Texas Health and Human Services Commission v. Linda Puglisi

ACCEPTED
03-15-00226-CV
6505541
THIRD COURT OF APPEALS
AUSTIN, TEXAS
8/14/2015 2:26:54 PM
JEFFREY D. KYLE
CLERK
CASE NO. 03-15-00226-CV

IN THE COURT OF APPEALS FILED IN
3rd COURT OF APPEALS
FOR THE THIRD JUDICIAL DISTRICT AUSTIN, TEXAS
AT AUSTIN, TEXAS 8/14/2015 2:26:54 PM
JEFFREY D. KYLE
Texas Health & Human Services Commission, Clerk
Appellant,
v.
Linda Puglisi,
Appellee.

On Appeal from Cause No. D-1-GN-14-000381
53rd Judicial District Court of Travis County, Texas
Honorable Judge Gisela D. Triana Presiding.

APPELLANT’S REPLY BRIEF

KEN PAXTON EUGENE A. CLAYBORN
Attorney General of Texas State Bar No.: 00785767
Assistant Attorney General
CHARLES E. ROY Deputy Chief, Administrative Law Division
First Assistant Attorney General OFFICE OF THE ATTORNEY GENERAL OF TEXAS
P.O. Box 12548, Capitol Station
JAMES E. DAVIS Austin, Texas 78711-2548
Deputy Attorney General for Telephone: (512) 475-3204
Civil Litigation Facsimile: (512) 320-0167
eugene.clayborn@texasattorneygeneral.gov
DAV ID A. TALBOT, JR.
Chief, Administrative Law Attorneys for Texas Health and
Division Human Services Commission

ORAL ARGUMENT REQUESTED August 14, 2015
 Table of Contents

Table of Contents ...................................................................................................... ii

Table of Authorities ................................................................................................. iii

I. ARGUMENT AND AUTHORITIES ................................................................1
A. Puglisi’s definition for covered DME is misleading. .............................1
B. Puglisi requires maximum assistance from her caregivers for all
activities of daily living. .........................................................................3
C. Compliance with Tex. Hum. Res. Code §§ 32.04242, 32.050(b) ...........4
D. Puglisi subverts the substantial evidence review standard. ....................6
E. Detgen is controlling authority regarding HHSC’s categorical
exclusion of mobile standers based on the availability of a cost-
effective alternative. ...............................................................................7
F. Puglisi received adequate due process. ................................................11

II. CONCLUSION ................................................................................................11

PRAYER ..................................................................................................................12

CERTIFICATE OF COMPLIANCE .......................................................................13

CERTIFICATE OF SERVICE ..........................................................................14

APPENDICES .........................................................................................................15

ii
 Table of Authorities
Cases

City of El Paso v. Pub. Util. Comm’n,
883 S.W.2d 179 (Tex. 1994) ..................................................................................6

DeSario v. Thomas,
139 F.3d 80 (2nd Cir. 1998) ...............................................................................3, 5

Detgen ex. rel. Detgen v. Janek,
752 F.3d 627 (5th Cir. 2014) ....................................................................... 8, 9, 10

Lavine v. Milne,
424 U.S. (1976) ......................................................................................................6

Slekis v. Thomas,
525 U.S. 1098 S.Ct. 864 L.Ed.2d 767 (1998) ........................................................6

Tex. Health Facilities Comm’n v. Charter Med.-Dall.,
665 S.W.2d 446 (Tex. 1984) ..................................................................................6

Tex. Rivers Prot. Ass’n v. Tex. Natural Res. Conservation Comm’n,
910 S.W.2d 147 (Tex. App.—Austin 1995, writ denied) ......................................6

Univ. of Tex. Med. Sch. at Houston v. Than,
901 S.W.2d 926 (Tex. 1995) ................................................................................11

Statutes
Texas Government Code
§ 2001.175 ............................................................................................................12

Rules

1 Tex. Admin. Code
§ 354.1039(a)(4)(D) ...............................................................................................8
§ 354.1041 ..................................................................................................... 4, 5, 6

iii
Tex. Hum. Res. Code
§§ 32.04242, .050(b) ..................................................................................... 4, 5, 6

Other Authorities
42 C.F.R.
Part 431 Subpart E ..................................................................................................9

TMPPM
§ 2.2.14.22 ..............................................................................................................8
§ 2.2.14.26 ..........................................................................................................8, 9
§ 2.3.1.2 ..................................................................................................................5
§ 2.3.1.3 ..................................................................................................................5

Fed. Reg.
Vol. 76, No. 133, Tuesday, July 12, 2011, Page 41032 .........................................3

iv
 CASE NO. 03-15-00226-CV

IN THE COURT OF APPEALS
FOR THE THIRD JUDICIAL DISTRICT
AT AUSTIN, TEXAS

Texas Health & Human Services Commission,
Appellant,
v.
Linda Puglisi,
Appellee.

On Appeal from Cause No. D-1-GN-14-000381
53rd Judicial District Court of Travis County, Texas,
Honorable Judge Gisela D. Triana Presiding.

APPELLANT’S REPLY BRIEF

TO THE HONORABLE JUDGE OF THIS COURT:

COMES NOW the Texas Health and Human Services Commission (HHSC)

and submits Appellant’s Reply Brief.

I. ARGUMENT AND AUTHORITIES

A. Puglisi’s definition for covered DME is misleading.

Puglisi erroneously alleges that “[a]n item of medical equipment is covered if

it meet HHSC’s definition of DME.” Br. of Appellee, p. 3. Puglisi’s definition of

covered DME, however, is derived from her fundamental misreading of the May 21,

2013 CMS letter. Br. of Appellee; App. 1. The May 21, 2013 CMS letter states

that “[a]s such, items of DME meeting the state’s definition of such coverage is to

1
be provided to individuals (of any age) meeting the State’s medical necessity

criteria.” (emphasis added). Br. of Appellee; App. p. 1. This statement shows that

an item defined as DME may or may not meet the State’s definition of covered DME.

In fact, there is no dispute about whether any of Puglisi’s requested items are

defined as DME. The facts are that the power wheel chair, the integrated standing

feature, and the power seat system are all defined as DME. Similarly, there is no

dispute about which of Puglisi’ requested items are covered. The facts are that the

power wheelchair and the power seat system are covered DME. However, the

integrated standing feature is not covered. However, the parties dispute whether

the requested items are medically necessary since the items do not facilitate any

additional MRADLs activities.

Despite these immutable facts, Puglisi asserts that the integrated standing feature

should be covered DME solely because it satisfies the definition of DME. But the

definition of covered DME is determined by the process and procedures prescribed

in applicable statutes, rules, and policies. Appellant’s Br. App. 4, 5. In essence,

Puglisi’s improperly conflates the definition of DME and the definition of covered

DME in order to reach an erroneous conclusion. As a result, Puglisi cannot rely

solely on the definition of DME to determine whether certain DME is covered DME

or not. “There is no requirement that a state fund every medically necessary

procedure or item falling within a service it covers under its plan. To begin with,

2
medical necessity and coverage are distinct concepts; a patient’s medical necessity

does not determine whether a particular item or service is covered.” DeSario v.

Thomas, 139 F.3d 80 (2nd Cir. 1998).

In addition, the May 21, 2013 CMS letter also states that its “Notice of

Proposed Rulemaking issued July 12, 2011” include proposals that define “a medical

supply, equipment, and appliance” and also provide “that any item meeting any of

those definitions must be covered under the state plan.…”. Br. of Appellee;

App. 1. It is true that CMS published proposed policy changes and clarifications to

certain Home Health Services, however, CMS’s proposals have not been formally

adopted. Fed. Reg. Vol. 76, No. 133, Tuesday, July 12, 2011, Page 41032;

Appellant’s Reply Br.; App. p. 13. Regardless, nothing in the proposed changes

appears to restrict the HHSC’s authority to define the scope of coverage for Medicaid

DME.

B. Puglisi requires maximum assistance from her caregivers for all activities
of daily living.

Puglisi states that “[s]he requires a custom power wheelchair for all mobility.”

Br. of Appellee, p. 5. Based on statements of Molina Healthcare’s Rehab Review,

Nurse Review, and Medical Doctor Review, however, the Hearing Officer

determined the following:

3
 On or about June 4, 2013, Molina Healthcare forwarded the DME
request to Rehab Review for a third party review for medical necessity
of the DME requested. Rehab Review is a Rehabilitation Engineering
and Assistive Technology Society (RESNA) certified entity contracted
to conduct independent reviews for medical necessity of DME.

....

Appellant requires maximum assistance with all activities of daily
living including transfers. Appellant requires caregiver assistance to
transfer in and out of her bed and wheelchair.

Molina healthcare recommended approval of a group 3 power
wheelchair with a stand-alone dynamic stander to meet the Appellant’s
needs; however Appellant is unable to transfer independently and
would require assistance from one or two caregivers to transfer to the
dynamic stander.

A.R. at 334. In short, Puglisi needs maximum assistance from her caregivers for all

MRADLs with or without a power wheelchair, integrated standing feature, or power

seat elevation system. Therefore, a group 4 custom power wheelchair with an

integrated mobile stander is not medically necessary to correct or ameliorate

Puglisi’s disability, condition, or illness, given that her caregivers must assist her

with transfers, feeding, and dressing.

C. Compliance with Tex. Hum. Res. Code §§ 32.04242, 32.050(b) and Tex.
Admin. Code § 354.1041 is important.

Puglisi states that “[i]t does not matter that ‘Texas law requires HHSC to

analyze claims submitted first under Medicare the extent allowed by law.’” Br. of

Appellee p. 12. Also, Puglisi states that this case is not about the payment of

claims.” Br. of Appellee, p. 12. Further, Puglisi states that “Medicare’s primary

4
payor status does not dictate any particular order for securing prior authorization of

the recommended wheelchair.” Br. of Appellee, p. 12. However, compliance with

Tex. Hum. Res. Code §§ 32.04242, .050(b) and 1 Tex. Admin. Code § 354.1041 is

important. To a state agency, compliance with the law cannot be so easily

disregarded.

On the one hand, absent a clear delegation of authority, it is nonsensical to

expect a state Medicaid program to provide prior authorizations of DME for a

Federal Medicare program and vice versa. On the other hand, TMPPM § 2.3.1.2

(Benefits for Medicare/Medicaid Clients) provides that “[f]or eligible

Medicare/Medicaid clients, Medicare is the primary coinsurance and providers must

contact Medicare first for prior authorization and reimbursement.” (emphasis

added). Appendix 14. Further, TMPPM § 2.3.1.3 (Medicare and Medicaid Prior

Authorization) provides that “[f]or MQMB clients, do not submit prior

authorization requests to TMHP if the Medicare denial reason states ‘not medically

necessary.’ Medicaid only will consider prior authorization requests if the

Medicare denial states ‘not a benefit of Medicare.’” Appellant’s Reply Br.;

Appendix 14. Hence, Puglisi’s MQMB status is a significant intervening event that

renders the underlying issues of this suit unfit for judicial review because applicable

law and policy requires her to present her prior authorization to Medicare before

presenting her request to HHSC. See DeSario v. Thomas, 139 F.3d 80, 96 (2nd Cir.

5
1998), cert. granted, judgment vacated, Slekis v. Thomas, 525 U.S. 1098, 119 S.Ct.

864, 142 L.Ed.2d 767 (1998) (“In general, the ‘normal assumption [is] that an

applicant is not entitled to benefits unless and until he proves his eligibility.’”

(Quoting Lavine v. Milne, 424 U.S. (1976)). Therefore, compliance with Tex.

Hum. Res. Code §§ 32.04242, .050(b) and 1 Tex. Admin. Code § 354.1041 is an

essential prerequisite to seeking prior authorization or reimbursement from

Medicaid.

D. Puglisi subverts the substantial evidence review standard.

The trial court erred by ignoring the substantial evidence review standard and

the proper burden of proof. In this suit for judicial review, Puglisi has the burden

of proof. “[F]indings, inferences, conclusions, and decisions of an administrative

agency are presumed to be supported by substantial evidence, and the burden is on

the contestant to prove otherwise.” City of El Paso v. Pub. Util. Comm’n, 883

S.W.2d 179, 185 (Tex. 1994) (citing Tex. Health Facilities Comm’n v. Charter

Med.-Dall., 665 S.W.2d 446, 452–53 (Tex. 1984)). As long as a properly supported

finding given in the order supports an agency’s action, the court will uphold the

action despite the existence of other findings that are irrelevant or unsupported by

the record. Tex. Rivers Prot. Ass’n v. Tex. Natural Res. Conservation Comm’n, 910

S.W.2d 147, 155 (Tex. App.—Austin 1995, writ denied).

6
 Puglisi makes several statements throughout her brief that demonstrate her

failure to meet the burden of proof under the substantial evidence test. Br. of

Appellee, p. 24-34. In one example, Puglisi states that “[t]he bottom line is that the

administrative record contains no credible evidence refuting the professional

opinions of Linda’s medical providers.” Br. of Appellee, p. 31. This statement,

however, follows several pages of argument dedicated to discounting the evidence

in the record that supports the findings and conclusions contained in the orders

upholding Molina’s decision. The bottom line is that there is more than a mere

scintilla of evidence in the record to support the Hearing Officer’s and the Reviewing

Attorney’s findings and conclusions. Appellant’s Br. p. 16-44.

E. Detgen is controlling authority regarding HHSC’s categorical exclusion
of mobile standers based on the availability of a cost-effective alternative.

Puglisi asserts that “TMHP’s policy excluding wheelchair standing features

from Medicaid coverage …, is an invalid basis for HHSC’s decision” and that

“TMHP’s exclusion of wheelchair standing features meets all of the criteria of a

‘rule’ identified in the Texas Administrative Procedures Act (APA), but was not

promulgated in compliance with the Act.” Br. of Appellee, p. 40-41. These

assertions fail because HHSC is not prohibited from categorically excluding certain

types of DME and Puglisi cannot claim a private right to DME that has been

categorically excluded from Medicaid coverage.

7
 In fact, Puglisi fails to assert a private right to a mobile stander in her legal

analysis alleging how TMPPM § 2.2.14.26 is a rule. The most that Puglisi could

possibly claim is a right to exceptional circumstances review because mobile

standers are categorically excluded from Medicaid coverage. Exceptional

circumstances review applies to unlisted DME. See 1 TAC § 354.1039(a)(4)(D).

However, Puglisi never requested exceptional circumstances review.

In this case, TMPPM § 2.2.14.22 provides a less costly, yet equally effective

alternative to the categorically excluded mobile power stander. Appellant’s Br.

App. 5, DM-78. As to the reasonableness of HHSC’s categorical exclusion of

certain DME (i.e. ceiling lifts), the Fifth Circuit recently stated the following:

It is hardly unreasonable for a state to exclude—even categorically—
any medical device whose purpose can be served by a more cost-
effective method. Not only has Texas not violated the plain language
of the statute, but also the reasonableness standard in the text likely
supports its imposition of reasonable categorical exclusions. The
plaintiffs’ notion that it would be unreasonable for a state not to provide
particular equipment within its definition of DME sounds plausible,
except that the state can choose by definition to exclude ceiling lifts.
FN6. Moreover, a categorical exclusion based on the availability of
cost-effective alternatives cannot mean that the state has denied a
medically necessary device, even if the statute did impose such a
standard.

Detgen ex. rel. Detgen v. Janek, 752 F.3d 627, 632 (5th Cir. 2014) (Medicaid

recipient brought suit against HHSC challenging the denial of their request for the

installation of ceiling lifts to transfer the recipient to and from bed, bath, etc.).

Appellant’s Br. App. 8.
8
 Nevertheless, Puglisi asserts that Detgen is “wrong.” Br. of App. p. 36.

TMPPM § 2.2.14.26, however, does not violate federal and state Medicaid

requirements because “[a] State may develop a list of pre-approved items of ME

[Medical Equipment] as an administrative convenience because such a list

eliminates the need to administer an extensive application process for each ME

request submitted.” (emphasis added). CMS letter dated September 4, 1998;

Appellant’s Brief; Appendix 6. Moreover, CMS guidance provides that:

. . . [A] State will be in compliance with federal Medicaid requirements
only if, with respect to an individual applicant’s request for an item of
ME, the following conditions are met:

• The process is timely and employs reasonable and specific
criteria by which an individual item of ME will be judged for coverage
under the State’s home health services benefit. These criteria must be
sufficiently specific to permit a determination of whether an item of
ME that does not appear on a State’s pre-approved list has been
arbitrarily excluded from coverage based solely on a diagnosis, type of
illness, or condition.

• The State’s process and criteria, as well as the State’s pre-
approved list of items, are made available to beneficiaries and the
public.

• Beneficiaries are informed of their right under 42 C.F.R. Part 431
Subpart E, to a fair hearing to determine whether an adverse decision is
contrary to the law cited above.

CMS letter dated September 4, 1998; Appellant’s Br. App. 6. In addition to the

federal guidance described in the DeSario Letter, Detgen v. Janek provides that:

“[t]he rule the court employs is this: where a State has explicit guidance from CMS
9
that FFP will not be available for an item of DME, that State acts reasonably when

it categorically excludes such an item from coverage in its Medicaid policies.”

Detgen ex. rel. Detgen v. Janek, 945 F.Supp.2d 746, 759 (N. D. Tex. 2013) (“The

court finds that Texas Medicaid’s policy categorically excluding ceiling lifts from

coverage does not conflict with the Medicaid Act’s ‘reasonable standards’

requirement, the ‘amount, duration, and scope’ regulation, or the DeSario letter’s

guidance.”). Appellant’s Br. App. p. 12. Furthermore, recent CMS guidance

provides that “items of DME meeting the state’s definition of coverage is to be

provided to individuals (of any age) meeting the State’s medical necessity criteria.”

CMS letter dated May 21, 2013 (“This means that medically necessary ceiling lifts

will be reimbursed by CMS as part of the Texas home health benefit if these lifts

meet the state’s definition of DME [coverage].” (emphasis added). A.R. at 303.

Furthermore, Detgen states that”

It would be perfectly consistent with federal law and this letter to adopt
a list of pre-approved devices for convenience and a list of categorical
exclusions if based on reasonable grounds, such as the availability of
more cost-effective alternatives, and to permit a beneficiary to
demonstrate need for an item on neither list. In short nothing in the
DeSario letter prohibits categorical exclusions, which might even be
eminently reasonable and thus consistent with the statutory language.

Detgen ex. rel. Detgen v. Janek, 752 F.3d 627, 633 (5th Cir. 2014); Appellant’s Br.

App. p. 8. HHSC’s categorical exclusion of mobile standers, therefore, is consistent

with state and federal statutes, rules, and guidance.

10
F. Puglisi received adequate due process.

After Puglisi requested the DME, Molina reviewed, analyzed, and denied the

request. HHSC reviewed and affirmed Molina’s decision. The trial court

judicially reviewed HHSC’s decision. Now this Court is judicially reviewing the

trial court’s decision. Nevertheless, Puglisi is alleging a denial of due process even

though she has participated in hearings at multiple levels of administrative and

judicial review. Her experiences before the administrative and judicial tribunals

define adequate due process. If this Court concludes that Puglisi is entitled to more

due process, the clear solution is to remand this case back to Molina and begin due

process anew. See Univ. of Tex. Med. Sch. at Houston v. Than, 901 S.W.2d 926

(Tex. 1995) (“In general, the remedy for a denial of due process is due process.”).

II. CONCLUSION

This case should have been dismissed for lack of subject matter jurisdiction

or remanded to the agency to take and adjudicate additional evidence regarding

Puglisi’s dual eligibility status. Regardless, substantial evidence supports the

Hearing Officer and Reviewing Attorney findings and conclusions. Moreover,

Molina, the Hearing Officer, and the Reviewing Attorney properly interpreted and

applied agency rules, policies, and procedures. In the final analysis, Puglisi has

received all the process that she was due.

11
 PRAYER

WHEREFORE, PREMISES CONSIDERED, Appellant respectfully asks that

this Court: a) reverse the trial court and dismiss this suit for lack of subject matter

jurisdiction; b) reverse the trial court and render judgment in favor of HHSC because

Molina Healthcare’s and HHSC’s decisions are supported by substantial evidence;

or c) reverse the trial court and remand the case to Molina Healthcare and HHSC to

take additional evidence pursuant to Texas Government Code § 2001.175, to allow

Puglisi the opportunity to seek prior authorization from Medicare, and to allow

Puglisi the opportunity to request exceptional circumstances review.

Respectfully Submitted,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

JAMES E. DAVIS
Deputy Attorney General for Litigation

DAV ID A. TALBOT, JR.
Chief, Administrative Law Division

12
 /s/ Eugene A. Clayborn
EUGENE A. CLAYBORN
State Bar No.: 00785767
Assistant Attorney General
Deputy Chief, Administrative Law Division
O FFICE OF THE A TTORNEY G ENERAL OF T EXAS
P.O. Box 12548, Capitol Station
Austin, Texas 78711-2548
Telephone: (512) 475-3204
Facsimile: (512) 320-0167
eugene.clayborn@ texasattorneygeneral.gov

Attorneys for Texas Health & Human Services
Commission

CERTIFICATE OF COMPLIANCE

I certify that the reply brief submitted complies with Texas Rule of Appellate
Procedure 9 and the word count of this document is 2,621. The word processing
software used to prepare this filing and calculate the word count of the document
was Microsoft Word 97-2003.

Dated: August 14, 2015

/s/ Eugene A. Clayborn
EUGENE A. CLAYBORN
Assistant Attorney General

13
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document has
been served on this the 14th day of August, 2015 on the following:

Maureen O’Connell Via: Electronic Service
State Bar No.: 00795949
S OUTHERN D ISABILITY L AW C ENTER
1307 Payne Avenue
Austin, Texas 78757
moconnell458@gmail.com
Attorneys for Appellee

/s/ Eugene A. Clayborn
EUGENE A. CLAYBORN
Assistant Attorney General

14
 CASE NO. 03-15-00226-CV
___________________________________________________________
IN THE COURT OF APPEALS
FOR THE THIRD JUDICIAL DISTRICT
AT AUSTIN, TEXAS
____________________________________________________________
Texas Health & Human Services Commission,
Appellant,
v.
Linda Puglisi,
Appellee.
____________________________________________________________
On Appeal from Cause No. D-1-GN-14-000381
53rd Judicial District Court of Travis County, Texas
Honorable Judge Gisela D. Triana Presiding.
____________________________________________________________
APPELLANT’S REPLY BRIEF
_________________________________________________________________

APPENDICES

No. 13. Fed. Reg. Proposed Rules

No. 14. TMPPM 2.3

15
DEPARTMENT OF ÉIEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop S2-26-12
Baltimore, MD 21244-1850 øAñfverÊaMDg|ø

Center for Medicaid, CHIP, and Survey & Certification

CMCS Informational Bulletin

DATE: July 13, 2011

FROM: Cindy Mann, Director
Center for Medicaid, CHIP and Survey and & Certification (CMCS)

SUBJECT: Updates on Medicaid/CHIP

This Informational Bulletin covers several important topics of interest to States:
o New Initiative for Medicare-Medicaid Enrollees;
o Proposed Regulations Regarding Affordable Insurance Exchanges
o Home Health Services NPRM;
o PRA Package for Medicaid and CHIP State Plan, Waiver, and Program Submissions;
o CMS Second National Background Check Program Conference;
o Inclusion of Training Costs in Rate Development:
o Pharmacy Pricing Survey

New Initiative for Medicare-Medicaid Enrollees

CMCS and the Office of Medicare-Medicaid Coordination is pleased to announce the release of
a State Medicaid Director's letter providing guidance on opportunities to test new financial
models designed to help States improve quality and share in the lower costs that result from
better coordinatingcare for individuals enrolled in both Medicare and Medicaid (Medicare-
Medicaid enrollees). A longstanding barrier to coordinating care for Medicare-Medicaid
enrollees has been the financial misalignment between Medicare and Medicaid. To address this,
and in response to State requests CMS is eager to collaborate with States to test two models to
better align the financing of these two programs and integrate primary, acute, behavioral health
and long term services and supports for their Medicare-Medicaid enrollees. We will be setting
up calls with States to review these opportunities.

For more information, please visit:

f
Proposed Regulations Regard in g Affo rdable Insurance Exchan ges
On July ll,20Il, CMS issued the a proposed rule setting forth a framework to assist States in
building Affordabte Insurance Exchanges, state-based competitive marketplaces where
individuals and small businesses will be able to purchase affordable private health insurance.
Starting in2014, Exchanges will make it easy for individuals and small businesses to compare
health plans, get answers to questions, find out if they are eligible for tax credits for private

Appendix - 13
2lPage- Inforrnational Bulletin
insurance or health programs like Medicaid and the Children's Health fnsurance Program
(CHIP), and enroll in a health plan that meets their needs.
The proposed rules offer States guidance and options on how to structure their Exchanges in two
key areas:
. Setting standards for establishing Exchanges, setting up a Small Business Health
Optioñs Program (SHOP), performing the basic functions of an Exchange, and certiffing
health plans for participation in the Exchange, and;
. Ensuring premium stability for plans and enrollees in the Exchange, especially in the
early yeàri as new people come in to Exchanges to shop for health insurance.

These proposed rules set minimum standards for Exchanges, give States the flexibility they need
to desiþ Èxchanges that best fit their unique insurance markets, and are consistent with steps
States ñave already taken to move forward with Exchanges. The proposed rules build on over a
year,s worth of wórk with States, small businesses, consumers and health insurance plans and
ãffer Søtes substantial flexibility. For example, it allows States to decide whether their
Exchanges should be local, regional, or operated by a non-profit organization, how to select
phns tJparticipate, and whethã to partner with the Department of Health and Human Services
GIIIS) to split up the work.

To reduce duplication of effort and the administrative burden on the states, HHS also announced
that the federãl government will partner with States to make Exchange development and
operations morJeflicient. States can choose to develop an Exchange in partnership with the
féderal government or develop these systems themselves. This provides States more flexibility to
focus their resources on designing the right Exchanges for their local insurance markets.

To review the proposed rule yisi¡; http://www.ofr.gov/OFRUoload/OFRData/2011-1761O-Pl.pdf .

The comment period closes on September 28,2011. HHS will also convene a series of regional
listening sessións and meetings tofacilitate pubic comments. Additional guidance-including
propo."ã rules related to eligibility and enrollment procedures for Exchanges and Medicaid-
will be issued in the future.

For more information on Exchanges, includingfact sheets, visit
http ://www.healthcare. gov/exchanges'

Home Health Services; Policy Changes and Clarifications Related to Home Health

On Tuesday, July 5, 2011, CMS released a Notice of Proposed Rule Making (NPRM)
providing
additional guidance to States on the implementation of section 6407 of the Affordable Care Act
which adds a requirement that in the course of authorizing home health services, physicians must
document the exlstence of a face-to-face encounter (including through the use of telehealth) with
the Medicaid eligible individual within specified timeframes. This proposed rule aligns Medicaid
implementation õf face-to-face encounteis with Medicare's regulatory guidance. This will
improve facilitation of services for individuals dually eligible for both programs, and make it
for providers participating in both programs to understand the rules. This provision was
"*i..
effective ón January 1,2010, but this is a proposed rule and comments are welcome.

Appendix - 13
3lPage- lnforrxational Bulletin
ln addition, this proposed rule clarifies that home health services, including medical supplies,
equipment and appliances may not be restricted to the home, and if medically necessary, should
be provided in any non-institutional setting in which normal life activities take place. It includes
in regulation the definition of medical supplies, equipment and appliances.

For more information and instructions on how to submit comments on this rule, please visit:
http://www.gpo.gov/fdsys/pkg/FR-201l-07-12/pdf/201l-16937.pdf. All comments are due by
September 12,2011.

PRA Package for Medicaid and CHIP State Plan, Waiver, and Program Submissions

On Friday, July 1, 2011, CMS published a generic Paperwork Reduction Act (PRA) package in
the Federal Register that includes forms necessary for CMCS to conduct ongoing business with
our State partners to continue the implementation of the Affordable Carc Act provisions related
to Medicaid and the CHIP. These forms include State plan amendments, waiver, demonstration
and reporting templates that will be developed over the 3-year approval period.

This PRA package provides support to both States and CMS by:

o Developing streamlined submissions for States to implement health reform initiatives in
Medicaid and CHIP;
o Enhancing collaboration and partnerships by documenting CMS policy for States to use
as they are developing program changes; and
o Improving the efficiency of administration by creating a common and user friendly
understanding of the information needed by CMS to process requests for State plan
amendments, waiver, demonstrations and reporting.

For more information and instructions on how to submit comments on this rule, please visit:
http://www.qÞo.sov/fdsys/pke/FR-201 1-07-01/pdf/201 I -16600.pdf. Comments and
recommendations must be submitted by August 30,2011.

Encouraging States to Attend the CMS Second National Bacþround Check Program
Conference

We are pleased to announce that the second CMS National Background Check Program (NBCP)
Conference is scheduled for2.5 days, September 13-15,2011attheCrownePlazaHotel, St.
Louis-Downtown located at200 N. Fourth Street, St. Louis, Missouri. This conference will
provide education to NBCP gtantee States as well as non-grantee States interested in establishing
or improving their background check programs for long term care providers and facilities.
Although grantee States are required to use grant funds to send at least three attendees to each of
the NBCP conferences, we also hope States who have not yet received a grantwill attend.

The NBCP conference is part of the technical assistance efforts CMS is providing to States in
support of section 6201 of the Affordable Care Act of 20l},which directs the Secretary ofthe
Department of Health and Huma¡r Services to establish a nationwide program to identiff efficient

Appendix - 13
4lPage- Inforlnational Bulletin
eflective, and economical procedures for long term care facilities and providers to conduct
background checks on a statewide basis on all prospective direct patient access employees. The
NBCP will enhance the safety of residents and clients of long term care providers by
disqualiffing certain offenders from positions that would bring them into contact with vulnerable
populations served in long term care settings.

Non-grantee States interested in attending the second CMS NBCP Conference at their own
expense, should contact Lisa Byrd, CMS Training Coordinator, via email at
lisa.byrd@cms.hhs.gov by Monday, August l,20ll for registration assistance. If you are a
non-grantee State with travel funding issues that may prohibit attendance at this conference,
please contact the Background Check Team at Background_Checks@cms.hhs.gov to discuss the
potential for CMS assistance. For all other questions related to conference registration, please
contact lisa.byrd@cms.hhs. gov.

Inclusion of Training Costs in Rate Development

In light of questions we have received, CMCS is providing this information regarding the
mechanism by whioh provider-related training costs may be considered in the development of
the rate of payment for medical services. Questions have come up particularly in the area of
home health services.

Medicaid statute and regulations (sectio n 1902 of the Social Security Act and 42 Code of Federal
Regulations 430 and 447) allow reimbursement for covered services delivered by a qualified
p.ovider to an eligible beneficiary. Costs associated with requirements that are prerequisite to
being a qualified Medicaid provider are not reimbursable by Medicaid. However, costs
associated with maintaining status as a qualified provider may be included in determining the
rate for services. Specifically, if as part of its provider qualification requirements, a State
requires a provider to acquire a certain minimum number of hours of specified types of
continuing education (CE) each period (annually or quarterly, for example), the State may
recognize such CE expenses as a cost to the provider of doing business and may consider such
costJ in developing the rate paid for the service. The cost of CE may only be included as part of
the rate paid for the service and may not be claimed separately by the Medicaid agency as an
administrative expense.

For example, a State's provider qualification standards could require the direct service provider
to: 1) have a high school diploma (or its equivalent) and be at least 18 years of age, and2)
complete a certain number of specified CE hours or credits during the calendar or fiscal year (or
quarter¡ in order to maintain eligible provider status. The State could not pay, or include in its
rates, costs for individuals to obtain a high school diploma or its equivalent. However, the State
may include the estimated costs of meeting ongoing CE requirements in determining the rate
paid for the service. If the provider fails to acquire the minimum required number of CE hours
òr credits, the provider would no longer be qualified, and no Medicaid payment could be made
either for services or for the CE that would be needed as a prerequisite to regaining status as a
qualified provider.

Appendix - 13
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