Medicaid Program; Low-Income Eligibility Groups and Coverage of Services; Legislative Changes

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 431, 435, 436, 440, and 447

[MB-13-P]

RIN 0938-AD17

Medicaid Program; Low-Income Eligibility Groups and Coverage of

Services; Legislative Changes

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Medicaid regulations to:

incorporate categorically needy eligibility groups of pregnant women,

infants, and children and aged and disabled individuals with incomes

related to the Federal poverty income guidelines; expand the deemed

eligibility group of newborn children; expand the eligibility group of

qualified children; clarify eligibility of homeless individuals;

provide for the continuous eligibility of pregnant women without regard

to changes in income; provide for ambulatory prenatal care for certain

pregnant women during a limited period of presumptive eligibility,

based on income eligibility only; and tie the medical assistance

program to the Aid to Families with Dependent Children (AFDC) payment

levels in the State.

The amendments would conform the regulations to provisions of the

Omnibus Budget Reconciliation Acts of 1990 and 1989, the Medicare

Catastrophic Coverage Act of 1988, the Family Support Act of 1988, the

Omnibus Budget Reconciliation Acts of 1987 and 1986, and the Homeless

Eligibility Clarification Act of 1986.

DATES: Written comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on May 23,

1994.

ADDRESSES: Mail written comments (original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: MB-13-P, P.O. Box 7518,

Baltimore, Maryland 21207-0518.

Please address a copy of comments on information collection

requirements to: Office of Information and Regulatory Affairs, Attn.:

Laura Oliven, Office of Management and Budget, Room 3002, New Executive

Office Building, Washington, DC 20503.

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

3 copies) to one of the following locations:

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, Maryland 21207.

Due to staffing and resource limitations, we cannot accept comments

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

code MB-13-P. Comments received timely will be available for public

inspection as they are received, beginning approximately 3 weeks after

publication, in Room 309-G of the Departmental offices at 200

Independence Ave., SW., Washington, DC, on Monday through Friday of

each week from 8:30 a.m. to 5 p.m. (202-690-7890).

FOR FURTHER INFORMATION CONTACT: Marinos Svolos, (410) 966-4452

(Eligibility) Robert Wardwell, (410) 966-5659 (Coverage of services).

SUPPLEMENTARY INFORMATION:

I. Background

Under title XIX of the Social Security Act (the Act), generally

States with Medicaid programs are required to provide Medicaid

eligibility to individuals, children, and families who are receiving,

or are deemed to be receiving, cash assistance under the aid to

families with dependent children (AFDC) program, the supplemental

security income (SSI) program, and the mandatory State supplement

program; and to certain other needy pregnant women and children

(referred to as the mandatory categorically needy eligibility groups).

At State option, States may provide Medicaid to individuals who meet

the categorical and financial requirements for the cash assistance

programs but, for various reasons, are not receiving such assistance--

for example, individuals who are in institutions or have not applied

for cash assistance benefits--and to certain other specified needy

groups (referred to as the optional categorically needy eligibility

groups).

In addition to categorically needy groups, States, at their option,

may provide Medicaid to individuals who would be eligible for the cash

assistance programs except that they have income or resources above

allowable levels (referred to as the medically needy eligibility

group). The medically needy are permitted to reduce their income to the

allowed level by deducting (spending down) incurred medical expenses to

become eligible for Medicaid.

In recent years, a number of statutes have been enacted that

established new eligibility groups, revised existing eligibility

groups, or expanded services to certain low-income individuals. On

October 21, 1986, Congress passed provisions of the Omnibus Budget

Reconciliation Act of 1986 (OBRA '86), Public Law 99-509, that amended

the Social Security Act to expand the Medicaid eligibility groups.

States were given the option of providing Medicaid to certain needy

individuals who had incomes up to a certain specified percentage of

Federal poverty income guidelines and who previously were not eligible

for Medicaid as categorically needy. These individuals included

pregnant women, infants, and children (section 9401) and aged and

disabled individuals (section 9402). In addition, section 9407 allowed

States to provide ambulatory prenatal care to pregnant women during a

presumptive eligibility period on the basis of income eligibility only.

OBRA '86 also clarified Medicaid eligibility of homeless

individuals who are residents of a State, regardless of whether or not

they maintain a home at a fixed address or maintain it permanently

(section 9405). In addition, section 11005 of the Homeless Eligibility

Clarification Act (title XI of the Anti-Drug Abuse Act of 1986, Public

Law 99-570), enacted on October 27, 1986, requires that a State

Medicaid plan provide for a method of making medical services

eligibility cards available to Medicaid-eligible individuals who do not

reside in a permanent dwelling or at a fixed address.

The Omnibus Budget Reconciliation Act of 1987 (OBRA '87), Public

Law 100-203, enacted on December 22, 1987, made further changes in the

Social Security Act to expand the optional eligibility groups of low-

income pregnant women, infants, and children and the mandatory

eligibility group of qualified children under a certain age. OBRA '87

also allowed a State to impose a monthly premium on optional

categorically needy pregnant women and infants with incomes between 150

and 185 percent of the Federal poverty level. In addition, section 4105

of OBRA '87 clarified Medicaid coverage of clinic services furnished

outside of clinic facilities to homeless individuals.

The Medicare Catastrophic Coverage Act of 1988 (MCCA), Public Law

100-360, enacted on July 1, 1988, also further amended provisions

relating to the eligibility groups of individuals with incomes related

to the Federal poverty income level. MCCA made some of the low-income

pregnant women and infants mandatory Medicaid eligibility groups (those

at or below 75 percent of the poverty level and then, a year later, 100

percent of the poverty level) and amended the eligibility criteria for

others.

The Family Support Act of 1988 (FSA), Public Law 100-485, enacted

on October 13, 1988, made several technical corrections to the Medicaid

provisions of the Social Security Act. These corrections related to the

description of the eligibility groups of low-income pregnant women,

infants, and children.

The Omnibus Budget Reconciliation Act of 1989 (OBRA '89), Public

Law 101-239, enacted on December 19, 1989, changed the mandatory

eligibility groups of low-income pregnant women and infants by

increasing the income criteria to at or below 133 percent (instead of

at or below 100 percent) of the Federal poverty income level; and added

a new mandatory group of low-income children who are age one but have

not attained age 6 who have incomes at or below 133 percent of the

Federal poverty level. OBRA '89 mandated a percentage greater than 133

percent of the Federal poverty level for the pregnant women and infants

groups if the State had such a greater percentage in its State plan

(whether approved or not) as of the date of enactment of OBRA '89, or

established under State authorizing legislation or State appropriations

as of December 19, 1989, when it covered these pregnant women or

infants, or both, as optional categorically needy groups. Low-income

children who are age 6 but have not attained age 7, or at State option,

age 8 with incomes at or below 100 percent of the Federal poverty level

remained an optional categorically needy group. These provisions were

effective on April 1, 1990.

The Omnibus Budget Reconciliation Act of 1990 (OBRA '90), Public

Law 101-508, enacted on November 5, 1990, made additional changes to

both the mandatory and optional groups of pregnant women, infants, and

children. OBRA '90 created a new group of mandatory categorically needy

children who are at least age 6 but have not yet reached age 19. These

are children born after September 30, 1983 with family income at or

below 100 percent of the Federal poverty level. OBRA '90 made

corresponding changes to the mandatory eligibility group of qualified

children to include children born after September 30, 1983 who have not

attained age 19 and to allow States to use an earlier date of birth in

order to include older children sooner than is mandated.

In addition, OBRA '90 mandated that a State provide continuous

eligibility to pregnant women throughout the pregnancy and postpartum

period without regard to changes in income. (This had been a State

option.) OBRA '90 also changed the requirement for newborns who are

deemed to be eligible as a result of their mothers' eligibility status.

Previously, a newborn was considered eligible at birth if the newborn's

mother was eligible for and receiving Medicaid. The newborn could

remain eligible for as long as a year if the mother remained eligible

and the infant was a member of the mother's household. With the OBRA

'90 change, a newborn may still remain eligible for as long as a year

if the mother loses eligibility but would remain eligible if she were

pregnant.

Finally, OBRA '90 made several changes to presumptive eligibility

for pregnant women by eliminating the existing time limit on the

presumptive period and allowing a pregnant woman to remain

presumptively eligible until the State makes a determination on her

regular application for Medicaid or, if she does not file a regular

application, the last day of the month following the month in which she

was determined presumptively eligible. OBRA '90 also provided that the

application given to a presumptively eligible pregnant woman could be

the application used by the State to determine the regular Medicaid

eligibility of low-income pregnant women under section 1902(1)(1)(A).

This document proposes to incorporate provisions of OBRA '86, '87,

'89, and '90, the Homeless Eligibility Clarification Act, MCCA, and FSA

in the Medicaid regulations, as outlined and discussed in the following

section of this document. (Additional related provisions in these laws

are being addressed in separate rulemaking documents.)

II. Discussion of Legislative Provisions and Proposed Amendments to

Regulations

A. Low-Income Pregnant Women, Infants, and Children

Section 9401 of OBRA '86 amended the Social Security Act by adding

new sections 1902(a)(10)(A)(ii)(IX) and 1902(1) to establish optional

categorically needy groups of pregnant women and women during the 60-

day period beginning on the last day of pregnancy, infants, and

children up to age 5 whose income does not exceed a State-established

standard that is a specified percentage of the Federal nonfarm poverty

income guidelines. Under OBRA '86, a State could establish this income

standard at a level at or below 100 percent of the Federal poverty

guidelines. A State had to cover both pregnant women and infants (it

could not cover either group separately) and it had to cover both of

these groups in order to cover children.

OBRA '86 also amended section 1902(e) to provide that States that

have chosen to cover infants and children under section 1902(1) must

continue to cover those infants and children under certain

circumstances. Under section 1902(e)(7), if the infants and children

are receiving covered inpatient services at the time they reach the age

limits under the State plan, the State must cover them until the end of

their inpatient stay if they remain otherwise eligible. Also, OBRA '86

specifically exempted the group of individuals described in section

1902(a)(10)(A)(ii)(IX) from the limits on family income which affect a

State's Federal financial participation (FFP) under section 1903(f)(4)

of the Act.

Later legislation changed the age limit for children and the

percentage of the poverty level for the income standard. Specifically,

section 4101(c) of OBRA '87 raised the maximum age for low-income

children from age 5 up to age 8. Section 4101(a)(1) of OBRA '87

increased the percentage of the poverty guidelines at which the income

standard could be set to 185 percent for pregnant women and infants

under age 1, effective July 1, 1988. However, for children age 1 up to

age 8, section 4101 retained the percentage level at no more than 100

percent of the Federal poverty guidelines (or, if the State had chosen

to cover pregnant women and infants with a percentage of income below

100 percent, the percentage for children had to equal the percentage

used for the pregnant women and infants). Section 4118 of OBRA '87 also

removed the reference to ``nonfarm'' in the description of the Federal

poverty income guidelines to be used. In addition, section 4101(d) of

OBRA '87 amended section 1916 of the Act to allow States to charge a

premium to optional groups of low-income pregnant women and infants who

have family incomes above a specified level.

Section 302 of MCCA added section 1902(a)(10)(A)(i)(IV) to the

Social Security Act, which required States to provide mandatory

eligibility to groups of pregnant women and infants up to one year of

age with incomes at or below 75 percent of the Federal poverty income

guidelines, effective July 1, 1989. Those States that, as of enactment

of MCCA, offered eligibility to pregnant women and infants with incomes

at 100 percent of the poverty level (or at some lower income threshold

between 75 percent and 100 percent) were required to continue

eligibility at this level. A State had to provide an income level that

reflected at least the percentage of poverty specified in an amendment

to its State plan to cover these groups (whether the amendment had been

approved or not). Even if there was no percentage specified in the

State plan, the maintenance of eligibility requirement also applied to

percentages established under a State's authorizing legislation or

provided for under the State's appropriations in order to provide

Medicaid to these individuals before July 1, 1989. MCCA also provided

that, effective July 1, 1990, mandatory eligibility was required for

groups of pregnant women and infants under age one with incomes at or

below 100 percent of the Federal poverty income guidelines. In addition

to creating mandatory groups of pregnant women and infants, the MCCA

eliminated the requirement in section 1902(1)(4) that States cover both

pregnant women and infants in order to cover either group and to cover

both groups in order to cover children. We have interpreted this MCCA

amendment to allow States to cover optional groups of pregnant women

and infants separately and with different income levels. Coverage of

groups of pregnant women or infants, or both, with incomes above the

mandatory percentages (75 percent, effective July 1, 1989, and 100

percent, effective July 1, 1990) but at or below 185 percent of the

poverty level and children age 1 year to age 8 years with incomes at or

below 100 percent of the poverty level remained optional under the MCCA

provisions.

The MCCA also amended section 1902(e)(7) to provide continued

coverage to all of the revised groups of children under section 1902(1)

until the end of their inpatient stays. It also amended section

1903(f)(4) to exempt from the FFP income limits all of the redefined

mandatory and optional groups in section 1902(1) and specifically made

the use of less restrictive income and resource methodologies under

section 1902(r)(2) apply to several groups, including the mandatory

groups of women and infants in section 1902(a)(10)(A)(i)(IV), and to

all optional categorically needy groups, including the optional group

of women, infants, and children in section 1902(a)(10)(A)(ii)(IX).

The changes made by section 302 of MCCA applied to payments for

medical assistance for calendar quarters beginning on or after July 1,

1989, with respect to eligibility on or after that date. The effective

date applied whether or not we had promulgated final rules to interpret

the provisions by that date. However, a State could, under certain

circumstances, request a delayed implementation date in order to enact

State legislation.

Section 6401 of OBRA '89 revised the provisions under MCCA by

further amending the eligibility groups of low-income pregnant women,

infants, and children up to age 8. First, section 6401 changed the

income criteria for the mandatory eligibility groups of low-income

pregnant women and infants up to age 1 under section

1902(a)(10)(A)(i)(IV) of the Act by increasing the income level

criteria from no less than 100 percent of the Federal poverty income

level to no less than 133 percent of the Federal poverty income level,

effective April 1, 1990. The law mandates that a State use a percentage

greater than 133 percent (but no greater than 185 percent) of the

Federal poverty income level if the State had such a higher percentage

for optional categorically needy groups of pregnant women and infants

as of the date of enactment of OBRA '89 in its State plan (whether

approved or not) or established by State authorizing legislation or

State appropriations. Second, OBRA '89 established under section

1902(a)(10)(A)(i)(VI) of the Act a new mandatory eligibility group of

low-income children age 1 up to age 6. The State was required to

establish an income level for this group that equaled 133 percent of

the Federal poverty income level. States could continue to cover as

optional categorically needy other low-income children age 6 up to age

7 or, at State option, up to age 8 who are born after September 30,

1983. The income level for this group of children age 6 up to age 8

would continue to be established at a level not to exceed 100 percent

of the Federal poverty income level.

Section 6401 of OBRA '89 also made conforming changes to section

1902(a)(10)(A)(ii)(IX) (excluding the mandatory group of children in

section 1902(a)(10)(A)(i)(VI) from the group of optional categorically

needy), other parts of section 1902(1) (changed the descriptions of

low-income groups of pregnant women, infants, and children), section

1902(e)(7) (added the new group of mandatory children to the

continuation of inpatient hospital services for infants and children

who have reached the maximum age for eligibility), section 1902(r)(2)

(made the use of less restrictive income and resource methodologies

than cash assistance methodologies apply to the new group of mandatory

children), and section 1903(f)(4) (exempted the new group of mandatory

children from the limitations on Medicaid payments). In addition,

section 6411(i)(3) of OBRA '89 amended section 1925 (a)(3)(C) and

(b)(3)(C)(i) to require States to determine if children who would cease

to receive extended Medicaid under section 1925 may be eligible for

Medicaid under sections 1902(a)(10)(A)(i) (IV) or (VI) or

1902(a)(10)(A)(ii)(IX) before terminating eligibility based on section

1925.

The changes made by section 6401 applied to payments for medical

assistance for calendar quarters beginning on or after April 1, 1990,

with respect to eligibility on or after that date. The effective date

applied whether or not we had promulgated final rules to interpret the

provisions by that date. However, a State could, under certain

circumstances, request a delayed implementation date in order to enact

State legislation. Section 6411(i)(3) was effective as if enacted as

part of the Family Support Act of 1988.

Section 4601 of OBRA '90 established a new mandatory group of low-

income children under section 1902(a)(10)(A)(i)(VII) of the Act. This

group described in 1902(l)(1)(D) of the Act includes children born

after September 30, 1983 who have attained age 6 but have not attained

age 19. The State must establish an income standard for this group of

children which equals 100 percent of the Federal poverty level. Section

4601 made conforming changes to section 1905(n)(2) of the Act which

defines qualified children. Children born after September 30, 1983 who

have not attained age 19 are now included in the mandatory group of

qualified children. In addition, States have the option to choose an

earlier date of birth if they wish to phase in this group more quickly.

Section 4601 made additional conforming changes to (1) section

1902(r)(2) to allow States to use less restrictive income and resource

methodologies than those used under the cash assistance programs in

determining financial eligibility of the new group under section

1902(a)(10)(A)(i)(VII); (2) section 1903(f)(4) of the Act to exempt the

new group of mandatory children from the limitations on Medicaid

payments; and (3) section 1925 of the Act to require that States

determine whether a child is eligible under this new mandatory group

before terminating eligibility based on section 1925.

The changes made by section 4601 applied to payments for medical

assistance for calendar quarters beginning on or after July 1, 1991.

The effective date applied whether or not we had promulgated final

rules to interpret the provisions by that date. However, a State could,

under certain circumstances, request a delayed implementation date in

order to enact State legislation.

Section 1902(l) of the Act, as added by section 9401 of OBRA '86

and amended by section 4101 of OBRA '87, section 302 of MCCA, section

608(d)(15) of FSA, section 6401 of OBRA '89, and section 4601 of OBRA

'90, specifies the eligibility conditions for the mandatory groups of

pregnant women and infants under section 1902(a)(10)(A)(i)(IV), the

mandatory group of children age 1 up to age 6 under section

1902(a)(10)(A)(i)(VI), the mandatory group of children age 6 up to age

19 under section 1902 (a)(10)(A)(i)(VII), and the optional

categorically needy groups of pregnant women and infants under section

1902(a)(10)(A)(ii)(IX).

1. Income Standard

Eligibility of individuals who fall into one of the mandatory and

optional groups of low-income pregnant women, infants, and children is

based on these individuals meeting State-established income standards.

States must establish their income standards at a level that does not

exceed the specified percentage of the Federal poverty income

guidelines for a family equal to the size of the family, including the

woman, infant, or child. Because the official poverty guidelines are

revised annually to adjust for inflation, States will be automatically

increasing the income standards established to keep pace with inflation

as a result of the changes in the poverty guidelines. (HHS determines

official Federal poverty income guidelines and issues them in the

Federal Register annually, usually during the month of February. See,

for example, 58 FR 8287, February 12, 1993.) For optional groups of

pregnant women and infants, the agency may establish separate income

standards or use a single standard.

Under section 1902(l)(3)(E), as added by OBRA '86 and amended by

section 4101(e)(3) of OBRA '87, in determining whether the income of

members of the low-income groups of pregnant women, infants, and

children meets the established income standards, States must use the

same methodologies as applied in determining financial eligibility for

AFDC, or for title IV-E as appropriate, except to the extent that the

methodologies are inconsistent with section 1902(a)(17)(D) of the Act.

Section 4101(e)(3) of OBRA '87 clarified that, in determining family

income, States must not use any AFDC methodologies (such as stepparent,

grandparent, or sibling deeming) that are inconsistent with the deeming

policies specific to Medicaid under section 1902(a)(17)(D) of the Act

(H. Rep. 391, 100th Cong., 1st Sess. 446 (1987)). Section

1902(a)(17)(D) of the Act provides, in part, that in determining

financial responsibility of relatives, only the income of spouses may

be considered as available to spouses, and only the income of parents

may be considered as available to a child until the child is 21, unless

the child is blind or disabled. The methodologies include, but are not

limited to, those used for disregarding income. States also are not

permitted to allow individuals whose eligibility is determined based on

membership in these low-income groups to spend down; that is, the State

may not deduct the costs of incurred medical expenses or any other type

of remedial care from income, in determining whether an individual's

income meets the income standard established by the State.

The requirements for determining financial eligibility of low-

income pregnant women, infants, and children were also affected by

section 303(e) of MCCA. Section 303(e) established a new section

1902(r)(2) to permit States, at their option, to use less restrictive

income and resource methodologies than those used under the cash

assistance programs (e.g., AFDC or SSI), in determining financial

eligibility for a number of groups, including the mandatory groups of

pregnant women and infants in section 1902(a)(10)(A)(i)(IV) and the

optional groups of pregnant women, infants, and children in section

1902(a)(10)(A)(ii)(IX). Section 6401 of OBRA '89 specifically made

section 1902(r)(2) applicable to the mandatory group of low-income

children age 1 up to age 6 in section 1902(a)(10)(A)(i)(VI). Section

4601 of OBRA '90 specifically made section 1902(r)(2) applicable to the

mandatory group of low-income children age 6 up to age 19 in section

1902(a)(10)(A)(i)(VII).

We believe that the specific preclusion of a spenddown in section

1902(l) was not modified by section 1902(r)(2). However, States may use

other more liberal methodologies to the extent that they are consistent

with section 1902(r)(2).

Section 1902(l)(1) of the Act specifically states that the income

standards established by the State must correlate to a family size that

includes the woman, infant, or child. The statute does not specifically

address whether the pregnant woman's unborn child must be counted in

determining family size. However, the legislative history supports

counting the pregnant woman as if her child were born and living with

her. The language of the 1986 House Committee Report that addressed the

section 1902(l)(1) provision states that ``in determining a pregnant

woman's family income level, the Committee intends that a State would

treat the woman as if her child were born and living with her at the

time she applied for assistance. Thus, a single woman would be treated

as a family of two, a pregnant woman living with a spouse or child as a

family of three, and so forth * * *'' (H. Rep. No. 727, 99th Cong., 2d

Sess. 100 (1986)). The House bill that accompanied this report states

that the family size should be equal to ``the family including the

woman or child.'' Even though the language is not specific in section

1902(l)(1), we believe the legislative history reveals that Congress

intended that the unborn child be included under this provision.

We proposed to specify in these proposed regulations that the

family size includes the ``unborn child and other members of the

Medicaid budgetary unit.'' Policies relating to the Medicaid budgetary

unit were addressed in a final rule with comment period published in

the Federal Register on January 19, 1993 (58 FR 4908), and are,

therefore, not being addressed in this preamble. The effective date of

the January 1993 rule has been delayed (58 FR 9120, February 19, 1993;

58 FR 44457, August 23, 1993; and 59 FR 8138, February 18, 1994). We

will conform the policies on the Medicaid budgetary unit contained in

these proposed regulations with whatever policy is in effect at the

time that we issue these proposed regulations as final.

2. Resource Standard

The statute allows States, at their option, to apply a resource

standard to the low-income eligibility groups of pregnant women,

infants, and children under section 1902(1) of the Act. Section 9401 of

OBRA '86 establishes a floor for the resource standard that is a

specific and objective standard. If a State chooses to apply a resource

standard, the standard may be no more restrictive than that applied

under SSI for pregnant women, and than that applied under AFDC, for

infants and children. (If Guam, Puerto Rico, and the Virgin Islands

elect to apply a resource standard, that standard for pregnant women

may be no more restrictive than that applied under SSI under section

1613 of the Act. This is because the reference to the resource standard

for pregnant women in the statute is to the standard that is applied

under title XVI (that is, SSI) and not to the standard that is applied

under the State plan program under title XVI.)

The amendments regarding the different treatment of income and

resources for the mandatory and optional groups of low-income pregnant

women, infants, and children do not require or permit this different

treatment to be applied to other Medicaid eligibility groups under the

comparability provisions of section 1902(a)(17) of the Act.

3. Applicability for States With Section 1115 Waivers and for

Territories

Section 302(c) of MCCA struck the original section 1902(1)(4)(A) of

the Act and section 302(d) of MCCA added a new section 1902(1)(4)(A).

Under the new section 1902(1)(4)(A), as amended by section 6401 of OBRA

'89 and section 4601 of OBRA '90, States that are providing Medicaid

under a waiver granted under section 1115 of the Act must provide

mandatory categorically needy eligibility to pregnant women and infants

under age 1 with incomes at or below 133 percent of the poverty level

under section 1902(a)(10)(A)(i)(IV), children age 1 but under age 6

with incomes at or below 133 percent of the poverty level under section

1902(a)(10)(A)(i)(VI) and children who have attained age 6 but are

under age 19 with incomes at or below 100 percent of the poverty level

under section 1902(a)(10)(A)(i)(VII) in the same manner as other

States. States operating under a waiver granted under section 1115 of

the Act must (as all other States must) cover the mandatory groups at

higher levels if they have already chosen to use those higher levels.

However, Guam, Puerto Rico, the Virgin Islands, American Samoa, and the

Northern Mariana Islands retain the option of providing Medicaid to the

otherwise mandatory groups of low-income pregnant women, infants, and

children. The Territories may establish separate or identical income

standards for pregnant women and infants at any percentage of the

poverty level at or below 185 percent. However, if a Territory chooses

to cover children from age 1 up to age 6, it must cover all such

children with incomes at or below 133 percent of the poverty level.

Also, if a Territory chooses to cover children born after September 30,

1983 who have attained age 6 but are under age 19, it must cover all

such children with incomes at or below 100 percent of the poverty

level.

4. Comparability of Services

Section 1902(a)(10) of the Act, as amended by section 9401 of OBRA

'86, section 4101 of OBRA '87, and section 302(a)(1)(C) of MCCA,

contains an exemption to the comparability of services requirements at

section 1902(a)(10)(B) for services furnished to pregnant women

described in section 1902(l)(1)(A) of the Act who are eligible as

mandatory or optional categorically needy under the provisions of

sections 1902(a)(10)(A)(i)(IV) and 1902(a)(10)(A)(ii)(IX). The amended

provision (under clause (VII) following what is currently paragraph (F)

of section 1902(a)(10)) provides that the services that are available

to pregnant women under the section 1902(l) low-income eligibility

groups are limited to services relating to pregnancy (including

prenatal, delivery, family planning, and postpartum services) and to

other conditions that may complicate pregnancy. (Section 4101(e)(1) of

OBRA '87 expanded services related to pregnancy to include ``family

planning.'')

The Consolidated Omnibus Budget Reconciliation Act (COBRA), Public

Law 99-272, enacted an earlier comparability of services requirement

for all pregnant women covered under the State plan. This requirement

appears under clause (V) following what is currently paragraph (F) of

section 1902(a)(10). This provision states that if a State makes

available ``services relating to pregnancy (including prenatal,

delivery, and postpartum services) or to any other condition which may

complicate pregnancy,'' the State is not required to provide these

services to any other individual, except pregnant women, covered under

the plan. The State must provide its pregnancy-related services and

services for any other condition that may complicate pregnancy, in the

same amount, duration, and scope, to all pregnant women covered under

the State plan, including pregnant women whose pregnancy is not the

basis for their Medicaid eligibility (e.g., those receiving AFDC or

SSI). (See Secs. 440.210 and 440.220).

We issued a separate document to interpret this and other

provisions of COBRA. In it, we left to the States the responsibility

for defining these services listed in the statute within the bounds of

broad policy guidelines (54 FR 7798, February 23, 1989 and 55 FR 48601,

November 21, 1990). We believe that the same principles apply for the

pregnancy-related services and services which may complicate pregnancy

which are specific to the section 1902(1) group of women. (See

Sec. 440.250(q).)

Generally, the State plan includes services identified in section

1905(a) (1) through (24) of the Act (mandatory and optional services

that are considered as medical assistance to Medicaid recipients). Many

of these services can qualify as appropriate components of the areas of

care required by the statute; that is, prenatal services, delivery

services, postpartum services, and family planning services, and

services related to conditions that may complicate pregnancy. For

example, physicians' services in section 1905(a)(5) can qualify as

prenatal services, since examinations by a physician are part of

prenatal care, and as delivery services, since a physician may also

deliver the woman's baby. Therefore, a State plan must provide pregnant

women with what the State has decided are enough services identified in

section 1905(a) to sufficiently cover each of the required areas of

care. In addition, a State, at its option, may provide services under

section 1905(a) of the Act (for example, rehabilitative services or

nutritional supplements) only to pregnant women and not to any other

categorically needy eligible Medicaid recipient, as long as such

services qualify as either services related to pregnancy or to other

conditions that may complicate pregnancy. A State would not be required

to specifically identify which services it provides to pregnant women.

However, the State would be required to specify in its plan that it

covers each of the required areas of care.

We interpret ``pregnancy-related services'' to mean those services

which are needed because the woman is or was pregnant, either because

they are necessary for the health of the pregnant woman or fetus or

because the services became necessary as a result of the woman having

been pregnant. These include, but are not limited to, prenatal care,

delivery, family planning, and postpartum services.

On the other hand, ``services relating to any other condition which

may complicate pregnancy'' are not ``pregnancy related'' because they

do not arise because of the pregnancy. These services include those for

diagnosis or treatment of illnesses or medical conditions which might

threaten the carrying of the fetus to full term or the safe delivery of

the fetus. Because these services are for conditions ``which may

complicate the pregnancy,'' the services can be provided only while the

woman is pregnant.

It is important to note that, unlike the other eligibility groups

of pregnant women who are entitled to at least the full range of

services available under a particular State's Medicaid plan to

recipients of the same eligibility group, these low-income

categorically needy pregnant women are only entitled to pregnancy-

related services (including family planning services) and services for

the treatment of conditions that may complicate pregnancy.

Infants and children in these eligibility groups are eligible for

all appropriate Medicaid services included in the approved State plan.

5. Premiums for Pregnant Women and Infants

Section 4101(d) of OBRA '87 redesignated section 1916(c) as 1916(d)

and created a new section 1916(c) which permits States to impose a

monthly premium on optional categorically needy low-income pregnant

women and infants eligible under section 1902(a)(10)(A)(ii)(IX) of the

Act. States may impose the premium on these individuals if their income

equals or exceeds 150 percent, but is not more than 185 percent, of the

poverty level for a family of the size involved. The amount of the

premium imposed may not exceed 10 percent of the amount by which the

family's income exceeds 150 percent of the poverty income guidelines.

Costs for the care of a dependent child must be deducted in determining

the family's income under this provision. States are prohibited from

requiring the prepayment of the premium. Eligibility may not be

terminated for failure to pay this premium unless the premium has been

unpaid for at least 60 days. In cases of undue hardship, as defined by

the State, the State may waive the payment of the premium. In addition,

a State may use State or local funds from other programs to pay the

premium. Under section 1916(c)(4) of the Act, if these funds are used,

they may not be counted as income to the individual for whom payment is

made.

Although Congress did not specifically address the meaning of the

term ``costs of care for a dependent child'' (the Conference Report

refers to these costs as ``child care'' expenses (H. Rep. No. 495,

100th Cong., 1st Sess. 731 (1987)), we believe that there was no

Congressional intent to use a broader concept of child care costs for

this provision than that traditionally used under the AFDC program.

Therefore, we propose to define child care costs for purposes of this

provision as costs related to the care of a child necessary to enable a

member of the family whose income was included in the eligibility

determination to work or participate in training.

6. Payment Levels Under AFDC

OBRA '86 added section 1902(1)(4)(A) to the Act, which provided

that a State plan may not elect to cover the optional groups of low-

income pregnant women, infants, and children up to age 5 described in

section 1902(a)(10)(A)(ii)(IX) unless the State had in effect AFDC

payment levels that were not less than those in effect on April 17,

1986. This provision became effective on April 1, 1987. OBRA '87

amended this provision, changing the date upon which AFDC levels would

be measured from April 1 to July 1, 1987. The OBRA '87 amendment was

effective on December 22, 1987.

Section 302(c) of MCCA eliminated section 1902(1)(4), but placed a

comparable provision in a new section 1903(i)(9). This provision states

that payment will not be made to a State with respect to amounts for

medical assistance for section 1902(a)(10)(A)(ii)(IX) optional groups

if the State has in effect AFDC payment levels that are less than those

in effect on July 1, 1987. In addition, section 302(c) established a

new, more general maintenance of effort provision in section

1902(c)(1), which states that the Secretary will not approve any

Medicaid State plan if the State has in effect AFDC payment levels

which are less than those in effect on May 1, 1988. Because section

1116(b) of the Act distinguishes between plans and plan amendments, we

interpret this provision literally as prohibiting approval of new State

plans but not prohibiting approval of amendments to a State plan. The

MCCA provisions were effective on July 1, 1989.

There have been some questions raised about how we would determine

if the AFDC payment level has been maintained by a State as specified

in the law. ``Payment level'' is not an existing term used under AFDC.

However, for the purposes of sections 1902(c) and 1903(i)(9), payment

levels are the amounts of the payments for basic needs (according to

family size) which would be made to families with no income under the

approved State AFDC plan. Special needs are not included, as we have

concluded, based on a review of statutory history, that Congress

intended to include only basic needs. Thus, we propose to find a State

has not reduced its payment level if it has not reduced the amount of

the AFDC payment for basic needs made to a family with no other income.

7. Application for AFDC

Section 4104(e) of OBRA '87 amended section 1902(1)(4) of the Act

by adding a new paragraph (C) to specify that a State Medicaid plan may

not provide that any of the low-income pregnant women, infants, and

children under section 1902(1) must apply for AFDC as a condition of

applying for or receiving Medicaid. Section 302(c) of MCCA made further

amendments by removing section 1902(1)(4) and adding a comparable

provision to section 1902(c)(2) of the Act. Section 1902(c)(2) provides

that the Secretary must not approve any State plan for Medicaid if the

State requires low-income pregnant women, infants, and children under

section 1902(1)(1) to apply for AFDC benefits as a condition of

applying for or receiving Medicaid.

8. Need for Regulations

The statutory amendments discussed above are effective without

regard to whether final regulations to carry them out have been

published by the applicable effective dates. However, changes in the

Medicaid regulations are necessary to bring the regulations up to date

with current statutory requirements.

9. Proposed Regulations

We propose to amend the Medicaid regulations under 42 CFR parts

435, 436, 440, and 447 as follows:

Add a new Sec. 435.118 to specify the mandatory

eligibility groups of pregnant women, infants under age 1, children age

1 up to age 6 with incomes at or below 133 percent of the Federal

poverty income guidelines, and children age 6 up to age 19 with incomes

at or below 100 percent of the Federal poverty income guidelines.

Add Sec. 435.228 to specify the optional eligibility

groups of low-income pregnant women and infants (and low-income

children in American Samoa and the Northern Mariana Islands) and

Sec. 436.226 to specify the optional eligibility groups of low-income

pregnant women, infants, and children and the conditions under which

they may establish eligibility.

Add Secs. 435.612 and 436.612 to incorporate the

requirements for a State to establish income standards, and at State

option, resource standards for these low-income groups and for applying

methodologies to determine financial eligibility.

Revise Secs. 435.608 and 436.608 to specify that the State

agency must not require low-income pregnant women, infants, and

children to apply for AFDC benefits as a condition of applying for or

receiving Medicaid.

Add a new Sec. 431.60 to specify the maintenance of

specified AFDC payment levels as a condition of State plan approval.

Revise Secs. 435.1002 and 436.1002 to specify that FFP is not available

for expenditures for Medicaid for optional groups of low-income

pregnant women and infants covered under section 1902(a)(10)(A)(ii)(IX)

if the State has in effect AFDC payment levels that are less than the

payment levels in effect under the plan on July 1, 1987.

Revise Sec. 440.250 on limits on comparability of services

to provide that services to pregnant women in the mandatory and

optional categorically needy low-income eligibility groups are limited

to services related to pregnancy (including prenatal, delivery, family

planning, and postpartum services) and to other conditions which may

complicate pregnancy that are included under the approved State plan.

Add a new Sec. 447.60 to specify the requirements and

conditions for imposing a monthly premium on the optional eligibility

groups of low-income pregnant women and infants with family incomes

between 150 and 185 percent of the poverty level and make conforming

changes to Secs. 447.50 and 447.51.

Section 303(e) of MCCA added section 1902(r)(2) of the Act, which

allows States to elect to use less restrictive income and resource

methodologies than the cash assistance methodologies for a number of

eligibility groups, including the mandatory and optional categorically

needy pregnant women, infants, and children in section 1902(l). On

January 19, 1993, we published in the Federal Register (58 FR 4908)

regulations at Secs. 435.601, 435.602, 436.601, and 436.602 to

interpret section 1902(r)(2). The eligibility groups of low-income

pregnant women, infants, and children described in this preamble are

subject to the provisions of Secs. 435.601, 435.602, 436.601, and

436.602.

[Note: On February 19, 1993, August 23, 1993, and February 18,

1994, we published notices in the Federal Register (58 FR 9120; 58

FR 44457; and 59 FR 8138) to delay the effective dates for the

January 19, 1993 final rule. If, at the time we issue the final rule

for these proposed regulations, the January 19, 1993 final

regulations have been revised or are not in effect, we will make

appropriate revisions.]

We propose to add new Secs. 435.612 and 436.612 to specify the

requirements for establishing the income and resource standards for

these groups and to cross-refer to Secs. 435.601, 435.602, 436.601, and

436.602 for the methodologies to be used for determining financial

eligibility. The group of low-income aged and disabled individuals

discussed in section I.F. of this document also is subject to

Secs. 435.601, 435.602, 436.601 and 436.602.

B. Continuous Eligibility of Pregnant Women

Under section 1902(e)(6) of the Act, as added by section 9401(d) of

OBRA '86 and amended by section 4101(e)(2) of OBRA '87, section 302(e)

of MCCA, and section 4603 of OBRA '90, States must treat any pregnant

women who are eligible under section 1902(a)(10) as continuously

eligible throughout the pregnancy and the postpartum period without

regard to changes in income.

Section 9401(d) of OBRA '86 added section 1902(e)(6) to the Act.

Section 1902(e)(6) allowed States to treat any women who were described

in sections 1902(a)(10)(A)(ii)(IX) and 1902(1) as continuously eligible

during the pregnancy and through a 60-day postpartum period, without

regard to any changes in family income. Women covered under this

provision consisted of two groups: low-income pregnant women and low-

income women during the 60-day period after the pregnancy ends.

Therefore, this provision covered women who applied for and became

Medicaid eligible under section 1902(l) either before or after giving

birth. Section 4101(e)(2) of OBRA '87 redefined the section 1902(e)(6)

postpartum period to specify that the period of continued coverage

extends for 60 days after the pregnancy ends, beginning on the last day

of pregnancy, plus any remaining days in the month in which the 60th

day occurs. The remaining days in the month provision was added by OBRA

'87 for Federal matching payment and quality control purposes because,

in some States, Medicaid eligibility is not terminated at any time

other than the end of the month.

Section 302(e) of MCCA amended section 1902(e)(6) of the Act to

provide States with the option of treating any pregnant woman who has

established eligibility under any eligibility group listed in section

1902(a)(10) and who, because of a change in income, would cease to be

eligible, as a mandatory eligible low-income pregnant woman throughout

the pregnancy and for the specified postpartum period, without regard

to changes in family income. Section 1902(e)(6) now refers to

``pregnant women'' rather than ``women described in section

1902(l)(1).'' As a result, we believe it still covers the pregnant

women described in section 1902(l)(1)(A) but no longer includes those

women in section 1902(l)(1)(A) who first become eligible only in the

60-day postpartum period after they have ceased to be ``pregnant

women.''

Section 4603(a)(2) of OBRA '90 further amended section 1902(e)(6)

to require States to provide continuous coverage to any pregnant woman

eligible under section 1902(a)(10) of the Act who would otherwise lose

her eligibility due to a change in income. The pregnant woman must be

``deemed to continue to be'' a mandatory categorically needy individual

described under sections 1902(a)(10)(A)(i)(IV) and 1902(1)(1)(A)

through the end of the postpartum period. The OBRA '90 amendment also

stated that this mandatory coverage would not apply in the case of a

woman who has received ambulatory prenatal care under section 1920 of

the Act during a presumptive eligibility period and is then determined

to be ineligible for regular Medicaid.

Although section 1902(e)(6) purports to cover all pregnant women

who, because of a change in family income, would not otherwise continue

to be eligible for Medicaid, we believe that it does not automatically

cover all pregnant women who must meet a spenddown. Most pregnant women

seeking to meet a spenddown would be attempting to establish

eligibility as medically needy. Section 1902(e)(6) now requires that a

State deem a pregnant woman (who has established eligibility under any

eligibility group) to continue to be a pregnant woman under sections

1902(a)(10)(A)(i)(IV) and 1902(1)(1)(A) if that woman would otherwise

cease to be eligible due to a change in income.

A medically needy woman can establish her eligibility during a

given budget period by spending down her excess income. However, if she

has the excess income in the following budget period and is ineligible

because she cannot spend it down, we do not believe that her

ineligibility has resulted from a ``change'' in income. In fact, her

income is unchanged for eligibility purposes if it remains in excess of

the medically needy income level by the same amount as in the previous

budget period; she has simply not been able to spend down to the

medically needy income level. We believe that under the statute, a

medically needy pregnant woman whose family income does not change and

who cannot meet her spenddown does not qualify as having the ``change''

in income contemplated by section 1902(e)(6).

We are uncertain how to apply section 1902(e)(6) in the context of

pregnant women who have a spenddown, and whose family incomes increase,

causing this spenddown amount to increase. We propose to cover under

this provision any pregnant woman who was eligible (either as

categorically needy, medically needy without a spenddown, or medically

needy after meeting a spenddown) at any time during her pregnancy, who

then experiences a change in family income which either would cause her

to lose categorically needy Medicaid, medically needy Medicaid without

a spenddown, or to lose eligibility (be unable to meet the increased

spenddown although she would have met the earlier spenddown) by virtue

of an increased spenddown amount.

We would interpret section 1902(e)(6) so that it will not relieve

pregnant women who qualify under section 1902(e)(6) of their obligation

to satisfy their original spenddown amount in each budget period while

in section 1902(e)(6) status.

If a pregnant woman who has in the previous budget period met a

spenddown has an increase in income and qualifies under section

1902(e)(6), she must be ``deemed to continue to be'' a pregnant woman

under sections 1902(a)(10)(A)(i)(IV) and 1902(1)(1)(A). These

provisions describe categorically needy eligibility groups with respect

to whom the limited Medicaid benefit is available. We believe that the

phrase ``deemed to continue to be'' is ambiguous. The phrase can mean

that the woman is to be regarded for all purposes as if she were

actually categorically needy, or only that she is to be considered as

categorically needy for the purpose of receiving the restricted service

package that applies to pregnant women described in section 1902(1)

without regard to the change in her family's income. If we were to

regard the woman as though she were actually categorically needy, she

would no longer have to meet any spenddown, and any subsequent changes

of income would not affect her eligibility. This would place the

medically needy pregnant woman whose income has increased in a better

position than any other medically needy pregnant woman with a spenddown

who has had no increase in income.

In order to avoid the anomalous result of only pregnant women with

higher incomes being relieved of their total spenddown obligations, we

propose not to interpret section 1902(e)(6) as requiring that a

medically needy woman be considered as though she were categorically

needy for all purposes. We propose instead to interpret the phrase

``deemed to continue to be'' in section 1902(e)(6) to require only that

a woman who meets her original spenddown amount, but cannot meet the

increased amount, be deemed to be eligible for the limited service

package provided to the section 1902(1) pregnant women. The woman can

maintain this deemed status without having to pay any increased

spenddown amounts which result from increases in family income. She

will, however, be required to continue to meet her original spenddown

while in section 1902(e)(6) status.

We propose to revise redesignated Sec. 435.918 relating to

redetermination of eligibility, to provide that the agency must

consider a pregnant woman eligible under any Medicaid eligibility group

as an individual who is eligible to receive the services available to

the mandatory categorically needy low-income group throughout the

pregnancy and for the specific postpartum period after the pregnancy

ends without regard to changes in the family income.

C. Qualified Children

Section 4601(a)(2) of OBRA '90 amended the definition of a

qualified child in section 1905(n)(2) of the Act, effective July 1,

1991. Under section 1902(a)(10)(A)(i)(III) of the Act, a State must

provide Medicaid coverage to the mandatory group of qualified children.

Effective July 1, 1991, under the new definition of qualified child

added by OBRA '90, a State must provide Medicaid coverage to children

under the age of 19 who were born after September 30, 1983, and who

meet the income and resource requirements of the State plan under title

IV-A. The option in section 1905(n)(2) for a State to include as

qualified children those children born after an earlier date than

September 30, 1983 (as chosen by the State) was retained. As a result,

effective July 1, 1991, States have the option to provide Medicaid

coverage to children under the age of 19 who were born after any date

prior to September 30, 1983 (as chosen by the State) who meet the

income and resource requirements of title IV-A.

We propose to amend Sec. 435.116(c) to raise the maximum age of a

qualified child to under age 19.

D. Deemed Newborn Eligibility

1. OBRA '90 Changes

Section 4603(a) of OBRA '90 changed the requirements in section

1902(e)(4) of the Act under which a newborn child remains eligible for

Medicaid, effective January 1, 1991. Prior to this change, States were

only required to continue the eligibility of an infant deemed eligible

at birth for so long as the infant remained a member of the mother's

household and the mother remained eligible for Medicaid. States must

now also continue the eligibility of an infant deemed eligible at birth

if the infant remains a member of the mother's household and the mother

loses Medicaid eligibility but would remain eligible if pregnant.

We considered whether the language ``remain eligible if pregnant''

meant that the mother should be considered as newly pregnant in each

month after the postpartum period. Under this interpretation, if the

mother was regarded as reapplying for Medicaid after the postpartum

period as though she were newly pregnant, her income might be too high

for her to be eligible, even under the pregnancy-related eligibility

categories. (For example, the mother's income may have increased above

the applicable standard during the pregnancy but she remained eligible

through the postpartum period by virtue of section 1902(e)(6) of the

Act.) If she is regarded as newly pregnant, she would not receive the

continued coverage under section 1902(e)(6) for women whose incomes

increase after they are already eligible and pregnant. As a result, the

mother would not be ``eligible'' even if she were considered to be

pregnant and the infant would lose eligibility under section

1902(e)(4).

We decided that a better reading of the provision would be to

consider a mother as if she had not yet given birth; that is, as if she

had remained continuously pregnant. A discussion of this provision in

the House Report of the Committee on Budget to accompany H.R. 5835 (H.

Rep. No. 881, 101st Cong., 2d. Sess. 103 (1990)) refers to the woman

remaining eligible for Medicaid or one who ``would be eligible for

Medicaid were she still pregnant,'' which implies she should be treated

as if she had not given birth. Therefore, we propose to require States

to continue the eligibility of an infant deemed eligible at birth who

is in his or her mother's household and whose mother would still be

eligible for Medicaid if the infant had not yet been born. Under this

interpretation, changes in the mother's income will have no impact on

the infant's eligibility because were the mother still pregnant, she

would remain eligible without regard to changes in income by virtue of

section 1902(e)(6) of the Act. A redetermination of the mother's

eligibility is not required at the end of the postpartum period unless

information is received that there has been a change in the mother's

circumstances which might have affected her eligibility even if she

were still pregnant and the infant had not yet been born.

2. Member of the Mother's Household

An infant must continue to be a member of his/her mother's

household to maintain deemed newborn eligibility. We are codifying

existing policy related to determinations of whether an infant is a

member of his or her mother's household. An infant is considered a

member of his or her mother's household as long as he or she is

continuously hospitalized after birth, unless the mother has legally

relinquished control of the child or the State has established that she

has abandoned the child. After the infant's release from the hospital,

or in situations not involving hospitalization, States must apply the

AFDC rules for determining whether a child is living with a specified

relative to determine if an infant (who is not an SSI recipient) is a

member of his or her mother's household.

E. Inpatient Services to Infants and Children

Under section 1902(e)(7) of the Act, as added by OBRA '86 and

amended by section 4101(b) of OBRA '87, section 302(e)(2) of MCCA, and

section 6401 of OBRA '89, States must extend Medicaid eligibility to a

low-income infant or child described in section 1902(l) of the Act or a

qualified child described in section 1905(n)(2) of the Act who is

receiving covered inpatient services in a hospital or a long-term care

facility on the date he or she attains the maximum age for Medicaid

eligibility under the State plan until the end of the inpatient stay if

the child or infant remains eligible, except that he or she has

attained that maximum age. This provision applies to the mandatory and

optional categorically needy eligibility groups of low-income infants

and children described under section 1902(l) of the Act. Section 6401

of OBRA '89 extended this provision to the new mandatory categorically

needy group of low-income children age 1 up to age 6 under section

1902(l)(1)(C) and section 4601 of OBRA '90 (by changes to section

1902(l)(1)(D)) to the new mandatory categorically needy group of

children born after September 30, 1983 who have not attained age 19

also. (In addition, section 302(b) of MCCA further clarified this

provision by adding in the matter after paragraph (F) of section

1902(a)(10) a new paragraph (X) to provide that States that impose

durational limits on payments for inpatient hospital services must

establish exceptions to these limits for medically necessary inpatient

services received by an infant up to age 1 in a hospital designated as

a disproportionate share hospital under the State's Medicaid plan.

Regulations to interpret section 302(b) of MCCA are included in a

separate document that is under development.)

We propose to amend Secs. 435.520 and 436.520 to require State

agencies to extend Medicaid eligibility to a low- income infant or

child described in section 1902(1) of the Act and a qualified child

described in section 1905(n)(2) of the Act who are receiving covered

inpatient services on the date they attain the maximum age for Medicaid

eligibility under the State plan until the end of the inpatient stay if

the infant or child remains eligible except for attainment of the

maximum age; and make conforming changes to Secs. 435.500 and 436.500.

F. Low-Income Aged and Disabled Individuals

Section 9402 of OBRA '86 amended the Social Security Act by adding

new sections 1902(a)(10)(A)(ii)(X) and 1902(m) to establish an optional

categorically needy eligibility group of aged and disabled individuals

with incomes at or below the Federal poverty income level. Section

1902(m) of the Act, as added by OBRA '86 and amended by section

4118(p)(8) of OBRA '87 and section 301(e) of MCCA, describes

individuals in this group as those who are 65 years of age or older or

are disabled as determined under SSI, whose income does not exceed a

standard established by the State that is set at a percentage (at or

below 100 percent) of the Federal poverty income level, and whose

resources do not exceed the maximum amount of resources allowed under

SSI. If a State has a medically needy program with a more generous

resource level, section 1902(m)(2)(B) allows a State to elect to use

the medically needy resource level instead of the SSI resource level.

Between July 1, 1987 and June 30, 1989, States were permitted to

provide eligibility to this optional group of low-income aged and

disabled individuals only if they also provided Medicaid eligibility to

the low-income group of pregnant women and infants under the provisions

of section 1902(a)(10)(A)(ii)(IX) as added by section 9401 of OBRA '86

discussed earlier. Section 301(e)(2)(D) of MCCA removed the condition

for providing eligibility to both groups, effective July 1, 1989.

Income eligibility for this optional group of aged and disabled

individuals is based on a standard established at a level that is at or

below 100 percent of the Federal poverty income guidelines for a family

of the size involved. The term ``family of the size involved,'' as used

in section 1902(m)(2)(A), is not specifically defined in the statute.

However, for this optional group of aged and disabled we believe that

it would be appropriate to adopt for individuals and couples who seek

eligibility under section 1902(m) of the Act the SSI program's

distinction between eligible individuals and eligible couples,

depending on whether the individual alone is eligible or both members

of the couple are eligible under section 1902(m). Since the statute

requires that income be determined using the principles of section

1612, which are SSI program rules, using SSI's individual and couple

distinction as well as SSI's deeming rules enables States to have a

clear understanding of the baseline for determining eligibility for

members of this poverty level-related group. It also avoids potential

conflicts with section 1902(a)(17)(D) of the Act, which could result if

eligibility for this group were determined by pooling family income (if

the family included individuals other than a husband and wife).

The SSI program determines eligibility for couples, or for

individuals. If the SSI definition of a couple (i.e., the couple is

married and they qualify for SSI benefits as an eligible couple) is not

met, eligibility is determined on an individual basis. We propose to

apply this principle to determine eligibility for the optional Medicaid

aged and disabled group. If two individuals are married and are both

eligible under section 1902(m), both spouses will be considered a

couple even if only one spouse applied for medical assistance and their

income will be compared to the Federal poverty level for a family of

two. If both individuals in a family are not eligible as a couple under

section 1902(m), their eligibility will be determined as individuals,

with their incomes being compared to the poverty level for an

individual, and deeming of income and resources from responsible family

members using SSI deeming methodologies.

Section 1902(m) of the Act has always specified that resources of

individuals under the low-income optional categorically needy group of

aged and disabled individuals may not exceed the SSI limits, and that

SSI methodologies must be used to determine countable income and

resources. However, section 1902(r)(2) of the Act, as added by section

303(e) of MCCA, does permit States, at their option, to use less

restrictive requirements than SSI for optional categorically needy

groups. However, in spite of section 1902(r)(2), we do not believe that

States are authorized to allow individuals to deduct (spend down) the

costs incurred for medical care or any other type of remedial care from

income in order to meet the income standard established, except as they

are permitted to do so under SSI if the individual is a severely

disabled person who works. This is because section 1902(m)(3)(B) of the

Act specifically prohibits the use of an income spenddown, except in

the case of individuals covered by section 1612(b)(4)(B)(ii) of the

Act. Under this exception, a severely disabled individual who works is

allowed to deduct from income the reasonable costs for attendant care

services, medical devices, equipment, prostheses, and similar items and

services (generally not including routine drugs or routine medical

services) that are necessary in order for the individual to work.

Section 6411(a) of OBRA '89 amended section 1902(f) of the Act to

eliminate the option to use more restrictive eligibility criteria than

are used by the SSI program for certain eligibility groups. One of

those groups is the optional low-income aged and disabled group.

Therefore, section 1902(f) States that elect to cover the section

1902(m) group must use SSI eligibility methodologies, and the

statutorily mandated income and resource standards, in determining

eligibility for individuals under this group. The only exception is

that section 1902(f) States can use more liberal criteria under section

1902(r)(2). (Guam, Puerto Rico, and the Virgin Islands would use the

SSI disability definition under section 1614 of the Act and the

methodologies for determining income and resource eligibility applied

under sections 1612 and 1613, or less restrictive income and resource

methodologies under section 1902(r)(2), as appropriate. This is because

the reference in section 1902(m) relating to disability and financial

methodologies is to those of title XVI (that is, SSI) and not to those

of the State plan program under title XVI.)

Section 4501(e)(1) of OBRA '90 amended section 1905(p)(2) of the

Act by adding paragraph (D) to provide that, in determining income

eligibility for qualified Medicare beneficiaries (QMBs) who are

entitled to monthly title II insurance benefits, any cost-of-living

adjustment (COLA) in these title II benefits received beginning in

December of the preceding year must be disregarded. We will issue a

separate regulation incorporating this provision for QMBs. Section

4501(e)(2) of OBRA '90 made this rule also apply to the income

eligibility determinations of the aged and disabled individuals covered

by section 1902(m).

The disregard applies to all the months from the month the COLA

increase is effective through the month after the month the revised

poverty levels are published each year. Since the new poverty levels

are usually published in February, the disregard normally will be

effective through March of each year.

However, for Medicaid purposes, the new poverty levels are

effective upon publication. This means that, for the period between

publication of the poverty levels (usually mid-February) and the end of

the disregard period (usually March), the disregard of the COLA

increase and the poverty level increase would overlap. As a result of

this overlap, some individuals would meet the income level for this

group because the COLA disregard would lower their countable income at

the same time that the revised poverty level would allow for higher

income. As soon as the COLA disregard expired, these individuals would

lose eligibility again.

We believe that this approach would create an unreasonable

administrative burden for States. They would have to add these

individuals to the Medicaid rolls, only to have to remove them again a

few weeks later. We also believe that the intent of the statutory

provision is to protect individuals who would lose that status for a

few weeks because of the COLA increase (but only until the increase in

the poverty level took effect), and not to permit other individuals to

achieve eligibility status for a few weeks.

For these reasons, we are proposing to make the revised poverty

levels effective for title II recipients with the month after the last

month in which the COLA disregard is effective. Since the COLA

disregard normally expires at the end of March, in most years, the new

poverty levels would be effective for these individuals on April 1. By

delaying the effective date of the increased poverty level so that it

coincides with the date on which the COLA increase is first counted, we

would eliminate the problem discussed above.

Section 9402 of OBRA '86 does not require or permit the different

treatment of income and resources allowed for this low-income aged and

disabled eligibility group to be applied to other Medicaid eligibility

groups because of the comparability provisions of section 1902(a)(17)

of the Act. In addition, we propose to require that if a State elects

to provide Medicaid eligibility to this low-income group, it must cover

both the aged and disabled and must apply the same income and resource

standards to both groups and to all family sizes involved. This

requirement is consistent with the intent of Congress, as expressed in

the language of the House Committee Report accompanying OBRA '86 (H.

Rep. 727, 99th Cong., 2d Sess. 103 (1986)).

Medicaid services provided to the optional group of low-income aged

and disabled individuals must be the same in amount, duration, and

scope as the Medicaid services provided to other categorically needy

individuals under the approved State Medicaid plan.

The amendments made by section 9402 of OBRA '86 apply to payments

to States for services for calendar quarters beginning on or after July

1, 1987, without regard to whether or not final regulations to carry

them out have been published by that date.

We propose to incorporate the provisions of sections

1902(a)(10)(A)(ii)(X) and 1902(m) of the Act and section 9402 of OBRA

'86 in the Medicaid regulations by adding Sec. 435.238 (Sec. 436.235

for the Territories) to specify the optional categorically needy

eligibility group of aged and disabled individuals with incomes at or

below Federal poverty income guidelines and the conditions under which

they may establish eligibility. We also propose to add a new

Secs. 435.615 and 436.615 to specify the requirements for establishing

the income and resource standards and methodologies for this group and

for determining financial eligibility.

G. Presumptive Eligibility for Pregnant Women

Section 9407 of OBRA '86 added a new section 1902(a)(47) to the

Act, redesignated section 1920 as section 1921, and added a new section

1920 to allow States to provide ambulatory prenatal care to certain

needy pregnant women to help ensure that these women receive health

care early in pregnancy. Section 411(k)(16)(B) of the MCCA and section

4605 of OBRA '90 amended section 1920. Under section 1920, ambulatory

prenatal care is available during a presumptive eligibility period on

the basis of income eligibility only before a woman is formally

determined to be eligible or ineligible for Medicaid and for a

specified number of days while a woman is waiting for a Medicaid

eligibility determination. Under the statutory provisions, a qualified

provider, who is defined in section 1920(b)(2), determines whether a

pregnant woman is presumptively eligible for Medicaid. These qualified

providers make the presumptive eligibility determination on the basis

of preliminary information about the pregnant woman's family income.

The qualified provider determines whether the pregnant woman's family

income appears to meet the income criteria applied to any of the

eligibility groups specified in the approved State Medicaid plan under

which the pregnant woman might be eligible. At the time of the

determination, a qualified provider must refer a pregnant woman to the

Medicaid agency. The qualified provider must also assist a pregnant

woman in completing and filing an application for full Medicaid

services if she wishes to apply for Medicaid at that time. The Medicaid

agency then would establish whether or not she is eligible for regular

Medicaid.

Any provider that is eligible for payment under the State plan for

services which the State considers to be ambulatory prenatal care can

furnish these services to presumptively eligible pregnant women during

the presumptive period. (We note that the purpose of presumptive

eligibility is to provide temporary, limited coverage to pregnant women

who are likely to be eligible for Medicaid. Under section 1905(a) of

the Act, individuals who are inmates in public institutions are

ineligible for Medicaid. Therefore, because she is not ``likely to be

eligible for Medicaid,'' any pregnant woman who is an inmate in a

public institution could not be determined presumptively eligible for

Medicaid and receive ambulatory prenatal care under section 1920 of the

Act.)

In accordance with section 1920(b)(1), as added by OBRA '86 and

amended by section 4605 of OBRA '90, the presumptive period of

eligibility for ambulatory prenatal care begins on the day a qualified

provider makes a presumptive eligibility determination. The pregnant

woman then has until the last calendar day of the month following the

month in which the presumptive eligibility determination was made to

file a regular Medicaid application with the Medicaid agency. If she

does not file a regular Medicaid application by that last day,

presumptive eligibility ends on that last day. If she files a regular

Medicaid application, presumptive eligibility under section 1920 ends

on the date a decision is made on the regular Medicaid application.

We are proposing to allow only one presumptive eligibility period

for any one pregnancy. We believe that this limitation is consistent

with the intent of Congress as evidenced in the language of the Senate

Committee Report on OBRA '86 (S. Rep. 348, 99th Cong., 2d Sess. 153

(1986)). In explaining the provision, the Committee stated that under

the presumptive eligibility program, States may ``for any one

pregnancy, grant presumptive eligibility for a period not to exceed * *

*'' (emphasis added). Congress' use of the underscored phrases leads to

the conclusion that only one presumptive period was intended. We

solicit comments on the proposed policy to allow only one presumptive

eligibility period per pregnancy.

The new section 1920 specifies that a presumptive eligibility

determination is to be made if the pregnant woman appears to the

qualified provider, on the basis of preliminary information supplied by

her on family income, to meet the applicable income level of

eligibility only. Resources and other Medicaid eligibility requirements

that would be considered under the approved State plan if the woman

were to apply for regular Medicaid benefits are not considered in

making the presumptive eligibility determination. In addition, section

1920 provides that a determination of presumptive eligibility be based

on ``preliminary information'' about family income. Therefore, a

qualified provider may only request information that is correct based

upon a pregnant woman's best information and belief and may not require

exact information under a penalty of perjury. A State may require that

women reveal what their incomes are or only that their incomes are

below the applicable level.

In implementing the provisions of section 1920 that specify that

presumptive eligibility determinations must be based on family income,

we would require the qualified provider in all cases to apply to the

woman's gross family income the highest, most advantageous income

criteria applicable to the pregnant woman under the approved plan. The

``applicable'' level would usually be the higher of either the poverty

level standard or the medically needy income level (without spenddown).

This means that income disregards are not considered, and in the case

of blind or disabled individuals in section 1902(f) States, or in

States that have a medically needy program, the cost of incurred

medical expenses could not be deducted in order to reduce income to the

allowed income level (spending down). Consideration of disregards and

incurred medical expenses would allow some women to have income above

the ``applicable level'' specified in section 1920(b)(1)(A). We believe

Congress intended by the use of the term ``applicable level'' to

require qualified providers only to make simple calculations and not

complicated adjustments of income such as those involved in applying

spenddown rules or in disregarding certain types of income. To impose

detailed calculations and complicated adjustments on providers would be

administratively burdensome and contrary to efficient administration

because of the short-term nature of the presumptive eligibility status

and because no other eligibility requirements (not even resources) are

considered. We believe that we are not imposing an undue hardship on a

pregnant woman by not allowing spenddown or not disregarding certain

income. If the provider makes a decision that the woman does not

``appear'' to meet the income criteria, the pregnant woman still has

the right to apply for regular Medicaid within a reasonable period of

time and have a formal eligibility determination made. Under a formal

eligibility determination, the agency may find that the pregnant woman

is retroactively eligible for regular Medicaid during the presumptive

period under the authority of section 1902(a)(34) of the Act.

Section 1920(b)(2) of the Act, as added by OBRA '86 and amended by

section 411(k)(16) of MCCA, specifies the qualifications that a

provider must meet in order to be allowed to make presumptive

eligibility determinations. The provider must--

(1) Be eligible to receive payments under Medicaid;

(2) Be an entity that provides services of the following type:

outpatient hospital services as specified in section 1905(a)(2)(A) of

the Act or rural health clinic services and any other ambulatory

services offered by a rural health clinic and otherwise included in the

plan as described in section 1905(a)(2)(B); or be an entity that

provides clinic services by or under the direction of a physician

described in section 1905(a)(9) of the Act;

(3) Be determined by the State agency to be capable of making

presumptive eligibility determinations on the basis of preliminary

information on family income; and

(4) Meet one of the following conditions:

--Be receiving funding from the migrant health centers or community

health centers programs under sections 329, 330, or 340 of the Public

Health Service Act; funding from the maternal and child health services

block grant program under title V of the Social Security Act; or

funding under title V of the Indian Health Care Improvement Act.

--Be participating in the Special Supplemental Food Program for Women,

Infants, and Children established under section 17 of the Child

Nutrition Act of 1966, or in the Commodity Supplemental Food Program

established under section 4(a) of the Agriculture and Consumer

Protection Act of 1973.

--Be participating in a State perinatal program.

--Be the Indian Health Service or a health program or facility operated

by a tribe or tribal organization under the Indian Self-Determination

Act (Pub. L. 93-638).

All providers who meet the criteria listed above must be considered

qualified providers. Therefore, if a State determines that a provider

is not capable of making presumptive eligibility determinations for

pregnant women, that provider would not be considered ``qualified'' to

make these determinations. We would permit States to exclude a provider

that is qualified only under very narrow circumstances; that is, if a

State can demonstrate that there is good cause to exclude the provider.

In addition, we wish to give States maximum flexibility in meeting the

needs of pregnant women and, therefore, propose to allow States to

determine whether a program is a ``State perinatal program.''

In interpreting the provisions of section 1920(b), we would require

States to provide qualified providers with proper screening forms for

pregnant women to request a decision of presumptive eligibility. We

also would require the States to provide instructions to qualified

providers on how to apply the gross income criteria under the various

eligibility groups under the State's approved Medicaid plan and how to

determine the highest income criteria group under which the pregnant

woman is most likely to be eligible if she applies for regular

Medicaid. We are not prescribing the specific content and format of the

screening forms or instructions. However, we expect State instructions

to be in enough detail to allow a qualified provider (based on

preliminary information provided by a pregnant woman) to make

reasonably accurate income eligibility determinations.

In accordance with section 1920(c)(1), we would require State

agencies to furnish qualified providers with regular Medicaid

application forms and train them to assist pregnant women who wish to

apply in completing and filing these forms. As provided by section

1920(c)(3) of the Act as amended by section 4605 of OBRA '90, the

application provided may be an application developed by the State for

use by pregnant women who wish to apply as low-income pregnant women

described in section 1902(l)(1)(A) of the Act.

Section 1920(c)(3) of the Act seems to contemplate an application

for regular Medicaid that is separate from the screening form for

presumptive eligibility for ambulatory prenatal care. We believe the

presumptive eligibility screening form and the regular Medicaid

application can be combined. However, pregnant women cannot be required

to provide all of the information necessary for a full-scale Medicaid

application when applying for only presumptive eligibility. If the

forms are combined, a State agency can offer the pregnant woman the

option to complete the entire application but cannot require that she

do so in order to establish presumptive eligibility. A qualified

provider must make a presumptive eligibility determination once a

pregnant woman has provided information about her family income and

cannot require additional information.

A presumptive eligibility screening form alone cannot be used to

establish a filing date for a regular Medicaid application. If a

combined presumptive eligibility screening form and Medicaid

application is used and the woman chooses to complete the entire

application, the completed application form must be forwarded promptly

to the appropriate State agency for a decision on regular Medicaid

eligibility under the plan once the qualified provider makes a decision

on presumptive eligibility. In this situation, the date the completed

form is received by the State agency is the Medicaid filing date for

Medicaid eligibility. If the woman is determined to be eligible, this

date will determine the beginning of the period in which she qualifies

for the more extensive services under the plan and will establish the

month used to determine the dates of the 3 months of retroactive

eligibility, if the woman would have been eligible during the

retroactive period. Under this latter approach, pregnant women would

not be required to file another application. However, they would not be

exempt from meeting with State agency staff as appropriate or from

providing additional information necessary to determine eligibility

under the plan.

A modified approach under this option would be to have State agency

staff on site at qualified provider locations to supervise or actually

assist pregnant women in completing the application form. In these

cases, the application date for regular Medicaid plan services would be

the date the onsite State agency staff person receives the completed

form. This would result in an earlier Medicaid filing date. However,

even though State agency staff who are working at qualified provider

locations can receive and process applications for regular Medicaid,

they cannot make presumptive eligibility determinations unless they

themselves meet the definition of ``qualified provider'' under section

1920(b)(2).

Since we are considering pregnant women who apply only for

presumptive eligibility for ambulatory prenatal care as requesting to

receive services under a special status (that is, not regular Medicaid

eligibility), we propose not to apply to a decision on presumptive

eligibility the notification requirements that a State must meet when

it makes a decision on a regular Medicaid application. Existing

regulations under Secs. 435.911 and 435.912 and part 431, subpart E,

require Medicaid agencies to notify Medicaid applicants within a

specified period of time of the agency's decision on a regular Medicaid

application, the reasons for the decision, and an explanation of rights

to a hearing if the application is denied. Although we propose not to

apply the requirements of Secs. 435.911 and 435.912 and part 431,

subpart E, to presumptive eligibility decisions, we are proposing to

require that the qualified provider inform a pregnant woman in writing

of the presumptive eligibility decision at the time of the

determination. In the case of a denial of presumptive eligibility, the

qualified provider would be required to inform the woman in writing of

the reason for the denial of this special status and of her right to

apply to the State agency for an eligibility decision for regular

Medicaid.

In accordance with section 1920 of the Act, we propose to require

the qualified provider to inform, in writing, a pregnant woman who is

determined presumptively eligible that she is required to file a

regular Medicaid application by the last day of the month following the

month in which the presumptive determination is made if she wishes to

continue to receive ambulatory prenatal care after that date. The

qualified provider must inform the pregnant woman in writing that if

she does not file her application for regular Medicaid by the last day

of the month following the month in which she was determined

presumptively eligible, her presumptive eligibility will end on that

date. However, if she files within the deadline, she will remain

presumptively eligible until she has a regular Medicaid determination.

Under the provisions of section 1920(c)(2), the qualified provider also

must notify the State agency within 5 working days after the date on

which the provider determines that the pregnant woman is presumptively

eligible.

While the procedures under Secs. 435.911 and 435.912 for notifying

individuals of actions on applications would not apply to presumptive

eligibility decisions for ambulatory prenatal care, they would apply to

regular Medicaid applications filed after the presumptive eligibility

determination is made. Because we do not consider presumptive

eligibility for ambulatory prenatal care to be eligibility for Medicaid

per se, and because termination of ambulatory prenatal care benefits

occurs automatically after specified time periods under section 1920 of

the Act, we also propose not to apply the existing provisions of the

regulations that require Medicaid agencies to provide timely written

notice of reduction or termination of Medicaid benefits and rights to

appeal of an adverse action (part 431, subpart E and Sec. 435.919). As

indicated earlier, we propose to require a qualified provider to

provide written notice of the date a pregnant woman can expect

presumptive eligibility for ambulatory prenatal care to end. However,

we propose not to grant rights to appeal a denial or termination of

ambulatory prenatal care services under a presumptive eligibility

decision. A presumptively eligible pregnant woman who subsequently

files a regular Medicaid application that is denied would have the

right to appeal the denial of her regular Medicaid application.

We do not believe that we are imposing an undue burden on qualified

providers by requiring that notification by a qualified provider be in

writing. We do not foresee that this written notice will be individual

personal letters. We considered requiring States to supply qualified

providers with preprinted notices. However, we decided to allow States

the flexibility to determine how to best arrange for this notification

within each State program. We particularly solicit comments on whether

the requirement that notification by a qualified provider be in writing

imposes an undue hardship on qualified providers.

Existing regulations at Sec. 435.914 permit States to provide

Medicaid for an entire month when an individual is eligible for

Medicaid under the plan at any time during the month. We propose not to

permit States to provide full month eligibility for presumptive

eligibility periods because by definition a presumptive determination

is not a determination of Medicaid eligibility but eligibility for a

special status. Therefore, special status eligibility begins on the

exact date a presumptive eligibility decision is made and ends on the

last day of the month following the month in which the presumptive

decision is made when a Medicaid application has not been filed, or on

the date a formal decision of Medicaid eligibility is made if an

application has been filed. However, full month regular Medicaid

eligibility is available during the approval month of a regular

Medicaid application in States that have elected full month coverage in

their approved State Medicaid plan.

Section 9407 of OBRA '86, as amended by section 411(k)(16) of MCCA,

provides that, for purposes of Federal financial participation,

ambulatory prenatal care services that are covered under the plan, are

furnished by a provider that is eligible for payment under the State

plan, and are furnished to pregnant women during a presumptive period

of eligibility, will be treated as expenditures for medical assistance

under the State plan and thus are regarded as Medicaid plan services.

If the State makes any payments for ambulatory prenatal care furnished

by an eligible provider during the presumptive period for women who are

later determined to be ineligible for Medicaid, these payments will not

be counted in determining a State's excess erroneous payments for

purposes of disallowing Federal financial participation. In general,

Medicaid quality control will not review the accuracy of presumptive

eligibility determinations in terms of predicting a pregnant woman's

eligibility for Medicaid, and any erroneous payments made cannot be

counted in determining the State's erroneous payments for purposes of

quality control eligibility errors. However, quality control will

review claims for services furnished to presumptively eligible pregnant

women to determine whether these claims were, in fact, made for women

who were pregnant and were for ambulatory prenatal services covered

under the State plan, were furnished by a provider that is eligible to

receive payment under the State plan, and were furnished during a

period of presumptive eligibility. There will be situations in which

the services furnished by a qualified provider will include

verification of a woman's pregnancy. The services that are furnished

for verification will be covered as presumptive eligibility services

for FFP purposes only if the woman is actually pregnant. Section 1920

covers only ambulatory prenatal care made available to a pregnant woman

during a specified period. Services furnished to deliver or remove an

embryo/fetus from the mother or furnished following that delivery or

removal will not be covered as presumptive eligibility services for FFP

purposes. That is because, if the embryo/fetus is no longer viable, the

woman is no longer considered to be a pregnant woman. Also, we do not

believe that the services involved in delivering either a viable or

nonviable fetus constitute prenatal services. In addition, any services

furnished following removal or delivery would not be furnished to a

pregnant woman nor would they constitute prenatal care.

We also expect States to monitor decisions made by specific

qualified providers to assure the accuracy and integrity of the

determinations and to take any corrective actions that may be

necessary. Therefore, we are proposing to require States to monitor

presumptive eligibility decisions.

We propose to amend the Medicaid regulations to incorporate the

provisions of section 9407 of OBRA '86, section 411(k)(16) of MCCA, and

section 4605 of OBRA '90 as follows:

Revise Secs. 431.864 and 431.865 to specify that excess

erroneous payments for purposes of disallowance of Federal financial

participation do not include erroneous payments for ambulatory prenatal

care covered under the State plan, and provided to pregnant women

during a presumptive eligibility period by a provider eligible for

Medicaid payments.

Add Secs. 435.250 and 436.250 to specify optional coverage

of pregnant women during a presumptive eligibility period.

Amend Sec. 435.907 to clarify what constitutes a formal

Medicaid application.

Add a new Sec. 435.911 to specify the screening and

application requirements and procedures for making presumptive

eligibility determinations. Existing Secs. 435.911 through 435.914

would be redesignated as Secs. 435.914 through 435.917, respectively,

to allow the incorporation of the new Sec. 435.911.

Add a new Sec. 435.912 to specify the application

requirements for pregnant women following the presumptive eligibility

determination.

Amend Secs. 435.1001 and 436.1001 to clarify that FFP is

available in the necessary administrative costs the State incurs in

determining presumptive eligibility for pregnant women and in providing

ambulatory prenatal care to presumptively eligible women.

Revise Sec. 440.1 to add the statutory basis for providing

ambulatory prenatal care to pregnant women during a presumptive

eligibility period.

Add Sec. 440.172 to define ambulatory prenatal care and

qualified provider.

Add Sec. 447.85 to specify the availability of Federal

financial participation for payments for ambulatory prenatal care.

H. Enhancement of Pregnancy Outcomes

As we have discussed earlier in two sections of this document,

Congress has expanded mandatory and optional Medicaid eligibility for

pregnant women as part of an overall effort to combat the problem of

infant mortality and incidences of low-birth weight through provision

of needed health services to low-income pregnant women. In addition, we

believe that we must focus State attention on the need for special

vigilance in cases of high-risk pregnancy in order to maximize the cost

effectiveness of the increased Medicaid investments. Examples of high-

risk pregnancies include those in which the women have a complicating

medical condition, complications that may result from genetic factors,

or a history of adverse pregnancy outcomes. There is much evidence that

many adverse birth outcomes are preventible through timely and

appropriate intervention by health and social services agencies, with

the potential for reducing infant mortality, the use of high-cost

neonatal intensive care services, and the incidence of long-term care

services associated with extended or lifelong disabilities.

We propose to add Sec. 435.935 to the Medicaid regulations to

require States to define a high-risk pregnancy, to describe the methods

they will apply to identify high-risk pregnant women, and to specify

steps that individuals, groups, and organizations involved in the

service delivery system will take to ensure that these women will

receive services designed to enhance pregnancy outcomes for both the

mother and the child. The purpose of defining these terms is to assist

States in their efforts to see that pregnant Medicaid recipients

receive the full range of medical and related services appropriate to

their risk status.

We are proposing to impose these requirements on States under the

authority of sections 1902(a) (4) and (19) of the Act. These

provisions, respectively, require that the Medicaid State plan provide

for such methods of administration as are found necessary by the

Secretary for the proper and efficient operation of the plan, and

provide such safeguards as may be necessary to assure that eligibility

for care and services under the plan will be determined, and the care

and services will be provided in a manner consistent with simplicity of

administration and the best interests of recipients.

We specially solicit comment on the proposal to require States to

target potentially high risk pregnant women. Moreover, we are

interested in comments on the effectiveness of a State plan amendment

to achieve this goal.

I. Clarification of Medicaid to Homeless Individuals

Section 9405 of OBRA '86 revised section 1902(b)(2) of the Act to

prohibit States from imposing any residence requirement that excludes

from Medicaid an otherwise eligible individual who resides in the

State, but does not maintain a residence permanently or at a fixed

address. Before this provision was enacted, some States were requiring

applicants for Medicaid to furnish a fixed address or evidence of a

permanent residence in order to qualify for Medicaid, even though this

was not a Federal requirement. In addition, section 11005 of the

Homeless Eligibility Clarification Act added section 1902(a)(48) to the

Act to require, as a State plan requirement, that States establish a

method for making Medicaid eligibility cards available to an eligible

individual who does not reside in a permanent dwelling or at a fixed

address. This provision was effective on January 1, 1987.

In the interest of affording States maximum flexibility in the

administration of their Medicaid programs, we are not proposing to

impose a specific method to be used to issue Medicaid eligibility cards

to homeless individuals. However, the State would be required to

describe the method in its State plan. The method, as part of the State

plan, would be subject to approval by HCFA. HCFA will approve any

reasonable method that ensures the timely issuance of cards and receipt

of Medicaid and that does not impose an undue hardship on the homeless

individual.

We propose to--

Amend Secs. 435.403 and 436.403 to add the prohibition

against requiring otherwise eligible homeless individuals to have a

fixed address or reside in a permanent dwelling.

Add a new Sec. 435.932 to specify the State plan

requirement that a State must establish and specify a method for

issuing Medicaid eligibility cards to homeless individuals.

III. Response to Public Comments

Because of the large volume of public comments that we usually

receive on notices of proposed rulemaking, we cannot acknowledge or

respond to them individually. However, we will address all public

comments received on this document in the preamble to the document in

which these proposed regulations are issued in final form.

IV. Paperwork Burden

Sections 435.612(f), 435.615(e), 435.907, 435.911, 435.918,

435.932, 435.935, 436.612(e), 436.615(e), 447.51, and 447.60 contain

information collection and reporting requirements that are subject to

review by the Office of Management and Budget under the requirements of

the Paperwork Reduction Act (44 U.S.C. chapter 35). We have submitted

these proposed regulations to OMB for review. The reporting burden for

this collection of information is estimated to be 6 hours per response.

A notice will be published in the Federal Register when approval is

obtained. Comments regarding the burden estimate or any other aspect of

information collection must be addressed to the specified office

indicated under the ``ADDRESSES'' section of this preamble.

V. Regulatory Analysis

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 proposed regulation

would not have a significant economic impact on a substantial number of

small entities. For purposes of RFA, we consider all providers and

suppliers of health care as small entities. Individuals and States are

not included in the definition of a small entity. We are not preparing

a RFA because we have determined, and the Secretary certifies, that

this proposed regulation would not have a significant economic impact

on a substantial number of providers and suppliers.

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

a regulatory impact analysis if a proposed rule may have a significant

impact on the operations of a substantial number of small rural

hospitals. Such an analysis must conform to the provisions of section

603 of the RFA. For purposes of section 1102(b) of the Act, we define a

small rural hospital as a hospital which is located outside a

Metropolitan Statistical Area and has fewer than 50 beds. We are not

preparing a rural hospital impact statement because we have determined,

and the Secretary certifies, that this proposed regulation would not

have a significant economic impact on the operations of a substantial

number of small rural hospitals.

Although this proposed rule is not an ``economically significant''

rule under Executive Order 12866, the statutory changes which are the

basis of this proposed rule, are substantial. We present below a

voluntary anaylsis of these effects.

This proposed rule would incorporate in regulations, and in some

cases interpret, statutory changes that are already in effect. In cases

where it was necessary to provide interpretation, we have relied on the

legislative history of the statutory provisions, when available, for

the best reading of the provision. The statutory provisions are

effective on the statutorily established date, regardless of whether or

not we have issued final regulations. The statutory changes that expand

eligibility groups and coverage of services will increase Medicaid

program expenditures independently of the promulgation of this rule.

Costs associated with these proposed regulations are the result of

legislation or due to the interpretation of statutory changes already

in effect. Therefore, these costs have been included in the Medicaid

budget estimates.

It is difficult to predict what the fiscal impact will be since

several provisions provide Medicaid coverage to certain groups at the

option of States. Another unknown factor is the additional number of

pregnant women, infants, and children and disabled, elderly, and

homeless individuals who will be offered services that previously were

not covered by the States and the type and cost of these specific

services. We know costs for States will rise as they begin to furnish

the additional services that will be required if medically necessary.

The following data reflects our estimate of medical costs attributable

to expansion of services under the Omnibus Budget Reconciliation Act of

1987, Public Law 100-203; the Medicare Catastrophic Coverage Act of

1988, Public Law 100-360; the Family Support Act of 1988, Public Law

100-485; the Omnibus Budget Reconciliation Act of 1989, Public Law 101-

239; and the Omnibus Budget Reconciliation Act of 1990, Public Law 101-

508. The following estimates are based on data from the census, current

population survey, and average cost using Medicaid data:

Estimated Federal Costs

[Dollars in millions]

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

Law Provisions FY93 FY94 FY95 FY96

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

OBRA-86.......................... MCH*............................. $250 $285 $325 $370

eld/disab**...................... 245 295 355 425

OBRA-87.......................... MCH.............................. 380 440 510 590

OBRA-88.......................... MCH.............................. 165 180 195 210

OBRA-89.......................... MCH.............................. 335 355 380 405

OBRA-90.......................... MCH.............................. 280 415 565 730

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

Totals....................... ................................. 1655 1970 2330 2730

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

Estimated State Costs

[Dollars in millions]

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

Law Provisions FY93 FY94 FY95 FY96

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

OBRA-86.......................... MCH*............................. $190 $215 $245 $280

eld/disab**...................... 185 220 265 320

OBRA-87.......................... MCH.............................. 285 330 380 445

OBRA-88.......................... MCH.............................. 125 135 145 160

OBRA-89.......................... MCH.............................. 250 265 285 305

OBRA-90.......................... MCH.............................. 210 310 425 550

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

Totals....................... ................................. 1245 1475 1745 2060

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

*MCH--Maternal/Child Health

**eld/disab--elderly/disabled

Several alternatives were considered in the development of these

proposed regulations and are discussed in detail earlier in the

preamble: Two of the more significant ones involve continuous

eligibility of pregnant women and deemed newborn eligibility under

sections II. B and II. D, respectively, of the preamble. Our proposed

interpretation of the statutory provisions relating to these two areas

would have minimal cost effects and will probably save money through

better management of high risk pregnancies. At most, the proposed

interpretation of the provision relating to continuous eligibility of

newborn children would cost $10 million, a very small addition to the

statutory costs included in the above tables. However, we believe that

most States have already adopted our proposed interpretation as

practice.

In accordance with the provisions of Executive Order 12866, this

proposed regulation was reviewed by the Office of Management and

Budget.

List of Subjects

42 CFR Part 431

Grant programs--health, Health facilities, Medicaid, Reporting and

recordkeeping requirements.

42 CFR Part 435

Aid to Families with Dependent Children, Grant program--health,

Medicaid, Supplemental Security Income (SSI).

42 CFR Part 436

Aid to Families with Dependent Children, Grant programs--health,

Guam, Medicaid, Puerto Rico, Supplemental Security Income (SSI), Virgin

Islands.

42 CFR Part 440

Grant programs--health, Medicaid.

42 CFR Part 447

Accounting, Administrative practice and procedure, Grant programs--

health, Health facilities, Health professions, Medicaid, Reporting and

recordkeeping requirements, Rural areas.

42 CFR chapter IV would be amended as set forth below:

Subchapter C--Medical Assistance Programs

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

A. Part 431 is amended as follows:

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. A new Sec. 431.60 is added to subpart B to read as follows:

Sec. 431.60 Maintenance of AFDC efforts.

Effective July 1, 1989, HCFA will not approve any State plan for

Medicaid if the State has in effect, under its approved AFDC plan,

payment levels (that is, the amount of the AFDC payment for basic needs

made to a family with no other income) that are less than its AFDC

payment levels in effect on May 1, 1988. However, HCFA will continue to

approve amendments to a State plan under these conditions.

3. Section 431.201 is amended by revising the definition of

``action'' to read as follows:

Sec. 431.201 Definitions.

* * * * *

Action means a termination, suspension, or reduction of Medicaid

eligibility or covered services. It does not include a denial of

presumptive eligibility for ambulatory prenatal care for a pregnant

woman or a termination of presumptive eligibility at the end of the

specified period under Sec. 435.911 of this subchapter.

* * * * *

4. In Sec. 431.864, the introductory text of paragraph (b) is

republished and the definition of ``erroneous payments'' under

paragraph (b) is revised to read as follows:

Sec. 431.864 Disallowance of Federal financial participation for

erroneous State payments (effective January 1, 1984 through June 30,

1990).

* * * * *

(b) Definitions. For purposes of this section--

* * * * *

Erroneous payment means the Medicaid payment that was made for an

individual or family under review who--

(1) Was ineligible for the review month or, if full month coverage

is not provided, at the time services were received;

(2) Was ineligible to receive a service provided during the review

month; or

(3) Had not properly met beneficiary liability prior to receiving

Medicaid services.

Effective April 1, 1987, the term does not include erroneous payments

made for ambulatory prenatal care that is included in the care and

services covered under the State plan and furnished to pregnant women

by providers that are eligible to receive payments under the State plan

during a presumptive eligibility period as defined in

Sec. 435.911(e)(2) of this subchapter.

* * * * *

5. In Sec. 431.865, the introductory text of paragraph (b) is

republished and the definition of ``erroneous payments'' under

paragraph (b) is revised to read as follows:

Sec. 431.865 Disallowance of Federal financial participation for

erroneous State payments (for annual assessment periods ending after

July 1, 1990).

* * * * *

(b) Definitions. For purposes of this section--

* * * * *

Erroneous payment means the Medicaid payment that was made for an

individual or family under review who--

(1) Was ineligible for the review month or, if full month coverage

is not provided, at the time services were rendered;

(2) Was ineligible to receive a service provided during the review

month; or

(3) Had not properly met beneficiary liability prior to receiving

Medicaid services.

The term does not include erroneous payments made for ambulatory

prenatal care that is included in the care and services covered under

the State plan and furnished to pregnant women by providers that are

eligible to receive payments under the State plan during a presumptive

eligibility period as defined in Sec. 435.911(e)(2) of this subchapter.

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE

NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

B. Part 435 is amended as follows:

l. The authority citation for part 435 continues to read as

follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.

1302).

2. The heading of subpart B is revised to read as follows:

Subpart B--Mandatory Coverage of the Categorically Needy and Special

Groups

3. In Sec. 435.3, paragraph (a) introductory text is republished

and several entries are added in numerical order to read as follows:

Sec. 435.3 Basis.

(a) This part interprets the following sections of the Act and

public laws which state eligibility requirements and standards:

* * * * *

1902(c)--Conditions of State plan approval--States must maintain

AFDC payment levels and not require that section 1902(l) low-income

pregnant women, infants, and children apply for AFDC benefits.

* * * * *

1902(e)(6)--Mandatory continuation of Medicaid for pregnant women

without consideration of changes in income up to specified periods

after pregnancy ends.

1902(e)(7)--Continuation of Medicaid eligibility for certain

infants and children receiving inpatient care.

* * * * *

1902(l)--Description of eligible pregnant women, infants, and

children with incomes related to Federal poverty income level.

1902(m)--Description of eligible aged and disabled individuals with

incomes at or below Federal poverty income level.

1902(r)(2)--Use of less restrictive income and resource

methodologies than those for cash assistance programs in determining

financial eligibility of specified categorically needy and medically

needy groups.

* * * * *

1920--Optional presumptive eligibility period for pregnant women.

* * * * *

4. In Sec. 435.116, paragraph (c) introductory text is republished

and paragraphs (c) (1) and (2) are revised to read as follows:

Sec. 435.116 Qualified pregnant women and children who are not

qualified family members.

* * * * *

(c) The agency must provide Medicaid to children who meet all of

the following criteria:

(1) They are born after September 30, 1983, or at State option, an

earlier designated date;

(2) They are under 19 years of age; and

* * * * *

5. Section 435.117 is revised to read as follows:

Sec. 435.117 Newborn children.

(a) The agency must provide categorically needy Medicaid

eligibility to a child born to a woman who is eligible as categorically

needy and is receiving Medicaid on the date of the child's birth. The

child is deemed to have applied and been found eligible for Medicaid on

the date of birth and remains eligible as categorically needy for one

year so long as the woman remains eligible or (with respect to infants

born on or after January 1, 1991) would have remained eligible if still

pregnant and the child is a member of the woman's household. If the

mother's basis of eligibility changes to medically needy, the child is

eligible as medically needy under Sec. 435.301(b)(1)(iii).

(b) An infant is considered to be a member of his or her mother's

household for so long as he or she is continuously hospitalized after

birth, unless the mother has legally relinquished control of the child

or the State has established that she has abandoned the child. After

the infant's release from the hospital, or in situations not involving

hospitalization, States must apply the AFDC rules to determine if an

infant (who is not an SSI beneficiary) is a member of his or her

mother's household.

6. The undesignated center heading ``Mandatory Coverage of Pregnant

Women, Children Under 8, and Newborn Children'' appearing before

Sec. 435.116 is revised and a new Sec. 435.118 is added to read as

follows:

Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn

Children

Sec. 435.118 Pregnant women, infants, and children with family incomes

at a percentage of the Federal poverty income guidelines.

(a) Pregnant women and infants. The agency must provide Medicaid to

pregnant women and women during the 60-day period beginning on the last

day of pregnancy, subject to the limits in Sec. 440.250(q), and to

infants under one year of age who meet the following criteria:

(1) Effective April 1, 1990, they have family income, established

in accordance with Sec. 435.610, that does not exceed 133 percent of

the Federal poverty income guidelines for a family of the size

involved, unless, as of December 19, 1989, the agency had elected to

apply a higher percentage (or percentages) in determining eligibility

for the optional categorically needy groups of low-income pregnant

women and infants described under Sec. 435.228. If the agency had

elected a percentage or percentages greater than 133 percent but no

more than 185 percent for either pregnant women or infants under

Sec. 435.228 or both, the percentage or percentages applicable under

paragraph (a)(1) of this section must be the percentage or percentages

that the agency specified in that election in--

(i) The approved State plan;

(ii) A State plan amendment submitted as of December 19, 1989,

whether approved or not; or

(iii) State legislation enacted or State appropriations made as of

December 19, 1989.

(2) At State option, they have resources that do not exceed

standards, established in accordance with Sec. 435.610, that are no

more restrictive than the SSI standard for pregnant women and no more

restrictive than the AFDC standard for infants under one year of age.

(b) Eligibility period for women and infants. The agency must

provide Medicaid to--

(1) Women described in paragraph (a) of this section, as long as

they continue to meet the criteria described in paragraph (a) of this

section, during their pregnancy and during a post partum period that

begins on the last day of the pregnancy and continues for 60 days.

Sections 435.170 and 435.918(c)(2) may also apply to these women.

(2) Infants described in paragraph (a) of this section, as long as

they continue to meet the criteria described in paragraph (a) of this

section, until they reach age 1, except as provided in Sec. 435.520(b).

Section 435.117 may also apply to these infants.

(c) Children age 1 up to age 6. The agency must provide Medicaid to

children who are age 1 but have not attained age 6 who meet the

following criteria:

(1) Effective April 1, 1990, they have family income, established

in accordance with Sec. 435.610, that does not exceed 133 percent of

the Federal poverty income guidelines for a family of the size

involved; and

(2) At State option, they have resources that do not exceed a

standard, established in accordance with Sec. 435.610, that is no more

restrictive than the AFDC standard.

(d) Eligibility period for children up to age 6. The agency must

provide Medicaid to children described in paragraph (c) of this

section, as long as they continue to meet the criteria described in

paragraph (c) of this section, until they reach age 6, except as

provided in Sec. 435.520(b).

(e) Children age 6 up to age 19. The agency must provide Medicaid

to children born after September 30, 1983, who have attained age 6 but

have not attained age 19 who meet the following criteria:

(1) Effective July 1, 1991, they have family income, established in

accordance with Sec. 435.610, that does not exceed 100 percent of the

Federal poverty income guidelines for a family of the size involved;

and

(2) At State option, they have resources that do not exceed a

standard, established in accordance with Sec. 435.610, that is no more

restrictive than the AFDC standard.

(f) Eligibility period for children age 6 up to age 19. The agency

must provide Medicaid to children described in paragraph (e) of this

section, as long as they continue to meet the criteria described in

paragraph (e) of this section, until they reach age 19, except as

provided in Sec. 435.520(b).

(g) States with section 1115 waivers. The 50 States and the

District of Columbia must provide Medicaid to individuals described in

paragraphs (a) through (e) of this section, regardless of whether or

not they operate their Medicaid programs under waivers granted under

section 1115 of the Act.

(h) Application of rules to Northern Mariana Islands and American

Samoa. The rules specified in this section do not apply in the Northern

Mariana Islands and American Samoa. In these two Territories, the rules

for optional coverage of individuals specified in Sec. 436.226 apply.

7. The heading of subpart C is revised to read as follows:

Subpart C--Options for Coverage of Individuals as Categorically Needy

and As Special Groups

8. A new Sec. 435.228 is added under the undesignated center

heading ``Options for Coverage of Families and Children'' under subpart

C to read as follows:

Sec. 435.228 Pregnant women and infants with family incomes at a

percentage of Federal poverty income guidelines.

(a) Subject to the conditions specified in paragraphs (b) and (c)

of this section, effective April 1, 1990, the agency may provide

Medicaid to any of the following groups of individuals who are not

otherwise eligible as mandatory categorically needy:

(1) Pregnant women and women during the 60-day period beginning on

the last day of pregnancy with family incomes that are above 133

percent (or any higher percent applicable under Sec. 435.118), but no

more than 185 percent of the Federal poverty income guidelines for a

family of the size involved; and

(2) Infants under 1 year of age with family incomes that are above

133 percent (or any higher percentage applicable under Sec. 435.118),

but no more than 185 percent, of the Federal poverty income guidelines

for a family of the size involved.

(b) Individuals described in paragraph (a) of this section are

eligible if--

(1) Their family income meets the applicable standard in

Sec. 435.612(c); and

(2) At State option, their resources meet the applicable standard

in Sec. 435.612(d).

(c) If the agency chooses to provide Medicaid to pregnant women

specified in paragraph (a)(1) of this section, it must cover the women,

as long as they continue to meet the criteria described in paragraph

(b) of this section, during the pregnancy and during the 60-day period

after the pregnancy ends. Sections 435.170 and 435.918(c)(2) may also

apply to these women. Services for these women are limited to services

specified in Sec. 440.250(q) of this subchapter.

(d) If the agency chooses to provide Medicaid to infants described

in paragraph (a)(2) of this section, it must cover the infants, as long

as they continue to meet the criteria described in paragraph (b) of

this section, until they reach age 1, except as provided in

Sec. 435.520(b). Section 435.117 may also apply to these infants.

9. A new Sec. 435.238 is added under the undesignated center

heading ``Options for Coverage of the Aged, Blind, and Disabled'' under

subpart C to read as follows:

Sec. 435.238 Aged and disabled individuals with incomes at or below

Federal poverty income guidelines.

(a) The agency may provide Medicaid to individuals who are not

eligible as mandatory categorically needy and who--

(1) Are 65 years of age or older; or are disabled as determined

under SSI;

(2) Have family income that meets a standard established by the

State at a level that is no more than 100 percent of the Federal

poverty income level in accordance with Sec. 435.615(b); and

(3) Have resources that meet the standard established in accordance

with Sec. 435.615(c).

(b) An agency that elects the option under paragraph (a) of this

section must provide Medicaid to both aged and disabled groups of

individuals.

10. A new undesignated center heading and Sec. 435.250 are added at

the end of subpart C to read as follows:

Option for Coverage of Special Groups

Sec. 435.250 Pregnant women eligible for a presumptive eligibility

period.

(a) The agency may provide pregnant women with eligibility for

ambulatory prenatal care services based on a presumptive eligibility

determination made by a qualified provider if--

(1) The woman's estimated gross family income appears to meet the

highest applicable income criteria under the State plan that are most

likely to be used if the woman applied for regular Medicaid;

(2) The provider making the determination meets the requirements of

Sec. 440.172(c) of this subchapter; and

(3) The agency has established procedures to ensure that the

screening and application requirements and procedures of Sec. 435.911

of subpart J of this part are met.

(b) Pregnant women who are determined eligible for ambulatory

prenatal care services under this section are eligible during a

presumptive period in accordance with Sec. 435.911.

11. In Sec. 435.301, paragraphs (b) introductory text and (b)(1)

introductory text are republished and paragraph (b)(1)(iii) is revised

to read as follows:

Sec. 435.301 General rules.

* * * * *

(b) If the agency chooses this option, the following provisions

apply:

(1) The agency must provide Medicaid to the following individuals

who meet the requirements of paragraph (a) of this section:

* * * * *

(iii) All newborn children born to a woman who is eligible as

medically needy and is receiving Medicaid on the date of the child's

birth. The child is deemed to have applied and been found eligible for

Medicaid on the date of birth and remains eligible as medically needy

for one year so long as the woman remains eligible or (with respect to

infants born on or after January 1, 1991) would have remained eligible

if still pregnant and the child is a member of the woman's household

(as determined in accordance with Sec. 435.117(b)). If the woman's

basis of eligibility changes to categorically needy, the child is

eligible as categorically needy under Sec. 435.117.

* * * * *

12. Section 435.403 is amended by redesignating paragraphs (j) (1),

(2), and (3) as paragraphs (j) (2), (3), and (4), respectively, and

adding a new paragraph (j)(1) to read as follows:

Sec. 435.403 State residence.

* * * * *

(j) Specific prohibitions.

(1) The agency may not deny Medicaid eligibility to an otherwise

qualified resident of the State because the individual's residence is

not maintained permanently or at a fixed address.

* * * * *

13. Section 435.500 is revised to read as follows:

Sec. 435.500 Scope.

This subpart prescribes categorical requirements for determining

the eligibility and continuing eligibility of both categorically and

medically needy individuals specified in subparts B, C, and D of this

part.

14. Section 435.520 is revised to read as follows:

Sec. 435.520 Age requirements for the aged and children.

(a) In determining or redetermining eligibility, the agency must

not impose an age requirement of more than 65 years.

(b) The agency must continue eligibility until the end of the

inpatient stay for infants and children who are eligible under

Sec. 435.116, 435.118, or 435.228, who are receiving covered inpatient

services on the date they reach the age limit for inclusion under the

State plan, and who would remain eligible under Sec. 435.116, 435.118,

or 435.228 but for attainment of that maximum age.

* * * * *

15. The heading of subpart G is revised to read as follows:

Subpart G--General Financial Eligibility Requirements and Options

for the Categorically Needy and Special Groups

16. Section 435.601 (as published on January 19, 1993 (58 FR 4929))

is amended by revising paragraph (b) and paragraph (d)(1)(ii) (the text

of paragraph (d)(1) introductory text is republished) to read as

follows:

Sec. 435.601 Application of financial eligibility methodologies.

* * * * *

(b) Basic rule for use of cash assistance methodologies. Except as

specified in paragraphs (c), (d), and (e) of this section and in

Secs. 435.121, 435.610, and 435.615, in determining financial

eligibility of individuals as categorically and medically needy, the

agency must apply the financial methodologies and requirements of the

cash assistance program that is most closely categorically related to

the individual's status.

* * * * *

(d) Use of less restrictive methodologies than those under cash

assistance programs.

(1) At State option, and subject to the conditions of paragraphs

(d)(2) through (d)(5) of this section, the agency may apply income and

resource methodologies that are less restrictive than the cash

assistance methodologies in determining eligibility of the following

groups:

* * * * *

(ii) Low-income pregnant women, infants, and children under

Secs. 435.118 and 435.228 and in section 1902(a)(10)(A)(i)(IV), section

1902(a)(10)(A)(i)(VI), section 1902(a)(10)(A)(i)(VII), and section

1902(a)(10)(A)(ii)(IX) of the Act;

* * * * *

17. Section 435.608 is amended by adding a new paragraph (c) to

read as follows:

Sec. 435.608 Applications for other benefits.

* * * * *

(c) The agency may not require any pregnant woman, infant, or child

eligible under Sec. 435.118 or Sec. 435.228 to apply for AFDC benefits

as a condition of applying for or receiving Medicaid.

18. A new Sec. 435.612 is added under subpart G to read as follows:

Sec. 435.612 Income and resource standards and methodologies: Pregnant

women, infants, and children with family incomes at a percentage of

Federal poverty income guidelines.

(a) General rules.

(1) The agency must determine income and resource eligibility of

women, infants, and children under Secs. 435.118 and 435.228 in

accordance with the requirements of this section.

(2) For purposes of this section, family size includes the unborn

child and other members of the Medicaid budgetary unit.

(b) Establishing the income standard: mandatory groups. (1) For

mandatory groups of low-income pregnant women, infants under age 1, and

children age 1 up to age 6 under Sec. 435.118, the agency must

establish and apply an income standard, based on family size, at a

level that is 133 percent of the Federal poverty income guidelines for

a family of the size involved, unless it is required to establish a

higher level (not to exceed 185 percent) by virtue of

Sec. 435.118(a)(1).

(2) For the mandatory group of low-income children age 6 up to age

19 under Sec. 435.118, the agency must establish and apply an income

standard, based on family size, at a level that is 100 percent of the

Federal poverty income guidelines for a family of the size involved.

(c) Establishing the income standard: optional groups. (1) For

optional groups of pregnant women and infants under Sec. 435.228, the

agency may establish separate income standards or use a single income

standard.

(2) The standards must be based on family size, at a level that

is--

(i) For pregnant women, above 133 percent and no more than 185

percent of the Federal poverty income guidelines for a family of the

size involved; and

(ii) For infants up to 1 year of age, above 133 percent and no more

than 185 percent of the Federal poverty income guidelines for a family

of the size involved.

(d) Establishing the resource standard. At State option, the agency

may apply resource standards in determining financial eligibility that

are no more restrictive than the SSI standard for pregnant women, and

no more restrictive than the AFDC standard for infants and children.

(e) Methodologies for determining income and resources. (1) Except

as specified in paragraphs (e)(2) through (5) of this section, in

determining family income and resources, the agency must use the

methodologies established in accordance with Sec. 435.601.

(2) In determining family income, the agency must use the income

methodologies of the approved AFDC plan or the State's title IV-E

adoption assistance and foster care plan as appropriate, or it may

instead use any less restrictive methodologies specified in the State

plan which conform with Sec. 435.601(d). Methodologies include, but are

not limited to, those used for disregarding income.

(3) In determining countable income, the agency may not deduct

costs incurred for medical care or any other type of remedial care to

reduce income to the level of the standard established.

(4) The resource methodologies used in determining financial

eligibility of pregnant women must not be more restrictive than the

methodologies applied under SSI. The resource methodologies used in

determining financial eligibility of infants and children must not be

more restrictive than the methodologies applied under the State's

approved AFDC plan.

(5) In determining the financial responsibility of relatives, the

State must use the requirements of Sec. 435.602.

(f) State plan requirements. The State plan must--

(1) Specify the income standards; and

(2) If the State elects to apply resource standards, specify those

resource standards.

19. A new Sec. 435.615 is added to subpart G to read as follows:

Sec. 435.615 Income and resource standards and methodologies: Aged and

disabled individuals with incomes at or below Federal poverty income

guidelines.

(a) General rule. If the agency provides Medicaid to aged and

disabled individuals under Sec. 435.238, it must determine financial

eligibility in accordance with the requirements of this section.

(b) Establishing the income standard. (1) The agency must establish

and apply an income standard at a level that does not exceed 100

percent of the Federal poverty income guidelines applicable to a family

of the size involved.

(2) For purposes of this section, ``family of the size involved''

is based on the SSI concept of eligibility for an individual as an

individual or as part of a couple. If two individuals in a family are

married and eligible under section 1902(m), their income will be

compared to the Federal poverty income level for a family of two. In

all other situations, eligibility will be determined on an individual

basis, using the poverty level for one, with deeming of income as

appropriate (under SSI deeming rules that do not conflict with title

XIX of the Act).

(c) Establishing the resource standard. The agency must establish

and apply a resource standard that is either--

(1) The SSI resource standard; or

(2) If the State has a medically needy program that uses a higher

resource standard, at State option, the resource standard applied to

the medically needy.

(d) Methodologies for determining income and resources. (1) Subject

to the provisions of paragraph (d) (2) through (4) of this section, in

determining financial eligibility, the agency must use the income and

resource methodologies applied under SSI, or it may instead use any

less restrictive income and resource methodologies than SSI as

specified in the approved State plan in accordance with Sec. 435.601.

(2) The agency may not deduct from income the costs incurred for

medical care or any other type of remedial care in order to reduce the

individual's income to the established income standard, except as

specified in paragraph (d)(3) of this section.

(3) For severely disabled individuals who work, the agency may

deduct the reasonable costs for attendant care services, medical

devices, equipment, prostheses, and similar items and services

(generally not including routine drugs or routine medical services)

that are necessary in order for the individual to work.

(4) In determining the financial responsibility of relatives, the

State must use the requirements of Sec. 435.602.

(5) In determining eligibility under this section for an individual

entitled to monthly social security cash benefits, Title II COLA

increases must be disregarded from December of each year through the

month after the month in which the Federal poverty guideline for the

next year is published. During that period, the poverty level for the

previous year will be used for these individuals.

(e) State plan requirement. The State plan must specify the income

standard and the resource standard by the family size involved.

20. The heading of subpart J and Sec. 435.907 are revised to read

as follows:

Subpart J--Eligibility in the States, the District of Columbia, the

Northern Mariana Islands, and American Samoa

Sec. 435.907 Written application.

(a) The agency must require a written application from the

applicant, an authorized representative, or, if the applicant is

incompetent or incapacitated, someone acting responsibly for the

applicant.

(b) The application must be on a form prescribed by the agency and

signed under a penalty of perjury.

(c) [Reserved]

(d) The application form must solicit sufficient information to

allow the agency to reasonably make a decision of eligibility or

ineligibility.

Sec. 435.916 [Redesignated]

20a. Section 435.916 is redesignated as Sec. 435.918 under the

undesignated center heading ``Redeterminations of Medicaid

Eligibility''.

21. Sections 435.911, 435.912, 435.913, and 435.914 are

redesignated as Secs. 435.914, 435.915, 435.916, and 435.917,

respectively, and new Secs. 435.911 and 435.912 are added under the

undesignated center heading ``Application'' under subpart J to read as

follows:

Sec. 435.911 Screening and application procedures for pregnant women

for presumptive eligibility determinations.

(a) If the agency elects to provide presumptive Medicaid

eligibility for pregnant women under the provisions of Sec. 435.250,

the requirements and conditions under paragraphs (b) through (e) of

this section must be met.

(b) A pregnant woman may be determined eligible for only one

presumptive eligibility period during any one pregnancy.

(c) The presumptive eligibility determination must be made by a

qualified provider who meets the requirements of Sec. 440.172(c) of

this subchapter.

(d) The agency must provide qualified providers with--

(1) Screening forms and guidelines for determining presumptive

eligibility under the plan and the eligibility group under which a

pregnant woman is most likely to be eligible under regular Medicaid if

she applies.

(2) Information on how to assist a pregnant woman in completing and

filing the screening form for presumptive eligibility for ambulatory

prenatal care services available to eligible pregnant women.

(3) Application forms for Medicaid under the plan, which forms may

be those developed for use by women described in section 1902(l)(1)(A)

of the Act, and instructions on how to help women complete and file

these forms.

(e) The agency must establish procedures to ensure that qualified

providers--

(1) Notify the agency in writing that a pregnant woman is

presumptively eligible within 5 working days after the date the

determination is made;

(2) Inform the woman in writing at the time the determination is

made that she has until the last day of the month following the month

in which the determination is made to file a Medicaid application if

she wishes to continue her presumptive eligibility beyond that date.

Providers also must inform the woman that if she files a Medicaid

application by that date, her presumptive eligibility will end on the

day a decision is made on her Medicaid application.

(3) In writing, inform any pregnant woman who is determined not

presumptively eligible of the reason why she was determined ineligible

and that she may file a Medicaid application with the agency if she

wishes to have a determination made on a regular Medicaid application.

A determination of ineligibility for ambulatory prenatal care is not

subject to appeal under part 431 of this subchapter.

(f) The agency must establish methods for monitoring the

presumptive eligibility determinations made by qualified providers to

ensure the integrity of the determinations and to take any corrective

action that may be necessary.

Sec. 435.912 Application for Medicaid by pregnant women following a

presumptive eligibility determination.

A pregnant woman who is determined by a qualified provider to be

presumptively eligible for ambulatory prenatal care services must file

an application for Medicaid with the agency by the last day of the

month following the month in which the presumptive eligibility

determination is made in order to extend the period of presumptive

eligibility until her eligibility for regular Medicaid has been

determined.

22. Redesignated Sec. 435.918 is amended by revising paragraph (c)

to read as follows:

Sec. 435.918 Periodic redeterminations of Medicaid eligibility.

* * * * *

(c) Agency action on information about changes.

(1) Except as provided for in paragraph (c)(2) of this section--

(i) The agency must promptly redetermine eligibility when it

receives information about changes in a recipient's circumstances that

may affect his or her eligibility.

(ii) If the agency has information about anticipated changes in a

recipient's circumstances, it must redetermine eligibility at the

appropriate time based on those changes.

(2) Effective January 1, 1991, the agency must consider any

pregnant woman who has established eligibility for Medicaid under this

part and who, because of a change in family income, would no longer be

eligible, to be eligible to receive services as mandatory categorically

needy under Sec. 435.118 throughout the pregnancy and the 60-day period

after pregnancy ends and for any remaining days in the month in which

the 60th day falls, without regard to any changes in income that may

occur during this period.

(i) This provision does not apply to women who are determined to be

presumptively eligible under Sec. 435.250 but are subsequently

determined to be ineligible for regular Medicaid.

(ii) A woman who is eligible for continued coverage under this

section retains her existing status as a mandatory categorically needy,

optional categorically needy, or medically needy recipient, even though

she is entitled to the services that are available to a mandatory

categorically needy pregnant woman described in Sec. 435.118. As a

result, she must continue to meet eligibility requirements associated

with her status (for example, she may have to meet a spenddown if she

is medically needy), except that any increase in income will have no

effect on her eligibility.

23. New Secs. 435.932 and 435.935 are added under undesignated

center heading ``Furnishing Medicaid'' under subpart J to read as

follows:

Sec. 435.932 Issuance of eligibility cards to homeless individuals.

(a) The agency must establish a method for making available to

individuals who do not reside at a permanent dwelling or at a fixed

address cards that evidence Medicaid eligibility.

(b) The State plan must describe the method.

Sec. 435.935 Enhancing pregnancy outcomes.

The State plan must--

(a) Define a high-risk pregnancy;

(b) Describe the process the State uses to identify, during the

pregnancy, high-risk women; and

(c) Specify the steps that providers and other organizations and

agencies involved in the delivery of services to pregnant women will

take to ensure that these high-risk Medicaid recipients receive

appropriate services designed to enhance the probability of a healthy,

full-term pregnancy, uncomplicated delivery, and a healthy outcome for

both mother and child.

24. Section 435.1001 is amended by revising paragraph (a) to read

as follows:

Sec. 435.1001 FFP for administration.

(a) FFP is available in the necessary administrative costs the

State incurs in--

(1) Determining and redetermining Medicaid eligibility and in

providing Medicaid to eligible individuals; and

(2) Determining presumptive eligibility for pregnant women and in

providing ambulatory prenatal care to presumptively eligible women.

* * * * *

25. Section 435.1002 is amended by revising paragraph (a) and

adding new paragraphs (c) and (d) to read as follows:

Sec. 435.1002 FFP for services.

(a) Except for the limitations and conditions specified in

paragraphs (c) and (d) of this section and in Secs. 435.1007 and

435.1008, FFP is available in expenditures for Medicaid services for

all recipients whose coverage is required or allowed under this part.

* * * * *

(c) FFP is available in expenditures for ambulatory prenatal care

services covered under the plan (as defined in Sec. 440.172) that are

furnished to pregnant women who are determined by a qualified provider

to be presumptively eligible when these services are furnished during a

presumptive eligibility period by a provider that is eligible for

payment under the State plan, regardless of whether or not the women

are determined eligible for regular Medicaid following the presumptive

eligibility period.

(d) FFP is not available in expenditures for services provided to

low-income pregnant women and infants covered as optional categorically

needy under Sec. 435.228 if the State has in effect under its AFDC plan

payment levels (that is, the amount of the AFDC payment for basic needs

made to a family with no other income) that are less than those in

effect under its AFDC plan on July 1, 1987.

PART 436--ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS

C. Part 436 is amended as follows:

1. The authority citation for part 436 continues to read as

follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.

1302).

2. The heading of subpart C is revised to read as follows:

Subpart C--Options for Coverage of Individuals as Categorically

Needy and as Special Groups

3. In Sec. 436.2, paragraph (a) introductory text is republished

and several entries are added in numerical order to read as follows:

Sec. 436.2 Basis.

(a) This part interprets the following sections of the Act and

public laws which state eligibility requirements and standards:

* * * * *

1902(c) Conditions of State plan approval--States must maintain AFDC

payment levels and not require that section 1902(1) low-income pregnant

women, infants, and children apply for AFDC benefits.

* * * * *

1902(e)(6) Mandatory continuation of Medicaid for pregnant women

without consideration of changes in income up to a specified period

after pregnancy ends.

1902(e)(7) Continuation of Medicaid eligibility for certain infants

and children receiving inpatient care.

1902(l) Description of pregnant women, infants, and children with

incomes related to the Federal poverty income level.

1902(m) Description of aged and disabled individuals with incomes at

or below the Federal poverty income level.

* * * * *

1902(r)(2) Use of less restrictive income and resource methodologies

than those under the cash assistance programs in determining financial

eligibility for specified categorically needy and medically needy

groups.

* * * * *

1920 Optional presumptive eligibility period for pregnant women.

* * * * *

4. In Sec. 436.120, paragraph (c) introductory text is republished

and paragraphs (c) (1) and (2) are revised to read as follows:

Sec. 436.120 Qualified pregnant women and children who are not

qualified family members.

* * * * *

(c) The agency must provide Medicaid to children who meet all of

the following criteria:

(1) They are born after September 30, 1983, or at State option, an

earlier designated date;

(2) They are under 19 years of age; and

* * * * *

5. Section 436.124 is revised to read as follows:

Sec. 436.124 Newborn children.

(a) The agency must provide categorically needy Medicaid

eligibility to a child born to a woman who is eligible as categorically

needy and is receiving Medicaid on the date of the child's birth. The

child is deemed to have applied and been found eligible for Medicaid on

the date of birth and remains eligible as categorically needy for one

year so long as the woman remains eligible or (with respect to infants

born on or after January 1, 1991) would have remained eligible if still

pregnant and the child is a member of the woman's household. If the

mother's basis of eligibility changes to medically needy, the child is

eligible as medically needy under Sec. 436.301(b)(1)(iii).

(b) An infant is considered to be a member of his or her mother's

household for so long as he or she is continuously hospitalized after

birth, unless the mother has legally relinquished control of the child

or the State has established that she has abandoned the child. After

the infant's release from the hospital, or in situations not involving

hospitalization, States must apply the AFDC rules to determine if an

infant (who is not an SSI beneficiary) is a member of his or her

mother's household.

6. A new Sec. 436.226 is added under the undesignated center

heading ``Options for Coverage of Families and Children and the Aged,

Blind, and Disabled, Including Pregnant Women'' (as published on

January 19, 1993 (58 FR 4935)) under subpart C to read as follows:

Sec. 436.226 Pregnant women, infants, and children with family incomes

at a percentage of Federal poverty income guidelines.

(a) Groups of pregnant women, infants and childen. Subject to the

conditions specified in paragraphs (b) and (c) of this section, the

agency may provide Medicaid to any of the following groups of

individuals who are not eligible as mandatory categorically needy:

(1) Pregnant women and women during the 60-day period beginning on

the last day of pregnancy with family incomes that are at or below 185

percent of the Federal poverty income guidelines for a family of the

size involved, or at or below any lesser percentage that the agency

chooses.

(2) Infants under 1 year of age with family incomes that are at or

below 185 percent of the Federal poverty income guidelines for a family

of the size involved, or at or below any lesser percentage that the

agency chooses.

(3) Children with family incomes at or below 133 percent of the

Federal poverty income guidelines who are age 1 but have not attained

age 6.

(4) Children with family incomes at or below 100 percent of the

Federal poverty income guidelines who are born after September 30, 1983

and who are age 6 but have not attained age 19.

(b) Conditions of eligibility. Individuals described in paragraph

(a) of this section may be eligible if they--

(1) Have family income that meets the applicable standard

established in accordance with Sec. 436.610(b); and

(2) At State option, have resources that meet the applicable

standard established in accordance with Sec. 436.610(c).

(c) Eligibility period for women. If the agency chooses to provide

Medicaid to women specified in paragraph (a)(1) of this section, it

must provide Medicaid to such women, as long as they continue to meet

the criteria described in paragraph (b) of this section, during the

pregnancy and during a postpartum period that begins on the last day of

the pregnancy and continues for 60 days. Sections 436.122 and

435.918(c)(2) of this subchapter may also apply to these women.

Services to these women are limited to services specified in

Sec. 440.250(q) of this subchapter.

(d) Eligibility period for infants under age 1. If the agency

chooses to provide Medicaid to infants specified in paragraph (a)(2) of

this section, it must provide Medicaid to such infants, as long as they

continue to meet the criteria described in paragraph (b) of this

section, until they reach age 1. Section 436.124 may also apply to

these infants.

(e) Eligibility period for children age 1 up to age 6. If the

agency chooses to provide Medicaid to children specified in paragraph

(a)(3) of this section, it must provide Medicaid to such children, as

long as they continue to meet the criteria described in paragraph (b)

of this section, until they reach age 6.

(f) Eligibility period for children age 6 up to age 19. If the

agency chooses to provide Medicaid to children specified in paragraph

(a)(4) of this section, it must provide Medicaid to such children, as

long as they continue to meet the criteria described in paragraph (b)

of this section, until they reach age 19.

(g) The provisions of this section apply to Guam, Puerto Rico, the

Virgin Islands, the Northern Mariana Islands, and America Samoa.

7. A new Sec. 436.235 is added under the undesignated center

heading ``Options for Coverage of the Aged, Blind, and Disabled'' under

subpart C to read as follows:

Sec. 436.235 Aged and disabled individuals with incomes at or below

Federal poverty income guidelines.

(a) The agency may provide Medicaid to individuals who are not

eligible as mandatory categorically needy and who--

(1) Are 65 years of age or older, or are disabled as determined

under section 1614 of the Act;

(2) Have family income that meets a standard established by the

State at a level that is no more than 100 percent of the Federal

poverty income level in accordance with Sec. 436.615(b); and

(3) Have resources that meet the standard established in accordance

with Sec. 436.615(c).

(b) An agency that elects the option under paragraph (a) of this

section must provide Medicaid to both aged and disabled groups of

individuals.

8. A new undesignated center heading and Sec. 436.250 is added at

the end of subpart C to read as follows:

Options for Coverage of Special Groups

Sec. 436.250 Pregnant women eligible during a presumptive eligibility

period.

(a) The agency may provide pregnant women with eligibility for

ambulatory prenatal care services on the basis of a presumptive

eligibility determination made by a qualified provider if--

(1) The woman's estimated gross family income appears to meet the

highest applicable income criteria under the State's approved plan that

are most likely to be used if the woman applied for regular Medicaid;

(2) The provider making the determination meets the requirements of

Sec. 440.172(c) of this subchapter; and

(3) The agency has established procedures to ensure that the

screening and application requirements and procedures of Sec. 435.911

of this subchapter are met.

(b) Pregnant women who are determined eligible for ambulatory

prenatal care services under this section are eligible during a

presumptive period in accordance with Sec. 435.911(e).

9. In Sec. 436.301, paragraphs (b) introductory text and (b)(1)

introductory text are republished and paragraph (b)(1)(iii) is revised

to read as follows:

Sec. 436.301 General rules.

* * * * *

(b) If the agency chooses this option, the following provisions

apply:

(1) The agency must provide Medicaid to the following individuals

who meet the requirements of paragraph (a) of this section:

* * * * *

(iii) All newborn children born to a woman who is eligible as

medically needy and is receiving Medicaid on the date of the child's

birth. The child is deemed to have applied and been found eligible for

Medicaid on the date of birth and remains eligible as medically needy

for one year so long as the woman remains eligible or (with respect to

infants born on or after January 1, 1991) would have remained eligible

if still pregnant and the child is a member of the woman's household

(as determined in accordance with Sec. 436.124(b)). If the woman's

basis of eligibility changes to categorically needy, the child is

eligible as categorically needy under Sec. 436.124.

* * * * *

10. Section 436.403 is amended by redesignating paragraphs (i) (1),

(2), and (3) as paragraphs (i) (2), (3), and (4), respectively, and

adding a new paragraph (i) (1) to read as follows:

Sec. 436.403 State residence.

* * * * *

(i) Specific prohibitions.

(1) The agency may not deny Medicaid eligibility to an otherwise

qualified resident of the State because the individual's residence is

not maintained permanently or at a fixed address.

* * * * *

11. Section 436.500 is revised to read as follows:

Sec. 436.500 Scope.

This subpart prescribes categorical requirements for determining

the eligibility and continuing eligibility of both categorically needy

and medically needy individuals specified in subparts B, C, and D of

this part.

12. Section 436.520 is revised to read as follows:

Sec. 436.520 Age requirements for the aged and children.

(a) In determining or redetermining eligibility, the agency must

not impose an age requirement of more than 65 years.

(b) The agency must continue eligibility until the end of the

inpatient stay for infants and children who are eligible under

Sec. 436.120 or Sec. 436.226, who are receiving covered inpatient

services on the date that they reach the age limit for inclusion under

the State plan, and who would remain eligible under Sec. 436.120 or

Sec. 436.226 but for attainment of that maximum age.

13. Section 436.601 is amended by revising paragraph (b), the

heading of paragraph (d), and paragraph (d)(1)(ii) (the text of

paragraph (d)(1) introductory text is republished) to read as follows:

Sec. 436.601 Application of financial eligibility methodologies.

* * * * *

(b) Basic rule for use of cash assistance methodologies. Except as

specified in paragraphs (c), (d), and (e) of this section and in

Secs. 436.610, and 436.615, in determining financial eligibility of

individuals as categorically and medically needy, the agency must apply

the financial methodologies and requirements of the cash assistance

program that is most closely categorically related to the individual's

status.

* * * * *

(d) Use of less restrictive methodologies than those under cash

assistance programs.

(1) At State option, and subject to the conditions of paragraphs

(d)(2) through (d)(5) of this section, the agency may apply income and

resource methodologies that are less restrictive than the cash

assistance methodologies in determining eligibility of the following

groups:

* * * * *

(ii) Low-inc

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