TITLE 1.ADMINISTRATION

Part 4. OFFICE OF THE SECRETARY OF STATE

Chapter 81. ELECTIONS

Subchapter I. IMPLEMENTATION OF THE HELP AMERICA VOTE ACT OF 2002

1 TAC §81.176

The Office of the Secretary of State, Elections Division, adopts new §81.176 concerning provisional voting for direct record electronic voting systems. The rule is adopted without change to the text as proposed in the September 17, 2004, issue of the Texas Register (29 TexReg 8978).

The new section will authorize voting systems to utilize electronic voting where the results of provisional votes are properly segregated from the totals until the votes are accepted by the early voting ballot board.

No comments were received concerning the proposed rule.

The rule is adopted under the Texas Election Code (Code), Chapter 31, Subchapter A, §31.003, which provides the Secretary of State with authority to promulgate rules to obtain uniformity in the interpretation and application of the Code, and under the Code, Chapter 122, §122.001(c), which authorizes the Secretary of State to prescribe additional standards for voting systems.

The Code, Chapter 122, is affected by this adoption.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 2, 2005.

TRD-200500494

Ann McGeehan

Director of Elections

Office of the Secretary of State

Effective date: February 22, 2005

Proposal publication date: September 17, 2004

For further information, please call: (512) 475-2821


Part 15. TEXAS HEALTH AND HUMAN SERVICES COMMISSION

Chapter 355. REIMBURSEMENT RATES

Subchapter J. PURCHASED HEALTH SERVICES

4. MEDICAID HOSPITAL SERVICES

1 TAC §355.8063

The Health and Human Service Commission (HHSC or the Commission) adopts amended §355.8063, Reimbursement Methodology for Inpatient Hospital Services, with changes to the proposed text as published in the October 22, 2004, issue of the Texas Register (29 TexReg 9754). The text of the rule will be republished.

The amended §355.8063 allows for subsection (u) to replace the standard dollar amount (SDA) high-volume add-on factor with a proportionate payment methodology that allocated payments based on uncompensated care losses of designated Medicaid high-volume hospitals. The amended rule also adds language to target increases in high-volume payments to hospitals with Medicaid inpatient utilization in excess of 160% of the statewide average and distribute the payments based on Medicaid inpatient days. The amended rule will allow HHSC to achieve greater Medicaid program budget certainty while simplifying and streamlining the overall administrative process regarding high-volume Medicaid payments. The amendment to §355.8063(t)(1) will also add Potter and Randall counties to the list of urban counties with a publicly-owned hospital or hospital affiliated with a hospital district that is eligible to receive supplemental Medicaid payments for inpatient hospital services provided to Medicaid patients.

HHSC received comments regarding the proposed rule during the comment period, which included a public hearing on October 22, 2004, expressing support for the rule to implement high-volume payments to non-public, non-state hospitals. Written and public hearing comments were received from the following associations: Health Care Association, Tenet, Universal Health Services, Association of Volunteer Hospitals, Christus Santa Rosa Health Care, Texas Hospital Association, Christus St. Joseph Hospital, Scott & White Memorial Hospital, Christus Health Gulf Coast, Trinity Mother Frances Health System and from a Texas State Representative.

Comment: Comments concerning §355.8063 were received from Health Care Association, Tenet, Universal Health Services, Association of Volunteer Hospitals, Christus Santa Rosa Health Care, Texas Hospital Association, Christus St. Joseph Hospital, Scott & White Memorial Hospital, Christus Health Gulf Coast, Trinity Mother Frances Health System and from a Texas State Representative requesting that disproportionate share hospital status be required to qualify for the high-volume payments.

Response: The Commission acknowledges the comments received. High-volume payments are intended to provide additional reimbursement for higher medical assistance costs and indigent care cost of both DSH and non-DSH hospitals that treat higher levels of low-income and indigent patients. The supplemental payments allow both DSH and non-DSH hospitals to better cover the cost of serving Medicaid patients, thus assuring continued provider participation in the Medicaid program and high quality healthcare for Medicaid clients. No change was made to the rule in response to these comments.

Comment: HHSC received a comment from an HHSC staff member who recommended some grammatical changes to the rule.

Response: HHSC agrees with the commenter. The rule was revised to include the grammatical changes suggested by the HHSC staff member.

The amendment is adopted under the Texas Government Code, §531.033, which provides the commissioner of HHSC with broad rulemaking authority; the Human Resources Code, §32.021, and the Texas Government Code, §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas; and the Texas Government Code, §531.021(b), which provides HHSC with the authority to propose and adopt rules governing the determination of Medicaid reimbursements.

§355.8063.Reimbursement Methodology for Inpatient Hospital Services.

(a) Introduction. Except as otherwise specified in subsection (q) of this section, the Texas Medical Assistance Program (Medicaid) reimburses hospitals, except in-state children's hospitals, for covered inpatient hospital services using a prospective payment system. In-state children's hospitals are reimbursed for covered inpatient hospital services using the methodology described in subsection (o) of this section. For hospitals other than in-state children's hospitals, the department or its designee groups hospitals into payment divisions using the average base year payment per case in each hospital after adjusting each hospital's base year payment per case by a case mix index, a cost-of-living index, and a budgetary reduction factor of 10%. The budgetary reduction factor for admissions occurring in state fiscal year 1990 (September 1, 1989, through August 31, 1990) is 7.0% and the budgetary reduction factor for admissions occurring in state fiscal year 1991 (September 1, 1990, through August 31, 1991) is 5.5%. For admissions occurring in state fiscal year 1992 (September 1, 1991, through August 31, 1992) and subsequent state fiscal years, a budgetary reduction factor is not applied. The payment divisions are separated into $100 increments. If a payment division has less than ten observations for Medicaid data, the department or its designee considers that payment division to be statistically invalid. Hospitals within that payment division are placed into the nearest valid payment division.

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Diagnosis-related group (DRG)--The taxonomy of diagnoses as defined in the Medicare DRG system or as otherwise specified by the department or its designee.

(2) Case mix index--The hospital-specific average relative weight.

(3) Relative weight--The arithmetic mean of the dollars for a specific DRG divided by the arithmetic mean of the dollars for all cases.

(4) Standard dollar amount--The weighted mean base year payment for all hospitals in a payment division after adjusting each hospital's base year payment per case by a case mix index, a cost-of-living index, and a budgetary reduction factor of 10%. The budgetary reduction factor for admissions occurring in state fiscal year 1990 (September 1, 1989, through August 31, 1990) is 7.0% and the budgetary reduction factor for admissions occurring in state fiscal year 1991 (September 1, 1990, through August 31, 1991) is 5.5%. For admissions occurring in state fiscal year 1992 (September 1, 1991, through August 31, 1992) and subsequent state fiscal years, a budgetary reduction factor is not applied. The department or its designee establishes a minimum standard dollar amount of $1,600 and applies it to those hospitals whose standard dollar amount is less than the minimum. The department or its designee applies cost-of-living indexes to the standard dollar amounts established for the base year to calculate standard dollar amounts for prospective years. A cost-of-living index is not applied to the minimum standard dollar amount.

(5) Base year--A 12-consecutive-month period of claims data selected by the department or its designee as the basis for establishing the payment divisions, standard dollar amounts, and relative weights. The department or its designee selects a new base year at least every three years.

(6) Base year payment per case--The payment that would have been made to a hospital if the department or its designee reimbursed the hospital under similar methods and procedures used in Title XVIII of the Social Security Act, as amended, effective October 1, 1982, by Public Law 97-248. In calculating the base year payment per case, the department or its designee uses the interim rate established at tentative or final settlement, if applicable, of the most recent cost reporting period up to and including the cost reporting period associated with the base year.

(7) Interim rate--Total reimbursable Title XIX inpatient costs, as specified in paragraph (6) of this subsection, divided by total covered Title XIX inpatient charges per tentative or final cost reporting period. Beginning with 1985 hospital fiscal year cost reporting periods, the interim rate established at tentative settlement includes incentive/penalty payments to the extent that they continue to be permitted by federal law and regulation and continue to be included on Title XVIII cost reports.

(8) New hospital--A facility that has been in operation under present and previous ownership for less than three years and that initially enrolls as a Title XIX provider after the current base year. A new hospital must have been substantially constructed within the five previous years from the effective date of the prospective rate period.

(9) Children's hospital--A hospital within Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.

(10) Out-of-state children's hospital--A hospital outside of Texas that is recognized by Medicare as a children's hospital and is exempted by Medicare from the Medicare prospective payment system.

(c) Calculating relative weights and standard dollar amounts. The department or its designee uses recent Texas claims data to calculate both the relative weights and standard dollar amounts. A relative weight is calculated for each DRG and applied to all payment divisions. A separate standard dollar amount is calculated for each payment division. Except for border hospitals with a Texas Medicaid provider number beginning with an H and out-of-state children's hospitals, the department or its designee uses the overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, as the standard dollar amount to reimburse out-of-state hospitals. The overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, is also used as the standard dollar amount to reimburse military hospitals providing inpatient emergency services for admissions on or after October 1, 1993. The calculation of the standard dollar amount for out-of-state children's hospitals is described in subsection (r) of this section. Except for new hospitals, the overall arithmetic mean base year payment per case, including the cost of living update as specified in subsection (n) of this section, is also used as the standard dollar amount to reimburse hospitals that initially enroll as a Title XIX provider after the current base year. The standard dollar amount for new hospitals is the lesser of the overall arithmetic mean base year payment per case plus three percentile points, including the cost of living update as specified in subsection (n) of this section, or the hospital's average Medicaid cost per Medicaid discharge based on the tentative or final settlement, if applicable, of the hospital's first 12-month cost reporting period occurring after the hospital's enrollment as a Title XIX provider. In the event that the new hospital is a replacement facility for a hospital that is currently enrolled as a Title XIX provider, the hospital is reimbursed by using either the standard dollar amount of the existing provider or the standard dollar amount for new hospitals, whichever is greater. The use of the hospital's average Medicaid cost per Medicaid discharge, after adjusting for case-mix intensity, as its standard dollar amount is applied prospectively to the beginning of the next prospective year and is applicable only if the tentative or final settlement is completed and available at least 60 days before the beginning of the prospective year. The hospital's Medicaid costs are determined using similar methods and procedures used in Title XVIII of the Social Security Act, as amended, effective October 1, 1982, by Public Law 97-248. When two or more Title XIX participating providers merge, the department or its designee combines the Medicaid inpatient costs, as described in this subsection, of each of the individual providers to calculate a standard dollar amount, effective at the start of the next prospective period, to be used to reimburse the merged entity. Acquisitions and buyouts do not result in a recalculation of the standard dollar amount of the acquired provider unless acquisitions or buyouts result in the purchased or acquired hospital becoming part of another Medicaid participating provider. When the department or its designee determines that the department or its designee has made an error that, if corrected, would result in the standard dollar amount of the provider for which the error was made changing to a new payment division, either higher or lower, the department or its designee moves the provider into the correct payment division, and the department or its designee reprocesses claims paid using the initial, incorrect standard dollar amount that was in effect for the current state fiscal year by using the existing standard dollar amount of the payment division in which the provider was moved. In the determination of the corrected payment division, the department or its designee uses the relative weights that are currently in effect for the state fiscal year. The correction of this error condition only applies to the current state fiscal year payments. No corrections are made to payment rates for services provided in previous state fiscal years. If a specific DRG has less than ten observations for Medicaid data, the department or its designee uses the corresponding Medicare relative weight, except for DRGs relating to organ transplants. Relative weights for organ transplant DRGs with less than ten observations may be developed using Medicaid-specific data. The relative weights include organ procurement costs for both solid and nonsolid organs. The department or its designee makes no distinction between urban and rural hospitals and there is no federal/national portion within the payment.

(d) Add-on payments. There are no separate add-on payments. The department or its designee:

(1) includes capital costs in the standard dollar amount for each payment division;

(2) includes the cost of indirect medical education in the standard dollar amount for each payment division;

(3) includes the cost of malpractice insurance in the standard dollar amount for each payment division; and

(4) includes return on equity in the standard dollar amount for each payment division.

(e) Calculating the payment amount. The department or its designee reimburses each hospital for covered inpatient hospital services by multiplying the standard dollar amount established for the hospital's payment division by the appropriate relative weight. The patient's DRG classification is primarily based on the patient's principal diagnosis. The resulting amount is the payment amount to the hospital.

(f) Patient transfers. If a patient is transferred, the department or its designee establishes payment amounts as specified in paragraphs (1) - (4) of this subsection. If appropriate, the department or its designee manually reviews transfers for medical necessity and appropriate payment.

(1) If the patient is transferred to a skilled nursing facility or intermediate care facility, the department or its designee pays the transferring hospital the total payment amount of the patient's DRG.

(2) If the patient is transferred to another hospital, the department or its designee pays the receiving hospital the total payment amount of the patient's DRG. The department or its designee pays the transferring hospital a DRG per diem. The DRG per diem is based on the following formula: (DRG relative weight x standard dollar amount)/DRG mean length of stay (LOS) x LOS. The LOS is the lesser of the DRG mean LOS, the claim LOS, or 30 days. The 30-day factor is not used in establishing a DRG per diem amount for a medically necessary stay of a recipient less than age one in a Title XIX participating hospital or a recipient less than age six in a disproportionate share hospital as defined by the department.

(3) If the department or its designee determines that the transferring hospital provided a greater amount of care than the receiving hospital, the department or its designee reverses the payment amounts. The transferring hospital is paid the total payment amount of the patient's DRG and the receiving hospital is paid the DRG per diem.

(4) The department or its designee makes multiple transfer payments by applying the per diem formula to the transferring hospitals and the total DRG payment amount to the discharging hospital.

(g) Split billing. The department or its designee does not allow interim billings by providers. The hospital may bill the department or its designee when the patient exceeds his 30-day inpatient hospital limit or is discharged. The department or its designee bases payment on the diagnosis codes known at billing. The payment is final.

(h) Rebasing the standard dollar amounts. The HHSC or its designee rebases the standard dollar amount for each payment division at least every three years. HHSC will not rebase or recalculate the standard dollar amounts for each payment division for admissions during the period September 1, 2003 through August 31, 2005. The relative weights are recalibrated whenever the standard dollar amounts are recalculated. The standard dollar amounts are not rebased on an interim basis unless the HHSC or its designee determines that special circumstances warrant rebasing.

(i) Recalibrating the relative weights. The department or its designee recalibrates the relative weights whenever the standard dollar amounts are rebased.

(j) Revising the diagnosis related groups. The department or its designee parallels the taxonomy of diagnoses as defined in the Medicare DRG prospective payment system unless a revision is required based on Texas claims data or other factors as determined by the department or its designee.

(k) Appeals.

(1) A hospital may appeal individual claims as specified in other department rules. As specified in subparagraphs (A) - (C) of this paragraph, a hospital may also appeal mechanical, mathematical, and data entry errors in base year claims data and incorrectly computed subsequent adjustments to the hospital's base year claims data because of the base year's tentative or final settlement.

(A) If a hospital believes that the department or its designee made a mechanical, mathematical, or data entry error in computing the hospital's base year claims data, the hospital may request a review of the disputed calculation by the department or, at the department's direction, its designee. A hospital may not request a review if the disputed calculation is the result of the hospital's submittal of incorrect data or the result of the department's or its designee's application of an interim rate to the base year claims data derived from a cost reporting period occurring before the base year. Upon the provider hospital's request, the department or its designee provides the applicable available data used in calculating the hospital's base year claims data to the provider hospital. The hospital must submit a specific written request for review and appropriate specific documentation supporting its contention that there has been a mechanical, mathematical, or data entry error to the department or its designee. Except as specified in subparagraph (C) of this paragraph, the request must be submitted within 60 days after the hospital receives initial notification of its payment division and standard dollar amount. The department or its designee conducts the review as quickly as possible and notifies the hospital of the results. If the hospital is dissatisfied with the results of the review, the hospital may request a formal hearing under the procedures, including the expedited processing provisions, contained in Chapter 1 of this title (relating to the Texas Board of Health), except that, in the event of any conflict, the procedures contained in this section apply. Except as specified in subparagraph (C) of this paragraph, if the review or appeal is completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied to that next prospective year. If the review or appeal is not completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year. The base year claims data used by the department or its designee pending the review or appeal is the base year claims data established by the department or its designee.

(B) If a hospital believes that the department or its designee incorrectly computed subsequent adjustments to the hospital's base year claims data because of the base year's tentative or final settlement, the hospital may request a review of the disputed calculation related to the tentative or final settlement by the department or, at the department's direction, its designee. The hospital's request may also include a request to review the tentative or final settlement. The hospital must submit a specific written request for review and appropriate specific documentation supporting its contention that the tentative or final settlement is incorrect to the department or its designee. Except as specified in subparagraph (C) of this paragraph, the request must be submitted within 60 days after the hospital receives notification of a tentative or final settlement of the base year data. The department or its designee conducts the review as quickly as possible and notifies the hospital of the results. If the hospital is dissatisfied with the results of the review, the hospital may request a formal hearing under the procedures, including the expedited processing provisions, contained in Chapter 1 of this title (relating to the Texas Board of Health), except that, in the event of any conflict, the procedures contained in this section apply. Except as specified in subparagraph (C) of this paragraph, if the review or appeal is completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied to that next prospective year. If the review or appeal is not completed at least 60 days before the beginning of the next prospective year, any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year. The interim rate applied to the base year claims data pending the review or appeal is the interim rate established by the department or its designee.

(C) If a hospital believes that the department or its designee incorrectly computed the hospital's 1985 base year claims data as specified in subparagraph (A) of this paragraph, the hospital may submit a specific written request for review and appropriate specific documentation supporting its contention within 60 days after the effective date of this section. If a hospital believes that the department or its designee incorrectly computed the tentative or final settlement of the cost reporting period associated with the 1985 base year as specified in subparagraph (B) of this paragraph, the hospital may submit a specific written request for review and appropriate specific documentation supporting its contention within 60 days after the effective date of this section. The hospital must follow the process described in subparagraph (A) or (B) of this paragraph, as appropriate. If the review or appeal is completed by December 31, 1987, any adjustment required after the completion of the review or appeal is applied to the March 1, 1988, adjustment described in subsection (n) of this section. If the review or appeal is not completed by December 31, 1987, any adjustment required after the completion of the review or appeal is applied to the next prospective year.

(2) A hospital may not appeal the prospective payment methodology used by the department or its designee, including:

(A) the payment division methodologies;

(B) the DRGs established;

(C) the methodology for classifying hospital discharges within the DRGs;

(D) the relative weights assigned to the DRGs; and

(E) the amount of payment as being inadequate to cover costs.

(l) Cost reports. Each hospital must submit a cost report at periodic intervals as prescribed by Medicare or as otherwise prescribed by the department or its designee. The department or its designee uses data from these reports in rebasing years, in making adjustments as described in subsections (n) and (q) of this section, and in completing cost settlements for children's hospitals.

(m) Cost settlements. If a hospital has already begun its fiscal year on September 1, 1986, cost settlement for that portion of the hospital's fiscal year which occurs before September 1, 1986, is based on reimbursement for covered inpatient hospital services under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248. Except as otherwise specified in subsection (q) of this section, there are no cost settlements for services provided to recipients admitted as inpatients to hospitals reimbursed under the prospective payment system on or after the implementation date of the prospective payment system.

(n) Adjustments to base year claims data.

(1) Beginning with 1985 hospital fiscal year cost reporting periods, the department or its designee adjusts each hospital's base year claims data and resulting payment division and standard dollar amount to reflect the interim rate established at tentative and final settlement, if applicable, of the cost reporting period associated with the base year. The adjustments are applied only to claims data for months within the base year that coincide with months within the hospital's cost reporting period. The claims data for months within the base year that do not coincide with months within the hospital's cost reporting period remain unchanged until the tentative or final settlement of the cost reporting period containing those months has been completed. The adjustments are applied to the next prospective year beginning September 1, 1988, except as specified in subparagraphs (A), (B), and (C) of this paragraph.

(A) If the tentative or final settlement is not completed and available at least 60 days before the beginning of the next prospective year, any adjustment required because of the settlement is applied to the subsequent prospective year.

(B) If a review or appeal of a tentative or final settlement is not completed at least 60 days before the beginning of the next prospective year, the interim rate applied to the claims data on which the hospital's payment division and standard dollar amount are established is the interim rate established at tentative or final settlement by the department or its designee. Any adjustment required after the completion of the review or appeal is applied only to the subsequent prospective year.

(C) The department or its designee makes a March 1, 1988, adjustment to each hospital's 1985 base year claims data and resulting payment division and standard dollar amount to reflect the interim rate established at tentative and final settlement, if applicable, of the cost reporting period associated with the 1985 base year. Any additional adjustments required as a result of reviews and appeals described in subsection (k) of this section and completed by December 31, 1987, are also reflected in the March 1, 1988, adjustment. Future adjustments as described in this subsection and subsection (k) of this section are made at the beginning of each prospective year.

(2) The HHSC or its designee updates the standard dollar amount each year for each payment division by applying a cost-of-living index to the standard dollar amount established for the base year. The cost-of-living index for state fiscal years 2003, 2004, and 2005 will not be applied to the standard dollar amount for admissions during the period September 1, 2003 through August 31, 2005. The index used to update the standard dollar amounts is the greater of:

(A) the Health Care Financing Administration's (HCFA) Market Basket Forecast (PPS Hospital Input Price Index) based on the report issued for the federal fiscal year quarter ending in March of each year, adjusted for the state fiscal year by summing one-third of the annual forecasted rate of the index for the current calendar year and two-thirds of the annual forecasted rate of the index for the next calendar year; or

(B) an amount determined by selecting the lesser of the following two measures:

(i) the change in total charges per case for the latest year available compared to total charges per case for the previous year; or

(ii) the change in the Texas medical consumer price index-urban (that is, the arithmetic mean of the Houston and Dallas/Fort Worth medical consumer price indices for urban consumers) for the latest year available compared to the Texas medical consumer price index-urban for the previous year.

(o) Reimbursement to in-state children's hospitals. The HHSC or its designee reimburses in-state children's hospitals under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA) except for the cost of direct graduate medical education (DGME). For cost reporting periods beginning on or after September 1, 2003, children's hospitals with allowable DGME costs as determined under TEFRA principles will receive a pro rata share of their annual TEFRA DGME cost based on appropriations or allocations from appropriations made specifically for this purpose. The amount and frequency of interim payments will also be subject to the availability of appropriations made specifically for this purpose. Interim payments are subject to settlement at both tentative and final audit of a hospital's cost report. The HHSC or its designee establishes target rates and stipulates payments per discharge, incentives, and percentage of payments. The department or its designee uses each hospital's 1987 final audited cost reporting period (fiscal year ending during calendar year 1987) as its target base period. The target base period for hospitals recognized by Medicare as children's hospitals after the implementation of this subsection is the hospital's first full 12-month cost reporting period occurring after its recognition by Medicare. The HHSC or its designee annually increases each hospital's target amount for the target base period by the cost-of-living index described in subsection (n) of this section. The HHSC or its designee selects a new target base period at least every three years. The HHSC or its designee bases interim payments to each hospital upon the interim rate derived from the hospital's most recent tentative or final Medicaid cost report settlement. If a Title XIX participating hospital is subsequently recognized by Medicare as a children's hospital after the implementation of this subsection, the hospital must submit written notification to the HHSC or its designee and include adequate documentation and claims data. Upon receipt of the written notification from the hospital, the HHSC or its designee reserves the right to take 90 days to convert the hospital's reimbursement to the reimbursement methodology described in this subsection.

(p) Day and cost outliers. Effective for inpatient hospital services provided on or after July 1, 1991, the HHSC or its designee pays day or cost outliers for medically necessary inpatient services provided to clients less than age one in all Title XIX participating hospitals and clients less than age six in disproportionate share hospitals, as defined by the HHSC, that are reimbursed under the prospective payment system. For purposes of outlier payment adjustments, disproportionate share hospitals are defined as those hospitals identified by the HHSC during the previous state fiscal year as disproportionate share hospitals. If an admission qualifies for both a day and a cost outlier, only the outlier resulting in the highest payment to the hospital is paid. (Note: This subsection does not address reimbursement for the provision of other necessary inpatient hospital services under the Early and Periodic Screening, Diagnosis, and Treatment Program, as required by the Omnibus Budget and Reconciliation Act of 1989.)

(1) To establish day outliers, the HHSC or its designee first removes from the current base year data those admissions whose actual lengths of stay are greater than or equal to plus or minus three standard deviations from the arithmetic mean length of stay for each DRG. The HHSC or its designee then recomputes the arithmetic mean length of stay and the standard deviations for each DRG. Inpatient days, which exceed two standard deviations beyond the arithmetic mean length of stay for the DRG are eligible for a day outlier. Payment is based on 70% of a per diem amount of a full DRG payment. The per diem amount is established by dividing the full DRG payment amount by the arithmetic mean length of stay for the DRG.

(2) To establish cost outliers, the HHSC or its designee first determines what the amount of reimbursement for the admission would have been if the HHSC or its designee reimbursed the hospital under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA). The HHSC or its designee then determines the outlier threshold by using the greater of the full DRG payment amount multiplied by 1.5 or an amount determined by selecting the lesser of the universe mean of the current base year data multiplied by 11.14, or the hospital's standard dollar amount multiplied by 11.14. The hospital's standard dollar amount is the amount that the HHSC or its designee uses to reimburse the hospital under the prospective payment system. The outlier threshold is subtracted from the amount of reimbursement for the admission established under the TEFRA principles. The HHSC or its designee multiplies any remainder by 70% to determine the actual amount of the cost outlier payment.

(3) If a recipient less than age one is admitted to and remains in a hospital past his or her first birthday, medically necessary inpatient days and hospital charges after the child reaches age one are included in calculating the amount of any day or cost outlier payment.

(q) Hospitals with 100 or fewer licensed beds and certain hospitals with more than 100 licensed beds. The policies in this subsection apply only to hospital fiscal years beginning on or after September 1, 1989 for hospitals with 100 or fewer licensed beds at the beginning of the hospital's fiscal year or hospital fiscal years beginning on or after September 1, 2003 for hospitals with more than 100 licensed beds at the beginning of the hospital's fiscal year, located in a county that is not in a metropolitan statistical area (MSA) as defined by the U.S. Office of Management and Budget (OMB) and designated by the Center for Medicare & Medicaid Services as a Sole Community Provider (SCH) or Rural Referral Center RCC. At tentative cost settlement of the hospital's fiscal year (with subsequent adjustment at final cost settlement, if applicable), the HHSC or its designee determines what the amount of reimbursement during the fiscal year would have been if the HHSC or its designee reimbursed the hospital under similar methods and procedures used in Title XVIII of the Social Security Act, as amended, effective October 1, 1982, by Public Law 97-248, Tax Equity and Fiscal Responsibility Act (TEFRA). This determination is made without imposing a TEFRA cap. If the amount of reimbursement under the TEFRA principles is greater than the amount of reimbursement received by the hospital under the prospective payment system, the HHSC or its designee reimburses the difference to the hospital.

(r) Reimbursement to out-of-state children's hospitals. For admissions on or after September 1, 1991, the standard dollar amount for out-of-state children's hospitals is calculated as specified in this subsection. The department or its designee calculates the overall average cost per discharge for in-state children's hospitals based on tentative or final settlement of cost reporting periods ending in calendar year 1990. The overall average cost per discharge is adjusted for intensity of service by dividing it by the average relative weight for all admissions from in-state children's hospitals during state fiscal year 1990 (September 1, 1989 through August 31, 1990). The adjusted cost per discharge is updated each year by applying the cost-of-living index described in subsection (n) of this section. The resulting product is the standard dollar amount to be used for payment of claims as described in subsection (e) of this section. The department or its designee selects a new cost reporting period and admissions period from the in-state children's hospitals at least every three years for the purpose of calculating the standard dollar amount for out-of-state children's hospitals.

(s) Reimbursement of inpatient direct graduate medical education (GME) costs. The Medicaid allowable inpatient direct graduate medical education cost, as specified under similar methods and procedures used in the Social Security Act, Title XVIII, as amended, effective October 1, 1982, by Public Law 97-248, is calculated for each hospital having inpatient direct graduate medical education costs on its tentative or final audited cost report. Those inpatient direct medical education costs are removed from the calculation of the interim rate described in subsection (b)(7) of this section and not used in the calculation of the provider's standard dollar amount described in subsection (c) of this section. Those allowable inpatient direct graduate medical education costs for services delivered to Medicaid eligible patients with inpatient admission dates on or after September 1, 1997, will be subject to the cost determination and settlement provisions as described in this subsection. No Medicaid inpatient direct graduate medical education cost settlement provisions are applied to inpatient hospital admissions prior to September 1, 1997. For cost reporting periods beginning on or after September 1, 2003, providers with Medicaid allowable direct graduate medical education costs as described in this subsection will receive a pro rata share of their annual GME cost based on appropriations or allocations from appropriations made specifically for this purpose. The amount and frequency of interim payments will also be subject to the availability of appropriations made specifically for this purpose. Interim payments are subject to settlement at both tentative and final audit of a provider's cost report.

(t) Non-State Owned Urban Hospital Supplemental Inpatient Payments. Notwithstanding other provisions of this chapter, supplemental payments will be made each state fiscal year in accordance with this subsection to eligible hospitals that serve high volumes of Medicaid and uninsured patients.

(1) Supplemental payments are available under this subsection for inpatient hospital services provided by a publicly-owned hospital or hospital affiliated with a hospital district in Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Midland, Potter, Randall, Tarrant, and Travis. Supplemental payments will be made for inpatient services on or after July 6, 2001 for Bexar, Dallas, Ector, El Paso, Harris, Lubbock, Nueces, Tarrant, and Travis counties. Supplemental payments will be made for inpatient services on or after February 7, 2004 for Midland County. Supplemental payments will be made for inpatient services on or after May 29, 2004 for Potter and Randall counties.

(2) State funding for supplemental payments authorized under this paragraph will be limited to and obtained through intergovernmental transfers of local or hospital district funds. The supplemental payments described in this paragraph will be made in accordance with the applicable regulations regarding the Medicaid upper limit provisions codified at 42 C.F.R. §447.272.

(3) In each county listed in paragraph (1) of this subsection, the publicly-owned hospital or hospital affiliated with a hospital district that incurs the greatest amount of cost for providing services to Medicaid and uninsured patients, will be eligible to receive supplemental high volume payments. The supplemental payments authorized under this paragraph are subject to the following limits:

(A) In each state fiscal year the amount of any inpatient supplemental payments and outpatient supplemental payments may not exceed the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter (relating to Reimbursement to Disproportionate Share Hospitals (DSH)); and

(B) The amount of inpatient supplemental payments and fee-for-service Medicaid inpatient payments the hospital receives in a state fiscal year may not exceed Medicaid inpatient billed charges for inpatient services provided by the hospital to fee-for-service Medicaid recipients in accordance with 42 CFR §447.271.

(4) An eligible hospital will receive quarterly supplemental payments. The quarterly payments will be limited to one-fourth of the lesser of:

(A) The difference between the hospital's Medicaid inpatient billed charges and Medicaid payments the hospital receives for services provided to fee-for-service Medicaid recipients. Medicaid billed charges and payments will be based on a twelve consecutive-month period of fee-for-service claims data selected by HHSC; or

(B) The difference between the hospital's "hospital specific limit," as determined under §355.8065(f)(2)(E) of this chapter and the hospital's DSH payments as determined by the most recently finalized DSH reporting period.

(5) For purposes of calculating the "hospital specific limit" in paragraph (4)(B) of this subsection, the "cost of services to uninsured patients, " as defined by §355.8065(b)(5) of this chapter and "Medicaid shortfall," as defined by §355.8065(b)(16) of this chapter, will be adjusted as follows:

(A) The amount of Medicaid payments (including inpatient and outpatient supplemental payments) that exceed Medicaid cost will be subtracted from the "Medicaid shortfall."

(B) The amount of the "Medicaid shortfall," as adjusted in accordance with subparagraph (A) of this paragraph, will be subtracted from the "cost of services to uninsured patients" to ensure that, during any state fiscal year, a hospital does not receive more in total Medicaid payments (inpatient and outpatient rate payments, graduate medical education payments, supplemental payments and disproportionate share hospital payments) than its cost of serving Medicaid patients and patients with no health insurance.

(u) In accordance with this subsection and subject to the availability of funds, a high volume adjustment factor will be included in the calculation of the state fiscal year 2003 (September 1, 2002 through August 31, 2003) Standard Dollar Amount described in subsection (a)(4) of this section for eligible hospitals. For purposes of this subsection, payments made in state fiscal year 2004, prior to the effective date of this subsection, may be adjusted in accordance with the methodology set out in this subsection. Notwithstanding paragraphs (1) and (2) of this subsection, all non-state owned or operated, non public, DRG reimbursed hospitals located in urban counties with a population greater than 100,000, and Medicaid days in greater than 175% of the mean Medicaid days in state fiscal year 2002 (September 1, 2001 through August 31, 2002) will be eligible for a high volume adjustment to their state fiscal year 2004 SDA. Medicaid days will be based on hospital claims data selected by HHSC. County population will be based on the 2000 United States census. Eligible hospitals in counties with a population less than 1,000,000 will receive a high volume adjustment factor of 3.25%; eligible hospitals in counties with a population greater than 1,000,000 will receive a high volume adjustment factor of 5.125%. Effective September 1, 2004, high-volume payments previously made as an add-on percentage to standard dollar amount shall be made according to paragraph (3) of this subsection.

(1) Eligible Hospitals. All non-state owned or operated, non public, DRG reimbursed hospitals located in urban counties with a population greater than 100,000, and Medicaid days greater than 175% of the mean Medicaid days in state fiscal year 2001 (September 1, 2000 through August 31, 2001) will be eligible for a high volume adjustment to their SDA. Medicaid days will be based on hospital claims data selected by HHSC. County population will be based on the 2000 United States census.

(2) All eligible hospitals in counties with a population less than 1,000,000 will receive a high volume adjustment factor of 6.50%; eligible hospitals in counties with a population greater than 1,000,000 will receive a high volume adjustment factor of 10.25%. High-volume payments will be made to eligible hospitals that serve as a safety net in providing emergency and inpatient care.

(3) High-volume payments recognize the higher medical assistance costs and indigent care cost of hospitals that treat higher levels of low-income and indigent patients. Eligible hospitals are defined as non-state owned or operated, non-public, hospitals located in urban counties with Medicaid days greater than 160% of the mean Medicaid days. High-volume payments totaling $22,500,000 shall be allocated in proportion to uncompensated care loss for eligible hospitals participating in the current year DSH program. High-volume payments totaling $63,808,065 shall be made to eligible hospitals in proportion to Medicaid inpatient days of service. Payments under this provision will be made annually based on current year finalized Medicaid DSH claims data. The state shall adjust the high volume payments in accordance with applicable Medicaid charge upper limit regulations. Any adjustment shall be made on a proportional basis in order to allow eligible hospitals to participate to the fullest extent possible within the limits on disproportionate share hospital payments. HHSC shall use current year DSH data to determine Medicaid days. County population will be based on the 2000 United States census.

(v) State Owned Hospital Supplemental Inpatient Payments. Notwithstanding other provisions of this attachment, supplemental payments will be made each state fiscal year in accordance with this subsection to state government-owned or operated hospitals for inpatient services provided to Medicaid patients.

(1) Supplemental payments are available under this subsection for inpatient hospital services provided by state government-owned or operated hospitals on or after December 13, 2003. To qualify for a supplemental payment, the hospital must be owned or operated by the state of Texas.

(2) The aggregate supplemental payment amount will be the annual difference between the aggregate upper payment limit and the inpatient fee-for-service Medicaid payments made to the state government-owned or operated hospitals under this attachment. The aggregate upper payment limit will be calculated, based on Medicare payment principles and in accordance with the federal upper limit regulations at 42 CFR §447.272, using the most recent cost report data available.

(3) The amount of the supplemental payment made to each state government-owned or operated hospital will be determined by:

(A) dividing each hospital's fee-for-service Medicaid payments by the sum of the Medicaid fee-for-service payments of all state government-owned of operated hospitals;

(B) multiplying the percentage calculated in subparagraph (A) of this paragraph by the aggregate supplemental payment calculated in paragraph (2) of this subsection.

(4) Supplemental payments determined under this subsection will be calculated annually and paid quarterly.

(5) Supplemental payments made under this subsection when combined with other inpatient payments made under this section shall not exceed the maximum amounts allowable under applicable federal regulations at 42 CFR §447.271.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 3, 2005.

TRD-200500502

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Effective date: February 23, 2005

Proposal publication date: October 22, 2004

For further information, please call: (512) 424-6900


Chapter 373. MEDICAID ESTATE RECOVERY PROGRAM

The Texas Health and Human Services Commission (HHSC or Commission) adopts new Chapter 373, Medicaid Estate Recovery Program, Subchapter A, General, §§373.101, 373.103, 373.105; Subchapter B, Recovery Claims, §§373.201, 373.203, 373.205, 373.207, 373.209, 373.211, 373.213, 373.215, 373.217, 373.219; and Subchapter C, Notice, §§373.301, 373.303, 373.305, 373.307.

HHSC adopts §§373.101, 373.105, 373.205, 373.207, 373.217, 373.301, 373.303, and 373.305, without changes to the proposed text as published in the December 3, 2004, issue of the Texas Register (29 TexReg 11229) and will not be republished.

HHSC adopts §§373.103, 373.201, 373.203, 373.209, 373.211, 373.213, 373.215, 373.219, and 373.307 with changes to the proposed as text published in the December 3, 2004, issue of the Texas Register (29 TexReg 11229). The text of the rules will be republished. Changes in the adopted rules respond to public comments on the proposed rules or reflect a non-substantive variation from the proposed rules.

New Chapter 373, Medicaid Estate Recovery Program, sets forth the provisions for the implementation of a Medicaid Estate Recovery Program that were developed with input from the public. Subchapter A addresses the purpose and applicability of the Medicaid Estate Recovery Program and defines the terms used in the chapter. Subchapter B concerns the basis of Medicaid Estate Recovery Program claims and the program's claim procedures. Subchapter C concerns the notice provisions to be provided by the program.

Section 531.077, Government Code (as added by Acts 2003, 78th Leg., ch 198, §2.17), requires HHSC to establish a Medicaid Estate Recovery Program (MERP) in order to comply with the provisions of the applicable federal law found at 42 U.S.C. §1396p(b)(1). HHSC, which is the State Medicaid Agency, and the Department of Aging and Disability Services (DADS), will operate a Medicaid Estate Recovery Program that will seek recovery of the costs of Medicaid long-term care benefits received by certain Medicaid recipients.

Section 531.077, Government Code, requires that any funds recovered by the Medicaid Estate Recovery Program be deposited in the Medicaid account in the State's general revenue fund. Under the statute, money in the account may be appropriated only to fund long-term care, including both community-based and facility-based care.

HHSC received comments from the Texas Chapter of the National Academy of Elder Law Attorneys (NAELA); The Center for Public Policy Priorities (CPPP); Texas Rural Legal Aid, Inc. (TRLA); Texas Senior Advocacy Coalition (TSAC); and the public. The comments received and HHSC's responses follow.

Comments on Chapter 373

General comment. The Texas Senior Advocacy Coalition (TSAC) commented in favor of the implementation of a Medicaid estate recovery program. Five members of the public commented in favor of the implementation of a Medicaid estate recovery program. Five members of the public commented against the implementation of a Medicaid estate recovery program.

Comments on §373.103

Comment. The Center for Public Policy Priorities (CPPP) commented in favor of proposed rule §373.103(a)(2), Applicability, in that the proposed rules exempted individuals from estate recovery who had applied for services before the effective date of the program, but sought the inclusion of the term "initially" for clarification purposes.

Response. The Commission agrees with the comment and has inserted the word "initially" in the beginning of the first sentence of subsection (a)(2) of §373.103.

Comment on §373.105(14)

Comment. The Texas Chapter of the National Academy of Elder Law Attorneys (NAELA), commented in favor of proposed rule §373.105(14), Definitions, Value of Real Property, but sought a modification of the language in the proposed rule to add language concerning mortgage liens, outstanding taxes or other exemptions because this modification would eliminate the punitive effect to persons who have borrowed funds against the equity of their homes to pay for the costs of their care.

Response. The Commission disagrees with the comment, as no punitive effect on persons will exist, as MERP claims will not be made until after the death of a Medicaid recipient for the costs of care paid by Medicaid.

Comments on §373.201

Comment. Texas Chapter of the National Academy of Elder Law Attorneys (NAELA), commented in favor of proposed rule §373.201, Basis for Claims, but sought the exclusion of language allowing MERP claims to be filed or presented to guardians under §805(4) of the Texas Probate Code as this would cause confusion, complications, and possible adverse effects if a claim were allowed under this provision as well as under §322 of the Texas Probate Code.

Response. The Commission agrees with the comment and has modified the language in §373.203 to clarify that that a MERP claim will be made only under the procedures outlined in §322 of the Texas Probate Code, and will not be presented or filed with a guardian under §805(4) of the Texas Probate Code.

Comments on §373.203

Comment. The Texas Chapter of the National Academy of Elder Law Attorneys (NAELA) commented in favor of proposed rule §373.203, Claims Procedures, but sought the exclusion of language related to §805(4) of the Texas Probate Code.

Response. The Commission agrees with the comment and has modified language in §373.203 to clarify that a MERP claim will be made only under the procedures outlined in §322 of the Texas Probate Code, and will not be presented or filed with a guardian under §805(4) of the Texas Probate Code.

Comments on §373.207

Comment. The Texas chapter of the National Academy of Elder Law Attorneys (NAELA), and The Center for Public Policy Priorities (CPPP) commented for proposed rule §373.207, Exemptions from Claims, and requested the addition of language under the provisions of 42 U.S.C. §1396(c)(2)(A)(iv) to exempt from transfer of assets penalties a home that is transferred to an individual's son/daughter who has lived in the home for at least two years prior to nursing home entry and who provided care that delayed nursing home entry of a Medicaid recipient.

Response. The Commission disagrees as HHSC, the State Medicaid Agency, was legislatively mandated to establish a Medicaid Estate Recovery Program (MERP) in order to comply with the provisions of the applicable federal law found at 42 U.S.C. §1396p(b)(1), and not at 42 U.S.C. §1396(c)(2)(A)(iv), to seek the recovery of the costs of Medicaid long-term care benefits received by certain Medicaid recipients.

Comments on §373.209

Comment. The Center for Public Policy Priorities (CPPP) commented in favor of proposed rule §373.209, Undue Hardship Waivers, but sought an increase in the time allowed to request undue hardship waivers from the Medicaid Estate Recovery Program from 40 days to 60 days in §373.209(a).

Response. The Commission agrees that it would benefit interested parties if more time were allowed to request undue hardship waivers and, in the second sentence of subsection (a), has changed the time to request an undue hardship waiver from 40 days to 60 days.

Comment. The Texas Chapter of the National Academy of Elder Law Attorneys (NAELA) commented in favor of §373.209, Undue Hardship Waivers, but suggested that the word "illegal" be inserted in subsection (b)(2) to clarify that legal estate planning methods were allowed.

Response. The Commission agrees with the comment that a revision of the language will assist in the clarification of this subsection and will insert the phrase "contrary to the requirements of Medicaid law" after the word "divested," and the revised subsection (b)(2) will read as follows: "The circumstances giving rise to the hardship were created by, or are the result of, estate planning methods under which assets were sheltered or divested contrary to the requirements of Medicaid law in order to avoid estate recovery."

Comment. The Texas Chapter of the National Academy of Elder Law Attorneys (NAELA), commented against proposed rule §373.209(c)(3), Undue Hardship Waivers, requiring that farms or ranches must produce 50% of the heirs' and legatees' livelihoods, as essentially negating the hardship waiver and requests that the language be revised to delete the 50% requirement and require only that the heir or legatee participate in the working farm or ranch activities.

Response. The Commission disagrees with this comment. The Centers for Medicare and Medicaid Services (CMS) commented that §373.209(c)(3), Undue Hardship Waivers, must treat exemptions for family-owned businesses and family ranches and farms equally with no disparate treatment and that the language must include criteria that reflect that the business, ranch or farm is the primary source of family income.

Comment. The Texas Chapter of the National Academy of Elder Law Attorneys (NAELA), commented against proposed rule §373.209(d), Undue Hardship Waivers Applicable to Homesteads, and sought to delete all of the requirements in the proposed rules requiring the homestead waiver to be linked to an individual's income.

Response. The Commission disagrees with this comment. The Commission received many public comments requesting that HHSC exempt a statewide homestead value amount such as $50,000 or $100,000 rather than a percentage of a homestead's value due to the wide disparity among counties in the value of homesteads. The Centers for Medicare and Medicaid Services (CMS) approved a provision allowing the Commission a $100,000 homestead undue hardship exemption for heirs whose income is below 300 percent of the federal poverty level. CMS will not allow any state to implement a statewide automatic and unconditional exempted homestead amount, as this would, under Federal law, violate the purpose of Medicaid estate recovery.

Comments on §373.211

Comment. The Center for Public Policy Priorities (CPPP) and the Texas Chapter of the National Academy of Elder Law Attorneys (NAELA) commented for proposed rule §373.211, Right to a Review of an Undue Hardship Waiver Denial, but requested that the time allowed for requesting a hardship waiver denial review be increased from 40 days to 60 days in §373.211(a).

Response. The Commission agrees this will benefit the public and will increase the time period allowed to request a review of an undue hardship waiver denial in §373.211(a) from 40 days from 60 days.

Comments on §373.213

Comment. The Center for Public Policy Priorities (CPPP) and the Texas Chapter of the National Academy of Elder Law Attorneys (NAELA) commented for proposed rule §373.213, Deduction Allowed For Home Maintenance and Costs of Care, but requested that the time allowed in §373.213(c) for obtaining these deductions be increased from 40 days to 60 days to enable families more time to collect necessary supporting documents

Response. The Commission agrees and will increase the time period in §373.213(c) from 40 to 60 days, as this will allow families more time to collect information.

Comments on §373.215

Comment. The National Academy of Elder Law Attorneys (NAELA) commented in favor of §373.215, Recovery Not Cost Effective, but sought inclusion of the term "recoverable" and the revision of §373.215(1) for clarification purposes.

Response. The Commission agrees with this comment and will insert the term "recoverable" and revise §373.215(1) to read: "the recoverable value of the estate is $10,000 or less."

Comments on §373.307

The Center for Public Policy Priorities (CPPP) commented for proposed rule §373.307, Notice of Intent to File a Claim Upon the Death of a Medicaid Recipient, but sought an increase to 60 days from 40 days in the time allowed to request undue hardship waivers from Medicaid estate recovery in §373.307(c).

Response. The Commission agrees that it would benefit interested parties if more time were allowed to request undue hardship waivers, and, in §373.307(c), has changed the time to request the waiver from 40 days to 60 days.

Non-substantive grammar and style changes were made at the suggestion of HHSC staff to improve the rules' readability, clarity, and consistency.

Subchapter A. GENERAL

1 TAC §§373.101, 373.103, 373.105

The new sections are adopted under §531.033, Government Code, which provides the Commissioner of HHSC with broad rule making authority, and §531.033, Government Code (as added by Acts 2003, 78th Leg., ch. 198, §2.17), under which HHSC, the State Medicaid Agency, is mandated to establish a Medicaid Estate Recovery Program (MERP) in order to comply with the provisions of the applicable federal law found at 42 U.S.C. §1396p(b)(1) to seek the recovery of the costs of Medicaid long-term care benefits received by certain Medicaid recipients.

§373.103.Applicability.

(a) A Medicaid Estate Recovery claim may be filed against the estate of a deceased Medicaid recipient for covered Medicaid services if the recipient:

(1) Was age 55 years or older at the time the services were received; and

(2) Initially applied for covered Medicaid long-term care services on or after March 1, 2005, the effective date of these rules.

(b) For purposes of this chapter, an individual will be considered to be age 55 as of the first day of the month following the month in which the recipient attains the age of 55.

(c) Covered Medicaid long-term care services include the following services provided to a recipient age 55 years or older under the State of Texas Medicaid plan under Title XIX of the Social Security Act (SSA):

(1) Nursing facility services;

(2) Intermediate Care Facilities for the Mentally Retarded (ICF-MR);

(3) Home and Community-Based Services (§1915(c), SSA) and Community Attendant Services (§1929(b), SSA); and

(4) Related costs of hospital and prescription drug services.

(d) For the purposes of this chapter, covered services do not include services provided before the effective date of these rules.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 7, 2005.

TRD-200500556

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Effective date: March 1, 2005

Proposal publication date: December 3, 2004

For further information, please call: (512) 424-6900


Subchapter B. RECOVERY CLAIMS

1 TAC §§373.201, 373.203, 373.205, 373.207, 373.209, 373.211, 373.213, 373.215, 373.217, 373.219

The new sections are adopted under §531.033, Government Code, which provides the Commissioner of HHSC with broad rule making authority, and §531.033, Government Code (as added by Acts 2003, 78th Leg., ch. 198, §2.17), under which HHSC, the State Medicaid Agency, is mandated to establish a Medicaid Estate Recovery Program (MERP) in order to comply with the provisions of the applicable federal law found at 42 U.S.C. §1396p(b)(1) to seek the recovery of the costs of Medicaid long-term care benefits received by certain Medicaid recipients.

§373.201.Basis for Claims.

The acceptance of Medicaid medical assistance, as defined by Title XIX of the Social Security Act, including mandatory and optional payments under the Social Security Act, provides a basis for: A Class 7 probate claim, as defined in §322 of the Texas Probate Code, Classification of Claims against Estates of Decedents, in favor of the Medicaid Estate Recovery Program as an interested party in the estate of the deceased Medicaid recipient.

§373.203.Claims Procedures.

(a) The Medicaid Estate Recovery Program (MERP) may file or present a: Class 7 probate claim under §298, Claims Against Estates of Decedents, Texas Probate Code, against the estate of deceased Medicaid recipients in accordance with the priorities contained in §322, Classification of Claims against Estates of Decedents, Texas Probate Code.

(b) A claim may be filed in accordance with applicable provisions of the Texas Probate Code, including §298, Claims Against Estates of Decedents, which allows unsecured claims to be presented at any time before the estate is closed or within 4 months of receipt of notice from the estate administrator.

§373.209.Undue Hardship Waivers.

(a) The Medicaid Estate Recovery Program (MERP) will not recover from estates if recovery would cause undue hardship. An undue hardship waiver request form will be provided with the MERP Notice of Intent to File a Claim, and undue hardship waiver requests must be made within 60 days of the date of the MERP Notice of Intent to File a Claim.

(b) An undue hardship does not exist solely because:

(1) Recovery would prevent heirs or legatees from receiving an anticipated inheritance; or

(2) The circumstances giving rise to the hardship were created by, or are the result of, estate planning methods under which assets were sheltered or divested contrary to the requirements of Medicaid law in order to avoid estate recovery.

(c) Undue hardship waivers include:

(1) The estate property subject to recovery has been the site of the operation of a family business, farm, or ranch at that location for at least 12 months prior to the death of the decedent; is the primary income producing asset of heirs and legatees, and produces 50 percent or more of their livelihood; and recovery by the State would affect the property and result in the heirs or legatees losing their primary source of income;

(2) Heirs and legatees would become eligible for public and/or medical assistance if a recovery claim were made;

(3) Allowing one or more survivors to receive the estate will enable him or her or them to discontinue eligibility for public and/or medical assistance;

(4) The Medicaid recipient received medical assistance as the result of a crime, as defined by Texas law, committed against the recipient; or

(5) Other compelling reasons.

(d) Undue Hardship Waivers Applicable to Homesteads After receiving a Medicaid estate recovery claim, an heir may assert that recovery against a deceased Medicaid recipient's homestead would be an undue hardship and that the homestead should therefore be exempt from recovery for the cost of Medicaid long-term care services. The Health and Human Services Commission will exempt a decedent's home from estate recovery based on undue hardship when the following conditions have been established to the Commission's satisfaction:

(1) The tax appraisal district value of the homestead is less than $100,000. If the tax appraisal district value of the homestead exceeds this amount, the first $100,000 of the tax appraisal district value for the most recent tax year at the time of the recipients' death shall be exempt from estate recovery. Any equity value of the tax appraisal district value for the most recent tax year at the time of the recipients' death in excess of $100,000 is subject to estate recovery.

(2) One or more siblings or direct descendents of the deceased person (lineal heir(s), such as children and grandchildren) will inherit the homestead of the deceased Medicaid recipient, provided that each sibling or lineal heir inheriting the homestead has gross family income below 300 percent of the Federal Poverty Level.

(3) When there are multiple heirs and not all heirs qualify for the hardship waiver, only that percentage of the homestead that corresponds to the qualifying heir or heirs' share of the homestead will be exempt from Medicaid estate recovery.

(4) "300 percent of the federal poverty level" is a gross income test; no exclusions or deductions are allowed.

(5) "Family" means that the Health and Human Services Commission will consider each heir separately. Heirs will not be aggregated into one family unless the heirs are minor children who are siblings. In the case of the adult heir, his or her family will be limited to the heir, the heir's spouse, and the heir's biological or legally adopted minor children and stepchildren residing in the household. In the case of the heir who is a minor, the heir's family will be the heir, his or her parent(s) or stepparent residing in the household, and the heir's minor siblings residing in the household, including half-, step-, and legally adopted siblings.

Figure: 1 TAC §373.209(d)(5)

(e) HHSC has exclusive authority to waive its Medicaid estate recovery claim and grant undue hardship waivers as determined by the Medicaid Estate Recovery Program (MERP) program on an individual case-by-case basis. An undue hardship waiver determination will be made by MERP within 40 days of the receipt of an undue hardship waiver request form and all required necessary supporting documents by MERP.

(f) Undue hardship waiver request forms must be submitted to the following address: MERP, Hardship Waiver Request, P.O. Box 13247, Austin, Texas 78711.

§373.211.Right to a Review of an Undue Hardship Waiver Denial.

(a) A Medicaid Estate Recovery Program (MERP) undue hardship waiver applicant may request a review of the denial of an undue hardship waiver request within 60 days of receiving notice of the denial from MERP. The review is an informal process and is not a hearing.

(b) MERP will review the request within 40 days from the date the request is received by MERP. All requests for a review of the denial of an undue hardship waiver request must be made in writing to MERP, Hardship Waiver Denial Review Request, P.O. Box 13247, Austin, Texas 78711.

§373.213.Deduction Allowed for Expenses for Home Maintenance and Costs of Care.

(a) An amount equal to necessary and reasonable maintenance expenses and taxes may be deducted from the Medicaid Estate Recovery Program (MERP) claim for maintaining the home of the deceased Medicaid recipient, provided that sufficient supporting documentation of these expenditures, such as receipts, is provided to MERP by estate personal representatives, heirs, or legatees. Necessary and reasonable expenses for maintaining the home include real estate taxes, utility bills, insurance, home repairs, and home maintenance expenses such as lawn care.

(b) An amount equal to the necessary and reasonable expenses for the direct payment of the costs of care (including payment of personal attendant care) provided for a deceased Medicaid recipient that enabled the recipient to remain in his or her home and thereby delayed the institutionalization of the Medicaid recipient may be deducted from the MERP claim, provided that sufficient supporting documentation of these expenditures, such as receipts, is provided to MERP by estate personal representatives, heirs, or legatees.

(c) Requests for obtaining allowable deductions from MERP claims for expenses under subsections (a) or (b) of this section must be made in writing within 60 days after receipt of the Notice of the Intent to File a Claim by MERP. All supporting documentation must be attached to the request and sent to MERP, Home Maintenance/Costs of Care Request, P.O. Box 13247, Austin, Texas 78711.

§373.215.Recovery Not Cost-Effective.

No Medicaid estate recovery claim will be filed if it is not cost effective. A claim will not be cost-effective if:

(1) the value of the recoverable estate is $10,000 or less,

(2) the recoverable amount of Medicaid costs is $3,000 or less, or

(3) the cost involved in the sale of the property would be equal to or greater than the value of the property.

§373.219.Claim Payments.

(a) All payments on estate recovery claims must be made payable to the "Texas Medicaid Account for Long-Term Care," and must be sent to MERP, P.O. Box 13247, Austin, Texas 78711.

(b) HHSC MERP may compromise, settle, or waive any claim that does not qualify for an undue hardship waiver upon good cause shown. Interest on the unpaid portion of any claim is the same as the amount provided under §2251.025(b), Government Code.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 7, 2005.

TRD-200500557

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Effective date: March 1, 2005

Proposal publication date: December 3, 2004

For further information, please call: (512) 424-6900


Subchapter C. NOTICE

1 TAC §§373.301, 373.303, 373.305, 373.307

The new sections are adopted under §531.033, Government Code, which provides the Commissioner of HHSC with broad rule making authority, and §531.033, Government Code (as added by Acts 2003, 78th Leg., ch. 198, §2.17), under which HHSC, the State Medicaid Agency, is mandated to establish a Medicaid Estate Recovery Program (MERP) in order to comply with the provisions of the applicable federal law found at 42 U.S.C. §1396p(b)(1) to seek the recovery of the costs of Medicaid long-term care benefits received by certain Medicaid recipients.

§373.307.Notice of Intent to File A Claim upon the Death of a Medicaid Recipient.

(a) The Medicaid Estate Recovery Program (MERP) will, within 30 days of the notification of the death of a Medicaid recipient, provide a Notice of Intent to File a Claim, to the following:

(1) Estate representative;

(2) Recipient's guardian of the person, if any; guardian of the estate, if any; or guardian of the person and estate, if any, provided that the name and address of the guardian or guardians are known by MERP;

(3) Recipient's agent under a durable power of attorney if the name and address of the agent are known by MERP;

(4) Recipient's agent under a medical power of attorney if the name and address of the agent are known by MERP; or

(5) If none of the above are known, family members who have acted on behalf of the recipient provided that the name and address of those family members who have acted on behalf of the recipient are known by MERP.

(b) Contents of Notice of Intent to File a Claim. Written notice of MERP's intent to file an estate recovery claim against the estate of a deceased Medicaid recipient for covered services will be provided to individuals identified in subsection (a) of this section. The notice will include the following:

(1) A program overview;

(2) A questionnaire that seeks to determine whether the deceased recipient had:

(A) A surviving spouse;

(B) A surviving child under age 21;

(C) A surviving child of any age who is blind or disabled, as defined by 42 U.S.C. §1382c; or

(D) An unmarried adult child residing continuously in the decedent's homestead for at least one year prior to the time of the Medicaid recipient's death.

(c) An undue hardship waiver request form. Undue hardship request forms and supporting documentation must be submitted to MERP within 60 days of the date of the Notice of Intent to File a Claim. No action will be taken on an undue hardship request that is submitted without supporting documentation. The request form and documentation should be sent to MERP, Hardship Waiver Request, P.O. Box 13247, Austin, Texas 78711.

(d) The Notice of Intent to File a Claim will state the date that MERP received notification of the death of a Medicaid recipient and the source of the death notification of the Medicaid recipient.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 7, 2005.

TRD-200500558

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Effective date: March 1, 2005

Proposal publication date: December 3, 2004

For further information, please call: (512) 424-6900