Medicaid Program; Premiums and Cost Sharing, 30244-30265 [2010-12954]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 103 (Friday, May 28, 2010)]
[Rules and Regulations]
[Pages 30244-30265]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-12954]



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Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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47 CFR Parts 447 and 457



Medicaid Program; Premiums and Cost Sharing; Final Rule

Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 447 and 457

[CMS-2244-FC]
RIN 0938-AP73


Medicaid Program; Premiums and Cost Sharing

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule revises the November 25, 2008 final rule 
entitled, ``Medicaid Programs; Premiums and Cost Sharing (73 FR 
71828),'' to address public comments received during reopened comment 
periods, and to reflect relevant statutory changes made in section 
5006(a) of the American Recovery and Reinvestment Act of 2009 (the 
Recovery Act). This revised final rule implements and interprets 
section 1916A of the Social Security Act (the Act), which was added by 
sections 6041, 6042, and 6043 of the Deficit Reduction Act of 2005 
(DRA), amended by section 405(a)(1) of the Tax Relief and Health Care 
Act of 2006 (TRHCA) and further amended by section 5006(a) of the 
American Recovery and Reinvestment Act of 2009 (the Recovery Act). 
These provisions increase State flexibility to impose premiums and cost 
sharing for coverage of certain individuals whose family income exceeds 
specified levels. This revised rule also provides a further opportunity 
for public comment on revisions made to implement and interpret section 
5006(a) of the Recovery Act. The Recovery Act prohibits States from 
charging premiums and cost sharing under Medicaid to Indians furnished 
items or services directly by the Indian Health Service, Indian Tribes, 
Tribal Organizations, or Urban Indian Organizations or through referral 
under contract health services.

DATES: 
    Effective Date: These regulations are effective on July 1, 2010.
    Comment Date: To be assured of consideration, comments limited to 
the implementation of section 5006(a) of the Recovery Act must be 
received at one of the addresses provided below, no later than 5 p.m. 
on July 27, 2010.

ADDRESSES: In commenting, please refer to file code CMS-2244-FC.
    You may submit comments in one of four ways (please choose only one 
of the ways listed). We cannot accept comments by facsimile (FAX) 
transmission.
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2244-FC, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2244-FC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:

a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Christine Gerhardt, (410) 786-0693.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Statutory Authority

    The Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) was 
enacted on February 8, 2006. Sections 6041, 6042, and 6043 of the DRA 
established a new section 1916A of the Social Security Act (the Act), 
which was amended by section 405(a)(1) of the Tax Relief and Health 
Care Act of 2006 (TRHCA) (Pub. L. 109-432, enacted on December 20, 
2006). Section 1916A of the Act sets forth State options for 
alternative premiums and cost sharing, including options for higher 
cost sharing for non-preferred prescription drugs and for non-emergency 
use of a hospital emergency room.
    Section 6041 of the DRA established new subsections 1916A(a) and 
(b) of the Act, which allow States to amend their State plans to impose 
alternative premiums and cost sharing on certain groups of individuals, 
for items and services other than drugs (which are subject to a 
separate provision discussed below), and to adopt certain rules with 
respect to the nonpayment and payment of the premiums and cost sharing. 
Subsections 1916A(a) and (b) of the Act set forth limitations on 
alternative premiums and cost sharing that vary based on family income, 
and exclude some specific services from alternative

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cost sharing. Section 6041 of the DRA also created a new section 
1916(h) of the Act, which requires the Secretary to increase the 
``nominal'' cost sharing amounts under section 1916 of the Act for each 
year (beginning with 2006) by the annual percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (CPI-U) as rounded up in an appropriate manner. Section 
405(a)(1) of the TRHCA modified subsections 1916A(a) and (b) of the 
Act.
    Section 6042 of the DRA created section 1916A(c) of the Act, which 
provides States with additional options to encourage the use of 
preferred drugs. Section 405(a)(1) of the TRHCA also modified section 
1916A(c) of the Act. Under section 1916A(c) of the Act, States may 
amend their State plans to require increased cost sharing by certain 
groups of individuals for non-preferred drugs and to waive or reduce 
the otherwise applicable cost sharing for preferred drugs. States may 
also permit pharmacy providers to require the receipt of a cost sharing 
payment from an individual before filling a prescription.
    Section 6043 of the DRA created section 1916A(e) of the Act, which 
permits States to amend their State plans to allow hospitals, after an 
appropriate medical screening examination under section 1867 of the Act 
(per the Emergency Medical Treatment and Active Labor Act), to impose 
higher cost sharing upon certain groups of individuals for non-
emergency care or services furnished in a hospital emergency 
department. Section 405(a)(1) of the TRHCA modified section 1916A(e) of 
the Act. Under this option, if the hospital determines that an 
individual does not have an emergency medical condition and that an 
available and accessible alternate non-emergency services provider can 
provide the services in a timely manner without the imposition of the 
same cost sharing, before providing the non-emergency services and 
imposing cost sharing, it must inform the individual of the 
availability of such services from the accessible non-emergency 
services provider and coordinate a referral to that provider. After 
notice is given, the hospital may require payment of the cost sharing 
before providing non-emergency services, if the individual elects to 
receive the non-emergency services from the hospital. The cost sharing 
cannot be imposed if no available alternative non-emergency service 
provider exists.
    Section 5006(a) of the American Recovery and Reinvestment Act of 
2009 (the Recovery Act) (Pub. L. 111-5, enacted on February 17, 2009) 
amended sections 1916 and 1916A of the Act effective July 1, 2009. 
Specifically, Section 5006(a)(1)(A) of the Recovery Act amended section 
1916 of the Act to add a new subsection (j), which prohibits premiums 
and cost sharing for Indians who are provided services or items covered 
under the Medicaid State plan by Indian health care providers or 
through referral under contract health services. Section 5006(a)(2) of 
the Recovery Act amended section 1916A(b)(3)(A) of the Act to add a new 
clause prohibiting premiums on an Indian furnished an item or service 
directly by Indian health care providers or through referral under 
contract health services, and also added a clause to 1916A(b)(3)(B) 
prohibiting cost sharing for that population. In addition, section 
5006(a)(1)(B) of the Recovery Act amended section 1916 of the Act to 
specify that payments to Indian health care providers or to a health 
care provider through referral under contract health services for 
Medicaid services or items furnished to Indians cannot be reduced by 
the amount of any enrollment fee, premium, or cost sharing that 
otherwise would be due from the individual.
    We also acknowledge the importance of providing adequate mental 
health benefits and will be separately addressing how the laws 
following the DRA, including the Paul Wellstone and Pete Domenici 
Mental Health Parity and Addiction Equity Act of 2008 (Pub. L. 110-
343), relate to the Medicaid program regarding the treatment of 
beneficiary cost sharing.

B. Regulatory History

    On February 22, 2008, we published a proposed rule in the Federal 
Register (73 FR 9727) that proposed to implement and interpret the 
provisions of sections 6041, 6042, and 6043 of the DRA. A final rule 
entitled ``Medicaid Program; Premiums and Cost Sharing'' was published 
in the Federal Register on November 25, 2008 (73 FR 71828).
    On January 27, 2009, prior to the effective date of the November 
25, 2008 final rule, we published a final rule in the Federal Register 
(74 FR 4888) that temporarily delayed for 60 days the effective date of 
the November 25, 2008 final rule and reopened the comment period on the 
policies set out in the November 25, 2008 final rule.
    On March 27, 2009, we published a second final rule in the Federal 
Register (74 FR 13346) that further delayed the effective date of the 
November 25, 2008 final rule until December 31, 2009. We stated that 
the delay was needed because our initial review had indicated that 
substantial revisions to the final rule would be needed. Also, the 
comment period was again reopened, for two purposes: for additional 
comments on the policies set forth in the November 25, 2008 final rule, 
and for comments on revisions needed to reflect section 5006(a) of the 
Recovery Act (related to the exclusion of Indians from payment of 
premiums and cost sharing).
    On October 30, 2009, we published a proposed rule in the Federal 
Register (74 FR 56151) to delay further the effective date of the 
November 25, 2008 final rule until July 1, 2010. Upon review and 
consideration of the public comments received and the provisions of the 
Recovery Act, we determined that we needed more time to review and 
revise the November 25, 2008 final rule. On November 30, 2009, we 
published a third final rule in the Federal Register (74 FR 62501) that 
delayed the effective date of the November 25, 2008 final rule until 
July 1, 2010.

II. Provisions of the November 25, 2008 Final Rule and the Extended 
Comment Period and Analysis of and Response to Public Comments

A. Public Comments

    We received approximately 50 timely items of correspondence during 
the public comment period for the February 22, 2008 proposed rule, 
which we addressed in the November 25, 2008 final rule. We received 
approximately 5 timely items of correspondence (including 20 specific 
comments) in response to the January 27, 2009 reopening of the comment 
period. In addition, we received approximately 10 timely items of 
correspondence (including 36 specific comments) in response to the 
March 27, 2009 reopening of the comment period. Summaries of those 
public comments and our responses are set forth in the various sections 
of this final rule under the appropriate heading.

B. General Comments

    A majority of the public comments received for the January 27, 2009 
and March 27, 2009 extended comment periods were similar to comments 
received on the February 22, 2008 proposed rule, which we addressed in 
the November 25, 2008 final rule. In light of the continued concerns 
reflected by these comments, and additional review of available 
research, State practice, and changes in overall economic circumstances 
throughout the country, we have reconsidered our responses to these 
comments. In

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particular, we have given greater weight to concerns about maintaining 
access to services for needy families. A summary of the general 
comments received and our responses are as follows:
    Comment: Several commenters stated that the rule would 
significantly reduce affordability of care and patients' access to 
adequate care, and would result in decreased utilization of essential 
health care services, increased adverse events, and worsened health 
status due to less use of health care characterized as ``effective'' 
and subsequent use of more costly care. These commenters requested that 
the final rule reflect the need for caution and care when imposing 
premiums and cost sharing charges on low-income Medicaid beneficiaries. 
These commenters asserted that the November 25, 2008 final rule would 
allow States to increase health care expenses for vulnerable citizens, 
result in more crisis situations that lead to more expensive 
hospitalizations, limit access to basic health care, and force out 
people who need services most. These commenters argued that increased 
flexibility for States to impose premiums or cost sharing is 
detrimental to low-income populations, unless there are explicit 
restrictions on maximum premium and cost sharing levels.
    One commenter described her personal situation that she would have 
inadequate money for food or rent if her copayments were increased.
    Response: We appreciate the significant concerns expressed in these 
comments and agree that there is ample evidence that cost is a 
significant barrier to people accessing coverage and care, particularly 
for those with low or moderate incomes. These are important issues with 
which States must contend when they determine whether to impose 
premiums and cost sharing for their Medicaid and Children's Health 
Insurance Program (CHIP) populations and as they design and implement 
these provisions. CMS also must be mindful of these issues as we 
promulgate rules and oversee the operation of Medicaid and CHIP. 
However, to the extent that these comments reflect fundamental 
disagreements with the statutory flexibility and requirements enacted 
in sections 1916 and 1916A of the Act, we note that CMS is charged with 
implementing applicable statutory provisions.
    We have developed the revised final rule in accordance with the 
provisions set forth at sections 1916 and 1916A of the Act. This 
regulation is consistent with the statute and reflects little 
interpretive policy by CMS; therefore, we are unable to change major 
aspects of the revised final rule based on these comments.
    In light of public comments, we have, however, reconsidered some of 
our prior responses to comments on specific interpretive issues, in 
order to increase the protections for vulnerable populations to the 
extent consistent with the statutory requirements. As we discuss in 
greater detail in responding to specific public comments on each issue 
below, in this revised rule we are:
     Reducing the maximum copayment amount from $5.70 (the 
maximum copayment amount for children in separate CHIP programs) to 
$3.40 per visit in fiscal year 2009 (which is then adjusted for 
inflation annually) for Medicaid expansion optional targeted low income 
children enrolled in managed care organizations, when a State does not 
have a fee-for-service system.
     Specifying that a State that adopts cost sharing rules 
that could result in aggregate costs to the family that exceed five 
percent of the family's income must: (1) Describe in its Medicaid State 
plan the methodology it will use to identify beneficiaries who are 
subject to premiums or cost sharing for specific items or services; and 
(2) track beneficiaries' incurred premiums and cost sharing through a 
mechanism developed by the State that does not rely on beneficiaries. 
These requirements are imposed so that the State is able to inform 
beneficiaries and providers of beneficiaries' liability and notify 
beneficiaries and providers when individual beneficiaries have reached 
the five percent limit on family out-of-pocket expenses and so are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period. Ideally, for ease of 
administration and accuracy, States will use automated systems to track 
these cost sharing amounts.
     Specifying that a State must describe in its Medicaid 
State plan how the State identifies for providers, ideally through the 
use of automated systems, whether cost sharing for a specific item or 
service may be imposed on an individual beneficiary and whether the 
provider may require the beneficiary, as a condition for receiving the 
item or service, to pay the cost sharing charge.
     Specifying at a minimum the services listed at Sec.  
457.520 as the preventive services that must be excluded from cost 
sharing for children younger than age 18, which reflect the well baby 
and well child care and immunizations described by the Bright Futures 
guidelines of the American Academy of Pediatrics.
     Requiring States to describe in their Medicaid State plan 
their process for beneficiaries to request a reassessment of the 
family's aggregate limit for premiums and cost sharing if the family's 
income is reduced or if eligibility is being terminated due to 
nonpayment of premiums.
     Clarifying that the statutory exclusion of family planning 
services and supplies from cost sharing encompasses the entire range of 
such services for which the State claims or could claim the enhanced 
Federal matching rate for family planning services and supplies under 
section 1903(a)(5) of the Act, including contraceptives and other 
pharmaceuticals.
     Clarifying that the statutory exclusion of certain 
populations and services from cost sharing exceeding a nominal amount 
means that drugs not identified by a State as non-preferred drugs 
within a class of pharmaceuticals are subject to the same exclusions 
from cost sharing as preferred drugs.
     Requiring States to submit documentation with a State plan 
amendment proposing to establish or substantially modify alternative 
premiums or cost sharing under section 1916A of the Act that the State 
provided the public with advance notice of the amendment and reasonable 
opportunity for comment in a form and manner provided under applicable 
State law.
    CMS will continue to carefully review State plan amendments 
submitted to implement or modify premiums or cost sharing to ensure 
that the processes described adhere to the statutory and regulatory 
requirements.
    We further note that the concerns expressed by the commenters may 
be widely shared. To date, only 8 States have approved State plan 
amendments for alternative premiums and/or cost sharing under section 
1916A of the Act. These provisions are usually applied to narrowly 
defined, higher income populations and/or to limited services, such as 
premiums for specific expansion populations or slightly more than 
nominal pharmacy copayments.
    Comment: We also received a recommendation that the rule should 
reflect the change in course signaled by the Children's Health 
Insurance Program Reauthorization Act of 2009 (CHIPRA) to strengthen 
quality of care, ensure the availability of preventive services, and 
enhance access to needed services to improve health outcomes. The 
commenter also recommended that rigorous data collection accompany any 
enhanced cost sharing, to determine whether higher co-payment 
requirements present a greater access

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barrier to people with disabilities. The commenter further recommended 
that providers report to States and that States report to CMS at least 
a sample of the race and ethnicity of individuals for whom providers 
approved a waiver from mandatory co-payments on a case-by-case basis, 
in order to demonstrate that the waiver does not have a disparate 
effect on people of color or non-English-speaking individuals.
    Response: While we agree with the commenter's overall sentiments, 
we believe it is important to consider these kinds of recommended 
information collection and reporting requirements separately, in 
conjunction with other similar potential information collection and 
reporting requirements. CMS has broad authority under section 
1902(a)(6) of the Act to require States to report any needed 
information, but it is important to carefully consider such reporting 
requirements and ensure that they can be integrated with existing State 
responsibilities and are not overly burdensome. Because providers are 
not required to report on their claims for Medicaid reimbursement 
whether the provider collected a mandatory copayment, requiring 
providers to obtain and submit information about the race and ethnicity 
of individuals for whom the provider waived a copayment would be 
burdensome and costly for all involved, even for a sample of claims.

C. General Comments on the Exemption of Indians From Premiums and Cost 
Sharing

    We received the following general comments concerning the exemption 
of Indians furnished items or services directly by an Indian health 
care provider (the Indian Health Service (IHS), an Indian Tribe, a 
Tribal Organization, or an Urban Indian Organization) or through 
referral under contract health services from payment of premiums and 
cost sharing effective July 1, 2009, in accordance with the section 
5006(a) of the Recovery Act.
    Comment: Several commenters urged CMS to fulfill its 
responsibilities for early Tribal consultation, which did not occur 
with the original cost-sharing rule.
    Response: CMS believes that it is in compliance with applicable 
Tribal consultation responsibilities, but notes that considerable 
additional consultation was undertaken since the original cost sharing 
rule was published. Further, we are open to specific suggestions as to 
how to maximize the effectiveness of Tribal consultation. In our March 
27, 2009 final rule, we specifically requested public comment on the 
new provisions exempting Indians from premiums and cost sharing, and we 
believe that there has been a full opportunity for Tribes to raise 
issues of concern. Moreover, the Recovery Act contains expanded 
consultation responsibilities for States in implementing options under 
the Federal Medicaid and CHIP statutes.
    In keeping with the Department's Tribal consultation policy and the 
new provisions in the Recovery Act, CMS collaborated and consulted with 
the Tribal Technical Advisory Group (TTAG) and the IHS to solicit 
advice on implementing these provisions. The Tribal Affairs Group and 
the Center for Medicaid, CHIP and Survey and Certification within CMS 
jointly hosted two All Tribes Calls on June 5 and 12, 2009, to consult 
on implementation of section 5006 of the Recovery Act. Two face-to-face 
consultation meetings were held in Denver on July 8 and 10, 2009, to 
solicit advice and input on these provisions from federally-recognized 
Tribes, Indian health care providers, and Urban Indian Organizations. 
An All-States Call was held on June 10, 2009, with the State Medicaid 
and CHIP programs, to describe the CMS Tribal consultation process and 
the Recovery Act provisions and to solicit feedback and questions from 
States.
    Comment: A commenter asserted that CMS should adopt the TTAG 
recommendation to adopt an interim rule to implement section 5006(a) of 
the Recovery Act by July 1, 2009, because, otherwise, violations of the 
new provision could occur and go undetected. The commenter stated that 
it is important for CMS to assure that mechanisms are put in place 
timely at the State level, to assure compliance with this new provision 
as of the effective date of July 1, 2009.
    Response: The requirements of section 5006(a) of the Recovery Act 
were effective as of July 1, 2009, and CMS intends to work with States 
to implement the statutory requirements through its compliance reviews 
and reviews of State plan amendments. CMS issued a letter to State 
Medicaid Directors and State Health Officials on January 22, 2010 
(SMDL 10-001/ARRA 6), providing guidance on 
implementation of section 5006 of the Recovery Act.
    The Congress did not expressly provide authority for interim final 
rulemaking authority under the Recovery Act. In light of the strong 
public interest in timely protection of the exempt Indian populations, 
we provided the interim guidance to States described above and have 
diligently pursued the rulemaking process.
    Comment: A commenter asked that CMS establish effective procedures 
to properly enforce this provision, including a new audit element to 
quickly detect any prohibited reductions in providers' payments or 
other violations. The commenter asserted that States must make 
supplemental payments to providers for any prohibited reductions in 
payment.
    Response: Congress did not provide for any new enforcement 
mechanism for these provisions, and it is not clear that existing 
enforcement mechanisms are inadequate. All States have an appeal 
process through which beneficiaries and providers can appeal State 
determinations concerning the amount of medical assistance. CMS 
involvement is primarily through the State plan approval process. In 
addition, CMS has authority to initiate compliance actions under 
section 1904 of the Act in the event of systemic noncompliance by a 
State.
    Comment: Another commenter recommended that CMS include 
requirements for administrative simplicity in the implementation of the 
Recovery Act's new exclusion of Native Americans from cost-sharing, 
including ease of tribal membership documentation.
    Response: We agree that administrative simplicity is very 
important. Therefore, we have defined the term ``Indian'' for purposes 
of the exemption from premiums and cost sharing in broad terms that 
indicate the kinds of documentation that could support the application 
of the exception.
    Specifically, Indian means any individual defined at 25 USC 
1603(c), 1603(f), or 1679(b), or who has been determined eligible as an 
Indian, pursuant to 42 CFR 136.12. This means the individual:
    (1) Is a member of a Federally-recognized Indian tribe;
    (2) resides in an urban center and meets one or more of the four 
criteria: (a) Is a member of a tribe, band, or other organized group of 
Indians, including those tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member; (b) is an Eskimo or Aleut or other Alaska Native; (c) is 
considered by the Secretary of the Interior to be an Indian for any 
purpose; or (d) is determined to be an Indian under regulations 
promulgated by the Secretary;
    (3) is considered by the Secretary of the Interior to be an Indian 
for any purpose; or

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    (4) is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.
    Documentation that an individual is an Indian could include Tribal 
enrollment and membership cards, a certificate of degree of Indian 
blood issued by the Bureau of Indian Affairs, a Tribal census document, 
or a document issued by a Tribe indicating an individual's affiliation 
with the Tribe. The Indian health care programs and urban Indian health 
programs are responsible for determining who is eligible to receive an 
item or service furnished by their programs and so a medical record 
card or similar documentation that specifies an individual is an Indian 
as defined above could suffice as appropriate documentation. These 
documents are examples of documents that may be used, but do not 
constitute an all-inclusive list of such documents.
    Comment: A commenter also stated that Tribal leaders are not 
cognizant of all the impacts that these changes will have on the 
elderly Indian populations enrolled in Medicaid. The commenter stated 
that none of this information has been provided by CMS or the IHS.
    Response: As described above, CMS has engaged in an extensive 
Tribal consultation process, providing information to the Tribes, 
soliciting their input, and incorporating changes into this revised 
rule based on that input.
    Comment: A commenter stated that for Indians who use the IHS 
system, Medicaid is considered the primary payer, and IHS is considered 
the payer of last resort according to 42 CFR 136.61. Therefore, the 
commenter asserted that a conflict exists between section 5006 of the 
Recovery Act specifying circumstances under which Indians may not be 
charged cost-sharing (and so defining when they may be charged cost 
sharing) and the IHS payer of last resort policy, as well as Federal 
responsibility in providing health care for Native Americans.
    Response: We do not see any conflict between the exclusion of 
Indians from Medicaid premiums and cost sharing and the IHS payer of 
last resort rule, which was included in section 2901 of the Patient 
Protection and Affordable Care Act of 2010, Public Law 111-148. We also 
do not see any conflict with overall Federal responsibilities toward 
Indian health care. Indeed, we believe that these policies are 
consistent and ensure that Medicaid programs will pay for health care 
coverage of Medicaid items and services primary to both IHS and to 
individual Indians.
    Comment: A commenter expressed concern that CMS seems to feel that 
the statutory framework for the cost sharing rule reflects the 
principle that States are in the best position to weigh the Tribes' 
concerns, as Sovereign Nations, and that the States alone are to 
determine the appropriate levels and scope of alternative cost sharing. 
The commenter noted that the Tribes' poorest people who are on Medicaid 
cannot afford even the smallest cost sharing, and the commenter was 
concerned that CMS ensure that States follow requirements to consult 
with Tribes prior to implementing cost sharing that will directly 
affect the Tribes and indigent patients.
    Response: We agree that there are special concerns about cost 
sharing for Indians, and we believe that Congress recognized these 
concerns in enacting the Recovery Act protections for Indians from cost 
sharing that are being implemented in this revised final rule, and the 
new requirements for CMS to maintain the TTAG and for States to engage 
in tribal consultation under section 5006(e) of the Recovery Act. We 
will continue to monitor State compliance with tribal consultation 
requirements in all aspects of the Medicaid program.

D. Comments From the January 27, 2009 and March 27, 2009 Extended 
Comment Periods on the November 25, 2008 Final Rule

    Following is a summary of each provision in the February 22, 2008 
proposed rule entitled ``Medicaid Programs: Premiums and Cost Sharing'' 
that was addressed in a public comment. We include a background summary 
of any changes included in the final rule published on November 25, 
2008 based on comments received during the initial comment period; and 
then a summary of the additional comments on the final rule that were 
received during the reopened comment periods beginning on January 27 
and March 27, 2009; and responses to those additional comments.
Maximum Allowable and Nominal Charges (Sec.  447.54)
    Under DRA Sec.  6041(b)(2), adding Sec.  1916(h) to the Social 
Security Act, the Secretary was authorized to adjust the regulatory 
definition of nominal charges. In reviewing those definitions, we also 
addressed the issue of maximum charges by managed care organizations 
(MCO). CMS had previously, in interpreting regulatory provisions that 
addressed maximum charges only under fee-for-service systems, limited 
MCO charges to an estimate of the charges that would have been allowed 
under a fee-for-service system. In the February 22, 2008 proposed rule, 
we proposed to revise Sec.  447.54 to provide updates for Federal 
fiscal year (FY) 2007 to the existing ``nominal'' Medicaid cost sharing 
amounts, specifically the nominal deductible amount described at Sec.  
447.54(a)(1) and the nominal copayment amounts described at Sec.  
447.54(a)(3) by applying an inflation factor, and described a 
methodology for future inflation-based updates that included rounding 
the maximum copayment amounts to the next highest 10-cent increment. We 
also proposed to add a new Sec.  447.54(a)(4) to establish a maximum 
copayment amount for Federal FY 2007 for services provided by an MCO, 
in light of the difficulty in determining comparable fee-for-service 
charges. We noted that a similar MCO limit was applied under the CHIP 
program.
    In the November 25, 2008 final rule, we updated the maximum nominal 
copayments to reflect amounts for Federal FY 2009. The amounts were 
rounded to the next highest 5-cent increment rather than 10-cent 
increment, to be consistent with the Medicare Part D program. In 
addition, we clarified that we would calculate the update each year 
without considering any rounding adjustment made in the previous year. 
A new paragraph (a)(4) was added to specify that the copayment amount 
for services provided by an MCO may not exceed the copayment amount for 
comparable services under a fee-for-service delivery system. In the 
circumstance when there is no fee-for-service delivery system under the 
plan, we specified that the copayment amount for services furnished by 
an MCO may not exceed the maximum copayment amount under a fee-for-
service delivery system, which was $3.40 per visit for Federal FY 2009 
(based on the maximum fee-for-service copayment under Medicaid), or for 
individuals referenced in an approved State child health plan under 
title XXI of the Act, a higher different maximum MCO copayment amount 
of $5.70 per visit (based on the maximum fee-for-service amount for 
children enrolled in separate CHIP programs under title XXI of the 
Act).
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters recommended deletion of the $5.70 per

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visit maximum Medicaid copayment specifically for children in CHIP-
related Medicaid expansions under managed care plans when a State does 
not have a fee-for-service system. This amount was added in the final 
rule published on November 25, 2008.
    Response: We agree with the underlying concern that copayments for 
such children would exceed levels otherwise considered nominal under 
the Medicaid program. Therefore, in this revised final rule, we have 
deleted the higher maximum copayment amount for Medicaid expansion 
children enrolled with MCOs. The same maximum copayment of $3.40 per 
visit for Federal FY 2009 will be applied for Medicaid expansion 
children as for all other Medicaid beneficiaries enrolled in MCOs. 
While our intent had been to align the Medicaid and CHIP programs by 
permitting the same copayment levels under either program, we have been 
convinced by the commenters that the status of the children under the 
Medicaid program should be of primary importance, because it indicates 
a State's determination that the children should be entitled to all the 
benefits and protections of the Medicaid program. We have always 
applied Medicaid-specific rules to Medicaid expansion programs, even if 
those rules vary from the rules applicable to separate CHIP programs. 
The importance of ensuring coverage for children and reducing barriers 
to such coverage has been affirmed generally by Congress in CHIPRA, 
which expanded and improved the CHIP program while maintaining the 
option of using CHIP funding for serving children through the Medicaid 
program.
Alternative Premiums and Cost Sharing: Basis, Purpose and Scope (Sec.  
447.62)
    In the February 22, 2008 proposed rule, we proposed to implement 
the flexibility for States to impose alternative premiums and cost 
sharing with the protections outlined in the TRHCA, including the 
imposition of nominal cost sharing for individuals with family income 
at or below 100 percent of the FPL limited to prescription drugs and 
non-emergency services furnished in a hospital emergency room.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without change but added a provision that clarified 
that individuals with family income at or below 100 percent of the FPL 
could be charged nominal copayments to the extent consistent with 
section 1916 of the Act.
    Specific comments on this section received during the reopened 
comment period, and our responses to those additional comments, are as 
follows:
    Comment: Several commenters recommended that the alternative 
premium and cost sharing rules be simplified and clarified as much as 
possible, such as the different requirements based on the family's 
income level, because neither the State nor providers have the 
resources to implement these complex rules.
    Response: We agree that the regulatory presentation of the 
statutory limitations on alternative premiums and cost sharing may have 
been confusing. In this revised final rule at Sec.  447.62(a) and 
(b)(1), we have attempted to clarify the regulatory provisions to 
better ensure consistency with the statutory requirements in sections 
1916 and 1916A of the Act. The basic provisions of this section, such 
as the different exclusions and limits based on a family's income 
level, are defined in statute and are by nature complex. We have 
attempted to describe these complex exclusions and limits in the 
simplest and most straightforward manner possible in this revised rule.
    Comment: A commenter recommended that the rule be revised to make 
it clear that the Secretary of Health and Human Services' (HHS) 
authority to waive cost sharing provisions under section 1916A of the 
Act is limited in accordance with section 1916(f) of the Act.
    Response: In this revised final rule, we included language in Sec.  
447.62(b) to clarify the text, taking into account the amendment to 
section 1916(f) of the Act made by section 6041(b)(1) of the DRA. In 
light of section 1916A of the Act and the provision of the DRA that 
applies section 1916(f) to 1916A of the Act, we are reviewing our 
policies under section 1115 of the Social Security Act.
    Comment: Several commenters advised that giving States the 
flexibility to exclude additional groups of individuals from payment of 
premiums or cost sharing should not have the effect of discriminating 
against individuals on the basis of race, color, national origin, or 
disability (title VI of the Civil Rights Act of 1964, Americans with 
Disabilities Act (ADA), 42 CFR 430.2(b), 45 CFR Part 80).
    Response: We agree. Existing HHS regulations under these civil 
rights and other statutes, including section 504 of the Rehabilitation 
Act, already prohibit both States and entities that receive Federal 
Medicaid funding from taking discriminatory actions. The HHS Office for 
Civil Rights (responsible for Departmental enforcement of most civil 
rights laws) and the Department of Justice (which also has 
responsibility for enforcement of certain civil rights laws, including 
the Americans with Disabilities Act), are available to investigate any 
questions or complaints as to illegal discrimination under these 
statutes and the implementing regulations.
Alternative Premiums, Enrollment Fees, or Similar Charges: State Plan 
Requirements (Sec.  447.64)
    We proposed at Sec.  447.64(a), that the State plan describe the 
group or groups of individuals that may be subject to such premiums, 
enrollment fees, or similar charges. We further proposed in Sec.  
447.64(b) that the State plan include a schedule of the premiums, 
enrollment fees, or similar charges. At Sec.  447.64(c), we proposed 
that the State plan describe the methodology used to determine family 
income, including the period and periodicity of those determinations. 
We also proposed in Sec.  447.64(d) that the State plan describe the 
methodology the State would use to ensure that the aggregate amount of 
premiums and cost sharing imposed for all individuals in the family 
does not exceed 5 percent of family income as applied during the 
monthly or quarterly period specified by the State. In addition, at 
Sec.  447.64(e), we proposed that the State plan specify the process 
for informing beneficiaries, applicants, providers, and the public of 
the schedule. We further proposed in Sec.  447.64(f) that the State 
plan describe the premium payment terms for the group or groups and the 
consequences for an individual who does not pay.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule with no substantive changes.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that the State agency, rather 
than beneficiaries or managed care organizations, be required to track 
each beneficiary's aggregate incurred premiums and cost sharing, to 
assure that a beneficiary's aggregate limit is not exceeded.
    Response: We agree with the commenters' request because we are 
concerned that it would be overly burdensome for beneficiaries to track 
aggregate incurred cost sharing that may have been made in small cash 
transactions when such information can be more efficiently tracked 
through the State's eligibility, enrollment, and claims processing 
systems. In this

[[Page 30250]]

revised final rule, we have modified paragraph (d) of Sec.  447.64 to 
specify that if a State chooses to charge premiums and cost sharing 
that could result in aggregate costs to a family that exceed 5 percent 
of the family's income, the State must develop a tracking mechanism and 
not rely on the so-called ``shoebox'' method that puts the burden on 
families to track cost sharing. Specifically, a State must describe in 
its Medicaid State plan the methodology it will use to identify 
beneficiaries who are subject to premiums or cost sharing for specific 
items or services and track their incurred premiums and cost sharing, 
in order to inform beneficiaries and providers of beneficiaries' 
liability and notify beneficiaries and providers when individual 
beneficiaries have incurred the 5 percent limit on family out-of-pocket 
expenses and are no longer subject to further cost sharing for the 
remainder of the family's current monthly or quarterly cap period. Such 
methods must assure that families' cost sharing will not exceed the 
statutory limits. Ideally, for ease of administration and accuracy, 
States will use automated systems to track these cost sharing amounts.
    We encourage States to track such costs through their Medicaid 
Management Information System (MMIS). Some States already use MMIS for 
this purpose. To the extent that they do so, enhanced Federal funding 
is available for development and operation of system improvements.
    As part of our review of State plan amendments and our ongoing 
reviews and audits of State Medicaid programs, we will review how 
States that impose costs that could exceed the 5 percent limit meet 
these requirements, to assure their compliance with the statutory and 
regulatory requirements. We will also share best practices among States 
to promote effective and efficient tracking systems. We note that 
States that design their cost sharing rules so that costs cannot exceed 
the 5 percent limit need not develop a tracking system.
General Alternative Premium Protections (Sec.  447.66)
    In the February 22, 2008 proposed rule at Sec.  447.66(a), we 
proposed to implement statutory requirements of section 1916A(b)(3)(A) 
of the Act that limit the application of alternative premiums under 
section 1916A by requiring that States exclude certain classes of 
individuals from the imposition of premiums. In addition, we proposed 
at Sec.  447.66(b) that a State may exempt additional classes of 
individuals from premiums.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without change.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that the Recovery Act's 
exclusion of premiums and cost sharing for Indians under certain 
circumstances be broadened to exclude from premiums and cost-sharing 
all Indians receiving any Medicaid service from any Medicaid provider.
    Response: The Recovery Act specifies under what circumstances 
States are required to exclude Indians from payments of premiums and 
cost sharing under sections 1916 and 1916A of the Act, and we are not 
authorized to expand on these statutory circumstances. In this revised 
final rule at Sec.  447.66(a)(7), we are specifying that States may not 
impose alternative premiums upon an Indian who is eligible to receive 
or has received an item or service furnished by an Indian health care 
provider or through referral under contract health services under 
authorities for serving Indians. This language would not preclude 
States from excluding from premiums individuals based on other criteria 
that could have the effect of broadening the circumstances in which 
Indian populations would be exempt from premiums. We add at Sec.  
447.66(c) to clarify that nothing in this subsection shall be construed 
as restricting the application of any other limitations on the 
imposition of premiums that may apply to an individual receiving 
Medicaid who is an Indian. And, at Sec.  447.70(e) we specify that 
States may exempt additional individuals, items, or services from cost 
sharing. We anticipate that additional exemptions, if needed to protect 
Indian populations, will be an issue raised in the tribal consultation 
process.
Alternative Copayments, Coinsurance, Deductibles, or Similar Cost 
Sharing Charges: State Plan Requirements (Sec.  447.68)
    In the February 22, 2008 proposed rule at Sec.  447.68(a), we 
proposed that the State plan describe the group or groups of 
individuals that may be subject to such cost sharing. We further 
proposed in Sec.  447.68(b) that the State plan must describe the 
methodology used to determine family income, including the period and 
periodicity of those determinations. We also proposed in Sec.  
447.68(c) that the State plan describe the item or service for which 
the charge is imposed. In Sec.  447.68(d), we proposed that the State 
plan must describe methods, such as the use of integrated automated 
systems, for tracking cost sharing charges, informing beneficiaries and 
providers of the beneficiary's liability, and notifying them when a 
beneficiary has reached the aggregate maximum for a period. In Sec.  
447.68(e), we proposed that the State plan must specify the process of 
publicizing the schedule of cost sharing charges. In Sec.  447.68(f), 
we proposed that the State plan must explain the methodology the State 
would use to ensure that the aggregate amount of premiums and cost 
sharing imposed for all individuals in the family does not exceed 5 
percent as applied during the monthly or quarterly period specified by 
the State. In addition, at Sec.  447.68(g), we proposed that the State 
plan specify how notice is provided of the time frame and manner of 
required cost sharing and the consequences for an individual who does 
not pay.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without any substantive change.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that States be required to 
describe in their State plans a method by which States identify for 
Medicaid providers which beneficiaries, services, and items are 
exempted from cost sharing, in accordance with Sec.  447.70 and Sec.  
447.71. Commenters also stated that States should be required to 
provide accurate and updated information to providers about appropriate 
cost sharing for each beneficiary. One commenter stated that States 
should be required to demonstrate, before implementing alternative 
premiums and cost sharing, that adequate State administrative systems 
are in place to protect families from exceeding the cost sharing 
limits. Other commenters requested that States, rather than 
beneficiaries or managed care organizations, be required to track 
beneficiaries' aggregate premiums and cost sharing, to assure that 5 
percent of a family's income is not exceeded. Another commenter stated 
that CMS should require States to implement automated systems to 
support the tracking and computing of beneficiaries' copayments at the 
point-of-sale and to adopt policies that support electronic 
identification of non-preferred drugs. The commenter also stated that 
States must be required to make information

[[Page 30251]]

electronically available at the point-of-sale regarding a beneficiary's 
required cost sharing and whether the beneficiary's family has met its 
applicable monthly or quarterly aggregate limit. In addition, the 
commenter stated that CMS should make an enhanced 90 percent 
administrative match available to States that implement such a system.
    Response: We agree with many of these comments that beneficiaries 
should not bear the full burden of accounting for aggregate cost 
sharing maximums. In this revised final rule, we have thus revised 
paragraph (d) of Sec.  447.68 to specify that a State must describe in 
its Medicaid State plan the methodology it will use to identify 
beneficiaries who are subject to premiums or to cost sharing for 
specific items or services and, if cost sharing could exceed 5 percent 
of family income, to track beneficiaries' incurred premiums and cost 
sharing in order to inform beneficiaries and providers of 
beneficiaries' liability and to notify beneficiaries and providers when 
individual beneficiaries have reached the five percent limit on family 
out-of-pocket expenses to assure that costs do not exceed the 5 percent 
statutory limit. Also, a State is required to describe in its State 
plan the State's methods for assuring that providers and beneficiaries 
are effectively informed of cost sharing requirements in the State 
plan, in accordance with Sec.  447.68(d). States must be mindful of the 
need for clear, non-technical explanations and that accommodations must 
be made for individuals for whom English is not the first language.
    For example, one State informs providers and members 
(beneficiaries) of allowable cost sharing amounts via provider updates 
and a member Enrollment and Benefits booklet. Another State conducts 
public meetings and sends a letter to each beneficiary for whom cost 
sharing is applicable.
    While this rule requires States imposing cost sharing that could 
exceed the 5 percent statutory cap to have a methodology to track costs 
and to assure that costs do not exceed the 5 percent limit, the rule 
does not require one particular system for tracking. Some of the 
methods that States are using to track families' incurred premiums and 
cost sharing and to assure that they do not exceed the aggregate 
maximum of 5 percent of the family's income include:
     On State has its premium collection vendor track premium 
payments. Its MCPs track enrollees' copayments. If a family reaches its 
aggregate maximum, the premium vendor will waive premiums and suspend 
invoicing for the remainder of the benefit period. The MCOs will notify 
their pharmacy and ambulance transportation providers to waive the 
family's copayments through a specified date.
     Another State uses MMIS to track and enforce cost sharing 
limits. The system calculates a family's quarterly out-of-pocket 
maximum based on the family's income, and tracks the family's cost 
sharing payments associated with submitted claims. If a family's 
maximum is reached, an indicator is changed in MMIS and providers are 
alerted as part of eligibility verification that the family is not 
subject to copayments.
     Another State calculates each family's cost sharing limit 
as part of the eligibility determination process, records this 
information in the eligibility system, copies the State's benefits 
administrator, and informs the family of the limit in the eligibility 
approval notice. It encourages families to track their payments, but it 
also has the benefits administrator track families' payments and notify 
the State if a family reaches its maximum. Families can also call the 
State to check on the amount of out-of-pocket expenses they have 
incurred. If the maximum is reached, the State moves the family to a 
no-cost benefits plan for the remainder of their plan year and notifies 
the family of this change in writing.
     Another State has its eligibility and enrollment broker 
inform families of their out-of-pocket limits in the letter notifying 
them of enrollment in a health plan. It also notifies the health plan. 
The health plan tracks families' cost sharing payments. If the limit is 
reached, the health plan notifies the family by letter and annotates 
the family's file in the electronic claims system in order to notify 
providers that no further cost sharing is required.
     Another State has its system track families' out-of-pocket 
payments, and stops deducting the copayment amount from the allowed 
amount on a provider's claim if a family reaches its limit. The system 
notes on an Explanation of Benefits (EOB) when a family reaches its 
maximum, and families may share the EOB with providers. Such a notice 
is also included in the point-of-sale system used by pharmacists. 
Monthly reports are generated to track copayments.
    We are requiring that States describe their method of tracking when 
they impose cost sharing that could exceed the 5 percent statutory 
limit, and are recommending that, whenever possible, they employ 
automated systems to do so. The Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) governs the contents and format of 
electronic transactions providing information from a State's MMIS, 
including an electronic transaction sent by a State Medicaid program in 
response to an enrolled provider's electronic request for information 
related to a beneficiary's Medicaid eligibility (for example, 
information about a beneficiary's cost sharing responsibilities and 
payments). MMIS system changes and operations are subject to an 
enhanced Federal matching rate. As part of our review of State plan 
amendments and our ongoing reviews and audits of State Medicaid 
programs, we will review how States meet the premium and cost sharing 
requirements, to assure their compliance with the statutory and 
regulatory requirements. We will also share best practices to help 
other States learn about effective and efficient ways to track cost 
sharing.
General Alternative Cost Sharing Protections (Sec.  447.70)
    In the February 22, 2008 proposed rule, we proposed that State 
plans may not impose alternative cost sharing under section 1916A(a) of 
the Act for certain services including emergency services and family 
planning services and supplies. We also proposed that State plans could 
not impose cost sharing for preferred drugs within a class for the same 
categories of individuals. We proposed that the State may exempt 
additional individuals or services from cost sharing. Also, we proposed 
that cost sharing applicable to a preferred drug be charged for a non-
preferred drug if the prescribing physician determines that the 
preferred drug would not be as effective for the individual or would 
have adverse effects for the individual or both. We further proposed 
that such overrides meet the State's criteria for prior authorization 
and be approved through the State's prior authorization process.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without substantive changes.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter recommended that the rule define the 
preventive services which are excluded from alternative cost-sharing 
(see Sec.  447.70(a)(2)), such as by using the definition in the 
American Academy of Pediatrics Bright Futures guidelines.
    Response: We agree. In this revised final rule, we revised Sec.  
447.70(a)(2) to

[[Page 30252]]

specify that, at the minimum, the preventive services listed at Sec.  
457.520 must be excluded from cost sharing for children younger than 18 
years old, which reflect the well baby and well child care and 
immunizations described by the Bright Futures guidelines of the 
American Academy of Pediatrics. These guidelines are used for well baby 
and well child care services in the CHIP program. They provide an 
explanation of the periodicity schedule recommended by the American 
Academy of Pediatrics for preventive visits and appropriate 
immunizations for children. The referencing of such a schedule allows 
for flexibility in the definition of preventive services to reflect the 
most current medical practice standards. States are permitted to exempt 
preventive services beyond those described in the Bright Futures 
guidelines.
    Comment: Several commenters recommended that the entire package of 
family planning services and supplies described and mandated at section 
1905(a)(4)(C) of the Act be excluded from cost sharing, as required by 
sections 1916A(b)(3)(B)(vii) and 1916(a)(2)(D) of the Act, so that even 
nominal cost sharing is not permitted for non-preferred family planning 
drugs (for example, contraceptive drugs not on a State's preferred drug 
list) and cost sharing does not otherwise distinguish between family 
planning methods.
    Response: While we agree with the concerns of commenters, we are 
not authorized by the statute to generally preclude alternate cost 
sharing under section 1916A(c) of the Act for family planning drugs. 
The protections under section 1916A(b)(3)(B)(vii) of the Act are 
``subject to the succeeding provisions of this section'' which include 
the special provisions concerning alternate cost sharing under section 
1916A(c) of the Act. But we believe it is reasonable to require that 
States have a consistent treatment of family planning drugs. In this 
revised final rule, we have revised Sec.  447.70(a)(7) to clarify that 
the exclusion for family planning services and supplies encompasses 
contraceptives and other prescription drugs for which the State claims 
or could claim the Federal matching rate available under section 
1903(a)(5) of the Act for family planning services and supplies.
    Comment: Several commenters requested that the rule be made 
consistent with section 1916A(c)(2)(B) of the Act by limiting 
alternative cost sharing for non-preferred prescription drugs for the 
items or services listed at Sec.  447.70(a) to no more than the nominal 
amount, in order to protect vulnerable populations such as pregnant 
women.
    Response: While we understand the underlying concerns of 
commenters, we are not authorized by the statute to generally preclude 
alternate cost sharing under section 1916A(c) of the Act for the 
services listed at Sec.  447.70(a). The protections under section 
1916A(b)(3)(B)(vii) of the Act are ``subject to the succeeding 
provisions of this section'' which include the special provisions 
concerning alternate cost sharing under section 1916A(c) of the Act. As 
a result of our review of these comments, however, we realized that we 
had not integrated the protections at section 1916A(c)(3) of the Act 
into these regulations, and thus we have integrated into the revised 
final rule at Sec.  447.70(d) the provision that drugs identified as 
non-preferred drugs are subject to the same exclusions and limits for 
cost-sharing as preferred drugs if the individual's prescribing 
physician determines that the preferred drug for treatment of the same 
condition either would be less effective for the individual or would 
have adverse effects for the individual or both. We deleted as 
unnecessary the additional requirement that the State's criteria for 
prior authorization, if any, must be met.
Alternative Premium and Cost Sharing Exemptions and Protections for 
Individuals With Family Incomes Above 100 Percent but at or Below 150 
Percent of the FPL (Sec.  447.72)
    In the February 22, 2008 proposed rule, we proposed at Sec.  
447.72(a) that the State plan exclude individuals with family incomes 
above 100 percent but at or below 150 percent of the FPL from the 
imposition of premiums. We also proposed at Sec.  447.72(b) that cost 
sharing for those individuals under the State plan not exceed 10 
percent of the payment the State Medicaid agency makes for that item or 
service, with the exception that cost sharing not exceed the nominal 
cost sharing amount for non-preferred drugs or twice the nominal cost 
sharing amount for non-emergency services furnished in a hospital 
emergency department. In the case of States that do not have fee-for-
service payment rates, we proposed that any copayment imposed by a 
State for services provided by an MCO may not exceed $5.20 for FY 2007. 
In addition, we proposed at Sec.  447.72(c) that aggregate premiums and 
cost sharing for individuals whose family income exceeds 100 percent, 
but does not exceed 150 percent of the FPL, not exceed the 5 perce