Permanent 90% Federal Funding for IT Systems Is a Must For States to Achieve Medicaid Modernization

Medicaid modernization is a popular term used by states to describe how they are moving into the digital age to streamline eligibility and enrollment and improve operational efficiency. Technology is at the center of this transformation but the fact that many states have held on to 30-year old mainframe systems suggests that states won’t keep pace as technology evolves. That’s one good reason why permanent 90-10 funding of Medicaid eligibility and enrollment systems (E&E) is critical.

In yesterday’s blog, I noted why it was important for CMS to boost federal support of E&E systems and summarized the steps CMS has taken to do so. Today’s blog will focus on the content of the notice of proposed rule making (NPRM) that would permanently extend enhanced federal funding for state systems. Systems approved for 90-10 funding that continue to meet federal standards also qualify for a 75% federal match for ongoing operational and maintenance costs. Previously, E&E systems were limited to a 50-50 federal match across the board, which has served as a significant barrier to the states keeping up with significant progress on the information technology (IT) front.

Beyond lifting the December 2015 sunset date on the enhanced federal funding, CMS is also proposing changes to the conditions and standards that states must meet. First, the NPRM will promote an integrated, enterprise approach to all of Medicaid’s IT needs by aligning requirements for Medicaid E&E systems with existing policy for the states’ claims payment systems known as Medicaid Management Information Systems (MMIS). The rule also requires states to receive federal approval prior to soliciting system components or executing contracts above a certain threshold amount.

The NPRM starts by defining Medicaid eligibility and enrollment systems as systems of software and hardware to process applications, renewals and updates from Medicaid applicants and enrollees. The proposed rule would require states to demonstrate operational readiness by achieving multiple critical success factors in addition to meeting all applicable industry standards (e.g., HIPAA, 508 or other accessibility standards for individuals with disabilities, etc.) adopted by the Office of the National Coordinator for Health. As required of MMIS, E&E systems:

  • Must support the data requirements of quality improvement organizations.
  • Must provide CMS with a broad license to reproduce, publish, and reuse any software developed with 90 percent FFP.
  • Can be approved on a modular basis.

To receive enhanced federal funding, the proposed rule requires E&E systems to:

  • Achieve seamless coordination and integration with the Marketplace, federal data services hub, and allows interoperability with health information exchanges, public health agencies, human service programs, and community organizations providing outreach and enrollment services.
  • Demonstrate acceptable MAGI-based system functionality through testing, with limited mitigations and workarounds.
  • Provide plans to protect against operational consequences of failure.
  • Identify key personnel by type and time commitment.
  • Include documentation for all system components and procedures to assure operability by a variety of contractors or other users.
  • Consider strategies to minimize the cost and difficulty of operating the various system components

What’s less apparent in the proposed rule is CMS’ goal to adopt policies that minimize redundant building of costly systems with duplicate functionality by promoting the reuse of system components across states. The NPRM addresses this in part by allowing enhanced federal match for the procurement of commercial off-the-shelf software. An even better strategy could be for CMS to commission the development of standardized components that could then be adapted as needed for each state. However, there seem to be lots of obstacles preventing such a logical approach to how we invest federal dollars that are hard to understand.

It’s clear that most states have yet to fully implement the ACA vision of paperless, data-driven, real-time eligibility determinations and highly automated renewals. Nor have they maximized technology to improve the consumer experience and produce the data needed to assess program performance. Without continuing enhanced funding, fully harnessing technology to streamline eligibility and improve operational effectiveness is at risk. Additionally, states are just beginning the task of incorporating eligibility for non-MAGI Medicaid (i.e., dual eligible disability categories), as well as re-integrating other public benefits programs (such as SNAP or childcare assistance) that provide important benefits that support low-income families in achieving financial stability.

With permanent enhanced federal funding, states will no longer have the excuse that they don’t have the money to make system upgrades and adopt new technology that will become available in the future. And hopefully CMS will have greater ability to hold states accountable for implementing the new ACA-realted policies and procedures that are intended to enhance the consumer experience and make our country’s critical public coverage programs as effective and efficient as possible.

The proposed rule is open for comments until June 16, 2015, which can be submitted at We’ll be drafting our own comments in support of the NPRM and, as always, are happy to share with others.