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 The changes would encourage the states to abandon outdated “legacy” systems and move toward a nationwide, unified system.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.

Kusserow on Compliance: Enrollment moratoria for new ambulance suppliers and home health agencies in several states

Over the last two years, I have been reporting on a large number of enforcement actions by the Department of Justice (DOJ) led Medicare Strike Force in eight target cities relating to cases involved home health agencies and ambulance services that many consider to be among the most vulnerable to fraud in health care. The OIG has issued a number of reports related to this problem. Going back to July 2013, CMS made their initial use of authority under the Patient Protection and Affordable Care Act (P.L. 111-148) to use temporary enrollment moratoria to prevent fraud where they have found that certain trends warranted such a moratorium on home health providers and ambulance suppliers in these geographic areas. Once again, they have issued a notice extending the temporary moratoria on the enrollment of new ambulance suppliers and home health agencies (HHAs) in specific locations within metropolitan areas in Florida, Illinois, Michigan, Texas, Pennsylvania, and New Jersey. CMS also placed temporary moratoria on the enrollment of ground ambulance suppliers in Harris County, Texas and other surrounding counties and in Philadelphia, Pennsylvania and surrounding counties. CMS had previously extended all of the above-mentioned moratoria through February 2, 2015. The programs affected by the CMS decision is especially vulnerable to fraud are those that allow the Medicaid recipient to control the selection and payment of personal care attendants.

In determining to extend the moratoria again, CMS considered factors suggesting a high risk of fraud, waste, or abuse by relying on law enforcement’s experience with fraud trends and activities through investigations and prosecutions. CMS then confirmed a high risk of fraud, waste, or abuse in these provider and supplier types through data analysis. The resulting extended moratoria lasts for a period of six months.

Alito stymies Third Circuit, temporarily blocks enforcement of mandate

Supreme Court Justice Samuel Alito has recalled a decision of the Third Circuit Court of Appeals, which lifted a preliminary injunction preventing the federal government from enforcing the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) contraception mandate against the Roman Catholic Diocese of Pittsburgh and an affiliate nonprofit corporation. On April 15, 2015, Alito issued an order in Zubik v. Burwell, recalling and staying the Third Circuit’s mandate pending a response from the government.


The Most Reverend David A. Zubik, Bishop of the Roman Catholic Diocese of Pittsburgh, along with the Diocese and Catholic Charities of the Diocese of Pittsburgh, Inc. (collectively, the Diocese) alleged that the contraception mandate violated the organizations’ rights under the Religious Freedom Restoration Act (RFRA) (42 U.S.C. §§2000bb et seq.). In 2013, a federal district court in Pennsylvania granted them a preliminary injunction against enforcement of the mandate (see Catholic dioceses granted preliminary injunction, Health Law Daily, November 26, 2013).

The case was consolidated with others and, in February 2015, the Third Circuit reversed the injunction (see Catholics stay clean: form submission ‘washes their hands’ of involvement with contraceptive coverage, Health Reform WK-EDGE, February 18, 2015). The appellate court determined that the requirement to execute EBSA Form 700-Certification, which certifies an organization’s religious objection to the mandate, did not burden the Dioceses’ exercise of religion. The Diocese, however, maintained that completing the form, which triggers notification that a third-party administrator must assume responsibility for providing or arranging contraceptive coverage to employees, made it complicit in sin. The Diocese sought an en banc hearing before the appellate court; the court denied the request on April 6, 2015.


Religious groups view this as a positive step toward unravelling the contraception mandate. Lori Windham, Senior Counsel at the Becket Fund for Religious Liberty, has represented organizations with religious objections to the mandate in other cases. She issued a statement on Justice Alito’s order, noting “The government really needs to give up on its illegal and unnecessary mandate.” The government’s response is due no later than April 20, 2015.

Texas universities shopping for Hobby Lobby treatment

Two Christian-based universities in Texas are hoping to receive the same exemption from the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) contraception mandate as Hobby Lobby did in its famous Supreme Court case. Texas Baptist University and East Texas Baptist University previously obtained a victory in the U.S. District Court for the Southern District of Texas. The district court found that the universities “demonstrated a substantial likelihood of success on the merits of their claim under the Religious Freedom Restoration Act.” However, HHS appealed and the hearing in the U.S. Court of Appeals for the Fifth Circuit in Houston took place April 7, 2015.

Religious exemption

In a provision known as the “HHS mandate,” employers are required to provide insurance coverage that includes 20 methods of contraception. However, some believe that certain forms of contraception result in abortion. This view often stems from religious faith. Hobby Lobby objected to this mandate, and the Supreme Court ruled in 2014 that if owners of a closely held for-profit corporation oppose the mandate due to religious beliefs, the company is exempt.

The arguments against the mandate stem from the Religious Freedom Restoration Act (RFRA) (P.L. 103-141). Under this Act, the government has limitations on creating burdens on the exercise of religion. These burdens must further a compelling governmental interest in the least restrictive way possible. The district court originally granted stays preventing the government from subjecting fines upon the universities for failing to provide contraception coverage. The district court felt that a substantial burden would be placed on the universities if they were forced to drop employee health benefits altogether for fear of facing huge fines under the ACA.

Extending the exemption to schools and nonprofits

According to legal counsel for the Beckett Fund for Religious Liberty, which represents the universities in the lawsuit, many employers have received exemptions for economic or political reasons. The universities are therefore fighting for this same exemption on the basis of religious liberty. Eric Rassbach, another Beckett Fund attorney, stated that the universities object to the coverage of four out of the 20 methods of contraception. These are pills known as “morning after” and “week after,” as well as two intrauterine devices, known as IUDs. President Robert Sloan of Houston Baptist University professed that the leaders of the universities sincerely believe that life begins when an egg is fertilized in the reproduction process, and that these forms of contraception destroy that life.

HHS previously exempted churches, auxiliaries, religious orders, and companies that employ fewer than 50 people from compliance with the mandate. Nonprofits that are morally opposed to covering certain forms of contraception are able to transfer away administrative obligations either to the insurance company or another administrator. That entity would handle all contraception claims, including processing, payment, and employee advising. The universities object to this process of transferring obligations. Even after self-certifying as morally opposed, the contraception options to which they oppose are still provided, but handled by someone else.

Federal stance

The government’s brief cited other rulings from circuit courts that deemed federal law requires insurance to assume responsibility for the program, not nonprofit action. The government argues that the universities are attempting to block access to contraceptives through a third party after they decide not to provide coverage. According to the brief, this goes beyond preventing the government from forcing an organization to provide contraceptive coverage against its religious beliefs.

Other cases

This case has been combined with cases involving Catholic institutions in the state during court deliberations. In March, the Supreme Court told the Seventh Circuit Court of Appeals to reconsider the University of Notre Dame’s objection to the contraception provision. Notre Dame also objects to the compromise of allowing an insurer to take over contraception obligations. After the Seventh Circuit rejected a preliminary injunction request, Notre Dame has been using this alternative system under protest. The American Civil Liberties Union opposes Notre Dame’s objections to the compromise, stating that the objection to contraceptive coverage is discrimination.