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Frequently Asked Questions

Frequently Asked Questions are used to provide additional information and/or statutory guidance not found in State Medicaid Director Letters, State Health Official Letters, or CMCS Informational Bulletins. The different sets of FAQs as originally released can be accessed below.

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Does the May 6, 2016 effective date for the change in FFP for EQR-related activities apply based on the date of approval of the EQRO contract, the date the activity was performed, or the date of expenditure for the EQR activity?

Regardless of whether an EQRO contract is approved before or after May 6, 2016, the change in FFP for EQR-related activities was effective May 6, 2016 for expenditures incurred by the state on or after May 6, 2016. Per general CMS-64 claiming principles, a state incurs an expenditure that may be claimed on the CMS-64 on the date the state pays the EQRO for the completed performance of the contracted EQR-associated activity.

The change to the FFP match rate for expenditure reporting takes effect in the middle of a quarter, which means that states must ensure that claims for expenditures for EQR activities affected by the change in FFP which were paid before May 6th and claims for expenditures which were paid on or after May 6th are reported separately. For only the quarter ending June 30, 2016, the CMS-64 EQRO Line 17 will allow states to report state expenditures associated with PIHP EQRO activities paid prior to May 6, 2016 and claim the enhanced 75 percent match. State expenditures associated with PIHP EQRO activities paid on or after May 6th must be claimed at the 50 percent matching rate.

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FAQ ID:94651

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My state is planning for our upcoming EQRO contracting. When does CMS plan to publish a protocol for the new activity relating to the validation of network adequacy?

CMS expects to first issue revised protocols for the current mandatory and optional EQR-related activities in the Fall of 2017. We expect to issue the protocol for the new mandatory EQR activity relating to the validation of network adequacy later in 2017 or early 2018. States will have up to one year from the publication of the protocol to implement the new mandatory EQR activity.

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FAQ ID:94656

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If I have additional questions about EQR and claiming for EQR, who can I ask?

For questions related to state expenditure reporting and claiming instructions for EQR activities, please contact your CMS regional office financial representative. For specific external quality review questions, including what activities qualify for enhanced match, please contact the Division of Quality and Health Outcomes at ManagedCareQualityTA@cms.hhs.gov.

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FAQ ID:94666

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The Final Rule at section 438.2 defines a rating period as the 12 month period for which actuarially sound capitation rates are set, but there may be legitimate reasons why a state may want to set capitation rates for a time period that is less than or greater than 12 months. Will states have any flexibility in this area?

Yes. CMS acknowledges that states may have legitimate reasons to set capitation rates for a time period that differs from 12 months and will take unusual circumstances into account when reviewing compliance with the rating period duration requirements. CMS will approve a rating period other than of 12 months when a state transitions the contract term and rating period from a calendar year to a state fiscal year basis and setting capitation rates for a 6 month or 18 month period would facilitate that transition. There may be other reasonable justifications for such variations in the rating period that CMS would be open to considering. The rationale for a rating period that differs from 12 months as defined in the regulation in section 438.2 should be specified in the rate certification required in section 438.7 for such consideration.

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FAQ ID:93456

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A rating period is defined in section 438.2 as the 12 month period for which actuarially sound capitation rates are set. The Final Rule ties implementation and compliance deadlines for some provisions to the rating period for contracts starting on or after a specific date. Non-risk prepaid inpatient health plans (PIHPs) and non-risk prepaid ambulatory health plans (PAHPs), PCCMs, and PCCM entities do not have a rating period as defined in section 438.2 because such arrangements are not subject to actuarial

The implementation date for non-risk PIHPs and PAHPs, PCCMs, and PCCM entities for provisions tied to a rating period is the earliest date that a risk-based MCO, PIHP, or PAHP would need to comply. For example, the provisions in subpart F relating to appeals and grievances have an implementation date for risk-based contracts of the rating period for contracts starting on or after July 1, 2017. Non-risk PIHPs and PAHPs would need to implement those provisions by July 1, 2017.

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FAQ ID:93461

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Can CMS please clarify if only audited financial statements that are done on a formal Generally Accepted Accounting Principles (GAAP) basis can be used to meet the requirements in section 438.3(m)? Audits can also be done following statutory accounting principles or government auditing standards and it is not clear if states and managed care plans have flexibility in which standard to apply.

The regulation at section 438.3(m) has a general reference to "generally accepted accounting principles" and "generally accepted auditing principles." This means that states have the flexibility to specify the applicable generally accepted accounting and auditing principles for the audited financial reports in the managed care plan contracts. The federal regulation does not endorse a particular standard.

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FAQ ID:93466

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If a state can prove that they are under the aggregate limits of AAC and PDF and have strong participation by pharmacies, are they required to adopt the AAC and PDF reimbursement methodology at the individual claim level?

All states are required to adopt the AAC and professional dispensing fee methodology; however, it is not required to be adopted at the individual claim level, but in the aggregate. In accordance with the regulatory requirements at 42 CFR 447.512(b), the state is responsible for establishing a payment methodology, that must not exceed, in the aggregate, payment levels that the agency has determined by applying the lower of the AAC plus a professional dispensing fee or the providers' usual and customary charges to the general public. In conjunction with this the state is also responsible to ensure that pharmacy reimbursement is consistent

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with the requirements of section 1902(a)(30)(A) of the Act, which specify that provider reimbursement rates should be consistent with efficiency, economy, and quality of care while assuring sufficient beneficiary access.

FAQ ID:94691

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If a state is already using actual acquisition cost (AAC) as their reimbursement methodology, does the state need to file a State Plan Amendment (SPA) or provide assurances that the current formula meets requirements established in the final rule? Is there a requirement for such states to file a SPA to provide assurance that the state's current dispensing fee amount meets the requirements of the final rule?

If a state is already making payment for prescription drugs under its state plan based on AAC, it may continue to use that methodology. However, if a state decides to change its AAC model of reimbursement, (e.g., the state decides to use the National Average Drug Acquisition Cost (NADAC) instead of a state survey to implement a payment methodology based on AAC), the state must submit a new SPA through the formal SPA process for review.

Additionally, the state should review its currently approved professional dispensing fee (PDF) to determine if, in light of the regulation (42 CFR 447.518), the PDF needs to be revised and a SPA needs to be submitted. The state does not have to submit a new SPA to provide assurance that its dispensing fee is reasonable.

Furthermore, we expect that all states, even those currently operating under an AAC reimbursement methodology, will evaluate their current state plans to determine if a SPA will be required to comply with the reimbursement requirements (including, but not limited to, AAC, PDF, 340B and the federal upper limits (FULs)).

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FAQ ID:94671

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Will there be an annual review of PDFs that are required as part of SPA approvals?

No, CMS will not perform an annual review of PDFs; however, states must consider both the ingredient cost reimbursement and the PDF reimbursement when proposing changes to ensure that total reimbursement to the pharmacy provider is calculated in accordance with requirements of section 1902(a)(30)(A) of the Act.

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FAQ ID:94676

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Will CMS be providing guidance to states to ensure that states include reasonable components in their cost of dispensing survey?

To the extent that a state is conducting a cost of dispensing survey, it should be a transparent, comprehensive, and well-designed tool that addresses a pharmacy provider's cost to dispense the drug product to a Medicaid beneficiary. States have the flexibility to set PDFs, including using national or regional data from another state and we do not require that a state use a specific standard or methodology such as a survey to do so.

Further, states are not required to use a specific formula or methodology such as a cost study or use an inflation update where cost studies are not conducted; however, the burden is on each state to ensure that pharmacy providers are reimbursed in accordance with the requirements in section 1902(a)(30)(A) of the Act. CMS will review each SPA submission against these standards (see 81 FR 5311).

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FAQ ID:94681

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