Medicaid/CHIP Program; Medicaid Program and Children's Health Insurance Program (CHIP); Changes to the Medicaid Eligibility Quality Control and Payment Error Rate Measurement Programs in Response to the Affordable Care Act, 31158-31188 [2017-13710]
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IFR Interim Final Rule with comment
period
IPERA Improper Payments Elimination
and Recovery Act
IPERIA Improper Payments Elimination
and Recovery Improvement Act
IPIA Improper Payments Information Act
IRFA Initial Regulatory Flexibility
Analysis
MAGI Modified Adjusted Gross Income
MEQC Medicaid Eligibility Quality
Control
MSO Medicaid State Operations
OMB Office of Management and Budget
PCCM Primary Care Case Management
PERM Payment Error Rate Measurement
RC Review Contractor
RFA Regulatory Flexibility Act
RIA Regulatory Impact Analysis
SC Statistical Contractor
SHO State Health Official
the Act Social Security Act
UMRA Unfunded Mandates Reform Act
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 431 and 457
[CMS–6068–F]
RIN 0938–AS74
Medicaid/CHIP Program; Medicaid
Program and Children’s Health
Insurance Program (CHIP); Changes to
the Medicaid Eligibility Quality Control
and Payment Error Rate Measurement
Programs in Response to the
Affordable Care Act
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule.
AGENCY:
This final rule updates the
Medicaid Eligibility Quality Control
(MEQC) and Payment Error Rate
Measurement (PERM) programs based
on the changes to Medicaid and the
Children’s Health Insurance Program
(CHIP) eligibility under the Patient
Protection and Affordable Care Act.
This rule also implements various other
improvements to the PERM program.
DATES: These regulations are effective
on August 4, 2017.
FOR FURTHER INFORMATION CONTACT:
Bridgett Rider, (410) 786–2602.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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Acronyms
AFR Agency Financial Report
AT Account Transfer file
CFR Code of Federal Regulations
CHIP Children’s Health Insurance
Program
CHIPRA Children’s Health Insurance
Program Reauthorization Act of 2009
CMS Centers for Medicare and Medicaid
Services
DAB Departmental Appeals Board
DHHS Department of Health and Human
Services
DP Data Processing
ELA Express Lane Agency
ELE Express Lane Eligibility
EOB Explanation of Benefits
ERC Eligibility Review Contractor
FFE Federally Facilitated Exchange
FFE–A Federally Facilitated ExchangeAssessment
FFE–D Federally Facilitated ExchangeDetermination
FFP Federal Financial Participation
FFS Fee-For-Service
FFY Federal Fiscal Year
FMAP Federal Medical Assistance
Percentages
FY Fiscal Year
HHS Health and Human Services
HIPP Health Insurance Premium
Payments
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I. Background
A. Introduction
The Medicaid Eligibility Quality
Control (MEQC) program at § 431.810
through 431.822 implements section
1903(u) of the Social Security Act (the
Act) and requires each state to report to
the Secretary the ratio of its erroneous
excess payments for medical assistance
under its state plan to its total
expenditures for medical assistance.
Section 1903(u) of the Act sets a 3
percent threshold for eligibility-related
improper payments in any fiscal year
(FY) and generally requires the
Secretary to withhold payments to states
with respect to the amount of improper
payments that exceed that threshold.
The Payment Error Rate Measurement
(PERM) program was developed to
implement the requirements of the
Improper Payments Information Act
(IPIA) of 2002 (Pub. L. 107–300, enacted
January 23, 2002), which requires the
heads of federal agencies to review all
programs and activities that they
administer to determine if any programs
are susceptible to significant erroneous
payments, and, if so, to identify them.
IPIA was amended by the Improper
Payments Elimination and Recovery Act
of 2010 (IPERA) (Pub. L. 111–204,
enacted on July 22, 2010) and the
Improper Payments Elimination and
Recovery Improvement Act of 2012
(IPERIA) (Pub. L. 112–248, enacted on
January 10, 2013).
The IPIA directed the Office of
Management and Budget (OMB) to
provide guidance on implementation;
OMB provides such guidance for IPIA,
IPERA, and IPERIA in OMB circular A–
123 App. C. OMB defines ‘‘significant
improper payments’’ as annual
erroneous payments in the program
exceeding (1) both $10 million and 1.5
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percent of program payments, or (2)
$100 million regardless of percentage
(OMB M–15–02, OMB Circular A–123,
App. C October 20, 2014). Erroneous
payments and improper payments have
the same meaning under OMB guidance.
For those programs found to be
susceptible to significant erroneous
payments, federal agencies must
provide the estimated amount of
improper payments and report on what
actions the agency is taking to reduce
those improper payments, including
setting targets for future erroneous
payment levels and a timeline by which
the targets will be reached. Section
2(b)(1) of IPERA clarified that, when
meeting IPIA and IPERA requirements,
agencies must produce a statistically
valid estimate, or an estimate that is
otherwise appropriate using a
methodology approved by the Director
of OMB. IPERIA further clarified
requirements for agency reporting on
actions to reduce and recover improper
payments.
The Medicaid program and the
Children’s Health Insurance Program
(CHIP) were identified as at risk for
significant erroneous payments by
OMB. As set forth in OMB Circular A–
136, Financial Reporting Requirements,
for IPIA reporting, the Department of
Health and Human Services (DHHS)
reports the estimated improper payment
rates (and other required information)
for both programs in its annual Agency
Financial Report (AFR).
Sections 203 and 601 of the
Children’s Health Insurance Program
Reauthorization Act of 2009 (CHIPRA)
(Pub. L. 111–3, enacted on February 4,
2009) relate to the PERM program.
Section 203 of the CHIPRA amended
sections 1902(e)(13) and 2107(e)(1) of
the Act to establish a state option for an
express lane eligibility (ELE) process for
determining eligibility for children and
an error rate measurement for the
enrollment of children under the ELE
option. ELE provides states with
important new avenues to expeditiously
facilitate children’s Medicaid or CHIP
enrollment through a fast and simplified
eligibility determination or renewal
process by which states may rely on
findings made by another program
designated as an express lane agency
(ELA) for eligibility factors including,
but not limited to, income or household
size. Section 1902(e)(13)(E) of the Act,
as amended by the CHIPRA, specifically
addresses error rates for ELE. States are
required to conduct a separate analysis
of ELE error rates, applying a 3 percent
error rate threshold, and are directed not
to include those children who are
enrolled in the State Medicaid plan or
the State CHIP plan through reliance on
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a finding made by an ELA in any data
or samples used for purposes of
complying with a MEQC review or as
part of the PERM measurement. Section
203(b) of the CHIPRA directed the
Secretary to conduct an independent
evaluation of children who enrolled in
Medicaid or CHIP plans through the
ELE option to determine the percentage
of children who were erroneously
enrolled in such plans, the effectiveness
of the option, and possible legislative or
administrative recommendations to
more effectively enroll children through
reliance on such findings.
Section 601(a)(1) of the CHIPRA
amended section 2015(c) of the Act, and
provided a 90 percent federal match for
CHIP spending related to PERM
administration and excluded such
spending from the CHIP 10 percent
administrative cap. (Section 2105(c)(2)
of the Act generally limits states to
using no more than 10 percent of the
CHIP benefit expenditures for
administrative costs, outreach efforts,
additional services other than the
standard benefit package for low-income
children, and administrative costs.)
Section 601(b) of the CHIPRA
required that the Secretary issue a new
PERM rule and delay any calculations of
a PERM improper payment rate for CHIP
until 6 months after the new PERM final
rule was effective. Section 601(c) of the
CHIPRA established certain standards
for such a rule, and section 601(d) of the
CHIPRA provided that states that were
scheduled for PERM measurement in FY
2007 or 2008, respectively, could elect
to accept a CHIP PERM improper
payment rate determined in whole or in
part on the basis of data for FY 2007 or
2008, respectively, or could elect
instead to consider its PERM
measurement conducted for FY 2010 or
2011, respectively, as the first fiscal year
for which PERM applied to the state for
CHIP. The new PERM rule required by
the CHIPRA was to include the
following:
• Clearly defined criteria for errors for
both states and providers.
• Clearly defined processes for
appealing error determinations.
• Clearly defined responsibilities and
deadlines for states in implementing
any corrective action plans (CAPs).
• Requirements for state verification
of an applicant’s self-declaration or selfcertification of eligibility for, and
correct amount of, medical assistance
under Medicaid or child health
assistance under CHIP.
• State-specific sample sizes for
application of the PERM requirements.
The Patient Protection and Affordable
Care Act (Pub. L. 111–148), as amended
by the Health Care and Education
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Reconciliation Act of 2010 (Pub. L. 111–
152) (collectively referred to as the
Affordable Care Act) was enacted in
March 2010. The Affordable Care Act
mandated changes to the Medicaid and
CHIP eligibility processes and policies
to simplify enrollment and increase the
share of eligible persons that are
enrolled and covered. Some of the key
changes applicable to all states,
regardless of a state decision to expand
Medicaid coverage, include:
• Use of Modified Adjusted Gross
Income (MAGI) methodologies for
income determinations and household
compositions for most applicants.
• Use of the single streamlined
application (or approved alternative) for
intake of applicant information.
• Availability of multiple application
channels, such as mail, fax, phone, or
on-line, for consumers to submit
application information.
• Use of a HHS-managed data
services hub for access to federal
verification sources.
• Need for account transfers and data
sharing between the state- or federalExchange, Medicaid, and CHIP to avoid
additional work or confusion by
consumers.
• Reliance on data-driven processes
for 12 month renewals.
• Use of applicant self-attestation of
most eligibility elements as of January 1,
2014, with reliance on electronic thirdparty data sources, if available, for
verification.
• Enhanced 90 percent federal
financial participation (FFP) match for
the design, development, installation, or
enhancement of the state’s eligibility
system.
In light of the implementation of the
Affordable Care Act’s major changes to
the Medicaid and CHIP eligibility and
enrollment provisions, and our
continued efforts to comply with
IPERIA and the CHIPRA, an interim
change in methodology was
implemented for conducting Medicaid
and CHIP eligibility reviews under
PERM. As described in an August 15,
2013 State Health Official (SHO) letter
(SHO #13–005), instead of the PERM
and MEQC eligibility review
requirements, we required states to
participate in Medicaid and CHIP
Eligibility Review Pilots from FY 2014
to FY 2016 to support the development
of a revised PERM methodology that
provides informative, actionable
information to states and allows CMS to
monitor program administration. A
subsequent SHO letter dated October 7,
2015 (SHO #15–004) extended the
Medicaid and CHIP Eligibility Review
Pilots for one additional year.
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B. Regulatory History
1. Medicaid Eligibility Quality Control
(MEQC) Program
The MEQC program implements
section 1903(u) of the Act, which
defines erroneous excess payments as
both payments for ineligible persons
and overpayments for eligible persons.
Section 1903(u) of the Act instructs the
Secretary not to make payment to a state
with respect to the portion of its
erroneous payments that exceed a 3
percent error rate, though the statute
also permits the Secretary to waive all
or part of that payment restriction if a
state demonstrates that it cannot reach
the 3 percent allowable error rate
despite a good faith effort.
Regulations implementing the MEQC
program are at 42 CFR part 431, subpart
P—Quality Control. The regulations
specify the sample and review
procedures for the MEQC program and
standards for good faith efforts to keep
improper payments below the error rate
threshold. From its implementation in
1978 until 1994, states were required to
follow the as-promulgated MEQC
regulations in what was known as the
traditional MEQC program. Every
month, states reviewed a random
sample of Medicaid cases and verified
the categorical and financial eligibility
of the case members. Sample sizes had
to meet minimum standards, but
otherwise were at state option.
For cases in the sample found
ineligible, the claims for services
received in the review month were
collected, and error rates were
calculated by comparing the amount of
such claims to the total claims for the
universe of sampled claims. The state’s
calculated error rate was adjusted based
on a federal validation subsample to
arrive at a final state error rate. This
final state error rate was calculated as a
point estimate, without adjustment for
the confidence interval resulting from
the sampling methodology. States with
error rates over 3 percent were subject
under those regulations to a
disallowance of FFP in all or part of the
amount of FFP over the 3 percent error
rate.
At HHS’s Departmental Appeals
Board (DAB), HHS’s final level of
administrative review, states prevailed
in challenges to disallowances based on
the MEQC system in 1992. The DAB
concluded that the MEQC sampling
protocol and the resulting error rate
calculation were not sufficiently
accurate to provide reliable evidence to
support a disallowance based on an
actual error rate exceeding the 3 percent
threshold.
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Although the MEQC system remained
in place, we provided states with an
alternative to the MEQC program that
was focused on prospective
improvements in eligibility
determinations rather than
disallowances. These changes, outlined
in Medicaid State Operations (MSO)
Letter #93–58, dated July 23, 1993,
provided states with the option to
continue operating a traditional MEQC
program, or to conduct what we termed
‘‘MEQC pilots,’’ that did not lead to the
calculation of error rates (or, therefore,
to disallowances). These pilots continue
today. States choosing the latter pilot
option have generally operated, on a
year-over-year basis, year-long pilots
focused on state-specific areas of
interest, such as high-cost or high-risk
eligibility categories and problematic
eligibility determination processes.
These pilots review specific program
areas to determine whether problems
exist and produce findings the state
agency can address through corrective
actions, such as policy changes or
additional training. Over time, most
states have elected to participate in the
pilots; 39 states now operate MEQC
pilots, while 12 maintain traditional
MEQC programs.
2. Payment Error Rate Measurement
(PERM) Program
We issued the August 27, 2004
proposed rule (69 FR 52620) as a result
of the IPIA and OMB guidance that set
forth proposed provisions establishing
the PERM program by which states
would annually be required to estimate
and report improper payments in the
Medicaid program and CHIP. The statereported, state-specific, improper
payment rates were to be used to
compute the national improper payment
estimates for these programs.
In the October 5, 2005 Federal
Register (70 FR 58260), we published a
PERM interim final rule (IFR) with
comment period that responded to
public comments on the proposed rule
and informed the public of both our
national contracting strategy and plan to
measure improper payments in a subset
of states. That IFR with comment period
described that a state’s Medicaid
program and CHIP would be subject to
PERM measurement just once every 3
years; the 3 year period is referred to as
a cycle, and the year in which a state is
measured is known as its ‘‘PERM year.’’
In response to the public comments
from that IFR, we published a second
IFR with comment period in the August
28, 2006 Federal Register (71 FR 51050)
that reiterated our national contracting
strategy to estimate improper payments
in both Medicaid and CHIP fee-for-
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service (FFS) and managed care. We set
forth, and invited comments on, state
requirements for estimating improper
payments due to Medicaid and CHIP
eligibility determination errors. We also
announced that a state’s Medicaid
program and CHIP would be reviewed
during the same cycle.
In the August 31, 2007 Federal
Register (72 FR 50490), we published a
PERM final rule that finalized state
requirements for: (1) Submitting claims
to the federal contractors that conduct
FFS and managed care reviews; (2)
conducting eligibility reviews; and (3)
estimating payment error rates due to
errors in eligibility determinations.
3. 2010 Final Rule: Revisions to MEQC
and PERM To Meet the CHIPRA
Requirements
In the July 15, 2009 Federal Register
(74 FR 34468), we published a proposed
rule which proposed revisions, as
required by the CHIPRA, to the MEQC
and PERM programs, including changes
to the PERM review process.
In the August 11, 2010 Federal
Register (75 FR 48816), we published a
final rule for the MEQC and PERM
programs, which became effective on
September 10, 2010, that codified
several procedural aspects of the
process for estimating improper
payments in Medicaid and CHIP,
including: Changes to state-specific
sample sizes to reduce state burden; the
stratification of universes to obtain
required precision levels; eligibility
sampling requirements; the
modification of review requirements for
self-declaration or self-certification of
eligibility; the exclusion of children
enrolled through the ELE from the
PERM measurement; clearly defined
‘‘types of payment errors’’ to clarify that
errors must affect payments for the
purpose of the PERM program; a clearly
defined difference resolution and
appeals process; and state requirements
for implementation of CAPs.
Section 601(e) of the CHIPRA
required harmonizing the MEQC and
PERM programs’ eligibility review
requirements to improve coordination of
the two programs, decrease duplicate
efforts, and minimize state burden. To
comply with the CHIPRA, the final rule
granted states the flexibility, in their
PERM year, to apply PERM data to
satisfy the annual MEQC requirements,
or to apply ‘‘traditional’’ MEQC data to
satisfy the PERM eligibility component
requirements.
The August 11, 2010 final rule
permitted a state to use the same data,
such as the same sample, eligibility
review findings, and payment review
findings, for each program. However,
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the CHIPRA permits substituting PERM
and MEQC data only where the MEQC
review is conducted under section
1903(u) of the Act, so only states using
the ‘‘traditional’’ MEQC methodology
may employ this substitution option.
Also, each state, with respect to each
program (MEQC and PERM) is still
required to develop separate error/
improper payment rate calculations.
II. Provisions of the Proposed Rule and
Analysis of and Responses to
Comments
We received 20 timely comments
from the public, in response to the
proposed rule published on June 22,
2016 (81 FR 40596). The following
sections, arranged by subject area,
include a summary of the public
comments received and our responses.
We received comments from the
public, State Medicaid agencies,
advocacy groups, a non-partisan
legislative branch agency, and
associations. The comments ranged
from general support or opposition to
the proposed provisions to very specific
questions or comments regarding the
proposed changes.
Many commenters raised issues
centered around the PERM managed
care component and the transparency
and public reporting aspects of both the
PERM and MEQC programs. We believe
that these issues are beyond the scope
of this final rule. However, we may
consider whether to take other actions,
such as revising or clarifying CMS
program operating instructions or
procedures, based on the information or
recommendations in the comments.
Brief summaries of each proposed
provision, a summary of the public
comments we received (with the
exception of specific comments on the
paperwork burden or the economic
impact analysis), and our responses to
the comments are provided in this final
rule. Comments related to the
paperwork burden and the impact
analyses included in the proposed rule
are addressed in the ‘‘Collection of
Information Requirements’’ and
‘‘Regulatory Impact Statement’’ sections
in this final rule. The final regulation
text follows these analyses.
We proposed the following changes to
part 431 to address the eligibility
provisions of the Affordable Care Act, as
well as to make improvements to the
PERM and MEQC programs.
A. MEQC Program Revision
Section 1903(u) of the Act requires
the review of Medicaid eligibility to
identify erroneous payments, but it does
not specify the manner by which such
reviews must occur. The MEQC program
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was originally created to implement the
requirements of section 1903(u) of the
Act, but the PERM program,
implemented subsequent to MEQC and
under other legal authority, likewise
reviews Medicaid eligibility to identify
erroneous payments. As noted
previously, the CHIPRA required
harmonizing the MEQC and PERM
programs and allowed for certain data
substitution options between the two
programs, to coordinate consistent state
implementation to meet both sets of
requirements and reduce redundancies.
Because states are subject to PERM
reviews only once every 3 years, we
proposed to meet the requirements in
section 1903(u) of the Act through a
combination of the PERM program and
a revised MEQC program that resembles
the current MEQC pilots, by which the
revised MEQC program would provide
measures of a state’s erroneous
eligibility determinations in the 2 offyears between its PERM years.
As previously noted, states currently
may satisfy our requirements by
conducting either a traditional MEQC
program or MEQC pilots, with the
majority of states (39) electing the latter
due to the pilots’ flexibility to target
specific problematic or high-interest
areas. The revised MEQC program will
eliminate the traditional MEQC program
and, instead, formalize, and make
mandatory, the pilot approach. During
the 2 off-years between each state’s
PERM years, when a state is not
reviewed under the PERM program, we
proposed that it conduct one MEQC
pilot spanning that 2-year period. The
revised regulations will conform the
MEQC program to how the majority of
states have applied the MEQC pilots
through the administrative flexibility we
granted states decades ago to meet the
requirements of section 1903(u) of the
Act. We believe such MEQC pilots will
provide states with the necessary
flexibility to target specific problems or
high-interest areas as necessary. As a
matter of semantics, note that in the
proposed rule we continued to use the
term ‘‘pilots,’’ not because they are fixed
or defined projects (as the term
sometimes connotes), but, rather
because, as described, states will have
flexibility to adapt pilots to target
particular areas.
We further proposed to take a similar
approach to ‘‘freezing’’ error rates as we
took when we initially introduced
MEQC pilots 2 decades ago. In 1994,
when we introduced MEQC pilots we
offered states the ability to ‘‘freeze’’
their error rates until they resumed
traditional MEQC activities. Similarly,
we proposed to freeze a state’s most
recent PERM eligibility improper
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payment rate during the 2 off-years
between a state’s PERM cycles, when
the state will be conducting an MEQC
pilot. As noted previously, section
1903(u) of the Act sets a 3 percent
threshold for improper payments in any
period or fiscal year and generally
requires the Secretary to withhold
payments to states with respect to the
amount of improper payments that
exceed the threshold. Therefore, we
proposed freezing the PERM eligibility
improper payment rate as it allows each
state a chance to test the efficacy of its
corrective actions as related to the
eligibility errors identified during its
PERM year. Our provisions also allow
states a chance to implement
prospective improvements in eligibility
determinations before having their next
PERM eligibility improper payment
measurement performed, where
identified improper payments will be
subject to potential payment reductions
and disallowances under 1903(u) of the
Act.
We proposed to revise § 431.800 to
revise and clarify the MEQC program
basis and scope.
Comment: Several commenters
supported our proposal to revise the
MEQC program into a pilot program that
works in conjunction with the PERM
program.
Response: We appreciate the
commenters’ support, and we are
finalizing as proposed.
We proposed to remove § 431.802 as
FFP, state plan requirements, and the
requirement for the MEQC program to
meet section 1903(u) of the Act will no
longer be applicable to the revised
MEQC program.
We did not receive any comments on
this proposal, and therefore, we are
finalizing as proposed.
We proposed to revise § 431.804 by
adding definitions for ‘‘corrective
action,’’ ‘‘deficiency,’’ ‘‘eligibility,’’
‘‘Medicaid Eligibility Quality Control
(MEQC),’’ ‘‘MEQC Pilot,’’ ‘‘MEQC
review period,’’ ‘‘negative case,’’ ‘‘off
years,’’ ‘‘Payment Error Rate
Measurement (PERM),’’ and ‘‘PERM
year.’’
We proposed to revise the definitions
for ‘‘active case,’’ and ‘‘eligibility error,’’
and remove ‘‘administrative period,’’
‘‘claims processing error,’’ ‘‘negative
case action,’’ and ‘‘state agency.’’ We
proposed to add, revise, or remove
definitions to provide additional
clarification for the proposed MEQC
program revisions.
The following is summary of the
comments we received regarding our
proposal to add, revise, or remove
definitions.
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Comment: One commenter stated that
the MEQC definition of ‘‘deficiency’’
should not include the word ‘‘error’’ in
it since ‘‘eligibility error’’ is separately
defined.
Response: As stated in this final rule,
the revised MEQC definition of
‘‘deficiency’’ means a finding that does
not meet the definition of an ‘‘eligibility
error.’’ Therefore, we believe it is
appropriate to also separately define the
term ‘‘eligibility error.’’ However, we
acknowledge that we made a technical
error in that the proposed PERM
definition of ‘‘deficiency’’ was
inadvertently published as the MEQC
definition of ‘‘deficiency,’’ which likely
contributed to reader confusion and the
request for clarification. As such, we
finalize the MEQC definition for
‘‘deficiency’’ to read that deficiency
means a finding in processing identified
through active case review or negative
case review that does not meet the
definition of an eligibility error.
Comment: Multiple commenters
requested clarification of the definition
‘‘eligibility error.’’ More specifically,
one commenter questioned whether
‘‘type of assistance’’ referred to ‘‘full
service versus emergency service, MAGI
versus Non-MAGI, Adult versus Parent
Caretaker or Child or to a subgroup
under one of these.’’ Other commenters
requested clarification for when a
redetermination would not be
considered timely in relationship to
previous determinations, and claim
payments. And some commenters
requested clarification surrounding the
meaning of the phrase ‘‘a required
element of the eligibility determination
process cannot be verified as being
performed/completed by the state.’’
Response: In this context, ‘‘type of
assistance’’ refers to the specific
eligibility categories within Medicaid or
CHIP, such as parents and caretakers,
children, pregnant women, and adult
expansion group, within which different
benefits may be provided. States may
use different terminology to refer to
eligibility categories, including type of
assistance. Next, federal regulations
found at 42 CFR part 435 subpart J
clearly define timely redeterminations.
Lastly, documentation and record
keeping requirements relevant to state
determinations of eligibility are outlined
in federal regulations, and, therefore,
states should be maintaining
information required for review. Federal
eligibility regulations are very specific
for certain elements of eligibility (such
as, but not limited to, citizenship and
immigration status) as to what the state
must do to have successfully verified an
individual’s eligibility for medical
assistance. Thus, if the state is unable to
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provide the necessary documentation to
support the state’s eligibility
determination, the payment under
review may be cited as an error due to
insufficient documentation. We are
finalizing the definition of ‘‘eligibility
error’’ as proposed.
Comment: Many commenters made
recommendations on policies that
should be included in the MEQC review
instructions that will be provided by
CMS following publication of the final
rule.
Response: While we appreciate these
recommendations, they are beyond the
scope of the proposed changes of the
rule. We may consider these
recommendations when developing
CMS guidance. The MEQC pilot
program review procedures are outlined
at § 431.812; states will be required to
follow the review procedures as
outlined there, in addition to other
instructions established by CMS.
Comment: One commenter requested
that CMS not remove the definition
‘‘administrative period,’’ stating that the
current regulation excludes the
additional errors discovered for a period
of time following the discovery of the
initial and/or original error, and that the
‘‘administrative period’’ recognizes
Medicaid policy that requires states to
provide notice to beneficiaries prior to
discontinuing benefits. Further, the
commenter stated that erroneous
benefits issued between the time in
which the error is discovered and the
dates in which the change in benefit
level can be applied are unavoidable.
Response: We removed the
‘‘administrative period’’ definition
because the terminology is not
applicable to the proposed changes to
the MEQC program, and, therefore, no
longer used in the regulation text. Thus,
the definition will not be included in
the regulation text.
As a result of the comments, and in
light of the acknowledged technical
error, the definition for ‘‘deficiency’’ has
been replaced at § 431.804 with the
appropriate MEQC definition.
Additionally, we made minor stylistic
changes to the definitions of ‘‘PERM’’
and ‘‘PERM year.’’ We received many
comments supporting the changes to the
MEQC program, which includes the
definitions, and are finalizing all other
added, revised, or removed definitions
as proposed.
We proposed to revise § 431.806 to
reflect the state requirements for the
MEQC pilot program. Section 431.806
clarifies that following the end of a
state’s PERM year, it would have up to
November 1 to submit its MEQC pilot
planning document for our review and
approval. We did not receive any
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comments on this proposal, and
therefore, we are finalizing as proposed.
We proposed to revise § 431.810 to
clarify the basic elements and
requirements of the MEQC program. We
did not receive any comments on this
proposal, and therefore, we are
finalizing as proposed.
We proposed to revise § 431.812 to
clarify the review procedures for the
MEQC program. As described
previously, the CHIPRA required
harmonizing the PERM and MEQC
programs and authorized us to permit
states to use PERM to fulfill the
requirements of section 1903(u) of the
Act; § 431.812(f), which permits states
to substitute PERM-generated eligibility
data to meet MEQC program
requirements, was issued under the
CHIPRA authority. Given that the
Congress, in the CHIPRA, directed the
Secretary to harmonize the PERM and
MEQC programs and expressly
permitted states to substitute PERM for
MEQC data, we believe that the PERM
program, with the proposed revisions
discussed in subpart Q, meets the
requirements of section 1903(u) of the
Act.
Our approach will continue to
harmonize the PERM and MEQC
programs. It will reduce the
redundancies associated with meeting
the requirements of two distinct
programs. As noted, the CHIPRA, with
certain limitations, allows for
substitution of MEQC data for PERM
eligibility data. Through our approach,
in their PERM year, states will
participate in the PERM program, while
during the 2 off-years between a state’s
PERM cycles they would conduct a
MEQC pilot, markedly reducing states’
burden. Moreover, we proposed to
revise the methodology for PERM
eligibility reviews, as discussed in
sections §§ 431.960 through 431.1010.
The MEQC pilots will focus on areas not
addressed through PERM reviews, such
as negative cases and understated/
overstated liability, as well as permit
states to conduct focused reviews on
areas identified as error-prone through
the PERM program, so the new cyclical
PERM/MEQC rotation will yield a
complementary approach to ensuring
accurate eligibility determinations.
By conducting eligibility reviews of a
sample of individuals who have
received services matched with Title
XIX or XXI funds, the PERM program
will continue to focus on identifying
individuals receiving medical assistance
under the Medicaid or CHIP programs
who are, in fact, ineligible. Such PERM
eligibility reviews conform to the
requirement at section 1903(u) of the
Act’s that states measure erroneous
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payments due to ineligibility. Likewise,
these eligibility reviews will continue
under the MEQC pilots during states’
off-years and include a review of
Medicaid spend-down as a condition of
eligibility, conforming to other state
measurement requirements of section
1903(u) of the Act. We will calculate a
state’s eligibility improper payment rate
during its PERM year, which will
remain frozen at that level during its 2
off-years when it conducts its MEQC
pilot. Again, freezing states’ eligibility
improper payment rates between PERM
cycles will allow states time to work on
effective and efficacious corrective
actions that would improve their
eligibility determinations. This
approach also encourages states to
pursue prospective improvements to
their eligibility determination systems,
policies, and procedures before their
next PERM cycle, in which an eligibility
improper payment rate will be
calculated with the potential for
payment reductions and disallowances
to be invoked, in the event that a state’s
eligibility improper payment rate is
above the 3 percent threshold.
1. Revised MEQC Review Procedures
For more than 2 decades, the majority
of states have used the flexibility of
MEQC pilots to review state-specific
areas of interest, such as high-cost or
high-risk eligibility categories and
problematic eligibility determination
processes. This flexibility has been
beneficial to states because it made
MEQC more useful from a corrective
action standpoint.
We proposed that MEQC pilots focus
on cases that may not be fully addressed
through the PERM review, including,
but not limited to, negative cases and
payment reviews of understated and
overstated liability. Still, states will
retain much of their current flexibility.
In § 431.812, we proposed that states
must use the MEQC pilots to perform
both active and negative case reviews,
but states would have flexibility
surrounding their active case review
pilot. In the event that a state’s
eligibility improper payment rate is
above the 3 percent threshold for two
consecutive PERM cycles, this
flexibility will decrease as states will be
required to comply with CMS guidance
to tailor the active case reviews to a
more appropriate MEQC pilot that
would be based upon a state’s PERM
eligibility findings. To ensure that states
with consecutive PERM eligibility
improper payment rates over the
threshold identify and conduct MEQC
active case reviews that are appropriate
during their off-years, we will provide
direction for conducting a MEQC pilot
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that would suitably address the errorprone areas identified through the
state’s PERM review. Both the PERM
and MEQC pilot programs are
operationally complementary, and
should be treated in a manner that
allows for states to review identified
issues, develop corrective actions, and
effectively implement prospective
improvements to their eligibility
determinations.
Active and negative cases represent
the eligibility determinations made for
individuals that either approve or deny
an individual’s eligibility to receive
benefits and/or services under Medicaid
or CHIP. Individuals who are found to
be eligible and authorized to receive
benefits/services are termed active
cases, whereas individuals who are
found to be ineligible for benefits are
known as negative cases. As finalized at
§ 431.812(b)(3), a state must focus its
active case reviews on three defined
areas, unless otherwise directed by
CMS, or, as finalized at
§ 431.812(b)(3)(i), it may perform a
comprehensive review that does not
limit its review of active cases.
Additionally, we proposed that the
MEQC pilots must include negative
cases because we also proposed to
eliminate PERM’s negative case reviews;
our proposal would ensure continuing
oversight over negative cases to ensure
the accuracy of state determinations to
deny or terminate eligibility.
Under the new MEQC pilot program,
we proposed that states review a
minimum total of 400 Medicaid and
CHIP active cases. We proposed that at
least 200 of those reviews must be
Medicaid cases and expect that states
will include some CHIP cases, but
beyond that, we proposed that states
would have the flexibility to determine
the precise distribution of active cases.
For example, a state could sample 300
Medicaid and 100 CHIP active cases; it
would describe its active sample
distribution in its MEQC pilot planning
document that it would submit to us for
approval. Under the new MEQC pilot
program, we also proposed that states
review, at a minimum, 200 Medicaid
and 200 CHIP negative cases. Currently,
under the PERM program, states are
required to conduct approximately 200
negative case reviews for both the
Medicaid program and CHIP (204 is the
base sample size, which may be
adjusted up or down from cycle to cycle
depending on a state’s performance). We
proposed a minimum total negative
sample size of 400 (200 for each
program) for the proposed MEQC pilots
because, as mentioned above and
discussed further below, we proposed to
eliminate PERM’s negative case reviews.
Historically, MEQC’s case reviews
(both active and negative) focused solely
on Medicaid eligibility determinations.
The new MEQC pilots will now include
both Medicaid and CHIP eligibility case
reviews. Because we proposed to
eliminate PERM’s negative case reviews,
it is important that we concomitantly
expand the MEQC pilots to include the
review of no less than 200 CHIP
negative cases to ensure that CHIP
applicants are not inappropriately
denied or terminated from a state’s
program. In the event that CHIP funding
should end, then states would be
CMS will provide guidance regarding a modified MEQC pilot that
will occur prior to the beginning
of your first PERM cycle.
First PERM review period: July
2018–June 2019.
required to review only Medicaid active
and negative cases, as there would no
longer be any cases associated with
CHIP funding.
We will provide states with
guidelines for conducting these MEQC
pilots, and states must submit MEQC
pilot planning documents for CMS’s
approval. This approach will ensure
that states are planning to conduct
pilots that are suitable and in
accordance with our guidance.
This final rule will require states to
conduct one MEQC pilot during their 2
off-years between PERM cycles. We
proposed that the MEQC pilot review
period span 12 months, beginning on
January 1, following the end of the
state’s PERM review period. For
instance, if a state’s PERM review
period is July 1, 2018 to June 30, 2019,
the next proposed MEQC pilot review
period would be January 1 to December
31, 2020. We proposed at § 431.806 that
a state would have up to November 1
following the end of its PERM review
period to submit its MEQC pilot
planning document for CMS review and
approval. Following a state’s MEQC
pilot review period, we proposed it
would have up to August 1 to submit a
CAP based on its MEQC pilot findings.
We realize that on the effective date
of this final rule, states will not all be
at the same point in the MEQC pilot
program/PERM timeline. The impact of
the proposed MEQC timeline for each
cycle of states is clarified below to assist
each cycle of states in understanding
when the proposed MEQC requirements
would apply.
Cycle 2 states
First PERM review period: July
2017–June 2018.
First MEQC pilot planning document due: November 1, 2018.
MEQC review period: January 1–
December 31, 2019.
MEQC findings and CAP due: August 1, 2020.
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Cycle 1 states
The following is a summary of the
comments we received regarding our
proposal to revise the review procedures
for the MEQC program.
Comment: A commenter requested
that the personnel responsible for the
MEQC activities not be required to be
functionally and physically separate
from the personnel responsible for
Medicaid and CHIP policy and
operations since there is no longer a
disallowance under MEQC.
Response: We appreciate the
commenter’s suggestion, but we decline
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Cycle 3 states
First MEQC pilot planning document due: November 1, 2017.
MEQC review period: January 1–December 31, 2018.
MEQC findings and CAP due: August 1, 2019.
First PERM review period: July 2019–June 2020.
to change this requirement. We believe
this separation is important to ensure
accurate and unbiased review and
reporting by states in order to maintain
important oversight of eligibility
determinations and to lower PERM
improper payment rates.
Comment: A commenter requested
clarification surrounding the MEQC
negative case reviews, stating since each
CHIP decision includes a Medicaid
determination, the same case should be
used to fulfill the requirement for both
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Medicaid and CHIP reviews of 200
negative cases.
Response: The regulation does not
prevent the same case from being in
both the Medicaid and CHIP negative
case samples if applicable. States must
submit a pilot planning document that
meets the requirements of § 431.814 for
both the active and negative case
reviews, which is subject to CMS
approval. However, we will not approve
a negative case review pilot planning
document for any state that chooses to
only review cases that were denied
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coverage by both Medicaid and CHIP, or
a proposal that does not meet CMS
requirements.
Comment: Several commenters
requested that CMS include more
details surrounding the MEQC pilot
review procedures in the regulatory text
of the final rule, including what will be
in the future CMS subregulatory
guidance.
Response: Forthcoming MEQC
program operating instructions and
procedures will provide further detail
on review and reporting requirements.
The regulatory text outlines the general
framework for the pilot program and the
forthcoming guidance will contain
specific implementing and operating
guidelines.
Comment: One commenter disagreed
with the proposed new MEQC review
schedule of 1 year on, and 2 years off.
The commenter requested that CMS
consider changing the proposed MEQC
review schedule to an ongoing annual
review cycle.
Response: We appreciate the
commenter’s suggestion, but decline to
change the proposed MEQC review
schedule. Our proposed review
schedule for MEQC was created to
provide necessary oversight of eligibility
determinations between a state’s PERM
cycles, account for those areas that are
not fully reviewed by PERM (for
example, negative cases, and overstated
and understated liability), and allow
states a chance to implement
prospective improvements in eligibility
determinations before having their next
PERM eligibility improper payment
measurement performed. While we are
not requiring an annual review cycle,
nothing in this final rule or in the
regulations in this subpart should be
construed as limiting the state’s program
integrity measures, or affecting the
state’s obligation to ensure that only
eligible individuals receive benefits or
to provide for methods of
administration that are in the best
interest of applicants and beneficiaries
and are necessary for the proper and
efficient operation of the plan.
Comment: Several commenters
requested that CMS strengthen the rules
for the MEQC and PERM programs to
include more specific requirements for
states to examine how the verification
rules and eligibility processes states
have put in place affect the overall
customer experience and timeliness of
the eligibility decision.
Response: The evaluation of customer
experience is not the role of the PERM
or MEQC programs. However, if there
are specific concerns around a state’s
processes, the MEQC pilots are flexible
enough that the states will, if they
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choose, be able to include them as a part
of their review and report on these
items, in addition to improper payment
information.
Comment: Several commenters
requested that CMS expand the scope of
the MEQC pilots to examine state
processes for transferring cases to and
from the exchange. Further, the
commenter recommended that CMS
needs to monitor account transfers to
ensure that states are using the
information applicants provide to the
exchange and not asking for information
or documentation that has already been
provided, and that states are
appropriately transferring denied
Medicaid cases that originate with the
state Medicaid agency to the exchanges.
Response: Appropriate use of
applicant-provided information and
transfer of denied Medicaid cases are
currently a part of our eligibility review
pilots, and we anticipate including
instructions on review of these items in
subregulatory guidance. Section 431.812
(b)(1) and (c)(1) will cover these type of
process related issues as it requires
states to identify deficiencies in
processing subject to corrective actions.
Comment: A commenter requested
that CMS direct all negative case
reviews rather than leaving them to state
discretion.
Response: We did propose to direct
all negative case reviews and did not
propose to leave them to state
discretion. Negative case reviews are not
given the same flexibility to focus on
specific areas, like active case reviews.
Additionally, all MEQC pilots,
including both active and negative case
reviews, require our approval. States
must comply with § 431.812(a), which
requires each state to conduct a MEQC
pilot in accordance with the approved
pilot planning document, as well as
other instructions established by CMS.
Comment: A few commenters
recommended that CMS direct the
MEQC active case reviews immediately
after a state’s eligibility improper
payment rate exceeds the 3 percent
threshold. These commenters contend
that waiting to impose this provision
until a state has exceeded the 3 percent
threshold in consecutive PERM cycles is
too long.
Response: While we appreciate the
commenter’s recommendation, we are
not accepting this recommendation at
this time. We want to give states an
opportunity to evaluate and
appropriately address their PERM
findings through their MEQC pilots
before taking away the flexibility of a
state’s active case reviews. We will
direct the focus of the active case
reviews for those states that exceed the
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3 percent in consecutive PERM cycles.
However, we will continue to maintain
oversight of states’ reviews, and all
states will need to follow CMS-provided
guidance when conducting their MEQC
pilot reviews. Both the PERM and
MEQC pilot programs are operationally
complementary, and should be treated
in a manner that allows for states to
review identified issues, develop
corrective actions, and effectively
implement prospective improvements to
their eligibility determinations. This
approach also encourages states to
pursue prospective improvements to
their eligibility determination systems,
policies, and procedures before their
next PERM cycle, in which an eligibility
improper payment rate will be
calculated with the potential for
payment reductions and disallowances.
Comment: A commenter stated that
§ 431.812 should specify how to report
payment findings and that the reference
to § 431.814 does not include this
information.
Response: Section 431.816 specifies
requirements for case review
completion and submission of reports
that include the reporting of payment
findings. As noted at § 431.816(b), states
must submit a detailed case-level report
in a format provided by CMS, and all
case-level findings are due by August 1
following the end of the MEQC review
period.
Comment: One commenter stated that
the timing of the modified MEQC pilot
program guidance will be critical for
Cycle 2 states to have sufficient time to
complete the pilot and implement
corrective actions prior to the date of the
eligibility determinations for the PERM
review period beginning in 2018.
Response: We plan to issue necessary
guidance upon publication of this final
rule, and we believe Cycle 2 states will
have sufficient time to meet the
requirements of this final rule.
As a result of the comments, we do
not have any revisions to the regulatory
text, and, therefore, we are finalizing it
as proposed.
2. MEQC Pilot Planning Document
We proposed to revise § 431.814 to
clarify the revised sampling plan and
procedures for the MEQC pilot program.
We proposed that each state be required
to submit, for our approval, a MEQC
Pilot Planning Document that details
how the state will perform its active and
negative case reviews. This process is
consistent with that used historically
with MEQC pilots and also with the FY
2014 to FY 2017 Medicaid and CHIP
Eligibility Review Pilots. Prior to the
first submission cycle, we will provide
states with guidance containing further
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details informing them of what
information will need to be included in
the MEQC Pilot Planning Document.
The following is summary of the
comments we received regarding our
proposal to require states to submit a
pilot planning document by November
1 following the end of the State’s PERM
year for each MEQC pilot that meets the
requirements of § 431.814 and is subject
to our approval.
Comment: Several commenters
requested that CMS strengthen the pilot
planning document provision to require
states to include justification for the
focus of the active case review, which
should be based on the findings of the
PERM review.
Response: We agree with this
recommendation and have added the
requirement to the regulatory text for
states to include justification for the
focus of their active case reviews.
Although error prone areas would be
based on each state’s PERM review
findings, the other options
(comprehensive review, recent changes
to eligibility policies and processes, or
areas where the state suspects
vulnerabilities) available for the active
case reviews would not necessarily be
tied to PERM.
Comment: One commenter stated that
for the state to be timely, it is crucial
that CMS have a deadline for approving
a timely submitted pilot planning
document because states cannot start
their MEQC pilot plans without CMS
approval, and recommends CMS
include in the final rule a process to
respond so that states can plan
accordingly to meet their mandated
deadlines.
Response: We intend to approve pilot
planning documents as to not delay
each state’s MEQC pilot timeline. We
cannot specify a timeline, as our
approval will be dependent upon the
content of each plan and the state’s
compliance with § 431.814.
As a result of the comments, we are
revising § 431.814(1)(i) to require states
to include justification for the focus of
the active case reviews, and finalize the
rest of § 431.814 as proposed.
sradovich on DSK3GMQ082PROD with RULES2
3. Timeline and Reporting for MEQC
Pilot Program
We proposed to revise § 431.816 to
clarify the case review completion
report submission deadlines. We
proposed that states be required to
report, through a CMS-approved Web
site and in a CMS-specified format, on
all sampled cases by August 1 following
the end of the MEQC review period,
which we believe will streamline the
reporting process and ensure that all
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findings are contained in a central
location.
We did not receive any comments on
this proposal to clarify reporting and
case review submission deadlines, and
therefore, we are finalizing as proposed.
We proposed to revise § 431.818 to
remove the mailing requirements and
the time requirement.
We did not receive any comments on
this proposal to remove the mailing and
time requirements from § 431.818, and
therefore, we are finalizing as proposed.
4. MEQC Corrective Actions
We proposed to revise § 431.820 to
clarify the corrective action
requirements under the proposed MEQC
pilot program. Corrective actions are
critical to ensuring that states
continually improve and refine their
eligibility processes. Under the existing
MEQC program, states must conduct
corrective actions on all identified case
errors, including technical deficiencies,
and we proposed that states continue to
be required to conduct corrective
actions on all errors and deficiencies
identified through the proposed MEQC
pilot program.
We proposed that states report their
corrective actions to CMS by August 1
following completion of the MEQC pilot
review period, and that such reports
also include updates on the life cycles
of previous corrective actions, from
implementation through evaluation of
effectiveness.
The following is summary of the
comments we received regarding our
proposal to report on corrective actions
and include updates on the life cycles
of previous corrective actions.
Comment: One commenter
recommended that CMS require states to
include in the corrective action plan
specific deadlines for addressing errors
and deficiencies found in the case
reviews, and for implementing
corrective actions.
Response: Specific deadlines for
addressing errors and deficiencies, as
well as for implementing corrective
actions are highly dependent on the
nature of the problem and the kind and
extent of the corrective action needed.
States do have an incentive to act
quickly, as implementing effective
correction actions through MEQC allows
states to pursue prospective
improvements to their eligibility
determination systems, policies, and
procedures before their next PERM
cycle, in which an eligibility improper
payment rate would be calculated with
the potential for payment reductions
and disallowances.
Comment: One commenter
recommended CMS broaden the
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requirement that states provide updates
on corrective actions reported for the
previous MEQC pilot, to include all
corrective actions, not just those
reported in the MEQC pilot immediately
preceding the current one that have not
been addressed.
Response: We decline to accept the
commenter’s recommendation because
such provisions would require states to
report on corrective actions that may no
longer be relevant. In the event that a
past MEQC corrective action was not
implemented by the state, similar
findings would be identified during a
state’s PERM cycle as well as the
immediately preceding MEQC pilot, and
thus, would require the state to meet
PERM CAP and MEQC CAP
requirements.
As a result of the comments, we are
finalizing this section as proposed.
We proposed to remove § 431.822, as
we will no longer be performing a
federal case eligibility review of the
revised MEQC program.
We did not receive any comments on
this proposal to remove § 431.822, and
therefore, we are finalizing as proposed.
5. MEQC Disallowances
Section I.B.1 of the proposed rule,
provided a detailed regulatory history of
CMS’s implementation of the MEQC
program, and, in conformity with CMS’s
policy since 1993, we proposed not
using the revised MEQC pilot program
to reduce payments or to institute
disallowances. Instead, we proposed to
formalize the MEQC pilot process to
align all states in one cohesive pilot
approach to support and encourage
states during their 2 off-years between
PERM cycles to address, test, and
implement corrective actions that would
assist in the improvement of their
eligibility determinations. This
approach also better harmonizes and
synchronizes the MEQC pilot and PERM
programs, leaving them operationally
complementary. Additionally, this
provision will be advantageous to all
states as they each will be exempt from
potential payment reductions and
disallowances while conducting their
MEQC pilot; therefore placing the main
focus of the pilots on the refinement and
improvement of their eligibility
determinations. Based on this approach,
we proposed that each state’s eligibility
improper payment rate will be
calculated in its PERM year, and that its
rate will be frozen at that level during
its off-years when it will conduct an
MEQC pilot and implement corrective
actions.
We proposed to remove § 431.865
because the CHIPRA authorized certain
PERM and MEQC data substitution
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allowances, upon which we believe that
the PERM eligibility improper payment
rate determination methodology
satisfies the requirements of section
1903(u) of the Act to be used for that
provision’s payment reduction (and
potential disallowance) requirement.
Therefore, we are requiring states to use
the PERM program to meet section
1903(u) of the Act requirements in their
PERM years, and that potential payment
reductions or disallowances only be
invoked under the PERM program.
Commenters supported our proposal
to remove § 431.865, and are finalizing
as proposed.
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6. Payment Error Rate Measurement
(PERM) Program
We proposed revisions to the PERM
program. Our proposed PERM eligibility
component revisions have been tested
and validated through multiple rounds
of PERM model pilots with 15 states and
through discussion with state and nonstate stakeholders. The PERM model
pilots were distinct from the separate
FY 2014 to FY 2017 Medicaid and CHIP
Eligibility Review Pilots, and were used
to assess, test, and recommend changes
to PERM’s eligibility component review
process based on the changes
implemented by the Affordable Care
Act. Specifically, we tested, and
requested stakeholder feedback on,
options in the following areas (below,
there is more detail on each):
• Universe definition.
• Sample unit definition.
• Eligibility Case review approach.
• Feasibility of using a federal
contractor to conduct the eligibility case
reviews.
• Difference resolution and appeals
process.
Through the PERM model pilots, we
have determined that each of the
proposed changes support the goals of
the PERM program and will produce a
valid, reliable eligibility improper
payment rate. We also interviewed
participating states, as well as a select
group of other states, to receive feedback
on the majority of the proposed changes,
and, to the extent possible, we
addressed state concerns in the
proposed rule.
7. Payment Error Rate Measurement
(PERM) Measurement Review Period
Since PERM began in 2006, the
measurement has been structured
around the federal fiscal year (FFY) with
states submitting FFS claims and
managed care payments with paid dates
that fall in the FFY under review. But,
a data collection centered on the FFY
has made it perennially challenging to
finalize the improper payment rate
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measurement and conduct all the
related reporting to support an improper
payment rate calculation by November
of each year. Therefore, to provide states
and CMS additional time to complete
the work related to each PERM cycle
prior to the annual improper payment
rate publication in the AFR, to better
align PERM with many state fiscal year
timeframes, and to mirror the review
period currently utilized in the
Medicare FFS improper payment
measurement program, we proposed to
change the PERM review period from a
FFY to a July through June period. We
proposed to begin this change with the
Cycle 1 states, whose PERM cycle
would have started on October 1, 2017,
so that Cycle 1 states would submit their
1st and 4th quarters of FFS claims and
managed care payments with paid dates
between, respectively, July 1 through
September 30, 2017 and April 1 through
June 30, 2018. Subsequent cycles would
follow a similar review period.
The following is summary of the
comments we received regarding our
proposal to change the PERM review
period.
Comment: A few commenters
expressed concerns about the effective
date of the new review period and when
pre-cycle activities would start with the
new review period. The commenters
requested that CMS provide lead time to
allow states sufficient time to schedule
cycle kick-off activities and evaluate
and prepare for the changes after the
final rule is released.
Response: We will work with states as
early as possible to prepare states for
their next PERM cycle, regardless of the
review period. We have already been
working closely with states through the
Medicaid and CHIP Eligibility Review
Pilots over the past 3 to 4 years, while
PERM eligibility reviews have been
suspended. Prior to the publication of
this final rule, we have worked closely
with states by assisting them in
evaluating their readiness for the
resumption of PERM eligibility. Also,
we anticipate conducting any
preparation/pre-cycle work earlier than
was done in previous cycles to give
states advanced guidance before the
cycle begins.
Comment: A commenter questioned
why only the 1st and 4th quarters were
mentioned, and not the 2nd and 3rd
quarters for state submission of FFS and
managed care payments.
Response: The 2nd and 3rd quarters
will still be required. The 1st and 4th
quarters are only mentioned to serve as
examples to clearly display the shift in
state’s quarterly FFS and managed care
submissions, based on the proposal to
change the PERM review period. States
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are still responsible for submitting 4
quarters of FFS and managed care
payments within the time period
finalized in this rule.
Comment: One commenter expressed
concern about potential areas of overlap
between cycles, which would mean that
states would have less time to
implement corrective actions to reduce
the next cycle’s improper payment rates.
Response: Although there may be
some overlap for states during the initial
transition between the previous and
new PERM review periods, states
should not wait to begin implementing
corrective actions to address all
identified errors and deficiencies.
Comment: One commenter questioned
how the rolling national improper
payment rates would be affected by the
new PERM review period.
Response: There is no expected
impact to the national improper
payment rate. During the transition
period from a federal fiscal year to the
July through June review period, the
assumption implied with the national
rate is that the cycle rate for the July
through June sampling period does not
differ statistically from the previous
fiscal year sampling period. We believe
this assumption is reasonable given the
shift in the sampling frame is only three
months.
In addition to the previous comments,
many commenters supported our
proposal to change the PERM review
period, and therefore, we are finalizing
this as proposed.
We proposed to revise § 431.950 to
clarify the requirement for states and
providers to submit information and
provide support to federal contractors to
produce national improper payment
estimates for Medicaid and CHIP.
We did not receive any comments
specifically regarding our proposed
revisions at § 431.950. However, all
comments regarding our proposal to
transfer the PERM eligibility review
responsibility from the states to a
federal contractor are listed below under
the ‘‘Eligibility Federal Review
Contractor and State Responsibilities’’
section.
We proposed various revisions to
§ 431.958 to add, revise, or remove
definitions to provide greater clarity for
the proposed PERM program changes.
Proposed additions and revisions
include definitions for ‘‘appeals,’’
‘‘corrective action,’’ ‘‘deficiency,’’
‘‘difference resolution,’’ ‘‘disallowance,’’
‘‘Eligibility Review Contractor (ERC),’’
‘‘error,’’ ‘‘federal contractor,’’ ‘‘Federally
facilitated exchange-determination
(FFE–D),’’ ‘‘Federal financial
participation,’’ ‘‘finding,’’ ‘‘Improper
payment rate,’’ ‘‘Lower limit,’’
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‘‘PERMreview period,’’ ‘‘recoveries,’’
‘‘Review Contractor (RC),’’ ‘‘Review
year,’’ ‘‘State-specific sample size,’’
‘‘State eligibility system,’’ ‘‘State error,’’
‘‘State payment system,’’ ‘‘Statistical
Contractor (SC),’’ and removing the
definitions of ‘‘active case,’’ ‘‘active
fraud investigation,’’ ‘‘agency,’’ ‘‘case,’’
‘‘case error rate,’’ ‘‘case record,’’ ‘‘last
action,’’ ‘‘negative case,’’ ‘‘payment
error rate,’’ ‘‘payment review,’’ ‘‘review
cycle,’’ ‘‘sample month,’’ ‘‘state agency,’’
and ‘‘undetermined.’’
The following is summary of the
comments we received regarding our
proposal to add, revise or remove
definitions.
Comment: One commenter stated that
the definition of ‘‘corrective action’’ was
not consistent with the rest of the
language surrounding corrective actions.
Response: We agree with this
comment and have revised the
definition of ‘‘corrective action’’ to be
more consistent with the language
surrounding corrective actions, and
revised it to read as actions to be taken
by the state to reduce errors or other
vulnerabilities.
Comment: A commenter requested
that the term ‘‘error’’ be removed from
the definition of ‘‘deficiency,’’ because
the term ‘‘error’’ is a separate definition.
Response: We agree with the
commenter that defining an ‘‘error’’ to
include only improper payments means
that an error which is defined as an
improper payment cannot also be a
deficiency, and have changed the
definition ‘‘error’’ to ‘‘payment error.’’
Comment: One commenter requested
clarification to the definition of
‘‘difference resolution,’’ stating that
states should have the opportunity to
dispute both error and deficiency
findings.
Response: States currently do have
the opportunity to dispute both error
and deficiency findings. The proposed
definition of difference resolution
means a process that allows states to
dispute the PERM Review Contractor
and Eligibility Review Contractor
‘‘error’’ findings directly with the
contractor. We will remove the term
‘‘error’’ from the definition of
‘‘difference resolution’’ for clarification
that all findings, both errors and
deficiencies, may be disputed to match
the current practice.
Comment: A commenter requested
that we add the term ‘‘findings’’ and/or
‘‘eligibility review findings’’ to the
definition of ‘‘error.’’
Response: We respectfully disagree
with the commenter and find the
current definition of ‘‘error’’ to be
adequate as proposed. An error is any
payment where federal and/or state
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dollars were paid improperly based on
PERM medical, data processing, and/or
eligibility reviews.
Comment: Two commenters requested
we clarify the definition of ‘‘state error.’’
The commenters stated that the way
‘‘state error’’ is currently worded seems
to exclude medical review findings from
the state improper payment rate.
Response: The definition of provider
error, to which we made no proposed
revisions, includes medical review
errors at § 431.960(c). A state’s improper
payment rate includes both state errors
and provider errors, or, in other words,
all data processing, medical review, and
eligibility errors, with the exception of
errors described under § 431.960(e)(2).
Comment: One commenter questioned
whether or not the definition of
‘‘disallowance’’ applies to CHIP, stating
the definition only references Medicaid.
Response: As proposed at § 457.628,
regulations at §§ 431.800 through
431.1010 (related to the PERM and
MEQC programs) apply to state’s CHIP
programs in the same manner as they
apply to state’s Medicaid programs. For
clarification, we will revise the
definition of ‘‘disallowance’’ by
exchanging the term ‘‘Medical
Assistance’’ for ‘‘Medicaid.’’
Comment: Some commenters
requested that CMS add a separate
definition for the term ‘‘eligibility
improper payment rate,’’ because they
believe it would be disingenuous to
calculate an eligibility improper
payment rate which would be used in
the calculation of any payment
reductions and/or disallowances should
a state exceed the 3 percent threshold,
based on the absolute (rather than net)
value of overpayments and
underpayments.
Response: Although we appreciate
these comments, we decline to alter the
definition of the improper payment rate
or to add a separate improper payment
rate definition for PERM eligibility. To
comply with IPERIA, ‘‘improper
payment rate’’ is defined as an annual
estimate of improper payments made
under Medicaid and CHIP equal to the
sum of the overpayments and
underpayments in the sample, that is,
the absolute value of such payments,
expressed as a percentage of total
payments made in the sample. As such,
eligibility improper payments are
included in the ‘‘improper payment
rate’’ definition. Further, § 431.960(d)
defines an ‘‘eligibility error’’ as an
underpayment or an overpayment. In
the ‘PERM Disallowance’ section of this
final rule, we address commenters
concerns surrounding the inclusion of
underpayments in the payment
reduction/disallowance calculations.
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As a result of the comments, we have
revised the definition of ‘‘corrective
action’’ to be more consistent with the
rest of the regulatory language
surrounding corrective actions by
revising to include actions to be taken
by the state to reduce errors or other
vulnerabilities, removed the term
‘‘error’’ from the definition of
‘‘difference resolution,’’ revised the
definition of ‘‘disallowance’’ by
exchanging the term ‘‘Medical
Assistance’’ for ‘‘Medicaid,’’ and
clarified the definition of ‘‘error’’ is a
‘‘payment error.’’ We made minor
stylistic changes to the definitions of
‘‘Eligibility Review Contractor (ERC),’’
‘‘Federal financial participation,’’
‘‘Lower limit,’’ ‘‘Recoveries,’’ ‘‘Review
Contractor (RC),’’ ‘‘Review year,’’ ‘‘State
eligibility system,’’ ‘‘State error,’’ and
‘‘Statistical Contractor (SC).’’ We are
finalizing all other added, revised, or
removed definitions as proposed.
We proposed to revise § 431.960 to
remove references to negative case
reviews and improper payments
because a separate negative case review
will no longer be a part of the PERM
review process, as well as to provide
greater clarity for the proposed PERM
program changes. Note that while a
separate negative case review would not
be conducted as part of the proposed
PERM review process, it could be
possible for a negative case to be
reviewed because the claims universe
includes claims that have been denied.
If a sampled denied claim was denied
because the beneficiary was not eligible
for Medicaid/CHIP benefits on the date
of service, PERM would review the
state’s decision to deny eligibility.
We did not receive any comments on
this proposal to remove references to
negative case reviews and improper
payments from § 431.960, and,
therefore, we are finalizing as proposed.
Please note, comments received
surrounding PERM’s proposal to no
longer include a separate negative case
review are addressed under the
‘Universe Definition’ section.
We proposed to revise § 431.972(a) to
specify that states would be required to
submit FFS claims and managed care
payments for the new PERM Review
Period.
We did not receive any comments on
this proposal to require states to submit
FFS claims and managed care payments,
and, therefore, we are finalizing as
proposed.
8. Eligibility Federal Review Contractor
and State Responsibilities
Under the existing § 431.974, states
conduct PERM eligibility reviews. Since
the first PERM eligibility cycle in FY
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2007, we have found that state resources
have been burdened by having to
conduct PERM eligibility reviews, and
because the reviews require substantial
staff resources, many states have
struggled to meet review timelines.
Moreover, we have found that having
states conduct PERM eligibility reviews
has created significant opportunity for
states to misinterpret and inconsistently
apply the PERM eligibility review
guidance, with, for example, states
having difficulty interpreting the
universe definitions and case review
guidelines.
To confront these challenges, we
proposed to utilize a federal contractor
(known as the ERC) to conduct the
eligibility reviews on behalf of states.
This will concomitantly reduce states’
PERM program burden and ensure more
consistent guidance interpretation,
thereby reducing case review
inconsistencies across states and
improving eligibility processes related
to case reviews and reporting. A federal
contractor will be able to apply
consistent standards and quality control
processes for the reviews and improve
CMS’s ability to oversee the process, so
improper payments will be reported
consistently across states. Moreover, the
ERC will allow us to gain a better
national view of improper payments to
better support the corrective action
process and ensure accurate and timely
eligibility determinations, while a thirdparty review team will be more
consistent with standard auditing
practices and our other improper
payment measurement programs.
Our PERM model pilot testing has
confirmed that having a federal
contractor conduct eligibility reviews is
feasible and improves our oversight of
the process, as an experienced federal
contractor can apply PERM guidance
consistently across states while
continuing to recognize unique state
eligibility policies, processes, and
systems. Further, through the pilots, we
have developed processes to ensure that
the federal contractor works
collaboratively with state staff to ensure
that the reviews are consistent with
state eligibility policies and procedures.
While states will not continue to
conduct PERM eligibility reviews, we
envision that they will still play a role,
as needed, in supporting the federal
contractor. Therefore, we proposed to
add state supporting role requirements
by revising § 431.970 to outline data
submission and state systems access
requirements to support the PERM
eligibility reviews and the ERC.
Under § 431.10(c)(1)(i)(A)(3), state
Medicaid agencies may delegate
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authority to determine eligibility for all,
or a defined subset of, individuals to the
Exchange, including Exchanges
operated by a state or by HHS. Those
states that have delegated the authority
to make Medicaid/CHIP eligibility
determinations to an Exchange operated
by HHS, known as the Federally
Facilitated Exchange (FFE), are
described as determination states, or
FFE–D states. By contrast, those states
that receive information from the FFE,
which makes assessments of Medicaid/
CHIP eligibility, but where the
applicant’s account is transferred to the
state for the final eligibility
determination, are known as assessment
states, or FFE–A states.
We proposed that states will be
responsible for providing the ERC with
eligibility determination policies and
procedures, and any case
documentation requested by the ERC,
which could include the account
transfer (AT) file for any claims where
the individual was determined eligible
by the FFE in a determination state
(FFE–D), or was passed on to the state
by the FFE for final determination in
assessment states (FFE–A).
Further, if the ERC finds that it cannot
complete a review due to insufficient
supporting documentation, it will
expect the state to provide it. States will
determine how to obtain the requested
documentation (we did not propose to
charge the ERC with conducting
additional outreach, such as client
contact) and, if unable to do so to enable
to ERC to complete the review, the ERC
will cite the case as an improper
payment due to insufficient
documentation. In the event that
additional documentation is needed for
a sampled FFE–D case, we are aware
that states may not have access to any
other supporting documentation, aside
from the AT file. For these cases, where
the beneficiary’s eligibility
determination under review was made
by the FFE, an insufficient
documentation improper payment
would be cited, but only included in the
national improper payment rate, and not
the state specific improper payment
rate. We also proposed that states will
be responsible for providing the ERC
with direct access to their eligibility
system(s). A state’s eligibility system(s)
(including any electronic document
management system(s)) contains data
the ERC must review, including
application information, third party data
verification results, and copies of
required documentation (for example,
pay stubs), and we believe that allowing
the ERC direct access would best enable
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it to complete its reviews in a timely
and accurate manner and reduce state
burden that would otherwise be
required to inform the ERC’s reviews.
However, to ensure that states
continue to have a measure of oversight,
we proposed allowing states the
opportunity to review the ERC’s case
findings prior to their being finalized
and used to calculate the national and
state improper payment rate. Through a
difference resolution and appeals
process, states would have the
opportunity to resolve disagreements
with the ERC. Based on our pilot testing,
we believe that open communication
between the state and the ERC would
best foster states’ understanding of the
review process and the basis for any
findings.
The following is summary of the
comments we received regarding our
proposal to add requirements which
outline the state’s role in supporting the
federal contractor during the PERM
eligibility reviews.
Comment: Several commenters
expressed the importance of continued
state involvement in the eligibility
reviews. The commenters noted the
need for the ERC to work collaboratively
with states and to allow state experts to
provide assistance, resources, and
support to the ERC. Additionally, one
commenter noted the need for states to
understand in advance how the ERC
will conduct reviews and have the
opportunity to review the ERC’s
planned review process.
Response: We agree with the
commenters and believe that open
communication and collaboration
between the state and the ERC is
essential and would best foster states’
understanding of the review process and
the basis for any findings. We intend to
minimize state burden, but envision that
states will still play an important role in
supporting the federal contractor. Our
PERM model pilot testing has confirmed
that having a federal contractor conduct
eligibility reviews is feasible as an
experienced federal contractor can
apply PERM guidance consistently
across states while continuing to
recognize unique state eligibility
policies, processes, and systems.
Further, through the pilots, we have
developed processes to ensure that the
federal contractor works collaboratively
with state staff. We tasked the ERC to
develop state-specific eligibility review
planning documents to ensure state and
CMS buy-in for the review process that
will be utilized in each state.
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Comment: One commenter suggested
that CMS make the eligibility review
procedures available to the public so
that stakeholders can understand the
standards and processes used to
evaluate the accuracy of Medicaid and
CHIP determinations.
Response: Similar to CMS’ current
practice for the PERM medical review
and data processing review processes
and procedures, we intend to make
eligibility review processes and
procedures available through
documents available on the CMS PERM
Web site.
Comment: One commenter requested
that CMS incorporate a mechanism or
process to determine whether the
automated eligibility processes required
by the Affordable Care Act are
functioning accurately and whether
eligibility category assignments result in
the appropriate federal match rate being
applied.
Response: As defined at
§ 431.960(d)(1), an eligibility error is an
error resulting in an overpayment or
underpayment that is determined from
a review of a beneficiary’s eligibility
determination, in comparison to the
documentation used to establish a
beneficiary’s eligibility and applicable
federal and state regulations and
policies, resulting in Federal and/or
State improper payments. This
definition will be applied regardless of
whether the error was caused by
automated system or caseworker
processes. For the commenter’s second
request, we intend to review eligibility
determinations for correct eligibility
category assignment. We proposed to
clarify in § 431.960(b)(1), (c)(1), and
(d)(1) that improper payments are
defined as both federal and state
improper payments. We believe this
change would allow us to identify
federal improper payments in
circumstances where states make an
incorrect eligibility category assignment
that would result in the incorrect FMAP
being claimed by the state.
Comment: A few commenters had
expressed concerns around the
requirement for states to provide the
case documentation needed to support
the eligibility review. One commenter
stated that the ERC should be
responsible for providing
documentation to support the eligibility
reviews because they are conducting the
reviews. Another commenter questioned
how the ERC would obtain all
information the state used to determine
eligibility if the supporting
documentation exists only in hard copy.
Response: As case documentation is
within the state’s custody and control,
the responsibility for providing
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documentation lies with the state.
Moreover, states must provide case
documentation as requested to support
the eligibility determinations under
review as proposed at § 431.970(a)(9).
As stated in the proposed rule, if the
state is unable to comply with all
information submission requirements
and the ERC is unable to complete the
review, the payment under review may
be cited as an error due to insufficient
documentation. The ERC will accept
both electronic and hard copy
documentation.
Comment: One commenter requested
that CMS allow and approve state
waiver requests to maintain the PERM
eligibility review responsibility, rather
than transferring the responsibility to
the federal contractor.
Response: To ensure the accuracy and
consistency of the PERM improper
payment rates, we will not allow or
approve state waiver requests to
maintain the PERM eligibility review
responsibility. As noted in the proposed
rule, the decision to transfer the PERM
eligibility reviews to a federal contractor
was proposed to reduce states’ PERM
program burden and ensure more
consistent guidance interpretation,
thereby reducing case review
inconsistencies across states and
improving eligibility processes related
to case reviews and reporting.
Comment: One commenter requested
that CMS include a provision requiring
the review contractor to review the case
according to state eligibility criteria and
documented policies and procedures, as
well as a provision that would prevent
an error from being counted three times
based on the data processing, medical,
and eligibility reviews.
Response: The definition of an
eligibility error at § 431.960(d)(1) states
that an eligibility error is an error
resulting in an overpayment or
underpayment that is determined from
a review of a beneficiary’s eligibility
determination, in comparison to the
documentation used to establish a
beneficiary’s eligibility and applicable
federal and state regulations and
policies, resulting in Federal and/or
State improper payments. Thus, the ERC
will be conducting the eligibility
reviews in accordance with applicable
federal, as well as, state regulations and
policies. Separate definitions for data
processing and medical review errors
are also detailed at § 431.960(b) and (c),
respectively, which the ERC will use to
conduct reviews. As the three payment
error definitions are distinct, a single
error would be prevented from being
counted three times.
In addition to the comments above,
we also received many comments
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supporting the transfer of the PERM
eligibility review responsibility to a
federal contractor, and therefore, are
finalizing as proposed.
9. Eligibility Review Procedures
As discussed, we proposed that a
federal contractor conduct the eligibility
case reviews, and states’ responsibilities
would therefore be limited. Because we
proposed state responsibilities at
§ 431.970, we proposed to remove
§ 431.974.
We did not receive any comments on
this proposal to remove § 431.974, and
therefore, we are finalizing as proposed.
10. Eligibility Sampling Plan
We proposed to remove § 431.978,
because the ERC will conduct the
eligibility reviews and states will no
longer be required to submit a sampling
plan. In place of the sampling plan, the
ERC will draft state-specific eligibility
case review planning documents
outlining how it will conduct the
eligibility review, including the relevant
state-specific eligibility policy and
system information.
We did not receive any comments on
this proposal to remove § 431.978, and
therefore, we are finalizing as proposed.
11. Eligibility Review Procedures
We proposed to remove § 431.980;
this section presently specifies the
review procedures required for states to
follow while performing the PERM
eligibility component reviews. States
will no longer be required to conduct
the PERM eligibility component
reviews, because the ERC will conduct
the eligibility reviews.
We did not receive any comments on
this proposal to remove § 431.980, and
therefore, we are finalizing as proposed.
12. Eligibility Case Review Completion
Deadlines and Submittal of Reports
We proposed to remove § 431.988;
this section presently specifies states’
requirements and deadlines for
reporting PERM eligibility review data,
which functions we proposed to
transition to an ERC.
We did not receive any comments on
this proposal to remove § 431.988, and
therefore, we are finalizing as proposed.
13. Payment System Access
Requirements
The Claims Review Contractor (RC)
currently conducts PERM reviews on
FFS and managed care claims for the
Medicaid program and CHIP, and is
required to conduct Data Processing
(DP) reviews on each sampled claim to
validate that the claim was processed
correctly based on information found in
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the state’s claim processing system and
other supporting documentation
maintained by the state. We believe that,
in order for the RC to review claims
during the review cycle, reviewers
would need remote or on-site access to
appropriate state systems. If the RC is
unable to review pertinent claims
information, and the state is not able to
comply with all information submission
and systems access requirements as
specified in the proposed rule, the
payment under review may be cited as
an error due to insufficient
documentation.
To facilitate the RC’s reviews, we
proposed that states grant it access to
systems that authorize payments,
including: FFS claims payments; Health
Insurance Premium Payment (HIPP)
payments; Medicare buy-in payments;
aggregate payments for providers;
capitation payments to health plans;
and per member per month payments
for Primary Care Case Management
(PCCM) or non-emergency
transportation programs. We proposed
that states also grant the RC access to
systems that contain beneficiary
demographics and provider enrollment
information to the extent such
information is not included in the
payment system(s), and to any imaging
systems that contain images of paper
claims and explanation of benefits
(EOBs) from third party payers or
Medicare.
Experience has demonstrated that
some states have allowed the RC only
partial and/or untimely systems access,
which we believe has led to a slower
review process. Based on our
discussions with the states, we believed
they are sometimes permitting limited
systems access due to a lack of
processes to grant access (for example,
requiring contractors to complete access
forms and training) rather than state
bans on providing outside contractors
with access due to privacy or cost
concerns. Therefore, we proposed
adding paragraphs (c) and (d) to
§ 431.970, which will require states to
provide access to appropriate and
necessary systems.
Comment: Many commenters stated
concerns surrounding the proposed
requirement for states to provide federal
contractors with direct access to all
eligibility systems necessary to conduct
the eligibility review, all payment
systems, any systems that include
beneficiary demographic information
and/or provider enrollment information
necessary to conduct the medical and
data processing reviews, any document
imaging systems, and systems that
house the results of third party data
matches. The majority of concerns
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stemmed from the need for data privacy
and security, as well as a concern
around the data that can be shared and/
or provided to federal contractors.
Response: Our contractors are subject
to stringent federal security standards,
including compliance with HIPAA
requirements, and their systems are
subject to annual security audits to
ensure that protected health information
(PHI) and personally identifiable
information (PII) used in the PERM
program is protected. Further, each CMS
contractor is subject to any state-specific
security requirements related to the
access and use of PHI and PII. This
includes entering into data use
agreements and completion of any other
security-related protocol required by the
states. This final rule requires that
contractors be provided direct access to
any necessary state systems required to
conduct Medicaid and CHIP claim and
eligibility reviews and that access can
be provided through remote means
(preferred) or through onsite access.
However, we understand that some data
elements within a system, such as the
IRS income amounts, cannot be viewed
by the ERC due to rules around access
to federal tax information (FTI). CMS
and our contractors will work with
states at the start of each cycle on the
identification of systems needed for
PERM reviews and potential access
challenges.
Comment: One commenter requested
that CMS clarify in regulation the
systems for which the contractor would
need direct access.
Response: Proposed § 431.970
outlined the system access requirements
for federal contractors. This includes all
payment system(s) necessary to conduct
the medical and data processing review,
including the Medicaid Management
Information System (MMIS), any
systems that include beneficiary
demographic and/or provider
enrollment information, and any
document imaging systems that store
paper claims. This also includes all
eligibility system(s) necessary to
conduct the eligibility review, including
any eligibility systems of record, any
electronic document management
system(s) that house case file
information, and systems that house the
results of third party data matches.
Because the number and types of
systems differ between states, we will
work with each state to determine
which systems contractors will need
direct access to meet the requirements
of § 431.970.
Comment: One commenter requested
that CMS clarify if there is a difference
between the terms ‘‘direct access’’ and
‘‘remote or on-site access.’’ The
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commenter stated that CMS should
allow states discretion to provide any
combination of direct, remote, or on-site
systems access.
Response: The terms ‘‘direct access’’
and ‘‘remote or on-site access’’ are
equivalent. States are required to
provide direct systems access to federal
contractors. While we encourage and
prefer states to provide remote access
where possible, both remote and on-site
access will meet the requirements of
§ 431.970.
Comment: Many commenters were
concerned about the time it would take
to train federal contractors to navigate
numerous systems, ultimately
increasing state burden. Commenters
requested that CMS re-evaluate the
efficiency of providing direct access to
federal contractors.
Response: We recognize that the time
and resources that could be required by
a state to train federal contractors in
navigating numerous systems will be
increased initially. However, following
this initial training, state burden should
be reduced over the duration of the
PERM cycle. Through previous PERM
cycles, as well as the PERM model
pilots, experience has demonstrated that
when states have allowed federal
contractors direct systems access, it has
led to a more timely and less
burdensome review process.
Comment: One commenter requested
that CMS clarify if there were any
alternatives should a state not provide
direct access to the eligibility system.
Response: If the state is unable to
comply with all information submission
and systems access requirements and
the ERC is unable to complete the
review, the payment under review may
be cited as an error due to insufficient
documentation.
In addition to these comments, we
received several comments supporting
our proposal to require states grant
direct systems access to federal
contractors, and therefore, we are
finalizing § 431.970(c) and (d) as
proposed.
14. Universe Definition
To meet IPERIA requirements, the
samples used for PERM eligibility
reviews must be taken from separate
universes: one that includes Title XIX
Medicaid dollars, and one that includes
Title XXI CHIP dollars. Section
431.978(d)(1) currently defines the
Medicaid and CHIP active universes as
all active Medicaid or CHIP cases
funded through Title XIX or Title XXI
for the sample month, with certain
exclusions. Developing an accurate and
complete universe is essential to
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developing a valid, accurate improper
payment rate.
In previous PERM cycles, sampling
universe development has been one of
the most difficult steps of the eligibility
review. Varying data availability and
system constraints have made it
challenging to maintain consistency in
state-developed eligibility universes;
developing the eligibility universe may
require substantial staff resources, and
the process may take several data pulls
that are often conducted by IT staff or
outside contractors not closely involved
in the PERM eligibility review process.
During the PERM model pilots, we
tested three PERM eligibility review
universe definition options, including
defining the universe by: (1) Eligibility
determinations and redeterminations
(that is, a universe of eligibility
decisions); (2) actual beneficiaries or
recipients (that is, a universe of eligible
individuals); and (3) claims/payments
(that is, a universe of payments made).
We found that the third approach,
defining the universe by the claims/
payments, was best; PERM was
designed to meet the IPERIA
requirements of calculating a national
Medicaid and CHIP improper payment
rate, so having the eligibility reviews
tied directly to a paid claim ensures that
PERM only reviews those beneficiaries
or recipients who have had services
paid for by the state Medicaid or CHIP
agency. Accordingly, for the PERM
eligibility review active universe we
proposed using the definition at
§ 431.972(a), and deleting the current
PERM eligibility review universe
requirements in § 431.974 and
§ 431.978. The PERM claims component
requires state submission of Medicaid
and CHIP FFS claims and managed care
payments on a quarterly basis; state
submission responsibilities are defined
under § 431.970. These claims and
payments are rigorously reviewed by the
federal statistical contractor, and the
process has extensive, thorough quality
control procedures that have been used
for several PERM cycles and have been
well-tested.
We believe that this universe
definition leverages the claims
component of PERM and supports
efficient use of resources, as the
universe would already be developed on
a consistent basis for the PERM claims
component. By this proposed change,
eligibility reviews using a claims
universe would be tied to payments and
be more consistent with IPERIA, state
burden would be minimized by
harmonizing PERM claims and
eligibility universe development, and
federal and state resources would no
longer be spent on eligibility reviews
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that potentially could not be tied to
payments (for example, eligibility
reviews conducted on beneficiaries that
did not receive any services).
Through our pilot testing, we have
also determined that the claims universe
does not result in a substantially
different rate of case error. However,
sampling from this universe did result
in a higher proportion of non-MAGI
cases because enrollees in such
eligibility categories are likely to have
higher health care service utilization,
and therefore, have more associated FFS
claims. Because PERM is designed to
focus on improper payments, we believe
it is appropriate to use a sample that
focuses on individuals who are linked
to the bulk of Medicaid and CHIP
payments. However, because eligibility
will be reviewed for both FFS claims
and managed care capitation payments,
MAGI cases will be subject to a PERM
eligibility review, primarily through the
review of eligibility for individuals who
have managed care capitations
payments on their behalf, as many states
have chosen to enroll individuals in
MAGI eligibility categories in managed
care. Further, states can choose to focus
on further Medicaid and CHIP reviews
of MAGI cases in the proposed MEQC
pilot reviews they would conduct
during their off-year pilots.
While it is possible for a claim to be
associated with a negative case, as
mentioned previously, the claims
universe does not support a negative
PERM eligibility case rate. Because
IPERIA focuses on payments, the statute
does not require determining a negative
case rate. The proposed MEQC pilot
reviews that states will conduct on offyears would be used to review Medicaid
and CHIP negative cases.
The following is summary of the
comments we received regarding our
proposal to change the universe
definition, which would no longer
include a separate negative case review
in PERM.
Comment: Several commenters
expressed concern around the removal
of the negative case reviews from PERM.
Many commenters were concerned
about the oversight of these cases if not
reviewed by PERM, and recommended
CMS reinstate negative case reviews as
part of the PERM program.
Response: The purpose of the PERM
program is to identify improper
payments. We recognize the importance
of negative case oversight and have
proposed to do so through the MEQC
pilot program. This important oversight
will help assure states are not
incorrectly denying coverage to
individuals, who are in fact eligible to
receive Medicaid/CHIP benefits.
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However, as recommended by the
comment below, we have added PERM
CAP requirements to require states to
evaluate whether actions states take to
reduce eligibility errors will also avoid
increases in improper denials.
Comment: One commenter suggested
additional PERM CAP requirements for
states that would require consideration
of whether actions states take to reduce
eligibility errors will also avoid
increases in improper denials, because
the PERM universe will no longer
include a review of negative cases to
determine whether there were
inappropriate denials.
Response: We agree with this
comment and have added language to
§ 431.992 to include that states will be
required to evaluate whether actions
states take to reduce eligibility errors
will also avoid increases in improper
denials.
Comment: One commenter stated that
denied claims should be removed from
the universe of claims because denied
claims have no federal funds attached.
The commenter also questioned
whether, if denied claims are included
in the universe, there is a timeframe that
the eligibility determinations associated
with denied claims would not be
reviewed and/or dropped, as the
determination under review could have
taken place a number of years earlier.
Response: One of the primary benefits
of moving to a single sample to support
medical reviews, data processing
reviews, and eligibility reviews for the
PERM program is to streamline the
universe submission and sampling
process and select just one sample from
a universe of paid and denied FFS and
managed care claims and payments.
This effort will minimize state burden
and better align the claims and
eligibility review process for the PERM
program. Further, based on IPERIA
requirements, the PERM program must
review for potential over- or underpayments. Denied claims are included
in the PERM claims universe to account
for possible underpayments. We will
not make any adjustments in regulation
regarding the inclusion of denied claims
in the PERM universe nor to the
potential for those claims to receive an
eligibility review. However, we
appreciate the commenter’s concern
regarding the sampling of claims where
the last eligibility action for the
individual associated with the claim
occurred years earlier than the claim
paid date. During the first 2 rounds of
the PERM model pilots, we conducted
an analysis to determine the average
length of time between the claim paid
date and the claim date of service to
determine if a significant lag between
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those two dates would result in
eligibility reviews that occurred more
than 1 to 2 years prior to the claim paid
date.
This analysis showed that the average
amount of time between a claim paid
date and a claim date of service in the
PERM sampled claims reviewed was
approximately 40 to 45 days.
Additionally, on average, the oldest
eligibility actions were approximately
13 months prior to claim paid date.
Further, to date, our pilot work has
found no issues preventing the
completion of eligibility reviews
regardless of the claim paid date or
claim date of service. We will continue
to monitor the eligibility review of
denied claims during Round 5 of the
Medicaid and CHIP Eligibility Review
Pilots, as well as during the initial
cycles when PERM eligibility resumes.
If issues are identified related to the
review of denied claims for eligibility
or, more generally, with the review of
older claims, we will issue
subregulatory guidance.
As a result of the comments, we are
revising § 431.992 to include a state
requirement to evaluate whether actions
states take to reduce eligibility errors
will also avoid increases in improper
denials. Moreover, we have also
received several comments supporting
our proposed universe definition, and
therefore, we are finalizing this as
proposed.
15. Inclusion of FFE–D Cases in the
PERM Review
As previously noted,
§ 431.10(c)(1)(i)(A)(3) permits state
Medicaid agencies to delegate authority
to determine eligibility for all or a
defined subset of individuals to the
Exchange, including Exchanges
operated by a state or by HHS. We
proposed that, in FFE–D states, cases
determined by the FFE (referred to as
FFE–D cases) could be reviewed if a FFS
claim or managed care payment for an
individual determined eligible by the
FFE is sampled. Although FFE–D states
are required to maintain oversight of
their Medicaid/CHIP programs per
§ 435.1200(c)(3), they also enter into an
agreement per § 435.1205(b)(2)(i)(A) by
which they must accept the
determinations of Medicaid/CHIP
eligibility based on MAGI made by
another insurance affordability program
(in this case, the FFE).
Federal regulations permit states to
delegate authority for MAGI-based
Medicaid and CHIP eligibility
determinations to the FFE and require
them to accept those determinations.
States have an overall responsibility for
oversight of all Medicaid and CHIP
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eligibility determinations, but, with
respect to the FFE delegation, they are
required to accept FFE determinations
without further review or discussion on
a case-level basis, making it difficult for
states to address improper payments on
a case-level basis. Therefore, we
proposed that case-level errors resulting
solely from an FFE determination of
MAGI-based eligibility that the state was
required to accept be included only in
the national improper payment rate, not
the state rate. Conversely, we proposed
that errors resulting from incorrect state
action taken on cases determined and
transferred from the FFE, or from the
state’s annual redetermination of cases
that were initially determined by the
FFE, be included in both state and
national improper payment rates.
Examples of errors that we proposed
will be included in both state and
national improper payment rates
include, but are not limited to: (1)
Where a case is initially determined and
transferred from the FFE, but the state
then fails to enroll an individual in the
appropriate eligibility category; and (2)
errors resulting from initial
determinations made by a state-based
Exchange.
We proposed revisions to § 431.960(e)
and § (f) to clarify that we would
distinguish between cases that are
included in a state’s, and the national,
improper payment rate. Although we
proposed this distinction for improper
payment measurement program
purposes, this distinction does not
preclude the single state agency from
exercising appropriate oversight over
eligibility determinations to ensure
compliance with all federal and state
laws, regulations and policies. We also
proposed revisions to § 431.992(b) to
clarify that states would be required to
submit PERM corrective actions only for
errors included in state improper
payment rates.
We did not receive any comments on
this proposal to not include case-level
errors resulting solely from an FFE
determination of MAGI-based eligibility
in the state improper payment rate, and
therefore, we are finalizing as proposed.
16. Sample Size
Establishing adequate sample sizes is
critical to ensuring that the PERM
improper payment rate measurement
meets IPERIA statistical requirements.
In accordance with IPERIA, PERM is
focused on establishing a national
improper payment rate, which must
meet the precision level established in
OMB Circular A–123, which is a 2.5
percent precision level at a 90 percent
confidence interval. Although not
required by IPERIA, as an additional
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goal we have always strived to achieve
state level improper payment rates
within a 3 percent precision level at a
95 percent confidence interval.
However, as discussed in the Regulatory
Impact Analysis, we recognize
achieving this level of precision in all
states poses some challenges and is not
always possible.
Previously, state-specific sample sizes
were calculated prior to each cycle and
the national annual sample size was the
aggregate of the state-specific sample
sizes. State-specific sample sizes were
based on past state PERM improper
payment rates. We proposed
establishing a national annual sample
size that would meet IPERIA’s precision
requirements at the national level, and
then distributing the sample across
states to maximize precision at the state
level, where possible. We also proposed
that the state-specific sample sizes
would be chosen to maximize precision
based on state characteristics, including
a history of high expenditures and/or
past state PERM improper payment
rates. We recognize that the precision of
past estimates of state-specific improper
payment rates has varied. We requested
public comment on this proposed
approach, its benefits, limitations, and
any potential alternatives. We believe
that, relative to our prior approach, the
proposed approach would more
effectively measure and reduce national
improper payments and would also
provide more stable state-specific
sample sizes, as the sample size would
be less responsive to changes in
improper payment rates from cycle to
cycle. A more stable state-specific
sample size may assist with state level
planning. Further, it will allow us to
exercise more control over the PERM
program’s budget by establishing a
national sample size. On the other hand,
like its predecessor, the proposed
approach may not yield improper
payment estimates at the state level
within a 3 percent precision level at a
95 percent confidence interval for all
states (due to underpowered sample
size). We will develop specific sampling
plans for PERM cycles that occur after
publication of the final rule. We will
continue to calculate a national
improper payment rate within a 2.5
percent precision level at a 90 percent
confidence interval as required by
IPERIA. Likewise, we will continue to
strive to achieve state improper
payment rates within a 3 percent
precision level at a 95 percent
confidence interval precision. In the
future, as information improves or new
priorities are identified, we may identify
additional factors that should be taken
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into account in developing state-specific
sample sizes.
In practice, we anticipate having the
ability to vary the number of data
processing, medical, and eligibility
reviews performed on each of the
sampled claims. Under this approach,
each sampled claim may not undergo all
three types of reviews, which would
allow us to more efficiently allocate the
types of reviews performed. Conducting
more reviews on payments that are
likely to have problems gives us better
information to implement effective
corrective actions, which could assist in
reducing improper payments. For
example, after eligibility reviews
resume, we may determine that there
are few eligibility improper payments
for clients associated with managed care
claims; thus, there might be a limited
benefit to conducting eligibility reviews
on all sampled managed care claims,
and we might reduce the number of
those reviews. This approach would
allow us to optimize PERM program
expenditures so we do not waste
resources conducting reviews unlikely
to provide valuable insight on the
causes of improper payments.
We note above that conducting
reviews on areas more likely to have
problems results in more information to
inform corrective actions versus
conducting more reviews on areas that
are likely to be correct. It is important
to note that state corrective actions are
not impacted by varying levels of statespecific improper payment rate
precision. As we describe later in this
final rule, states are required to submit
corrective action plans that address all
improper payments and deficiencies
identified.
The following is a summary of the
comments we received regarding our
proposals to: (1) Establish a national
annual sample size that would meet
IPERIA’s precision requirements at the
national level, and then distributing the
sample across states to maximize
precision at the state level, where
possible, and (2) choose state-specific
sample sizes that would maximize
precision based on state characteristics,
including a history of high expenditures
and/or past state PERM improper
payment rates.
Comment: Commenters requested
clarification around the phrase ‘‘In
practice, we anticipate having the
ability to vary the number of data
processing, medical, and eligibility
reviews performed on each of the
sampled claims. Under this approach,
each sampled claim may not undergo all
three types of reviews, which would
allow us to more efficiently allocate the
types of reviews performed.’’
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Commenters questioned when this
approach would first go into effect, and
were concerned with how this
allocation of reviews would be
determined.
Response: The new sample size
methodology, where the national
sample will be distributed across states
and when sampled claims will receive
some combination of data processing
(DP), medical review (MR), and
eligibility review, will go into effect
upon the effective date of the final rule.
The first PERM measurement impacted
by the changes in this regulation,
including the sample size methodology
change, will be Cycle 1 states, whose
review period is from July 1, 2017,
through June 30, 2018. Beginning with
these reviews, we anticipate setting the
number of DP, MR, and eligibility
reviews at the national level, which
would then be distributed across states.
Comment: Many commenters
requested clarification of the phrase
‘‘Conducting more reviews on payments
that are likely to have problems gives us
better information to implement
effective corrective actions, which could
assist in reducing improper payments.’’
Commenters stated that this approach
would inaccurately overstate the error
rate, target eligibility cases that are more
likely to have problems, and not
produce a statistically valid sample.
Response: It is our goal to select a
sample that is both representative of the
universe of claims in the State and is
descriptive enough that potential error
causes will be present in the sample so
they can be addressed by the State in
corrective actions. All claims sampled
are applied the respective sampling
weight that accurately reflects the state’s
improper payment rate. That is, if the
PERM program were to sample high risk
claims at a greater frequency compared
to other claims, the high risk claims
would receive a relatively lower
statistical weight, which prevents
overstating of a state’s improper
payment rate. This weighting process
helps make sure the resulting improper
payment rate is statistically valid and
representative of the universe of claims.
Comment: Two commenters requested
that CMS provide detailed information
of an estimated state-specific sample
size and the method used to make that
determination. One commenter
requested that CMS allow states to
enhance their state-specific sample
based on the state’s characteristics and
suggested that defining the state’s
sample based on high expenditure
claims and prior payment errors does
not reflect the overall performance of
the state.
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Response: We will continue to strive
to achieve state level improper payment
rates within a 3 percent precision level
at a 95 percent confidence interval. We
will distribute the national annual
sample across states to maximize
precision at the state level, where
possible. State-specific sample sizes
would be chosen to maximize precision
based on state characteristics, including
a history of high expenditures and/or
past state PERM improper payment
rates. In the future, as information
improves or new priorities are
identified, we may identify additional
factors that should be taken into account
in developing state-specific sample
sizes. Therefore, more detailed
statistical methodology information will
be made available in a subregulatory
form so that we can make updates to the
methodology as additional factors are
identified.
After considering the comments, we
did not make any revisions to the
regulatory text, and therefore, are
finalizing as proposed.
17. Data Processing, Medical, and
Eligibility Improper Payment
Definitions
We proposed clarifying in
§ 431.960(b)(1), (c)(1), and (d)(1) that
improper payments are defined as both
federal and state improper payments.
We believe this change would allow us
to cite federal improper payments in
circumstances where states make an
incorrect eligibility category assignment
that would result in the incorrect FMAP
being claimed by the state. Previously,
improper payments were only cited if
the total computable amount—the
federal share plus the state share—was
incorrect. Under the Affordable Care
Act, beneficiaries in the newly eligible
adult group receive a higher FMAP rate
than other eligibility categories. As a
result, incorrect enrollment of an
individual in the newly eligible adult
category may result in improper federal
payments even though the total
computable amount may be correct.
Although there were eligibility
categories that could receive higher
FMAP rates previously, the size of the
newly eligible adult category makes it
critical for us to have the ability to cite
federal improper payments to achieve
an accurate PERM improper payment
rate.
The following is summary of the
comments we received regarding our
proposal to clarify in § 431.960(b)(1),
(c)(1), and (d)(1) that improper
payments are defined as both federal
and state improper payments.
Comment: A commenter requested we
modify the definition of federal
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improper payments, stating if the total
computable payment is correct that the
payment should not be cited as an error.
Response: We believe this proposed
change would allow us to state federal
improper payments in circumstances
where states make an incorrect
eligibility category assignment that
would result in the incorrect federal
medical assistance percentage (FMAP)
being claimed by the state. Previously,
improper payments were only stated if
the total computable amount—the
federal share plus the state share—was
incorrect. Under the Affordable Care
Act, beneficiaries in the newly eligible
adult group receive a higher FMAP rate
than other eligibility categories. As a
result, incorrect enrollment of an
individual in the newly eligible adult
category may result in improper federal
payments even though the total
computable amount may be correct.
Although there were eligibility
categories that could receive higher
FMAP rates previously, the size of the
newly eligible adult category makes it
critical for us to have the ability to state
federal improper payments to achieve
an accurate PERM improper payment
rate.
Comment: Commenters requested
clarification of the eligibility error
definition in regard to the phrase
‘‘lacked or had insufficient
documentation in his or her case
record,’’ specifically regarding whether
or not states have the opportunity to
provide the missing documentation that
proves the eligibility determination was
correct before it is determined an error.
Response: States are required to
provide documentation to support their
eligibility determination. We intend to
accept documentation to support
accurate payments that is provided in
time to be included in the improper
payment rate calculation and meets
criteria set forth by CMS in future
subregulatory guidance regarding the
provision of documentation for
eligibility reviews.
Comment: One commenter stated the
eligibility error definition for both
PERM and MEQC was likely to increase
error rates, as citing errors when a case
does not contain sufficient
documentation to support the eligibility
determination decision overlooks the
possibility that the documentation
could not be attained for legitimate
reasons. The commenter also stated that,
currently, these cases are removed from
the sample as the inaccuracy of the
decision cannot be proven and requests
CMS to continue its practice of
excluding these cases from the sample
unit.
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Response: We respectfully disagree
with the commenter. We must include
cases of insufficient documentation as
improper payments to comply with
OMB’s implementing guidance for
IPERIA, which states that ‘‘when an
agency’s review is unable to discern
whether a payment was proper as a
result of insufficient or lack of
documentation, this payment must also
be considered an improper payment.’’
Consistent with this guidance, PERM
has never allowed for cases of
insufficient or lack of documentation to
be excluded.
Comment: One commenter requested
that CMS clarify if PERM eligibility
errors would include both caseworker
and systems errors.
Response: The definition of an
eligibility error at § 431.960(d)(1) states
that an eligibility error is an error
resulting in an overpayment or
underpayment that is determined from
a review of a beneficiary’s eligibility
determination, in comparison to the
documentation used to establish a
beneficiary’s eligibility and applicable
federal and state regulations and
policies, resulting in Federal and/or
State improper payments. This
definition will be applied regardless of
whether the error finding was caused by
a caseworker or system.
In addition to the comments above,
we also received several comments
supporting our proposal to clarify in
§ 431.960(b)(1), (c)(1), and (d)(1) that
improper payments are defined as both
federal and state improper payments.
Therefore, we are finalizing § 431.960 as
proposed.
18. Difference Resolution and Appeals
Process
Because we proposed to use an ERC
to conduct the eligibility case reviews,
we likewise proposed that the ERC
conduct the eligibility difference
resolution and appeals process, which
would mirror how that process is
conducted with respect to FFS claims
and managed care payments. The
difference resolution and appeals
process used for the FFS and managed
care components of the PERM program
is well developed and has allowed us to
adequately resolve disagreements
between the RC and states. We have
revised § 431.998 to include the
proposed eligibility changes for the
difference resolution and appeals
process.
Additionally, we proposed deleting
the statement in the regulation text
currently at § 431.998(d) about CMS
recalculating state-specific improper
payment rates, upon state request, in the
event of any reversed disposition of
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unresolved claims; Instead proposing
that the recalculation be performed
whenever there is a reversed
disposition, such that no state request is
needed.
The following is summary of the
comments we received regarding our
proposal for the ERC to conduct the
eligibility difference resolution and
appeals.
Comment: One commenter requested
that CMS include in regulation the
requirements for the ERC to respond
and collaborate with states to resolve
differences in a timely manner.
Response: PERM review contractors
have requirements in their contracts for
responding to state requests for
difference resolutions in a timely
manner. Currently, the PERM review
contractors are contractually required to
respond to state requests for difference
resolutions in 15 days. Requirements
such as state collaboration are also
included in these contracts and the
contractors are held accountable to be in
compliance. Additionally, through the
PERM model pilots we learned that state
collaboration and communication are
essential in making the new eligibility
review process with the ERC a success,
which is also a priority to us.
Comment: A commenter requested
that CMS re-evaluate the time allowed
for the difference resolution and appeals
processes, especially for the eligibility
component, as the current time
allowances are insufficient. The
commenter recommended that CMS
allow for 60 calendar days for difference
resolution requests and 30 calendar
days for appeal requests.
Response: We find the request to reevaluate the difference resolution and
appeals timeframes reasonable, but
disagree with the specific timeframes
recommended by the commenter.
Instead, we will extend the difference
resolution time allowance to 25
business days and the appeal time
allowance to 15 business days, which
will allow states more time to research
errors while still allowing the PERM
process to be completed within a
reasonable timeframe.
Comment: One commenter requested
clarification as to whether or not CMS
would be able to complete all
recalculated state improper payment
rates to enable them to be published in
the AFR and state report.
Response: Changing the PERM review
period provides states and CMS
additional time to complete the work
related to each PERM cycle prior to the
annual improper payment rate
publication in the AFR and state
reports. Therefore, we anticipate the
need for state improper payment rate
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recalculations to be limited. Per
§ 431.998(d), all differences that are not
overturned in time for improper
payment rate calculation will be
considered as errors in the improper
payment rate calculation to meet the
reporting requirements of the IPIA (as
amended). In the event of any reversed
disposition of unresolved claims, a state
improper payment rate recalculation
will be performed.
Comment: One commenter requested
that CMS clarify the types of reports that
will be provided to states to determine
if a difference resolution or appeal
should be pursued or requested for
findings. Additionally, the commenter
requested that detailed case information
will be needed, not only for determining
whether or not to file a difference
resolution/appeal, but for developing
and implementing corrective actions.
Response: As proposed, the difference
resolution and appeals process would
mirror how that process is conducted
for FFS and managed care payments.
Detailed information on the payment
under review, as well as the reason for
the error/deficiency citation, is provided
to allow states to determine whether
they should request difference
resolution and/or an appeal, as well as
develop appropriate corrective actions.
As a result of the comments, we have
revised § 431.998(b) and (d) to include
the new time allowances for both
difference resolution and appeal
requests. We are finalizing all other
provisions this section as proposed.
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19. Corrective Action Plans
Under § 431.992, states are required to
submit CAPs to address all improper
payments and deficiencies found
through the PERM review. We proposed
that states would continue to submit
CAPs that address eligibility improper
payments, along with improper
payments found through the FFS and
managed care components. We
proposed to revise § 431.992(a) to clarify
that states would be required to address
all errors included in the state improper
payment rate at § 431.960(f)(1).
We proposed to revise § 431.992 to
provide additional clarification for the
PERM CAP process. We proposed minor
revisions to the regulatory text to reflect
the current corrective action process
and provide additional state
requirements, consistent with the
CHIPRA. Proposed revisions include
replacing ‘‘major tasks’’ at
§ 431.992(b)(3)(ii)(A) with ‘‘corrective
action,’’ to improve clarity. Other
proposed clarifications would also be
provided at § 431.992(b)(3)(ii)(A)
through (E).
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We also proposed adding language to
clarify the state responsibility to
evaluate corrective actions from the
previous PERM cycle at § 431.992(b)(4),
and a requirement for states, annually
and when requested by CMS, to update
us on the status of corrective actions.
We proposed to request updates on state
corrective action implementation
progress on an annual basis, a frequency
that would enable us fully monitor
corrective actions and ensure that states
are continually evaluating the
effectiveness of their corrective actions.
Additionally, we proposed to add
language in § 431.992 to specify further
CAP requirements should a state’s
PERM eligibility improper payment rate
exceed the allowable threshold of 3
percent per section 1903(u) of the Act
for consecutive PERM years. This
proposal only pertains to a state’s
additional CAP requirements related to
the PERM eligibility improper payment
rate, and does not extend to the FFS and
managed care components. As the
allowable threshold for eligibility is set
by section 1903(u) of the Act, this will
not change from year to year. The
improper payment rate targets for FFS
and managed care are not constant,
therefore, it is not judicious to hold
states accountable to meet a target that
is variable.
We proposed to require states whose
eligibility improper payment rates
exceed the 3 percent threshold for
consecutive PERM years to provide
status updates on all corrective actions
on a more frequent basis, as well as
include more details surrounding the
state’s implementation and evaluation
of all corrective actions, than would be
required for those states that did not
have eligibility improper payment rates
over the 3 percent threshold for
consecutive PERM years. As noted
above, we anticipate typically
requesting updates on corrective actions
on an annual basis, however, for those
states with consecutive PERM eligibility
improper payment rates above the
allowable threshold, we proposed to
require updates every other month.
Such states would also be required to
submit information about any setbacks
and provide alternate corrective actions
or manual workarounds, in the event
that their original corrective actions are
unattainable or no longer feasible. This
would ensure that states have additional
plans in place, if the original corrective
action cannot be implemented as
planned. Also, states would be required
to submit actual examples
demonstrating that the corrective
actions have led to improvements in
operations, and explanations for how
these improvements are efficacious and
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will assist the state to reduce both the
number of errors cited and the state’s
next PERM eligibility improper payment
rate. Moreover, we proposed that states
be required to submit an overall
summary that clearly demonstrates how
the corrective actions planned and
implemented would provide the state
with the ability to meet the 3 percent
threshold upon their next PERM
eligibility improper payment rate
measurement.
The following is summary of the
comments we received regarding our
proposals to revise § 431.992 by (1)
clarifying that states would be required
to address all errors included in the
state improper payment rate at
§ 431.960(f)(1); (2) adding language to
clarify the state responsibility to
evaluate corrective actions from the
previous PERM cycle at § 431.992(b)(4),
and a requirement for states, annually
and when requested by CMS, to update
us on the status of corrective actions;
and (3) adding language to specify
further CAP requirements should a
state’s PERM eligibility improper
payment rate exceed the allowable
threshold of 3 percent per section
1903(u) of the Act for consecutive PERM
years.
Comment: One commenter requested
that CMS impose a 1-year timeframe for
completing the corrective actions, with
tighter timeframes when feasible.
Response: Specific deadlines for
addressing errors and deficiencies, as
well as for implementing corrective
actions, are highly dependent on the
nature of the problem, and the kind and
extent of the corrective action needed.
Therefore, we do not believe that
imposing a timeframe for states’
completing corrective actions would be
feasible.
Comment: One commenter suggested
CMS clarify that the evaluation lookback period applies to all previous CAPs
and is not limited to only the CAP from
the most recent PERM measurement.
Response: Implementing such
provisions would require states to report
on corrective actions that could
potentially be no longer relevant. In the
event that a corrective action was not
implemented by the state, similar
findings would be identified during
their MEQC pilots and PERM reviews,
and, thus, have to meet MEQC CAP and
PERM CAP requirements. Additionally,
should a state exceed the 3 percent
threshold for consecutive PERM years,
more stringent CAP requirements are
required per § 431.992(e).
As a result of the comments, and as
previously mentioned in the responses
to commenter concerns regarding the
exclusion of negative case reviews from
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PERM’s review, we are revising
§ 431.992 to include that states be
required to evaluate whether actions
states take to reduce eligibility errors
will also avoid increases in improper
denials in their PERM CAPs.
Additionally, we also received several
comments supporting the proposed
changes to § 431.992 and are therefore,
finalizing all other provisions of
§ 431.992 as proposed.
20. PERM Disallowances
As previously stated regarding MEQC
Disallowances, we proposed to require
states to use PERM to meet the
requirements of section 1903(u) of the
Act in their PERM years, and to no
longer require the proposed MEQC pilot
program to satisfy the requirements of
section 1903(u) of the Act. We proposed
to require states to use PERM to meet
section 1903(u) of the Act requirements,
as this approach has been supported by
the CHIPRA through its certain data
substitution authorization between the
PERM and MEQC programs. Moreover,
requiring the PERM program to satisfy
IPERIA requirements and requiring a
separate program to satisfy the
erroneous excess payment measurement
and payment reduction/disallowance
requirements of section 1903(u) of the
Act, when PERM is capable of meeting
the requirements of both, would be
contrary to the CHIPRA’s requirement to
harmonize PERM and MEQC. Therefore,
based on the ability of the PERM
program to meet both the requirements
of section 1903(u) of the Act and
IPERIA, we proposed that in a state’s
PERM year, a state’s PERM eligibility
improper payment rate be used to
satisfy both IPERIA’s improper payment
requirements and 1903(u) the Act’s
erroneous excess payments and
payment reduction/disallowance
requirements.
If a state’s PERM eligibility improper
payment rate is above the 3 percent
allowable threshold per section 1903(u)
of the Act, it would be subjected to
potential payment reductions and
disallowances. However, if the state has
taken the action it believed was needed
to meet the threshold and still failed to
achieve that level, the state may be
eligible for a good faith waiver as
outlined in § 431.1010. Essential
elements of a state’s showing of a good
faith effort include the state’s
participation in the MEQC pilot
program in accordance with subpart P
(§ 431.800 through § 431.820) and
implementation of PERM CAPs in
accordance with § 431.992.
Absent CMS’s approval, a state’s
failure to comply with the requirements
of both the MEQC pilot program and
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PERM CAP would be considered a
failure to demonstrate a good faith effort
to reduce its eligibility improper
payment rate. Again, absent our
approval, we would not grant a good
faith waiver for any state that either
does not comply with the MEQC pilot
program requirements or does not
implement a PERM corrective action
plan. We also proposed that the
requirements under section 1903(u) of
the Act would not become effective
until a state’s second PERM eligibility
improper payment rate measurement
has occurred, as an earlier effective date
would not give states a chance to
demonstrate, if needed, a good faith
effort.
Under this proposed regulation, we
would reduce a state’s FFP for medical
assistance by the percentage by which
the lower limit of the state’s eligibility
improper payment rate exceeds the 3
percent threshold should a state fail to
demonstrate a good faith effort. We
proposed to use the lower limit of the
improper payment rate, because we
believe that utilizing the lower limit of
the error rate for disallowance purposes
will assist in ensuring there is reliable
evidence that a state’s error rate exceeds
the 3 percent threshold. This approach
addresses the varying levels of statespecific improper payment rate
precision as discussed in the sample
size section above. Therefore, we
proposed to add § 431.1010, which
establishes rules and procedures for
payment reductions and disallowances
of FFP in erroneous medical assistance
payments due to eligibility improper
payments, as detected through the
PERM program. Federal medical
assistance funds include all servicebased fee-for-service, managed care, and
aggregate payments which are included
in the PERM universe. Exclusions from
the federal medical assistance funds for
disallowance purposes include nonservice related costs (for example,
administrative, staffing, contractors,
systems) as well as certain payments for
services not provided to individual
beneficiaries such as Disproportionate
Share Hospital (DSH) payments to
facilities, grants to State agencies or
local health departments, and costbased reconciliations to non-profit
providers and Federally-Qualified
Health Centers (FQHCs). If expenditures
included in the PERM universe are
adjusted, we may also need to adjust the
universe definition to meet program
needs.
The following is summary of the
comments we received regarding our
proposal for PERM to meet section
1903(u) of the Act in state’s PERM years.
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Comment: Several commenters were
concerned with whether the 3 percent
eligibility improper payment threshold
was realistic and reasonable given the
changes to the PERM program.
Additionally, many of those
commenters requested that CMS
demonstrate the validity of this figure to
ensure that states would not be
inappropriately penalized as a result of
these substantial changes.
Response: The 3 percent threshold for
eligibility-related improper payments in
any fiscal year is established by section
1903(u) of the Act. Payment reductions/
disallowances become effective on and
after July 1, 2020, at which time states,
within their respective PERM cycles,
will be reviewed for the second time
under this final rule.
Comment: One commenter stated that
CMS should revisit the establishment of
the 3 percent threshold, as, historically,
MEQC processes allowed for the
dropping of undetermined cases,
wherein PERM will include
undetermined cases among the errors.
Response: Historically, MEQC
allowed for the dropping of
undetermined cases due to the nature of
the required MEQC review that made
undetermined cases likely to be
prevalent. MEQC required states to
determine if cases were eligible for
services during all or parts of a month
under review. Under MEQC, state
agencies were required to collect and
verify all information necessary to
determine eligibility, including
conducting field investigations and inperson beneficiary interviews. However,
under PERM, the ERC will review the
last action performed by the state that
resulted in the eligibility for the
beneficiary on the date of service
associated with the sampled claim.
Documentation and record keeping
requirements relevant to state
determinations of eligibility are outlined
in federal regulations, and, therefore,
states should be maintaining
information required for review. Thus,
eligibility errors will continue to
include cases that lacked or had
insufficient documentation to make a
definitive review decision as defined in
§ 431.960(d)(2)(iii).
Comment: A few commenters
requested that CMS show how
disallowances would be calculated and
to provide an example.
Response: For each state, along with
the improper payment rate, we calculate
a 95 percent confidence interval, which
has a lower limit and an upper limit.
Under the proposed regulation, if a
state’s eligibility error rate is above the
3 percent allowable threshold (as
established by section 1903(u) of the
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Act), and the state fails to demonstrate
a good faith effort in reducing its
eligibility improper payment rate, then
further action will be taken. Using the
lower limit of the state’s eligibility
improper payment rate, the state’s FFP
for medical assistance will be reduced
by the amount that the lower limit of the
state’s eligibility improper payment rate
(excluding underpayments) exceeds the
3 percent threshold. For example, a state
has a Medicaid eligibility improper
payment rate of 10 percent. The lower
limit of the 95 percent confidence
interval is 5 percent and the upper limit
is 15 percent. Thus, the lower limit
exceeds the 3 percent threshold by 2
percentage points (the 5 percent lower
limit less the 3 percent threshold is 2
percent). The state’s FFP for Medicaid
will then be reduced by 2 percent. The
2 percent reduction will be based on the
total FFP received for the state’s
Medicaid program during the period
spanning the state’s PERM review year.
Comment: Commenters requested that
CMS revise the proposed § 431.1010 to
include authority to disallow only those
expenditures that actually produced a
cost to the federal government.
Response: As specified in § 431.972,
the PERM claims universe includes
payments which are eligible for FFP (or
would have been if the claim had not
been denied) through Title XIX
(Medicaid) or Title XXI (CHIP).
Therefore, all improper payments
identified through PERM and included
in improper payment rates used for
calculation of payment reductions/
disallowances would include FFP.
Comment: A few commenters stated
that a state should only be required to
return funds based on a calculation of
excess FFP, and not for any under
claiming of FFP.
Response: While the occurrence of
eligibility underpayments is expected to
be extremely rare, we agree and will
revise the regulatory text to remove
underpayments from any payment
reduction/disallowance calculations.
We are revising § 431.1010(a)(2) to
specify that, after the state’s eligibility
improper rate has been established for
each PERM review period, we will
compute the amount of the
disallowance, removing any
underpayments due to eligibility errors,
and adjust the FFP payable to each state.
Comment: One commenter requested
that CMS clarify if FFP will be reduced
or disallowed at a program and/or
waiver level only. The commenter
stated that disallowances tied to
Medicaid and/or CHIP in total will
inappropriately reduce or disallow FFP
and will put beneficiaries at risk for not
receiving medically necessary services.
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Response: For each state, along with
the improper payment rate, we calculate
a 95 percent confidence interval, which
has a lower limit and an upper limit.
Under the proposed rule, if a state’s
Medicaid and/or CHIP eligibility
improper payment rate is above the 3
percent allowable threshold per section
1903(u) of the Act, and the state fails to
demonstrate a good faith effort in
reducing its eligibility improper
payment rate, then further action will be
taken. Using the lower limit of the
state’s eligibility improper payment rate
(excluding underpayments), the state’s
FFP for the Medicaid program and/or
CHIP will be reduced by the amount
that the lower limit of the state’s
program-specific eligibility improper
payment rate exceeds the 3 percent
threshold. Payment reductions/
disallowances will only be pursued after
each state has been measured twice
under this regulation. This provision
affords states with the ability to
demonstrate a good faith effort as
defined in this regulation.
Comment: One commenter requested
clarification for whether payment
reductions and disallowances would
also be applied to the years between
PERM cycles for a state whose last
PERM eligibility improper payment rate
was above the 3 percent threshold, and
that state failed to demonstrate a good
faith effort.
Response: The disallowance of FFP
for states whose PERM eligibility
improper payment rate is over the 3
percent threshold and who fail to
demonstrate a good faith effort applies
to each state only in the state’s PERM
year. Although this rate remains frozen
until the state’s next PERM eligibility
improper payment rate, the
disallowance will not be extended to the
2 years between a state’s PERM years.
For clarification purposes, we have
added language to § 431.1010(a)(2) to
specifically state the period of payment
reduction/disallowance.
Comment: One commenter requested
that CMS strengthen the requirement for
what it means for states to demonstrate
a good faith effort to obtain a waiver
from payment reductions/
disallowances, should a state exceed the
3 percent threshold. The commenter
recommended that a state should have
to show a reduction in the eligibility
improper payment rate from the first
PERM year to the second PERM year in
order to be granted a good faith waiver.
Response: Factors impacting PERM
eligibility improper payment rates are
complex and vary from year to year.
Thus, even though a state’s improper
payment rate does not decrease between
PERM years, it does not mean the same
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errors and/or deficiencies exist, or
necessarily mean that the state did not
implement effective corrective actions.
We continue to believe that the
proposed requirements of a state’s
participation in the MEQC pilot
program in conformity with §§ 431.800
through 431.820 and its implementation
of PERM CAPs in accordance with
§ 431.992 are essential elements to the
showing of a state’s good faith effort.
Comment: One commenter suggested
CMS clarify that the good faith waiver
is limited to one PERM cycle and will
not be extended.
Response: In the event that a state
does receive a good faith waiver, it will
not be extended beyond the PERM year
in which it was received. Any state
whose PERM eligibility improper
payment rate is above the 3 percent
threshold for consecutive cycles must
meet the good faith waiver requirements
for each cycle.
Comment: A commenter requested
that CMS clarify additional exemptions
states can meet in addition to the MEQC
pilots that would allow states to be
eligible for a good faith waiver.
Response: The good faith waiver
requirements are outlined at
§ 431.1010(b)(2). There are no additional
exemptions. We will grant a good faith
waiver only if a state both participates
in the MEQC pilot program and
implements PERM CAPs.
We also received many comments
supporting our proposal to require
PERM to meet section 1903(u) of the Act
in states PERM years. Therefore, in
response to the comments received, we
are adding language at § 431.1010(a)(2)
and (a)(3)(i) to exclude underpayments
from any payment reduction/
disallowance calculations. We also
revised the definition of ‘‘disallowance’’
at § 431.958 and added clarification at
§ 431.1010(a)(2) to state that payment
reduction/disallowance is only
applicable to a state’s PERM year. We
are finalizing the remaining provisions
as proposed.
III. Provisions of the Final Regulations
With the exception of the following
provisions and other minor stylistic
revisions, this final rule incorporates the
provisions of the proposed rule. Those
provisions of this final rule that differ
from the proposed rule are as follows:
• In § 431.804, we are replacing the
proposed definition of ‘‘deficiency’’
with the correct MEQC definition of
‘‘deficiency.’’
• At § 431.814(b)(1)(i), we are adding
the requirement for states to provide the
justification for the focus of the active
case reviews.
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• In § 431.958, we are revising the
definitions of ‘‘corrective action,’’
‘‘difference resolution,’’ ‘‘disallowance,’’
and changing the definition ‘‘error’’ to
‘‘payment error’’ as a result of issues
raised by commenters.
• At § 431.992(a)(2), we are adding a
requirement for states to provide an
evaluation of whether actions states take
to reduce eligibility errors will also
avoid increases in improper denials.
• At § 431.998(d), we are updating the
time allowances for states to request
difference resolutions and appeals.
• At § 431.1010(a)(2), we are adding
that payment reduction/disallowance
calculations will not include
underpayments, and that payment
reductions/disallowances are only
applicable to the state’s PERM year.
• At § 431.1010(a)(3)(i), we are adding
that underpayments will be excluded
from payment reduction/disallowance
calculations.
IV. Collection of Information
Under the Paperwork Reduction Act
of 1995 (PRA), we are required to
publish a 60-day notice in the Federal
Register and solicit public comment
before a collection of information
requirement is submitted to the Office of
Management and Budget (OMB) for
review and approval.
To fairly evaluate whether an
information collection should be
approved by OMB, section 3506(c)(2)(A)
of the PRA 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 burden
estimates.
• The quality, utility, and clarity of
the information to be collected.
• Our effort to minimize the
information collection burden on the
affected public, including the use of
automated collection techniques.
The estimates in this collection of
information were derived from feedback
received from states during the PERM
cycle. We solicited public comment on
each of the required issues under
section 3506(c)(2)(A) of the PRA for the
following information collection
requirements (ICRs).
Wages
To derive average costs, we used data
from the U.S. Bureau of Labor Statistics’
May 2014 National Industry-Specific
Occupational Employment and Wage
Estimates for State Government (NAICS
999200) (https://www.bls.gov/oes/
current/naics4_999200.htm#13-0000).
In this regard, Table 1 presents the mean
hourly wage, the cost of fringe benefits
and overhead (calculated at 100 percent
of salary), and the adjusted hourly wage.
TABLE 1—(SUMMARY OF 2014 BLS STATE GOVERNMENT WAGE ESTIMATES)
Occupation
code
Occupation title
Claims Adjusters, Appraisers, Examiners, and Investigators ..........................
Medical Secretaries .........................................................................................
As indicated, we are adjusting our
employee hourly wage estimates by a
factor of 100 percent. This is necessarily
a rough adjustment, both because fringe
benefits and overhead costs vary
significantly from employer to
employer, and because methods of
estimating these costs vary widely from
study to study. Nonetheless, there is no
practical alternative and we believe that
doubling the hourly wage to estimate
total cost is a reasonably accurate
estimation method.
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A. ICRs Regarding Review Procedures
(§ 431.812)
Section 431.812 requires states to
conduct one MEQC pilot during the 2
years between their designated PERM
years. Revisions to § 431.812 requires
that states must use the MEQC pilots to
perform both active and negative case
reviews, while providing states with
some flexibility surrounding their active
case review pilot. States will review a
minimum total of 400 Medicaid and
CHIP active cases, with at least 200 of
the active cases being Medicaid cases.
States will have the flexibility to
determine the precise distribution of
active cases (for example, states could
sample 300 Medicaid cases and 100
CHIP cases), and states will describe the
active sample distribution in the MEQC
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43–6013
pilot planning document at § 431.814.
States will also, at a minimum, be
required to review 200 Medicaid and
200 CHIP negative cases. Currently,
under the PERM program, states are
required to conduct approximately 200
negative case reviews for each the
Medicaid program and CHIP. Therefore,
a total minimum negative sample size of
400 (200 for each program) will be
reviewed under the MEQC pilots.
Section 431.812 aligns with § 431.816
and outlines the case review completion
deadlines and submission of reports.
Additionally, § 431.820 is also
considered to be a part of a state’s
MEQC pilot reporting. Therefore,
burden estimates are combined for the
case reviews, the reporting of findings,
including corrective actions. The time,
effort, and costs listed in this section
will be identical to the sections where
§ 431.816 and § 431.820 are described,
but should not be considered additional
or separate costs.
The ongoing burden associated with
the requirements under § 431.812 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP agencies for 17 states equates to a
maximum of 34 total respondents each
PERM off-year) to perform the required
number of eligibility case reviews as
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Mean hourly
wage
($/hr)
27.60
16.50
Fringe benefit
($/hr)
Adjusted
hourly wage
($/hr)
27.60
16.50
55.20
33.00
mentioned above, and report on their
findings and corrective actions.
We estimate that it will take 1,200
hours annually per state program to
report on all case review findings (900
hours) and corrective actions (300
hours). This estimate assumes that states
spend approximately 100 hours a month
on the related activities (100 hours x 12
months = 1,200 hours) during the State’s
MEQC reporting year. The total
estimated annual burden is 40,800
hours (1,200 hours x 34 respondents), at
a total estimated cost per respondent of
$66,240 (1,200 hours x ($55.20/hour))
and a total estimated cost of $2,252,160
(($66,240 per respondent) x 34
respondents) for all respondents. The
preceding requirements and burden
estimates will be submitted to OMB as
a revision to the information collection
request currently approved under
control number 0938–0147.
B. ICRs Regarding Pilot Planning
Document (§ 431.814)
Revised § 431.814 requires states to
submit a MEQC Pilot Planning
Document. The Pilot Planning
Document must be approved by us as
outlined in § 431.814 of this final rule
and is critical to ensuring that the state
will conduct a MEQC pilot that
complies with our guidance. The Pilot
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Planning Document submitted by the
state would include details surrounding
how the state will perform both its
active and negative case reviews.
The ongoing burden associated with
the requirements under § 431.814 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP programs for 17 states equates to
a maximum of 34 total respondents each
PERM off-year) to develop, submit and
gain CMS approval of its MEQC Pilot
Planning Document.
We estimate that it will take 48 hours
per MEQC pilot per state program to
submit its Pilot Planning Document and
gain approval under § 431.814. We have
based the estimated 48 hours off of the
pilot proposal process currently utilized
in the FY 2014–2017 Medicaid and
CHIP Eligibility Review Pilots, and have
estimated the burden associated
accordingly. The total estimated annual
burden across all respondents is 1,632
hours ((48 hours/respondent) x 34
respondents). The total estimated cost
per respondent is $2,649.60 (48 hours x
($55.20/hour)) and the total estimated
annual cost across all respondents is
$90,086.40 (($2,649.60/respondent) x 34
respondents). As the MEQC program is
currently suspended, and will be
operationally different under this final
rule, this estimate is not based on real
time data. Once real time data is
available, we will solicit information
from the states and update our burden
estimates accordingly.
The preceding requirements and
burden estimates will be submitted to
OMB as a revision to the information
collection currently approved under
control number 0938–0146.
C. ICRs Regarding Case Review
Completion Deadlines and Submittal of
Reports (§ 431.816)
Revised § 431.816 provides
clarification surrounding the case
review completion deadlines and
submittal of reports. States would be
required to report on all sampled cases
in a CMS-specified format by August 1
following the end of the MEQC review
period.
As mentioned above, § 431.816 aligns
with § 431.812 and § 431.820, thus, the
burden estimates are identical for these
sections and should not be thought of as
separate estimates or a duplication of
effort. The ongoing burden associated
with the requirements under § 431.816
is the time and effort it would take each
of the 34 state programs (17 Medicaid
and 17 CHIP agencies for 17 states
equates to maximum 34 total
respondents each PERM off-year) to
complete the required number of
eligibility case reviews, and report on
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18:16 Jul 03, 2017
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their findings. Refer back to section
IV.A., ICRs Regarding Review
Procedures (§ 431.812), for the
expanded burden estimate.
The preceding requirements and
burden estimates will be submitted to
OMB as a revision to the information
collection currently approved under
control number 0938–0147.
D. ICRs Regarding Corrective Action
Under the MEQC Program (§ 431.820)
Under the current MEQC program,
states are required to conduct corrective
actions on all case errors, including
technical deficiencies, found through
the review. Corrective actions are
critical to ensuring that states
continually improve and refine their
eligibility processes. Therefore,
revisions to § 431.820 require states to
implement corrective actions on any
errors or deficiencies identified through
the revised MEQC program as outlined
under § 431.820.
We proposed that states report their
corrective actions to us by August 1
following completion of the MEQC
review period. The report would also
include updates on previous corrective
actions, including information regarding
the status of corrective action
implementation and an evaluation of
those corrective actions.
The ongoing burden associated with
the requirements under § 431.820 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP agencies for 17 states equates to
maximum 34 total respondents each
PERM off-year) to develop and report its
corrective actions in response to its
MEQC pilot program findings. Refer
back to section IV.A. of this final rule
for the expanded burden estimate.
The preceding requirements and
burden estimates will be submitted to
OMB as a revision to the information
collection currently approved under
control number 0938–0147.
E. ICRs Regarding Information
Submission and Systems Access
Requirements (§ 431.970)
Currently, the PERM claims
component requires state submission of
Medicaid and CHIP FFS claims and
managed care payments on a quarterly
basis; and provider submission of
medical records; state and provider
submission responsibilities are defined
under § 431.970. These claims and
payments are rigorously reviewed by the
federal statistical contractor. We are
proposing to utilize this same claims
universe to complete the PERM
eligibility component. Previously, states
had to pull a separate case universe for
the PERM eligibility component. With
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this proposed change, states would only
be required to submit one universe to
satisfy all components of PERM.
Additionally, states are required to
collect and submit (with an estimate of
4 submissions) state policies. With this
proposed change, states will still be
required to collect and submit state
policies surrounding FFS and managed
care, but would now also have to submit
all state eligibility policies. There would
be an initial submission and quarterly
updates. There are no proposed changes
for the provider submission of medical
records.
The ongoing burden associated with
the requirements under § 431.970 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP agencies for 17 states equates to
maximum 34 total respondents each
PERM year) to submit its claims
universe, and collect and submit state
policies, and the time and effort it
would take providers to furnish medical
record documentation.
We estimate that it will take 1,350
hours annually per state program to
develop and submit its claims universe
and state policies. The total estimated
hours is broken down between the FFS,
managed care, and eligibility
components and is estimated at 900
hours for universe development and
submission, and 450 hours for policy
collection and submission. Per
component it is estimated at 1,150 FFS
hours, 100 managed care hours, and 100
eligibility hours for a total of 45,900
annual hours (1,350 hours × 34
respondents). The total estimated
annual cost per respondent is $74,520
(1,350 hours × ($55.20/hour), and the
total estimated annual cost across all
respondents is $2,533,680 (($74,520/
respondent) × 34 respondents).
However, as a federal contractor has
not previously conducted the eligibility
component of PERM, the hours assessed
related to the state burden associated
with the revised eligibility component
are not based on real time data, but
rather based off information solicited
from the states. The information
received was from those states that
participated in the PERM model
eligibility pilots that were conducted by
a federal contractor, but on a much
smaller scale than that of PERM.
We estimate that it will take 2,824
hours annually per PERM cycle per
program (Medicaid and CHIP) for
providers to furnish medical record
documentation to substantiate claim
submission. The total estimated annual
burden on providers is 5,648 hours
(2,824 hours/program × 2 programs). We
estimate the total cost to providers per
program annually to be $93,192 (2,824
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hours × $33.00/hour). The total
estimated cost for providers is $186,384
($93,192/program × 2 programs). These
estimates are based on the average
number of medical reviews conducted
per PERM cycle and the average amount
of time it takes for providers to comply
with the medical record request. These
estimates are for FFS claims only, as
medical review is only completed on
sampled FFS claims.
The preceding requirements and
burden estimates will be submitted to
OMB as a revision to the information
collection currently approved under
control numbers 0938–0974, 0938–0994,
and 0938–1012.
F. ICRs Regarding Corrective Action
Plan Under the PERM Program
(§ 431.992)
Currently, under § 431.992, states are
required to submit corrective action
plans to address all improper payments
and deficiencies found through the
PERM review. Proposed revisions to
§ 431.992(a) clarify that states would be
required to address all improper
payments and deficiencies included in
the state improper payment rate as
defined at § 431.960(f)(1). Additional
language was also added to § 431.992 to
clarify the state responsibility to
evaluate corrective actions from the
previous PERM cycle at § 431.992(b)(4).
The ongoing burden associated with
the requirements under § 431.992 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP agencies for 17 states equates to
maximum 34 total respondents per
PERM cycle) to submit its corrective
action plan.
We estimate that it will take 750
hours (250 hours for FFS, 250 hours for
managed care and an additional 250
hours for eligibility), per PERM cycle
per state program to submit its
corrective action plan for a total
estimated annual burden of 25,500
hours ((750 hours/respondent) × 34
respondents). We estimate the total cost
per respondent to be $41,400 (750 hours
× ($55.20/hour)). The total estimated
cost for all respondents is $1,407,600
(($41,400/respondent) × 34
respondents).
However, as a federal contractor has
not previously conducted the eligibility
component of PERM, the hours assessed
related to the state burden associated
with the revised eligibility component
are not based on real time data, but
rather based off information solicited
from the states. The information
received was from those states that
participated in the PERM model
eligibility pilots which were conducted
by a federal contractor, but on a much
smaller scale than that of PERM.
The preceding requirements and
burden estimates will be submitted to
OMB as part of revisions to the
information collections currently
approved under control numbers 0938–
0974, 0938–0994, and 0938–1012. Not
to be confused with the burden set
outlined above, the revised PERM PRA
packages’ total burden would amount
to: 34 annual respondents, 34 annual
responses, and 750 hours per corrective
action plan.
G. ICRs Regarding Difference Resolution
and Appeal Process (§ 431.998)
Currently, the difference resolution
and appeals process used for the FFS
and managed care components of the
PERM program is well developed and
has allowed us to adequately resolve
disagreements between the RC and
states. Revisions to § 431.998 now
include the proposed eligibility changes
for the difference resolution and appeals
process. Because we proposed to use an
ERC to conduct the eligibility case
reviews, we likewise proposed that the
ERC conduct the eligibility difference
resolution and appeals process, which
would mirror how that process is
conducted with respect to FFS claims
and managed care payments.
The ongoing burden associated with
the requirements under § 431.998 is the
time and effort it would take each of the
34 state programs (17 Medicaid and 17
CHIP agencies for 17 states equates to
maximum 34 total respondents per
PERM cycle) to review PERM findings
and inform the federal contractor(s) of
any additional information and/or
dispute requests.
We estimate that it will take 1625
hours (500 hours for FFS, 475 hours for
managed care and an additional 650
hours for eligibility) per PERM cycle per
state program to review PERM findings
and inform federal contractor(s) of any
additional information or dispute
requests for FFS, managed care, and
eligibility components total estimated
annual burden of 55,250 hours ((1,625
hours/respondent) × 34 respondents).
We estimate the total cost per
respondent to be $89,700 (1,625 hours ×
($55.20/hour)). The total estimated cost
for all respondents is $3,049,800
(($89,700/respondent) × 34
respondents).
The preceding requirements and
burden estimates will be submitted to
OMB as revisions to the information
collections currently approved under
control numbers 0938–0974, 0938–0994,
and 0938–1012. Not to be confused with
the burden set outlined above, the
revised PERM PRA packages’ total
burden would amount to: 34 annual
respondents, 34 annual responses, and
1,625 hours per PERM cycle.
TABLE 2—SUMMARY OF ANNUAL INFORMATION COLLECTION BURDEN ESTIMATES
Regulation
section(s)
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§ 431.812
§ 431.814
§ 431.816
§ 431.820
§ 431.970
OCN
........
........
........
........
........
§ 431.970 ........
§ 431.992 ........
§ 431.998 ........
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Respondents
0938–0147 ......
0938–0146 ......
0938–0147 ......
0938–0147 ......
0938–0974;
0938–0994;
0938–1012.
Provider Submissions.
0938–0974;
0938–0994;
0938–1012.
0938–0974;
0938–0994;
0938–1012.
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Jkt 241001
Responses
Burden per
response
(hours)
Total annual
burden
(hours)
Labor
cost of
reporting
($)
Total cost
($)
34
34
34
34
34
34
34
* 34
* 34
34
1,200
48
* 1,200
* 1,200
1,350
40,800
1,632
* 40,800
* 40,800
45,900
$66,240.00
2,649.60
* 66,240.00
* 66,240.00
74,520.00
$2,252,160.00
90,086.40
* 2,252,160.00
* 2,252,160.00
2,533,680.00
Varies
Varies
Varies
5,648
93,192.00
186,384.00
34
34
750
25,500
41,400.00
1,407,600.00
34
34
1,625
55,250
89,700.00
3,049,800.00
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31181
TABLE 2—SUMMARY OF ANNUAL INFORMATION COLLECTION BURDEN ESTIMATES—Continued
Regulation
section(s)
OCN
Total .........
Respondents
.........................
Burden per
response
(hours)
Responses
34
34
........................
Total annual
burden
(hours)
174,730
Labor
cost of
reporting
($)
367,701.60
Total cost
($)
9,519,710.404
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* Not included in totals, as these represent the combined estimated hours/cost for 3 sections as mentioned above. These numbers should only
be counted once.
The following is a summary of the
comments we received regarding our
information collection requirements.
Comment: Two commenters requested
that CMS revisit the PERM collection of
information estimates, as both
commenters stated they were vastly
underestimated.
Response: We solicited information
from the states prior to developing these
estimates. We received several
responses, and as a result averaged the
information provided from the states
regarding the hours spent on PERM
activities. We acknowledged that there
will be outliers that fall above and
below these estimates; however, the
estimates represent a national average of
the time and costs for states to perform
PERM activities based on the previous
PERM ICR estimates, as well as the
information received from states. We
also acknowledged that, as a federal
contractor has not previously conducted
the eligibility component of PERM, the
hours assessed related to the state
burden associated with the revised
eligibility component are not based on
real time data, but, rather, based off of
the information solicited from the states.
The information received was from
those states that participated in the
PERM model eligibility pilots that were
conducted by a federal contractor, but
on a much smaller scale than that of
PERM. We plan to update these
estimates once real time data is
available, and, also, as needed in the
future to ensure an adequate
representation of the national averages.
Comment: One commenter requested
that CMS review the combined costs of
MEQC activities.
Response: As the MEQC program is
currently suspended, and will be
operationally different under this final
rule, this estimate is not based on real
time data. Once real time data is
available, we will solicit information
from the states and update our burden
estimates accordingly. These estimates
were based on information we solicited
from the states regarding the time spent
performing activities associated with the
FY 2014–2017 Medicaid and CHIP
Eligibility Review Pilots. We received
several responses and this information
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18:16 Jul 03, 2017
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was then averaged to obtain the
estimates above.
Comment: One commenter stated she
did not support the requirement for
states to collect and submit all state
eligibility policies, due to states having
limited staff and resources.
Response: This requirement was
developed to ensure the ERC was
provided with the most up-to-date state
eligibility policy information. We will
implement a process which is intended
to limit state burden; however, states are
required to comply with the
requirement.
As a result of the comments, we are
finalizing the information collection
requirements as proposed. However,
upon review, one technical
miscalculation was found and corrected
in Table 2. The one technical
miscalculation was due to human error,
as the ‘Total’ under the ‘‘Total Annual
Burden (hours)’’ column was entered
incorrectly. Addition of the numbers in
the ‘‘Total Annual Burden (hours)’’
column was correct as published, but
the number entered as the total in the
‘Total’ field was incorrect. Also, we
have clarified this information for easier
reading, by separating out the ‘‘Provider
Submission’’ estimates from the section
it was under at time of the proposed
rule’s publication.
V. Regulatory Impact Statement
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96
354), section 1102(b) of the Act, section
202 of the Unfunded Mandates Reform
Act of 1995 (March 22, 1995; Pub. L.
104–4), Executive Order 13132 on
Federalism (August 4, 1999) and the
Congressional Review Act (5 U.S.C.
804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
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environmental, public health and safety
effects, distributive impacts, and
equity). A regulatory impact analysis
(RIA) must be prepared for major rules
with economically significant effects
($100 million or more in any 1 year).
This final rule will make small changes
to the administration of the existing
MEQC and PERM programs. It would
therefore have a relatively small
economic impact; as a result, this final
rule does not reach the $100 million
threshold and thus is neither an
‘‘economically significant’’ rule under
E.O. 12866, nor a ‘‘major rule’’ under
the Congressional Review Act.
The Regulatory Flexibility Act
requires agencies to analyze options for
regulatory relief of small entities, and to
prepare a final regulatory flexibility
analysis for final rules that would have
a ‘‘significant economic impact on a
substantial number of small entities.’’
For purposes of the RFA, small entities
include small businesses, nonprofit
organizations, and small governmental
jurisdictions. Most hospitals and most
other providers and suppliers are small
entities, either by nonprofit status or by
having revenues of less than $7.5
million to $38.5 million in any 1 year.
Individuals and states are not included
in the definition of a small entity. These
entities may incur costs due to
collecting and submitting medical
records to support medical reviews, but
we estimate that these costs will not be
significantly changed under this final
rule. Therefore, we have determined
that this final rule will not have a
significant economic impact on a
substantial number of small entities.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 604 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a metropolitan statistical area and has
fewer than 100 beds. For the preceding
reasons, we are not preparing an
analysis for section 1102(b) of the Act
because we have determined that this
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final rule will not have a direct
economic impact on the operations of a
substantial number of small rural
hospitals.
Please note, a state will be reviewed
only once, per program, every 3 years
and it is unlikely for a provider to be
selected more than once per program to
provide supporting documentation.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. In 2017, that
threshold is approximately $148
million. For the preceding reasons, we
have determined that this final rule does
not mandate any spending that would
approach the $148 million threshold for
state, local, or tribal governments, or on
the private sector.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it issues a proposed
rule (and subsequent final rule) that
imposes substantial direct requirement
costs on state and local governments,
preempts state law, or otherwise has
Federalism implications. This final rule
will shift minor costs and burden for
conducting PERM eligibility reviews
from states to the federal government
and its contractors. However, these
reductions would be largely offset by
federal government savings in reduced
payments to states in matching funds.
The net effect of this regulation on state
or local governments is minor.
Consistent with Executive Order
13771 (82 FR 9339, February 3, 2017),
we have estimated the cost savings of
this final rule for the PERM program to
be $8,387,860.80. This cost savings
estimate is quantifiable for only the
PERM program, includes both federal
and state savings, and is attributable to
reduced burden in the PERM program
by shifting the eligibility review
responsibility from the states to a
federal contractor. While we believe this
final rule would generate cost savings
for the MEQC program as well, we are
unable to quantify the cost savings. This
rule is an E.O. 13771 deregulatory
action.
In accordance with the provisions of
Executive Order 12866, this regulation
was reviewed by the OMB.
List of Subjects
42 CFR Part 431
Grant programs-health, Health
facilities, Medicaid, Privacy, Reporting
and recordkeeping requirements.
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18:16 Jul 03, 2017
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42 CFR Part 457
Grant programs-health, Health
insurance, Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR
chapter IV as set forth below:
PART 431—STATE ORGANIZATION
AND GENERAL ADMINISTRATION
1. The authority citation for part 431
continues to read as follows:
■
Authority: Sec. 1102 of the Social Security
Act, (42 U.S.C. 1302).
2. Section 431.800 and the
undesignated center heading preceding
the section are revised to read as
follows:
■
Medicaid Eligibility Quality Control
(MEQC) Program
§ 431.800
Basis and scope.
This subpart establishes State
requirements for the Medicaid
Eligibility Quality Control (MEQC)
Program designed to reduce erroneous
expenditures by monitoring eligibility
determinations and a claims processing
assessment that monitors claims
processing operations. MEQC will work
in conjunction with the Payment Error
Rate Measurement (PERM) Program
established in subpart Q of this part. In
years in which the State is required to
participate in PERM, as stated in
subpart Q of this part, it will only
participate in the PERM program and
will not be required to conduct a MEQC
pilot. In the 2 years between PERM
cycles, the State is required to conduct
a MEQC pilot, as set forth in this
subpart.
■ 3. Section 431.804 is revised to read
as follows:
§431.804
Definitions.
As used in this subpart—
Active case means an individual
determined to be currently authorized
as eligible for Medicaid or CHIP by the
State.
Corrective action means action(s) to
be taken by the State to reduce major
error causes, trends in errors or other
vulnerabilities for the purpose of
reducing improper payments in
Medicaid and CHIP.
Deficiency means a finding in
processing identified through active
case review or negative case review that
does not meet the definition of an
eligibility error.
Eligibility means meeting the State’s
categorical and financial criteria for
receipt of benefits under the Medicaid
or CHIP programs.
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Eligibility error is an error resulting
from the States’ improper application of
Federal rules and the State’s
documented policies and procedures
that causes a beneficiary to be
determined eligible when he or she is
ineligible for Medicaid or CHIP, causes
a beneficiary to be determined eligible
for the incorrect type of assistance,
causes applications for Medicaid or
CHIP to be improperly denied by the
State, or causes existing cases to be
improperly terminated from Medicaid
or CHIP by the State. An eligibility error
may also be caused when a
redetermination did not occur timely or
a required element of the eligibility
determination process (for example
income) cannot be verified as being
performed/completed by the state.
Medicaid Eligibility Quality Control
(MEQC) means a program designed to
reduce erroneous expenditures by
monitoring eligibility determinations
and work in conjunction with the PERM
program established in subpart Q of this
part.
MEQC pilot refers to the process used
to implement the MEQC Program.
MEQC review period is the 12-month
timespan from which the State will
sample and review cases.
Negative case means an individual
denied or terminated eligibility for
Medicaid or CHIP by the State.
Off-years are the scheduled 2-year
period of time between a States’
designated PERM years.
Payment Error Rate Measurement
(PERM) Program means the program set
forth at subpart Q of this part utilized
to calculate a national improper
payment rate for Medicaid and CHIP.
PERM year is the scheduled and
designated year for a State to participate
in, and be measured by, the PERM
Program set forth at subpart Q of this
part.
■ 4. Section 431.806 is revised to read
as follows:
§ 431.806
State requirements.
(a) General requirements. (1) In a
State’s PERM year, the PERM
measurement will meet the
requirements of section 1903(u) of the
Act.
(2) In the 2 years between each State’s
PERM year, the State is required to
conduct one MEQC pilot, which will
span parts of both off years.
(i) The MEQC pilot review period will
span 12 months of a calendar year,
beginning the January 1 following the
end of the State’s PERM year through
December 31.
(ii) The MEQC pilot planning
document described in § 431.814 is due
no later than the first November 1
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following the end of the State’s PERM
year.
(iii) A State must submit its MEQC
pilot findings and its plan for corrective
action(s) by the August 1 following the
end of its MEQC pilot review period.
(b) PERM measurement. Requirements
for the State PERM review process are
set forth in subpart Q of this part.
(c) MEQC pilots. MEQC pilot
requirements are specified in §§ 431.812
through 431.820.
(d) Claims processing assessment
system. Except in a State that has an
approved Medicaid Management
Information System (MMIS) under
subpart C of part 433 of this subchapter,
a State plan must provide for operating
a Medicaid quality control claims
processing assessment system that
meets the requirements of §§431.830
through 431.836.
■ 5. The undesignated center heading
preceding § 431.810 is removed and
§ 431.810 is revised to read as follows:
§ 431.810 Basic elements of the Medicaid
Eligibility Quality Control (MEQC) Program
(a) General requirements. The State
must operate the MEQC pilot in
accordance with this section and
§§ 431.812 through 431.820, as well as
other instructions established by CMS.
(b) Review requirements. The State
must conduct reviews for the MEQC
pilot in accordance with the
requirements specified in § 431.812 and
other instructions established by CMS.
(c) Pilot planning requirements. The
State must develop a MEQC pilot
planning proposal in accordance with
requirements specified in § 431.814 and
other instructions established by CMS.
(d) Reporting requirements. The State
must report the finding of the MEQC
pilots in accordance with the
requirements specified in § 431.816 and
other instructions established by CMS.
(e) Corrective action requirements.
The State must conduct corrective
actions based on the findings of the
MEQC pilots in accordance with the
requirements specified in § 431.820 and
other instructions established by CMS.
■ 6. Section 431.812 is revised to read
as follows:
sradovich on DSK3GMQ082PROD with RULES2
§ 431.812
Review procedures.
(a) General requirements. Each State
is required to conduct a MEQC pilot
during the 2 years between required
PERM cycles in accordance with the
approved pilot planning document
specified in § 431.814, as well as other
instructions established by CMS. The
agency and personnel responsible for
the development, direction,
implementation, and evaluation of the
MEQC reviews and associated activities,
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must be functionally and physically
separate from the State agencies and
personnel that are responsible for
Medicaid and CHIP policy and
operations, including eligibility
determinations.
(b) Active case reviews. (1) The State
must review all active cases selected
from the universe of cases, as
established in the State’s approved
MEQC pilot planning document, under
§ 431.814 to determine if the cases were
eligible for services, as well as to
identify deficiencies in processing
subject to corrective actions.
(2) The State must select and review,
at a minimum, 400 active cases in total
from the Medicaid and CHIP universe.
(i) The State must review at least 200
Medicaid cases.
(ii) The State will identify in the pilot
planning document at § 431.814 the
sample size per program.
(iii) The State may sample more than
400 cases.
(3) The State may propose to focus the
active case reviews on recent changes to
eligibility policies and processes, areas
where the state suspects vulnerabilities,
or proven error prone areas.
(i) Unless otherwise directed by CMS,
the State must propose its active case
review approach in the pilot planning
document described at § 431.814 or
perform a comprehensive review.
(ii) When the State has a PERM
eligibility improper payment rate that
exceeds the 3 percent national standard
for two consecutive PERM cycles, the
State must follow CMS direction for its
active case reviews. CMS guidance will
be provided to any state meeting this
criteria.
(c) Negative case reviews. (1) As
established in the State’s approved
MEQC pilot planning document under
§ 431.814, the State must review
negative cases selected from the State’s
universe of cases that are denied or
terminated in the review month to
determine if the denial, or termination,
was correct, as well as to identify
deficiencies in processing subject to
corrective actions.
(2) The State must review, at a
minimum, 200 negative cases from
Medicaid and 200 negative cases from
CHIP.
(i) The State may sample more than
200 cases from Medicaid and/or more
than 200 cases from CHIP.
(ii) [Reserved]
(d) Error definition. (1) An active case
error is an error resulting from the
State’s improper application of Federal
rules and the State’s documented
policies and procedures that causes a
beneficiary to be determined eligible
when he or she is ineligible for
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Medicaid or CHIP, causes a beneficiary
to be determined eligible for the
incorrect type of assistance, or when a
determination did not occur timely or
cannot be verified.
(2) Negative case errors are errors,
based on the State’s documented
policies and procedures, resulting from
either of the following:
(i) Applications for Medicaid or CHIP
that are improperly denied by the State.
(ii) Existing cases that are improperly
terminated from Medicaid or CHIP by
the State.
(e) Active case payment reviews. In
accordance with instructions
established by CMS, the State must also
conduct payment reviews to identify
payments for active case errors, as well
as identify the individual’s understated
or overstated liability, and report
payment findings as specified in
§ 431.816.
■ 7. Section 431.814 is revised to read
as follows:
§ 431.814
Pilot planning document.
(a) Plan approval. For each MEQC
pilot, the State must submit a MEQC
pilot planning document that meets the
requirements of this section to CMS for
approval by the first November 1
following the end of the State’s PERM
year. The State must receive approval
for a plan before the plan can be
implemented.
(b) Plan requirements. The State must
have an approved pilot planning
document in effect for each MEQC pilot
that must be in accordance with
instructions established by CMS and
that includes, at a minimum, the
following for—
(1) Active case reviews. (i) Focus of
the active case reviews in accordance
with § 431.812(b)(3) and justification for
focus.
(ii) Universe development process.
(iii) Sample size per program.
(iv) Sample selection procedure.
(v) Case review process.
(2) Negative case reviews. (i) Universe
development process.
(ii) Sample size per program.
(iii) Sample selection procedure.
(iv) Case review process.
■ 8. Section 431.816 is revised to read
as follows:
§ 431.816 Case review completion
deadlines and submittal of reports.
(a) The State must complete case
reviews and submit reports of findings
to CMS as specified in paragraph (b) of
this section in the form and at the time
specified by CMS.
(b) In addition to the reporting
requirements specified in § 431.814
relating to the MEQC pilot planning
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document, the State must complete case
reviews and submit reports of findings
to CMS in accordance with paragraphs
(b)(1) and (2) of this section.
(1) For all active and negative cases
reviewed, the State must submit a
detailed case-level report in a format
provided by CMS.
(2) All case-level findings will be due
by August 1 following the end of the
MEQC review period.
■ 9. Section 431.818 is revised to read
as follows:
§ 431.818
Access to records.
The State, upon written request, must
submit to the HHS staff, or other
designated entity, all records, including
complete local agency eligibility case
files or legible copies and all other
documents pertaining to its MEQC
reviews to which the State has access,
including information available under
part 435, subpart I of this chapter.
■ 10. Section 431.820 is revised to read
as follows:
§ 431.820 Corrective action under the
MEQC program.
The State must—
(a) Take action to correct any active or
negative case errors, including
deficiencies, found in the MEQC pilot
sampled cases in accordance with
instructions established by CMS;
(b) By the August 1 following the
MEQC review period, submit to CMS a
report that—
(1) Identifies the root cause and any
trends found in the case review
findings.
(2) Offers corrective actions for each
unique error and deficiency finding
based on the analysis provided in
paragraph (b)(1) of this section.
(c) In the corrective action report, the
State must provide updates on
corrective actions reported for the
previous MEQC pilot.
§ 431.822
■
[Removed]
11. Section 431.822 is removed.
§§ 431.861—431.865
[Removed]
12. The undesignated center heading
‘‘Federal Financial Participation’’ and
§§ 431.861 through 431.865 are
removed.
■ 13. Section 431.950 is revised to read
as follows:
■
sradovich on DSK3GMQ082PROD with RULES2
§ 431.950
Purpose.
This subpart requires States and
providers to submit information and
provide support to Federal contractors
as necessary to enable the Secretary to
produce national improper payment
estimates for Medicaid and the
Children’s Health Insurance Program
(CHIP).
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14. Section 431.958 is amended by—
a. Removing the definitions of ‘‘Active
case’’, ‘‘Active fraud investigation’’, and
‘‘Agency’’.
■ b. Revising the definition of ‘‘Annual
sample size’’.
■ c. Adding a definition, in alphabetical
order, for ‘‘Appeals’’.
■ d. Removing the definitions of
‘‘Application’’, ‘‘Case’’, ‘‘Case error
rate’’, and ‘‘Case record’’.
■ e. Adding definitions, in alphabetical
order, for ‘‘Corrective action’’,
‘‘Deficiency’’, ‘‘Difference resolution’’,
‘‘Disallowance’’, ‘‘Eligibility Review
Contractor (ERC)’’, ‘‘Federal contractor’’,
‘‘Federally Facilitated Exchange (FFE)’’,
‘‘Federally Facilitated ExchangeDetermination (FFE–D)’’, ‘‘Federal
financial participation’’, ‘‘Finding’’, and
‘‘Improper payment rate’’.
■ f. Removing the definition of ‘‘Last
action’’.
■ g. Adding a definition, in alphabetical
order, for ‘‘Lower limit’’.
■ h. Removing the definition of
‘‘Negative case’’.
■ i. Adding a definition, in alphabetical
order, for ‘‘Payment error’’.
■ j. Removing the definitions of
‘‘Payment error rate’’ and ‘‘Payment
review’’.
■ k. Adding definitions, in alphabetical
order, for ‘‘PERM Review Period’’,
‘‘Recoveries’’, and ‘‘Review Contractor
(RC)’’.
■ l. Removing the definitions of
‘‘Review cycle’’ and ‘‘Review month’’.
■ m. Revising the definition of ‘‘Review
year’’.
■ n. Removing the definitions of
‘‘Sample month’’ and ‘‘State agency’’.
■ o. Adding a definition, in alphabetical
order, for ‘‘State eligibility system’’.
■ p. Revising the definition of ‘‘State
error’’.
■ q. Adding definitions, in alphabetical
order, for ‘‘State payment system’’,
‘‘State-specific sample size’’, and
‘‘Statistical Contractor (SC)’’.
■ r. Removing the definition of
‘‘Undetermined’’.
The additions and revisions read as
follows:
■
■
§ 431.958
Definitions and use of terms.
*
*
*
*
*
Annual sample size means the
number of fee-for-service claims,
managed care payments, or eligibility
cases that will be sampled for review in
a given PERM cycle.
Appeals means a process that allows
the State to dispute the PERM Review
Contractor and Eligibility Review
Contractor findings with CMS after the
difference resolution process has been
exhausted.
*
*
*
*
*
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Corrective action means actions to be
taken by the State to reduce errors or
other vulnerabilities for the purpose of
reducing improper payments in
Medicaid and CHIP.
Deficiency means a finding in which
a claim or payment had a medical, data
processing, and/or eligibility error that
did not result in federal and/or state
improper payment.
Difference resolution means a process
that allows the State to dispute the
PERM Review Contractor and Eligibility
Review Contractor findings directly
with the contractor.
Disallowance means the percentage of
Federal medical assistance funds the
State is required to return to CMS in
accordance with section 1903(u) of the
Act.
*
*
*
*
*
Eligibility Review Contractor (ERC)
means the CMS contractor responsible
for conducting state eligibility reviews
for the PERM Program.
Federal contractor means the ERC,
RC, or SC which support CMS in
executing the requirements of the PERM
program.
Federally Facilitated Exchange (FFE)
means the health insurance exchange
established by the Federal government
with responsibilities that include
making Medicaid and CHIP
determinations for states that delegate
authority to the FFE.
Federally Facilitated Exchange—
Determination (FFE–D) means cases
determined by the FFE in states that
have delegated the authority to make
Medicaid/CHIP eligibility
determinations to the FFE.
Federal financial participation means
the Federal Government’s share of the
State’s expenditures under the Medicaid
program and CHIP.
Finding means errors and/or
deficiencies identified through the
medical, data processing, and eligibility
reviews.
*
*
*
*
*
Improper payment rate means an
annual estimate of improper payments
made under Medicaid and CHIP equal
to the sum of the overpayments and
underpayments in the sample, that is,
the absolute value of such payments,
expressed as a percentage of total
payments made in the sample.
Lower limit means the lower bound of
the 95-percent confidence interval for
the State’s eligibility improper payment
rate.
*
*
*
*
*
Payment error means any claim or
payment where federal and/or state
dollars were paid improperly based on
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medical, data processing, and/or
eligibility reviews.
*
*
*
*
*
PERM review period means the
timeframe in which claims and
eligibility are reviewed for national
annual improper payment rate
calculation purposes, July through June.
*
*
*
*
*
Recoveries mean those monies for
which the State is responsible to pay
back to CMS based on the identification
of Federal improper payments.
Review Contractor (RC) means the
CMS contractor responsible for
conducting state data processing and
medical record reviews for the PERM
Program.
Review year means the year being
analyzed for improper payments under
the PERM Program.
*
*
*
*
*
State eligibility system means any
system, within the State or with a statedelegated contractor, that is used by the
state to determine Medicaid and/or
CHIP eligibility and/or that maintains
documentation related to Medicaid and/
or CHIP eligibility determinations.
State error includes, but is not limited
to, data processing errors and eligibility
errors as described in § 431.960(b) and
(d), as determined in accordance with
documented State and Federal policies.
State errors do not include the errors
described in paragraph § 431.960(e)(2).
State payment system means any
system within the State or with a statedelegated contractor that is used to
adjudicate and pay Medicaid and/or
CHIP FFS claims and/or managed care
payments.
*
*
*
*
*
State-specific sample size means the
sample size determined by CMS that is
required from each individual State to
support national improper payment rate
precision requirements.
Statistical Contractor (SC) means the
contractor responsible for collecting and
sampling fee-for-service claims and
managed care capitation payment data,
as well as calculating Medicaid and
CHIP state and national improper
payment rates.
■ 15. Section 431.960 is revised to read
as follows:
sradovich on DSK3GMQ082PROD with RULES2
§ 431.960
Types of payment errors.
(a) General rule. Errors identified for
the Medicaid and CHIP improper
payments measurement under the
Improper Payments Information Act of
2002 must affect payment under
applicable Federal or State policy, or
both.
(b) Data processing errors. (1) A data
processing error is an error resulting in
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an overpayment or underpayment that
is determined from a review of the claim
and other information available in the
State’s Medicaid Management
Information System, related systems, or
outside sources of provider verification
resulting in Federal and/or State
improper payments.
(2) The difference in payment
between what the State paid (as
adjusted within improper payment
measurement guidelines) and what the
State should have paid, in accordance
with federal and state documented
policies, is the dollar measure of the
payment error.
(3) Data processing errors include, but
are not limited to, the following:
(i) Payment for duplicate items.
(ii) Payment for non-covered services.
(iii) Payment for fee-for-service claims
for managed care services.
(iv) Payment for services that should
have been paid by a third party but were
inappropriately paid by Medicaid or
CHIP.
(v) Pricing errors.
(vi) Logic edit errors.
(vii) Data entry errors.
(viii) Managed care rate cell errors.
(ix) Managed care payment errors.
(c) Medical review errors. (1) A
medical review error is an error
resulting in an overpayment or
underpayment that is determined from
a review of the provider’s medical
record or other documentation
supporting the service(s) claimed, Code
of Federal Regulations that are
applicable to conditions of payment, the
State’s written policies, and a
comparison between the documentation
and written policies and the information
presented on the claim resulting in
Federal and/or State improper
payments.
(2) The difference in payment
between what the State paid (as
adjusted within improper payment
measurement guidelines) and what the
State should have paid, in accordance
with the applicable conditions of
payment per 42 CFR parts 440 through
484, this part (431), and in accordance
with the State’s documented policies, is
the dollar measure of the payment error.
(3) Medical review errors include, but
are not limited to, the following:
(i) Lack of documentation.
(ii) Insufficient documentation.
(iii) Procedure coding errors.
(iv) Diagnosis coding errors.
(v) Unbundling.
(vi) Number of unit errors.
(vii) Medically unnecessary services.
(viii) Policy violations.
(ix) Administrative errors.
(d) Eligibility errors. (1) An eligibility
error is an error resulting in an
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31185
overpayment or underpayment that is
determined from a review of a
beneficiary’s eligibility determination,
in comparison to the documentation
used to establish a beneficiary’s
eligibility and applicable federal and
state regulations and policies, resulting
in Federal and/or State improper
payments.
(2) Eligibility errors include, but are
not limited to, the following:
(i) Ineligible individual, but
authorized as eligible when he or she
received services.
(ii) Eligible individual for the
program, but was ineligible for certain
services he or she received.
(iii) Lacked or had insufficient
documentation in his or her case record,
in accordance with the State’s
documented policies and procedures, to
make a definitive review decision of
eligibility or ineligibility.
(iv) Was ineligible for managed care
but enrolled in managed care.
(3) The dollars paid in error due to an
eligibility error is the measure of the
payment error.
(4) A State eligibility error does not
result from the State’s verification of an
applicant’s self-declaration or selfcertification of eligibility for, and the
correct amount of, medical assistance or
child health assistance, if the State
process for verifying an applicant’s selfdeclaration or self-certification satisfies
the requirements in Federal law or
guidance, or, if applicable, has the
Secretary’s approval.
(e) Errors for purposes of determining
the national improper payment rates. (1)
The Medicaid and CHIP national
improper payment rates include, but are
not limited to, the errors described in
paragraphs (b) through (d) of this
section.
(2) Eligibility errors resulting solely
from determinations of Medicaid or
CHIP eligibility delegated to, and made
by, the Federally Facilitated Exchange
will be included in the national
improper payment rate.
(f) Errors for purposes of determining
the State improper payment rates. The
Medicaid and CHIP State improper
payment rates include, but are not
limited to, the errors described in
paragraphs (b) through (d) of this
section, and do not include the errors
described in paragraph (e)(2) of this
section.
(g) Error codes. CMS will define
different types of errors within the
above categories for analysis and
reporting purposes. Only Federal and/or
State dollars in error will factor into the
State’s PERM improper payment rate.
■ 16. Section 431.970 is revised to read
as follows:
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sradovich on DSK3GMQ082PROD with RULES2
§ 431.970 Information submission and
systems access requirements.
(a) The State must submit information
to the Secretary for, among other
purposes, estimating improper
payments in Medicaid and CHIP, that
include, but are not limited to—
(1) Adjudicated fee-for-service or
managed care claims information, or
both, on a quarterly basis, from the
review year;
(2) Upon request from CMS, provider
contact information that has been
verified by the State as current;
(3) All medical, eligibility, and other
related policies in effect, and any
quarterly policy updates;
(4) Current managed care contracts,
rate information, and any quarterly
updates applicable to the review year;
(5) Data processing systems manuals;
(6) Repricing information for claims
that are determined during the review to
have been improperly paid;
(7) Information on claims that were
selected as part of the sample, but
changed in substance after selection, for
example, successful provider appeals;
(8) Adjustments made within 60 days
of the adjudication dates for the original
claims or line items, with sufficient
information to indicate the nature of the
adjustments and to match the
adjustments to the original claims or
line items;
(9) Case documentation to support the
eligibility review, as requested by CMS;
(10) A corrective action plan for
purposes of reducing erroneous
payments in FFS, managed care, and
eligibility; and
(11) Other information that the
Secretary determines is necessary for,
among other purposes, estimating
improper payments and determining
improper payment rates in Medicaid
and CHIP.
(b) Providers must submit information
to the Secretary for, among other
purposes, estimating improper
payments in Medicaid and CHIP, which
include but are not limited to Medicaid
and CHIP beneficiary medical records,
within 75 calendar days of the date the
request is made by CMS. If CMS
determines that the documentation is
insufficient, providers must respond to
the request for additional
documentation within 14 calendar days
of the date the request is made by CMS.
(c) The State must provide the Federal
contractor(s) with access to all payment
system(s) necessary to conduct the
medical and data processing review,
including the Medicaid Management
Information System (MMIS), any
systems that include beneficiary
demographic and/or provider
enrollment information, and any
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document imaging systems that store
paper claims.
(d) The State must provide the
Federal contractor(s) with access to all
eligibility system(s) necessary to
conduct the eligibility review, including
any eligibility systems of record, any
electronic document management
system(s) that house case file
information, and systems that house the
results of third party data matches.
■ 17. Section 431.972 is revised to read
as follows:
§ 431.974
§ 431.972
§ 431.992
Claims sampling procedures.
(a) General requirements. The State
will submit quarterly FFS claims and
managed care payments, as identified in
§ 431.970(a), to allow federal contractors
to conduct data processing, medical
record, and eligibility reviews to meet
the requirements of the PERM
measurement.
(b) Claims universe. (1) The PERM
claims universe includes payments that
were originally paid (paid claims) and
for which payment was requested but
denied (denied claims) during the
PERM review period, and for which
there is FFP (or would have been if the
claim had not been denied) through
Title XIX (Medicaid) or Title XXI
(CHIP).
(2) The State must establish controls
to ensure FFS and managed care
universes are accurate and complete,
including comparing the FFS and
managed care universes to the Form
CMS–64 and Form CMS–21 as
appropriate.
(c) Sample size. CMS estimates each
State’s annual sample size for the PERM
review at the beginning of the PERM
cycle.
(1) Precision and confidence levels.
The national annual sample size will be
estimated to achieve at least a minimum
National-level improper payment rate
with a 90 percent confidence interval of
plus or minus 2.5 percent of the total
amount of all payments for Medicaid
and CHIP.
(2) State-specific sample sizes. CMS
will develop State-specific sample sizes
for each State. CMS may take into
consideration the following factors in
determining each State’s annual statespecific sample size for the current
PERM cycle:
(i) State-level precision goals for the
current PERM cycle;
(ii) The improper payment rate and
precision of that improper payment rate
from the State’s previous PERM cycle;
(iii) The State’s overall Medicaid and
CHIP expenditures; and
(iv) Other relevant factors as
determined by CMS.
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■
§ 431.978
■
[Removed]
19. Section 431.978 is removed.
§ 431.980
■
[Removed]
18. Section 431.974 is removed.
[Removed]
20. Section 431.980 is removed.
§ 431.988
[Removed]
21. Section 431.988 is removed.
22. Section 431.992 is revised to read
as follows:
■
■
Corrective action plan.
(a) The State must develop a separate
corrective action plan for Medicaid and
CHIP for each improper payment rate
measurement, designed to reduce
improper payments in each program
based on its analysis of the improper
payment causes in the FFS, managed
care, and eligibility components.
(1) The corrective action plan must
address all errors that are included in
the State improper payment rate defined
at § 431.960(f)(1) and all deficiencies.
(2) For eligibility, the corrective
action plan must include an evaluation
of whether actions the State takes to
reduce eligibility errors will also avoid
increases in improper denials.
(b) In developing a corrective action
plan, the State must take the following
actions:
(1) Error analysis. The State must
conduct analysis such as reviewing
causes, characteristics, and frequency of
errors that are associated with improper
payments. The State must review the
findings of the analysis to determine
specific programmatic causes to which
errors are attributed (for example,
provider lack of understanding of the
requirement to provide documentation),
if any, and to identify root improper
payment causes.
(2) Corrective action planning. The
State must determine the corrective
actions to be implemented that address
the root improper payment causes and
prevent that same improper payment
from occurring again.
(3) Implementation and monitoring.
(i) The State must develop an
implementation schedule for each
corrective action and implement those
actions in accordance with the
schedule.
(ii) The implementation schedule
must identify all of the following for
each action:
(A) The specific corrective action.
(B) Status.
(C) Scheduled or actual
implementation date.
(D) Key personnel responsible for
each activity.
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(E) A monitoring plan for monitoring
the effectiveness of the action.
(4) Evaluation. The State must submit
an evaluation of the corrective action
plan from the previous measurement.
The State must evaluate the
effectiveness of the corrective action(s)
by assessing all of the following:
(i) Improvements in operations.
(ii) Efficiencies.
(iii) Number of errors.
(iv) Improper payments.
(v) Ability to meet the PERM
improper payment rate targets assigned
by CMS.
(c) The State must submit to CMS and
implement the corrective action plan for
the fiscal year it was reviewed no later
than 90 calendar days after the date on
which the State’s Medicaid or CHIP
improper payment rates are posted on
the CMS contractor’s Web site.
(d) The State must provide updates on
corrective action plan implementation
progress annually and upon request by
CMS.
(e) In addition to paragraphs (a)
through (d) of this section, each State
that has an eligibility improper payment
rates over the allowable threshold of 3
percent for consecutive PERM years,
must submit updates on the status of
corrective action implementation to
CMS every other month. Status updates
must include, but are not limited to the
following:
(1) Details on any setbacks along with
an alternate corrective action or
workaround.
(2) Actual examples of how the
corrective actions have led to
improvements in operations, and
explanations for how the improvements
will lead to a reduction in the number
of errors, as well as the State’s next
PERM eligibility improper payment rate.
(3) An overall summary on the status
of corrective actions, planning, and
implementation, which demonstrates
how the corrective actions will provide
the State with the ability to meet the 3
percent threshold.
■ 23. Section 431.998 is revised to read
as follows:
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§ 431.998
process.
Difference resolution and appeal
(a) The State may file, in writing, a
request with the relevant Federal
contractor to resolve differences in the
Federal contractor’s findings based on
medical, data processing, or eligibility
reviews in Medicaid or CHIP.
(b) The State must file requests to
resolve differences based on the
medical, data processing, or eligibility
reviews within 25 business days after
the report of review findings is shared
with the State.
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(c) To file a difference resolution
request, the State must be able to
demonstrate all of the following:
(1) Have a factual basis for filing the
request.
(2) Provide the appropriate Federal
contractor with valid evidence directly
related to the finding(s) to support the
State’s position.
(d) For a finding in which the State
and the Federal contractor cannot
resolve the difference in findings, the
State may appeal to CMS for final
resolution by filing an appeal within 15
business days from the date the relevant
Federal contractor’s finding as a result
of the difference resolution is shared
with the State. There is no minimum
dollar threshold required to appeal a
difference in findings.
(e) To file an appeal request, the State
must be able to demonstrate all of the
following:
(1) Have a factual basis for filing the
request.
(2) Provide CMS with valid evidence
directly related to the finding(s) to
support the State’s position.
(f) All differences, including those
pending in CMS for final decision that
are not overturned in time for improper
payment rate calculation, will be
considered as errors in the improper
payment rate calculation in order to
meet the reporting requirements of the
IPIA.
■ 24. Section 431.1010 is added to
subpart Q to read as follows:
funds for the period, are multiplied by
that percentage. This product is the
amount of the disallowance or
withholding.
(b) Notice to States and showing of
good faith. (1) If CMS is satisfied that
the State did not meet the 3 percent
allowable threshold despite a good faith
effort, CMS will reduce the funds being
disallowed in whole.
(2) CMS may find that a State did not
meet the 3 percent allowable threshold
despite a good faith effort if the State
has taken the action it believed was
needed to meet the threshold, but the
threshold was not met. CMS will grant
a good faith waiver only if the State
both:
(i) Participates in the MEQC pilot
program in accordance with §§ 431.800
through 431.820, and
(ii) Implements PERM CAPs in
accordance with § 431.992.
(3) Each State that has an eligibility
improper payment rate above the
allowable threshold will be notified by
CMS of the amount of the disallowance.
(c) Disallowance subject to appeal. If
the State does not agree with a
disallowance imposed under paragraph
(e) of this section, it may appeal to the
Departmental Appeals Board within 30
days from the date of the final
disallowance notice from CMS. The
regular procedures for an appeal of a
disallowance will apply, including
review by the Appeals Board under 45
CFR part 16.
§ 431.1010 Disallowance of Federal
financial participation for erroneous State
payments (for PERM review years ending
after July 1, 2020).
PART 457—ALLOTMENTS AND
GRANTS TO STATES
(a) Purpose. (1) This section
establishes rules and procedures for
disallowing Federal financial
participation (FFP) in erroneous
medical assistance payments due to
eligibility improper payment errors, as
detected through the PERM program
required under this subpart, in effect on
and after July 1, 2020.
(2) After the State’s eligibility
improper rate has been established for
each PERM review period, CMS will
compute the amount of the
disallowance, removing any
underpayments due to eligibility errors,
and adjust the FFP payable to each
State. The disallowance or withholding
is only applicable to the State’s PERM
year.
(3) CMS will compute the amount to
be withheld or disallowed as follows:
(i) Subtract the 3 percent allowable
threshold from the lower limit of the
State’s eligibility improper payment rate
percentage excluding underpayments.
(ii) If the difference is greater than
zero, the Federal medical assistance
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25. The authority citation for part 457
continues to read as follows:
■
Authority: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
26. Section 457.628(a) is revised to
read as follows:
■
§ 457.628 Other applicable Federal
regulations.
*
*
*
*
*
(a) HHS regulations in §§ 431.800
through 431.1010 of this chapter
(related to the PERM and MEQC
programs); §§ 433.312 through 433.322
of this chapter (related to
Overpayments); § 433.38 of this chapter
(Interest charge on disallowed claims of
FFP); §§ 430.40 through 430.42 of this
chapter (Deferral of claims for FFP and
Disallowance of claims for FFP);
§ 430.48 of this chapter (Repayment of
Federal funds by installments);
§§ 433.50 through 433.74 of this chapter
(sources of non-Federal share and
Health Care-Related Taxes and Provider
Related Donations); and § 447.207 of
this chapter (Retention of Payments)
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apply to State’s CHIP programs in the
same manner as they apply to State’s
Medicaid programs.
*
*
*
*
*
Dated: April 4, 2017.
Seema Verma,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: June 16, 2017.
Thomas E. Price,
Secretary, Department of Health and Human
Services.
[FR Doc. 2017–13710 Filed 6–29–17; 4:15 pm]
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Agencies
[Federal Register Volume 82, Number 127 (Wednesday, July 5, 2017)]
[Rules and Regulations]
[Pages 31158-31188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13710]
[[Page 31157]]
Vol. 82
Wednesday,
No. 127
July 5, 2017
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
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42 CFR Parts 431 and 457
Medicaid/CHIP Program; Medicaid Program and Children's Health Insurance
Program; Changes to the Medicaid Eligibility Quality Control and
Payment Error Rate Measurement Programs in Response to the Affordable
Care Act; Final Rule
Federal Register / Vol. 82 , No. 127 / Wednesday, July 5, 2017 /
Rules and Regulations
[[Page 31158]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 431 and 457
[CMS-6068-F]
RIN 0938-AS74
Medicaid/CHIP Program; Medicaid Program and Children's Health
Insurance Program (CHIP); Changes to the Medicaid Eligibility Quality
Control and Payment Error Rate Measurement Programs in Response to the
Affordable Care Act
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule updates the Medicaid Eligibility Quality
Control (MEQC) and Payment Error Rate Measurement (PERM) programs based
on the changes to Medicaid and the Children's Health Insurance Program
(CHIP) eligibility under the Patient Protection and Affordable Care
Act. This rule also implements various other improvements to the PERM
program.
DATES: These regulations are effective on August 4, 2017.
FOR FURTHER INFORMATION CONTACT: Bridgett Rider, (410) 786-2602.
SUPPLEMENTARY INFORMATION:
Acronyms
AFR Agency Financial Report
AT Account Transfer file
CFR Code of Federal Regulations
CHIP Children's Health Insurance Program
CHIPRA Children's Health Insurance Program Reauthorization Act
of 2009
CMS Centers for Medicare and Medicaid Services
DAB Departmental Appeals Board
DHHS Department of Health and Human Services
DP Data Processing
ELA Express Lane Agency
ELE Express Lane Eligibility
EOB Explanation of Benefits
ERC Eligibility Review Contractor
FFE Federally Facilitated Exchange
FFE-A Federally Facilitated Exchange-Assessment
FFE-D Federally Facilitated Exchange-Determination
FFP Federal Financial Participation
FFS Fee-For-Service
FFY Federal Fiscal Year
FMAP Federal Medical Assistance Percentages
FY Fiscal Year
HHS Health and Human Services
HIPP Health Insurance Premium Payments
IFR Interim Final Rule with comment period
IPERA Improper Payments Elimination and Recovery Act
IPERIA Improper Payments Elimination and Recovery Improvement
Act
IPIA Improper Payments Information Act
IRFA Initial Regulatory Flexibility Analysis
MAGI Modified Adjusted Gross Income
MEQC Medicaid Eligibility Quality Control
MSO Medicaid State Operations
OMB Office of Management and Budget
PCCM Primary Care Case Management
PERM Payment Error Rate Measurement
RC Review Contractor
RFA Regulatory Flexibility Act
RIA Regulatory Impact Analysis
SC Statistical Contractor
SHO State Health Official
the Act Social Security Act
UMRA Unfunded Mandates Reform Act
I. Background
A. Introduction
The Medicaid Eligibility Quality Control (MEQC) program at Sec.
431.810 through 431.822 implements section 1903(u) of the Social
Security Act (the Act) and requires each state to report to the
Secretary the ratio of its erroneous excess payments for medical
assistance under its state plan to its total expenditures for medical
assistance. Section 1903(u) of the Act sets a 3 percent threshold for
eligibility-related improper payments in any fiscal year (FY) and
generally requires the Secretary to withhold payments to states with
respect to the amount of improper payments that exceed that threshold.
The Payment Error Rate Measurement (PERM) program was developed to
implement the requirements of the Improper Payments Information Act
(IPIA) of 2002 (Pub. L. 107-300, enacted January 23, 2002), which
requires the heads of federal agencies to review all programs and
activities that they administer to determine if any programs are
susceptible to significant erroneous payments, and, if so, to identify
them. IPIA was amended by the Improper Payments Elimination and
Recovery Act of 2010 (IPERA) (Pub. L. 111-204, enacted on July 22,
2010) and the Improper Payments Elimination and Recovery Improvement
Act of 2012 (IPERIA) (Pub. L. 112-248, enacted on January 10, 2013).
The IPIA directed the Office of Management and Budget (OMB) to
provide guidance on implementation; OMB provides such guidance for
IPIA, IPERA, and IPERIA in OMB circular A-123 App. C. OMB defines
``significant improper payments'' as annual erroneous payments in the
program exceeding (1) both $10 million and 1.5 percent of program
payments, or (2) $100 million regardless of percentage (OMB M-15-02,
OMB Circular A-123, App. C October 20, 2014). Erroneous payments and
improper payments have the same meaning under OMB guidance.
For those programs found to be susceptible to significant erroneous
payments, federal agencies must provide the estimated amount of
improper payments and report on what actions the agency is taking to
reduce those improper payments, including setting targets for future
erroneous payment levels and a timeline by which the targets will be
reached. Section 2(b)(1) of IPERA clarified that, when meeting IPIA and
IPERA requirements, agencies must produce a statistically valid
estimate, or an estimate that is otherwise appropriate using a
methodology approved by the Director of OMB. IPERIA further clarified
requirements for agency reporting on actions to reduce and recover
improper payments.
The Medicaid program and the Children's Health Insurance Program
(CHIP) were identified as at risk for significant erroneous payments by
OMB. As set forth in OMB Circular A-136, Financial Reporting
Requirements, for IPIA reporting, the Department of Health and Human
Services (DHHS) reports the estimated improper payment rates (and other
required information) for both programs in its annual Agency Financial
Report (AFR).
Sections 203 and 601 of the Children's Health Insurance Program
Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted on
February 4, 2009) relate to the PERM program. Section 203 of the CHIPRA
amended sections 1902(e)(13) and 2107(e)(1) of the Act to establish a
state option for an express lane eligibility (ELE) process for
determining eligibility for children and an error rate measurement for
the enrollment of children under the ELE option. ELE provides states
with important new avenues to expeditiously facilitate children's
Medicaid or CHIP enrollment through a fast and simplified eligibility
determination or renewal process by which states may rely on findings
made by another program designated as an express lane agency (ELA) for
eligibility factors including, but not limited to, income or household
size. Section 1902(e)(13)(E) of the Act, as amended by the CHIPRA,
specifically addresses error rates for ELE. States are required to
conduct a separate analysis of ELE error rates, applying a 3 percent
error rate threshold, and are directed not to include those children
who are enrolled in the State Medicaid plan or the State CHIP plan
through reliance on
[[Page 31159]]
a finding made by an ELA in any data or samples used for purposes of
complying with a MEQC review or as part of the PERM measurement.
Section 203(b) of the CHIPRA directed the Secretary to conduct an
independent evaluation of children who enrolled in Medicaid or CHIP
plans through the ELE option to determine the percentage of children
who were erroneously enrolled in such plans, the effectiveness of the
option, and possible legislative or administrative recommendations to
more effectively enroll children through reliance on such findings.
Section 601(a)(1) of the CHIPRA amended section 2015(c) of the Act,
and provided a 90 percent federal match for CHIP spending related to
PERM administration and excluded such spending from the CHIP 10 percent
administrative cap. (Section 2105(c)(2) of the Act generally limits
states to using no more than 10 percent of the CHIP benefit
expenditures for administrative costs, outreach efforts, additional
services other than the standard benefit package for low-income
children, and administrative costs.)
Section 601(b) of the CHIPRA required that the Secretary issue a
new PERM rule and delay any calculations of a PERM improper payment
rate for CHIP until 6 months after the new PERM final rule was
effective. Section 601(c) of the CHIPRA established certain standards
for such a rule, and section 601(d) of the CHIPRA provided that states
that were scheduled for PERM measurement in FY 2007 or 2008,
respectively, could elect to accept a CHIP PERM improper payment rate
determined in whole or in part on the basis of data for FY 2007 or
2008, respectively, or could elect instead to consider its PERM
measurement conducted for FY 2010 or 2011, respectively, as the first
fiscal year for which PERM applied to the state for CHIP. The new PERM
rule required by the CHIPRA was to include the following:
Clearly defined criteria for errors for both states and
providers.
Clearly defined processes for appealing error
determinations.
Clearly defined responsibilities and deadlines for states
in implementing any corrective action plans (CAPs).
Requirements for state verification of an applicant's
self-declaration or self-certification of eligibility for, and correct
amount of, medical assistance under Medicaid or child health assistance
under CHIP.
State-specific sample sizes for application of the PERM
requirements.
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
as amended by the Health Care and Education Reconciliation Act of 2010
(Pub. L. 111-152) (collectively referred to as the Affordable Care Act)
was enacted in March 2010. The Affordable Care Act mandated changes to
the Medicaid and CHIP eligibility processes and policies to simplify
enrollment and increase the share of eligible persons that are enrolled
and covered. Some of the key changes applicable to all states,
regardless of a state decision to expand Medicaid coverage, include:
Use of Modified Adjusted Gross Income (MAGI) methodologies
for income determinations and household compositions for most
applicants.
Use of the single streamlined application (or approved
alternative) for intake of applicant information.
Availability of multiple application channels, such as
mail, fax, phone, or on-line, for consumers to submit application
information.
Use of a HHS-managed data services hub for access to
federal verification sources.
Need for account transfers and data sharing between the
state- or federal-Exchange, Medicaid, and CHIP to avoid additional work
or confusion by consumers.
Reliance on data-driven processes for 12 month renewals.
Use of applicant self-attestation of most eligibility
elements as of January 1, 2014, with reliance on electronic third-party
data sources, if available, for verification.
Enhanced 90 percent federal financial participation (FFP)
match for the design, development, installation, or enhancement of the
state's eligibility system.
In light of the implementation of the Affordable Care Act's major
changes to the Medicaid and CHIP eligibility and enrollment provisions,
and our continued efforts to comply with IPERIA and the CHIPRA, an
interim change in methodology was implemented for conducting Medicaid
and CHIP eligibility reviews under PERM. As described in an August 15,
2013 State Health Official (SHO) letter (SHO #13-005), instead of the
PERM and MEQC eligibility review requirements, we required states to
participate in Medicaid and CHIP Eligibility Review Pilots from FY 2014
to FY 2016 to support the development of a revised PERM methodology
that provides informative, actionable information to states and allows
CMS to monitor program administration. A subsequent SHO letter dated
October 7, 2015 (SHO #15-004) extended the Medicaid and CHIP
Eligibility Review Pilots for one additional year.
B. Regulatory History
1. Medicaid Eligibility Quality Control (MEQC) Program
The MEQC program implements section 1903(u) of the Act, which
defines erroneous excess payments as both payments for ineligible
persons and overpayments for eligible persons. Section 1903(u) of the
Act instructs the Secretary not to make payment to a state with respect
to the portion of its erroneous payments that exceed a 3 percent error
rate, though the statute also permits the Secretary to waive all or
part of that payment restriction if a state demonstrates that it cannot
reach the 3 percent allowable error rate despite a good faith effort.
Regulations implementing the MEQC program are at 42 CFR part 431,
subpart P--Quality Control. The regulations specify the sample and
review procedures for the MEQC program and standards for good faith
efforts to keep improper payments below the error rate threshold. From
its implementation in 1978 until 1994, states were required to follow
the as-promulgated MEQC regulations in what was known as the
traditional MEQC program. Every month, states reviewed a random sample
of Medicaid cases and verified the categorical and financial
eligibility of the case members. Sample sizes had to meet minimum
standards, but otherwise were at state option.
For cases in the sample found ineligible, the claims for services
received in the review month were collected, and error rates were
calculated by comparing the amount of such claims to the total claims
for the universe of sampled claims. The state's calculated error rate
was adjusted based on a federal validation subsample to arrive at a
final state error rate. This final state error rate was calculated as a
point estimate, without adjustment for the confidence interval
resulting from the sampling methodology. States with error rates over 3
percent were subject under those regulations to a disallowance of FFP
in all or part of the amount of FFP over the 3 percent error rate.
At HHS's Departmental Appeals Board (DAB), HHS's final level of
administrative review, states prevailed in challenges to disallowances
based on the MEQC system in 1992. The DAB concluded that the MEQC
sampling protocol and the resulting error rate calculation were not
sufficiently accurate to provide reliable evidence to support a
disallowance based on an actual error rate exceeding the 3 percent
threshold.
[[Page 31160]]
Although the MEQC system remained in place, we provided states with
an alternative to the MEQC program that was focused on prospective
improvements in eligibility determinations rather than disallowances.
These changes, outlined in Medicaid State Operations (MSO) Letter #93-
58, dated July 23, 1993, provided states with the option to continue
operating a traditional MEQC program, or to conduct what we termed
``MEQC pilots,'' that did not lead to the calculation of error rates
(or, therefore, to disallowances). These pilots continue today. States
choosing the latter pilot option have generally operated, on a year-
over-year basis, year-long pilots focused on state-specific areas of
interest, such as high-cost or high-risk eligibility categories and
problematic eligibility determination processes. These pilots review
specific program areas to determine whether problems exist and produce
findings the state agency can address through corrective actions, such
as policy changes or additional training. Over time, most states have
elected to participate in the pilots; 39 states now operate MEQC
pilots, while 12 maintain traditional MEQC programs.
2. Payment Error Rate Measurement (PERM) Program
We issued the August 27, 2004 proposed rule (69 FR 52620) as a
result of the IPIA and OMB guidance that set forth proposed provisions
establishing the PERM program by which states would annually be
required to estimate and report improper payments in the Medicaid
program and CHIP. The state-reported, state-specific, improper payment
rates were to be used to compute the national improper payment
estimates for these programs.
In the October 5, 2005 Federal Register (70 FR 58260), we published
a PERM interim final rule (IFR) with comment period that responded to
public comments on the proposed rule and informed the public of both
our national contracting strategy and plan to measure improper payments
in a subset of states. That IFR with comment period described that a
state's Medicaid program and CHIP would be subject to PERM measurement
just once every 3 years; the 3 year period is referred to as a cycle,
and the year in which a state is measured is known as its ``PERM
year.'' In response to the public comments from that IFR, we published
a second IFR with comment period in the August 28, 2006 Federal
Register (71 FR 51050) that reiterated our national contracting
strategy to estimate improper payments in both Medicaid and CHIP fee-
for-service (FFS) and managed care. We set forth, and invited comments
on, state requirements for estimating improper payments due to Medicaid
and CHIP eligibility determination errors. We also announced that a
state's Medicaid program and CHIP would be reviewed during the same
cycle.
In the August 31, 2007 Federal Register (72 FR 50490), we published
a PERM final rule that finalized state requirements for: (1) Submitting
claims to the federal contractors that conduct FFS and managed care
reviews; (2) conducting eligibility reviews; and (3) estimating payment
error rates due to errors in eligibility determinations.
3. 2010 Final Rule: Revisions to MEQC and PERM To Meet the CHIPRA
Requirements
In the July 15, 2009 Federal Register (74 FR 34468), we published a
proposed rule which proposed revisions, as required by the CHIPRA, to
the MEQC and PERM programs, including changes to the PERM review
process.
In the August 11, 2010 Federal Register (75 FR 48816), we published
a final rule for the MEQC and PERM programs, which became effective on
September 10, 2010, that codified several procedural aspects of the
process for estimating improper payments in Medicaid and CHIP,
including: Changes to state-specific sample sizes to reduce state
burden; the stratification of universes to obtain required precision
levels; eligibility sampling requirements; the modification of review
requirements for self-declaration or self-certification of eligibility;
the exclusion of children enrolled through the ELE from the PERM
measurement; clearly defined ``types of payment errors'' to clarify
that errors must affect payments for the purpose of the PERM program; a
clearly defined difference resolution and appeals process; and state
requirements for implementation of CAPs.
Section 601(e) of the CHIPRA required harmonizing the MEQC and PERM
programs' eligibility review requirements to improve coordination of
the two programs, decrease duplicate efforts, and minimize state
burden. To comply with the CHIPRA, the final rule granted states the
flexibility, in their PERM year, to apply PERM data to satisfy the
annual MEQC requirements, or to apply ``traditional'' MEQC data to
satisfy the PERM eligibility component requirements.
The August 11, 2010 final rule permitted a state to use the same
data, such as the same sample, eligibility review findings, and payment
review findings, for each program. However, the CHIPRA permits
substituting PERM and MEQC data only where the MEQC review is conducted
under section 1903(u) of the Act, so only states using the
``traditional'' MEQC methodology may employ this substitution option.
Also, each state, with respect to each program (MEQC and PERM) is still
required to develop separate error/improper payment rate calculations.
II. Provisions of the Proposed Rule and Analysis of and Responses to
Comments
We received 20 timely comments from the public, in response to the
proposed rule published on June 22, 2016 (81 FR 40596). The following
sections, arranged by subject area, include a summary of the public
comments received and our responses.
We received comments from the public, State Medicaid agencies,
advocacy groups, a non-partisan legislative branch agency, and
associations. The comments ranged from general support or opposition to
the proposed provisions to very specific questions or comments
regarding the proposed changes.
Many commenters raised issues centered around the PERM managed care
component and the transparency and public reporting aspects of both the
PERM and MEQC programs. We believe that these issues are beyond the
scope of this final rule. However, we may consider whether to take
other actions, such as revising or clarifying CMS program operating
instructions or procedures, based on the information or recommendations
in the comments. Brief summaries of each proposed provision, a summary
of the public comments we received (with the exception of specific
comments on the paperwork burden or the economic impact analysis), and
our responses to the comments are provided in this final rule. Comments
related to the paperwork burden and the impact analyses included in the
proposed rule are addressed in the ``Collection of Information
Requirements'' and ``Regulatory Impact Statement'' sections in this
final rule. The final regulation text follows these analyses.
We proposed the following changes to part 431 to address the
eligibility provisions of the Affordable Care Act, as well as to make
improvements to the PERM and MEQC programs.
A. MEQC Program Revision
Section 1903(u) of the Act requires the review of Medicaid
eligibility to identify erroneous payments, but it does not specify the
manner by which such reviews must occur. The MEQC program
[[Page 31161]]
was originally created to implement the requirements of section 1903(u)
of the Act, but the PERM program, implemented subsequent to MEQC and
under other legal authority, likewise reviews Medicaid eligibility to
identify erroneous payments. As noted previously, the CHIPRA required
harmonizing the MEQC and PERM programs and allowed for certain data
substitution options between the two programs, to coordinate consistent
state implementation to meet both sets of requirements and reduce
redundancies. Because states are subject to PERM reviews only once
every 3 years, we proposed to meet the requirements in section 1903(u)
of the Act through a combination of the PERM program and a revised MEQC
program that resembles the current MEQC pilots, by which the revised
MEQC program would provide measures of a state's erroneous eligibility
determinations in the 2 off-years between its PERM years.
As previously noted, states currently may satisfy our requirements
by conducting either a traditional MEQC program or MEQC pilots, with
the majority of states (39) electing the latter due to the pilots'
flexibility to target specific problematic or high-interest areas. The
revised MEQC program will eliminate the traditional MEQC program and,
instead, formalize, and make mandatory, the pilot approach. During the
2 off-years between each state's PERM years, when a state is not
reviewed under the PERM program, we proposed that it conduct one MEQC
pilot spanning that 2-year period. The revised regulations will conform
the MEQC program to how the majority of states have applied the MEQC
pilots through the administrative flexibility we granted states decades
ago to meet the requirements of section 1903(u) of the Act. We believe
such MEQC pilots will provide states with the necessary flexibility to
target specific problems or high-interest areas as necessary. As a
matter of semantics, note that in the proposed rule we continued to use
the term ``pilots,'' not because they are fixed or defined projects (as
the term sometimes connotes), but, rather because, as described, states
will have flexibility to adapt pilots to target particular areas.
We further proposed to take a similar approach to ``freezing''
error rates as we took when we initially introduced MEQC pilots 2
decades ago. In 1994, when we introduced MEQC pilots we offered states
the ability to ``freeze'' their error rates until they resumed
traditional MEQC activities. Similarly, we proposed to freeze a state's
most recent PERM eligibility improper payment rate during the 2 off-
years between a state's PERM cycles, when the state will be conducting
an MEQC pilot. As noted previously, section 1903(u) of the Act sets a 3
percent threshold for improper payments in any period or fiscal year
and generally requires the Secretary to withhold payments to states
with respect to the amount of improper payments that exceed the
threshold. Therefore, we proposed freezing the PERM eligibility
improper payment rate as it allows each state a chance to test the
efficacy of its corrective actions as related to the eligibility errors
identified during its PERM year. Our provisions also allow states a
chance to implement prospective improvements in eligibility
determinations before having their next PERM eligibility improper
payment measurement performed, where identified improper payments will
be subject to potential payment reductions and disallowances under
1903(u) of the Act.
We proposed to revise Sec. 431.800 to revise and clarify the MEQC
program basis and scope.
Comment: Several commenters supported our proposal to revise the
MEQC program into a pilot program that works in conjunction with the
PERM program.
Response: We appreciate the commenters' support, and we are
finalizing as proposed.
We proposed to remove Sec. 431.802 as FFP, state plan
requirements, and the requirement for the MEQC program to meet section
1903(u) of the Act will no longer be applicable to the revised MEQC
program.
We did not receive any comments on this proposal, and therefore, we
are finalizing as proposed.
We proposed to revise Sec. 431.804 by adding definitions for
``corrective action,'' ``deficiency,'' ``eligibility,'' ``Medicaid
Eligibility Quality Control (MEQC),'' ``MEQC Pilot,'' ``MEQC review
period,'' ``negative case,'' ``off years,'' ``Payment Error Rate
Measurement (PERM),'' and ``PERM year.''
We proposed to revise the definitions for ``active case,'' and
``eligibility error,'' and remove ``administrative period,'' ``claims
processing error,'' ``negative case action,'' and ``state agency.'' We
proposed to add, revise, or remove definitions to provide additional
clarification for the proposed MEQC program revisions.
The following is summary of the comments we received regarding our
proposal to add, revise, or remove definitions.
Comment: One commenter stated that the MEQC definition of
``deficiency'' should not include the word ``error'' in it since
``eligibility error'' is separately defined.
Response: As stated in this final rule, the revised MEQC definition
of ``deficiency'' means a finding that does not meet the definition of
an ``eligibility error.'' Therefore, we believe it is appropriate to
also separately define the term ``eligibility error.'' However, we
acknowledge that we made a technical error in that the proposed PERM
definition of ``deficiency'' was inadvertently published as the MEQC
definition of ``deficiency,'' which likely contributed to reader
confusion and the request for clarification. As such, we finalize the
MEQC definition for ``deficiency'' to read that deficiency means a
finding in processing identified through active case review or negative
case review that does not meet the definition of an eligibility error.
Comment: Multiple commenters requested clarification of the
definition ``eligibility error.'' More specifically, one commenter
questioned whether ``type of assistance'' referred to ``full service
versus emergency service, MAGI versus Non-MAGI, Adult versus Parent
Caretaker or Child or to a subgroup under one of these.'' Other
commenters requested clarification for when a redetermination would not
be considered timely in relationship to previous determinations, and
claim payments. And some commenters requested clarification surrounding
the meaning of the phrase ``a required element of the eligibility
determination process cannot be verified as being performed/completed
by the state.''
Response: In this context, ``type of assistance'' refers to the
specific eligibility categories within Medicaid or CHIP, such as
parents and caretakers, children, pregnant women, and adult expansion
group, within which different benefits may be provided. States may use
different terminology to refer to eligibility categories, including
type of assistance. Next, federal regulations found at 42 CFR part 435
subpart J clearly define timely redeterminations. Lastly, documentation
and record keeping requirements relevant to state determinations of
eligibility are outlined in federal regulations, and, therefore, states
should be maintaining information required for review. Federal
eligibility regulations are very specific for certain elements of
eligibility (such as, but not limited to, citizenship and immigration
status) as to what the state must do to have successfully verified an
individual's eligibility for medical assistance. Thus, if the state is
unable to
[[Page 31162]]
provide the necessary documentation to support the state's eligibility
determination, the payment under review may be cited as an error due to
insufficient documentation. We are finalizing the definition of
``eligibility error'' as proposed.
Comment: Many commenters made recommendations on policies that
should be included in the MEQC review instructions that will be
provided by CMS following publication of the final rule.
Response: While we appreciate these recommendations, they are
beyond the scope of the proposed changes of the rule. We may consider
these recommendations when developing CMS guidance. The MEQC pilot
program review procedures are outlined at Sec. 431.812; states will be
required to follow the review procedures as outlined there, in addition
to other instructions established by CMS.
Comment: One commenter requested that CMS not remove the definition
``administrative period,'' stating that the current regulation excludes
the additional errors discovered for a period of time following the
discovery of the initial and/or original error, and that the
``administrative period'' recognizes Medicaid policy that requires
states to provide notice to beneficiaries prior to discontinuing
benefits. Further, the commenter stated that erroneous benefits issued
between the time in which the error is discovered and the dates in
which the change in benefit level can be applied are unavoidable.
Response: We removed the ``administrative period'' definition
because the terminology is not applicable to the proposed changes to
the MEQC program, and, therefore, no longer used in the regulation
text. Thus, the definition will not be included in the regulation text.
As a result of the comments, and in light of the acknowledged
technical error, the definition for ``deficiency'' has been replaced at
Sec. 431.804 with the appropriate MEQC definition. Additionally, we
made minor stylistic changes to the definitions of ``PERM'' and ``PERM
year.'' We received many comments supporting the changes to the MEQC
program, which includes the definitions, and are finalizing all other
added, revised, or removed definitions as proposed.
We proposed to revise Sec. 431.806 to reflect the state
requirements for the MEQC pilot program. Section 431.806 clarifies that
following the end of a state's PERM year, it would have up to November
1 to submit its MEQC pilot planning document for our review and
approval. We did not receive any comments on this proposal, and
therefore, we are finalizing as proposed.
We proposed to revise Sec. 431.810 to clarify the basic elements
and requirements of the MEQC program. We did not receive any comments
on this proposal, and therefore, we are finalizing as proposed.
We proposed to revise Sec. 431.812 to clarify the review
procedures for the MEQC program. As described previously, the CHIPRA
required harmonizing the PERM and MEQC programs and authorized us to
permit states to use PERM to fulfill the requirements of section
1903(u) of the Act; Sec. 431.812(f), which permits states to
substitute PERM-generated eligibility data to meet MEQC program
requirements, was issued under the CHIPRA authority. Given that the
Congress, in the CHIPRA, directed the Secretary to harmonize the PERM
and MEQC programs and expressly permitted states to substitute PERM for
MEQC data, we believe that the PERM program, with the proposed
revisions discussed in subpart Q, meets the requirements of section
1903(u) of the Act.
Our approach will continue to harmonize the PERM and MEQC programs.
It will reduce the redundancies associated with meeting the
requirements of two distinct programs. As noted, the CHIPRA, with
certain limitations, allows for substitution of MEQC data for PERM
eligibility data. Through our approach, in their PERM year, states will
participate in the PERM program, while during the 2 off-years between a
state's PERM cycles they would conduct a MEQC pilot, markedly reducing
states' burden. Moreover, we proposed to revise the methodology for
PERM eligibility reviews, as discussed in sections Sec. Sec. 431.960
through 431.1010. The MEQC pilots will focus on areas not addressed
through PERM reviews, such as negative cases and understated/overstated
liability, as well as permit states to conduct focused reviews on areas
identified as error-prone through the PERM program, so the new cyclical
PERM/MEQC rotation will yield a complementary approach to ensuring
accurate eligibility determinations.
By conducting eligibility reviews of a sample of individuals who
have received services matched with Title XIX or XXI funds, the PERM
program will continue to focus on identifying individuals receiving
medical assistance under the Medicaid or CHIP programs who are, in
fact, ineligible. Such PERM eligibility reviews conform to the
requirement at section 1903(u) of the Act's that states measure
erroneous payments due to ineligibility. Likewise, these eligibility
reviews will continue under the MEQC pilots during states' off-years
and include a review of Medicaid spend-down as a condition of
eligibility, conforming to other state measurement requirements of
section 1903(u) of the Act. We will calculate a state's eligibility
improper payment rate during its PERM year, which will remain frozen at
that level during its 2 off-years when it conducts its MEQC pilot.
Again, freezing states' eligibility improper payment rates between PERM
cycles will allow states time to work on effective and efficacious
corrective actions that would improve their eligibility determinations.
This approach also encourages states to pursue prospective improvements
to their eligibility determination systems, policies, and procedures
before their next PERM cycle, in which an eligibility improper payment
rate will be calculated with the potential for payment reductions and
disallowances to be invoked, in the event that a state's eligibility
improper payment rate is above the 3 percent threshold.
1. Revised MEQC Review Procedures
For more than 2 decades, the majority of states have used the
flexibility of MEQC pilots to review state-specific areas of interest,
such as high-cost or high-risk eligibility categories and problematic
eligibility determination processes. This flexibility has been
beneficial to states because it made MEQC more useful from a corrective
action standpoint.
We proposed that MEQC pilots focus on cases that may not be fully
addressed through the PERM review, including, but not limited to,
negative cases and payment reviews of understated and overstated
liability. Still, states will retain much of their current flexibility.
In Sec. 431.812, we proposed that states must use the MEQC pilots to
perform both active and negative case reviews, but states would have
flexibility surrounding their active case review pilot. In the event
that a state's eligibility improper payment rate is above the 3 percent
threshold for two consecutive PERM cycles, this flexibility will
decrease as states will be required to comply with CMS guidance to
tailor the active case reviews to a more appropriate MEQC pilot that
would be based upon a state's PERM eligibility findings. To ensure that
states with consecutive PERM eligibility improper payment rates over
the threshold identify and conduct MEQC active case reviews that are
appropriate during their off-years, we will provide direction for
conducting a MEQC pilot
[[Page 31163]]
that would suitably address the error-prone areas identified through
the state's PERM review. Both the PERM and MEQC pilot programs are
operationally complementary, and should be treated in a manner that
allows for states to review identified issues, develop corrective
actions, and effectively implement prospective improvements to their
eligibility determinations.
Active and negative cases represent the eligibility determinations
made for individuals that either approve or deny an individual's
eligibility to receive benefits and/or services under Medicaid or CHIP.
Individuals who are found to be eligible and authorized to receive
benefits/services are termed active cases, whereas individuals who are
found to be ineligible for benefits are known as negative cases. As
finalized at Sec. 431.812(b)(3), a state must focus its active case
reviews on three defined areas, unless otherwise directed by CMS, or,
as finalized at Sec. 431.812(b)(3)(i), it may perform a comprehensive
review that does not limit its review of active cases. Additionally, we
proposed that the MEQC pilots must include negative cases because we
also proposed to eliminate PERM's negative case reviews; our proposal
would ensure continuing oversight over negative cases to ensure the
accuracy of state determinations to deny or terminate eligibility.
Under the new MEQC pilot program, we proposed that states review a
minimum total of 400 Medicaid and CHIP active cases. We proposed that
at least 200 of those reviews must be Medicaid cases and expect that
states will include some CHIP cases, but beyond that, we proposed that
states would have the flexibility to determine the precise distribution
of active cases. For example, a state could sample 300 Medicaid and 100
CHIP active cases; it would describe its active sample distribution in
its MEQC pilot planning document that it would submit to us for
approval. Under the new MEQC pilot program, we also proposed that
states review, at a minimum, 200 Medicaid and 200 CHIP negative cases.
Currently, under the PERM program, states are required to conduct
approximately 200 negative case reviews for both the Medicaid program
and CHIP (204 is the base sample size, which may be adjusted up or down
from cycle to cycle depending on a state's performance). We proposed a
minimum total negative sample size of 400 (200 for each program) for
the proposed MEQC pilots because, as mentioned above and discussed
further below, we proposed to eliminate PERM's negative case reviews.
Historically, MEQC's case reviews (both active and negative)
focused solely on Medicaid eligibility determinations. The new MEQC
pilots will now include both Medicaid and CHIP eligibility case
reviews. Because we proposed to eliminate PERM's negative case reviews,
it is important that we concomitantly expand the MEQC pilots to include
the review of no less than 200 CHIP negative cases to ensure that CHIP
applicants are not inappropriately denied or terminated from a state's
program. In the event that CHIP funding should end, then states would
be required to review only Medicaid active and negative cases, as there
would no longer be any cases associated with CHIP funding.
We will provide states with guidelines for conducting these MEQC
pilots, and states must submit MEQC pilot planning documents for CMS's
approval. This approach will ensure that states are planning to conduct
pilots that are suitable and in accordance with our guidance.
This final rule will require states to conduct one MEQC pilot
during their 2 off-years between PERM cycles. We proposed that the MEQC
pilot review period span 12 months, beginning on January 1, following
the end of the state's PERM review period. For instance, if a state's
PERM review period is July 1, 2018 to June 30, 2019, the next proposed
MEQC pilot review period would be January 1 to December 31, 2020. We
proposed at Sec. 431.806 that a state would have up to November 1
following the end of its PERM review period to submit its MEQC pilot
planning document for CMS review and approval. Following a state's MEQC
pilot review period, we proposed it would have up to August 1 to submit
a CAP based on its MEQC pilot findings.
We realize that on the effective date of this final rule, states
will not all be at the same point in the MEQC pilot program/PERM
timeline. The impact of the proposed MEQC timeline for each cycle of
states is clarified below to assist each cycle of states in
understanding when the proposed MEQC requirements would apply.
------------------------------------------------------------------------
Cycle 1 states Cycle 2 states Cycle 3 states
------------------------------------------------------------------------
First PERM review period: July CMS will provide First MEQC pilot
2017-June 2018. guidance planning document
First MEQC pilot planning regarding a due: November 1,
document due: November 1, modified MEQC 2017.
2018. pilot that will MEQC review period:
MEQC review period: January 1- occur prior to January 1-December
December 31, 2019. the beginning of 31, 2018.
MEQC findings and CAP due: your first PERM MEQC findings and CAP
August 1, 2020. cycle. due: August 1, 2019.
First PERM review First PERM review
period: July period: July 2019-
2018-June 2019. June 2020.
------------------------------------------------------------------------
The following is a summary of the comments we received regarding
our proposal to revise the review procedures for the MEQC program.
Comment: A commenter requested that the personnel responsible for
the MEQC activities not be required to be functionally and physically
separate from the personnel responsible for Medicaid and CHIP policy
and operations since there is no longer a disallowance under MEQC.
Response: We appreciate the commenter's suggestion, but we decline
to change this requirement. We believe this separation is important to
ensure accurate and unbiased review and reporting by states in order to
maintain important oversight of eligibility determinations and to lower
PERM improper payment rates.
Comment: A commenter requested clarification surrounding the MEQC
negative case reviews, stating since each CHIP decision includes a
Medicaid determination, the same case should be used to fulfill the
requirement for both Medicaid and CHIP reviews of 200 negative cases.
Response: The regulation does not prevent the same case from being
in both the Medicaid and CHIP negative case samples if applicable.
States must submit a pilot planning document that meets the
requirements of Sec. 431.814 for both the active and negative case
reviews, which is subject to CMS approval. However, we will not approve
a negative case review pilot planning document for any state that
chooses to only review cases that were denied
[[Page 31164]]
coverage by both Medicaid and CHIP, or a proposal that does not meet
CMS requirements.
Comment: Several commenters requested that CMS include more details
surrounding the MEQC pilot review procedures in the regulatory text of
the final rule, including what will be in the future CMS subregulatory
guidance.
Response: Forthcoming MEQC program operating instructions and
procedures will provide further detail on review and reporting
requirements. The regulatory text outlines the general framework for
the pilot program and the forthcoming guidance will contain specific
implementing and operating guidelines.
Comment: One commenter disagreed with the proposed new MEQC review
schedule of 1 year on, and 2 years off. The commenter requested that
CMS consider changing the proposed MEQC review schedule to an ongoing
annual review cycle.
Response: We appreciate the commenter's suggestion, but decline to
change the proposed MEQC review schedule. Our proposed review schedule
for MEQC was created to provide necessary oversight of eligibility
determinations between a state's PERM cycles, account for those areas
that are not fully reviewed by PERM (for example, negative cases, and
overstated and understated liability), and allow states a chance to
implement prospective improvements in eligibility determinations before
having their next PERM eligibility improper payment measurement
performed. While we are not requiring an annual review cycle, nothing
in this final rule or in the regulations in this subpart should be
construed as limiting the state's program integrity measures, or
affecting the state's obligation to ensure that only eligible
individuals receive benefits or to provide for methods of
administration that are in the best interest of applicants and
beneficiaries and are necessary for the proper and efficient operation
of the plan.
Comment: Several commenters requested that CMS strengthen the rules
for the MEQC and PERM programs to include more specific requirements
for states to examine how the verification rules and eligibility
processes states have put in place affect the overall customer
experience and timeliness of the eligibility decision.
Response: The evaluation of customer experience is not the role of
the PERM or MEQC programs. However, if there are specific concerns
around a state's processes, the MEQC pilots are flexible enough that
the states will, if they choose, be able to include them as a part of
their review and report on these items, in addition to improper payment
information.
Comment: Several commenters requested that CMS expand the scope of
the MEQC pilots to examine state processes for transferring cases to
and from the exchange. Further, the commenter recommended that CMS
needs to monitor account transfers to ensure that states are using the
information applicants provide to the exchange and not asking for
information or documentation that has already been provided, and that
states are appropriately transferring denied Medicaid cases that
originate with the state Medicaid agency to the exchanges.
Response: Appropriate use of applicant-provided information and
transfer of denied Medicaid cases are currently a part of our
eligibility review pilots, and we anticipate including instructions on
review of these items in subregulatory guidance. Section 431.812 (b)(1)
and (c)(1) will cover these type of process related issues as it
requires states to identify deficiencies in processing subject to
corrective actions.
Comment: A commenter requested that CMS direct all negative case
reviews rather than leaving them to state discretion.
Response: We did propose to direct all negative case reviews and
did not propose to leave them to state discretion. Negative case
reviews are not given the same flexibility to focus on specific areas,
like active case reviews. Additionally, all MEQC pilots, including both
active and negative case reviews, require our approval. States must
comply with Sec. 431.812(a), which requires each state to conduct a
MEQC pilot in accordance with the approved pilot planning document, as
well as other instructions established by CMS.
Comment: A few commenters recommended that CMS direct the MEQC
active case reviews immediately after a state's eligibility improper
payment rate exceeds the 3 percent threshold. These commenters contend
that waiting to impose this provision until a state has exceeded the 3
percent threshold in consecutive PERM cycles is too long.
Response: While we appreciate the commenter's recommendation, we
are not accepting this recommendation at this time. We want to give
states an opportunity to evaluate and appropriately address their PERM
findings through their MEQC pilots before taking away the flexibility
of a state's active case reviews. We will direct the focus of the
active case reviews for those states that exceed the 3 percent in
consecutive PERM cycles. However, we will continue to maintain
oversight of states' reviews, and all states will need to follow CMS-
provided guidance when conducting their MEQC pilot reviews. Both the
PERM and MEQC pilot programs are operationally complementary, and
should be treated in a manner that allows for states to review
identified issues, develop corrective actions, and effectively
implement prospective improvements to their eligibility determinations.
This approach also encourages states to pursue prospective improvements
to their eligibility determination systems, policies, and procedures
before their next PERM cycle, in which an eligibility improper payment
rate will be calculated with the potential for payment reductions and
disallowances.
Comment: A commenter stated that Sec. 431.812 should specify how
to report payment findings and that the reference to Sec. 431.814 does
not include this information.
Response: Section 431.816 specifies requirements for case review
completion and submission of reports that include the reporting of
payment findings. As noted at Sec. 431.816(b), states must submit a
detailed case-level report in a format provided by CMS, and all case-
level findings are due by August 1 following the end of the MEQC review
period.
Comment: One commenter stated that the timing of the modified MEQC
pilot program guidance will be critical for Cycle 2 states to have
sufficient time to complete the pilot and implement corrective actions
prior to the date of the eligibility determinations for the PERM review
period beginning in 2018.
Response: We plan to issue necessary guidance upon publication of
this final rule, and we believe Cycle 2 states will have sufficient
time to meet the requirements of this final rule.
As a result of the comments, we do not have any revisions to the
regulatory text, and, therefore, we are finalizing it as proposed.
2. MEQC Pilot Planning Document
We proposed to revise Sec. 431.814 to clarify the revised sampling
plan and procedures for the MEQC pilot program. We proposed that each
state be required to submit, for our approval, a MEQC Pilot Planning
Document that details how the state will perform its active and
negative case reviews. This process is consistent with that used
historically with MEQC pilots and also with the FY 2014 to FY 2017
Medicaid and CHIP Eligibility Review Pilots. Prior to the first
submission cycle, we will provide states with guidance containing
further
[[Page 31165]]
details informing them of what information will need to be included in
the MEQC Pilot Planning Document.
The following is summary of the comments we received regarding our
proposal to require states to submit a pilot planning document by
November 1 following the end of the State's PERM year for each MEQC
pilot that meets the requirements of Sec. 431.814 and is subject to
our approval.
Comment: Several commenters requested that CMS strengthen the pilot
planning document provision to require states to include justification
for the focus of the active case review, which should be based on the
findings of the PERM review.
Response: We agree with this recommendation and have added the
requirement to the regulatory text for states to include justification
for the focus of their active case reviews. Although error prone areas
would be based on each state's PERM review findings, the other options
(comprehensive review, recent changes to eligibility policies and
processes, or areas where the state suspects vulnerabilities) available
for the active case reviews would not necessarily be tied to PERM.
Comment: One commenter stated that for the state to be timely, it
is crucial that CMS have a deadline for approving a timely submitted
pilot planning document because states cannot start their MEQC pilot
plans without CMS approval, and recommends CMS include in the final
rule a process to respond so that states can plan accordingly to meet
their mandated deadlines.
Response: We intend to approve pilot planning documents as to not
delay each state's MEQC pilot timeline. We cannot specify a timeline,
as our approval will be dependent upon the content of each plan and the
state's compliance with Sec. 431.814.
As a result of the comments, we are revising Sec. 431.814(1)(i) to
require states to include justification for the focus of the active
case reviews, and finalize the rest of Sec. 431.814 as proposed.
3. Timeline and Reporting for MEQC Pilot Program
We proposed to revise Sec. 431.816 to clarify the case review
completion report submission deadlines. We proposed that states be
required to report, through a CMS-approved Web site and in a CMS-
specified format, on all sampled cases by August 1 following the end of
the MEQC review period, which we believe will streamline the reporting
process and ensure that all findings are contained in a central
location.
We did not receive any comments on this proposal to clarify
reporting and case review submission deadlines, and therefore, we are
finalizing as proposed.
We proposed to revise Sec. 431.818 to remove the mailing
requirements and the time requirement.
We did not receive any comments on this proposal to remove the
mailing and time requirements from Sec. 431.818, and therefore, we are
finalizing as proposed.
4. MEQC Corrective Actions
We proposed to revise Sec. 431.820 to clarify the corrective
action requirements under the proposed MEQC pilot program. Corrective
actions are critical to ensuring that states continually improve and
refine their eligibility processes. Under the existing MEQC program,
states must conduct corrective actions on all identified case errors,
including technical deficiencies, and we proposed that states continue
to be required to conduct corrective actions on all errors and
deficiencies identified through the proposed MEQC pilot program.
We proposed that states report their corrective actions to CMS by
August 1 following completion of the MEQC pilot review period, and that
such reports also include updates on the life cycles of previous
corrective actions, from implementation through evaluation of
effectiveness.
The following is summary of the comments we received regarding our
proposal to report on corrective actions and include updates on the
life cycles of previous corrective actions.
Comment: One commenter recommended that CMS require states to
include in the corrective action plan specific deadlines for addressing
errors and deficiencies found in the case reviews, and for implementing
corrective actions.
Response: Specific deadlines for addressing errors and
deficiencies, as well as for implementing corrective actions are highly
dependent on the nature of the problem and the kind and extent of the
corrective action needed. States do have an incentive to act quickly,
as implementing effective correction actions through MEQC allows states
to pursue prospective improvements to their eligibility determination
systems, policies, and procedures before their next PERM cycle, in
which an eligibility improper payment rate would be calculated with the
potential for payment reductions and disallowances.
Comment: One commenter recommended CMS broaden the requirement that
states provide updates on corrective actions reported for the previous
MEQC pilot, to include all corrective actions, not just those reported
in the MEQC pilot immediately preceding the current one that have not
been addressed.
Response: We decline to accept the commenter's recommendation
because such provisions would require states to report on corrective
actions that may no longer be relevant. In the event that a past MEQC
corrective action was not implemented by the state, similar findings
would be identified during a state's PERM cycle as well as the
immediately preceding MEQC pilot, and thus, would require the state to
meet PERM CAP and MEQC CAP requirements.
As a result of the comments, we are finalizing this section as
proposed.
We proposed to remove Sec. 431.822, as we will no longer be
performing a federal case eligibility review of the revised MEQC
program.
We did not receive any comments on this proposal to remove Sec.
431.822, and therefore, we are finalizing as proposed.
5. MEQC Disallowances
Section I.B.1 of the proposed rule, provided a detailed regulatory
history of CMS's implementation of the MEQC program, and, in conformity
with CMS's policy since 1993, we proposed not using the revised MEQC
pilot program to reduce payments or to institute disallowances.
Instead, we proposed to formalize the MEQC pilot process to align all
states in one cohesive pilot approach to support and encourage states
during their 2 off-years between PERM cycles to address, test, and
implement corrective actions that would assist in the improvement of
their eligibility determinations. This approach also better harmonizes
and synchronizes the MEQC pilot and PERM programs, leaving them
operationally complementary. Additionally, this provision will be
advantageous to all states as they each will be exempt from potential
payment reductions and disallowances while conducting their MEQC pilot;
therefore placing the main focus of the pilots on the refinement and
improvement of their eligibility determinations. Based on this
approach, we proposed that each state's eligibility improper payment
rate will be calculated in its PERM year, and that its rate will be
frozen at that level during its off-years when it will conduct an MEQC
pilot and implement corrective actions.
We proposed to remove Sec. 431.865 because the CHIPRA authorized
certain PERM and MEQC data substitution
[[Page 31166]]
allowances, upon which we believe that the PERM eligibility improper
payment rate determination methodology satisfies the requirements of
section 1903(u) of the Act to be used for that provision's payment
reduction (and potential disallowance) requirement. Therefore, we are
requiring states to use the PERM program to meet section 1903(u) of the
Act requirements in their PERM years, and that potential payment
reductions or disallowances only be invoked under the PERM program.
Commenters supported our proposal to remove Sec. 431.865, and are
finalizing as proposed.
6. Payment Error Rate Measurement (PERM) Program
We proposed revisions to the PERM program. Our proposed PERM
eligibility component revisions have been tested and validated through
multiple rounds of PERM model pilots with 15 states and through
discussion with state and non-state stakeholders. The PERM model pilots
were distinct from the separate FY 2014 to FY 2017 Medicaid and CHIP
Eligibility Review Pilots, and were used to assess, test, and recommend
changes to PERM's eligibility component review process based on the
changes implemented by the Affordable Care Act. Specifically, we
tested, and requested stakeholder feedback on, options in the following
areas (below, there is more detail on each):
Universe definition.
Sample unit definition.
Eligibility Case review approach.
Feasibility of using a federal contractor to conduct the
eligibility case reviews.
Difference resolution and appeals process.
Through the PERM model pilots, we have determined that each of the
proposed changes support the goals of the PERM program and will produce
a valid, reliable eligibility improper payment rate. We also
interviewed participating states, as well as a select group of other
states, to receive feedback on the majority of the proposed changes,
and, to the extent possible, we addressed state concerns in the
proposed rule.
7. Payment Error Rate Measurement (PERM) Measurement Review Period
Since PERM began in 2006, the measurement has been structured
around the federal fiscal year (FFY) with states submitting FFS claims
and managed care payments with paid dates that fall in the FFY under
review. But, a data collection centered on the FFY has made it
perennially challenging to finalize the improper payment rate
measurement and conduct all the related reporting to support an
improper payment rate calculation by November of each year. Therefore,
to provide states and CMS additional time to complete the work related
to each PERM cycle prior to the annual improper payment rate
publication in the AFR, to better align PERM with many state fiscal
year timeframes, and to mirror the review period currently utilized in
the Medicare FFS improper payment measurement program, we proposed to
change the PERM review period from a FFY to a July through June period.
We proposed to begin this change with the Cycle 1 states, whose PERM
cycle would have started on October 1, 2017, so that Cycle 1 states
would submit their 1st and 4th quarters of FFS claims and managed care
payments with paid dates between, respectively, July 1 through
September 30, 2017 and April 1 through June 30, 2018. Subsequent cycles
would follow a similar review period.
The following is summary of the comments we received regarding our
proposal to change the PERM review period.
Comment: A few commenters expressed concerns about the effective
date of the new review period and when pre-cycle activities would start
with the new review period. The commenters requested that CMS provide
lead time to allow states sufficient time to schedule cycle kick-off
activities and evaluate and prepare for the changes after the final
rule is released.
Response: We will work with states as early as possible to prepare
states for their next PERM cycle, regardless of the review period. We
have already been working closely with states through the Medicaid and
CHIP Eligibility Review Pilots over the past 3 to 4 years, while PERM
eligibility reviews have been suspended. Prior to the publication of
this final rule, we have worked closely with states by assisting them
in evaluating their readiness for the resumption of PERM eligibility.
Also, we anticipate conducting any preparation/pre-cycle work earlier
than was done in previous cycles to give states advanced guidance
before the cycle begins.
Comment: A commenter questioned why only the 1st and 4th quarters
were mentioned, and not the 2nd and 3rd quarters for state submission
of FFS and managed care payments.
Response: The 2nd and 3rd quarters will still be required. The 1st
and 4th quarters are only mentioned to serve as examples to clearly
display the shift in state's quarterly FFS and managed care
submissions, based on the proposal to change the PERM review period.
States are still responsible for submitting 4 quarters of FFS and
managed care payments within the time period finalized in this rule.
Comment: One commenter expressed concern about potential areas of
overlap between cycles, which would mean that states would have less
time to implement corrective actions to reduce the next cycle's
improper payment rates.
Response: Although there may be some overlap for states during the
initial transition between the previous and new PERM review periods,
states should not wait to begin implementing corrective actions to
address all identified errors and deficiencies.
Comment: One commenter questioned how the rolling national improper
payment rates would be affected by the new PERM review period.
Response: There is no expected impact to the national improper
payment rate. During the transition period from a federal fiscal year
to the July through June review period, the assumption implied with the
national rate is that the cycle rate for the July through June sampling
period does not differ statistically from the previous fiscal year
sampling period. We believe this assumption is reasonable given the
shift in the sampling frame is only three months.
In addition to the previous comments, many commenters supported our
proposal to change the PERM review period, and therefore, we are
finalizing this as proposed.
We proposed to revise Sec. 431.950 to clarify the requirement for
states and providers to submit information and provide support to
federal contractors to produce national improper payment estimates for
Medicaid and CHIP.
We did not receive any comments specifically regarding our proposed
revisions at Sec. 431.950. However, all comments regarding our
proposal to transfer the PERM eligibility review responsibility from
the states to a federal contractor are listed below under the
``Eligibility Federal Review Contractor and State Responsibilities''
section.
We proposed various revisions to Sec. 431.958 to add, revise, or
remove definitions to provide greater clarity for the proposed PERM
program changes. Proposed additions and revisions include definitions
for ``appeals,'' ``corrective action,'' ``deficiency,'' ``difference
resolution,'' ``disallowance,'' ``Eligibility Review Contractor
(ERC),'' ``error,'' ``federal contractor,'' ``Federally facilitated
exchange-determination (FFE-D),'' ``Federal financial participation,''
``finding,'' ``Improper payment rate,'' ``Lower limit,''
[[Page 31167]]
``PERMreview period,'' ``recoveries,'' ``Review Contractor (RC),''
``Review year,'' ``State-specific sample size,'' ``State eligibility
system,'' ``State error,'' ``State payment system,'' ``Statistical
Contractor (SC),'' and removing the definitions of ``active case,''
``active fraud investigation,'' ``agency,'' ``case,'' ``case error
rate,'' ``case record,'' ``last action,'' ``negative case,'' ``payment
error rate,'' ``payment review,'' ``review cycle,'' ``sample month,''
``state agency,'' and ``undetermined.''
The following is summary of the comments we received regarding our
proposal to add, revise or remove definitions.
Comment: One commenter stated that the definition of ``corrective
action'' was not consistent with the rest of the language surrounding
corrective actions.
Response: We agree with this comment and have revised the
definition of ``corrective action'' to be more consistent with the
language surrounding corrective actions, and revised it to read as
actions to be taken by the state to reduce errors or other
vulnerabilities.
Comment: A commenter requested that the term ``error'' be removed
from the definition of ``deficiency,'' because the term ``error'' is a
separate definition.
Response: We agree with the commenter that defining an ``error'' to
include only improper payments means that an error which is defined as
an improper payment cannot also be a deficiency, and have changed the
definition ``error'' to ``payment error.''
Comment: One commenter requested clarification to the definition of
``difference resolution,'' stating that states should have the
opportunity to dispute both error and deficiency findings.
Response: States currently do have the opportunity to dispute both
error and deficiency findings. The proposed definition of difference
resolution means a process that allows states to dispute the PERM
Review Contractor and Eligibility Review Contractor ``error'' findings
directly with the contractor. We will remove the term ``error'' from
the definition of ``difference resolution'' for clarification that all
findings, both errors and deficiencies, may be disputed to match the
current practice.
Comment: A commenter requested that we add the term ``findings''
and/or ``eligibility review findings'' to the definition of ``error.''
Response: We respectfully disagree with the commenter and find the
current definition of ``error'' to be adequate as proposed. An error is
any payment where federal and/or state dollars were paid improperly
based on PERM medical, data processing, and/or eligibility reviews.
Comment: Two commenters requested we clarify the definition of
``state error.'' The commenters stated that the way ``state error'' is
currently worded seems to exclude medical review findings from the
state improper payment rate.
Response: The definition of provider error, to which we made no
proposed revisions, includes medical review errors at Sec. 431.960(c).
A state's improper payment rate includes both state errors and provider
errors, or, in other words, all data processing, medical review, and
eligibility errors, with the exception of errors described under Sec.
431.960(e)(2).
Comment: One commenter questioned whether or not the definition of
``disallowance'' applies to CHIP, stating the definition only
references Medicaid.
Response: As proposed at Sec. 457.628, regulations at Sec. Sec.
431.800 through 431.1010 (related to the PERM and MEQC programs) apply
to state's CHIP programs in the same manner as they apply to state's
Medicaid programs. For clarification, we will revise the definition of
``disallowance'' by exchanging the term ``Medical Assistance'' for
``Medicaid.''
Comment: Some commenters requested that CMS add a separate
definition for the term ``eligibility improper payment rate,'' because
they believe it would be disingenuous to calculate an eligibility
improper payment rate which would be used in the calculation of any
payment reductions and/or disallowances should a state exceed the 3
percent threshold, based on the absolute (rather than net) value of
overpayments and underpayments.
Response: Although we appreciate these comments, we decline to
alter the definition of the improper payment rate or to add a separate
improper payment rate definition for PERM eligibility. To comply with
IPERIA, ``improper payment rate'' is defined as an annual estimate of
improper payments made under Medicaid and CHIP equal to the sum of the
overpayments and underpayments in the sample, that is, the absolute
value of such payments, expressed as a percentage of total payments
made in the sample. As such, eligibility improper payments are included
in the ``improper payment rate'' definition. Further, Sec. 431.960(d)
defines an ``eligibility error'' as an underpayment or an overpayment.
In the `PERM Disallowance' section of this final rule, we address
commenters concerns surrounding the inclusion of underpayments in the
payment reduction/disallowance calculations.
As a result of the comments, we have revised the definition of
``corrective action'' to be more consistent with the rest of the
regulatory language surrounding corrective actions by revising to
include actions to be taken by the state to reduce errors or other
vulnerabilities, removed the term ``error'' from the definition of
``difference resolution,'' revised the definition of ``disallowance''
by exchanging the term ``Medical Assistance'' for ``Medicaid,'' and
clarified the definition of ``error'' is a ``payment error.'' We made
minor stylistic changes to the definitions of ``Eligibility Review
Contractor (ERC),'' ``Federal financial participation,'' ``Lower
limit,'' ``Recoveries,'' ``Review Contractor (RC),'' ``Review year,''
``State eligibility system,'' ``State error,'' and ``Statistical
Contractor (SC).'' We are finalizing all other added, revised, or
removed definitions as proposed.
We proposed to revise Sec. 431.960 to remove references to
negative case reviews and improper payments because a separate negative
case review will no longer be a part of the PERM review process, as
well as to provide greater clarity for the proposed PERM program
changes. Note that while a separate negative case review would not be
conducted as part of the proposed PERM review process, it could be
possible for a negative case to be reviewed because the claims universe
includes claims that have been denied. If a sampled denied claim was
denied because the beneficiary was not eligible for Medicaid/CHIP
benefits on the date of service, PERM would review the state's decision
to deny eligibility.
We did not receive any comments on this proposal to remove
references to negative case reviews and improper payments from Sec.
431.960, and, therefore, we are finalizing as proposed. Please note,
comments received surrounding PERM's proposal to no longer include a
separate negative case review are addressed under the `Universe
Definition' section.
We proposed to revise Sec. 431.972(a) to specify that states would
be required to submit FFS claims and managed care payments for the new
PERM Review Period.
We did not receive any comments on this proposal to require states
to submit FFS claims and managed care payments, and, therefore, we are
finalizing as proposed.
8. Eligibility Federal Review Contractor and State Responsibilities
Under the existing Sec. 431.974, states conduct PERM eligibility
reviews. Since the first PERM eligibility cycle in FY
[[Page 31168]]
2007, we have found that state resources have been burdened by having
to conduct PERM eligibility reviews, and because the reviews require
substantial staff resources, many states have struggled to meet review
timelines. Moreover, we have found that having states conduct PERM
eligibility reviews has created significant opportunity for states to
misinterpret and inconsistently apply the PERM eligibility review
guidance, with, for example, states having difficulty interpreting the
universe definitions and case review guidelines.
To confront these challenges, we proposed to utilize a federal
contractor (known as the ERC) to conduct the eligibility reviews on
behalf of states. This will concomitantly reduce states' PERM program
burden and ensure more consistent guidance interpretation, thereby
reducing case review inconsistencies across states and improving
eligibility processes related to case reviews and reporting. A federal
contractor will be able to apply consistent standards and quality
control processes for the reviews and improve CMS's ability to oversee
the process, so improper payments will be reported consistently across
states. Moreover, the ERC will allow us to gain a better national view
of improper payments to better support the corrective action process
and ensure accurate and timely eligibility determinations, while a
third-party review team will be more consistent with standard auditing
practices and our other improper payment measurement programs.
Our PERM model pilot testing has confirmed that having a federal
contractor conduct eligibility reviews is feasible and improves our
oversight of the process, as an experienced federal contractor can
apply PERM guidance consistently across states while continuing to
recognize unique state eligibility policies, processes, and systems.
Further, through the pilots, we have developed processes to ensure that
the federal contractor works collaboratively with state staff to ensure
that the reviews are consistent with state eligibility policies and
procedures.
While states will not continue to conduct PERM eligibility reviews,
we envision that they will still play a role, as needed, in supporting
the federal contractor. Therefore, we proposed to add state supporting
role requirements by revising Sec. 431.970 to outline data submission
and state systems access requirements to support the PERM eligibility
reviews and the ERC.
Under Sec. 431.10(c)(1)(i)(A)(3), state Medicaid agencies may
delegate authority to determine eligibility for all, or a defined
subset of, individuals to the Exchange, including Exchanges operated by
a state or by HHS. Those states that have delegated the authority to
make Medicaid/CHIP eligibility determinations to an Exchange operated
by HHS, known as the Federally Facilitated Exchange (FFE), are
described as determination states, or FFE-D states. By contrast, those
states that receive information from the FFE, which makes assessments
of Medicaid/CHIP eligibility, but where the applicant's account is
transferred to the state for the final eligibility determination, are
known as assessment states, or FFE-A states.
We proposed that states will be responsible for providing the ERC
with eligibility determination policies and procedures, and any case
documentation requested by the ERC, which could include the account
transfer (AT) file for any claims where the individual was determined
eligible by the FFE in a determination state (FFE-D), or was passed on
to the state by the FFE for final determination in assessment states
(FFE-A).
Further, if the ERC finds that it cannot complete a review due to
insufficient supporting documentation, it will expect the state to
provide it. States will determine how to obtain the requested
documentation (we did not propose to charge the ERC with conducting
additional outreach, such as client contact) and, if unable to do so to
enable to ERC to complete the review, the ERC will cite the case as an
improper payment due to insufficient documentation. In the event that
additional documentation is needed for a sampled FFE-D case, we are
aware that states may not have access to any other supporting
documentation, aside from the AT file. For these cases, where the
beneficiary's eligibility determination under review was made by the
FFE, an insufficient documentation improper payment would be cited, but
only included in the national improper payment rate, and not the state
specific improper payment rate. We also proposed that states will be
responsible for providing the ERC with direct access to their
eligibility system(s). A state's eligibility system(s) (including any
electronic document management system(s)) contains data the ERC must
review, including application information, third party data
verification results, and copies of required documentation (for
example, pay stubs), and we believe that allowing the ERC direct access
would best enable it to complete its reviews in a timely and accurate
manner and reduce state burden that would otherwise be required to
inform the ERC's reviews.
However, to ensure that states continue to have a measure of
oversight, we proposed allowing states the opportunity to review the
ERC's case findings prior to their being finalized and used to
calculate the national and state improper payment rate. Through a
difference resolution and appeals process, states would have the
opportunity to resolve disagreements with the ERC. Based on our pilot
testing, we believe that open communication between the state and the
ERC would best foster states' understanding of the review process and
the basis for any findings.
The following is summary of the comments we received regarding our
proposal to add requirements which outline the state's role in
supporting the federal contractor during the PERM eligibility reviews.
Comment: Several commenters expressed the importance of continued
state involvement in the eligibility reviews. The commenters noted the
need for the ERC to work collaboratively with states and to allow state
experts to provide assistance, resources, and support to the ERC.
Additionally, one commenter noted the need for states to understand in
advance how the ERC will conduct reviews and have the opportunity to
review the ERC's planned review process.
Response: We agree with the commenters and believe that open
communication and collaboration between the state and the ERC is
essential and would best foster states' understanding of the review
process and the basis for any findings. We intend to minimize state
burden, but envision that states will still play an important role in
supporting the federal contractor. Our PERM model pilot testing has
confirmed that having a federal contractor conduct eligibility reviews
is feasible as an experienced federal contractor can apply PERM
guidance consistently across states while continuing to recognize
unique state eligibility policies, processes, and systems. Further,
through the pilots, we have developed processes to ensure that the
federal contractor works collaboratively with state staff. We tasked
the ERC to develop state-specific eligibility review planning documents
to ensure state and CMS buy-in for the review process that will be
utilized in each state.
[[Page 31169]]
Comment: One commenter suggested that CMS make the eligibility
review procedures available to the public so that stakeholders can
understand the standards and processes used to evaluate the accuracy of
Medicaid and CHIP determinations.
Response: Similar to CMS' current practice for the PERM medical
review and data processing review processes and procedures, we intend
to make eligibility review processes and procedures available through
documents available on the CMS PERM Web site.
Comment: One commenter requested that CMS incorporate a mechanism
or process to determine whether the automated eligibility processes
required by the Affordable Care Act are functioning accurately and
whether eligibility category assignments result in the appropriate
federal match rate being applied.
Response: As defined at Sec. 431.960(d)(1), an eligibility error
is an error resulting in an overpayment or underpayment that is
determined from a review of a beneficiary's eligibility determination,
in comparison to the documentation used to establish a beneficiary's
eligibility and applicable federal and state regulations and policies,
resulting in Federal and/or State improper payments. This definition
will be applied regardless of whether the error was caused by automated
system or caseworker processes. For the commenter's second request, we
intend to review eligibility determinations for correct eligibility
category assignment. We proposed to clarify in Sec. 431.960(b)(1),
(c)(1), and (d)(1) that improper payments are defined as both federal
and state improper payments. We believe this change would allow us to
identify federal improper payments in circumstances where states make
an incorrect eligibility category assignment that would result in the
incorrect FMAP being claimed by the state.
Comment: A few commenters had expressed concerns around the
requirement for states to provide the case documentation needed to
support the eligibility review. One commenter stated that the ERC
should be responsible for providing documentation to support the
eligibility reviews because they are conducting the reviews. Another
commenter questioned how the ERC would obtain all information the state
used to determine eligibility if the supporting documentation exists
only in hard copy.
Response: As case documentation is within the state's custody and
control, the responsibility for providing documentation lies with the
state. Moreover, states must provide case documentation as requested to
support the eligibility determinations under review as proposed at
Sec. 431.970(a)(9). As stated in the proposed rule, if the state is
unable to comply with all information submission requirements and the
ERC is unable to complete the review, the payment under review may be
cited as an error due to insufficient documentation. The ERC will
accept both electronic and hard copy documentation.
Comment: One commenter requested that CMS allow and approve state
waiver requests to maintain the PERM eligibility review responsibility,
rather than transferring the responsibility to the federal contractor.
Response: To ensure the accuracy and consistency of the PERM
improper payment rates, we will not allow or approve state waiver
requests to maintain the PERM eligibility review responsibility. As
noted in the proposed rule, the decision to transfer the PERM
eligibility reviews to a federal contractor was proposed to reduce
states' PERM program burden and ensure more consistent guidance
interpretation, thereby reducing case review inconsistencies across
states and improving eligibility processes related to case reviews and
reporting.
Comment: One commenter requested that CMS include a provision
requiring the review contractor to review the case according to state
eligibility criteria and documented policies and procedures, as well as
a provision that would prevent an error from being counted three times
based on the data processing, medical, and eligibility reviews.
Response: The definition of an eligibility error at Sec.
431.960(d)(1) states that an eligibility error is an error resulting in
an overpayment or underpayment that is determined from a review of a
beneficiary's eligibility determination, in comparison to the
documentation used to establish a beneficiary's eligibility and
applicable federal and state regulations and policies, resulting in
Federal and/or State improper payments. Thus, the ERC will be
conducting the eligibility reviews in accordance with applicable
federal, as well as, state regulations and policies. Separate
definitions for data processing and medical review errors are also
detailed at Sec. 431.960(b) and (c), respectively, which the ERC will
use to conduct reviews. As the three payment error definitions are
distinct, a single error would be prevented from being counted three
times.
In addition to the comments above, we also received many comments
supporting the transfer of the PERM eligibility review responsibility
to a federal contractor, and therefore, are finalizing as proposed.
9. Eligibility Review Procedures
As discussed, we proposed that a federal contractor conduct the
eligibility case reviews, and states' responsibilities would therefore
be limited. Because we proposed state responsibilities at Sec.
431.970, we proposed to remove Sec. 431.974.
We did not receive any comments on this proposal to remove Sec.
431.974, and therefore, we are finalizing as proposed.
10. Eligibility Sampling Plan
We proposed to remove Sec. 431.978, because the ERC will conduct
the eligibility reviews and states will no longer be required to submit
a sampling plan. In place of the sampling plan, the ERC will draft
state-specific eligibility case review planning documents outlining how
it will conduct the eligibility review, including the relevant state-
specific eligibility policy and system information.
We did not receive any comments on this proposal to remove Sec.
431.978, and therefore, we are finalizing as proposed.
11. Eligibility Review Procedures
We proposed to remove Sec. 431.980; this section presently
specifies the review procedures required for states to follow while
performing the PERM eligibility component reviews. States will no
longer be required to conduct the PERM eligibility component reviews,
because the ERC will conduct the eligibility reviews.
We did not receive any comments on this proposal to remove Sec.
431.980, and therefore, we are finalizing as proposed.
12. Eligibility Case Review Completion Deadlines and Submittal of
Reports
We proposed to remove Sec. 431.988; this section presently
specifies states' requirements and deadlines for reporting PERM
eligibility review data, which functions we proposed to transition to
an ERC.
We did not receive any comments on this proposal to remove Sec.
431.988, and therefore, we are finalizing as proposed.
13. Payment System Access Requirements
The Claims Review Contractor (RC) currently conducts PERM reviews
on FFS and managed care claims for the Medicaid program and CHIP, and
is required to conduct Data Processing (DP) reviews on each sampled
claim to validate that the claim was processed correctly based on
information found in
[[Page 31170]]
the state's claim processing system and other supporting documentation
maintained by the state. We believe that, in order for the RC to review
claims during the review cycle, reviewers would need remote or on-site
access to appropriate state systems. If the RC is unable to review
pertinent claims information, and the state is not able to comply with
all information submission and systems access requirements as specified
in the proposed rule, the payment under review may be cited as an error
due to insufficient documentation.
To facilitate the RC's reviews, we proposed that states grant it
access to systems that authorize payments, including: FFS claims
payments; Health Insurance Premium Payment (HIPP) payments; Medicare
buy-in payments; aggregate payments for providers; capitation payments
to health plans; and per member per month payments for Primary Care
Case Management (PCCM) or non-emergency transportation programs. We
proposed that states also grant the RC access to systems that contain
beneficiary demographics and provider enrollment information to the
extent such information is not included in the payment system(s), and
to any imaging systems that contain images of paper claims and
explanation of benefits (EOBs) from third party payers or Medicare.
Experience has demonstrated that some states have allowed the RC
only partial and/or untimely systems access, which we believe has led
to a slower review process. Based on our discussions with the states,
we believed they are sometimes permitting limited systems access due to
a lack of processes to grant access (for example, requiring contractors
to complete access forms and training) rather than state bans on
providing outside contractors with access due to privacy or cost
concerns. Therefore, we proposed adding paragraphs (c) and (d) to Sec.
431.970, which will require states to provide access to appropriate and
necessary systems.
Comment: Many commenters stated concerns surrounding the proposed
requirement for states to provide federal contractors with direct
access to all eligibility systems necessary to conduct the eligibility
review, all payment systems, any systems that include beneficiary
demographic information and/or provider enrollment information
necessary to conduct the medical and data processing reviews, any
document imaging systems, and systems that house the results of third
party data matches. The majority of concerns stemmed from the need for
data privacy and security, as well as a concern around the data that
can be shared and/or provided to federal contractors.
Response: Our contractors are subject to stringent federal security
standards, including compliance with HIPAA requirements, and their
systems are subject to annual security audits to ensure that protected
health information (PHI) and personally identifiable information (PII)
used in the PERM program is protected. Further, each CMS contractor is
subject to any state-specific security requirements related to the
access and use of PHI and PII. This includes entering into data use
agreements and completion of any other security-related protocol
required by the states. This final rule requires that contractors be
provided direct access to any necessary state systems required to
conduct Medicaid and CHIP claim and eligibility reviews and that access
can be provided through remote means (preferred) or through onsite
access. However, we understand that some data elements within a system,
such as the IRS income amounts, cannot be viewed by the ERC due to
rules around access to federal tax information (FTI). CMS and our
contractors will work with states at the start of each cycle on the
identification of systems needed for PERM reviews and potential access
challenges.
Comment: One commenter requested that CMS clarify in regulation the
systems for which the contractor would need direct access.
Response: Proposed Sec. 431.970 outlined the system access
requirements for federal contractors. This includes all payment
system(s) necessary to conduct the medical and data processing review,
including the Medicaid Management Information System (MMIS), any
systems that include beneficiary demographic and/or provider enrollment
information, and any document imaging systems that store paper claims.
This also includes all eligibility system(s) necessary to conduct the
eligibility review, including any eligibility systems of record, any
electronic document management system(s) that house case file
information, and systems that house the results of third party data
matches. Because the number and types of systems differ between states,
we will work with each state to determine which systems contractors
will need direct access to meet the requirements of Sec. 431.970.
Comment: One commenter requested that CMS clarify if there is a
difference between the terms ``direct access'' and ``remote or on-site
access.'' The commenter stated that CMS should allow states discretion
to provide any combination of direct, remote, or on-site systems
access.
Response: The terms ``direct access'' and ``remote or on-site
access'' are equivalent. States are required to provide direct systems
access to federal contractors. While we encourage and prefer states to
provide remote access where possible, both remote and on-site access
will meet the requirements of Sec. 431.970.
Comment: Many commenters were concerned about the time it would
take to train federal contractors to navigate numerous systems,
ultimately increasing state burden. Commenters requested that CMS re-
evaluate the efficiency of providing direct access to federal
contractors.
Response: We recognize that the time and resources that could be
required by a state to train federal contractors in navigating numerous
systems will be increased initially. However, following this initial
training, state burden should be reduced over the duration of the PERM
cycle. Through previous PERM cycles, as well as the PERM model pilots,
experience has demonstrated that when states have allowed federal
contractors direct systems access, it has led to a more timely and less
burdensome review process.
Comment: One commenter requested that CMS clarify if there were any
alternatives should a state not provide direct access to the
eligibility system.
Response: If the state is unable to comply with all information
submission and systems access requirements and the ERC is unable to
complete the review, the payment under review may be cited as an error
due to insufficient documentation.
In addition to these comments, we received several comments
supporting our proposal to require states grant direct systems access
to federal contractors, and therefore, we are finalizing Sec.
431.970(c) and (d) as proposed.
14. Universe Definition
To meet IPERIA requirements, the samples used for PERM eligibility
reviews must be taken from separate universes: one that includes Title
XIX Medicaid dollars, and one that includes Title XXI CHIP dollars.
Section 431.978(d)(1) currently defines the Medicaid and CHIP active
universes as all active Medicaid or CHIP cases funded through Title XIX
or Title XXI for the sample month, with certain exclusions. Developing
an accurate and complete universe is essential to
[[Page 31171]]
developing a valid, accurate improper payment rate.
In previous PERM cycles, sampling universe development has been one
of the most difficult steps of the eligibility review. Varying data
availability and system constraints have made it challenging to
maintain consistency in state-developed eligibility universes;
developing the eligibility universe may require substantial staff
resources, and the process may take several data pulls that are often
conducted by IT staff or outside contractors not closely involved in
the PERM eligibility review process.
During the PERM model pilots, we tested three PERM eligibility
review universe definition options, including defining the universe by:
(1) Eligibility determinations and redeterminations (that is, a
universe of eligibility decisions); (2) actual beneficiaries or
recipients (that is, a universe of eligible individuals); and (3)
claims/payments (that is, a universe of payments made). We found that
the third approach, defining the universe by the claims/payments, was
best; PERM was designed to meet the IPERIA requirements of calculating
a national Medicaid and CHIP improper payment rate, so having the
eligibility reviews tied directly to a paid claim ensures that PERM
only reviews those beneficiaries or recipients who have had services
paid for by the state Medicaid or CHIP agency. Accordingly, for the
PERM eligibility review active universe we proposed using the
definition at Sec. 431.972(a), and deleting the current PERM
eligibility review universe requirements in Sec. 431.974 and Sec.
431.978. The PERM claims component requires state submission of
Medicaid and CHIP FFS claims and managed care payments on a quarterly
basis; state submission responsibilities are defined under Sec.
431.970. These claims and payments are rigorously reviewed by the
federal statistical contractor, and the process has extensive, thorough
quality control procedures that have been used for several PERM cycles
and have been well-tested.
We believe that this universe definition leverages the claims
component of PERM and supports efficient use of resources, as the
universe would already be developed on a consistent basis for the PERM
claims component. By this proposed change, eligibility reviews using a
claims universe would be tied to payments and be more consistent with
IPERIA, state burden would be minimized by harmonizing PERM claims and
eligibility universe development, and federal and state resources would
no longer be spent on eligibility reviews that potentially could not be
tied to payments (for example, eligibility reviews conducted on
beneficiaries that did not receive any services).
Through our pilot testing, we have also determined that the claims
universe does not result in a substantially different rate of case
error. However, sampling from this universe did result in a higher
proportion of non-MAGI cases because enrollees in such eligibility
categories are likely to have higher health care service utilization,
and therefore, have more associated FFS claims. Because PERM is
designed to focus on improper payments, we believe it is appropriate to
use a sample that focuses on individuals who are linked to the bulk of
Medicaid and CHIP payments. However, because eligibility will be
reviewed for both FFS claims and managed care capitation payments, MAGI
cases will be subject to a PERM eligibility review, primarily through
the review of eligibility for individuals who have managed care
capitations payments on their behalf, as many states have chosen to
enroll individuals in MAGI eligibility categories in managed care.
Further, states can choose to focus on further Medicaid and CHIP
reviews of MAGI cases in the proposed MEQC pilot reviews they would
conduct during their off-year pilots.
While it is possible for a claim to be associated with a negative
case, as mentioned previously, the claims universe does not support a
negative PERM eligibility case rate. Because IPERIA focuses on
payments, the statute does not require determining a negative case
rate. The proposed MEQC pilot reviews that states will conduct on off-
years would be used to review Medicaid and CHIP negative cases.
The following is summary of the comments we received regarding our
proposal to change the universe definition, which would no longer
include a separate negative case review in PERM.
Comment: Several commenters expressed concern around the removal of
the negative case reviews from PERM. Many commenters were concerned
about the oversight of these cases if not reviewed by PERM, and
recommended CMS reinstate negative case reviews as part of the PERM
program.
Response: The purpose of the PERM program is to identify improper
payments. We recognize the importance of negative case oversight and
have proposed to do so through the MEQC pilot program. This important
oversight will help assure states are not incorrectly denying coverage
to individuals, who are in fact eligible to receive Medicaid/CHIP
benefits. However, as recommended by the comment below, we have added
PERM CAP requirements to require states to evaluate whether actions
states take to reduce eligibility errors will also avoid increases in
improper denials.
Comment: One commenter suggested additional PERM CAP requirements
for states that would require consideration of whether actions states
take to reduce eligibility errors will also avoid increases in improper
denials, because the PERM universe will no longer include a review of
negative cases to determine whether there were inappropriate denials.
Response: We agree with this comment and have added language to
Sec. 431.992 to include that states will be required to evaluate
whether actions states take to reduce eligibility errors will also
avoid increases in improper denials.
Comment: One commenter stated that denied claims should be removed
from the universe of claims because denied claims have no federal funds
attached. The commenter also questioned whether, if denied claims are
included in the universe, there is a timeframe that the eligibility
determinations associated with denied claims would not be reviewed and/
or dropped, as the determination under review could have taken place a
number of years earlier.
Response: One of the primary benefits of moving to a single sample
to support medical reviews, data processing reviews, and eligibility
reviews for the PERM program is to streamline the universe submission
and sampling process and select just one sample from a universe of paid
and denied FFS and managed care claims and payments. This effort will
minimize state burden and better align the claims and eligibility
review process for the PERM program. Further, based on IPERIA
requirements, the PERM program must review for potential over- or
under-payments. Denied claims are included in the PERM claims universe
to account for possible underpayments. We will not make any adjustments
in regulation regarding the inclusion of denied claims in the PERM
universe nor to the potential for those claims to receive an
eligibility review. However, we appreciate the commenter's concern
regarding the sampling of claims where the last eligibility action for
the individual associated with the claim occurred years earlier than
the claim paid date. During the first 2 rounds of the PERM model
pilots, we conducted an analysis to determine the average length of
time between the claim paid date and the claim date of service to
determine if a significant lag between
[[Page 31172]]
those two dates would result in eligibility reviews that occurred more
than 1 to 2 years prior to the claim paid date.
This analysis showed that the average amount of time between a
claim paid date and a claim date of service in the PERM sampled claims
reviewed was approximately 40 to 45 days. Additionally, on average, the
oldest eligibility actions were approximately 13 months prior to claim
paid date. Further, to date, our pilot work has found no issues
preventing the completion of eligibility reviews regardless of the
claim paid date or claim date of service. We will continue to monitor
the eligibility review of denied claims during Round 5 of the Medicaid
and CHIP Eligibility Review Pilots, as well as during the initial
cycles when PERM eligibility resumes. If issues are identified related
to the review of denied claims for eligibility or, more generally, with
the review of older claims, we will issue subregulatory guidance.
As a result of the comments, we are revising Sec. 431.992 to
include a state requirement to evaluate whether actions states take to
reduce eligibility errors will also avoid increases in improper
denials. Moreover, we have also received several comments supporting
our proposed universe definition, and therefore, we are finalizing this
as proposed.
15. Inclusion of FFE-D Cases in the PERM Review
As previously noted, Sec. 431.10(c)(1)(i)(A)(3) permits state
Medicaid agencies to delegate authority to determine eligibility for
all or a defined subset of individuals to the Exchange, including
Exchanges operated by a state or by HHS. We proposed that, in FFE-D
states, cases determined by the FFE (referred to as FFE-D cases) could
be reviewed if a FFS claim or managed care payment for an individual
determined eligible by the FFE is sampled. Although FFE-D states are
required to maintain oversight of their Medicaid/CHIP programs per
Sec. 435.1200(c)(3), they also enter into an agreement per Sec.
435.1205(b)(2)(i)(A) by which they must accept the determinations of
Medicaid/CHIP eligibility based on MAGI made by another insurance
affordability program (in this case, the FFE).
Federal regulations permit states to delegate authority for MAGI-
based Medicaid and CHIP eligibility determinations to the FFE and
require them to accept those determinations. States have an overall
responsibility for oversight of all Medicaid and CHIP eligibility
determinations, but, with respect to the FFE delegation, they are
required to accept FFE determinations without further review or
discussion on a case-level basis, making it difficult for states to
address improper payments on a case-level basis. Therefore, we proposed
that case-level errors resulting solely from an FFE determination of
MAGI-based eligibility that the state was required to accept be
included only in the national improper payment rate, not the state
rate. Conversely, we proposed that errors resulting from incorrect
state action taken on cases determined and transferred from the FFE, or
from the state's annual redetermination of cases that were initially
determined by the FFE, be included in both state and national improper
payment rates. Examples of errors that we proposed will be included in
both state and national improper payment rates include, but are not
limited to: (1) Where a case is initially determined and transferred
from the FFE, but the state then fails to enroll an individual in the
appropriate eligibility category; and (2) errors resulting from initial
determinations made by a state-based Exchange.
We proposed revisions to Sec. 431.960(e) and Sec. (f) to clarify
that we would distinguish between cases that are included in a state's,
and the national, improper payment rate. Although we proposed this
distinction for improper payment measurement program purposes, this
distinction does not preclude the single state agency from exercising
appropriate oversight over eligibility determinations to ensure
compliance with all federal and state laws, regulations and policies.
We also proposed revisions to Sec. 431.992(b) to clarify that states
would be required to submit PERM corrective actions only for errors
included in state improper payment rates.
We did not receive any comments on this proposal to not include
case-level errors resulting solely from an FFE determination of MAGI-
based eligibility in the state improper payment rate, and therefore, we
are finalizing as proposed.
16. Sample Size
Establishing adequate sample sizes is critical to ensuring that the
PERM improper payment rate measurement meets IPERIA statistical
requirements. In accordance with IPERIA, PERM is focused on
establishing a national improper payment rate, which must meet the
precision level established in OMB Circular A-123, which is a 2.5
percent precision level at a 90 percent confidence interval. Although
not required by IPERIA, as an additional goal we have always strived to
achieve state level improper payment rates within a 3 percent precision
level at a 95 percent confidence interval. However, as discussed in the
Regulatory Impact Analysis, we recognize achieving this level of
precision in all states poses some challenges and is not always
possible.
Previously, state-specific sample sizes were calculated prior to
each cycle and the national annual sample size was the aggregate of the
state-specific sample sizes. State-specific sample sizes were based on
past state PERM improper payment rates. We proposed establishing a
national annual sample size that would meet IPERIA's precision
requirements at the national level, and then distributing the sample
across states to maximize precision at the state level, where possible.
We also proposed that the state-specific sample sizes would be chosen
to maximize precision based on state characteristics, including a
history of high expenditures and/or past state PERM improper payment
rates. We recognize that the precision of past estimates of state-
specific improper payment rates has varied. We requested public comment
on this proposed approach, its benefits, limitations, and any potential
alternatives. We believe that, relative to our prior approach, the
proposed approach would more effectively measure and reduce national
improper payments and would also provide more stable state-specific
sample sizes, as the sample size would be less responsive to changes in
improper payment rates from cycle to cycle. A more stable state-
specific sample size may assist with state level planning. Further, it
will allow us to exercise more control over the PERM program's budget
by establishing a national sample size. On the other hand, like its
predecessor, the proposed approach may not yield improper payment
estimates at the state level within a 3 percent precision level at a 95
percent confidence interval for all states (due to underpowered sample
size). We will develop specific sampling plans for PERM cycles that
occur after publication of the final rule. We will continue to
calculate a national improper payment rate within a 2.5 percent
precision level at a 90 percent confidence interval as required by
IPERIA. Likewise, we will continue to strive to achieve state improper
payment rates within a 3 percent precision level at a 95 percent
confidence interval precision. In the future, as information improves
or new priorities are identified, we may identify additional factors
that should be taken
[[Page 31173]]
into account in developing state-specific sample sizes.
In practice, we anticipate having the ability to vary the number of
data processing, medical, and eligibility reviews performed on each of
the sampled claims. Under this approach, each sampled claim may not
undergo all three types of reviews, which would allow us to more
efficiently allocate the types of reviews performed. Conducting more
reviews on payments that are likely to have problems gives us better
information to implement effective corrective actions, which could
assist in reducing improper payments. For example, after eligibility
reviews resume, we may determine that there are few eligibility
improper payments for clients associated with managed care claims;
thus, there might be a limited benefit to conducting eligibility
reviews on all sampled managed care claims, and we might reduce the
number of those reviews. This approach would allow us to optimize PERM
program expenditures so we do not waste resources conducting reviews
unlikely to provide valuable insight on the causes of improper
payments.
We note above that conducting reviews on areas more likely to have
problems results in more information to inform corrective actions
versus conducting more reviews on areas that are likely to be correct.
It is important to note that state corrective actions are not impacted
by varying levels of state-specific improper payment rate precision. As
we describe later in this final rule, states are required to submit
corrective action plans that address all improper payments and
deficiencies identified.
The following is a summary of the comments we received regarding
our proposals to: (1) Establish a national annual sample size that
would meet IPERIA's precision requirements at the national level, and
then distributing the sample across states to maximize precision at the
state level, where possible, and (2) choose state-specific sample sizes
that would maximize precision based on state characteristics, including
a history of high expenditures and/or past state PERM improper payment
rates.
Comment: Commenters requested clarification around the phrase ``In
practice, we anticipate having the ability to vary the number of data
processing, medical, and eligibility reviews performed on each of the
sampled claims. Under this approach, each sampled claim may not undergo
all three types of reviews, which would allow us to more efficiently
allocate the types of reviews performed.'' Commenters questioned when
this approach would first go into effect, and were concerned with how
this allocation of reviews would be determined.
Response: The new sample size methodology, where the national
sample will be distributed across states and when sampled claims will
receive some combination of data processing (DP), medical review (MR),
and eligibility review, will go into effect upon the effective date of
the final rule. The first PERM measurement impacted by the changes in
this regulation, including the sample size methodology change, will be
Cycle 1 states, whose review period is from July 1, 2017, through June
30, 2018. Beginning with these reviews, we anticipate setting the
number of DP, MR, and eligibility reviews at the national level, which
would then be distributed across states.
Comment: Many commenters requested clarification of the phrase
``Conducting more reviews on payments that are likely to have problems
gives us better information to implement effective corrective actions,
which could assist in reducing improper payments.'' Commenters stated
that this approach would inaccurately overstate the error rate, target
eligibility cases that are more likely to have problems, and not
produce a statistically valid sample.
Response: It is our goal to select a sample that is both
representative of the universe of claims in the State and is
descriptive enough that potential error causes will be present in the
sample so they can be addressed by the State in corrective actions. All
claims sampled are applied the respective sampling weight that
accurately reflects the state's improper payment rate. That is, if the
PERM program were to sample high risk claims at a greater frequency
compared to other claims, the high risk claims would receive a
relatively lower statistical weight, which prevents overstating of a
state's improper payment rate. This weighting process helps make sure
the resulting improper payment rate is statistically valid and
representative of the universe of claims.
Comment: Two commenters requested that CMS provide detailed
information of an estimated state-specific sample size and the method
used to make that determination. One commenter requested that CMS allow
states to enhance their state-specific sample based on the state's
characteristics and suggested that defining the state's sample based on
high expenditure claims and prior payment errors does not reflect the
overall performance of the state.
Response: We will continue to strive to achieve state level
improper payment rates within a 3 percent precision level at a 95
percent confidence interval. We will distribute the national annual
sample across states to maximize precision at the state level, where
possible. State-specific sample sizes would be chosen to maximize
precision based on state characteristics, including a history of high
expenditures and/or past state PERM improper payment rates. In the
future, as information improves or new priorities are identified, we
may identify additional factors that should be taken into account in
developing state-specific sample sizes. Therefore, more detailed
statistical methodology information will be made available in a
subregulatory form so that we can make updates to the methodology as
additional factors are identified.
After considering the comments, we did not make any revisions to
the regulatory text, and therefore, are finalizing as proposed.
17. Data Processing, Medical, and Eligibility Improper Payment
Definitions
We proposed clarifying in Sec. 431.960(b)(1), (c)(1), and (d)(1)
that improper payments are defined as both federal and state improper
payments. We believe this change would allow us to cite federal
improper payments in circumstances where states make an incorrect
eligibility category assignment that would result in the incorrect FMAP
being claimed by the state. Previously, improper payments were only
cited if the total computable amount--the federal share plus the state
share--was incorrect. Under the Affordable Care Act, beneficiaries in
the newly eligible adult group receive a higher FMAP rate than other
eligibility categories. As a result, incorrect enrollment of an
individual in the newly eligible adult category may result in improper
federal payments even though the total computable amount may be
correct. Although there were eligibility categories that could receive
higher FMAP rates previously, the size of the newly eligible adult
category makes it critical for us to have the ability to cite federal
improper payments to achieve an accurate PERM improper payment rate.
The following is summary of the comments we received regarding our
proposal to clarify in Sec. 431.960(b)(1), (c)(1), and (d)(1) that
improper payments are defined as both federal and state improper
payments.
Comment: A commenter requested we modify the definition of federal
[[Page 31174]]
improper payments, stating if the total computable payment is correct
that the payment should not be cited as an error.
Response: We believe this proposed change would allow us to state
federal improper payments in circumstances where states make an
incorrect eligibility category assignment that would result in the
incorrect federal medical assistance percentage (FMAP) being claimed by
the state. Previously, improper payments were only stated if the total
computable amount--the federal share plus the state share--was
incorrect. Under the Affordable Care Act, beneficiaries in the newly
eligible adult group receive a higher FMAP rate than other eligibility
categories. As a result, incorrect enrollment of an individual in the
newly eligible adult category may result in improper federal payments
even though the total computable amount may be correct. Although there
were eligibility categories that could receive higher FMAP rates
previously, the size of the newly eligible adult category makes it
critical for us to have the ability to state federal improper payments
to achieve an accurate PERM improper payment rate.
Comment: Commenters requested clarification of the eligibility
error definition in regard to the phrase ``lacked or had insufficient
documentation in his or her case record,'' specifically regarding
whether or not states have the opportunity to provide the missing
documentation that proves the eligibility determination was correct
before it is determined an error.
Response: States are required to provide documentation to support
their eligibility determination. We intend to accept documentation to
support accurate payments that is provided in time to be included in
the improper payment rate calculation and meets criteria set forth by
CMS in future subregulatory guidance regarding the provision of
documentation for eligibility reviews.
Comment: One commenter stated the eligibility error definition for
both PERM and MEQC was likely to increase error rates, as citing errors
when a case does not contain sufficient documentation to support the
eligibility determination decision overlooks the possibility that the
documentation could not be attained for legitimate reasons. The
commenter also stated that, currently, these cases are removed from the
sample as the inaccuracy of the decision cannot be proven and requests
CMS to continue its practice of excluding these cases from the sample
unit.
Response: We respectfully disagree with the commenter. We must
include cases of insufficient documentation as improper payments to
comply with OMB's implementing guidance for IPERIA, which states that
``when an agency's review is unable to discern whether a payment was
proper as a result of insufficient or lack of documentation, this
payment must also be considered an improper payment.'' Consistent with
this guidance, PERM has never allowed for cases of insufficient or lack
of documentation to be excluded.
Comment: One commenter requested that CMS clarify if PERM
eligibility errors would include both caseworker and systems errors.
Response: The definition of an eligibility error at Sec.
431.960(d)(1) states that an eligibility error is an error resulting in
an overpayment or underpayment that is determined from a review of a
beneficiary's eligibility determination, in comparison to the
documentation used to establish a beneficiary's eligibility and
applicable federal and state regulations and policies, resulting in
Federal and/or State improper payments. This definition will be applied
regardless of whether the error finding was caused by a caseworker or
system.
In addition to the comments above, we also received several
comments supporting our proposal to clarify in Sec. 431.960(b)(1),
(c)(1), and (d)(1) that improper payments are defined as both federal
and state improper payments. Therefore, we are finalizing Sec. 431.960
as proposed.
18. Difference Resolution and Appeals Process
Because we proposed to use an ERC to conduct the eligibility case
reviews, we likewise proposed that the ERC conduct the eligibility
difference resolution and appeals process, which would mirror how that
process is conducted with respect to FFS claims and managed care
payments. The difference resolution and appeals process used for the
FFS and managed care components of the PERM program is well developed
and has allowed us to adequately resolve disagreements between the RC
and states. We have revised Sec. 431.998 to include the proposed
eligibility changes for the difference resolution and appeals process.
Additionally, we proposed deleting the statement in the regulation
text currently at Sec. 431.998(d) about CMS recalculating state-
specific improper payment rates, upon state request, in the event of
any reversed disposition of unresolved claims; Instead proposing that
the recalculation be performed whenever there is a reversed
disposition, such that no state request is needed.
The following is summary of the comments we received regarding our
proposal for the ERC to conduct the eligibility difference resolution
and appeals.
Comment: One commenter requested that CMS include in regulation the
requirements for the ERC to respond and collaborate with states to
resolve differences in a timely manner.
Response: PERM review contractors have requirements in their
contracts for responding to state requests for difference resolutions
in a timely manner. Currently, the PERM review contractors are
contractually required to respond to state requests for difference
resolutions in 15 days. Requirements such as state collaboration are
also included in these contracts and the contractors are held
accountable to be in compliance. Additionally, through the PERM model
pilots we learned that state collaboration and communication are
essential in making the new eligibility review process with the ERC a
success, which is also a priority to us.
Comment: A commenter requested that CMS re-evaluate the time
allowed for the difference resolution and appeals processes, especially
for the eligibility component, as the current time allowances are
insufficient. The commenter recommended that CMS allow for 60 calendar
days for difference resolution requests and 30 calendar days for appeal
requests.
Response: We find the request to re-evaluate the difference
resolution and appeals timeframes reasonable, but disagree with the
specific timeframes recommended by the commenter. Instead, we will
extend the difference resolution time allowance to 25 business days and
the appeal time allowance to 15 business days, which will allow states
more time to research errors while still allowing the PERM process to
be completed within a reasonable timeframe.
Comment: One commenter requested clarification as to whether or not
CMS would be able to complete all recalculated state improper payment
rates to enable them to be published in the AFR and state report.
Response: Changing the PERM review period provides states and CMS
additional time to complete the work related to each PERM cycle prior
to the annual improper payment rate publication in the AFR and state
reports. Therefore, we anticipate the need for state improper payment
rate
[[Page 31175]]
recalculations to be limited. Per Sec. 431.998(d), all differences
that are not overturned in time for improper payment rate calculation
will be considered as errors in the improper payment rate calculation
to meet the reporting requirements of the IPIA (as amended). In the
event of any reversed disposition of unresolved claims, a state
improper payment rate recalculation will be performed.
Comment: One commenter requested that CMS clarify the types of
reports that will be provided to states to determine if a difference
resolution or appeal should be pursued or requested for findings.
Additionally, the commenter requested that detailed case information
will be needed, not only for determining whether or not to file a
difference resolution/appeal, but for developing and implementing
corrective actions.
Response: As proposed, the difference resolution and appeals
process would mirror how that process is conducted for FFS and managed
care payments. Detailed information on the payment under review, as
well as the reason for the error/deficiency citation, is provided to
allow states to determine whether they should request difference
resolution and/or an appeal, as well as develop appropriate corrective
actions.
As a result of the comments, we have revised Sec. 431.998(b) and
(d) to include the new time allowances for both difference resolution
and appeal requests. We are finalizing all other provisions this
section as proposed.
19. Corrective Action Plans
Under Sec. 431.992, states are required to submit CAPs to address
all improper payments and deficiencies found through the PERM review.
We proposed that states would continue to submit CAPs that address
eligibility improper payments, along with improper payments found
through the FFS and managed care components. We proposed to revise
Sec. 431.992(a) to clarify that states would be required to address
all errors included in the state improper payment rate at Sec.
431.960(f)(1).
We proposed to revise Sec. 431.992 to provide additional
clarification for the PERM CAP process. We proposed minor revisions to
the regulatory text to reflect the current corrective action process
and provide additional state requirements, consistent with the CHIPRA.
Proposed revisions include replacing ``major tasks'' at Sec.
431.992(b)(3)(ii)(A) with ``corrective action,'' to improve clarity.
Other proposed clarifications would also be provided at Sec.
431.992(b)(3)(ii)(A) through (E).
We also proposed adding language to clarify the state
responsibility to evaluate corrective actions from the previous PERM
cycle at Sec. 431.992(b)(4), and a requirement for states, annually
and when requested by CMS, to update us on the status of corrective
actions. We proposed to request updates on state corrective action
implementation progress on an annual basis, a frequency that would
enable us fully monitor corrective actions and ensure that states are
continually evaluating the effectiveness of their corrective actions.
Additionally, we proposed to add language in Sec. 431.992 to
specify further CAP requirements should a state's PERM eligibility
improper payment rate exceed the allowable threshold of 3 percent per
section 1903(u) of the Act for consecutive PERM years. This proposal
only pertains to a state's additional CAP requirements related to the
PERM eligibility improper payment rate, and does not extend to the FFS
and managed care components. As the allowable threshold for eligibility
is set by section 1903(u) of the Act, this will not change from year to
year. The improper payment rate targets for FFS and managed care are
not constant, therefore, it is not judicious to hold states accountable
to meet a target that is variable.
We proposed to require states whose eligibility improper payment
rates exceed the 3 percent threshold for consecutive PERM years to
provide status updates on all corrective actions on a more frequent
basis, as well as include more details surrounding the state's
implementation and evaluation of all corrective actions, than would be
required for those states that did not have eligibility improper
payment rates over the 3 percent threshold for consecutive PERM years.
As noted above, we anticipate typically requesting updates on
corrective actions on an annual basis, however, for those states with
consecutive PERM eligibility improper payment rates above the allowable
threshold, we proposed to require updates every other month. Such
states would also be required to submit information about any setbacks
and provide alternate corrective actions or manual workarounds, in the
event that their original corrective actions are unattainable or no
longer feasible. This would ensure that states have additional plans in
place, if the original corrective action cannot be implemented as
planned. Also, states would be required to submit actual examples
demonstrating that the corrective actions have led to improvements in
operations, and explanations for how these improvements are efficacious
and will assist the state to reduce both the number of errors cited and
the state's next PERM eligibility improper payment rate. Moreover, we
proposed that states be required to submit an overall summary that
clearly demonstrates how the corrective actions planned and implemented
would provide the state with the ability to meet the 3 percent
threshold upon their next PERM eligibility improper payment rate
measurement.
The following is summary of the comments we received regarding our
proposals to revise Sec. 431.992 by (1) clarifying that states would
be required to address all errors included in the state improper
payment rate at Sec. 431.960(f)(1); (2) adding language to clarify the
state responsibility to evaluate corrective actions from the previous
PERM cycle at Sec. 431.992(b)(4), and a requirement for states,
annually and when requested by CMS, to update us on the status of
corrective actions; and (3) adding language to specify further CAP
requirements should a state's PERM eligibility improper payment rate
exceed the allowable threshold of 3 percent per section 1903(u) of the
Act for consecutive PERM years.
Comment: One commenter requested that CMS impose a 1-year timeframe
for completing the corrective actions, with tighter timeframes when
feasible.
Response: Specific deadlines for addressing errors and
deficiencies, as well as for implementing corrective actions, are
highly dependent on the nature of the problem, and the kind and extent
of the corrective action needed. Therefore, we do not believe that
imposing a timeframe for states' completing corrective actions would be
feasible.
Comment: One commenter suggested CMS clarify that the evaluation
look-back period applies to all previous CAPs and is not limited to
only the CAP from the most recent PERM measurement.
Response: Implementing such provisions would require states to
report on corrective actions that could potentially be no longer
relevant. In the event that a corrective action was not implemented by
the state, similar findings would be identified during their MEQC
pilots and PERM reviews, and, thus, have to meet MEQC CAP and PERM CAP
requirements. Additionally, should a state exceed the 3 percent
threshold for consecutive PERM years, more stringent CAP requirements
are required per Sec. 431.992(e).
As a result of the comments, and as previously mentioned in the
responses to commenter concerns regarding the exclusion of negative
case reviews from
[[Page 31176]]
PERM's review, we are revising Sec. 431.992 to include that states be
required to evaluate whether actions states take to reduce eligibility
errors will also avoid increases in improper denials in their PERM
CAPs. Additionally, we also received several comments supporting the
proposed changes to Sec. 431.992 and are therefore, finalizing all
other provisions of Sec. 431.992 as proposed.
20. PERM Disallowances
As previously stated regarding MEQC Disallowances, we proposed to
require states to use PERM to meet the requirements of section 1903(u)
of the Act in their PERM years, and to no longer require the proposed
MEQC pilot program to satisfy the requirements of section 1903(u) of
the Act. We proposed to require states to use PERM to meet section
1903(u) of the Act requirements, as this approach has been supported by
the CHIPRA through its certain data substitution authorization between
the PERM and MEQC programs. Moreover, requiring the PERM program to
satisfy IPERIA requirements and requiring a separate program to satisfy
the erroneous excess payment measurement and payment reduction/
disallowance requirements of section 1903(u) of the Act, when PERM is
capable of meeting the requirements of both, would be contrary to the
CHIPRA's requirement to harmonize PERM and MEQC. Therefore, based on
the ability of the PERM program to meet both the requirements of
section 1903(u) of the Act and IPERIA, we proposed that in a state's
PERM year, a state's PERM eligibility improper payment rate be used to
satisfy both IPERIA's improper payment requirements and 1903(u) the
Act's erroneous excess payments and payment reduction/disallowance
requirements.
If a state's PERM eligibility improper payment rate is above the 3
percent allowable threshold per section 1903(u) of the Act, it would be
subjected to potential payment reductions and disallowances. However,
if the state has taken the action it believed was needed to meet the
threshold and still failed to achieve that level, the state may be
eligible for a good faith waiver as outlined in Sec. 431.1010.
Essential elements of a state's showing of a good faith effort include
the state's participation in the MEQC pilot program in accordance with
subpart P (Sec. 431.800 through Sec. 431.820) and implementation of
PERM CAPs in accordance with Sec. 431.992.
Absent CMS's approval, a state's failure to comply with the
requirements of both the MEQC pilot program and PERM CAP would be
considered a failure to demonstrate a good faith effort to reduce its
eligibility improper payment rate. Again, absent our approval, we would
not grant a good faith waiver for any state that either does not comply
with the MEQC pilot program requirements or does not implement a PERM
corrective action plan. We also proposed that the requirements under
section 1903(u) of the Act would not become effective until a state's
second PERM eligibility improper payment rate measurement has occurred,
as an earlier effective date would not give states a chance to
demonstrate, if needed, a good faith effort.
Under this proposed regulation, we would reduce a state's FFP for
medical assistance by the percentage by which the lower limit of the
state's eligibility improper payment rate exceeds the 3 percent
threshold should a state fail to demonstrate a good faith effort. We
proposed to use the lower limit of the improper payment rate, because
we believe that utilizing the lower limit of the error rate for
disallowance purposes will assist in ensuring there is reliable
evidence that a state's error rate exceeds the 3 percent threshold.
This approach addresses the varying levels of state-specific improper
payment rate precision as discussed in the sample size section above.
Therefore, we proposed to add Sec. 431.1010, which establishes rules
and procedures for payment reductions and disallowances of FFP in
erroneous medical assistance payments due to eligibility improper
payments, as detected through the PERM program. Federal medical
assistance funds include all service-based fee-for-service, managed
care, and aggregate payments which are included in the PERM universe.
Exclusions from the federal medical assistance funds for disallowance
purposes include non-service related costs (for example,
administrative, staffing, contractors, systems) as well as certain
payments for services not provided to individual beneficiaries such as
Disproportionate Share Hospital (DSH) payments to facilities, grants to
State agencies or local health departments, and cost-based
reconciliations to non-profit providers and Federally-Qualified Health
Centers (FQHCs). If expenditures included in the PERM universe are
adjusted, we may also need to adjust the universe definition to meet
program needs.
The following is summary of the comments we received regarding our
proposal for PERM to meet section 1903(u) of the Act in state's PERM
years.
Comment: Several commenters were concerned with whether the 3
percent eligibility improper payment threshold was realistic and
reasonable given the changes to the PERM program. Additionally, many of
those commenters requested that CMS demonstrate the validity of this
figure to ensure that states would not be inappropriately penalized as
a result of these substantial changes.
Response: The 3 percent threshold for eligibility-related improper
payments in any fiscal year is established by section 1903(u) of the
Act. Payment reductions/disallowances become effective on and after
July 1, 2020, at which time states, within their respective PERM
cycles, will be reviewed for the second time under this final rule.
Comment: One commenter stated that CMS should revisit the
establishment of the 3 percent threshold, as, historically, MEQC
processes allowed for the dropping of undetermined cases, wherein PERM
will include undetermined cases among the errors.
Response: Historically, MEQC allowed for the dropping of
undetermined cases due to the nature of the required MEQC review that
made undetermined cases likely to be prevalent. MEQC required states to
determine if cases were eligible for services during all or parts of a
month under review. Under MEQC, state agencies were required to collect
and verify all information necessary to determine eligibility,
including conducting field investigations and in-person beneficiary
interviews. However, under PERM, the ERC will review the last action
performed by the state that resulted in the eligibility for the
beneficiary on the date of service associated with the sampled claim.
Documentation and record keeping requirements relevant to state
determinations of eligibility are outlined in federal regulations, and,
therefore, states should be maintaining information required for
review. Thus, eligibility errors will continue to include cases that
lacked or had insufficient documentation to make a definitive review
decision as defined in Sec. 431.960(d)(2)(iii).
Comment: A few commenters requested that CMS show how disallowances
would be calculated and to provide an example.
Response: For each state, along with the improper payment rate, we
calculate a 95 percent confidence interval, which has a lower limit and
an upper limit. Under the proposed regulation, if a state's eligibility
error rate is above the 3 percent allowable threshold (as established
by section 1903(u) of the
[[Page 31177]]
Act), and the state fails to demonstrate a good faith effort in
reducing its eligibility improper payment rate, then further action
will be taken. Using the lower limit of the state's eligibility
improper payment rate, the state's FFP for medical assistance will be
reduced by the amount that the lower limit of the state's eligibility
improper payment rate (excluding underpayments) exceeds the 3 percent
threshold. For example, a state has a Medicaid eligibility improper
payment rate of 10 percent. The lower limit of the 95 percent
confidence interval is 5 percent and the upper limit is 15 percent.
Thus, the lower limit exceeds the 3 percent threshold by 2 percentage
points (the 5 percent lower limit less the 3 percent threshold is 2
percent). The state's FFP for Medicaid will then be reduced by 2
percent. The 2 percent reduction will be based on the total FFP
received for the state's Medicaid program during the period spanning
the state's PERM review year.
Comment: Commenters requested that CMS revise the proposed Sec.
431.1010 to include authority to disallow only those expenditures that
actually produced a cost to the federal government.
Response: As specified in Sec. 431.972, the PERM claims universe
includes payments which are eligible for FFP (or would have been if the
claim had not been denied) through Title XIX (Medicaid) or Title XXI
(CHIP). Therefore, all improper payments identified through PERM and
included in improper payment rates used for calculation of payment
reductions/disallowances would include FFP.
Comment: A few commenters stated that a state should only be
required to return funds based on a calculation of excess FFP, and not
for any under claiming of FFP.
Response: While the occurrence of eligibility underpayments is
expected to be extremely rare, we agree and will revise the regulatory
text to remove underpayments from any payment reduction/disallowance
calculations. We are revising Sec. 431.1010(a)(2) to specify that,
after the state's eligibility improper rate has been established for
each PERM review period, we will compute the amount of the
disallowance, removing any underpayments due to eligibility errors, and
adjust the FFP payable to each state.
Comment: One commenter requested that CMS clarify if FFP will be
reduced or disallowed at a program and/or waiver level only. The
commenter stated that disallowances tied to Medicaid and/or CHIP in
total will inappropriately reduce or disallow FFP and will put
beneficiaries at risk for not receiving medically necessary services.
Response: For each state, along with the improper payment rate, we
calculate a 95 percent confidence interval, which has a lower limit and
an upper limit. Under the proposed rule, if a state's Medicaid and/or
CHIP eligibility improper payment rate is above the 3 percent allowable
threshold per section 1903(u) of the Act, and the state fails to
demonstrate a good faith effort in reducing its eligibility improper
payment rate, then further action will be taken. Using the lower limit
of the state's eligibility improper payment rate (excluding
underpayments), the state's FFP for the Medicaid program and/or CHIP
will be reduced by the amount that the lower limit of the state's
program-specific eligibility improper payment rate exceeds the 3
percent threshold. Payment reductions/disallowances will only be
pursued after each state has been measured twice under this regulation.
This provision affords states with the ability to demonstrate a good
faith effort as defined in this regulation.
Comment: One commenter requested clarification for whether payment
reductions and disallowances would also be applied to the years between
PERM cycles for a state whose last PERM eligibility improper payment
rate was above the 3 percent threshold, and that state failed to
demonstrate a good faith effort.
Response: The disallowance of FFP for states whose PERM eligibility
improper payment rate is over the 3 percent threshold and who fail to
demonstrate a good faith effort applies to each state only in the
state's PERM year. Although this rate remains frozen until the state's
next PERM eligibility improper payment rate, the disallowance will not
be extended to the 2 years between a state's PERM years. For
clarification purposes, we have added language to Sec. 431.1010(a)(2)
to specifically state the period of payment reduction/disallowance.
Comment: One commenter requested that CMS strengthen the
requirement for what it means for states to demonstrate a good faith
effort to obtain a waiver from payment reductions/disallowances, should
a state exceed the 3 percent threshold. The commenter recommended that
a state should have to show a reduction in the eligibility improper
payment rate from the first PERM year to the second PERM year in order
to be granted a good faith waiver.
Response: Factors impacting PERM eligibility improper payment rates
are complex and vary from year to year. Thus, even though a state's
improper payment rate does not decrease between PERM years, it does not
mean the same errors and/or deficiencies exist, or necessarily mean
that the state did not implement effective corrective actions. We
continue to believe that the proposed requirements of a state's
participation in the MEQC pilot program in conformity with Sec. Sec.
431.800 through 431.820 and its implementation of PERM CAPs in
accordance with Sec. 431.992 are essential elements to the showing of
a state's good faith effort.
Comment: One commenter suggested CMS clarify that the good faith
waiver is limited to one PERM cycle and will not be extended.
Response: In the event that a state does receive a good faith
waiver, it will not be extended beyond the PERM year in which it was
received. Any state whose PERM eligibility improper payment rate is
above the 3 percent threshold for consecutive cycles must meet the good
faith waiver requirements for each cycle.
Comment: A commenter requested that CMS clarify additional
exemptions states can meet in addition to the MEQC pilots that would
allow states to be eligible for a good faith waiver.
Response: The good faith waiver requirements are outlined at Sec.
431.1010(b)(2). There are no additional exemptions. We will grant a
good faith waiver only if a state both participates in the MEQC pilot
program and implements PERM CAPs.
We also received many comments supporting our proposal to require
PERM to meet section 1903(u) of the Act in states PERM years.
Therefore, in response to the comments received, we are adding language
at Sec. 431.1010(a)(2) and (a)(3)(i) to exclude underpayments from any
payment reduction/disallowance calculations. We also revised the
definition of ``disallowance'' at Sec. 431.958 and added clarification
at Sec. 431.1010(a)(2) to state that payment reduction/disallowance is
only applicable to a state's PERM year. We are finalizing the remaining
provisions as proposed.
III. Provisions of the Final Regulations
With the exception of the following provisions and other minor
stylistic revisions, this final rule incorporates the provisions of the
proposed rule. Those provisions of this final rule that differ from the
proposed rule are as follows:
In Sec. 431.804, we are replacing the proposed definition
of ``deficiency'' with the correct MEQC definition of ``deficiency.''
At Sec. 431.814(b)(1)(i), we are adding the requirement
for states to provide the justification for the focus of the active
case reviews.
[[Page 31178]]
In Sec. 431.958, we are revising the definitions of
``corrective action,'' ``difference resolution,'' ``disallowance,'' and
changing the definition ``error'' to ``payment error'' as a result of
issues raised by commenters.
At Sec. 431.992(a)(2), we are adding a requirement for
states to provide an evaluation of whether actions states take to
reduce eligibility errors will also avoid increases in improper
denials.
At Sec. 431.998(d), we are updating the time allowances
for states to request difference resolutions and appeals.
At Sec. 431.1010(a)(2), we are adding that payment
reduction/disallowance calculations will not include underpayments, and
that payment reductions/disallowances are only applicable to the
state's PERM year.
At Sec. 431.1010(a)(3)(i), we are adding that
underpayments will be excluded from payment reduction/disallowance
calculations.
IV. Collection of Information
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
publish a 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval.
To fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA 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 burden estimates.
The quality, utility, and clarity of the information to be
collected.
Our effort to minimize the information collection burden
on the affected public, including the use of automated collection
techniques.
The estimates in this collection of information were derived from
feedback received from states during the PERM cycle. We solicited
public comment on each of the required issues under section
3506(c)(2)(A) of the PRA for the following information collection
requirements (ICRs).
Wages
To derive average costs, we used data from the U.S. Bureau of Labor
Statistics' May 2014 National Industry-Specific Occupational Employment
and Wage Estimates for State Government (NAICS 999200) (https://www.bls.gov/oes/current/naics4_999200.htm#13-0000). In this regard,
Table 1 presents the mean hourly wage, the cost of fringe benefits and
overhead (calculated at 100 percent of salary), and the adjusted hourly
wage.
Table 1--(Summary of 2014 BLS State Government Wage Estimates)
----------------------------------------------------------------------------------------------------------------
Adjusted
Occupation title Occupation Mean hourly Fringe benefit hourly wage ($/
code wage ($/hr) ($/hr) hr)
----------------------------------------------------------------------------------------------------------------
Claims Adjusters, Appraisers, Examiners, and 13-1031 27.60 27.60 55.20
Investigators..................................
Medical Secretaries............................. 43-6013 16.50 16.50 33.00
----------------------------------------------------------------------------------------------------------------
As indicated, we are adjusting our employee hourly wage estimates
by a factor of 100 percent. This is necessarily a rough adjustment,
both because fringe benefits and overhead costs vary significantly from
employer to employer, and because methods of estimating these costs
vary widely from study to study. Nonetheless, there is no practical
alternative and we believe that doubling the hourly wage to estimate
total cost is a reasonably accurate estimation method.
A. ICRs Regarding Review Procedures (Sec. 431.812)
Section 431.812 requires states to conduct one MEQC pilot during
the 2 years between their designated PERM years. Revisions to Sec.
431.812 requires that states must use the MEQC pilots to perform both
active and negative case reviews, while providing states with some
flexibility surrounding their active case review pilot. States will
review a minimum total of 400 Medicaid and CHIP active cases, with at
least 200 of the active cases being Medicaid cases. States will have
the flexibility to determine the precise distribution of active cases
(for example, states could sample 300 Medicaid cases and 100 CHIP
cases), and states will describe the active sample distribution in the
MEQC pilot planning document at Sec. 431.814. States will also, at a
minimum, be required to review 200 Medicaid and 200 CHIP negative
cases. Currently, under the PERM program, states are required to
conduct approximately 200 negative case reviews for each the Medicaid
program and CHIP. Therefore, a total minimum negative sample size of
400 (200 for each program) will be reviewed under the MEQC pilots.
Section 431.812 aligns with Sec. 431.816 and outlines the case
review completion deadlines and submission of reports. Additionally,
Sec. 431.820 is also considered to be a part of a state's MEQC pilot
reporting. Therefore, burden estimates are combined for the case
reviews, the reporting of findings, including corrective actions. The
time, effort, and costs listed in this section will be identical to the
sections where Sec. 431.816 and Sec. 431.820 are described, but
should not be considered additional or separate costs.
The ongoing burden associated with the requirements under Sec.
431.812 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP agencies for 17 states equates to a
maximum of 34 total respondents each PERM off-year) to perform the
required number of eligibility case reviews as mentioned above, and
report on their findings and corrective actions.
We estimate that it will take 1,200 hours annually per state
program to report on all case review findings (900 hours) and
corrective actions (300 hours). This estimate assumes that states spend
approximately 100 hours a month on the related activities (100 hours x
12 months = 1,200 hours) during the State's MEQC reporting year. The
total estimated annual burden is 40,800 hours (1,200 hours x 34
respondents), at a total estimated cost per respondent of $66,240
(1,200 hours x ($55.20/hour)) and a total estimated cost of $2,252,160
(($66,240 per respondent) x 34 respondents) for all respondents. The
preceding requirements and burden estimates will be submitted to OMB as
a revision to the information collection request currently approved
under control number 0938-0147.
B. ICRs Regarding Pilot Planning Document (Sec. 431.814)
Revised Sec. 431.814 requires states to submit a MEQC Pilot
Planning Document. The Pilot Planning Document must be approved by us
as outlined in Sec. 431.814 of this final rule and is critical to
ensuring that the state will conduct a MEQC pilot that complies with
our guidance. The Pilot
[[Page 31179]]
Planning Document submitted by the state would include details
surrounding how the state will perform both its active and negative
case reviews.
The ongoing burden associated with the requirements under Sec.
431.814 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP programs for 17 states equates to a
maximum of 34 total respondents each PERM off-year) to develop, submit
and gain CMS approval of its MEQC Pilot Planning Document.
We estimate that it will take 48 hours per MEQC pilot per state
program to submit its Pilot Planning Document and gain approval under
Sec. 431.814. We have based the estimated 48 hours off of the pilot
proposal process currently utilized in the FY 2014-2017 Medicaid and
CHIP Eligibility Review Pilots, and have estimated the burden
associated accordingly. The total estimated annual burden across all
respondents is 1,632 hours ((48 hours/respondent) x 34 respondents).
The total estimated cost per respondent is $2,649.60 (48 hours x
($55.20/hour)) and the total estimated annual cost across all
respondents is $90,086.40 (($2,649.60/respondent) x 34 respondents). As
the MEQC program is currently suspended, and will be operationally
different under this final rule, this estimate is not based on real
time data. Once real time data is available, we will solicit
information from the states and update our burden estimates
accordingly.
The preceding requirements and burden estimates will be submitted
to OMB as a revision to the information collection currently approved
under control number 0938-0146.
C. ICRs Regarding Case Review Completion Deadlines and Submittal of
Reports (Sec. 431.816)
Revised Sec. 431.816 provides clarification surrounding the case
review completion deadlines and submittal of reports. States would be
required to report on all sampled cases in a CMS-specified format by
August 1 following the end of the MEQC review period.
As mentioned above, Sec. 431.816 aligns with Sec. 431.812 and
Sec. 431.820, thus, the burden estimates are identical for these
sections and should not be thought of as separate estimates or a
duplication of effort. The ongoing burden associated with the
requirements under Sec. 431.816 is the time and effort it would take
each of the 34 state programs (17 Medicaid and 17 CHIP agencies for 17
states equates to maximum 34 total respondents each PERM off-year) to
complete the required number of eligibility case reviews, and report on
their findings. Refer back to section IV.A., ICRs Regarding Review
Procedures (Sec. 431.812), for the expanded burden estimate.
The preceding requirements and burden estimates will be submitted
to OMB as a revision to the information collection currently approved
under control number 0938-0147.
D. ICRs Regarding Corrective Action Under the MEQC Program (Sec.
431.820)
Under the current MEQC program, states are required to conduct
corrective actions on all case errors, including technical
deficiencies, found through the review. Corrective actions are critical
to ensuring that states continually improve and refine their
eligibility processes. Therefore, revisions to Sec. 431.820 require
states to implement corrective actions on any errors or deficiencies
identified through the revised MEQC program as outlined under Sec.
431.820.
We proposed that states report their corrective actions to us by
August 1 following completion of the MEQC review period. The report
would also include updates on previous corrective actions, including
information regarding the status of corrective action implementation
and an evaluation of those corrective actions.
The ongoing burden associated with the requirements under Sec.
431.820 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP agencies for 17 states equates to
maximum 34 total respondents each PERM off-year) to develop and report
its corrective actions in response to its MEQC pilot program findings.
Refer back to section IV.A. of this final rule for the expanded burden
estimate.
The preceding requirements and burden estimates will be submitted
to OMB as a revision to the information collection currently approved
under control number 0938-0147.
E. ICRs Regarding Information Submission and Systems Access
Requirements (Sec. 431.970)
Currently, the PERM claims component requires state submission of
Medicaid and CHIP FFS claims and managed care payments on a quarterly
basis; and provider submission of medical records; state and provider
submission responsibilities are defined under Sec. 431.970. These
claims and payments are rigorously reviewed by the federal statistical
contractor. We are proposing to utilize this same claims universe to
complete the PERM eligibility component. Previously, states had to pull
a separate case universe for the PERM eligibility component. With this
proposed change, states would only be required to submit one universe
to satisfy all components of PERM.
Additionally, states are required to collect and submit (with an
estimate of 4 submissions) state policies. With this proposed change,
states will still be required to collect and submit state policies
surrounding FFS and managed care, but would now also have to submit all
state eligibility policies. There would be an initial submission and
quarterly updates. There are no proposed changes for the provider
submission of medical records.
The ongoing burden associated with the requirements under Sec.
431.970 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP agencies for 17 states equates to
maximum 34 total respondents each PERM year) to submit its claims
universe, and collect and submit state policies, and the time and
effort it would take providers to furnish medical record documentation.
We estimate that it will take 1,350 hours annually per state
program to develop and submit its claims universe and state policies.
The total estimated hours is broken down between the FFS, managed care,
and eligibility components and is estimated at 900 hours for universe
development and submission, and 450 hours for policy collection and
submission. Per component it is estimated at 1,150 FFS hours, 100
managed care hours, and 100 eligibility hours for a total of 45,900
annual hours (1,350 hours x 34 respondents). The total estimated annual
cost per respondent is $74,520 (1,350 hours x ($55.20/hour), and the
total estimated annual cost across all respondents is $2,533,680
(($74,520/respondent) x 34 respondents).
However, as a federal contractor has not previously conducted the
eligibility component of PERM, the hours assessed related to the state
burden associated with the revised eligibility component are not based
on real time data, but rather based off information solicited from the
states. The information received was from those states that
participated in the PERM model eligibility pilots that were conducted
by a federal contractor, but on a much smaller scale than that of PERM.
We estimate that it will take 2,824 hours annually per PERM cycle
per program (Medicaid and CHIP) for providers to furnish medical record
documentation to substantiate claim submission. The total estimated
annual burden on providers is 5,648 hours (2,824 hours/program x 2
programs). We estimate the total cost to providers per program annually
to be $93,192 (2,824
[[Page 31180]]
hours x $33.00/hour). The total estimated cost for providers is
$186,384 ($93,192/program x 2 programs). These estimates are based on
the average number of medical reviews conducted per PERM cycle and the
average amount of time it takes for providers to comply with the
medical record request. These estimates are for FFS claims only, as
medical review is only completed on sampled FFS claims.
The preceding requirements and burden estimates will be submitted
to OMB as a revision to the information collection currently approved
under control numbers 0938-0974, 0938-0994, and 0938-1012.
F. ICRs Regarding Corrective Action Plan Under the PERM Program (Sec.
431.992)
Currently, under Sec. 431.992, states are required to submit
corrective action plans to address all improper payments and
deficiencies found through the PERM review. Proposed revisions to Sec.
431.992(a) clarify that states would be required to address all
improper payments and deficiencies included in the state improper
payment rate as defined at Sec. 431.960(f)(1). Additional language was
also added to Sec. 431.992 to clarify the state responsibility to
evaluate corrective actions from the previous PERM cycle at Sec.
431.992(b)(4).
The ongoing burden associated with the requirements under Sec.
431.992 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP agencies for 17 states equates to
maximum 34 total respondents per PERM cycle) to submit its corrective
action plan.
We estimate that it will take 750 hours (250 hours for FFS, 250
hours for managed care and an additional 250 hours for eligibility),
per PERM cycle per state program to submit its corrective action plan
for a total estimated annual burden of 25,500 hours ((750 hours/
respondent) x 34 respondents). We estimate the total cost per
respondent to be $41,400 (750 hours x ($55.20/hour)). The total
estimated cost for all respondents is $1,407,600 (($41,400/respondent)
x 34 respondents).
However, as a federal contractor has not previously conducted the
eligibility component of PERM, the hours assessed related to the state
burden associated with the revised eligibility component are not based
on real time data, but rather based off information solicited from the
states. The information received was from those states that
participated in the PERM model eligibility pilots which were conducted
by a federal contractor, but on a much smaller scale than that of PERM.
The preceding requirements and burden estimates will be submitted
to OMB as part of revisions to the information collections currently
approved under control numbers 0938-0974, 0938-0994, and 0938-1012. Not
to be confused with the burden set outlined above, the revised PERM PRA
packages' total burden would amount to: 34 annual respondents, 34
annual responses, and 750 hours per corrective action plan.
G. ICRs Regarding Difference Resolution and Appeal Process (Sec.
431.998)
Currently, the difference resolution and appeals process used for
the FFS and managed care components of the PERM program is well
developed and has allowed us to adequately resolve disagreements
between the RC and states. Revisions to Sec. 431.998 now include the
proposed eligibility changes for the difference resolution and appeals
process. Because we proposed to use an ERC to conduct the eligibility
case reviews, we likewise proposed that the ERC conduct the eligibility
difference resolution and appeals process, which would mirror how that
process is conducted with respect to FFS claims and managed care
payments.
The ongoing burden associated with the requirements under Sec.
431.998 is the time and effort it would take each of the 34 state
programs (17 Medicaid and 17 CHIP agencies for 17 states equates to
maximum 34 total respondents per PERM cycle) to review PERM findings
and inform the federal contractor(s) of any additional information and/
or dispute requests.
We estimate that it will take 1625 hours (500 hours for FFS, 475
hours for managed care and an additional 650 hours for eligibility) per
PERM cycle per state program to review PERM findings and inform federal
contractor(s) of any additional information or dispute requests for
FFS, managed care, and eligibility components total estimated annual
burden of 55,250 hours ((1,625 hours/respondent) x 34 respondents). We
estimate the total cost per respondent to be $89,700 (1,625 hours x
($55.20/hour)). The total estimated cost for all respondents is
$3,049,800 (($89,700/respondent) x 34 respondents).
The preceding requirements and burden estimates will be submitted
to OMB as revisions to the information collections currently approved
under control numbers 0938-0974, 0938-0994, and 0938-1012. Not to be
confused with the burden set outlined above, the revised PERM PRA
packages' total burden would amount to: 34 annual respondents, 34
annual responses, and 1,625 hours per PERM cycle.
Table 2--Summary of Annual Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per
Regulation section(s) OCN Respondents Responses response Total annual Labor cost of Total cost ($)
(hours) burden (hours) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 431.812................. 0938-0147........ 34 34 1,200 40,800 $66,240.00 $2,252,160.00
Sec. 431.814................. 0938-0146........ 34 34 48 1,632 2,649.60 90,086.40
Sec. 431.816................. 0938-0147........ 34 * 34 * 1,200 * 40,800 * 66,240.00 * 2,252,160.00
Sec. 431.820................. 0938-0147........ 34 * 34 * 1,200 * 40,800 * 66,240.00 * 2,252,160.00
Sec. 431.970................. 0938-0974; 0938- 34 34 1,350 45,900 74,520.00 2,533,680.00
0994; 0938-1012.
Sec. 431.970................. Provider Varies Varies Varies 5,648 93,192.00 186,384.00
Submissions.
Sec. 431.992................. 0938-0974; 0938- 34 34 750 25,500 41,400.00 1,407,600.00
0994; 0938-1012.
Sec. 431.998................. 0938-0974; 0938- 34 34 1,625 55,250 89,700.00 3,049,800.00
0994; 0938-1012.
-----------------------------------------------------------------------------------------------------
[[Page 31181]]
Total...................... ................. 34 34 .............. 174,730 367,701.60 9,519,710.404
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Not included in totals, as these represent the combined estimated hours/cost for 3 sections as mentioned above. These numbers should only be counted
once.
The following is a summary of the comments we received regarding
our information collection requirements.
Comment: Two commenters requested that CMS revisit the PERM
collection of information estimates, as both commenters stated they
were vastly underestimated.
Response: We solicited information from the states prior to
developing these estimates. We received several responses, and as a
result averaged the information provided from the states regarding the
hours spent on PERM activities. We acknowledged that there will be
outliers that fall above and below these estimates; however, the
estimates represent a national average of the time and costs for states
to perform PERM activities based on the previous PERM ICR estimates, as
well as the information received from states. We also acknowledged
that, as a federal contractor has not previously conducted the
eligibility component of PERM, the hours assessed related to the state
burden associated with the revised eligibility component are not based
on real time data, but, rather, based off of the information solicited
from the states. The information received was from those states that
participated in the PERM model eligibility pilots that were conducted
by a federal contractor, but on a much smaller scale than that of PERM.
We plan to update these estimates once real time data is available,
and, also, as needed in the future to ensure an adequate representation
of the national averages.
Comment: One commenter requested that CMS review the combined costs
of MEQC activities.
Response: As the MEQC program is currently suspended, and will be
operationally different under this final rule, this estimate is not
based on real time data. Once real time data is available, we will
solicit information from the states and update our burden estimates
accordingly. These estimates were based on information we solicited
from the states regarding the time spent performing activities
associated with the FY 2014-2017 Medicaid and CHIP Eligibility Review
Pilots. We received several responses and this information was then
averaged to obtain the estimates above.
Comment: One commenter stated she did not support the requirement
for states to collect and submit all state eligibility policies, due to
states having limited staff and resources.
Response: This requirement was developed to ensure the ERC was
provided with the most up-to-date state eligibility policy information.
We will implement a process which is intended to limit state burden;
however, states are required to comply with the requirement.
As a result of the comments, we are finalizing the information
collection requirements as proposed. However, upon review, one
technical miscalculation was found and corrected in Table 2. The one
technical miscalculation was due to human error, as the `Total' under
the ``Total Annual Burden (hours)'' column was entered incorrectly.
Addition of the numbers in the ``Total Annual Burden (hours)'' column
was correct as published, but the number entered as the total in the
`Total' field was incorrect. Also, we have clarified this information
for easier reading, by separating out the ``Provider Submission''
estimates from the section it was under at time of the proposed rule's
publication.
V. Regulatory Impact Statement
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96 354), section 1102(b) of the Act, section 202 of the
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4),
Executive Order 13132 on Federalism (August 4, 1999) and the
Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
This final rule will make small changes to the administration of the
existing MEQC and PERM programs. It would therefore have a relatively
small economic impact; as a result, this final rule does not reach the
$100 million threshold and thus is neither an ``economically
significant'' rule under E.O. 12866, nor a ``major rule'' under the
Congressional Review Act.
The Regulatory Flexibility Act requires agencies to analyze options
for regulatory relief of small entities, and to prepare a final
regulatory flexibility analysis for final rules that would have a
``significant economic impact on a substantial number of small
entities.'' For purposes of the RFA, small entities include small
businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $7.5 million to $38.5 million in any 1 year. Individuals and
states are not included in the definition of a small entity. These
entities may incur costs due to collecting and submitting medical
records to support medical reviews, but we estimate that these costs
will not be significantly changed under this final rule. Therefore, we
have determined that this final rule will not have a significant
economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. For the preceding
reasons, we are not preparing an analysis for section 1102(b) of the
Act because we have determined that this
[[Page 31182]]
final rule will not have a direct economic impact on the operations of
a substantial number of small rural hospitals.
Please note, a state will be reviewed only once, per program, every
3 years and it is unlikely for a provider to be selected more than once
per program to provide supporting documentation.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2017, that
threshold is approximately $148 million. For the preceding reasons, we
have determined that this final rule does not mandate any spending that
would approach the $148 million threshold for state, local, or tribal
governments, or on the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule (and subsequent final
rule) that imposes substantial direct requirement costs on state and
local governments, preempts state law, or otherwise has Federalism
implications. This final rule will shift minor costs and burden for
conducting PERM eligibility reviews from states to the federal
government and its contractors. However, these reductions would be
largely offset by federal government savings in reduced payments to
states in matching funds. The net effect of this regulation on state or
local governments is minor.
Consistent with Executive Order 13771 (82 FR 9339, February 3,
2017), we have estimated the cost savings of this final rule for the
PERM program to be $8,387,860.80. This cost savings estimate is
quantifiable for only the PERM program, includes both federal and state
savings, and is attributable to reduced burden in the PERM program by
shifting the eligibility review responsibility from the states to a
federal contractor. While we believe this final rule would generate
cost savings for the MEQC program as well, we are unable to quantify
the cost savings. This rule is an E.O. 13771 deregulatory action.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the OMB.
List of Subjects
42 CFR Part 431
Grant programs-health, Health facilities, Medicaid, Privacy,
Reporting and recordkeeping requirements.
42 CFR Part 457
Grant programs-health, Health insurance, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION
0
1. The authority citation for part 431 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act, (42 U.S.C.
1302).
0
2. Section 431.800 and the undesignated center heading preceding the
section are revised to read as follows:
Medicaid Eligibility Quality Control (MEQC) Program
Sec. 431.800 Basis and scope.
This subpart establishes State requirements for the Medicaid
Eligibility Quality Control (MEQC) Program designed to reduce erroneous
expenditures by monitoring eligibility determinations and a claims
processing assessment that monitors claims processing operations. MEQC
will work in conjunction with the Payment Error Rate Measurement (PERM)
Program established in subpart Q of this part. In years in which the
State is required to participate in PERM, as stated in subpart Q of
this part, it will only participate in the PERM program and will not be
required to conduct a MEQC pilot. In the 2 years between PERM cycles,
the State is required to conduct a MEQC pilot, as set forth in this
subpart.
0
3. Section 431.804 is revised to read as follows:
Sec. 431.804 Definitions.
As used in this subpart--
Active case means an individual determined to be currently
authorized as eligible for Medicaid or CHIP by the State.
Corrective action means action(s) to be taken by the State to
reduce major error causes, trends in errors or other vulnerabilities
for the purpose of reducing improper payments in Medicaid and CHIP.
Deficiency means a finding in processing identified through active
case review or negative case review that does not meet the definition
of an eligibility error.
Eligibility means meeting the State's categorical and financial
criteria for receipt of benefits under the Medicaid or CHIP programs.
Eligibility error is an error resulting from the States' improper
application of Federal rules and the State's documented policies and
procedures that causes a beneficiary to be determined eligible when he
or she is ineligible for Medicaid or CHIP, causes a beneficiary to be
determined eligible for the incorrect type of assistance, causes
applications for Medicaid or CHIP to be improperly denied by the State,
or causes existing cases to be improperly terminated from Medicaid or
CHIP by the State. An eligibility error may also be caused when a
redetermination did not occur timely or a required element of the
eligibility determination process (for example income) cannot be
verified as being performed/completed by the state.
Medicaid Eligibility Quality Control (MEQC) means a program
designed to reduce erroneous expenditures by monitoring eligibility
determinations and work in conjunction with the PERM program
established in subpart Q of this part.
MEQC pilot refers to the process used to implement the MEQC
Program.
MEQC review period is the 12-month timespan from which the State
will sample and review cases.
Negative case means an individual denied or terminated eligibility
for Medicaid or CHIP by the State.
Off-years are the scheduled 2-year period of time between a States'
designated PERM years.
Payment Error Rate Measurement (PERM) Program means the program set
forth at subpart Q of this part utilized to calculate a national
improper payment rate for Medicaid and CHIP.
PERM year is the scheduled and designated year for a State to
participate in, and be measured by, the PERM Program set forth at
subpart Q of this part.
0
4. Section 431.806 is revised to read as follows:
Sec. 431.806 State requirements.
(a) General requirements. (1) In a State's PERM year, the PERM
measurement will meet the requirements of section 1903(u) of the Act.
(2) In the 2 years between each State's PERM year, the State is
required to conduct one MEQC pilot, which will span parts of both off
years.
(i) The MEQC pilot review period will span 12 months of a calendar
year, beginning the January 1 following the end of the State's PERM
year through December 31.
(ii) The MEQC pilot planning document described in Sec. 431.814 is
due no later than the first November 1
[[Page 31183]]
following the end of the State's PERM year.
(iii) A State must submit its MEQC pilot findings and its plan for
corrective action(s) by the August 1 following the end of its MEQC
pilot review period.
(b) PERM measurement. Requirements for the State PERM review
process are set forth in subpart Q of this part.
(c) MEQC pilots. MEQC pilot requirements are specified in
Sec. Sec. 431.812 through 431.820.
(d) Claims processing assessment system. Except in a State that has
an approved Medicaid Management Information System (MMIS) under subpart
C of part 433 of this subchapter, a State plan must provide for
operating a Medicaid quality control claims processing assessment
system that meets the requirements of Sec. Sec. 431.830 through
431.836.
0
5. The undesignated center heading preceding Sec. 431.810 is removed
and Sec. 431.810 is revised to read as follows:
Sec. 431.810 Basic elements of the Medicaid Eligibility Quality
Control (MEQC) Program
(a) General requirements. The State must operate the MEQC pilot in
accordance with this section and Sec. Sec. 431.812 through 431.820, as
well as other instructions established by CMS.
(b) Review requirements. The State must conduct reviews for the
MEQC pilot in accordance with the requirements specified in Sec.
431.812 and other instructions established by CMS.
(c) Pilot planning requirements. The State must develop a MEQC
pilot planning proposal in accordance with requirements specified in
Sec. 431.814 and other instructions established by CMS.
(d) Reporting requirements. The State must report the finding of
the MEQC pilots in accordance with the requirements specified in Sec.
431.816 and other instructions established by CMS.
(e) Corrective action requirements. The State must conduct
corrective actions based on the findings of the MEQC pilots in
accordance with the requirements specified in Sec. 431.820 and other
instructions established by CMS.
0
6. Section 431.812 is revised to read as follows:
Sec. 431.812 Review procedures.
(a) General requirements. Each State is required to conduct a MEQC
pilot during the 2 years between required PERM cycles in accordance
with the approved pilot planning document specified in Sec. 431.814,
as well as other instructions established by CMS. The agency and
personnel responsible for the development, direction, implementation,
and evaluation of the MEQC reviews and associated activities, must be
functionally and physically separate from the State agencies and
personnel that are responsible for Medicaid and CHIP policy and
operations, including eligibility determinations.
(b) Active case reviews. (1) The State must review all active cases
selected from the universe of cases, as established in the State's
approved MEQC pilot planning document, under Sec. 431.814 to determine
if the cases were eligible for services, as well as to identify
deficiencies in processing subject to corrective actions.
(2) The State must select and review, at a minimum, 400 active
cases in total from the Medicaid and CHIP universe.
(i) The State must review at least 200 Medicaid cases.
(ii) The State will identify in the pilot planning document at
Sec. 431.814 the sample size per program.
(iii) The State may sample more than 400 cases.
(3) The State may propose to focus the active case reviews on
recent changes to eligibility policies and processes, areas where the
state suspects vulnerabilities, or proven error prone areas.
(i) Unless otherwise directed by CMS, the State must propose its
active case review approach in the pilot planning document described at
Sec. 431.814 or perform a comprehensive review.
(ii) When the State has a PERM eligibility improper payment rate
that exceeds the 3 percent national standard for two consecutive PERM
cycles, the State must follow CMS direction for its active case
reviews. CMS guidance will be provided to any state meeting this
criteria.
(c) Negative case reviews. (1) As established in the State's
approved MEQC pilot planning document under Sec. 431.814, the State
must review negative cases selected from the State's universe of cases
that are denied or terminated in the review month to determine if the
denial, or termination, was correct, as well as to identify
deficiencies in processing subject to corrective actions.
(2) The State must review, at a minimum, 200 negative cases from
Medicaid and 200 negative cases from CHIP.
(i) The State may sample more than 200 cases from Medicaid and/or
more than 200 cases from CHIP.
(ii) [Reserved]
(d) Error definition. (1) An active case error is an error
resulting from the State's improper application of Federal rules and
the State's documented policies and procedures that causes a
beneficiary to be determined eligible when he or she is ineligible for
Medicaid or CHIP, causes a beneficiary to be determined eligible for
the incorrect type of assistance, or when a determination did not occur
timely or cannot be verified.
(2) Negative case errors are errors, based on the State's
documented policies and procedures, resulting from either of the
following:
(i) Applications for Medicaid or CHIP that are improperly denied by
the State.
(ii) Existing cases that are improperly terminated from Medicaid or
CHIP by the State.
(e) Active case payment reviews. In accordance with instructions
established by CMS, the State must also conduct payment reviews to
identify payments for active case errors, as well as identify the
individual's understated or overstated liability, and report payment
findings as specified in Sec. 431.816.
0
7. Section 431.814 is revised to read as follows:
Sec. 431.814 Pilot planning document.
(a) Plan approval. For each MEQC pilot, the State must submit a
MEQC pilot planning document that meets the requirements of this
section to CMS for approval by the first November 1 following the end
of the State's PERM year. The State must receive approval for a plan
before the plan can be implemented.
(b) Plan requirements. The State must have an approved pilot
planning document in effect for each MEQC pilot that must be in
accordance with instructions established by CMS and that includes, at a
minimum, the following for--
(1) Active case reviews. (i) Focus of the active case reviews in
accordance with Sec. 431.812(b)(3) and justification for focus.
(ii) Universe development process.
(iii) Sample size per program.
(iv) Sample selection procedure.
(v) Case review process.
(2) Negative case reviews. (i) Universe development process.
(ii) Sample size per program.
(iii) Sample selection procedure.
(iv) Case review process.
0
8. Section 431.816 is revised to read as follows:
Sec. 431.816 Case review completion deadlines and submittal of
reports.
(a) The State must complete case reviews and submit reports of
findings to CMS as specified in paragraph (b) of this section in the
form and at the time specified by CMS.
(b) In addition to the reporting requirements specified in Sec.
431.814 relating to the MEQC pilot planning
[[Page 31184]]
document, the State must complete case reviews and submit reports of
findings to CMS in accordance with paragraphs (b)(1) and (2) of this
section.
(1) For all active and negative cases reviewed, the State must
submit a detailed case-level report in a format provided by CMS.
(2) All case-level findings will be due by August 1 following the
end of the MEQC review period.
0
9. Section 431.818 is revised to read as follows:
Sec. 431.818 Access to records.
The State, upon written request, must submit to the HHS staff, or
other designated entity, all records, including complete local agency
eligibility case files or legible copies and all other documents
pertaining to its MEQC reviews to which the State has access, including
information available under part 435, subpart I of this chapter.
0
10. Section 431.820 is revised to read as follows:
Sec. 431.820 Corrective action under the MEQC program.
The State must--
(a) Take action to correct any active or negative case errors,
including deficiencies, found in the MEQC pilot sampled cases in
accordance with instructions established by CMS;
(b) By the August 1 following the MEQC review period, submit to CMS
a report that--
(1) Identifies the root cause and any trends found in the case
review findings.
(2) Offers corrective actions for each unique error and deficiency
finding based on the analysis provided in paragraph (b)(1) of this
section.
(c) In the corrective action report, the State must provide updates
on corrective actions reported for the previous MEQC pilot.
Sec. 431.822 [Removed]
0
11. Section 431.822 is removed.
Sec. Sec. 431.861--431.865 [Removed]
0
12. The undesignated center heading ``Federal Financial Participation''
and Sec. Sec. 431.861 through 431.865 are removed.
0
13. Section 431.950 is revised to read as follows:
Sec. 431.950 Purpose.
This subpart requires States and providers to submit information
and provide support to Federal contractors as necessary to enable the
Secretary to produce national improper payment estimates for Medicaid
and the Children's Health Insurance Program (CHIP).
0
14. Section 431.958 is amended by--
0
a. Removing the definitions of ``Active case'', ``Active fraud
investigation'', and ``Agency''.
0
b. Revising the definition of ``Annual sample size''.
0
c. Adding a definition, in alphabetical order, for ``Appeals''.
0
d. Removing the definitions of ``Application'', ``Case'', ``Case error
rate'', and ``Case record''.
0
e. Adding definitions, in alphabetical order, for ``Corrective
action'', ``Deficiency'', ``Difference resolution'', ``Disallowance'',
``Eligibility Review Contractor (ERC)'', ``Federal contractor'',
``Federally Facilitated Exchange (FFE)'', ``Federally Facilitated
Exchange-Determination (FFE-D)'', ``Federal financial participation'',
``Finding'', and ``Improper payment rate''.
0
f. Removing the definition of ``Last action''.
0
g. Adding a definition, in alphabetical order, for ``Lower limit''.
0
h. Removing the definition of ``Negative case''.
0
i. Adding a definition, in alphabetical order, for ``Payment error''.
0
j. Removing the definitions of ``Payment error rate'' and ``Payment
review''.
0
k. Adding definitions, in alphabetical order, for ``PERM Review
Period'', ``Recoveries'', and ``Review Contractor (RC)''.
0
l. Removing the definitions of ``Review cycle'' and ``Review month''.
0
m. Revising the definition of ``Review year''.
0
n. Removing the definitions of ``Sample month'' and ``State agency''.
0
o. Adding a definition, in alphabetical order, for ``State eligibility
system''.
0
p. Revising the definition of ``State error''.
0
q. Adding definitions, in alphabetical order, for ``State payment
system'', ``State-specific sample size'', and ``Statistical Contractor
(SC)''.
0
r. Removing the definition of ``Undetermined''.
The additions and revisions read as follows:
Sec. 431.958 Definitions and use of terms.
* * * * *
Annual sample size means the number of fee-for-service claims,
managed care payments, or eligibility cases that will be sampled for
review in a given PERM cycle.
Appeals means a process that allows the State to dispute the PERM
Review Contractor and Eligibility Review Contractor findings with CMS
after the difference resolution process has been exhausted.
* * * * *
Corrective action means actions to be taken by the State to reduce
errors or other vulnerabilities for the purpose of reducing improper
payments in Medicaid and CHIP.
Deficiency means a finding in which a claim or payment had a
medical, data processing, and/or eligibility error that did not result
in federal and/or state improper payment.
Difference resolution means a process that allows the State to
dispute the PERM Review Contractor and Eligibility Review Contractor
findings directly with the contractor.
Disallowance means the percentage of Federal medical assistance
funds the State is required to return to CMS in accordance with section
1903(u) of the Act.
* * * * *
Eligibility Review Contractor (ERC) means the CMS contractor
responsible for conducting state eligibility reviews for the PERM
Program.
Federal contractor means the ERC, RC, or SC which support CMS in
executing the requirements of the PERM program.
Federally Facilitated Exchange (FFE) means the health insurance
exchange established by the Federal government with responsibilities
that include making Medicaid and CHIP determinations for states that
delegate authority to the FFE.
Federally Facilitated Exchange--Determination (FFE-D) means cases
determined by the FFE in states that have delegated the authority to
make Medicaid/CHIP eligibility determinations to the FFE.
Federal financial participation means the Federal Government's
share of the State's expenditures under the Medicaid program and CHIP.
Finding means errors and/or deficiencies identified through the
medical, data processing, and eligibility reviews.
* * * * *
Improper payment rate means an annual estimate of improper payments
made under Medicaid and CHIP equal to the sum of the overpayments and
underpayments in the sample, that is, the absolute value of such
payments, expressed as a percentage of total payments made in the
sample.
Lower limit means the lower bound of the 95-percent confidence
interval for the State's eligibility improper payment rate.
* * * * *
Payment error means any claim or payment where federal and/or state
dollars were paid improperly based on
[[Page 31185]]
medical, data processing, and/or eligibility reviews.
* * * * *
PERM review period means the timeframe in which claims and
eligibility are reviewed for national annual improper payment rate
calculation purposes, July through June.
* * * * *
Recoveries mean those monies for which the State is responsible to
pay back to CMS based on the identification of Federal improper
payments.
Review Contractor (RC) means the CMS contractor responsible for
conducting state data processing and medical record reviews for the
PERM Program.
Review year means the year being analyzed for improper payments
under the PERM Program.
* * * * *
State eligibility system means any system, within the State or with
a state-delegated contractor, that is used by the state to determine
Medicaid and/or CHIP eligibility and/or that maintains documentation
related to Medicaid and/or CHIP eligibility determinations.
State error includes, but is not limited to, data processing errors
and eligibility errors as described in Sec. 431.960(b) and (d), as
determined in accordance with documented State and Federal policies.
State errors do not include the errors described in paragraph Sec.
431.960(e)(2).
State payment system means any system within the State or with a
state-delegated contractor that is used to adjudicate and pay Medicaid
and/or CHIP FFS claims and/or managed care payments.
* * * * *
State-specific sample size means the sample size determined by CMS
that is required from each individual State to support national
improper payment rate precision requirements.
Statistical Contractor (SC) means the contractor responsible for
collecting and sampling fee-for-service claims and managed care
capitation payment data, as well as calculating Medicaid and CHIP state
and national improper payment rates.
0
15. Section 431.960 is revised to read as follows:
Sec. 431.960 Types of payment errors.
(a) General rule. Errors identified for the Medicaid and CHIP
improper payments measurement under the Improper Payments Information
Act of 2002 must affect payment under applicable Federal or State
policy, or both.
(b) Data processing errors. (1) A data processing error is an error
resulting in an overpayment or underpayment that is determined from a
review of the claim and other information available in the State's
Medicaid Management Information System, related systems, or outside
sources of provider verification resulting in Federal and/or State
improper payments.
(2) The difference in payment between what the State paid (as
adjusted within improper payment measurement guidelines) and what the
State should have paid, in accordance with federal and state documented
policies, is the dollar measure of the payment error.
(3) Data processing errors include, but are not limited to, the
following:
(i) Payment for duplicate items.
(ii) Payment for non-covered services.
(iii) Payment for fee-for-service claims for managed care services.
(iv) Payment for services that should have been paid by a third
party but were inappropriately paid by Medicaid or CHIP.
(v) Pricing errors.
(vi) Logic edit errors.
(vii) Data entry errors.
(viii) Managed care rate cell errors.
(ix) Managed care payment errors.
(c) Medical review errors. (1) A medical review error is an error
resulting in an overpayment or underpayment that is determined from a
review of the provider's medical record or other documentation
supporting the service(s) claimed, Code of Federal Regulations that are
applicable to conditions of payment, the State's written policies, and
a comparison between the documentation and written policies and the
information presented on the claim resulting in Federal and/or State
improper payments.
(2) The difference in payment between what the State paid (as
adjusted within improper payment measurement guidelines) and what the
State should have paid, in accordance with the applicable conditions of
payment per 42 CFR parts 440 through 484, this part (431), and in
accordance with the State's documented policies, is the dollar measure
of the payment error.
(3) Medical review errors include, but are not limited to, the
following:
(i) Lack of documentation.
(ii) Insufficient documentation.
(iii) Procedure coding errors.
(iv) Diagnosis coding errors.
(v) Unbundling.
(vi) Number of unit errors.
(vii) Medically unnecessary services.
(viii) Policy violations.
(ix) Administrative errors.
(d) Eligibility errors. (1) An eligibility error is an error
resulting in an overpayment or underpayment that is determined from a
review of a beneficiary's eligibility determination, in comparison to
the documentation used to establish a beneficiary's eligibility and
applicable federal and state regulations and policies, resulting in
Federal and/or State improper payments.
(2) Eligibility errors include, but are not limited to, the
following:
(i) Ineligible individual, but authorized as eligible when he or
she received services.
(ii) Eligible individual for the program, but was ineligible for
certain services he or she received.
(iii) Lacked or had insufficient documentation in his or her case
record, in accordance with the State's documented policies and
procedures, to make a definitive review decision of eligibility or
ineligibility.
(iv) Was ineligible for managed care but enrolled in managed care.
(3) The dollars paid in error due to an eligibility error is the
measure of the payment error.
(4) A State eligibility error does not result from the State's
verification of an applicant's self-declaration or self-certification
of eligibility for, and the correct amount of, medical assistance or
child health assistance, if the State process for verifying an
applicant's self-declaration or self-certification satisfies the
requirements in Federal law or guidance, or, if applicable, has the
Secretary's approval.
(e) Errors for purposes of determining the national improper
payment rates. (1) The Medicaid and CHIP national improper payment
rates include, but are not limited to, the errors described in
paragraphs (b) through (d) of this section.
(2) Eligibility errors resulting solely from determinations of
Medicaid or CHIP eligibility delegated to, and made by, the Federally
Facilitated Exchange will be included in the national improper payment
rate.
(f) Errors for purposes of determining the State improper payment
rates. The Medicaid and CHIP State improper payment rates include, but
are not limited to, the errors described in paragraphs (b) through (d)
of this section, and do not include the errors described in paragraph
(e)(2) of this section.
(g) Error codes. CMS will define different types of errors within
the above categories for analysis and reporting purposes. Only Federal
and/or State dollars in error will factor into the State's PERM
improper payment rate.
0
16. Section 431.970 is revised to read as follows:
[[Page 31186]]
Sec. 431.970 Information submission and systems access requirements.
(a) The State must submit information to the Secretary for, among
other purposes, estimating improper payments in Medicaid and CHIP, that
include, but are not limited to--
(1) Adjudicated fee-for-service or managed care claims information,
or both, on a quarterly basis, from the review year;
(2) Upon request from CMS, provider contact information that has
been verified by the State as current;
(3) All medical, eligibility, and other related policies in effect,
and any quarterly policy updates;
(4) Current managed care contracts, rate information, and any
quarterly updates applicable to the review year;
(5) Data processing systems manuals;
(6) Repricing information for claims that are determined during the
review to have been improperly paid;
(7) Information on claims that were selected as part of the sample,
but changed in substance after selection, for example, successful
provider appeals;
(8) Adjustments made within 60 days of the adjudication dates for
the original claims or line items, with sufficient information to
indicate the nature of the adjustments and to match the adjustments to
the original claims or line items;
(9) Case documentation to support the eligibility review, as
requested by CMS;
(10) A corrective action plan for purposes of reducing erroneous
payments in FFS, managed care, and eligibility; and
(11) Other information that the Secretary determines is necessary
for, among other purposes, estimating improper payments and determining
improper payment rates in Medicaid and CHIP.
(b) Providers must submit information to the Secretary for, among
other purposes, estimating improper payments in Medicaid and CHIP,
which include but are not limited to Medicaid and CHIP beneficiary
medical records, within 75 calendar days of the date the request is
made by CMS. If CMS determines that the documentation is insufficient,
providers must respond to the request for additional documentation
within 14 calendar days of the date the request is made by CMS.
(c) The State must provide the Federal contractor(s) with access to
all payment system(s) necessary to conduct the medical and data
processing review, including the Medicaid Management Information System
(MMIS), any systems that include beneficiary demographic and/or
provider enrollment information, and any document imaging systems that
store paper claims.
(d) The State must provide the Federal contractor(s) with access to
all eligibility system(s) necessary to conduct the eligibility review,
including any eligibility systems of record, any electronic document
management system(s) that house case file information, and systems that
house the results of third party data matches.
0
17. Section 431.972 is revised to read as follows:
Sec. 431.972 Claims sampling procedures.
(a) General requirements. The State will submit quarterly FFS
claims and managed care payments, as identified in Sec. 431.970(a), to
allow federal contractors to conduct data processing, medical record,
and eligibility reviews to meet the requirements of the PERM
measurement.
(b) Claims universe. (1) The PERM claims universe includes payments
that were originally paid (paid claims) and for which payment was
requested but denied (denied claims) during the PERM review period, and
for which there is FFP (or would have been if the claim had not been
denied) through Title XIX (Medicaid) or Title XXI (CHIP).
(2) The State must establish controls to ensure FFS and managed
care universes are accurate and complete, including comparing the FFS
and managed care universes to the Form CMS-64 and Form CMS-21 as
appropriate.
(c) Sample size. CMS estimates each State's annual sample size for
the PERM review at the beginning of the PERM cycle.
(1) Precision and confidence levels. The national annual sample
size will be estimated to achieve at least a minimum National-level
improper payment rate with a 90 percent confidence interval of plus or
minus 2.5 percent of the total amount of all payments for Medicaid and
CHIP.
(2) State-specific sample sizes. CMS will develop State-specific
sample sizes for each State. CMS may take into consideration the
following factors in determining each State's annual state-specific
sample size for the current PERM cycle:
(i) State-level precision goals for the current PERM cycle;
(ii) The improper payment rate and precision of that improper
payment rate from the State's previous PERM cycle;
(iii) The State's overall Medicaid and CHIP expenditures; and
(iv) Other relevant factors as determined by CMS.
Sec. 431.974 [Removed]
0
18. Section 431.974 is removed.
Sec. 431.978 [Removed]
0
19. Section 431.978 is removed.
Sec. 431.980 [Removed]
0
20. Section 431.980 is removed.
Sec. 431.988 [Removed]
0
21. Section 431.988 is removed.
0
22. Section 431.992 is revised to read as follows:
Sec. 431.992 Corrective action plan.
(a) The State must develop a separate corrective action plan for
Medicaid and CHIP for each improper payment rate measurement, designed
to reduce improper payments in each program based on its analysis of
the improper payment causes in the FFS, managed care, and eligibility
components.
(1) The corrective action plan must address all errors that are
included in the State improper payment rate defined at Sec.
431.960(f)(1) and all deficiencies.
(2) For eligibility, the corrective action plan must include an
evaluation of whether actions the State takes to reduce eligibility
errors will also avoid increases in improper denials.
(b) In developing a corrective action plan, the State must take the
following actions:
(1) Error analysis. The State must conduct analysis such as
reviewing causes, characteristics, and frequency of errors that are
associated with improper payments. The State must review the findings
of the analysis to determine specific programmatic causes to which
errors are attributed (for example, provider lack of understanding of
the requirement to provide documentation), if any, and to identify root
improper payment causes.
(2) Corrective action planning. The State must determine the
corrective actions to be implemented that address the root improper
payment causes and prevent that same improper payment from occurring
again.
(3) Implementation and monitoring. (i) The State must develop an
implementation schedule for each corrective action and implement those
actions in accordance with the schedule.
(ii) The implementation schedule must identify all of the following
for each action:
(A) The specific corrective action.
(B) Status.
(C) Scheduled or actual implementation date.
(D) Key personnel responsible for each activity.
[[Page 31187]]
(E) A monitoring plan for monitoring the effectiveness of the
action.
(4) Evaluation. The State must submit an evaluation of the
corrective action plan from the previous measurement. The State must
evaluate the effectiveness of the corrective action(s) by assessing all
of the following:
(i) Improvements in operations.
(ii) Efficiencies.
(iii) Number of errors.
(iv) Improper payments.
(v) Ability to meet the PERM improper payment rate targets assigned
by CMS.
(c) The State must submit to CMS and implement the corrective
action plan for the fiscal year it was reviewed no later than 90
calendar days after the date on which the State's Medicaid or CHIP
improper payment rates are posted on the CMS contractor's Web site.
(d) The State must provide updates on corrective action plan
implementation progress annually and upon request by CMS.
(e) In addition to paragraphs (a) through (d) of this section, each
State that has an eligibility improper payment rates over the allowable
threshold of 3 percent for consecutive PERM years, must submit updates
on the status of corrective action implementation to CMS every other
month. Status updates must include, but are not limited to the
following:
(1) Details on any setbacks along with an alternate corrective
action or workaround.
(2) Actual examples of how the corrective actions have led to
improvements in operations, and explanations for how the improvements
will lead to a reduction in the number of errors, as well as the
State's next PERM eligibility improper payment rate.
(3) An overall summary on the status of corrective actions,
planning, and implementation, which demonstrates how the corrective
actions will provide the State with the ability to meet the 3 percent
threshold.
0
23. Section 431.998 is revised to read as follows:
Sec. 431.998 Difference resolution and appeal process.
(a) The State may file, in writing, a request with the relevant
Federal contractor to resolve differences in the Federal contractor's
findings based on medical, data processing, or eligibility reviews in
Medicaid or CHIP.
(b) The State must file requests to resolve differences based on
the medical, data processing, or eligibility reviews within 25 business
days after the report of review findings is shared with the State.
(c) To file a difference resolution request, the State must be able
to demonstrate all of the following:
(1) Have a factual basis for filing the request.
(2) Provide the appropriate Federal contractor with valid evidence
directly related to the finding(s) to support the State's position.
(d) For a finding in which the State and the Federal contractor
cannot resolve the difference in findings, the State may appeal to CMS
for final resolution by filing an appeal within 15 business days from
the date the relevant Federal contractor's finding as a result of the
difference resolution is shared with the State. There is no minimum
dollar threshold required to appeal a difference in findings.
(e) To file an appeal request, the State must be able to
demonstrate all of the following:
(1) Have a factual basis for filing the request.
(2) Provide CMS with valid evidence directly related to the
finding(s) to support the State's position.
(f) All differences, including those pending in CMS for final
decision that are not overturned in time for improper payment rate
calculation, will be considered as errors in the improper payment rate
calculation in order to meet the reporting requirements of the IPIA.
0
24. Section 431.1010 is added to subpart Q to read as follows:
Sec. 431.1010 Disallowance of Federal financial participation for
erroneous State payments (for PERM review years ending after July 1,
2020).
(a) Purpose. (1) This section establishes rules and procedures for
disallowing Federal financial participation (FFP) in erroneous medical
assistance payments due to eligibility improper payment errors, as
detected through the PERM program required under this subpart, in
effect on and after July 1, 2020.
(2) After the State's eligibility improper rate has been
established for each PERM review period, CMS will compute the amount of
the disallowance, removing any underpayments due to eligibility errors,
and adjust the FFP payable to each State. The disallowance or
withholding is only applicable to the State's PERM year.
(3) CMS will compute the amount to be withheld or disallowed as
follows:
(i) Subtract the 3 percent allowable threshold from the lower limit
of the State's eligibility improper payment rate percentage excluding
underpayments.
(ii) If the difference is greater than zero, the Federal medical
assistance funds for the period, are multiplied by that percentage.
This product is the amount of the disallowance or withholding.
(b) Notice to States and showing of good faith. (1) If CMS is
satisfied that the State did not meet the 3 percent allowable threshold
despite a good faith effort, CMS will reduce the funds being disallowed
in whole.
(2) CMS may find that a State did not meet the 3 percent allowable
threshold despite a good faith effort if the State has taken the action
it believed was needed to meet the threshold, but the threshold was not
met. CMS will grant a good faith waiver only if the State both:
(i) Participates in the MEQC pilot program in accordance with
Sec. Sec. 431.800 through 431.820, and
(ii) Implements PERM CAPs in accordance with Sec. 431.992.
(3) Each State that has an eligibility improper payment rate above
the allowable threshold will be notified by CMS of the amount of the
disallowance.
(c) Disallowance subject to appeal. If the State does not agree
with a disallowance imposed under paragraph (e) of this section, it may
appeal to the Departmental Appeals Board within 30 days from the date
of the final disallowance notice from CMS. The regular procedures for
an appeal of a disallowance will apply, including review by the Appeals
Board under 45 CFR part 16.
PART 457--ALLOTMENTS AND GRANTS TO STATES
0
25. The authority citation for part 457 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
0
26. Section 457.628(a) is revised to read as follows:
Sec. 457.628 Other applicable Federal regulations.
* * * * *
(a) HHS regulations in Sec. Sec. 431.800 through 431.1010 of this
chapter (related to the PERM and MEQC programs); Sec. Sec. 433.312
through 433.322 of this chapter (related to Overpayments); Sec. 433.38
of this chapter (Interest charge on disallowed claims of FFP);
Sec. Sec. 430.40 through 430.42 of this chapter (Deferral of claims
for FFP and Disallowance of claims for FFP); Sec. 430.48 of this
chapter (Repayment of Federal funds by installments); Sec. Sec. 433.50
through 433.74 of this chapter (sources of non-Federal share and Health
Care-Related Taxes and Provider Related Donations); and Sec. 447.207
of this chapter (Retention of Payments)
[[Page 31188]]
apply to State's CHIP programs in the same manner as they apply to
State's Medicaid programs.
* * * * *
Dated: April 4, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: June 16, 2017.
Thomas E. Price,
Secretary, Department of Health and Human Services.
[FR Doc. 2017-13710 Filed 6-29-17; 4:15 pm]
BILLING CODE 4120-01-P