U.S. Code of Federal Regulations
Regulations most recently checked for updates: Jun 09, 2023
§ 433.110 - Basis, purpose, and applicability.
(a) This subpart implements the following sections of the Act:
(1) Section 1903(a)(3) of the Act, which provides for FFP in State expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures for implementing these regulations are in 45 CFR part 75, 45 CFR part 95, subpart F, and part 11, State Medicaid Manual; and
(2) Section 1903(r) of the Act, which imposes certain standards and conditions on mechanized claims processing and information retrieval systems (including eligibility determination systems) in order for these systems to be eligible for Federal funding under section 1903(a) of the Act.
§ 433.111 - Definitions.
For purposes of this section:
(a) The following terms are defined at 45 CFR part 95, subpart F § 95.605:
(b) “Mechanized claims processing and information retrieval system” means:
(1) “Mechanized claims processing and information retrieval system” means the system of software and/or hardware used to process claims for medical assistance and to retrieve and produce service utilization and management information required by the Medicaid single state agency and Federal government for program administration and audit purposes. It may include modules of hardware, software, and other technical capabilities that are used by the Medicaid Single State Agency to manage, monitor, and administer the Medicaid enterprise, including transaction processing, information management, and reporting and data analytics.
(2) “Mechanized claims processing and information retrieval system” includes a “System of Systems.” Under this definition all modules or systems developed to support a Medicaid Management Information System (MMIS) and Eligibility and Enrollment (E&E) may be implemented as discrete, independent, interoperable elements. Use of a System of Systems requires interoperability between the systems.
(i) The system consists of—
(A) Required modules specified by the Secretary.
(B) Required changes to the system or required module that are specified by the Secretary.
(C) Approved enhancements to the system or module.
(ii) A “Mechanized claims processing and information retrieval system” include—s—
(A) An Eligibility and Enrollment (E&E) System which is used to process applications from Medicaid or CHIP applicants and beneficiaries to determine eligibility for enrollment in the Medicaid or CHIP programs, as well as change in circumstance updates and renewals; and
(B) A Medicaid Management Information System (MMIS) which is used to process claims for Medicaid payment from providers of medical care and services furnished to beneficiaries under the medical assistance program and to perform other functions necessary for economic and efficient operations, management, monitoring, and administration of the Medicaid program. The pertinent business areas are those included in the MMIS Certification Toolkit, and they may be applicable to Fee-For-Service, Managed Care, or an Administrative Services Organization (ASO) model.
(c) “Medicaid Information Technology Architecture (MITA)” is defined at § 495.302 of this chapter.
(d) “Open source” means software that can be used freely, changed, and shared (in modified or unmodified form) by anyone. Open source software is distributed under Open Source Initiative-approved licenses that comply with an open source framework that allows for free redistribution, provision of the source code, allowance for modifications and derived works, free and open distribution of licenses without restrictions and licenses that are technology-neutral.
(e) “Proprietary” means a closed source product licensed under exclusive legal right of the copyright holder with the intent that the licensee is given the right to use the software only under certain conditions, and restricted from other uses, such as modification, sharing, studying, redistribution, or reverse engineering.
(f) “Service” means a self-contained unit of functionality that is a discretely invokable operation. Services can be combined to provide the functionality of a large software application.
(g) “Shared Service” means the use of a service, including SaaS, by one part of an organization or group, including states, where that service is also made available to other entities of the organization, group or states. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider.
(h) “Module” means a packaged, functional business process or set of processes implemented through software, data, and interoperable interfaces that are enabled through design principles in which functions of a complex system are partitioned into discrete, scalable, reusable components.
(i) “Commercial Off the Shelf” (COTS) software means specialized software (which could be a system, subsystem or module) designed for specific applications that is available for sale or lease to other users in the commercial marketplace, and that can be used with little or no modification.
(j) “Software-as-a-Service” (SaaS) means a software delivery model in which software is managed and licensed by its vendor-owner on a pay-for-use or subscription basis, centrally hosted, on-demand, and common to all users.
§ 433.112 - FFP for design, development, installation or enhancement of mechanized processing and information retrieval systems.
(a) Subject to paragraph (c) of this section, FFP is available at the 90 percent rate in State expenditures for the design, development, installation, or enhancement of a mechanized claims processing and information retrieval system only if the APD is approved by CMS prior to the State's expenditure of funds for these purposes.
(b) CMS will approve the E&E or claims system described in an APD if certain conditions are met. The conditions that a system must meet are:
(1) CMS determines the system is likely to provide more efficient, economical, and effective administration of the State plan.
(2) The system meets the system requirements, standards and conditions, and performance standards in Part 11 of the State Medicaid Manual, as periodically amended.
(3) The system is compatible with the claims processing and information retrieval systems used in the administration of Medicare for prompt eligibility verification and for processing claims for persons eligible for both programs.
(4) The system supports the data requirements of quality improvement organizations established under Part B of title XI of the Act.
(5) The State owns any software that is designed, developed, installed or improved with 90 percent FFP.
(6) The Department has a royalty free, non-exclusive, and irrevocable license to reproduce, publish, or otherwise use and authorize others to use, for Federal Government purposes, software, modifications to software, and documentation that is designed, developed, installed or enhanced with 90 percent FFP.
(7) The costs of the system are determined in accordance with 45 CFR 75, subpart E.
(8) The Medicaid agency agrees in writing to use the system for the period of time specified in the advance planning document approved by CMS or for any shorter period of time that CMS determines justifies the Federal funds invested.
(9) The agency agrees in writing that the information in the system will be safeguarded in accordance with subpart F, part 431 of this subchapter.
(10) Use a modular, flexible approach to systems development, including the use of open interfaces and exposed application programming interfaces; the separation of business rules from core programming, available in both human and machine readable formats.
(11) Align to, and advance increasingly, in MITA maturity for business, architecture, and data.
(12) The agency ensures alignment with, and incorporation of, industry standards adopted by the Office of the National Coordinator for Health IT in accordance with 45 CFR part 170, subpart B: The HIPAA privacy, security and transaction standards; accessibility standards established under section 508 of the Rehabilitation Act, or standards that provide greater accessibility for individuals with disabilities, and compliance with Federal civil rights laws; standards adopted by the Secretary under section 1104 of the Affordable Care Act; and standards and protocols adopted by the Secretary under section 1561 of the Affordable Care Act.
(13) Promote sharing, leverage, and reuse of Medicaid technologies and systems within and among States.
(14) Support accurate and timely processing and adjudications/eligibility determinations and effective communications with providers, beneficiaries, and the public.
(15) Produce transaction data, reports, and performance information that would contribute to program evaluation, continuous improvement in business operations, and transparency and accountability.
(16) The system supports seamless coordination and integration with the Marketplace, the Federal Data Services Hub, and allows interoperability with health information exchanges, public health agencies, human services programs, and community organizations providing outreach and enrollment assistance services as applicable.
(17) For E&E systems, the State must have delivered acceptable MAGI-based system functionality, demonstrated by performance testing and results based on critical success factors, with limited mitigations and workarounds.
(18) The State must submit plans that contain strategies for reducing the operational consequences of failure to meet applicable requirements for all major milestones and functionality.
(19) The agency, in writing through the APD, must identify key state personnel by name, type and time commitment assigned to each project.
(20) Systems and modules developed, installed or improved with 90 percent match must include documentation of components and procedures such that the systems could be operated by a variety of contractors or other users.
(21) For software systems and modules developed, installed or improved with 90 percent match, the State must consider strategies to minimize the costs and difficulty of operating the software on alternate hardware or operating systems.
(22) Other conditions for compliance with existing statutory and regulatory requirements, issued through formal guidance procedures, determined by the Secretary to be necessary to update and ensure proper implementation of those existing requirements.
(c)(1) FFP is available at 90 percent of a State's expenditures for the design, development, installation or enhancement of an E&E system that meets the requirements of this subpart and only for costs incurred for goods and services provided on or after April 19, 2011.
(2) Design, development, installation, or enhancement costs include costs for initial licensing of commercial off the shelf (COTS) software, and the minimum necessary costs to analyze the suitability of COTS software, install, configure and integrate the COTS software, and modify non-COTS software to ensure coordination of operations. The nature and extent of such costs must be expressly described in the approved APD.
§ 433.114 - Procedures for obtaining initial approval; notice of decision.
(a) To obtain initial approval, the Medicaid agency must inform CMS in writing that the system meets the conditions specified in § 433.116(c) through (i).
(b) If CMS disapproves the system, the notice will include all of the following information:
(1) The findings of fact upon which the determination was made.
(2) The procedures for appeal of the determination in the context of a reconsideration of the resulting disallowance to the Departmental Appeals Board.
§ 433.116 - FFP for operation of mechanized claims processing and information retrieval systems.
(a) Subject to paragraph (j) of this section, FFP is available at 75 percent of expenditures for operation of a mechanized claims processing and information retrieval system approved by CMS, from the first day of the calendar quarter after the date the system met the conditions of initial approval, as established by CMS (including a retroactive adjustment of FFP if necessary to provide the 75 percent rate beginning on the first day of that calendar quarter). Subject to 45 CFR 95.611(a), the State shall obtain prior written approval from CMS when it plans to acquire ADP equipment or services, when it anticipates the total acquisition costs will exceed thresholds, and meets other conditions of the subpart.
(b) CMS will approve enhanced FFP for system operations if the conditions specified in paragraphs (c) through (i) of this section are met.
(c) The conditions of § 433.112(b)(1) through (22) must be met at the time of approval.
(d) The system must have been operating continuously during the period for which FFP is claimed.
(e) The system must provide individual notices, within 45 days of the payment of claims, to all or a sample group of the persons who received services under the plan.
(f) The notice required by paragraph (e) of this section—
(1) Must specify—
(i) The service furnished;
(ii) The name of the provider furnishing the service;
(iii) The date on which the service was furnished; and
(iv) The amount of the payment made under the plan for the service; and
(2) Must not specify confidential services (as defined by the State) and must not be sent if the only service furnished was confidential.
(g) The system must provide both patient and provider profiles for program management and utilization review purposes.
(h) If the State has a Medicaid fraud control unit certified under section 1903(q) of the Act and § 455.300 of this chapter, the Medicaid agency must have procedures to assure that information on probable fraud or abuse that is obtained from, or developed by, the system is made available to that unit. (See § 455.21 of this chapter for State plan requirements.)
(i) The standards and conditions of § 433.112(b)(10) through (b)(16) of this subpart must be met.
(j) Beginning, and no earlier than, April 19, 2011, FFP is available at 75 percent of a State's expenditures for the operation of an E&E system that meets the requirements of this subpart. FFP is not available for E&E systems that do not meet the standards and conditions.
§ 433.117 - Initial approval of replacement systems.
(a) A replacement system must meet all standards and conditions of initial approval of a mechanized claims processing and information retrieval system.
(b) The agency must submit a APD that includes—
(1) The date the replacement system will be in operation; and
(2) A plan for orderly transition from the system being replaced to the replacement system.
(c) FFP is available at—
(1) 90 percent in expenditures for design, development, and installation in accordance with the provisions of § 433.112; and
(2) 75 percent in expenditures for operation of an approved replacement system in accordance with the provisions of § 433.116(b) through (j), from the date that the system met the conditions of initial approval, as established by CMS.
(d) FFP is available at 75 percent in expenditures for the operation of an approved system that is being replaced (or at a reduced rate determined under § 433.120 of this subpart for a system that has been disapproved) until the replacement system is in operation and approved.
§ 433.119 - Conditions for reapproval; notice of decision.
(a) CMS periodically reviews each system operation initially approved under § 433.114 of this subpart and reapproves it for FFP at 75 percent of expenditures if the following standards and conditions are met:
(1) The system meets the requirements of § 433.112(b)(1), (3), (4), and (7) through (22).
(2) The system meets the conditions of § 433.116 (d) through (j).
(3) The system meets the standards, conditions, and performance standards for reapproval and the system requirements in part 11 of the State Medicaid Manual as periodically amended.
(4) A State system must meet all of the requirements of this subpart within the appropriate period CMS determines should apply as required by § 433.123(b) of this subpart.
(b) CMS may review an entire system operation or focus its review on parts of the operation. However, at a minimum, CMS will review standards, system requirements and other conditions of reapproval that have demonstrated weakness in a previous review or reviews.
(c) After performing the review under paragraph (a) of this section, CMS will issue to the Medicaid agency a written notice informing the agency whether the system is reapproved or disapproved. If the system is disapproved, the notice will include the following information:
(1) CMS's decision to reduce FFP for system operations from 75 percent to 50 percent of expenditures, beginning with the first day of the first calendar quarter after CMS issues the written notice to the State.
(2) The findings of fact upon which the determination was made.
(3) A statement that State claims in excess of the reduced FFP rate will be disallowed and that any such disallowance will be appealable to the Departmental Appeals Board.
§ 433.120 - Procedures for reduction of FFP after reapproval review.
(a) If CMS determines after the reapproval review that the system no longer meets the conditions for reapproval in § 433.119, CMS may reduce FFP for certain expenditures for system operations.
(b) CMS may reduce FFP from 75 percent to 50 percent for expenditures related to the operations of non-compliant functionality or system components.
§ 433.121 - Reconsideration of the decision to reduce FFP after reapproval review.
(a) The State Medicaid agency may appeal (to the Departmental Appeals Board under 45 CFR part 16) a disallowance concerning a reduction in FFP claimed for system operations caused by a disapproval of the State's system.
(b) The decisions concerning whether to restore any FFP retroactively and the actual number of quarters for which FFP will be restored under § 433.122 of this subpart are not subject to administrative appeal to the Departmental Appeals Board under 45 CFR part 16.
(c) An agency's request for a reconsideration before the Board under paragraph (a) of this section does not delay implementation of the reduction in FFP. However, any reduction is subject to retroactive adjustment if required by the Board's determination on reconsideration.
§ 433.122 - Reapproval of a disapproved system.
When FFP has been reduced under § 433.120(a), and CMS determines upon subsequent review that the system meets all current performance standards, system requirements and other conditions of reapproval, the following provisions apply:
(a) CMS will resume FFP in expenditures for system operations at the 75 percent level beginning with the quarter following the review determination that the system again meets conditions of reapproval.
(b) CMS may retroactively waive a reduction of FFP in expenditures for system operations if CMS determines that the waiver could improve the administration of the State Medicaid plan. However, CMS cannot waive this reduction for any quarter before the fourth quarter immediately preceding the quarter in which CMS issues the determination (as part of the review process) stating that the system is reapproved.
§ 433.123 - Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.
(a) Whenever CMS modifies system requirements or other conditions for approval under § 433.112 or § 433.116, CMS will—
(1) Publish a notice in the
(2) Respond in a subsequent
(3) Issue the new or modified requirements or conditions in the State Medicaid Manual.
(b) For changes in system requirements or other conditions for approval, CMS will allow an appropriate period for Medicaid agencies to meet the requirement determining this period on the basis of the requirement's complexity and other relevant factors.
(c) Whenever CMS modifies performance standards and other conditions for reapproval under § 433.119, CMS will notify Medicaid agencies at least one calendar quarter before the review period to which the new or modified standards or conditions apply.
§ 433.127 - Termination of FFP for failure to provide access to claims processing and information retrieval systems.
CMS will terminate FFP at any time if the Medicaid agency fails to provide State and Federal representatives with full access to the system, including on-site inspection. CMS may request such access at any time to determine whether the conditions in this subpart are being met.
§ 433.131 - Waiver for noncompliance with conditions of approval and reapproval.
If a State is unable to comply with the conditions of approval or of reapproval and the noncompliance will cause a percentum reduction in FFP, CMS will waive the FFP reduction in the following circumstances:
(a) Good cause. If CMS determines that good cause existed, CMS will waive the FFP reduction attributable to those items for which the good cause existed. A waiver of FFP consequences of the failure to meet the conditions of approval or reapproval based upon good cause will not extend beyond two consecutive quarters.
(b) Circumstances beyond the control of a State. The State must satisfactorily explain the circumstances that are beyond its control. When CMS grants the waiver, CMS will also defer all other system deadlines for the same length of time that the waiver applies.
(c) Waiver of deadline. In no case will CMS waive the December 31, 2015 deadlines referenced in § 433.112(c) and § 433.116(j).