Frequently Asked Questions

OMB Circular A-87requires costs associated with building shared state-based Information Technology (IT) systems that support multiple health and human service programs be allocated across all benefitting programs in proportion to their use of the system. The OMB A-87 Exception revised this approach by allowing human service programs (e.g. SNAP, TANF, LIHEAP, etc.) and others to utilize a wide range of IT components, needed by Medicaid but also of use to these other programs, at no additional cost except for interfaces or other uniquely required services specific to those programs. The A-87 Exception applies only to design, development, and implementation. Maintenance and operations work should continue to be allocated in accordance with the A-87 Circular. OMB Circular A-87  – Cost Principles for State, Local, and Indian Tribal Governments, has been Relocated to 2 CFR, Part 225 .

FAQ ID:93611

On July 20, 2015, the U.S. Department of Health and Human Services and the U.S. Department of Agriculture announced a three-year extension of the Exception to the OMB A-87 cost allocation requirements from December 31, 2015 to December 31, 2018. We are currently making plans for the OMB A-87 exception to end.

FAQ ID:93616

States will need to incur costs for goods and services furnished no later than December 31, 2018 to make use of this Exception. Therefore, if work is completed by December 31, 2018, it can be funded under the OMB A-87 Exception and states should follow typical invoicing and claiming processes. However, if an amount has been obligated by December 31, 2018, but the good or service is not furnished by that date, then such expenditure must be cost allocated by program in proportion to their use of the system in accordance with OMB A-87.

FAQ ID:93621

For FFY2019 annual APDs and budget tables, including the Medicaid Detailed Budget Table (MDBT), must be completed as follows:

• For Q1 FFY2019, states can allocate costs in accordance with the OMB A-87 Exception
• For Q2-Q$ FFY2019, and all APDs going forward, states should allocate costs as required under the OMB A-87 Circular

If a state has already submitted their annual APDs without providing separate budgets they will need to complete an APDU with a revised MDBT and cost allocation plan. The update should address how cost allocation will be done prior to, and after, December 31, 2018. Budget tables should be completed as described above.

The Data and Systems Group (DSG) that approves APDs does not approve cost allocation methodology. States working to develop their new methodologies should send operational cost allocation plans to Cost Allocation Services  and the regional office fiscal staff for all benefiting programs.

FAQ ID:93626

No, an upper payment limit demonstration considers all Medicaid payments (base and supplemental). States must conduct UPL demonstrations for the applicable services described in State Medicaid Director Letter (SMDL) 13-003 regardless of whether a state makes supplemental payments under the Medicaid state plan for the services.

FAQ ID:92191

Yes, the templates allow the use of multiple methodologies. The state would complete the templates associated with the UPL methodologies used. For example, if the state uses a cost-based methodology for state owned hospitals and a payment-based methodology for private hospitals, then the state would complete the cost template for the state owned hospitals and the payment template for the private hospitals. When using multiple methodologies, the state should insert a new tab in the templates that summarizes the UPL gap calculations for each of the ownership categories (state government owned, non-state government owned, and private), unless a summary worksheet is already included in the workbook.

FAQ ID:92271

A state may report adjustments by using the following variables: Adjustments to Medicare Per Diem #1 - Variable 212.1 and Adjustments to Medicare Per Diem #2 - Variable 212.2 for the Medicare Per Diem and Adjustment to Medicaid Per Diem #1 - Variable 314.1 and Adjustment to Medicaid Per Diem #2 - Variable 314.2 for the Medicaid Per Diem. A state may report more than one adjustment under a single variable. For example, if the state has three adjustments to their Medicaid per diem, one of these adjustments can be reported in variable 314.1 and the other two adjustments can be added together and reported in variable 314.2. When reporting any adjustment, the state must provide a detailed description of the adjustment(s) in the notes tab.

FAQ ID:92296

To date, CMS has not published a list of revenue codes that must be included or excluded from this service category.  Medicaid outpatient hospital services are defined at 42 Code of Federal Regulations (CFR) 440.20 and include “preventive, diagnostic, therapeutic, rehabilitative, or palliative services”.  In the state plan, states further define those services covered as outpatient hospital services.

FAQ ID:92411

Section 1902(a) (25) (I) of the Act defines ""health insurers"" to include self-insured plans, group health plans (as defined in section Medicaid Management Information Systems (MMIS)(l) of the Employee Retirement Income Security Act of 1974 (ERISA)), service benefit plans, managed care organizations (MCOs), pharmacy benefit managers (PBMs), and ""other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a health care item or service."" Workers' compensation, automobile insurance, and liability insurance plans all are included within the definition of ""health insurer"" for purposes of this section and the requisite state laws which must be enacted pursuant to it.

The CMS interprets ""other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim"" to include:

1. Prepaid Inpatient Health Plans (PIHPs) and Prepaid Ambulatory Health Plans (PAHPs). For purposes of Medicaid managed care, PIHPs and PAHPs are entities that contract with the state to deliver Medicaid-covered services; in that context, they would also be considered ""other parties that are, by contract, legally responsible for payment of a claim for a health care item or service;"" and,
2. Such entities as third party administrators (TPAs), fiscal intermediaries, and managed care contractors, which administer benefits on behalf of the riskbearing plan sponsor (e.g., an employer with a self-insured health plan). CMS recognizes that entities such as PBMs and TPAs do not necessarily have ultimate financial liability, but, to the extent that they are required, by contract or otherwise, to review claims and authorize payment by the plan sponsor, they are included within the definition of ""third party"" and ""health insurer"" for purposes of section 1902(a) (25) of the Act.

Nothing in revisions to the Social Security Act made by the Deficit Reduction Act of 2005 (DRA) imposes new liability to pay claims on entities that do not otherwise bear such liability. Nor does section 1902(a) (25) of the Act negate any right of indemnification against a plan sponsor or other entity with ultimate liability for health care claims by a contracting party that pays the claims.

Supplemental Links:

• This FAQ was released as part of a larger set. View the full set. (PDF, 252.32 KB) 

FAQ ID:94021

Indemnity policies may be considered third party resources if the policies meet certain criteria. Federal Medicaid regulations at 42 CFR 433.136 define a third party as ""any individual, entity, or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a state plan."" This includes private insurance. Section 433.136 also defines private insurer to include ""any commercial insurance company offering health or casualty insurance to individuals or groups (including both experience-related insurance contracts and indemnity contracts)."" Private insurers are required to comply with the Deficit Reduction Act of 2005 (DRA) and related state enactments.

Indemnity plans may include a variety of insurance policies such as accident, cancer/specified disease, dental, hospital confinement indemnity, hospital confinement sickness indemnity, hospital intensive care, long-term care, short-term disability, specified health event, and vision. An individualized review of the various policy terms would be necessary to determine if they should be considered a third party resource for purposes of Medicaid. If this review determines that the policy provides for payment of health care items and services, the policy is a third party resource and payments would be assigned to the Medicaid agency.

An indemnity policy may be designed to pay a cash benefit to policyholders, unless the policyholder chooses otherwise. The policy may state that these payments may be used to cover medical expenses or living expenses such as rent, child care, or groceries. However, the insurance company may condition payment upon the occurrence of a medical event. Whenever payments are linked to specific medical events, these payments should be considered third party payments. Thus, the state could seek to recover Medicaid payments from the policy benefits.

Where indemnity policies do not qualify as a third party resource, any payments made to a Medicaid beneficiary may be countable as income for Medicaid eligibility purposes.

Supplemental Links:

• This FAQ was released as part of a larger set. View the full set. (PDF, 252.32 KB) 

FAQ ID:94026