2. ICRs Regarding Good Faith Effort Exemptions and Quarterly Reporting (§ 435.560)

The following changes will be submitted to OMB for approval under control number 0938-1148 (CMS-10398 #100).

As stated in section II.K. of this IFC, States must implement the community engagement requirement (such as the demonstration or deemed demonstration of community engagement by certain individuals) beginning January 1, 2027, although States may elect an earlier implementation date.

Section 1902(xx)(11) of the Act provides the Secretary of HHS with the authority to provide States with a temporary good faith effort exemption from timely implementation of the community engagement requirement and outlines the criteria that must be considered when evaluating whether a State has demonstrated a good faith effort towards implementation.

Section 1902(xx)(11)(B) of the Act, codified at § 435.560, outlines the criteria CMS must consider when determining whether a State has demonstrated a good faith effort towards implementing the community engagement requirement. Section 1902(xx)(11)(A)(i) of the Act provides CMS with the ability to specify the form and timing of States' requests for a good faith effort exemption. Good faith effort exemptions will be considered on a case-by-case basis and will be approved only for States that demonstrate they have a work plan, have been diligently making progress on the work plan every month in 2026, and were only limited by circumstances beyond the control of the State.

States that cannot meet the statutory effective date and seek additional time will be required to submit a good faith effort exemption request, and, if granted an exemption, submit quarterly progress reports. Collections include:

Exemption request submission, including milestones and plan to implement the requirement.

Quarterly reports on progress toward milestones.

Quarterly (or as-needed) reporting on newly identified risks/barriers and mitigation plans.

As of May 2026, 43 States and the District of Columbia (44 jurisdictions) cover populations subject to the community engagement requirement at section 1902(xx) of the Act. To date, several of the 44 jurisdictions have been preparing for, or have previously implemented, a similar community engagement requirement, thus reducing the need for a potential good faith exemption request. CMS will work with each State to support compliance by the January 1, 2027, statutory effective date to reduce the need for a good faith exemption and to assist States in addressing any unforeseen challenges. Ultimately, we estimate that approximately 10 States will need to prepare and submit a good faith exemption request.

For the development and submission of the good faith effort exemptions, we estimate that it will take approximately 24 hours at $87.52/hr for a Business Operations Specialist to develop the exemption request, which includes documenting the State's efforts to date, challenges and barriers the State faces, and a work plan to document progress toward fully implementing the community engagement requirement. We also estimate that it will take 4 hours at $128.00/hr for General and Operations Managers to review and provide oversight prior to submission to CMS. In aggregate, we estimate a one-time burden of 280 hours (28 hr × 10 States) at a cost of $26,125 [(240 hr × $87.52/hr) + (40 hr × $128.00/hr)]. Accounting for the Federal administrative match of 50 percent, the requirement will cost States $13,063 ($26,125 × 0.50).

Each good faith effort exemption request will be reviewed and adjudicated on its own merits. For the purposes of this burden estimate we estimate that of the approximately 10 States that we expect to apply, we will approve approximately 2 States for a good faith effort exemption. These estimated two States will need to develop and submit quarterly reports to document their implementation progress. States will be eligible to submit quarterly reports for a maximum of 2 years; for burden purposes, we assume both States will submit quarterly reports in the first year, but that only 1 State will require an ongoing exemption and will continue to submit quarterly reports in the second year. In total we estimate that 12 quarterly reports will be submitted [(2 States × 4 reports in year 1) + (1 State × 4 reports in year 2)]. We estimate that each quarterly report will take approximately 12 hours at $87.52/hr for a Business Operations Specialist to prepare. The burden relates to the quarterly reports on: (1) the status of the milestones the State provided on the detailed plan and timeline for achieving full compliance, per § 435.560(b)(3); and (2) information on specific risks or newly identified barriers or challenges to full compliance, including the State's plan to mitigate such risks, barriers, and challenges. We also estimate that it would take General and Operations Managers 0.5 hours at $128.00/hr to review and provide oversight prior to submission to CMS. In aggregate, we estimate a total burden of 150 hours (12.5 hr/report × 12 quarterly reports) at a cost of $13,371 [(144 hr × $87.52/hr) + (6 hr × $128.00/hr)]. Accounting for the Federal administrative match of 50 percent, the requirement will cost States $6,686 ($13,371 × 0.50).

We have summarized the total burden associated with good faith effort exemptions under § 435.560 in Table 8.