3. Systems Changes Needed To Implement Community Engagement

To successfully meet the community engagement requirement, States will need to implement multiple interrelated changes to their Medicaid Enterprise Systems (MES), including but not limited to the eligibility and enrollment (E&E) systems (as defined in § 433.111(b)(2)). CMS expects States to continue to enhance their systems after the State's implementation date by expanding the use of electronic data sources to verify qualifying activities, exceptions, and exclusions, automating manual processes, and incorporating operational lessons learned from initial implementation. Additionally, we will engage with States through regular implementation oversight processes, which will include review of monthly project status reports, milestone tracking, technical assistance discussions, regular demonstrations of functionality, and other monitoring activities designed to assess progress toward timely implementation. In particular, we will focus on whether States are making meaningful progress towards systems readiness, identifying and escalating implementation risks in a timely manner, and seeking technical assistance to ensure operational readiness. We will use information obtained through these oversight activities to inform our understanding of State progress, implementation challenges, and whether a State is making continued good-faith efforts toward compliance. We intend to publish more detailed expectations for the features and functionalities, testing, systems demonstrations, and reporting of CMS-required outcomes and metrics in separate forthcoming guidance, as well as discuss monitoring of State progress in implementing the systems changes needed to operationalize the community engagement requirement.

Enhancements, as defined at 45 CFR 95.605 , [ 108 ] to existing E&E systems and the addition of new connections to electronic data sources to implement the community engagement requirement may trigger periodic review and systems approval or reapproval. In the May 24, ( printed page 33417) 2023, CMCS Informational Bulletin, [ 109 ] we explained that the streamlined modular certification framework for MES is structured around conditions for enhanced funding, outcomes, and metrics, and expressly described outcomes and metrics as applying to “a new module or enhancement to an existing module.” In the context of community engagement implementation, States will need to enhance existing eligibility and enrollment functionality, which may include the need to incorporate connections to additional electronic data sources into the existing system.

Under § 433.119, we established a periodic review and reapproval framework focused on continued compliance of the operational system [ 110 ] initially approved under §§ 433.114 and 433.116 for 75 percent FFP for ongoing operations. Continued compliance refers to confirmation that the system in operation continues to meet applicable Federal requirements and the conditions for enhanced Federal matching rates, as evidenced through operational reports, metric data, and other supporting documentation. We use this framework to assess ongoing system performance and compliance, which does not necessitate a reapproval each time a State enhances an existing CMS-approved system, adds an interface, or incorporates a new data source. [ 111 ] However, based on our assessment of ongoing system performance and compliance, we may determine a need to review and reapprove a State's entire MES, a particular module or solution, or discrete components of a system to validate whether the system is operating in alignment with applicable Federal requirements. 112 As a result, CMS does not require systems to be reapproved because they were modified or enhanced unless indicated by declines in system performance.

Accordingly, where a State modifies an already approved operational system to implement the community engagement requirement, the relevant question for purposes of 75 percent FFP for operations is whether the system, as modified, continues to satisfy the applicable conditions for enhanced operational funding and remains compliant with Federal requirements. Such changes do not, by themselves, require a separate reapproval solely because existing approved functionality has been enhanced. At the same time, the system remains subject to CMS's periodic review and reapproval authority under § 433.119, and we may review the system, module, or discrete components, as appropriate, to assess continued compliance. We interpret this framework to apply to enhancements like the incorporation of additional electronic data sources, interfaces, and exchanges that support implementation of the community engagement requirement within an already-approved MES.

Under § 433.116, 75 percent FFP is available for operation of an approved MES module or component when the system meets the applicable operational conditions. Those conditions include, through § 433.116(i), the reporting condition incorporated from § 433.112(b)(15), which requires the production of transaction data, reports, and performance information that contribute to program evaluation, continuous improvement in business operations, and transparency and accountability. CMS explained in the 2023 CIB [ 113 ] that States must submit operational reports containing metric data, verification of compliance with the conditions for enhanced Federal matching rates required under §§ 433.112 and 433.116, and other evidence that MES modules meet all applicable requirements for the State's claimed Federal matching funds. CMS further explained that operational reporting enables monitoring of system performance and functionality and provides ongoing demonstration of continuous achievement of required outcomes.

CMS applies this same requirement to community engagement-related systems changes. In many cases, implementation of community engagement will require States to adjust existing system logic, add reporting and tracking functions, support new beneficiary-facing processes, and establish or refine data exchanges with other entities. Where those changes are made within an existing approved MES module or solution, we interpret the applicable regulations to require the State to continue its operational reporting and metrics in a manner that demonstrates that the system, as modified, remains compliant with the conditions for enhanced funding and continues to operate successfully. We remind States that FFP may be available for systems changes necessary to implement the community engagement requirement, in addition to the funding provided under the government efficiency grants authorized under WFTC legislation. Accordingly, to the extent a State must design, develop, or install new or enhanced E&E systems (as defined at § 433.111(b)(2)) to implement the community engagement requirement, such activities may be eligible for 90 percent FFP, consistent with § 433.112. To receive enhanced FFP, the State must obtain CMS approval of the applicable advance planning document (APD) prior to incurring expenditures, and the project must meet the conditions of 42 CFR part 433, subpart C and other applicable Federal requirements.

Lastly, we remind States and their vendors to pursue implementation of community engagement-related systems changes in a manner that is timely, operationally practical, and cost-effective in alignment with § 433.112(b)(1). Vendors supporting these efforts should provide best possible pricing, facilitate robust coordination with States, support integration with existing Medicaid Enterprise Systems, and avoid unnecessary customization or other practices that could result in avoidable cost increases or implementation delays. We expect solutions to be scalable, transparent, and designed to promote efficient implementation. States remain responsible for ensuring that procured systems solutions are appropriately scoped, reasonably priced, and aligned with applicable Federal requirements.