139; (iv) Recover reimbursement from third parties after Medicaid claims payment as required in §433.139; and, (v) Record information and actions relating to the action plan. (3) The action plan must be consistent with the conditions for reapproval set forth in §433.119. The portion of the plan which is integrated with MMIS is monitored in accordance with those conditions and if the conditions are not met; it is subject to FFP reduction in accordance with procedures set forth in §433.120. The State is not subject to any other penalty as a result of other monitoring, quality control, or auditing requirements for those items in the action plan. (4) The agency must submit its action plan to the CMS Regional Office within 120 days from the date CMS issues implementing instructions for the State Medicaid Manual. If a State does not have an approved MMIS on the date of issuance of the State Medicaid Manual but subsequently implements an MMIS, the State must submit its action plan within 90 days from the date the system is operational. The CMS Regional Office approves or disapproves the action plan. (l) Waiver of requirements. (1) The agency may request initial and continuing waiver of the requirements to determine third party liability found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), (g)(3), and (g)(4) of this section if the State determines the activity to be not cost-effective. An activity would not be cost-effective if the cost of the required activity exceeds the third party liability recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the State. (i) The agency must submit a request for waiver of the requirement in writing to the CMS regional office. (ii) The request must contain adequate documentation to establish that to meet a requirement specified by the agency is not cost-effective. Examples of documentation are claims recovery data and a State analysis documenting a cost-effective alternative that accomplished the same task. (iii) The agency must agree, if a waiver is granted, to notify CMS of any event that occurs that changes the conditions upon which the waiver was approved. (2) CMS will review a State's request to have a requirement specified under paragraph (l)(1) of this section waived and will request additional information from the State, if necessary. CMS will notify the State of its approval or disapproval determination within 30 days of receipt of a properly documented request. (3) CMS may rescind a waiver at any time that it determines that the agency no longer meets the criteria for approving the waiver. If the waiver is rescinded, the agency has 6 months from the date of the rescission notice to meet the requirement that had been waived. [52 FR 5975, Feb. 27, 1987, as amended at 54 FR 8741, Mar. 2, 1989; 55 FR 1432, Jan. 16, 1990; 55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, 1995] (a) Basic provisions. (1) For claims involving third party liability that are processed on or after May 12, 1986, the agency must use the procedures specified in paragraphs (b) through (f) of this section. (2) The agency must submit documentation of the methods (e.g., cost avoidance, pay and recover later) it uses for payment of claims involving third party liability to the CMS Regional Office. (b) Probable liability is established at the time claim is filed. Except as provided in paragraph (e) of this section— (1) If the agency has established the probable existence of third party liability at the time the claim is filed, the agency must reject the claim and return it to the provider for a determination of the amount of liability. The establishment of third party liability takes place when the agency receives confirmation from the provider or a third party resource indicating the extent of third party liability. When the amount of liability is determined, the agency must then pay the claim to the extent that payment allowed under the agency's payment schedule exceeds the amount of the third party's payment. (2) The agency may pay the full amount allowed under the agency's payment schedule for the claim and then seek reimbursement from any liable third party to the limit of legal liability if the claim is for labor and delivery and postpartum care. (Costs associated with the inpatient hospital stay for labor and delivery and postpartum care must be cost-avoided.) (3) The agency must pay the full amount allowed under the agency's payment schedule for the claim and seek reimbursement from any liable third party to the limit of legal liability (and for purposes of paragraph (b)(3)(ii) of this section, from a third party, if the third party liability is derived from an absent parent whose obligation to pay support is being enforced by the State title IV-D agency), consistent with paragraph (f) of this section if— (i) The claim is prenatal care for pregnant women, or preventive pediatric services (including early and periodic screening, diagnosis and treatment services provided for under part 441, subpart B of this chapter), that is covered under the State plan; or (ii) The claim is for a service covered under the State plan that is provided to an individual on whose behalf child support enforcement is being carried out by the State title IV-D agency. The agency prior to making any payment under this section must assure that the following requirements are met: (A) The State plan specifies whether or not providers are required to bill the third party. (B) The provider certifies that before billing Medicaid, if the provider has billed a third party, the provider has waited 30 days from the date of the service and has not received payment from the third party. (C) The State plan specifies the method used in determining the provider's compliance with the billing requirements. (c) Probable liability is not established or benefits are not available at the time claim is filed. If the probable existence of third party liability cannot be established or third party benefits are not available to pay the recipient's medical expenses at the time the claim is filed, the agency must pay the full amount allowed under the agency's payment schedule. (d) Recovery of reimbursement. (1) If the agency has an approved waiver under paragraph (e) of this section to pay a claim in which the probable existence of third party liability has been established and then seek reimbursement, the agency must seek recovery of reimbursement from the third party to the limit of legal liability within 60 days after the end of the month in which payment is made unless the agency has a waiver of the 60-day requirement under paragraph (e) of this section. (2) Except as provided in paragraph (e) of this section, if the agency learns of the existence of a liable third party after a claim is paid, or benefits become available from a third party after a claim is paid, the agency must seek recovery of reimbursement within 60 days after the end of the month it learns of the existence of the liable third party or benefits become available. (3) Reimbursement must be sought unless the agency determines that recovery would not be cost effective in accordance with paragraph (f) of this section. (e) Waiver of requirements. (1) The agency may request initial and continuing waiver of the requirements in paragraphs (b)(1), (d)(1), and (d)(2) of this section, if it determines that the requirement is not cost-effective. An activity would not be cost-effective if the cost of the required activity exceeds the third party liability recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the State. (i) The agency must submit a request for waiver of the requirement in writing to the CMS regional office. (ii) The request must contain adequate documentation to establish that to meet a requirement specified by the agency is not cost-effective. Examples of documentation are costs associated with billing, claims recovery data, and a State analysis documenting a cost-effective alternative that accomplishes the same task. (iii) The agency must agree, if a waiver is granted, to notify CMS of any event that occurs that changes the conditions upon which the waiver was approved. (2) CMS will review a State's request to have a requirement specified under paragraph (e)(1) of this section waived and will request additional information from the State, if necessary. CMS will notify the State of its approval or disapproval determination within 30 days of receipt of a properly documented request. (3) CMS may rescind the waiver at any time that it determines that the State no longer meets the criteria for approving the waiver. If the waiver is rescinded, the agency has 6 months from the date of the rescission notice to meet the requirement that had been waived. (4) An agency requesting a waiver of the requirements specifically concerning either the 60-day limit in paragraph (d)(1) or (d)(2) of this section must submit documentation of written agreement between the agency and the third party, including Medicare fiscal intermediaries and carriers, that extension of the billing requirement is agreeable to all parties. (f) Suspension or termination of recovery of reimbursement. (1) An agency must seek reimbursement from a liable third party on all claims for which it determines that the amount it reasonably expects to recover will be greater than the cost of recovery. Recovery efforts may be suspended or terminated only if they are not cost effective. (2) The State plan must specify the threshold amount or other guideline that the agency uses in determining whether to seek recovery of reimbursement from a liable third party, or describe the process by which the agency determines that seeking recovery of reimbursement would not be cost effective. (3) The State plan must also specify the dollar amount or period of time for which it will accumulate billings with respect to a particular liable third party in making the decision whether to seek recovery of reimbursement. [50 FR 46665, Nov. 12, 1985, as amended at 51 FR 16319, May 2, 1986; 60 FR 35503, July 10, 1995; 62 FR 23140, Apr. 29, 1997] (a) FFP is not available in Medicaid payments if— (1) The agency failed to fulfill the requirements of §§433.138 and 433.139 with regard to establishing liability and seeking reimbursement from a third party; (2) The agency received reimbursement from a liable third party; or (3) A private insurer would have been obligated to pay for the service except that its insurance contract limits or excludes payments if the individual is eligible for Medicaid. (b) FFP is available at the 50 percent rate for the agency's expenditures in carrying out the requirements of this subpart. (c) If the State receives FFP in Medicaid payments for which it receives third party reimbursement, the State must pay the Federal government a portion of the reimbursement determined in accordance with the FMAP for the State. This payment may be reduced by the total amount needed to meet the incentive payment in §433.153. (a) A State plan must provide that, as a condition of eligibility, each legally able applicant or recipient is required to: (1) Assign to the Medicaid agency his or her rights, or the rights of any other individual eligible under the plan for whom he or she can legally make an assignment, to medical support and to payment for medical care from any third party; (2) Cooperate with the agency in establishing paternity and in obtaining medical support and payments, unless the individual establishes good cause for not cooperating, and except for individuals described in section 1902(l)(1)(A) of the Act (poverty level pregnant women), who are exempt from cooperating in establishing paternity and obtaining medical support and payments from, or derived from, the father of the child born out of wedlock; and (3) Cooperate in identifying and providing information to assist the Medicaid agency in pursuing third parties who may be liable to pay for care and services under the plan, unless the individual establishes good cause for not cooperating. (b) A State plan must provide that the requirements for assignments, cooperation in establishing paternity and obtaining support, and cooperation in identifying and providing information to assist the State in pursuing any liable third party under §§433.146 through 433.148 are met. (c) A State plan must provide that the assignment of rights to benefits obtained from an applicant or recipient is effective only for services that are reimbursed by Medicaid. [55 FR 48606, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993] (a) Except as specified in paragraph (b) of this section, the agency must require the individual to assign to the State— (1) His own rights to any medical care support available under an order of a court or an administrative agency, and any third party payments for medical care; and (2) The rights of any other individual eligible under the plan, for whom he can legally make an assignment. (b) Assignment of rights to benefits may not include assignment of rights to Medicare benefits. (c) If assignment of rights to benefits is automatic because of State law, the agency may substitute such an assignment for an individual executed assignment, as long as the agency informs the individual of the terms and consequences of the State law. (a) Scope of requirement. The agency must require the individual who assigns his or her rights to cooperate in— (1) Establishing paternity of a child born out of wedlock and obtaining medical support and payments for himself or herself and any other person for whom the individual can legally assign rights, except that individuals described in section 1902(l)(1)(A) of the Act (poverty level pregnant women) are exempt from these requirements involving paternity and obtaining medical support and payments from, or derived from, the father of the child born out of wedlock; and (2) Identifying and providing information to assist the Medicaid agency in pursuing third parties who may be liable to pay for care and services under the plan. (b) Essentials of cooperation. As part of a cooperation, the agency may require an individual to— (1) Appear at a State or local office designated by the agency to provide information or evidence relevant to the case; (2) Appear as a witness at a court or other proceeding; (3) Provide information, or attest to lack of information, under penalty of perjury; (4) Pay to the agency any support or medical care funds received that are covered by the assignment of rights; and (5) Take any other reasonable steps to assist in establishing paternity and securing medical support and payments, and in identifying and providing information to assist the State in pursuing any liable third party. (c) Waiver of cooperation for good cause. The agency must waive the requirements in paragraphs (a) and (b) of this section if it determines that the individual has good cause for refusing to cooperate. (1) With respect to establishing paternity of a child born out of wedlock or obtaining medical care support and payments, or identifying or providing information to assist the State in pursuing any liable third party for a child for whom the individual can legally assign rights, the agency must find the cooperation is against the best interests of the child, in accordance with factors specified for the Child Support Enforcement Program at 45 CFR part 232. If the State title IV-A agency has made a finding that good cause for refusal to cooperate does or does not exist, the Medicaid agency must adopt that finding as its own for this purpose. (2) With respect to obtaining medical care support and payments for an individual and identifying and providing information to assist in pursuing liable third parties in any case not covered by paragraph (c)(1) of this section, the agency must find that cooperation is against the best interests of the individual or the person to whom Medicaid is being furnished because it is anticipated that cooperation will result in reprisal against, and cause physical or emotional harm to, the individual or other person. (d) Procedures for waiving cooperation. With respect to establishing paternity, obtaining medical care support and payments, or identifying and providing information to assist the State in pursuing liable third parties for a child for whom the individual can legally assign rights, the agency must use the procedures specified for the Child Support Enforcement Program at 45 CFR part 232. With respect to obtaining medical care support and payments or to identifying and providing information to assist the State in pursuing liable third parties for any other individual, the agency must adopt procedures similar to those specified in 45 CFR part 232, excluding those procedures applicable only to children. [45 FR 8984, Feb. 11, 1980, as amended at 55 FR 48606, Nov. 21, 1990; 58 FR 4907, Jan. 19, 1993] In administering the assignment of rights provision, the agency must: (a) Deny or terminate eligibility for any applicant or recipient who— (1) Refuses to assign his own rights or those of any other individual for whom he can legally make an assignment; or (2) Refuses to cooperate as required under §433.147(a) unless cooperation has been waived; (b) Provide Medicaid to any individual who— (1) Cannot legally assign his own rights; and (2) Would otherwise be eligible for Medicaid but for the refusal, by a person legally able to assign his rights, to assign his rights or to cooperate as required by this subpart; and (c) In denying or terminating eligibility, comply with the notice and hearing requirements of part 431, subpart E of this subchapter. For medical assistance furnished on or after October 1, 1984— (a) A State plan must provide for entering into written cooperative agreements for enforcement of rights to and collection of third party benefits with at least one of the following entities: The State title IV-D agency, any appropriate agency of any State, and appropriate courts and law enforcement officials. The agreements must be in accordance with the provisions of §433.152. (b) A State plan must provide that the requirements for making incentive payments and for distributing third party collections specified in §§433.153 and 433.154 are met. [50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985] (a) Except as specified in paragraph (b) of this section, the State agency may develop the specific terms of cooperative agreements with other agencies as it determines appropriate for individual circumstances. (b) Agreements with title IV-D agencies must specify that the Medicaid agency will— (1) Meet the requirements of the Office of Child Support Enforcement for cooperative agreements under 45 CFR Part 306; and (2) Provide reimbursement to the IV-D agency only for those child support services performed that are not reimbursable by the Office of Child Support Enforcement under title IV-D of the Act and that are necessary for the collection of amounts for the Medicaid program. [50 FR 46666, Nov. 12, 1985] (a) When payments are required. The agency must make an incentive payment to a political subdivision, a legal entity of the subdivision such as a prosecuting or district attorney or a friend of the court, or another State that enforces and collects medical support and payments for the agency. (b) Amount and source of payment. The incentive payment must equal 15 percent of the amount collected, and must be made from the Federal share of that amount. (c) Payment to two or more jurisdictions. If more than one State or political subdivision is involved in enforcing and collecting support and payments: (1) The agency must pay all of the incentive payment to the political subdivision, legal entity of the subdivision, or another State that collected medical support and payments at the request of the agency. (2) The political subdivision, legal entity or other State that receives the incentive payment must then divide the incentive payment equally with any other political subdivisions, legal entities, or other States that assisted in the collection, unless an alternative allocation is agreed upon by all jurisdictions involved. The agency must distribute collections as follows— (a) To itself, an amount equal to State Medicaid expenditures for the individual on whose right the collection was based. (b) To the Federal Government, the Federal share of the State Medicaid expenditures, minus any incentive payment made in accordance with §433.153. (c) To the recipient, any remaining amount. This amount must be treated as income or resources under part 435 or part 436 of this subchapter, as appropriate. Source: 54 FR 5460, Feb. 3, 1989, unless otherwise noted.
This subpart implements— (a) Section 1903(d)(2)(A) of the Act, which directs that quarterly Federal payments to the States under title XIX (Medicaid) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made. (b) Section 1903(d)(2) (C) and (D) of the Act, which provides that a State has 60 days from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider before adjustment in the Federal Medicaid payment to the State is made; and that adjustment will be made at the end of the 60 days, whether or not recovery is made, unless the State is unable to recover from a provider because the overpayment is a debt that has been discharged in bankruptcy or is otherwise uncollectable. (c) Section 1903(d)(3) of the Act, which provides that the Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment. This subpart sets forth the requirements and procedures under which States have 60 days following discovery of overpayments made to providers for Medicaid services to recover or attempt to recover that amount before the States must refund the Federal share of these overpayments to CMS, with certain exceptions. As used in this subpart— Abuse (in accordance with §455.2) means provider practices that are inconsistent with sound fiscal, business, or medical practices, and result in an unnecessary cost to the Medicaid program, or in reimbursement for services that are not medically necessary or that fail to meet professionally recognized standards for health care. Discovery (or discovered) means identification by any State Medicaid agency official or other State official, the Federal Government, or the provider of an overpayment, and the communication of that overpayment finding or the initiation of a formal recoupment action without notice as described in §433.316. Fraud (in accordance with §455.2) means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to himself or some other person. It includes any act that constitutes fraud under applicable Federal or State law. Overpayment means the amount paid by a Medicaid agency to a provider which is in excess of the amount that is allowable for services furnished under section 1902 of the Act and which is required to be refunded under section 1903 of the Act. Provider (in accordance with §400.203) means any individual or entity furnishing Medicaid services under a provider agreement with the Medicaid agency. Recoupment means any formal action by the State or its fiscal agent to initiate recovery of an overpayment without advance official notice by reducing future payments to a provider. Third party (in accordance with §433.136) means an individual, entity, or program that is or may be liable to pay for all or part of the expenditures for medical assistance furnished under a State plan. [54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989] (a) General rule. Except as provided in paragraphs (b) and (c) of this section, the provisions of this subpart apply to— (1) Overpayments made to providers that are discovered by the State; (2) Overpayments made to providers that are initially discovered by the provider and made known to the State agency; and (3) Overpayments that are discovered through Federal reviews. (b) Third party payments and probate collections. The requirements of this subpart do not apply to— (1) Cases involving third party liability because, in these situations, recovery is sought for a Medicaid payment that would have been made had another party not been legally responsible for payment; and (2) Probate collections from the estates of deceased Medicaid recipients, as they represent the recovery of payments properly made from resources later determined to be available to the State. (c) Unallowable costs paid under rate-setting systems. (1) Unallowable costs for a prior year paid to an institutional provider under a rate-setting system that a State recovers through an adjustment to the per diem rate for a subsequent period do not constitute overpayments that are subject to the requirements of this subpart. In such cases, the State is not required to refund the Federal share explicitly related to the original overpayment in accordance with the regulations in this subpart. Refund of the Federal share occurs when the State claims future expenditures made to the provider at a reduced rate. (2) Unallowable costs for a prior year paid to an institutional provider under a rate-setting system that a State seeks to recover in a lump sum, by an installment repayment plan, or through reduction of future payments to which the provider would otherwise be entitled constitute overpayments that are subject to the requirements of this subpart. (d) Recapture of depreciation upon gain on the sale of assets. Depreciation payments are considered overpayments for purposes of this subpart if a State requires their recapture in a discrete amount(s) upon gain on the sale of assets. (a) Basic rules. (1) Except as provided in paragraph (b) of this section, the Medicaid agency has 60 days from the date of discovery of an overpayment to a provider to recover or seek to recover the overpayment before the Federal share must be refunded to CMS. (2) The agency must refund the Federal share of overpayments at the end of the 60-day period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider. (b) Exception. The agency is not required to refund the Federal share of an overpayment made to a provider when the State is unable to recover the overpayment amount because the provider has been determined bankrupt or out of business in accordance with §433.318. (c) Applicability. (1) The requirements of this subpart apply to overpayments made to Medicaid providers that occur and are discovered in any quarter that begins on or after October 1, 1985. (2) The date upon which an overpayment occurs is the date upon which a State, using its normal method of reimbursement for a particular class of provider (e.g., check, interfund transfer), makes the payment involving unallowable costs to a provider. (a) General rule. The date on which an overpayment is discovered is the beginning date of the 60-calendar day period allowed a State to recover or seek to recover an overpayment before a refund of the Federal share of an overpayment must be made to CMS. (b) Requirements for notification. Unless a State official or fiscal agent of the State chooses to initiate a formal recoupment action against a provider without first giving written notification of its intent, a State Medicaid agency official or other State official must notify the provider in writing of any overpayment it discovers in accordance with State agency policies and procedures and must take reasonable actions to attempt to recover the overpayment in accordance with State law and procedures. (c) Overpayments resulting from situations other than fraud or abuse. An overpayment resulting from a situation other than fraud or abuse is discovered on the earliest of— (1) The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery; (2) The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or (3) The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing. (d) Overpayments resulting from fraud or abuse. An overpayment that results from fraud or abuse is discovered on the date of the final written notice of the State's overpayment determination that a Medicaid agency official or other State official sends to the provider. (e) Overpayments identified through Federal reviews. If a Federal review at any time indicates that a State has failed to identify an overpayment or a State has identified an overpayment but has failed to either send written notice of the overpayment to the provider that specified a dollar amount subject to recovery or initiate a formal recoupment from the provider without having first notified the provider in writing, CMS will consider the overpayment as discovered on the date that the Federal official first notifies the State in writing of the overpayment and specifies a dollar amount subject to recovery. (f) Effect of changes in overpayment amount. Any adjustment in the amount of an overpayment during the 60-day period following discovery (made in accordance with the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution process specified in State administrative policies and procedures) has the following effect on the 60-day recovery period: (1) A downward adjustment in the amount of an overpayment subject to recovery that occurs after discovery does not change the original 60-day recovery period for the outstanding balance. (2) An upward adjustment in the amount of an overpayment subject to recovery that occurs during the 60-day period following discovery does not change the 60-day recovery period for the original overpayment amount. A new 60-day period begins for the incremental amount only, beginning with the date of the State's written notification to the provider regarding the upward adjustment. (g) Effect of partial collection by State. A partial collection of an overpayment amount by the State from a provider during the 60-day period following discovery does not change the 60-day recovery period for the original overpayment amount due to CMS. (h) Effect of administrative or judicial appeals. Any appeal rights extended to a provider do not extend the date of discovery. [54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989] (a) Basic rules. (1) The agency is not required to refund the Federal share of an overpayment made to a provider as required by §433.312(a) to the extent that the State is unable to recover the overpayment because the provider has been determined bankrupt or out of business in accordance with the provisions of this section. (2) The agency must notify the provider that an overpayment exists in any case involving a bankrupt or out-of-business provider and, if the debt has not been determined uncollectable, take reasonable actions to recover the overpayment during the 60-day recovery period in accordance with policies prescribed by applicable State law and administrative procedures. (b) Overpayment debts that the State need not refund. Overpayments are considered debts that the State is unable to recover within the 60-day period following discovery if the following criteria are met: (1) The provider has filed for bankruptcy, as specified in paragraph (c) of this section; or (2) The provider has gone out of business and the State is unable to locate the provider and its assets, as specified in paragraph (d) of this section. (c) Bankruptcy. The agency is not required to refund to CMS the Federal share of an overpayment at the end of the 60-day period following discovery, if— (1) The provider has filed for bankruptcy in Federal court at the time of discovery of the overpayment or the provider files a bankruptcy petition in Federal court before the end of the 60-day period following discovery; and (2) The State is on record with the court as a creditor of the petitioner in the amount of the Medicaid overpayment. (d) Out of business. (1) The agency is not required to refund to CMS the Federal share of an overpayment at the end of the 60-day period following discovery if the provider is out of business on the date of discovery of the overpayment or if the provider goes out of business before the end of the 60-day period following discovery. (2) A provider is considered to be out of business on the effective date of a determination to that effect under State law. The agency must— (i) Document its efforts to locate the party and its assets. These efforts must be consistent with applicable State policies and procedures; and (ii) Make available an affidavit or certification from the appropriate State legal authority establishing that the provider is out of business and that the overpayment cannot be collected under State law and procedures and citing the effective date of that determination under State law. (3) A provider is not out of business when ownershp is transferred within the State unless State law and procedures deem a provider that has transferred ownership to be out of business and preclude collection of the overpayment from the provider. (e) Circumstances requiring refunds. If the 60-day recovery period has expired before an overpayment is found to be uncollectable under the provisions of this section, if the State recovers an overpayment amount under a court-approved discharge of bankruptcy, or if a bankruptcy petition is denied, the agency must refund the Federal share of the overpayment in accordance with the procedures specified in §433.320. [54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989] (a) Basic requirements. (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS–64). (2) The Federal share of overpayments subject to recovery must be credited on the Form CMS–64 report submitted for the quarter in which the 60-day period following discovery, established in accordance with §433.316, ends. (3) A credit on the Form CMS–64 must be made whether or not the overpayment has been recovered by the State from the provider. (b) Effect of reporting collections and submitting reduced expenditure claims. (1) The State is not required to refund the Federal share of an overpayment when the State reports a collection or submits an expenditure claim reduced by a discrete amount to recover an overpayment prior to the end of the 60-day period following discovery. (2) The State is not required to report on the Form CMS–64 any collections made on overpayment amounts for which the Federal share has been refunded previously. (3) If a State has refunded the Federal share of an overpayment as required under this subpart and the State subsequently makes recovery by reducing future provider payments by a discrete amount, the State need not reflect that reduction in its claim for Federal financial participation. (c) Reclaiming overpayment amounts previously refunded to CMS. If the amount of an overpayment is adjusted downward after the agency has credited CMS with the Federal share, the agency may reclaim the amount of the downward adjustment on the Form CMS–64. Under this provision— (1) Downward adjustment to an overpayment amount previously credited to CMS is allowed only if it is properly based on the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution processes specified in State administrative policies and procedures. (2) The 2-year filing limit for retroactive claims for Medicaid expenditures does not apply. A downward adjustment is not considered a retroactive claim but rather a reclaiming of costs previously claimed. (d) Expiration of 60-day recovery period. If an overpayment has not been determined uncollectable in accordance with the requirements of §433.318 at the end of the 60-day period following discovery of the overpayment, the agency must refund the Federal share of the overpayment to CMS in accordance with the procedures specified in paragraph (a) of this section. (e) Court-approved discharge of bankruptcy. If the State recovers any portion of an overpayment under a court-approved discharge of bankruptcy, the agency must refund to CMS the Federal share of the overpayment amount collected on the next quarterly expenditure report that is due to CMS for the period that includes the date on which the collection occurs. (f) Bankruptcy petition denied. If a provider's petition for bankruptcy is denied in Federal court, the agency must credit CMS with the Federal share of the overpayment on the later of— (1) The Form CMS–64 submission due to CMS immediately following the date of the decision of the court; or (2) The Form CMS–64 submission for the quarter in which the 60-day period following discovery of the overpayment ends. (g) Reclaim of refunds. (1) If a provider is determined bankrupt or out of business under this section after the 60-day period following discovery of the overpayment ends and the State has not been able to make complete recovery, the agency may reclaim the amount of the Federal share of any unrecovered overpayment amount previously refunded to CMS. CMS allows the reclaim of a refund by the agency if the agency submits to CMS documentation that it has made reasonable efforts to obtain recovery. (2) If the agency reclaims a refund of the Federal share of an overpayment— (i) In bankruptcy cases, the agency must submit to CMS a statement of its efforts to recover the overpayment during the period before the petition for bankruptcy was filed; and (ii) In out-of-business cases, the agency must submit to CMS a statement of its efforts to locate the provider and its assets and to recover the overpayment during any period before the provider is found to be out of business in accordance with §433.318. (h) Supporting reports. The agency must report the following information to support each Quarterly Statement of Expenditures Form CMS–64: (1) Amounts of overpayments not collected during the quarter but refunded because of the expiration of the 60-day period following discovery; (2) Upward and downward adjustments to amounts credited in previous quarters; (3) Amounts of overpayments collected under court-approved discharges of bankruptcy; (4) Amounts of previously reported overpayments to providers certified as bankrupt or out of business during the quarter; and (5) Amounts of overpayments previously credited and reclaimed by the State. The Medicaid agency must maintain a separate record of all overpayment activities for each provider in a manner that satisfies the retention and access requirements of 45 CFR part 74, subpart D.
Title 42: Public Health
PART 433—STATE FISCAL ADMINISTRATION
Section Contents
§ 433.1 Purpose.
§ 433.8 [Reserved]
§ 433.10 Rates of FFP for program services.
§ 433.11 Enhanced FMAP rate for children.
§ 433.15 Rates of FFP for administration.
§ 433.32 Fiscal policies and accountability.
§ 433.34 Cost allocation.
§ 433.35 Equipment—Federal financial participation.
§ 433.36 Liens and recoveries.
§ 433.37 Reporting provider payments to Internal Revenue Service.
§ 433.38 Interest charge on disallowed claims for FFP.
§ 433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.
§ 433.50 Basis, scope, and applicability.
§ 433.51 Public funds as the State share of financial participation.
§ 433.52 General definitions.
§ 433.53 State plan requirements.
§ 433.54 Bona fide donations.
§ 433.55 Health care-related taxes defined.
§ 433.56 Classes of health care services and providers defined.
§ 433.57 General rules regarding revenues from provider-related donations and health care-related taxes.
§ 433.58 Provider-related donations and health care-related taxes during a State's transition period.
§ 433.60 Limitations on level of FFP in State expenditures from provider-related donations and health care-related taxes during the transition period.
§ 433.66 Permissible provider-related donations after the transition period.
§ 433.67 Limitations on level of FFP for permissible provider-related donations.
§ 433.68 Permissible health care-related taxes after the transition period.
§ 433.70 Limitations on level of FFP for revenues from health care-related taxes after the transition period.
§ 433.72 Waiver provisions applicable to health care-related taxes.
§ 433.74 Reporting requirements.
§ 433.110 Basis, purpose, and applicability.
§ 433.111 Definitions.
§ 433.112 FFP for design, development, installation or enhancement of mechanized claims processing and information retrieval systems.
§ 433.113 Reduction of FFP for failure to operate a system and obtain initial approval.
§ 433.114 Procedures for obtaining initial approval; notice of decision.
§ 433.116 FFP for operation of mechanized claims processing and information retrieval systems.
§ 433.117 Initial approval of replacement systems.
§ 433.119 Conditions for reapproval; notice of decision.
§ 433.120 Procedures for reduction of FFP after reapproval review.
§ 433.121 Reconsideration of the decision to reduce FFP after reapproval review.
§ 433.122 Reapproval of a disapproved system.
§ 433.123 Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.
§ 433.127 Termination of FFP for failure to provide access to claims processing and information retrieval systems.
§ 433.130 Waiver of conditions of initial operation and approval.
§ 433.131 Waiver for noncompliance with conditions of approval and reapproval.
§ 433.135 Basis and purpose.
§ 433.136 Definitions.
§ 433.137 State plan requirements.
§ 433.138 Identifying liable third parties.
§ 433.139 Payment of claims.
§ 433.140 FFP and repayment of Federal share.
Assignment of Rights to Benefits
§ 433.145 Assignment of rights to benefits—State plan requirements.
§ 433.146 Rights assigned; assignment method.
§ 433.147 Cooperation in establishing paternity and in obtaining medical support and payments and in identifying and providing information to assist in pursuing third parties who may be liable to pay.
§ 433.148 Denial or termination of eligibility.
Cooperative Agreements and Incentive Payments
§ 433.151 Cooperative agreements and incentive payments—State plan requirements.
§ 433.152 Requirements for cooperative agreements for third party collections.
§ 433.153 Incentive payments to States and political subdivisions.
§ 433.154 Distribution of collections.
§ 433.300 Basis.
§ 433.302 Scope of subpart.
§ 433.304 Definitions.
§ 433.310 Applicability of requirements.
§ 433.312 Basic requirements for refunds.
§ 433.316 When discovery of overpayment occurs and its significance.
§ 433.318 Overpayments involving providers who are bankrupt or out of business.
§ 433.320 Procedures for refunds to CMS.
§ 433.322 Maintenance of records.
§ 433.1 Purpose.
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Subpart A—Federal Matching and General Administration Provisions
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§ 433.8 [Reserved]
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§ 433.10 Rates of FFP for program services.
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§ 433.11 Enhanced FMAP rate for children.
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§ 433.15 Rates of FFP for administration.
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§ 433.32 Fiscal policies and accountability.
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§ 433.34 Cost allocation.
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§ 433.35 Equipment—Federal financial participation.
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§ 433.36 Liens and recoveries.
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§ 433.37 Reporting provider payments to Internal Revenue Service.
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§ 433.38 Interest charge on disallowed claims for FFP.
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§ 433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.
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Subpart B—General Administrative Requirements State Financial Participation
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§ 433.50 Basis, scope, and applicability.
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§ 433.51 Public funds as the State share of financial participation.
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§ 433.52 General definitions.
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§ 433.53 State plan requirements.
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§ 433.54 Bona fide donations.
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§ 433.55 Health care-related taxes defined.
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§ 433.56 Classes of health care services and providers defined.
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§ 433.57 General rules regarding revenues from provider-related donations and health care-related taxes.
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§ 433.58 Provider-related donations and health care-related taxes during a State's transition period.
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§ 433.60 Limitations on level of FFP in State expenditures from provider-related donations and health care-related taxes during the transition period.
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§ 433.66 Permissible provider-related donations after the transition period.
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§ 433.67 Limitations on level of FFP for permissible provider-related donations.
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§ 433.68 Permissible health care-related taxes after the transition period.
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§ 433.70 Limitations on level of FFP for revenues from health care-related taxes after the transition period.
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§ 433.72 Waiver provisions applicable to health care-related taxes.
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§ 433.74 Reporting requirements.
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Subpart C—Mechanized Claims Processing and Information Retrieval Systems
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§ 433.110 Basis, purpose, and applicability.
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§ 433.111 Definitions.
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§ 433.112 FFP for design, development, installation or enhancement of mechanized claims processing and information retrieval systems.
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§ 433.113 Reduction of FFP for failure to operate a system and obtain initial approval.
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§ 433.114 Procedures for obtaining initial approval; notice of decision.
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§ 433.116 FFP for operation of mechanized claims processing and information retrieval systems.
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§ 433.117 Initial approval of replacement systems.
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§ 433.119 Conditions for reapproval; notice of decision.
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§ 433.120 Procedures for reduction of FFP after reapproval review.
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§ 433.121 Reconsideration of the decision to reduce FFP after reapproval review.
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§ 433.122 Reapproval of a disapproved system.
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§ 433.123 Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.
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§ 433.127 Termination of FFP for failure to provide access to claims processing and information retrieval systems.
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§ 433.130 Waiver of conditions of initial operation and approval.
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§ 433.131 Waiver for noncompliance with conditions of approval and reapproval.
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Subpart D—Third Party Liability
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§ 433.135 Basis and purpose.
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§ 433.136 Definitions.
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§ 433.137 State plan requirements.
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§ 433.138 Identifying liable third parties.
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§ 433.139 Payment of claims.
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§ 433.140 FFP and repayment of Federal share.
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Assignment of Rights to Benefits
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§ 433.145 Assignment of rights to benefits—State plan requirements.
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§ 433.146 Rights assigned; assignment method.
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§ 433.147 Cooperation in establishing paternity and in obtaining medical support and payments and in identifying and providing information to assist in pursuing third parties who may be liable to pay.
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§ 433.148 Denial or termination of eligibility.
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Cooperative Agreements and Incentive Payments
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§ 433.151 Cooperative agreements and incentive payments—State plan requirements.
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§ 433.152 Requirements for cooperative agreements for third party collections.
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§ 433.153 Incentive payments to States and political subdivisions.
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§ 433.154 Distribution of collections.
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Subpart E [Reserved]
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Subpart F—Refunding of Federal Share of Medicaid Overpayments to Providers
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§ 433.300 Basis.
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§ 433.302 Scope of subpart.
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§ 433.304 Definitions.
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§ 433.310 Applicability of requirements.
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§ 433.312 Basic requirements for refunds.
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§ 433.316 When discovery of overpayment occurs and its significance.
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§ 433.318 Overpayments involving providers who are bankrupt or out of business.
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§ 433.320 Procedures for refunds to CMS.
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§ 433.322 Maintenance of records.
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