CMS proposes more federal funds for state Medicaid computer system makeovers

On April 14, 2015, CMS released a Proposed rule that would extend the availability of 90 percent federal matching funds for the design, development, and implementation of eligibility determination and enrollment systems. The changes would encourage the states to abandon outdated “legacy” systems and move toward a nationwide, unified system. The Proposed rule was published in the Federal Register on April 16, 2015.

Federal funds for Medicaid computer systems

Although most state Medicaid expenditures are matched at 50 percent, Soc. Sec. Act Sec. 1903(a)(3) provides for federal financial participation (FFP) of 90 percent for the design, development, and implementation of mechanized claims processing and information retrieval systems. In the 1990’s, CMS did not apply the 90 percent to eligibility determination and enrollment systems; at that time, most determinations of Medicaid eligibility were tied to eligibility for a cash assistance program.

ACA requirements

The enactment of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) required states to make major changes in their eligibility and enrollment systems to apply the modified adjusted gross income (MAGI) eligibility standards to families with children, pregnant women, and nondisabled adults, whose eligibility was no longer tied to eligibility for cash assistance programs. The state Medicaid agencies also were required to coordinate eligibility determinations with the Health Insurance Exchanges, or Marketplaces. Therefore, CMS adopted a rule that made the 90 percent FFP available for eligibility determination and enrollment systems through December 31, 2015 (See Final rule, 76 FR 21950, April 19, 2011).

For various reasons, many states have not completed the updates to their eligibility determination systems. In addition, CMS anticipates that the need for changes to these systems will be ongoing.

Changes in the Proposed rule

If the rule is adopted as proposed, the most significant change will be the expansion of the definition of “mechanized claims processing and information retrieval system” to include eligibility determination and enrollment systems. The functionality necessary to process MAGI-based eligibility determinations would be required for states to qualify for the enhanced funding. States also would be required to have CMS-approved mitigation plans in place in case they fail to achieve compliance with requirements.

The adoption of commercial off-the-shelf (COTS) software would qualify for the 90 percent matching funds if described in the advance planning documents. CMS also would require the use of open source code or the creation of documentation so that any agency or contractor could use the system. The Proposed rule provides for CMS approval of more detailed advance planning documents and would allow state agencies to proceed to requests for bids or execution of a contract without obtaining further approval if the conditions in the planning documents have been met and the contract value is below a threshold. The rule also would align the requirements for Medicaid information systems with the industry standards required by the Office of the National Coordinator for Health Information Technology, HIPAA accessibility, security, privacy and transaction standards; the accessibility requirements of the Rehabilitation Act and federal civil rights laws; and the standards adopted by the Secretary under sections 1561 and 1104 of the ACA.

Modular systems, staged compliance

Finally, the Proposed rule would shift CMS’ approval and enforcement protocols to allow for the approval of modules, or subsystems, rather than withholding approval until an entire system has been implemented. If CMS finds that a subsystem does not meet requirements, it would have the ability to withhold part of the matching funds rather than using an all-or-nothing approach.