Medicaid Program; Freedom of Choice Waiver; Conforming Changes

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 431

[MB-068-IFC]

RIN 0938-AG63

Medicaid Program; Freedom of Choice Waiver; Conforming Changes

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Interim final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This interim final rule amends existing Medicaid regulations

on freedom of choice waivers granted under section 1915(b) of the

Social Security Act (the Act) to conform them to the amendments made to

the Act by sections 4604 and 4742 of the Omnibus Budget Reconciliation

Act of 1990. This rule:

Specifies that the Secretary may not waive the requirement

that the State plan provide for adjustments in payment for inpatient

hospital services furnished to infants under one year of age, or to

children under 6 years of age who receive these services in

disproportionate share hospitals.

Extends to any provider participating under a section

1915(b)(4) waiver the same prompt payment standards that apply to all

other health care practitioners furnishing Medicaid services.

This rule also makes technical changes in the regulations relating

to a recipient's free choice of providers of family planning services

and cost-sharing requirements under waivers.

DATES: Effective Date: This interim final rule is effective on March 3,

1994. Comment Date: Written comments will be considered if we receive

them at the appropriate address, as provided below, no later than 5

p.m. on April 4, 1994.

ADDRESSES: Mail comments (original and three copies) to the following

address: Health Care Financing Administration, Department of Health and

Human Services, Attention: MB-068-IFC, P.O. Box 7518, Baltimore, MD

21207-0518

If you prefer, you may deliver your written comments (original and

three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,

Washington, DC 20201, or

Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,

MD, 21207.

Due to staffing and resource limitations, we cannot accept comments

by facsimile (FAX) transmission. In commenting, please refer to file

MB-068-IFC. Comments received timely will be available for public

inspection as they are received, beginning approximately three weeks

after publication of this document, in room 309-G of the Department's

offices at 200 Independence Avenue, SW, Washington DC, on Monday

through Friday of each week from 8:30 a.m. to 5 p.m. (phone: 202-690-

7890).

FOR FURTHER INFORMATION CONTACT: Carole Benner, (410) 966-4464

SUPPLEMENTARY INFORMATION:

I. Background

Title XIX of the Social Security Act (the Act) provides authority

for the States to operate Medicaid programs to provide medical

assistance to needy individuals. States with Medicaid programs must

meet State plan requirements specified in section 1902 of the Act to

qualify for Federal financial participation (FFP). The costs of both

administration and health care services furnished under approved State

Medicaid plans qualify for FFP.

Under section 1915(b) of the Act, a State may request the Secretary

to waive certain State plan requirements of section 1902 of the Act, if

the Secretary finds such waivers to be cost effective, efficient, and

consistent with Medicaid program objectives. The waivers permit a

State, under its Medicaid program, to restrict a recipient's free

choice of provider by:

Implementing a case management system or a specialty

physician services arrangement that restricts the provider from or

through whom the recipients can obtain primary care services (other

than emergency services), so long as the restriction does not

substantially impair access to services of adequate quality;

Allowing a locality to act as a central broker in

assisting beneficiaries in selecting among competing health care plans;

Sharing with recipients any cost savings (through

provision of additional health services) resulting from the use by a

recipient of more cost effective medical care service arrangements; and

Restricting the provider from or through whom the

recipient can receive services (other than emergency services) to

providers or practitioners who comply with State plan payment, quality,

efficiency, and utilization standards so long as this restriction does

not discriminate among classes of providers on grounds unrelated to

their demonstrated effectiveness and efficiency in providing those

services. (This provision has been expanded to provide for timely

payment to providers, as explained later in this preamble.)

No section 1915(b) waiver may restrict the choice of a recipient in

receiving family planning services.

Congress has prohibited the Secretary from granting, under section

1915(b), waivers of certain State plan requirements through amendments

made by sections 4604 and 4742 of the Omnibus Budget Reconciliation Act

of 1990 (OBRA '90), Public Law 101-508. Section 4604(c) of OBRA '90

amended section 1915(b) of the Act to prohibit waiver of the

requirement that the State plan provide for adjustments in payment for

inpatient hospital services furnished to infants who have not attained

one year of age or to children who have not attained 6 years of age and

who receive these services in disproportionate share hospitals. Section

4742(a) of OBRA '90 amended section 1915(b)(4) of the Act to specify

that the same prompt payment requirements that apply to health care

practitioners under Medicaid under section 1902(a)(37)(A) must be

extended to any type of provider who participates in the Medicaid

program under a section 1915(b)(4) freedom of choice waiver.

II. Discussion of Legislative Changes and Provisions of Regulations

A. Medicaid Payments for Services Provided in Disproportionate Share

Hospitals

Section 4604 (a) and (b) of OBRA '90 amended section 1902 of the

Act by adding sections 1902(a)(55) and 1902(s). Section 1902(a)(55)

specifies that a State Medicaid plan must provide, in accordance with

section 1902(s), for adjustments in payments for certain inpatient

hospital services. Section 1902(s) specifies that a State plan must

provide that payments to hospitals for inpatient hospital services

furnished to infants who have not attained age one and to children who

have not attained age six and who receive these services in

disproportionate share hospitals must provide outlier adjustments for

inpatient hospital services involving exceptionally high costs, or

exceptionally long lengths of stay, if payment is made on a prospective

basis (whether per diem, per case, or otherwise). Also, section 1902(s)

provides that these payments must not be limited by (1) the imposition

of day limits with respect to delivery of these services to the

specified individuals; and (2) the imposition of dollar limits (other

than limits resulting from the outlier adjustments specified above)

with respect to the delivery of these services to infants who have not

attained their first birthday (or in the case of an infant who is an

inpatient on his first birthday, until the infant is discharged).

Section 4604(c) of OBRA '90 amended section 1915(b) of the Act to

specifically prohibit any waiver of the section 1902(s) requirements.

Section 4604 became effective with respect to payments for calendar

quarters beginning on or after July 1, 1991, without regard to whether

or not final regulations to carry out the amendments have been

promulgated by that date. However, if a State requires State

legislation to meet the requirements, the State will not be held out of

compliance with the requirement before the first day of the calendar

quarter beginning after the close of the first regular session of the

State legislature that begins after November 5, 1990.

This interim final rule amends Sec. 431.55 of the Medicaid

regulations by adding a new paragraph (b)(5) that prohibits the waiver

of the section 1902(s) requirements of the Act under section 1915(b)

waivers.

B. Timely Payment of Claims to Health Care Providers

Under section 1902(a)(37) of the Act, as interpreted under

Sec. 447.45 of the Medicaid regulations, a State's Medicaid plan must

require the following prompt payment standards with regard to the

payment of Medicaid claims made by health care practitioners in

individual or group practice, or in shared health facilities:

Claims can be submitted no later than 12 months from the

date of service.

The agency must pay 90 percent of all clean claims within

30 days of the receipt of the claim unless a waiver is granted for good

faith effort to comply.

The agency must pay 99 percent of all clean claims within

90 days of receipt of the claim unless a waiver is granted for good

faith effort to comply.

The agency must pay all other claims within 12 months of

receipt of the claim. This limitation does not apply to retroactive

adjustments to providers who are paid under a retrospective payment

system; to claims filed timely under Medicare; to claims of providers

under investigation for fraud or abuse; or to claims for which this

limitation is superseded by a court order, a hearing decision, or other

corrective action.

Section 447.45 also requires that the State plan contain a

definition of a claim to be used in meeting the requirements of timely

claims payments; specifies the conditions for approving waiver

requests; and requires that the State agency provide compliance reports

and documentation.

Section 1902(a)(37) of the Act and Sec. 447.45 do not apply to

claims from hospitals and other institutions.

Section 4742(a) of OBRA '90 amended section 1915(b)(4) of the Act

to require timely payment of claims for services provided under the

freedom of choice waivers. This provision specifies that each State

must meet the same prompt payment standards for providers under a

section 1915(b)(4) waiver that are currently required for payment of

other health care practitioners who furnish services under Medicaid, as

provided for in section 1902(a)(37)(A) of the Act. Section 4742(a) of

OBRA '90 became effective on January 1, 1991.

This interim final rule amends Sec. 431.55 of the Medicaid

regulations by adding a new paragraph (f)(4) that requires States to

make timely payments to any provider who participates in a Medicaid

program under a section 1915(b)(4) waiver in the same manner that is

required for payment to other health care practitioners furnishing

Medicaid services, as specified in Sec. 447.45.

III. Technical Changes

A. Freedom of Choice of Providers of Family Planning Services

Section 1902(a)(23) of the Act provides that Medicaid recipients

may obtain services from any qualified provider that undertakes to

provide services to them. Under section 1915(b) of the Act, a State may

request that the Secretary waive the freedom of choice of provider

requirement of section 1902(a)(23) in certain specified circumstances,

but the law prohibits any restriction on a recipient's choice of a

provider of family planning services.

One of the circumstances for waiving the section 1902(a)(23)

freedom of choice requirement is to allow the State to implement

primary care case management systems (PCCMs) or specialty physician

services arrangements, under which the State may restrict the provider

through whom a recipient can receive medical care services. Under a

PCCM, the State must assure that a specific person or agency will be

responsible for locating, coordinating, and monitoring all primary and

other medical services on behalf of recipients involved in the program.

A specialty services arrangement allows the State to restrict

recipients of specialty services to designated providers even in the

absence of a PCCM, for example, restricting recipients in need of

maternity related services to specific clinics. Emergency services and

family planning services may not be restricted under these waivers, nor

may the waiver substantially impair a recipient's access to services of

adequate quality.

Section 431.51(b)(1) of the existing regulations specifies that a

recipient has a freedom of choice of providers, with certain allowed

exceptions (one of which is under a section 1915(b) waiver). Section

431.51(b)(2) of the existing regulations specifically states that a

State plan must provide that a recipient enrolled in a primary care

case management system, an HMO, or other similar entity will not be

restricted in freedom of choice of providers of family planning

services. However, the existing regulations at Sec. 431.55(b) that set

forth the general requirements for waivers under section 1915(b),

including waivers relating to implementing case management systems

(Sec. 431.55(c)), do not specifically reference the prohibited

restriction of a recipient's freedom of choice of providers of family

planning services. We believe this reference oversight may result in

some misunderstanding if Sec. 431.55 is read alone and not in the

context of the complete subpart which contains both Secs. 431.51 and

431.55. Therefore we are revising Sec. 431.55(b) by adding a new

paragraph (b)(2)(iv) to clarify that the prohibition against limiting a

recipient's freedom of choice of family planning services applies to

all section 1915(b) waivers (including waivers relating to case

management systems).

B. Waiver of Cost-Sharing Requirements

For organizational purposes, we are separating the provisions on

waiver of cost-sharing requirements that appear under the existing

paragraph (g) of Sec. 431.55 from other requirements and establishing

them as a new Sec. 431.57, with some minor editorial changes. We have

made conforming changes in paragraph (a) of Sec. 431.55 to reflect this

transfer.

IV. Waiver of Proposed Rulemaking

We ordinarily publish a notice of proposed rulemaking for a

regulation in the Federal Register to provide a period for public

comment.

Section 4207(j) of OBRA '90 permits the Secretary to issue interim

final regulations in order to implement the provisions of that Act.

Therefore, we are dispensing with prior notice and comment rulemaking

in this case and promulgating this rule on an interim final basis.

However, we are providing a 60-day period for public comments on the

interim final rule as indicated at the beginning of this preamble.

V. Response to Comments

Because of the large volume of correspondence we normally receive

on an interim final rule, we are not able to acknowledge or respond to

them individually. However, we will consider all comments that we

receive by the date and time specified in the DATES section of this

preamble, and if we proceed with the final rule, we will respond to the

comments in the final rule.

VI. Regulatory Impact Statement

We generally prepare a regulatory flexibility analysis that is

consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612) unless the Secretary certifies that a rule would not have

a significant economic impact on a substantial number of small

entities. For purposes of the RFA, States are not considered to be

small entities.

Also, section 1102(b) of the Act requires the Secretary to prepare

a regulatory impact analysis for any interim final rule that may have a

significant effect on the operations of a substantial number of small

rural hospitals. Such an 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 50 beds. We are not

preparing a rural hospital impact statement since we have determined,

and the Secretary certifies, that this interim final rule would not

have a significant economic impact on the operations of a substantial

number of small rural hospitals.

VII. Collection of Information Requirements

This final rule contains no information collection requirements.

Consequently, this rule need not be reviewed by the Office of

Management and Budget under the authority of the Paperwork Reduction

Act of 1980 (44 U.S.C. 3501 et seq.).

List of Subjects in 42 CFR Part 431

Grant programs-health, Health facilities, Medicaid, Privacy,

Reporting and recordkeeping requirements.

42 CFR part 431 is amended as follows:

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. In Sec. 431.55, paragraph (a) is revised, paragraph (b)(2) is

revised, a new paragraph (b)(5) is added, a new paragraph (f)(4) is

added, and paragraph (g) is removed to read as follows:

Sec. 431.55 Waiver of other Medicaid requirements.

(a) Statutory basis. Section 1915(b) of the Act authorizes the

Secretary to waive most requirements of section 1902 of the Act to the

extent he or she finds proposed improvements or specified practices in

the provision of services under Medicaid to be cost effective,

efficient, and consistent with the objectives of the Medicaid program.

Sections 1915 (f) and (h) prescribe how such waivers are to be

approved, continued, monitored, and terminated.

(b) General requirements.

* * * * *

(2) In applying for a waiver to implement an approvable project

under paragraph (c), (d), (e), or (f) of this section, a Medicaid

agency must document in the waiver request and maintain data regarding:

(i) The cost-effectiveness of the project;

(ii) The effect of the project on the accessibility and quality of

services;

(iii) The anticipated impact of the project on the State's Medicaid

program and;

(iv) Assurances that the restrictions on free choice of providers

do not apply to family planning services.

* * * * *

(5) The requirements of section 1902(s) of the Act, with regard to

adjustments in payments for inpatient hospital services furnished to

infants who have not attained age 1 and to children who have not

attained age 6 and who receive these services in disproportionate share

hospitals, may not be waived under a section 1915(b) waiver.

* * * * *

(f) Restriction of freedom of choice.

* * * * *

(4) The agency must make payments to providers furnishing services

under a freedom of choice waiver under this paragraph (f) in accordance

with the timely claims payment standards specified in Sec. 447.45 of

this chapter for health care practitioners participating in the

Medicaid program.

3. A new Sec. 431.57 is added to read as follows:

Sec. 431.57 Waiver of cost-sharing requirements.

(a) Sections 1916(a)(3) and 1916(b)(3) of the Act specify the

circumstances under which the Secretary is authorized to waive the

requirement that cost-sharing amounts be nominal.

(b) For nonemergency services furnished in a hospital emergency

room, the Secretary may by waiver permit a State to impose a copayment

of up to double the ``nominal'' copayment amounts determined under

Sec. 447.54(a)(3) of this subchapter.

(c) Nonemergency services are services that do not meet the

definition of emergency services at Sec. 447.53(b)(4) of this

subchapter.

(d) In order for a waiver to be approved under this section, the

State must establish to the satisfaction of HCFA that alternative

sources of nonemergency, outpatient services are available and

accessible to recipients.

(e) Although, in accordance with Sec. 431.55(b)(3) of this part, a

waiver will generally be granted for a 2-year duration, HCFA will

reevaluate waivers approved under this section if the State increases

the nominal copayment amounts in effect when the waiver was approved.

(f) A waiver approved under this section cannot apply to services

furnished before the waiver was granted.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical

Assistance Program)

Dated: August 5, 1993.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: December 2, 1993.

Donna E. Shalala,

Secretary.

[FR Doc. 94-2115 Filed 1-31-94; 8:45 am]

BILLING CODE 4120-01-P