Medicaid; Federal Funding for Medicaid Eligibility Determination and Enrollment Activities, 68583-68595 [2010-27971]

Agencies

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

[Federal Register Volume 75, Number 215 (Monday, November 8, 2010)]
[Proposed Rules]
[Pages 68583-68595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27971]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 433

[CMS-2346-P]
RIN 0938-AQ53


Medicaid; Federal Funding for Medicaid Eligibility Determination 
and Enrollment Activities

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise Medicaid regulations for 
Mechanized Claims Processing and Information Retrieval Systems. 
Specifically, we are proposing to amend the definition of Mechanized 
Claims Processing and Information Retrieval Systems to include systems 
used for eligibility determination, enrollment, and eligibility 
reporting activities. We propose to modify our regulations so that the 
enhanced Federal financial participation (FFP) is available for design, 
development and installation or enhancement of eligibility 
determination systems until December 31, 2015, with enhanced FFP for 
maintenance and operations available for such systems beyond that date 
in certain circumstances. We also propose that all Medicaid Management 
Information Systems (MMISs) meet certain defined standards and 
conditions in terms of timeliness, accuracy, efficiency, and integrity 
and that they achieve high positive levels of consumer experience, 
acceptance and satisfaction in order to receive enhanced FFP.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. January 7, 2011.

ADDRESSES: In commenting, please refer to file code CMS-2346-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2346-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    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-2346-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses: a. For delivery in Washington, 
DC--Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is 
not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: Richard Friedman, (410) 786-4451.

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://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. The Current State of the Medicaid Management Information System 
(MMIS)

    A Medicaid management information system (MMIS) is a mechanized 
system of claims processing and information retrieval used in State 
Medicaid programs under title XIX of the Social Security Act (the Act). 
The system is used to process Medicaid claims from providers and to 
retrieve and produce utilization data and management information about 
medical care and services furnished to Medicaid recipients. The system 
also is potentially eligible to receive enhanced administrative funding 
from the Federal government under section 1903(a)(3) of the Act. 
Specifically, section 1903(a)(3)(A)(i) of the Act provides that Federal 
financial participation (FFP) is available at 90 percent of 
expenditures for the design, development, or installation of mechanized 
claims processing and information retrieval systems as the ``Secretary 
determines is likely to provide more efficient, economical and 
effective administration of the plan and to be compatible with the 
claims processing and information retrieval systems utilized in the 
administration of title XVIII [that is, Medicare].'' In addition, 
section 1903(a)(3)(B) provides for the availability of FFP at 75 
percent of expenditures attributable to operating the ``systems * * * 
of the type described in [section 1903(a)(3)] subparagraph (A)(i),'' 
which are approved by the Secretary and meet certain other requirements 
(including requirements relating to explanations of benefits). For 
purposes of this proposed rule, we refer to 90 percent and 75 percent 
FFP as ``enhanced'' FFP since it is greater than the 50 percent FFP 
available for most Medicaid administrative expenses. Finally, section 
1903(r) of the Act places conditions on a State's ability to receive 
Federal funding for automated data systems in the administration of the 
State plan.
    In order to receive an enhanced match, the Secretary must find that 
the mechanized claims and information retrieval system is adequate to 
provide

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efficient, economical, and effective administration of the State plan. 
The Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-
148, as amended by the Health Care and Education Recovery Act of 2010; 
Pub. L. 111-152, together referred to as the Affordable Care Act) also 
made additional changes to the requirements within section 1903(r) of 
the Act relating to the reporting of data to the Secretary; these 
requirements will be discussed in separate rulemaking.
    Our Federal regulations concerning mechanized claims processing and 
information retrieval systems are at 42 CFR part 433, subpart C. A 
State that chooses to develop, enhance, or replace its required system 
or subsystems must first submit for approval an Advanced Planning 
Document (APD). The general HHS requirements for approval of APDs are 
found at 45 CFR part 95, subpart F.

B. Availability of Enhanced FFP for Automated Eligibility Systems

    Historically, Medicaid eligibility for many applicants and 
recipients was determined by an agency other than the State Medicaid 
agency; under section 1902(a)(10)(A)(i) of the Act, States were 
required to provide Medicaid to recipients under the Aid to Families 
with Dependent Children (AFDC) program, as well as recipients of the 
Supplemental Security Income (SSI) program. In these cases, eligibility 
determinations were derived from the cash welfare-assistance 
determination. As a result, States that maintained a Medicaid 
eligibility determination system usually integrated these systems into 
the public welfare systems. In 1989, we published a final rule on 
October 13, 1989 (54 FR 41966, effective November 13, 1989) excluding 
eligibility determination systems from the enhanced funding that was 
available under section 1903(a)(3) of the Act, reasoning that the close 
interrelationship between these cash assistance programs and Medicaid 
eligibility rendered such enhanced assistance redundant and unnecessary 
(54 FR 41966 through 41974). As a result, we revised the definition of 
mechanized claims processing and information retrieval systems to 
exclude eligibility determination systems.
    We also indicated in the final rule that to receive any FFP for 
Medicaid purposes for an eligibility determination system after 
November 13, 1989, a State must submit an APD for funding in accordance 
with the requirements of 45 CFR part 95, subpart F. If we approved the 
APD, the State agency would receive 50 percent FFP for administrative 
costs under section 1903(a)(7) of the Act for the system's design, 
development, and installation, and operation.

C. Changes in Medicaid Eligibility Policies

    Since promulgation of the 1989 regulation, a series of statutory 
changes have dramatically affected eligibility for Medicaid and how 
Medicaid eligibility is determined. Among other things, new eligibility 
coverage groups were created and expanded, and in 1996, Medicaid 
eligibility was ``de-linked'' from the receipt of cash assistance when 
the AFDC program was replaced by the Temporary Assistance to Needy 
Families (Pub. L. 104-193, enacted on July 1, 1997) (TANF) program.
    With the passage of the Balanced Budget Act of 1997 (Pub. L. 105-
33) (BBA), States were required to coordinate eligibility for and 
enrollment in Medicaid, with the new Children's Health Insurance 
Program (CHIP) to ensure enrollment of children in the appropriate 
program. With passage of the ``Express Lane Eligibility'' provisions in 
section 203 of the Children's Health Insurance Reauthorization Program 
Reauthorization Act of 2009 (Pub. L. 111-3) (CHIPRA), States were 
provided with the option, and are encouraged, to coordinate and 
expedite eligibility for children in Medicaid and CHIP by using 
findings regarding income and other eligibility criteria made by other 
agencies, such as the Supplemental Nutrition Assistance Program, as the 
basis for Medicaid and CHIP eligibility adjudications.
    With the passage of the Affordable Care Act, we expect that changes 
to eligibility policies and business processes would need to be 
adopted. States would need to apply new rules to adjudicate eligibility 
for the program; enroll millions of newly eligible individuals through 
multiple channels; renew eligibility for existing enrollees; operate 
seamlessly with newly authorized Health Insurance Exchanges whether run 
by the State or HHS if the State chooses not to operate a State 
Exchange (hereafter referred to as ``Exchanges''); participate in a 
system to verify information from applicants electronically; 
incorporate a streamlined application used to apply for multiple 
sources of coverage and health insurance assistance; and produce 
notices and communications to applicants and beneficiaries concerning 
the process, outcomes, and their rights to dispute or appeal. We 
further anticipate, following consultation with States and other 
stakeholders, additional standard Federal requirements for more timely 
and detailed reporting of eligibility and enrollment status statistics, 
including breakdowns by eligibility group, demographic characteristics, 
enrollment in managed care plans, and participation in waiver programs.
    System transformations would be needed in most States to accomplish 
these changes. These systems transformations should be undertaken in 
full partnership with Exchanges in order to meet coverage goals, 
minimize duplication, ensure effective reuse of infrastructure and 
applications, produce seamless enrollment for consumers, and ensure 
accuracy of program placements. Extensive coordination and 
collaboration would be required between Exchanges and Medicaid, 
including on oversight and evaluation of the interoperability of the 
Exchange and Medicaid systems.

II. Provisions of the Proposed Regulations

A. Medicaid Eligibility Determinations

    Because of the changes made by the Affordable Care Act with respect 
to Medicaid eligibility, as well as changes in Medicaid eligibility and 
business processes that have occurred since our 1989 final rule, we 
propose to consider Medicaid eligibility determinations to be 
``claims'' of eligibility that can be considered part of the MMIS 
systems that are potentially eligible for the enhanced 90 and 75 
percent FFP under section 1903(a)(3) of the Act. This proposed policy 
would apply only upon the effective date of the subsequent final rule. 
Additionally, we note that enhanced FFP does not eliminate the 
responsibility of States to ensure compliance with cost allocation 
principles outlined in OMB Circular A-87.
    Further, as explained below, enhanced FFP at the 90 percent rate 
for design, development, installation or enhancement would be available 
for State expenditures only through calendar year (CY) 2015, even if 
work on approved APDs continues after 2015. Enhanced FFP at the 75 
percent rate to maintain and operate systems that previously qualified 
for 90 percent FFP would be available after 2015 if those systems 
continue to meet the requirements specified in this rule. Additionally, 
enhanced funding at 75 percent to maintain and operate systems meeting 
the standards and conditions is available prior to December 31, 2015, 
(but after the effective date of any final rule), in recognition of the 
fact that some States may have already invested in improvements that 
will allow systems to qualify without the need for additional enhanced 
development,

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design, installation or enhancement funding. For any State receiving 
enhanced FFP at 90 percent or 75 percent prior to December 31, 2015, 
systems must continue to meet the requirements specified in this rule 
in order to continue receiving 75 percent enhanced funding after 
December 31, 2015.
    We are limiting the timeframe for which enhanced 90 percent FFP is 
available for design, development, installation or enhancement of 
automated eligibility systems because we view the changes made by the 
Affordable Care Act for the new eligibility rules in Medicaid as 
requiring immediate, substantial commitment to, and investment in, 
technologies. That is, we expect that changes to State systems would be 
completed with the start of the new Affordable Care Act provisions and 
support the operation of Exchanges on January 1, 2014. However, we 
realize that States may need to make additional changes to State 
systems to provide for additional functionality in support of Medicaid 
eligibility rule modifications. Thus, we are providing for an 
additional 2 years of 90 percent enhanced FFP so that States' systems 
would have additional time to ensure the peak performance of their 
systems.
    At the same time, once appropriate systems are deployed to support 
the eligibility changes in the Affordable Care Act, we anticipate 
significant efficiencies in both application maintenance and business 
operations. Thus, we believe that after CY 2015, 2 years after the 
Affordable Care Act changes have gone into effect, additional 
investments in the design, development, and installation of such 
systems would no longer continue to result in ``more'' efficient, 
effective or economical administration of the State plan, as required 
by section 1903(a)(3)(A)(i) of the Act.
    Additional investments in State eligibility systems are unlikely to 
yield similar rates of improvement and a regular administrative match 
(that is 50 percent FFP for design, development, installation or 
enhancement) should be sufficient for efficient and effective 
administration of State Medicaid programs. We also note that ending 
enhanced funding in 2015 follows closely with the end of Federal grants 
for development of health insurance exchanges. States would need to 
incur costs for goods and services furnished no later than December 31, 
2015 to receive 90 percent FFP for the design, development, 
installation or enhancement of an eligibility determination system.
    Further, we are proposing to limit the availability of 75 percent 
enhanced funding for maintenance and operations to those eligibility 
determination systems that have complied with the standards and 
conditions in this rule by December 31, 2015. As discussed above, the 
eligibility changes of the Affordable Care Act will require that States 
modify their eligibility systems in time to comply with all such 
eligibility changes, and we believe that to meet the requirements of 
section 1903(a)(3)(A)(i) of the Act, all such modifications must be in 
place by December 31, 2015. If eligibility systems cannot meet our 
standards and conditions by such deadline, then we believe such systems 
will not be operating in a more efficient, economical or effective 
manner, because of their inability to timely meet the requirements of 
the Affordable Care Act for seamless coordination with the Exchange and 
implementation of simplified Medicaid eligibility rules and expanded 
coverage. Therefore we believe their subsequent operation would not 
meet the statutory requirements that they result in a more efficient, 
economical and effective operation of the State plan.

B. Standards and Conditions for Receiving Enhanced Funding

    Under sections 1903(a)(3)(A)(i) and 1903(a)(3)(B) of the Act, we 
are proposing standards and conditions that must be met by States in 
order for their Medicaid technology investments (including traditional 
claims processing systems, as well as eligibility systems) to be 
eligible for the enhanced match. These authorities provide that the 
enhanced FFP of 90 percent is not available unless the Secretary 
determines that a system is ``likely to provide more efficient, 
economical, and effective administration of the plan'' as described in 
section 1903(a)(3)(A)(i) of the Act. Similarly, section 1903(a)(3)(B) 
of the Act specifies that enhanced FFP of 75 percent is not available 
for maintenance or operations unless the system is ``of the type 
described in subparagraph (A)(i)'' and is approved by the Secretary).
    Over the last 5 years CMS developed and implemented the Medicaid 
Information Technology Architecture (MITA). MITA is intended to foster 
integrated business and IT transformation across the Medicaid 
enterprise to improve the administration of the Medicaid program. (The 
Medicaid enterprise is comprised of the Federal government, the States, 
and any trading partners who exchange Medicaid transactions with either 
the States or the Federal government).
    We believe the MITA initiative has accelerated the pace of 
modernization and over time, this effort will drive States' systems 
toward a widespread network of technology and processes that support 
improved State administration of the Medicaid program, with a focus on 
streamlining and simplifying the enrollment process, and improving 
health outcomes and administrative procedures for Medicaid 
beneficiaries.
    The MITA initiative began in 2005 with the concept of moving the 
design and development of Medicaid information systems away from the 
siloed, sub-system components that comprise a typical MMIS and moving 
to a Service Oriented Architecture (SOA) method of designing Medicaid 
information systems using discretely identified and described business 
services to drive system requirements. The MITA initiative uses an 
architecture framework--business, technical, and information--along 
with a business maturity model and process and planning guidelines, to 
provide a framework for the planned use of technology and 
infrastructure to meet the changing business needs of Medicaid 
programs. MITA enables all State Medicaid enterprises to meet common 
objectives within the Framework, while still supporting local needs 
unique to one particular State.
    All MITA framework documents are available to the public at https://www.cms.gov/MedicaidInfoTechArch/. The MITA Framework describes the 
maturity model, policies, and procedures.
    We know that there is not a ``one size fits all'' technology 
solution to every business challenge and recognize that each technology 
investment must be viewed in light of existing, interrelated assets and 
their maturity. We also recognize that there are trade-offs concerning 
schedules, costs, risks, business goals, and other factors that should 
be considered when making technology investments. However, we wish to 
ensure that enhanced FFP is approved only when infrastructure and 
application projects maximize the extent to which they utilize current 
technology development and deployment practices and produce reliable 
business outputs and outcomes.
    We are proposing to define MITA at Sec.  433.111(c) in this rule 
and we propose to build on the work of MITA by codifying that enhanced 
FFP (either at the 90 percent rate for design, development, 
installation or enhancement; or at the 75 percent rate for maintenance 
and operations) is only available when certain standards and

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conditions are met. Specifically, we articulate a set of standards and 
conditions that States must commit to in order to receive enhanced FFP:
     Use of a modular, flexible approach to systems 
development, including the use of open interfaces and exposed 
application programming interfaces; the separation of business rules 
from core programming; and the availability of business rules in both 
human and machine readable formats. We believe that this commitment is 
extremely important in order to ensure that States can more easily 
change and maintain systems, as well as integrate and interoperate with 
a clinical and administrative ecosystem designed to deliver person- and 
citizen-centric services and benefits.
     Align to and advance increasingly in MITA maturity for 
business, architecture, and data. We expect to see States continuing to 
make measurable progress in implementing their MITA roadmaps. Already 
the MITA investment by Federal, State, and private partners have 
allowed us to make important incremental improvements to share data and 
reuse business models, applications and components. However, it is 
critical to build on and accelerate the modernization we have 
collectively begun under MITA, so that States achieve the final vision 
of MITA and have a comprehensive framework with which to meet the 
technical and business demands required by an environment that will 
increasingly rely on health information technology and the electronic 
exchange of healthcare information to improve health outcomes and lower 
program costs.
     Ensure alignment with, and incorporation of, industry 
standards: the Health Insurance Portability and Accountability Act of 
1996 security, privacy and transaction standards; accessibility 
standards established under section 508 of the Rehabilitation Act, or 
standards that provide greater accessibility for individuals with 
disabilities, and compliance with Federal civil rights laws; standards 
adopted by the Secretary under section 1104 of the Affordable Care Act; 
and standards and protocols adopted by the Secretary under section 1561 
of the Affordable Care Act.
    We must ensure that Medicaid technology investments are made both 
to ensure the timely and reliable adoption of industry standards and to 
make most productive use of those standards as they become available. 
Use of industry standards promotes reuse, data exchange, and reduces 
administrative burden on patients, providers, and applicants. We would 
communicate applicable standards to States. Standards would be updated 
periodically to ensure conformance with the standards in the industry. 
States would be required to update systems and practices to adhere to 
evolving industry standards in order to remain eligible for enhanced 
FFP. Use of standards to promote accessibility for individuals with 
disabilities ensures that Medicaid technology investments would be 
equally effective in providing access to benefits and services for all 
users, and would comply with Federal civil rights laws prohibiting 
discrimination against individuals with disabilities, such as section 
504 of the Rehabilitation Act and Title II of the Americans with 
Disabilities Act.
     Promote sharing, leverage, and reuse of Medicaid 
technologies and systems within and among States. We would examine APDs 
to ensure that States make appropriate use and reuse of components and 
technologies available off the shelf or with minimal customization to 
maximize return on investment and minimize project risk. We intend to 
work with States to identify promising State systems that can be 
leveraged and used by other States. We anticipate that we would be able 
to expedite review of APDs incorporating such successful models. 
Further, we would strongly encourage States to move to regional or 
multi-State solutions as often as possible, and we would help 
facilitate collaboration and communication among States. We would also 
scrutinize carefully any proposed investments in sub-State systems when 
we are asked to share in the costs of updating or maintaining multiple 
systems performing essentially the same functions within the same 
State.
     Support accurate and timely processing of claims 
(including claims of eligibility), adjudications, and effective 
communications with providers, beneficiaries, and the public. 
Ultimately, the test of an effective and efficient system is whether it 
supports and enables an effective and efficient business process, 
producing and effectively communicating intended operational results 
with a high degree of reliability and accuracy. We do not believe that 
it would be appropriate for us to provide enhanced Federal funding for 
systems that are unable to support desired business outcomes.
     Produce transaction data, reports, and performance 
information that would contribute to program evaluation, continuous 
improvement in business operations, and transparency and 
accountability. Systems should be able to electronically and accurately 
produce and expose data necessary for oversight, administration, 
evaluation, integrity, and transparency. This includes program data on 
claims, expenditures, and enrolled individuals; participation in 
waivers and plans; performance data, such as processing times, 
accuracy, and appeal results; and traditional systems standards such as 
availability and down time.
    We would develop a range of data and performance metrics on which 
States would be required to report on a regular basis, as a condition 
of receiving ongoing enhanced FFP for maintenance and operation.
     Ensure seamless coordination and integration with the 
Exchange(whether run by the State or Federal government), and allow 
interoperability with health information exchanges, public health 
agencies, human services programs, and community organizations 
providing outreach and enrollment assistance services.
    We expect that a key outcome of our technology investments is a 
much higher degree of interaction and interoperability in order to 
maximize value and minimize burden and costs on providers and 
beneficiaries. Additionally, we expect that technology investments must 
comply with standards to ensure security and accessibility consistent 
with current Federal law and investments must comply with the 
requirements under existing Federal civil rights protections for all 
individuals in developing the system architecture.
    We seek comments on these standards and conditions. In particular, 
we seek comments on the following:
     What types of Federal leadership, technical assistance, 
and sub-regulatory guidance would be helpful to support States as they 
come into compliance with these standards and conditions.
     Whether this list of standards and conditions is 
sufficiently robust and complete to guide decisions on technology 
investments of the scope and size of MMIS.
    Further, to ensure that States have an opportunity to come into 
compliance with these requirements, we are proposing that States 
currently receiving enhanced FFP for MMIS have a period of transition 
to come into compliance with the standards and conditions above. Under 
our proposed schedule, the following transition periods would apply:
     For new MMIS development (new APDs requesting 90 percent 
FFP for design, development, installation, and enhancement): No 
transition period. We believe all APD requests submitted after

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the effective date of the final rule must comply with all of our final 
standards and conditions.
     For MMIS development already underway (approved APDs 
providing 90 percent enhanced FFP): 12-month transition period 
(beginning with the effective date of the final regulation) in which to 
submit an updated Implementation APD (IAPD) detailing how systems would 
be modified to meet the required conditions and standards. This 
transition period would allow systems that are currently being 
developed to come into compliance with our standard and conditions, 
while ensuring that new systems receiving Federal funding are 
eventually designed in a manner that results in the most efficient use 
of technology.
     For maintenance and operations of MMIS currently receiving 
75 percent FFP: 36-month transition period (beginning with the 
effective date of the final regulation) in which to submit an IAPD with 
plans to upgrade or modify systems to meet the required conditions and 
standards.
     Eligibility systems (currently receiving 50 percent for 
development and maintenance and operations): Because eligibility 
systems are not currently receiving enhanced funding, we propose no 
transition period for new requests for enhanced funding for eligibility 
systems. Any APDs requesting enhanced funding for eligibility systems 
funding following the effective date of this regulation would have to 
meet the standards and conditions above. States with eligibility 
systems currently under development (approved APDs providing 50 percent 
FFP) can update their APDs to reflect how they would comply with these 
standards and conditions in order to begin receiving 90 percent FFP. 
Similarly, eligibility systems currently receiving 50 percent FFP for 
State expenditures would need to comply with our final standards and 
conditions to receive a 75-percent FFP.
    We request comments on this proposed transition schedule and 
whether the transition periods should be reduced or extended. We also 
request comments on how, during the transition period and beyond, we 
can provide strong Federal leadership by fostering collaboration among 
States, identifying and disseminating best practices, creating Federal 
models or components (e.g., the Office of Consumer Information and 
Insurance Oversight's (OCIIO) Cooperative Agreement providing funding 
to create efficiencies in the design, development, and implementation 
of the Exchange IT systems), and assisting individual States.
    Lastly, we are proposing that these standards and conditions be 
enforced through both front-end and back-end review processes. Front-
end review would entail APD review and prior approval processes where 
States apply for enhanced match before entering into IT investment 
projects. Back-end reviews would entail certifications of the systems 
capabilities, as well as ongoing performance monitoring.

C. Reviews and Performance Monitoring of MMISs

    Previously, regulations at Sec.  433.119 indicated that we would 
review at least once every 3 years each system operation initially 
approved under Sec.  433.114 and, based on the results of the review, 
reapprove it for FFP at 75 percent of expenditures if certain standards 
and conditions were met. The 3-year system performance reviews (SPRs) 
served as an evaluation instrument in determining the extent to which 
an MMIS performance is sustained after the initial certification. As 
part of SPRs, we determined if the system program logic was accurately 
and timely processing claims and payment information according to 
standards determined in Federal regulation. Subsequent recertification 
of a State's MMIS was based upon the results of the SPR. Prior to 1998, 
SPRs were performed annually.
    We stopped performing such periodic reviews after enactment of 
section 4753 of the BBA (See section 11100 of the State Medicaid 
Manual). SPRs currently are performed only as part of focused reviews. 
The BBA also eliminated references to development and application of 
performance standards used to conduct periodic standards-based reviews 
of previously certified MMISs. As such, many of the provisions in 42 
CFR part 433, subpart C should have been revised to comply with the 
repealed requirements; for example, much of the language included in 
Sec.  433.119 through Sec.  433.121 references the SPRs and the 
reduction of FFP in the event that States did not have systems that 
remained capable of processing claims and payments and/or were not 
performing well in completing these activities.
    While the BBA eliminated the mandate that we perform SPRs, we do 
not believe it removed our discretion to perform reviews under our 
general authority to ensure that MMISs continue to operate in a manner 
that complies with Federal law, regulations, and guidance. The 
Secretary has authority to perform periodic reviews of MMIS systems 
(including eligibility determination systems receiving an enhanced FFP) 
to ensure that systems receiving enhanced FFP continue to meet the 
requirements of section 1903(a)(3) of the Act and that they continue to 
provide efficient, economical, and effective administration of the 
plan. Section 1903(a)(3)(B) of the Act allows for 75 percent FFP for 
the sums expended that are ``attributable to the operation of systems * 
* * of the type described in subparagraph (A)(i).'' The type of system 
described in ``subparagraph (A)(i)'' is one that, on an ongoing basis, 
results in ``more efficient, economical and effective administration of 
the plan.'' In addition, the Secretary has authority under section 
1903(r) of the Act to ensure continuing compliance with the 
requirements of that section.
    Given our proposed modifications to part 433 of our regulations, as 
well as the new enhanced FFP for certain eligibility determination 
systems, we believe it is prudent for us to clearly state the 
expectation that ongoing successful performance is a necessary 
condition for receipt of the 75 percent FFP for operations and 
maintenance. We plan to establish standards and conditions that would 
ensure that all MMIS systems receiving enhanced FFP are complying with 
regulatory and statutory requirements. Through sub-regulatory guidance, 
we would explain further how we would measure whether the requirements 
are being met, such as through a core set of standards and conditions 
that focuses on the dimensions for systems that communicate to 
beneficiaries. We would also explain how States can meet any such 
performance measures.
    For example, we would measure how a system meets requirements for 
providing notices to beneficiaries, claims and applications intake and 
acceptance, efficient timely and accurate processing of claims, 
applications and renewals, proper determinations, and experience with 
appeals, interoperability with Exchanges, as well as traditional 
systems standards such as availability and down time. We expect to see 
such data automatically generated by the systems in which we invest, 
with standards and conditions established in consultation with 
stakeholders and based on industry experience.
    Additionally, we propose to evaluate systems based upon their 
interoperability with other Federal and State health programs. Thus, in 
operating their systems, States would need to ensure that they consult 
documents articulating the

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Department's strategy on interoperability, such as the Guidance for 
Exchange and Medicaid Information Technology Systems.
    We would expect that any failures or deficiencies would be the 
basis for investigation and opportunity for corrective action before 
making a determination that enhanced FFP would be discontinued.
    Therefore, we propose to modify Sec. Sec.  433.119 through 433.121 
to eliminate any reference to SPRs but, more importantly, to reflect 
this requirement for performance monitoring and review. We are 
requesting comments on this proposal, as well as on the types of 
standards and conditions that should be employed initially and over 
time.
    Additionally, States should consider that we propose to evaluate 
systems and consider interoperability with other Federal and State 
health programs. Thus, States should consider other documents that 
articulate the Department's strategy such as the Guidance for Exchange 
and Medicaid Information Technology Systems and continue to consider 
such guidance in meeting the requirements of this proposed rule.

D. Partial Systems Improvements or Modernizations

    Throughout this proposed rule, we have used the word ``system'' or 
``technology'' to refer to what might well be a system of systems 
maintained in States in support of MMIS functions. We recognize that a 
modernization agenda in such a State might well move in phases. 
However, States submitting partial system updates would need to submit 
and have an approved roadmap for achieving full compliance with the 
standards and conditions in this regulation. We would track progress 
against approved roadmap when determining if system updates meet the 
standards and conditions for the enhanced match. We also recognize that 
some enhancements currently eligible for enhanced funding are intended 
to satisfy a specific requirement or to address a compliance issue, for 
example, ICD-10 or implementation of the National Correct Coding 
Initiative. We invite comments on alternative approaches to best 
address these cases in applying our standards and conditions or 
performance monitoring.

E. Other Technical Changes to Federal Regulations at 42 CFR Part 433 
Subpart C--Mechanized Claims Processing and Information Retrieval 
Systems

    Since the enactment of the BBA, other provisions of our regulations 
have since been superseded. For example, regulations at Sec.  433.113 
(referencing the need to have mechanized claims processing and 
information retrieval systems by a certain deadline, or face reduced 
Federal Medicaid funds as a consequence) and Sec.  433.130 (referencing 
waiver provisions for qualifying States with a certain 1976 population 
and expenditures) no longer apply. As we are revising our regulations 
to provide for the enhanced FFP for systems that perform eligibility 
and enrollment activities, we propose to also revise other provisions 
in part 433, subpart C to conform to the proposals set out in this 
rule. Thus, we are proposing to delete Sec. Sec.  433.113 and 433.130 
in their entirety, and references to the provisions in these sections 
that we are deleting.
    Specifically, we propose to add a new definition to Sec.  433.111 
at (c) to include MITA. MITA is both an initiative and a framework. It 
is a national framework to support improved systems development and 
health care management for the Medicaid enterprise. It is an initiative 
to establish national guidelines for technologies and processes that 
enable improved program administration for the Medicaid enterprise. The 
MITA initiative includes an architecture framework, models, processes, 
and planning guidelines for enabling State Medicaid enterprises to meet 
common objectives with the framework while supporting unique local 
needs.
    Further, we propose to amend Sec.  433.111(b)(3) to eliminate the 
requirement that ``Eligibility determination systems are not part of 
mechanized claims processing and information retrieval systems or 
enhancements to those systems.'' This, in effect, would mean that, once 
the subsequent final rule is effective, mechanized claims processing 
and information retrieval systems would include eligibility 
determination systems, including the allocated Medicaid portion of 
integrated eligibility determination systems. We note that eligibility 
determination systems would be eligible for the 90 and 75 percent FFP 
only after the effective date of our final rule.
    We also propose to eliminate the provision at Sec.  433.112(c), 
which currently states that ``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.''
    We propose to add language to Sec.  433.112 to indicate that 90 
percent and 75 percent FFP would be available for the design, 
development, installation or enhancement, and maintenance and operation 
(respectively) of mechanized claims processing systems, including those 
that perform eligibility determination and enrollment activities, as 
well as the Medicaid portion of integrated eligibility determination 
systems, if such systems meet our standards and conditions. (The 90 
percent FFP for eligibility determination systems would be available 
only for a time-limited period, and the 75 percent FFP for eligibility 
determinations would be available only for those systems that come into 
compliance with the standards and conditions before the end of that 
time-limited period.)
    By amending Sec.  433.112, 90 percent and 75 percent FFP for a 
State's reasonable administrative expenditures for the design, 
development, installation or enhancement, and maintenance and 
operations to mechanized claims processing and information retrieval 
systems, (MMISs), including those that perform eligibility 
determination and enrollment activities, as well as the Medicaid 
portion of eligibility determination systems, would be available only 
if the APD is approved by us before the State's expenditure of funds 
and if the system meets the standards and conditions. For those systems 
that are currently approved for 90 percent FFP, we would provide a 
transition period of 12 months for States to submit an IAPD to modify 
and upgrade systems meet the standards and conditions established by 
this rule. For those systems that are already approved and currently 
receiving 75 percent FFP for maintenance and operations, the States 
would be required to submit an IAPD to modify and upgrade systems to 
meet the standards and conditions within 36 months. Both transition 
periods would begin with the effective date of the subsequent final 
rule. New systems seeking 90 percent FFP would need to demonstrate that 
they would meet all standards and conditions established by this rule. 
Eligibility determination systems currently operating would need to 
come into compliance with the standards and conditions in order to 
begin receiving 75 percent FFP for State expenditures. We believe this 
would provide States with a reasonable period of transition while still 
ensuring that State systems move expeditiously towards improvement and 
advanced technology.
    States would be required to supply information and demonstrate 
consideration of the following items to CMS for review and approval and 
as part of the APD before we would grant approval of enhanced funding. 
We

[[Page 68589]]

would scrutinize all proposed investments and would decline to approve 
enhanced funding (resulting in 50 percent FFP) for proposals that do 
not demonstrate careful consideration and application of these 
standards and conditions. States would ensure that MMIS systems, 
including those that perform eligibility determinations and enrollment 
activities (as well as the Medicaid portion of eligibility 
determination systems) would be required to meet the following 
requirements:
    (1) Use a modular, flexible approach to systems development, 
including the use of open interfaces and exposed application 
programming interfaces; the separation of business rules from core 
programming, available in both human and machine readable formats.
    (2) Align to and advance increasingly in MITA maturity for 
business, architecture, and data.
    (3) Ensure alignment with, and incorporation of, industry 
standards: The Health Insurance Portability and Accountability Act of 
1996 privacy, security, and transaction standards; accessibility 
standards established under section 508 of the Rehabilitation Act, or 
standards that provide greater accessibility for individuals with 
disabilities, and compliance with Federal civil rights laws; standards 
adopted by the Secretary under section 1104 of the Affordable Care Act; 
and standards and protocols adopted by the Secretary under section 1561 
of the Affordable Care Act.
    (4) Promote sharing, leverage, and reuse of Medicaid technologies 
and systems within and among States.
    (5) Support accurate and timely processing of claims (including 
claims of eligibility), adjudications, and effective communications 
with providers, beneficiaries, and the public.
    (6) Produce transaction data, reports, and performance information 
that would contribute to program evaluation, continuous improvement in 
business operations, and transparency and accountability.
    (7) Ensure seamless coordination and integration with the Exchange, 
and allow interoperability with health information exchanges, public 
health agencies, human services programs, and community organizations 
providing outreach and enrollment assistance services.
    States can also choose to continue as they currently operate and 
receive 50 percent matching. However, this would not change the need 
for States to meet the substantive requirements of Federal legislation.
    Further, we are proposing to codify at Sec.  433.112(c) that we 
would provide 90 percent FFP for the design, development, installation 
or enhancement of an eligibility determination system only before 
December 31, 2015, even if work on an approved APD continues after 
2015.
    We believe that changes to State systems would be completed with 
the start of the new Affordable Care Act and support the operation of 
Exchanges on January 1, 2014. However, we realize that States may need 
to make additional changes to State systems to provide for additional 
functionality in support of the Exchanges, and/or Medicaid and CHIP 
eligibility expansions. Thus, we are providing for an additional 2 
years of 90 percent enhanced FFP so that States' systems are provided 
with additional time to ensure the performance and efficiency of their 
systems.
    States would need to incur costs for goods and services furnished 
no later than December 31, 2015 to receive 90 percent FFP for the 
design, development, installation or enhancement of an eligibility 
determination system.
    Lastly, we propose to revise Sec.  433.119 to account for 
performance monitoring and reviews and to make related conforming 
changes to part 433.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The changes specified in this proposed rule do not impose any new 
reporting, recordkeeping or disclosure requirements. States already 
submit to us for review and approval APDs for funding for automated 
data processing in accordance with Federal regulations at 45 CFR part 
95, subpart F. The burden associated with the aforementioned 
information collection requirements is currently approved under OCN 
0938-1088 and expires May 31, 2013. We are, however, requesting 
comments on our analysis; that is, that the specific requirements 
imposed by this rule do not mandate any additional information 
collection requirements on States.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Overall Impact

    The estimated costs of the Federal-share for Medicaid 
administration have been reflected in the Mid-Session Review of the FY 
2011 President's Budget.
    We have examined the proposed impacts of this rule as required by 
Executive Order 12866, the Regulatory Flexibility Act (RFA), section 
1102(b) of the Act regarding rural hospital impacts, the Unfunded 
Mandates Reform Act, Executive Order 13132 on Federalism, and the 
Congressional Review Act.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for rules with economically significant 
effects ($100 million or more in any 1 year). This proposed rule is 
anticipated to have an annual effect on the economy of $100 million or 
more, making it an economically significant rule under the Executive 
Order and a major rule under the Congressional Review Act. Accordingly, 
we have prepared a RIA that to the best of our ability presents the 
costs and benefits of the proposed rule.
    States could continue to receive the traditional 50 percent FFP for 
reasonable administrative expenditures for designing, developing, 
installing, or enhancing the Medicaid portion of their integrated 
eligibility determination

[[Page 68590]]

systems. Similarly, States could continue to receive 50 percent FFP for 
expenditures associated with the maintenance and operation of such 
systems.
    This proposed rule addresses the impact related to enhanced FFP for 
mechanized claims processing and information retrieval systems, 
including those that perform eligibility determination and enrollment 
activities, as well as the Medicaid portion of integrated eligibility 
determination systems that the Secretary determines are likely to 
provide more efficient, economical, and effective administration of the 
State plan.
    In projecting the impact to the Federal government and State 
Medicaid agencies, we considered how the proposed standards and 
conditions on MMIS and the availability of enhanced match for State 
eligibility systems through CY 2015 would impact State investments over 
the 10-year period of 2011 through 2020. As discussed further below, we 
considered the expected costs to the Federal government of providing 
the enhanced match rate, changes in state investments due to the 
application of standards and conditions on MMIS (including eligibility 
systems), and possible savings as a result of the use of more modern, 
reusable, and efficient technologies.

B. Potential Savings

    We considered a number of ways in which application of the 
standards and conditions, including increased use of MITA, could result 
in savings; however, as no States have yet reached MITA maturity, it is 
difficult to predict the savings that may accrue over any certain 
timeframe. These areas include the following:
    (1) Modular technology solutions: As States, or groups of States, 
would begin to develop ``modular'' technology solutions, these 
solutions could be used by others through a ``plug and play'' approach, 
in which pieces of a new MMIS would not need to be reinvented from 
scratch every time, but rather, could be incorporated into the MMIS 
framework.
    We assume that savings associated with reusable technology could be 
achieved in both the development and operation of new systems. We 
expect that States would dispense with the need to engage in 
significant requirements analyses and the need to pay for new modules 
to be built when there are successful models around the country that 
they can draw down from a ``technology bank'' maintained by the Federal 
or State governments.
    (2) Increased use of industry standards and open source 
technologies: While HIPAA administrative transaction standards have 
existed for 5 to 7 years, use of more specific industry standards to 
build new systems would allow such systems to exchange information 
seamlessly--a major goal of the Affordable Care Act, and one that is 
the explicit purpose of the standards work envisioned within section 
1561 of the Act. We also believe that more open source technology would 
encourage the development of software solutions that address the needs 
of a variety of diverse activities--such as eligibility, member 
enrollment, and pharmacy analysis of drug claims. Software that is 
sufficiently flexible to meet different needs and perform different 
functions could result in cost savings, as States are able to use the 
systems without making major adaptations to them.
    (3) Maintenance and operations: As States take up the changes in 
this proposed rule, the maintenance/operation costs of new systems 
should decrease. Less maintenance should be required than that 
necessary to reengineer special, highly customized systems every time 
there is a new regulatory or legal requirement.
    (4) Reengineering business processes, more Web-based solutions, 
service-oriented architecture (SOA): Savings are likely to result from 
the modular design and operation of systems, combined with use of 
standardized business processes, as States are be compelled to rethink 
and streamline processes as a result of greater reliance on technology.

C. Calculation of MMIS Costs

    MMIS costs are estimated at approximately $10.0 billion over the 5-
year budget window and $23.0 billion over the 10-year budget window. 
These costs represent only the Federal share.
    To calculate the impact of the regulation on MMIS costs, we assumed 
that new systems on average would cost $150 million over 3 years for 
each State ($50 million total cost per year, or $45 million Federal 
costs at 90 percent FFP per year). We assumed ten States have 
sophisticated systems that are very close to meeting the proposed 
regulation standards. As a result, we assumed the remaining 41 States 
would have approved APDs in place to replace or update their MMIS 
between FY 2011 and FY 2013 to comply with the new regulation standards 
and conditions.
    We assumed that early adopter States would see increased 
development, design, and installation costs, whereas late adopter 
States would see increased development, design, and installation 
savings as they are able to take advantage of efficiencies gained by 
the early adopter States. Specifically, for those States that update or 
build new systems in FY 2011 and FY 2012, we assumed a 10 percent 
annual cost increase to new MMIS systems for design, development, and 
installation. For those States that build new systems in FY 2013 and FY 
2014, we assumed a 5 percent annual savings to new MMIS systems for 
design, development, and installation.
    While it is difficult to predict State behavior, we believe all 
States would comply with the standards and conditions proposed in this 
regulation to receive the 90 percent FFP, and have assumed that for the 
purpose of these estimates.
    For maintenance, we assumed those States that have implemented the 
new regulation requirements would see a 20 percent annual savings, and 
for operations, we assumed those States that have implemented the new 
regulation requirements would see a 5 percent annual savings.
    Based on these assumptions, we estimate the net Federal budgetary 
impact on baseline MMIS costs from FY 2011 through 2015 of implementing 
the proposed regulation is approximately $1.1 billion, and the net 
Federal budgetary impact from FY 2011 through 2020 is approximately 
$557 million in savings.

D. Calculation of Eligibility Systems Costs

    For eligibility systems, we applied the same methodology we used to 
calculate net Federal costs to MMIS under the proposed regulation.
    In order to meet the requirements of the Affordable Care Act, 
States would build new systems or modernize existing systems. Rather, 
most States will add new functionalities to interface with the 
Exchanges and implement new adaptability standards and conditions (such 
as incorporation of new mandated eligibility categories). We assume 
baseline costs for development, design, and installation at 50 percent 
FFP for all States are approximately $815 million from FY 2011 through 
2015 and $1.1 billion from FY 2011 through 2020. Eligibility systems 
costs for maintenance and operations at 50 percent for all States are 
approximately $1.2 billion from FY 2011 through 2015 and $2.7 billion 
from FY 2011 through 2020. These costs represent only the Federal 
share.
    To calculate the impact of the regulation, we assumed that new 
systems on average would cost $50 million over 3 years for each State

[[Page 68591]]

($16.7 million total cost per year, or $15 million Federal costs at 90 
percent FFP per year). We assumed that 25 States would replace their 
eligibility systems in FY 2011 through CY 2015. We assumed no States 
would build new systems past FY 2014 (beyond what is assumed in the 
baseline) due to the timing of the start of major coverage provisions 
in the Affordable Care Act, the length of time needed to build new 
systems (approximately 3 years), and the enhanced match ending after CY 
2015. For maintenance, we assumed States that have implemented new 
systems meeting the required standards and conditions would see a 20 
percent annual savings, and for operations, we assumed those States 
that have implemented the new systems would see a 5 percent annual 
savings. These assumptions are consistent with our approach for savings 
under MMIS in the proposed regulation.
    The net Federal cost impact from FY 2011 through 2015 of 
implementing the proposed regulation on eligibility systems is 
approximately $2.2 billion, and the net Federal cost from FY 2011 
through 2020 is $2.9 billion. These costs represent only the Federal 
share.

E. Total Net Cost Impact

    Combining the impact of the proposed regulation, the total net 
Federal cost impact is approximately $3.3 billion for FY 2011 through 
2015 and approximately $2.3 billion for FY 2011 through 2020. We see 
lower costs over the 10-year budget window due to the increased savings 
to MMIS over time.
    Aligned with these Federal net costs, States will see a 
corresponding decrease in their net State share due to the enhanced 
Federal match for eligibility systems they will receive through CY 2015 
and the benefits accrued to their systems by putting in place the set 
of standards and conditions articulated in this proposed regulation. 
Combining the impact of the proposed regulation, the total net State 
budget impact is approximately $792.5 million in savings for FY 2011 
through 2015 and approximately $1.9 billion in savings for FY 2011 
through 2020. Similar to the Federal budget impact, we expect to see 
higher savings achieved by States over the 10-year budget window due to 
the increased savings to MMIS over time.
    The projections in this analysis are subject to considerable 
uncertainty, as they reflect projected costs based on technology and 
innovation. While we believe that advancements in technology would 
likely have an impact on States' systems, it is difficult to predict 
with certainty how significant the technology advancements may be and 
how they would affect State systems. For example, we have worked for 
many years developing the MITA maturity model. We believe that States 
should adopt the MITA framework as the basis for all MMIS replacements 
and major system upgrades related to the MMIS, and while we are 
requiring that States move to a MITA framework in order to receive 
enhanced funding, to date there are no States that have reached full 
MITA maturity. Consequently, having no States at full MITA maturity 
would indicate that it takes time, money and considerable effort for 
States to make changes to their current technology.
    Additional uncertainty exists because we are unsure of the rate of 
adoption for States to make the changes in this proposed rule. The 
enhanced FFP is available for approximately 5 years, from CY 2011 
through CY 2015, and States could upgrade or replace their systems at 
any point within the 5-year period. Further, States may simply choose 
to make moderate changes to existing systems, and even with the 90 and 
75 percent enhanced FFP, such moderate changes could be less costly 
overall for States than replacing their systems.
    Additional uncertainty exists about the rate of State adoption 
since some States may consider the costs needed to move to a more 
advanced system to be too high to undertake such a project. Similarly, 
States may decide not to make changes due to implementation of 
performance requirements and the performance reviews.
    We acknowledge that there are uncertainties regarding our 
assumptions, including State behavior, and the associated cost 
estimates with respect to states implementing new systems within the 
timeframe assessed. However, we have offered our estimates with a 25 
percent upper and lower range to capture such uncertainty in actual 
implementation outcomes. Due to a number of uncertainties in our 
assumptions, we believe a range of estimates better represents the net 
cost impact of this proposed regulation. Tables 1 and 2 represent a 25 
percent range for these aggregate net costs to the Federal and State 
government, respectively. It is important to point out that we believe 
that systems transformation is necessary to meet the vision of the 
Affordable Care Act and consequently, these costs are necessary and 
would provide for efficient systems that in the end would provide for 
more efficient and effective administration of the State plan. The 
separate impacts to MMIS and eligibility systems are summarized below.

         Table 1--Net Federal Cost Impact of Proposed Regulation
                         [Dollars in millions*]
------------------------------------------------------------------------
                                                          FY 2011-2020
------------------------------------------------------------------------
MMIS (excluding Eligibility).........................    (417.4)-(695.7)
Eligibility Systems..................................    2,154.6-3,591.0
                                                      ------------------
    Total............................................    1,737.2-2,895.3
------------------------------------------------------------------------
* Numbers in parentheses represent savings to the