Medicaid Program; Community Engagement Requirement for Certain Individuals

States have the option under section 1902(xx)(3)(B) of the Act to include in their State plans a “short-term hardship” exception to the community engagement requirement for applicable individuals. States electing this option must, under procedures established by the State, in accordance with standards specified by the Secretary, deem applicable individuals to have demonstrated community engagement during a month in which they meet the criteria for one of the circumstances described in the statute's definition of a “short-term hardship event.” A “short-term hardship event” exists under section 1902(xx)(3)(B) of the Act when the criteria for any of the following circumstances are met for all or part of a month:

As described in section 1902(xx)(3)(B)(ii)(I) of the Act, an applicable individual receives inpatient hospital services, nursing facility services, services in an intermediate care facility for individuals with intellectual disabilities (ICF/IID), inpatient psychiatric hospital services, or such other services of similar acuity (including outpatient care relating to the preceding institutional services) as the Secretary determines appropriate;

An applicable individual resides in a county (or equivalent unit of local government) in which, as described in section 1902(xx)(3)(B)(ii)(II)(aa) of the Act, there exists an emergency or disaster declared by the President under the National Emergencies Act (NEA) or the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act); or, as described in section

1902(xx)(3)(B)(ii)(II)(bb) of the Act, the unemployment rate is at or above the lesser of 8 percent or 1.5 times the national unemployment rate; or

As described in section 1902(xx)(3)(B)(ii)(III) of the Act, an applicable individual, or the dependent of the applicable individual, must travel outside of their community for an extended period of time to receive medical services necessary to treat a serious or complex medical condition (as described in section 1902(xx)(9)(A)(ii)(V)(ee) of the Act) that are not available within their community of residence.

For the circumstance described in section 1902(xx)(3)(B)(ii)(II)(bb) of the Act (relating to an area with a particular unemployment rate percentage), the State must make a request to the Secretary, in such form, at such time, and containing such information as the Secretary may require, for the short-term hardship to be available. Under section 1902(xx)(3)(B)(i) of the Act, the applicable individual must request of the State a short-term hardship exception for the circumstances described in section 1902(xx)(3)(B)(ii)(I) or (III) of the Act (relating, respectively, to the receipt of certain institutional services or services of similar acuity or where the individual or individual's dependent must travel outside their community for necessary medical treatment for an extended period of time).

We are implementing this State option at new Sec. 435.555. 1. Scope of the Election and Certain Notice Requirements

While the short-term hardship exception in section 1902(xx)(3)(B) of the Act is optional for States, the statute does not offer States an option to select one or only some of the circumstances described in section 1902(xx)(3)(B)(ii) of the Act to be the exclusive basis for granting a short-term hardship exception. For example, a State may not limit the short-term hardship exception only to individuals who reside in a county (or equivalent unit of local government) in which there exists an emergency or disaster declared by the President under the NEA or the Stafford Act. We therefore specify at Sec. 435.555(a) that States electing the short-term hardship exception must deem an applicable individual to have demonstrated community engagement when the individual experiences any one of the short-term hardship events described in section 1902(xx)(3)(B)(ii) of the Act and implemented at new Sec. 435.555(d). (We note, however, that certain short-term hardship events include in their criteria a State request to effectuate them, as described below.)

States that elect the short-term hardship option must confirm that they are doing so in their State plans. We expect that States will be able to make the election in the initial material, currently under development, that they will be required to submit to CMS confirming their compliance with section 1902(xx) of the Act. If a State does not initially elect the short-term hardship option, it may do so through a State plan amendment at a later time. A State that elects the short- term hardship option will be permitted to deselect the option through a State plan amendment.

New Sec. 435.561(b)(3)(ii) and (iii) require the State to conduct outreach as implemented at new Sec. 435.561 whenever a State: (a) elects the short-term hardship exception in its State plan under Sec. 435.555(a); and (b) on each occasion in which a short-term hardship exception relating to an event described in Sec. 435.555(d)(2) (for NEA-declared or Stafford Act-declared emergencies or disaster) becomes available to applicable individuals, or the State effectuates the short-term hardship event described in Sec. 435.555(d)(3) (relating to a county or equivalent unit of local government having an unemployment rate at or above a certain level). It is possible that a State, upon electing the short-term hardship exception through a State plan amendment, will simultaneously submit a request to CMS to effectuate the short-term hardship circumstance relating to a county or other locality experiencing a certain level of unemployment (the procedure for this request is described below and would be separate from the State plan amendment). The State's request to CMS to effectuate the unemployment-related short-term hardship circumstance would not be a component of the State plan amendment, and it would necessarily be approved by CMS after approval of the State plan amendment proposing to elect the short-term hardship exception, although the approval of the former may closely follow in time the approval of the letter. The State would still be required to conduct outreach upon both occasions, consistent with Sec. 435.561(b)(3)(ii) and (iii).

We consider both deselection of the short-term hardship exception option from a State plan and the expiration of a short-term hardship event to be an “action” under Sec. 431.201, because the former reduces eligibility by removing the availability of an exception from the State plan while the latter ends the availability of an exception currently in use. Therefore, whenever a State deselects the short-term hardship option from the State plan or upon an anticipated expiration of a short-term hardship event, the State must provide all impacted beneficiaries with a minimum of 10 days advance notice with fair hearing rights consistent with Sec. Sec. 435.917 through 435.918 and 42 CFR part 431 subpart E. Consistent with new Sec. 435.561(b)(3)(iv)(A) and (B), the advance notice in these circumstances must include the outreach content in new Sec. 435.561(c). 2. Procedures for Implementing Short-Term Hardship Exceptions

Section 1902(xx)(3)(B)(i) of the Act directs that State determinations of short-term hardship be made “under procedures established by the State (in accordance with standards specified by the Secretary).” This language is nearly identical to the “undue hardship” language in section 1917(b)(3)(A) of the Act (relating to the estate-recovery rules), section 1917(c)(2)(D) of the Act (relating to the asset-transfer rules), and section 1917(d)(5) of the Act (relating to the trust rules).\85\ We consider our policies implementing these other provisions of the Act to provide a familiar model for implementing the short-term hardship procedures for community engagement.

\85\ Section 1917(b)(3)(A) of the Act reads: “The State shall establish procedures (in accordance with standards specified by the Secretary) under which the agency shall waive the application of this subsection . . . if such application would work an undue hardship as determined on the basis of criteria established by the Secretary.” Section 1917(c)(2) of the Act reads: “An individual shall not be ineligible for medical assistance by reason of [the asset transfer rules] to the extent that--(D) the State determines, under procedures established by the State (in accordance with standards specified by the Secretary) that the denial of eligibility would work an undue hardship as determined on the basis of criteria established by the Secretary.” Section 1917(d)(5) of the Act reads: “The State shall establish procedures (in accordance with standards specified by the Secretary) under which the agency waives the application of this subsection for an individual if the individual establishes that such application would work an undue hardship on the individual as determined on the basis of criteria established by the Secretary.”

For the procedures relating to the estate recovery undue hardship provision, we have instructed States as follows: “These procedures must, at a minimum, provide for advance notice of any proposed recovery. They must also specify the method for applying for a[n] [undue hardship] waiver, the hearing and appeal rights, and the time frames involved.” CMS State Medicaid Manual, Section 3810(D).

For the procedures relating to the asset transfer and trust undue hardship provisions, CMS has historically

instructed States as follows: “[Y]our undue hardship provision must, at a minimum, provide for: Notice to recipients that an undue hardship exception exists; A timely process for determining whether an undue hardship waiver will be granted; [and] A process under which an adverse determination can be appealed.” CMS State Medicaid Manual, Section 3258.10(C)(5) and 3259.8(C).86 87

\86\ The CMS State Medicaid Manual is available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/paper-based-manuals-items/cms021927.

\87\ We note the very slight difference in the prefatory language to the notice requirements described in Section 3258.10(C)(5) (relating to asset-transfers) and Section 3259.8, in that Section 3258.10(C)(5) instructs that a State's undue hardship procedure must “provide for and discuss the following administrative requirements.” (Emphasis added.) The notice requirement elements described above, however, are identical, and CMS does not consider the distinction in the prefatory language in these two provisions to be meaningful.

Sections 1917(b)(3)(A), (c)(2)(D), and (d)(5) of the Act are mandatory, and CMS established the policies implementing them in 1994.\88\ We expect that States are experienced in applying hardship- related exceptions consistent with these standards. Thus, given the similarities in the statutory language, and the authority in section 1902(xx)(3)(B)(i) of the Act for the Secretary to specify the procedural standards for the short-term hardship exception, we are generally adopting in regulation for the short-term hardship exception the policies that apply under the undue hardship provisions, except for one difference discussed below.

\88\ After CMS established its policy for the undue hardship- related notice, request process, and appeal requirements for asset- transfers, the Deficit Reduction Act of 2005, Public Law 109-171, at section 6011(d)(2), incorporated them into Federal law. See 42 U.S.C. 1396p note.

One significant difference between the evaluation of undue hardship in the various provisions described in section 1917 of the Act and short-term hardship under section 1902(xx)(3)(B) of the Act is that, in the latter circumstance, the hardship will generally have an end date. For example, a short-term hardship exception for an inpatient hospital stay (which is a short-term hardship circumstance under section 1902(xx)(3)(B)(ii)(I) of the Act) will generally last through the end of the month in which the inpatient hospitalization of an applicable individual ends (as such an applicable individual would be deemed to meet community engagement under section 1902(xx)(3)(B) of the Act if the individual is only hospitalized for a part of a month). By contrast, an individual who, for example, transfers an asset for less than fair market value during the period described in section 1917(c)(B)(i) of the Act but who establishes undue hardship per section 1917(c)(2)(D) of the Act will not be ineligible (that is, not subject to a “penalty period”) for medical assistance for nursing facility services or other services (as described in section 1917(c)(1)(C) of the Act). The exception to the penalty period will not have a beginning or end date; the penalty will simply not apply to the asset transfer.

Our policies relating to the undue hardship provisions of section 1917 of the Act have not had to account for a fixed duration of the exceptions. For the community engagement requirement, we address this by requiring that States notify applicable individuals of their determination that a short-term hardship exception will or will not apply, and, if determining that it will, the date on which the exception will end. We understand that the actual calendar date may not be known to the State at the time of its determination that the exception will apply. It would be sufficient for a State to advise the applicable individual of the event that would result in the end of the exception. In the example of an applicable individual who requests a short-term hardship exception on the basis of inpatient hospitalization, it would be sufficient for the State to notify the individual, upon informing the individual that the exception will apply, that it will end on the last day of the month in which the applicable individual's inpatient hospitalization ends. Once the specific date on which the State intends to end the hardship exception for an individual or individuals is known, the State must, as explained above, provide advance notice to the individual(s) consistent with Sec. Sec. 435.917 through 435.918 and 42 CFR part 431 subpart E.

We thus direct at Sec. 435.555(c) that States electing the short- term hardship exception must provide notice informing applicable individuals that a short-term hardship exception exists and its anticipated end date for circumstances in which an applicable individual need not request an exception. For circumstances in which the applicable individual or an individual acting on their behalf must request an exception, the State must also provide: notice of the method by which an applicable individual (or individual acting on their behalf) may request a short-term hardship exception; notice of the timeframe for requesting the exception; a timely process for determining whether a short-term hardship exception will be granted; notice to an applicable individual of the State's determination that a short-term hardship exception will or will not apply, and, if the State determines that the exception will apply, the anticipated end date of the exception; and a process under which an adverse determination can be appealed.

States must comply with the notice requirement, described in Sec. 435.555(c)(1), as part of their conformity with the noncompliance procedures in this rule. Under Sec. 435.558(c)(1)(vii), relating to the mandatory content of a notice of noncompliance with the community engagement requirement, such a notice must include, in States that have adopted the short-term hardship exception, “the information about short-term hardships described in Sec. 435.555(c).” We note that States electing the short-term hardship option will also provide notification of the availability of the exception when they comply with Sec. 435.561 (relating to State outreach requirements for community engagement). Under Sec. 435.561, States must notify individuals of the community engagement requirement, including an explanation of the exceptions to the requirement, when the State provides an individual enrolled in the adult group at Sec. 435.119 or an applicable section 1115 demonstration an eligibility determination notice at application or renewal of eligibility, or when moving into one of these groups based on a change in circumstances. Under Sec. 435.561(c)(1)(i), the outreach notice must include an “explanation of the exceptions to such requirement under Sec. 435.553, including short-term hardship exceptions under Sec. 435.555, if elected by the State[.]” In States that have elected the short-term hardship exception, such notices would therefore necessarily include information on the existence of the short-term hardship exception. Additionally, as explained previously, Sec. 435.561(b)(3)(ii) and (iii) require that States notify applicable individuals when the State elects the short-term hardship exception and when certain short-term hardship circumstances become available or are effectuated.

In circumstances in which an applicable individual must request an exception based on a short-term hardship event (as described in section II.G.4. and II.G.7. of this IFC), States must accept the request from any of the individuals described in Sec. 435.907(a): the applicable individual; an adult in the applicable individual's household, as defined in Sec. 435.603(f), or family, as defined in section 36B(d)(1) of the Code; an authorized representative of the applicable individual; or, if the

applicable individual is a minor (in a State in which an individual 19 or older is a minor) or incapacitated, someone acting responsibly on the applicable individual's behalf. Section 435.907(a) requires that States accept from the particular individuals described in that regulation “any documentation required to establish eligibility.” As described above, compliance with community engagement is a condition of eligibility, which means that a request for a short-term hardship exception to the community engagement requirement helps an applicable individual establish or maintain Medicaid eligibility. We therefore believe that States must accept requests for short-term hardship exceptions from the individuals described in Sec. 435.907(a), which we specify at Sec. 435.555(b)(2), (c), and (d). 3. Definition of a Short-Term Hardship Event

Section 1902(xx)(3)(B)(ii) of the Act defines a “short-term hardship event” to be, in summary, one of the following circumstances: an applicable individual receives certain institutional (or comparable) services; an applicable individual resides in an area in which an emergency or disaster under certain Federal authorities has been declared or in an area of comparatively high unemployment; or an applicable individual, or the dependent of the applicable individual, must travel outside of their community for an extended period of time for necessary medical care for certain conditions. An applicable individual will be deemed to have met community engagement if the individual meets the criteria for any of these circumstances for all or part of a month. We implement the definition of a short-term hardship event at Sec. 435.555(d). We address each of the circumstances in the following sections. 4. Applicable Individuals in Certain Medical Institutions or Receiving Outpatient Services

The first short-term hardship event is described in section 1902(xx)(3)(B)(ii)(I) of the Act and pertains to applicable individuals who are receiving inpatient hospital services, nursing facility services, services in an ICF/IID, inpatient psychiatric hospital services, or such other services of similar acuity (including outpatient care relating to other services specified in this subclause) as the Secretary determines appropriate.

We note first that an individual who receives any of the services described in section 1902(xx)(3)(B)(ii)(I) of the Act may be a specified excluded individual based on being medically frail or otherwise having special medical needs under Sec. 435.554(c)(5). For example, an individual who for all or part of a month receives services in an ICF/IID may be medically frail under Sec. 435.554(c)(5)(i)(A) (relating to individuals who are blind or disabled as defined in section 1614 of the Act) or Sec. 435.554(c)(5)(i)(D) (relating to individuals with a physical, intellectual, or developmental disability that significantly impairs their ability to perform one or more ADLs) if their physical, mental, or behavioral health condition significantly impair their ability to comply with the community engagement requirement. As we explain in II.F. of this IFC, if a State determines that an individual is a specified excluded individual in the month of application or when the State processes the renewal, it must not determine whether the individual meets the community engagement requirement or meets the criteria for a mandatory exception. The same outcomes described in II.F. of this IFC would apply in the context of the optional short-term hardship exception; that is, if a State that has elected the short-term hardship exception determines an individual to be a specified excluded individual in the month of application or when the State processes the renewal, it must not determine whether the individual met the community engagement requirement or met the optional short-term hardship exception. We implement this requirement at Sec. 435.555(f).

“Inpatient hospital services” are defined for purposes of Medicaid State plan coverage in section 1905(a)(1) of the Act and Sec. 440.10, and this definition specifically excludes services in an institution for mental diseases (IMD). Similarly, section 1905(a)(4)(A) of the Act and Sec. 440.155 define “nursing facility services” for purposes of Medicaid State plan coverage and this definition excludes services in an IMD. In addition, services in an ICF/IID are defined for purposes of State plan coverage in section 1905(a)(15) of the Act and Sec. 440.150 and this definition also excludes services in an IMD. IMDs are defined in section 1905(i) of the Act to mean “a hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services.”

Because section 1905(a) of the Act and our implementing regulations define “inpatient hospital services,” “nursing facility services,” and “ICF/IID services” States must recognize services meeting the “inpatient hospital services,” “nursing facility services,” and “ICF/IID services” definitions at Sec. Sec. 440.10, 440.155, and 440.150, respectively, for purposes of the short-term hardship exception at section 1902(xx)(3)(B)(ii)(I) of the Act. Applicable individuals who receive “inpatient hospital services” as defined at Sec. 440.10, “nursing facility services” as defined at Sec. 440.155, and “ICF/IID services” as defined at Sec. 440.150 for part or all of a month must be deemed to have met the community engagement requirement for such month if the individual's State has adopted the short-term hardship exception. We have included receipt of “inpatient hospital services” as defined at Sec. 440.10, “nursing facility services” as defined at Sec. 440.155, and “ICF/IID services” as defined at Sec. 440.150 as a short-term hardship event in our regulation at Sec. 435.555(d)(1)(i).

We do not define “inpatient psychiatric hospital services” for all age groups. However, “inpatient psychiatric hospital services under age 21” are defined for purposes of Medicaid State plan coverage in section 1905(a)(16) of the Act and at Sec. 440.160. In the absence of a definition of “inpatient psychiatric hospital services” for individuals of all ages in title XIX of the Act, we believe it is reasonable for States to consider our “inpatient psychiatric hospital services under age 21” definition at Sec. 440.160 in the context of defining “inpatient psychiatric hospital services” for purposes of the short-term hardship exception. However, given that our definition at Sec. 440.160 does not apply to all age groups, we do not believe it would be reasonable for States to solely use that definition in the context of section 1902(xx)(3)(B)(ii)(I) of the Act. It is also our understanding that some States define “inpatient psychiatric hospital services” under State law or follow “inpatient psychiatric hospital services” definitions used in universal coding constructs. In addition, many “inpatient psychiatric hospital services” are not coverable in Medicaid due to the IMD payment exclusion even though it would be reasonable for a State to consider such services as “inpatient psychiatric hospital services.” We believe it would be reasonable for States to follow definitions of “inpatient psychiatric hospital services” described in State law or universal coding even for services that are not otherwise coverable under the State plan. For these reasons we are defining “inpatient psychiatric hospital services” at Sec. 435.555(d)(1)(i) as “inpatient psychiatric hospital services including the services defined at

Sec. 440.160 for individuals under the age of 21 without regard to whether such services are in an institution for mental diseases” for purposes of the short-term hardship exception at section 1902(xx)(3)(B)(ii)(I) of the Act.

As previously noted, section 1902(xx)(3)(B)(ii)(I) of the Act also references “such other services of similar acuity (including outpatient care relating to other services specified in this subclause) as the Secretary determines appropriate.” We are interpreting and implementing this language at Sec. 435.555(d)(1)(ii), as described below.

We recognize that individuals may receive inpatient services that do not meet our benefit definitions for “inpatient hospital services,” “nursing facility services,” “ICF/IID services,” and “inpatient psychiatric hospital services.” Specifically, an individual may receive Medicaid-covered inpatient services in a critical access hospital (CAH) consistent with Sec. 440.170(g) or an emergency hospital consistent with Sec. 440.170(e), respectively, in States that cover such services. Further, an individual may receive inpatient services in an IMD or in other facilities that are not covered under section 1905(a) of the Act as inpatient services. We believe an exception would be warranted for an individual receiving inpatient services furnished in a CAH consistent with Sec. 440.170(g), inpatient services furnished in an emergency hospital consistent with Sec. 440.170(e), services in an IMD, and inpatient services furnished by other facilities that are not covered under Medicaid but are otherwise recognized by the State as “other services of similar acuity” for purposes of this short-term hardship exception. We believe that this is warranted, because an individual that is an inpatient in such facilities would be equally unable to meet the community engagement requirement as an individual receiving services in one of the facilities identified in section 1902(xx)(3)(B)(ii)(I) of the Act. Further, the inpatient services furnished by such facilities can be nearly identical to the services furnished by an inpatient hospital, nursing facility, ICD/IID, or inpatient psychiatric hospital.

For example, inpatient services provided by a VA medical facility do not meet the “inpatient hospital services” definition at Sec. 440.10, as such facilities are not certified as a hospital under the Medicare Conditions of Participation requirements at 42 CFR part 482 and do not participate in Medicaid, but the services provided by such facilities can be nearly identical to Medicaid-covered “inpatient hospital services.” We note that under section 1905(a) of the Act there is a general prohibition on Medicaid payment for any services provided to an individual in an IMD. While Medicaid payment cannot generally be made for services provided to an individual in an IMD, we believe it is reasonable to consider such services as “other services of similar acuity,” when the services are provided to an inpatient, since such an individual's Medicaid eligibility is not terminated on the basis that they receive inpatient services in an IMD, they are unable to meet the community engagement requirement while receiving such services, and the inpatient services provided by an IMD can be nearly identical to “inpatient hospital services,” “nursing facility services,” or “ICF/IID services.” We are specifying at Sec. 435.555(d)(1)(ii)(A) through (D) that “other services of similar acuity” includes inpatient services furnished in a CAH consistent with Sec. 440.170(g), inpatient services furnished in an emergency hospital consistent with Sec. 440.170(e), inpatient services furnished in an IMD, and inpatient services furnished by other facilities that are not covered under Medicaid but are otherwise recognized by the State in an IMD, and inpatient services furnished by other facilities that are not covered under Medicaid but are otherwise recognized by the State.

Regulations at Sec. 440.2 define an “inpatient” for purposes of coverage of services under the State plan to be, among other things, an individual who “(1) Receives room, board and professional services in the institution for a 24 hour period or longer, or (2) Is expected by the institution to receive room, board and professional services in the institution for a 24 hour period or longer even though it later develops that the patient dies, is discharged or is transferred to another facility and does not actually stay in the institution for 24 hours.” States would use this definition when an applicable individual qualifies for a section 1902(xx)(3)(B)(ii)(I) exception because they are receiving the types of Medicaid-covered services to which this exception applies. States must also use the inpatient definition at Sec. 440.2 when an applicable individual has an exception under section 1902(xx)(3)(B)(ii)(I) of the Act based on “inpatient” services that are not Medicaid-covered services. We recognize that States might not follow our “inpatient” definition at Sec. 440.2 with respect to non-Medicaid-covered inpatient services. However, we believe that the “inpatient” definition at Sec. 440.2 is a standard that non-Medicaid-covered inpatient services should reasonably be able to meet and that for purposes of this short-term hardship exception it would be more administratively simple to apply one definition of “inpatient” services. For these reasons, we are providing at Sec. 435.555(d)(1)(iii) that States must use the definition of “inpatient” at Sec. 440.2 for any of the inpatient services described in the preceding paragraphs for purposes of the short-term hardship exception at section 1902(xx)(3)(B)(ii)(I) of the Act.

The statutory language addressing other services of similar acuity also specifies that those services include “outpatient care relating to other services specified” in section 1902(xx)(3)(B)(ii)(I) of the Act. We noted that the services specifically identified in section 1902(xx)(3)(B)(ii)(I) of the Act, and the ones we are adding to Sec. 435.555(d)(1)(ii)(A) through (D), as described above, are exclusively provided in institution-based settings. We want to acknowledge the growing availability of services provided in the community as an alternative to institutional placement. When appropriate, such services have the potential to divert the need for the higher-cost institutional based services by treating certain conditions in a community setting or in an individual's home. There are a wide range of medical and non- available in non-institutional settings.\89\ Indeed, States have actively increased and continue to increase the availability of community that individuals have the choice to receive services in settings other than institutions.\90\

\89\ See for example, Carpenter AC, Stepanczuk, C, Murray, et al. (2025). “Trends in Users and Expenditures for Home and Community-Based Services as a Share of Total Medicaid Long-Term Services and Supports Users and Expenditures, 2023.” https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-brief-2023.pdf.

\90\ “The Centers for Medicare & Medicaid Services (CMS) is committed to supporting States with strengthening and enhancing their LTSS systems and helping to ensure that Medicaid beneficiaries receive high quality, cost-effective, person-centered services in the setting of their choice.” CMS. (2020). “Long Term Services and Supports Rebalancing Toolkit,” pg. 3. https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.

Thus, we believe that limiting the short-term hardship exception described in section 1902(xx)(3)(B)(ii)(I) of the Act to individuals receiving services in institutions and not allowing it to be available to individuals receiving services of similar acuity outside of institutions would fail to account for the realities of current service delivery methods and place favor on institutional-based care in a way that is

inconsistent with our efforts and policies with regard to individual choice. We also believe that individuals with service needs similar in acuity to an institutional stay, but who choose to receive their services in the community, would be similarly challenged in their ability to demonstrate community engagement compared to individuals receiving services in institutions. Therefore, we are interpreting “other services of similar acuity” to include certain noninstitutional services.

We have considered which noninstitutional services may qualify as “other services of similar acuity” as compared to the specific institutional-based services described in section 1902(xx)(3)(B)(ii)(I) of the Act. We believe it is clear that section 1902(xx)(3)(B)(ii)(I) of the Act requires that there be a connection between the specific institutional services described therein and any “services of similar acuity” included as part of this short-term hardship event. Section 1902(xx)(3)(B)(ii)(I) also refers to “outpatient care” relating to the other services specified in that subclause. In light of this language in section 1902(xx)(3)(B)(ii)(I) of the Act and in alignment with our position that the short-term hardship authorized under this provision should allow for noninstitutional services, at Sec. 435.555(d)(1)(ii)(E) we are adding to the definition of this short-term hardship event noninstitutional services that an applicable individual receives that, but for the receipt of such services, would likely result in the individual receiving services provided in an inpatient hospital, nursing facility, ICF/IID, inpatient psychiatric hospital or other inpatient institutional settings of similar acuity (that is, services specified in section 1902 (xx)(3)(B)(ii)(I) of the Act and Sec. 435.555(d)(1)(i) and (ii)(A) through (D)).

We believe it may sometimes be possible for States to identify these noninstitutional services on a categorical basis. We considered whether there are noninstitutional services that in all circumstances are delivered to an individual who has an acuity level similar to that of an individual who receives services from one of the specified institutions. We concluded that it is difficult to identify a complete list of such services, as many services, for example, that are authorized for section 1915(c) waivers (which serve individuals who, but for the receipt of such authorized services, would be treated in hospitals, nursing facilities, or ICF-IIDs) are also available under Medicaid to people who do not have such a clinical need.

However, a scenario that could meet the specified criteria would be an individual whose hospital discharge care plan prescribes services that could be provided in either one of the institutions specified or in the individual's home or other noninstitutional setting and who elects the noninstitutional services. In this circumstance, the prescribed institutional services would clearly reflect that the individual would likely need such services in the absence of the individual's election of the noninstitutional services. While the individual would still have to request the exception, the State could make the categorical determination of the individual's need for “other services of similar acuity” without additional review of the individual's acuity.

States could identify other circumstances in which an individual receives certain noninstitutional services that, matched with discrete circumstances, could lead to the categorical determination that, but for the individual's noninstitutional services, the individual would likely require services in one of the institutions specified in Sec. 435.555(d)(1)(i) and (ii)(A) through (D). Under Sec. 435.555(d)(1)(ii)(E), a State could provide the short-term hardship exception for noninstitutional services in these circumstances.

States could also make individual evaluations for all applicable individuals who assert having services needs that, but for their receipt of noninstitutional services, would likely require that they be in one of the institutions specified in Sec. 435.555(d)(1)(i) and (ii)(A) through (D). When making such individualized determinations, the State would have to identify the particular noninstitutional services that the individual receives that help the individual avoid the likelihood of requiring one of the institutional services described in Sec. 435.555(d)(1)(i) and (ii)(A) through (D), as the provision is limited to individuals who, if not receiving one of the specified services, receive “other services of similar acuity.” 5. Emergency and Disaster Areas

The definition of a “short-term hardship event” includes the circumstance of an individual residing in a county or equivalent unit of local government in which there exists an emergency or disaster that has been declared by the President under the NEA or the Stafford Act. We implement these parts of the short-term hardship exception at Sec. 435.555(d)(2).

The National Emergencies Act (NEA) (Pub. L. 94-412), codified at 50 U.S.C. 1621 et seq., authorizes the President to proclaim a national emergency. Such a Presidential Declaration must be immediately transmitted to Congress and published in the Federal Register. Various provisions of Federal law authorize special presidential powers when a national emergency has been proclaimed by the President. Unlike declared disasters, national emergencies are generally not declared for discrete areas of the country and are at times declared for situations that, while affecting the United States, are external to its borders. For example, recent emergency declarations have been declared for the “southern border” and “northern border,” in which neither specific States nor discrete areas of the States are identified,\91\ while, a separate 2022 emergency is still in effect regarding United States nationals held hostage abroad.\92\ Additionally, such emergencies typically do not contain a specific calendar end date.\93\ Emergencies or disaster declared by the President pursuant to the NEA, however, are included in section 1902(xx)(3)(B)(ii)(II)(aa) of the Act.

\91\ “Declaring a National Emergency at the Southern Border of the United States,” Proclamation 10886, January 20, 2025, 90 FR 8327 (January 29, 2025). https://www.whitehouse.gov/presidential-actions/2025/01/declaring-a-national-emergency-at-the-southern-border-of-the-united-states; “Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border,” Executive Order 14193, February 1, 2025, 90 FR 9113 (February 7, 2025). https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border.

\92\ “Bolstering Efforts to Bring Hostages and Wrongfully Detained Unites States Nationals Home,” Executive Order 14078, July 19, 2022, 87 FR 43389 (July 21, 2022). https://www.federalregister.gov/documents/2022/07/21/2022-15743/bolstering-efforts-to-bring-hostages-and-wrongfully-detained-united-states-nationals-home.

\93\ Ibid.

Using the example of the emergencies declared under the NEA for the “southern border” and “northern border,” we have considered that one possible interpretation of section 1902(xx)(3)(B)(ii)(II)(aa) of the Act would be that all States that border Canada and Mexico are, in their entireties, subject to a national emergency (given that the declarations pertaining to them did not specify discrete localities in those States), and that any such State that adopts the short-term hardship exception will have its entire applicable individual population excepted from community engagement unless and until such disaster is declared over.

We are concerned, however, that this interpretation would in effect nullify the community engagement requirement for an indefinite period of time in such States, and would be inconsistent with the concept of a short-term hardship. Section 1902(xx)(3)(B)(ii)(II) of the Act lists three short-term hardship circumstances that, generally, relate to emergencies, disasters, and comparatively high unemployment. Because applicable individuals in States that elect the short-term hardship option are deemed to be in compliance with community engagement when residing in one of the areas described in section 1902(xx)(3)(B)(ii)(II) of the Act, we believe it is reasonable to interpret section 1902(xx)(3)(B)(ii)(II) of the Act as describing circumstances that affect an individual's ability to demonstrate community engagement.

This interpretation is also supported by the example of other emergencies declared pursuant to the NEA. For example, in “Declaring a National Energy Emergency,” Executive Order 14156, Section 1, January 20, 2025, 90 FR 8433 (January 29, 2025), it is declared that “[t]he energy and critical minerals (“energy”) identification, leasing, development, production, transportation, refining, and generation capacity of the United States are all far too inadequate to meet our Nation's needs,” and that the problems giving rise to this issue are “most pronounced in our Nation's Northeast and West Coast.” For purposes of the short-term hardship exception, it is unclear whether this means that these areas may be properly classified as areas in which “there exists an emergency,” as required by section 1902(xx)(3)(B)(ii)(II)(aa) of the Act, or if this national emergency is based on a sum total of energy-related problems throughout the country in which the Northeast and West Coast weigh heaviest but which are not themselves experiencing an emergency.

For these reasons, we therefore believe that it is appropriate to further define the scope of a short-term hardship exception in NEA- related circumstances. Consistent with our authority to specify standards for the procedures established by States for short-term hardship under section 1902(xx)(3)(B)(i) of the Act, we specify at Sec. 435.555(d)(2)(i) that a short-term hardship based on an NEA- declared emergency exists when the emergency affects the ability of applicable individuals to demonstrate community engagement in a particular county (or equivalent unit of local government), multiple counties, or statewide. Information that will be relevant to determining whether this is the case would be the barriers to demonstrating community engagement that the NEA-declared emergency presents, how businesses are impacted by the NEA-declared emergency, and other information tending to show an adverse impact on the ability of applicable individuals to demonstrate community engagement. To ensure compliance with this definition, we are also requiring at Sec. 435.555(d)(2)(iii) that a State notify CMS timely of its plan to effectuate a short-term hardship exception based on an emergency declared pursuant to the National Emergencies Act, and are providing at Sec. 435.555(d)(2)(iv) that CMS will review States' use and implementation of these exceptions.

Section 1902(xx)(3)(B)(ii)(II)(aa) also includes a reference to emergencies and disasters declared by the President pursuant to the Stafford Act. The Stafford Act (Pub. L. 100-707), codified at 42 U.S.C. 5122, is intended to “provide an orderly and continuing means of assistance by the Federal Government to State and local governments in carrying out their responsibilities to alleviate the suffering and damage which result from . . . disasters.” The assistance is triggered by a presidential declaration and applies in cases of hurricanes, tornados, earthquakes, floods, fires, and other circumstances.

Presidential declarations made under the Stafford Act are published in the Federal Register. Ordinarily, the declaration identifies the State in which the emergency or disaster has occurred, the particular areas adversely affected by the event, and the “incident period” during which the disaster-causing event occurred. Typically, the duration of the incident period has expired at the time of the declaration, sometimes by several months (for example, “Presidential Declaration of a Major Disaster for Public Assistance Only for the State of Alaska,” 89 FR 91866, November 20, 2024 (relating to landslides), identifying the incident date as August 25, 2024, and the presidential declaration November 13, 2024). The declaration itself then initiates the authority for assistance intended to alleviate damages and losses sustained as a result of the disaster or emergency.

The declarations, however, do not expire, nor do the statutory or regulatory authorities for the assistance dictate an established duration. “For example, Federal Emergency Management Agency (FEMA) may designate a hurricane's incident period as the sequence of 5 days during which winds and flooding caused injuries and damages. FEMA may then provide assistance (often over the course of months or years) to cover the costs of losses, damages, and injuries sustained during those 5 days.” \94\ This means that at the time of a Stafford Act declaration, the incident giving rise to the declaration may be over, and the assistance thus authorized by the declaration will be indefinite. Because section 1902(xx)(3)(B)(ii)(II)(aa) of the Act requires that applicable individuals be deemed to have met community engagement in a month in which “there exists an emergency or disaster declared by the President under . . . [the Stafford Act],” we have considered when such an emergency or disaster “exists” for purposes of the Stafford Act-related exception and address this topic at Sec. 435.555(d)(2)(iv).

\94\ Horn DP, Lee E, Webster E. (2023). “Closing the Incident Period for the Stafford Act Declaration for the COVID-19 Pandemic,” Congressional Research Service, pg. 1. https://www.congress.gov/crs-product/IN12106.

We have determined that at a minimum, applicable individuals residing in the designated area identified in a Stafford Act declaration must be deemed to have demonstrated community engagement for the month (or months) during which the identified incident period occurred. For example, if the President issues a Stafford Act declaration on May 1st and identifies March 25th through March 30th as the incident period, applicable individuals residing in the area in which the disaster or emergency occurred must be deemed to have met community engagement for at least the month of March (in States that have elected the option for a short-term hardship exception).

For purposes of the months following the end of the month in which the incident period occurred (in the prior example, the months of April and beyond), we note that section 1902(xx)(3)(B)(ii)(II)(aa) of the Act does not limit the duration of the exception for a Stafford Act disaster to its incident period. Thus, we would consider it reasonable for a State to extend the exception, given that the effects of a disaster invariably extend in time beyond the discrete time period in which a disaster actually occurred.

We therefore grant States the option to seek CMS approval for an exception period beyond the incident period, based on submission of information showing that barriers to demonstrating the community engagement requirement in Sec. 435.552 in the relevant area persist. In these circumstances, we anticipate that States will regularly communicate with CMS. The information we would expect of States that would support the continued applicability of the exception due to ongoing barriers to demonstrating

the community engagement requirement in Sec. 435.552 in the relevant area might, for example, relate to the extent to which businesses have not reopened, transportation has been hampered, or temporary housing or relocation of individuals in the community has become necessary. Other information could also be relevant to support a State's request. We implement the short-term hardship event for emergencies and disasters declared by the President pursuant to the Stafford Act definition at Sec. 435.555(d)(2)(iv). 6. Areas With Certain Levels of Unemployment

Section 1902(xx)(3)(ii)(II) of the Act also includes in the definition of a “short-term hardship” event the circumstance of an applicable individual residing in a county or equivalent unit of local government that has an unemployment rate that is at or above the lesser of 8 percent or 1.5 times the national unemployment rate. To implement a short-term hardship exception in this circumstance a State first must seek CMS approval. We implement this component of the short-term hardship event definition at Sec. 435.555(d)(3).

Notably, Section 1902(xx)(3)(B)(ii)(II)(bb) of the Act does not specify a source that States or CMS must use to determine whether a county or equivalent unit of local government has an unemployment rate that has reached one of the thresholds described therein. The U.S. Bureau of Labor Statistics (BLS) is the Federal government's primary source for unemployment information \95\ and maintains statistics for 7,500 different areas in the U.S., including, but not limited to, States, small labor market areas, and counties and county equivalents.\96\ The “Local Area Unemployment Statistics” program (“LAUS” program) that is maintained by the BLS is a Federal-State cooperative effort, and both Federal programs and State and local governments use LAUS information for various purposes.\97\ (References herein to “BLS information” include the LAUS information.)

\96\ See generally, “About the U.S. Bureau of Labor Statistics,” U.S. Bureau of Labor Statistics, last modified February 28, 2025, https://www.bls.gov/bls/about-bls.htm.

\97\ “Local Area Unemployment Statistics,” U.S. Bureau of Labor Statistics, https://www.bls.gov/lau/ lau/.

Because the BLS information is well-known and utilized by both States and the Federal government, CMS considers it appropriate to make the BLS information the standard for evaluating whether a State's request to apply the short-term hardship exception in this circumstance is consistent with Sec. 435.555(d)(3); for example, if a State requests the unemployment-related undue hardship exception on the basis that an unemployment rate in a particular county (or counties) is at or above 8 percent, we will consult the unemployment rate in the county or counties using the BLS statistics, presume the accuracy of such information, and use it to determine (subject to a State's rebuttal, as described below) whether the particular county's (or counties') unemployment rate is at or above 8 percent.

We understand, however, that a State might believe that the available BLS information does not reflect the actual circumstances in a particular county or other unit of local government For example, as available BLS data is commonly based on data from previous months, the BLS adjustment of a county's unemployment rate in a county that experiences widespread layoffs from a major employer may take multiple months. To account for such a situation, for any month for which the available BLS data is based on data from previous months, a State may submit preliminary data from a reliable source (such as a State labor department) reflecting the unemployment rate in a county pending the BLS adjustment (if an adjustment is necessary) of the county's figure. We will review the preliminary data and will approve a State's request to implement this exception if we determine its data persuasive. If we determine the State's preliminary data persuasive and the BLS data, when updated, conflicts with the State's data and indicates an unemployment rate below the thresholds in section 1902(xx)(3)(B)(ii)(II)(bb) of the Act, we will not require revision of short-term hardship exceptions that were applied based on our approval of the State's preliminary data but will take the updated data into consideration.

As noted in section 1902(xx)(3)(B)(ii)(II)(bb) of the Act, the unemployment-related short-term hardship exception is subject to a State submitting a request to the Secretary “made in such form, at such time, and containing such information as the Secretary may require.” We will consider it sufficient if a State submits a request to CMS, in either electronic or hard-copy form, to apply the unemployment-related short-term hardship exception and identifies the particular county or counties, or equivalent unit(s) of local government, in which the State alleges the unemployment rate to have reached the lesser of the two thresholds described in Sec. 435.555(d)(3). The State must also provide information from BLS or another reliable source to demonstrate that the unemployment rate has reached the appropriate threshold. We note that while the unemployment- related short-term hardship exception is contingent on a State submitting a request to the Secretary, section 1902(xx)(3)(B) of the Act does not mandate that a State make the request even if it believes one of the relevant unemployment thresholds has been reached; that is, a State that has elected the short-term hardship exception is not required to implement the unemployment-related exception when conditions are present in the State that would support it. In effect, implementing the unemployment-related short-term hardship event is optional for States that elect the short-term hardship exception.

We further note that, distinct from the short-term hardship events relating to applicable individuals who receive services in certain medical institutions (or receiving services of similar acuity) or needing to travel outside of their community for an extended period of time to receive medical services (as described in section II.G.7. of this IFC), section 1902(xx)(3)(B) of the Act does not require an applicable individual (or individual acting on the applicable individual's behalf) to request a short-term hardship exception in the circumstances described in section 1902(xx)(3)(B)(ii)(II) of the Act. The events described in section 1902(xx)(3)(B)(ii)(II) of the Act are broadly impactful in their nature and, especially in the case of disasters and emergencies, can hamper the ability of both local governments and individuals to function in a routine manner. We consider it reasonable to require that, for applicable individuals in States that have elected the short-term hardship exception and who are residing in areas in which a disaster has been declared under the Stafford Act or an emergency under the NEA (and in which, in the latter circumstance, CMS has approved the designation of a short-term hardship, as described previously), or in areas that are experiencing comparatively high unemployment, a State agency must apply an automatic short-term hardship exception to such applicable individuals for the duration of the particular circumstances; that is, a State would deem all applicable individuals residing in the affected areas to have demonstrated community engagement for the relevant months, without requiring applicable individuals to make such a request,

requesting any verification relating to these events from such individuals, or conducting any evaluation of the extent to which any such applicable individuals are affected by the circumstances. 7. Applicable Individual or Dependent Must Travel Outside of Their Community for an Extended Period of Time To Receive Medical Services Necessary for a Serious or Complex Medical Condition

Section 1902(xx)(3)(B)(ii)(III) of the Act provides that, in States that adopt the short-term hardship exception, applicable individuals are excepted from demonstrating community engagement when, for all or part of a month, they or their dependent must travel outside of their community for an extended period of time to receive medical services necessary to treat a serious or complex medical condition (as described in section 1902(xx)(9)(A)(ii)(V)(ee) of the Act) that are not available within their community of residence. We implement this component of the short-term hardship event definition at Sec. 435.555(d)(4). We provide the following explanation for its elements.

Section 1902(xx) of the Act does not define “dependent.” Section 1902(xx)(9)(ii)(III) of the Act refers to a “dependent child” within the definition of a “specified excluded individual,” and we define “dependent child” for that purpose at Sec. 435.554(a). Because the “dependent” reference in section 1902(xx)(3)(B)(ii)(III) of the Act is not similarly limited to a “child,” we do not believe our analysis above (section II.E.3.e. of this IFC), relating to specified excluded individuals who are parents, guardians, caretaker relatives, or family caregivers to dependent children, is warranted here.

We are defining a “dependent” at Sec. 435.555(b)(1), for the purposes of the short-term hardship circumstance described in section 1902(xx)(3)(B)(ii)(III) of the Act, as: a minor (as defined under State law) child of the applicable individual who is living with the applicable individual; a tax dependent of the applicable individual (whether or not the tax dependent is a minor child of the individual or residing with the applicable individual); or an individual for whom the applicable individual has been appointed a guardian by a court. We believe that the dependent relationship in each of these cases can be reasonably considered categorical and represents common uses of the term “dependent.” \98\

\98\ See, for example, https://www.merriam-webster.com/dictionary/dependent.

We note that the statute does not require that the applicable individual travel with the dependent for purposes of the exception.

We have considered, however, that the circumstance described in section 1902(xx)(3)(B)(ii)(III) of the Act is that of an applicable individual being deemed to have demonstrated community engagement when a dependent of that individual must travel outside of their community for necessary medical care, and we believe it is reasonable to conclude that the statute contemplates that the need for the dependent to travel for necessary medical care will significantly impact the applicable individual. If the applicable individual is not actually traveling with their dependent, we believe that the applicable individual could be impacted by the dependent's need to travel for medical care by needing to take leave from employment or to be absent from other scheduled community engagement activities for reasons related to the dependent's condition or travel, being responsible for managing the logistics of the medical appointment or the travel, needing to take the dependent to local medical appointments related to the condition that requires the travel, or needing to be available to communicate with medical providers.

Even though we are not interpreting section 1902(xx)(3)(B)(ii)(III) of the Act to impose a travel requirement on the applicable individual when it is the dependent of such individual who must travel for the relevant medical care, we recognize that this circumstance offers the applicable individual a short-term hardship exception to the community engagement requirement. To reflect the absence of a co-travel requirement in section 1902(xx)(3)(B)(ii)(III) of the Act while giving meaning to the statutory reference to a hardship that an applicable individual will sustain in the absence of actually traveling with their dependent, we believe it is reasonable for an applicable individual who is not traveling with the dependent to verify that they have experienced a short-term hardship in order to qualify for the exception.

Accordingly, at Sec. 435.555(d)(4)(i), we require an applicable individual who does not travel with their dependent for the necessary medical treatment to verify their efforts on behalf of the dependent that are directly related to the dependent's travel or medical condition that gives rise to the need for the travel. Specifically, the applicable individual must demonstrate having to take leave from employment or having to absent themselves from other community engagement activities for reasons related to the dependent's condition or travel. Examples of reasons related to the dependent's condition or travel could be taking the dependent to local medical appointments related to or in preparation for the medical appointment that requires the travel; conducting logistical activities relating to the travel; and maintaining primary responsibility for communicating with the dependent's medical providers.

Under section 1902(xx)(3)(B)(ii) of the Act, the short-term hardship exception only applies during a month in which, for part or all of such month, the applicable individual, or the applicable individual's dependent, must travel outside of their community. This means that, whether the applicable individual travels with the dependent or not, the exception only applies in the month in which the dependent travels. Thus, if an applicable individual must take leave from work or leave or be absent from other community engagement activities in the month preceding the dependent's travel, a short-term hardship exception will not apply because the dependent is not traveling. Additionally, the leave from employment or leave or absence from other community engagement activities must occur in the month in which the dependent travels in order for the applicable individual who is not traveling with the dependent to receive the exception.

The definition at Sec. 435.554(c)(5)(i)(E) of a “serious or complex medical condition” would also apply to the short-term hardship event for travel outside of the community to receive medical services necessary to treat a serious or complex medical condition.

We have considered whether and how other terms and phrases in section 1902(xx)(3)(B)(ii)(III) of the Act should be defined where section 1902(xx) of the Act does not define them. We consider the phrase “community” to be subject to several different interpretations. While numerous uses of “community” exist in title XIX of the Act, the term is generally not defined by itself within it (“home and community-based services” are described in section 1915(c) and (i) of the Act, for example, and section 1924 of the Act essentially defines a “community spouse” as an individual who is not in a medical institution or nursing facility).

What is considered a “community” will typically vary from one State to another, such as between predominantly rural States and others with numerous

urban areas, or even within a State. Therefore, we are not defining this term for purposes of this rule and are instead providing States with the discretion to determine what would count as a “community” for purposes of the short-term hardship exception. A State could reasonably define “community” to align with political subdivisions; that is, that when an applicable individual (or the dependent of such individual) must leave their political subdivision, they will have left their “community.” Alternatively, a State could reasonably define community based on proximity to the individual's residence; for example, that an individual leaves their community when needing to travel more than 25 miles or a certain number of hours (or has to stay overnight). Other definitions of “community” may be reasonable, although we remind States that the exception is for a short-term hardship. As we have instructed States in the context of the undue hardship exceptions to the application of the asset-transfer and trust rules (as described in section II.G.2. of this IFC), the mere causation of inconvenience is insufficient to establish a hardship.\99\ States should therefore develop standards for a “community” that make leaving it pose some measurable complication for applicable individuals and their dependents while at the same time not creating a standard that is too onerous. (For example, a State should not define a “community” to be an entire State such that only when applicable individuals or their dependents have to leave the State does the short- term hardship apply.)

\99\ Section 3258.11, 3259.8(A) of the State Medicaid Manual.

“Period of time” is also used in title XIX of the Act as a general, undefined phrase (for example, in section 1902(a)(44), (v), and (ee)(3)(A)(iii) of the Act)) and these other uses do not contain a modifier such as “extended,” as is used in section 1902(xx)(3)(B)(ii)(III) of the Act. We are not defining “extended period of time” in this rule and are thus providing States discretion to create a definition and standard for “extended period of time,” consistent with the nature of the short-term hardship exception. Section 1902(xx)(3)(B)(ii) of the Act directs that the short-term hardship circumstances described therein exist when, for “part or all of [a] month,” all of the criteria for one of the circumstances is met. “Part” of a month is therefore sufficient for purposes of any of the short-term hardship circumstances, which means that “extended period of time” could be less than a full month, and States are not permitted to require that it be at least a full month or longer.

Finally, under section 1902(xx)(3)(B)(ii)(III) of the Act, the medical services requiring the travel described in that section must be ones that “are not available within” the applicable individual's or dependent's “community of residence.” We do not interpret “community of residence” to have a distinct meaning from “community” within section 1902(xx)(3)(B)(ii)(III) of the Act. For purposes of evaluating the unavailability of the services within such community, we again believe that States should have the discretion to develop the standards to evaluate this, subject again to the “hardship” concept that is central to this exception.

States may find helpful their processes for determining if a Medicaid eligible individual needs related travel expenses \100\ (in particular meals, lodging, and attendants) for non-emergency medical transportation (NEMT) or out-of-State services as described at Sec. 431.52, when designing a process to determine if an individual must travel outside of their community under the short-term hardship exception at section 1902(xx)(3)(B)(ii)(III) of the Act. State processes for NEMT-related travel expenses and out-of-State services are often different, so States could look to one or both processes in implementing this short-term hardship exception. While States must pay for NEMT-related travel expenses when it is necessary for a beneficiary to secure covered services, States have flexibility to determine the processes to determine if a beneficiary requires NEMT to secure covered services and if related travel expenses are necessary for that NEMT trip. Under Sec. 431.52 States must cover out-of-State services when medical services are needed because of a medical emergency; medical services are needed and the beneficiary's health would be endangered if they were required to travel to their State of residence; the State determines, on the basis of medical advice, that the needed medical services, or necessary supplementary resources, are more readily available in the other State; or it is general practice for beneficiaries in a particular locality to use medical resources in another State. However, States have the flexibility to establish the process to determine if an out-of-State service meets one of the required criteria under Sec. 431.52. It is our understanding that the State processes for determining the necessity of NEMT-related travel expenses and out-of-State services typically factor in an individual's medical condition, their need for medical services, the availability of a medical service in the individual's geographic area (for example, number of providers in their particular geographic area who accept Medicaid and can furnish the relevant medical services, time and distance to providers who are able to furnish services if closer providers are unavailable, provider acceptance of new patients, that the medical services are more readily available in a different geographic area, etc.), and the impact a lack of the medical services would have on the individual. Thus, either of these State-established processes might be used by a State as a starting point for identifying when an applicable individual can receive this exception.

\100\ CMCS State Medicaid Director letter #23-005, “Assurance of Transportation: A Medicaid Transportation Coverage Guide.” (September 28, 2023), pg. 30. Available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd23006.pdf.

This section of the IFC discusses how States must assess compliance with the community engagement requirement in the context of applications, renewals, certain redeterminations in connection with changes in circumstances, and, at State option, more frequent verifications between renewals.

Section 1902(xx)(1) of the Act, as implemented in new Sec. 435.556, provides that States must require applicable individuals to demonstrate community engagement as a condition of eligibility for medical assistance at application and renewal. Section 1902(xx)(4) of the Act provides States the option to conduct more frequent verifications of compliance with the community engagement requirement. Section II.K. of this IFC describes when States must first implement the community engagement requirement.

Subject to certain limitations, section 1902(xx)(1) of the Act allows States to determine the number of months for which applicable individuals must demonstrate community engagement. Generally, the specific months for which an applicable individual must demonstrate community engagement differ for those who are applying for medical assistance under the State plan (or a waiver of such plan) and those who are already enrolled and receiving medical assistance under the State plan (or a waiver of such plan). However, in both cases, we use the term “review period” to reference the time period under consideration, during which an applicable individual must demonstrate the required number of months of

community engagement (or be deemed to being doing so through an exception) to fulfill the requirement. 1. Assessing Applicability of the Community Engagement Requirement

As a threshold matter, the State must first confirm whether an applicant or beneficiary is an applicable individual as defined at Sec. 435.551. This means the State must determine whether the applicant or beneficiary is a specified excluded individual as defined at Sec. 435.554 before determining whether they have demonstrated or are deemed to have demonstrated community engagement. Because a specified excluded individual, as described at Sec. 435.554, is not an applicable individual who must demonstrate or be deemed to demonstrate community engagement during the review period, the State determines if someone is a specified excluded individual or an applicable individual at application based on the month of application, as a State does when evaluating other factors of Medicaid eligibility. At renewal, this means the State determines if someone is a specified excluded individual or an applicable individual when processing the renewal. As further described in section II.E. of this IFC, specified excluded individuals are not applicable individuals and are therefore not required to demonstrate community engagement as a condition of eligibility. Thus, the general process for assessing compliance as described in this section would not apply to a specified excluded individual. See section II.H.3.d. “Processing Certain Changes in Circumstance,” at the end of this section for a discussion of how to address an individual who becomes an applicable individual after being a specified excluded individual or when moving from an eligibility group that does not include applicable individuals to the adult group or a section 1115 demonstration that does. 2. Assessing Compliance for Applicants

At new Sec. 435.556(a)(1), we implement the requirement under section 1902(xx)(1)(A) of the Act that, for an applicable individual, the State must require the individual to demonstrate community engagement as a condition of eligibility at application. Specifically, the State must require an applicable individual who files an application for medical assistance under the State plan (or a waiver of such plan) to demonstrate community engagement for at least 1 but not more than 3 consecutive months, as specified by the State, immediately preceding the month of application. At application, the review period is the State-specified number of months prior to the month of application for which someone must demonstrate community engagement. We interpret the requirement to mean that at a minimum, States must require applicable individuals to demonstrate community engagement in the 1 month prior to the month of application. However, States may elect to extend this review period to 2 or 3 consecutive months prior to the month of application. An applicable individual who files an application is considered to have successfully met the requirement if they demonstrate community engagement for all of the months elected by the State. States must specify the number of consecutive months for which an applicable individual must demonstrate community engagement prior to the month of application in the State plan.

We acknowledge that assessing compliance with the community engagement requirement will necessitate changes to existing application processes and procedures. As States consider the changes that are necessary to implement this requirement, States may need to consider how these changes affect the application process, including the paper and online applications, overall timelines, and workflows. States will need to make the necessary adjustments to ensure efficient eligibility and enrollment operations and compliance with processes for all Medicaid populations. 3. Assessing Compliance for Enrolled Beneficiaries

At new Sec. 435.556(a)(2), we implement the requirement under section 1902(xx)(1)(B) of the Act that the State must require an applicable individual who is enrolled and receiving medical assistance to demonstrate community engagement as a condition of eligibility.

Section 1902(xx)(1)(B) of the Act specifies that States must require an applicable individual who is enrolled and receiving medical assistance to demonstrate community engagement “for 1 or more months, as specified by the State, whether or not consecutive” at renewal or, at State option, more frequently. We interpret this to mean that a State must specify the number of months for which the enrolled applicable individual must demonstrate community engagement either between renewals or, if elected by the State, between more frequent verifications of community engagement. The State must specify a minimum of 1 month and may elect to require that individuals demonstrate more than 1 month of compliance with the community engagement requirement during the review period. The State must consider a beneficiary who is an applicable individual to have successfully met the requirement if during any part of the review period under consideration (either between renewals or between more frequent verifications, if elected by the State), the beneficiary demonstrates or is deemed to demonstrate community engagement for the number of months specified by the State. The statute does not specify the maximum length of the review period. To ensure that a State does not require an individual to demonstrate community engagement outside of the review period, at Sec. 435.556(b), we prohibit States from requiring an applicable individual to demonstrate community engagement for a number of months that exceeds the applicable review period.

Section 1902(xx)(a)(1)(B) of the Act provides that, at renewal or at more frequent verification, if elected by the State, an applicable individual must demonstrate community engagement for 1 or more months “whether or not consecutive.” Although the statute leaves to the State's discretion the number of months for which a beneficiary who is an applicable individual must demonstrate community engagement, the clause, “whether or not consecutive” is not modified by a grant of discretion to the State. We therefore interpret it not to permit the State to require a beneficiary to demonstrate community engagement for consecutive months, if the State elects to require more than 1 month, or to dictate the specific month(s) for which an applicable individual must demonstrate community engagement during the review period between renewals or more frequent verifications, if elected by the State.

We will discuss next how the review period is defined for beneficiaries and how States must assess compliance at renewal or at more frequent verifications. We also address requirements for States that elect to conduct more frequent verifications of community engagement, beyond the minimum required verification as part of a beneficiary's regular renewal. a. Assessing Compliance at Renewal if the State Does Not Elect To Conduct More Frequent Verifications of Compliance With the Community Engagement Requirement

To implement section 1902(xx)(a)(1)(B)(i) of the Act, at Sec. 435.556(a)(2)(i), we require States that do not opt to conduct more frequent verifications of compliance with the

community engagement requirement to assess an applicable individual's compliance during the period between such individual's most recent determination or redetermination of eligibility and the date the individual's renewal is due, consistent with section 1902(e)(14)(L) of the Act and Sec. 435.916. The period of time between the effective date of the individual's last determination or redetermination of eligibility and the date the renewal is due is also referred to as the individual's “eligibility period.” For beneficiaries, their eligibility period is the “review period” at renewal when States do not conduct more frequent verifications of compliance with the community engagement requirement. As part of the renewal process, a State must verify that a beneficiary who is an applicable individual demonstrated or is deemed to have demonstrated community engagement for the required number of months during the review period (which is the same period of time as the eligibility period).

In this context, we interpret “redetermination of eligibility” to mean the redetermination conducted during the individual's periodic renewal of eligibility under section 1902(e)(14)(L) of the Act and Sec. 435.916(a), rather than as a result of a change in circumstances following the redetermination procedures at Sec. 435.916(d). We considered whether to interpret “redetermination of eligibility” to also include redeterminations based on instances when the State only evaluates the eligibility factor for which the individual experienced a change in accordance with Sec. 435.916(d)(1)(i). However, we did not choose to include such redeterminations because they are limited in nature and could shorten an individual's review period based on a change unrelated to community engagement.

At renewal, States must require a beneficiary who is an applicable individual to demonstrate at least 1 month of community engagement during the review period. When considering whether to require applicable individuals to demonstrate more than 1 month of community engagement at renewal, a State should consider how long its renewal process currently takes in relation to the length of the eligibility period. We remind States that most individuals required to demonstrate community engagement are also subject to the new 6-month renewal requirement under section 1902(e)(14)(L) of the Act. Because most States currently take between 60 and 90 days to complete all steps in the renewal process for a cohort, an individual subject to renewals once every 6 months may only have been enrolled in their current eligibility period for approximately 3 months when the State initiates the next renewal and begins checking reliable information available to the State. As such, in electing the number of months during the review period for which a beneficiary must demonstrate community engagement at renewal, a State should consider its ability to access timely data to verify compliance with community engagement and otherwise renew eligibility, consistent with the community engagement ex parte verification requirements in section 1902(xx)(5) of the Act, this IFC, and existing Federal renewal requirements at Sec. 435.916(a). b. Assessing Compliance When the State Conducts More Frequent Verifications of Compliance With the Community Engagement Requirement

To implement section 1902(xx)(a)(1)(B)(ii) of the Act, at Sec. 435.556(a)(2)(ii), we specify that, if a State elects to verify compliance more frequently than at a beneficiary's renewal, the State must require a beneficiary who is an applicable individual to demonstrate community engagement during the period between the most recent verification of community engagement and the date the next verification is due, consistent with Sec. 435.557(d). As such, States must evaluate whether an applicable individual demonstrated or is deemed to have demonstrated community engagement for the number of months specified under Sec. 435.556(a)(2), during the period between the date of the beneficiary's last verification of community engagement and the date the next scheduled verification of community engagement is due. The next scheduled verification of community engagement may be either the next more frequent verification of compliance with community engagement that occurs during the eligibility period or the verification that occurs during the individual's next renewal. In the context of a State that elects more frequent verifications, the review period is the time between each verification of community engagement, including the verification that occurs as part of the regular renewal.

As an illustrative example, consider a State that elects to verify community engagement more frequently than at regularly scheduled renewals and does so in the third month of a 6-month eligibility period. The State requires an applicable individual to demonstrate community engagement for 1 month at each verification of community engagement. Prior to assessing compliance, the State must first confirm the beneficiary is still an applicable individual and is not a specified excluded individual, as defined at Sec. 435.554. If the beneficiary remains an applicable individual, then, to conduct a verification of community engagement in the third month of eligibility, the State will check information available, including information from data sources, to determine whether the applicable individual demonstrated community engagement, including by meeting an exception under Sec. 435.553 or, if applicable, Sec. 435.555, for at least 1 month since the last verification of community engagement. In this specific scenario, the review period would consist of the first, second, and third months of the eligibility period, and the applicable individual could meet the requirement by demonstrating community engagement (including by being deemed as demonstrating community engagement) in any one of these 3 months. If the State is unable to verify the applicable individual's demonstration of community engagement, then the State would follow the noncompliance procedures described in section II.J. of this IFC and Sec. 435.558. If the State is able to verify the applicable individual's demonstration of community engagement, the individual's eligibility period continues. Then, at renewal, the State will again verify whether the individual is a specified excluded individual and, if not, verify whether the applicable individual demonstrated 1 month of community engagement between the fourth month of the eligibility period and the end of the eligibility period.

States that verify community engagement more frequently than at each renewal will need to consider the timing of the additional verifications, the frequency of renewals for applicable individuals, and the time it takes the State to process renewals for a cohort. Doing so will help minimize concurrent verifications that create additional administrative burden for the State and individual, which could occur when conducting a more frequent verification overlaps with the time period the individual's renewal is in progress. For example, if a State conducts the more frequent verification of community engagement in month 3 of a 6-month eligibility period, it is possible the State is still processing the verification, including following applicable noncompliance procedures, into month 4 of an individual's eligibility period,

while at the same time the State's system is initiating the individual's renewal that must be completed by the end of the 6-month eligibility period.

Additionally, we remind States of the requirement at Sec. 435.916(d) to promptly redetermine eligibility if they receive information about a change in a beneficiary's circumstances that may affect eligibility. States that elect to conduct more frequent verifications of community engagement compliance may receive information that may affect other factors of eligibility, such as changes in income, and the State must take prompt action to redetermine eligibility based on such information when it is received. c. Prohibition on Assessing Compliance With Community Engagement for Specified Excluded Individuals

At new Sec. 435.556(c), we specify that States may not apply the requirements under Sec. 435.556(a) to specified excluded individuals defined at Sec. 435.554. Because specified excluded individuals are not applicable individuals, States may not require such individuals to demonstrate or be deemed as demonstrating community engagement for the otherwise applicable number of months at application, renewal, or, if applicable, more frequent verification. If a State identifies that an applicable individual meets an exclusion, the person becomes a specified excluded individual and is no longer subject to the requirements at Sec. 435.556(a). This could be identified during the renewal process, as part of a more frequent verification of community engagement (if elected by the State), identified through information that becomes available to the State, or due to the individual reporting a change in their status to the Medicaid agency. Section II.I.7. of this IFC addresses how States must verify whether an individual is a specified excluded individual. d. Processing Certain Changes in Circumstances

As a reminder, States are required to have procedures in place to ensure individuals make timely and accurate reports of any changes that may affect eligibility, in accordance with Sec. 435.916(c). As described in section II.L. of this IFC, individuals who are enrolled in an eligibility group subject to the community engagement requirement must receive outreach about the community engagement requirement, including information on how to report changes. In accordance with Sec. 435.916(d), the State must promptly act on any changes in circumstances that may affect eligibility, and if a State has information about anticipated changes in a beneficiary's circumstances that may affect their eligibility, the State must redetermine eligibility at the appropriate time based on such changes. We note that not all changes related to an individual's status as a specified excluded individual or demonstration or deemed demonstration of community engagement will affect a person's Medicaid eligibility. State decisions on how many months individuals must demonstrate compliance with community engagement in the review period and the individual's circumstances will influence whether a change related to community engagement is material to the individual's Medicaid eligibility. However, States should ensure they have procedures for beneficiaries to report such changes, as the individual may not know whether a change may affect their eligibility. In addition, States have an obligation to notify individuals of changes to eligibility requirements and rights and responsibilities, such as losing their specified excluded status, which is described further in this section of the IFC. (1) Changes in Circumstances for Beneficiaries Enrolled on Another Basis Who Become Eligible for a Group Subject to the Community Engagement Requirement

States will encounter instances when a beneficiary enrolled in an eligibility group that is not subject to the community engagement requirement experiences a change in circumstance and becomes potentially eligible for an eligibility group for which community engagement is a factor of eligibility, such as the adult group or an applicable section 1115 demonstration described at Sec. 435.551. When redetermining eligibility based on the change and considering eligibility on other bases, a State must evaluate whether the beneficiary is potentially eligible in the adult group or in an applicable section 1115 demonstration. If so, the State must evaluate whether the beneficiary would be an applicable individual. If the beneficiary is determined to be an applicable individual, the State must then determine whether the beneficiary meets or is deemed to meet the community engagement requirement. Only after these steps may the State complete its determination of eligibility and, if appropriate, move the beneficiary into the new eligibility group or applicable section 1115 demonstration.

Section 1902(xx)(3)(A) of the Act provides that anyone described in section 1902(a)(10)(A)(i)(I) through (VII) of the Act for part or all of a month is deemed to have demonstrated community engagement for that month. At Sec. 435.556(a)(2)(iii), we specify that in the case of a beneficiary who becomes an applicable individual during their eligibility period, the review period is the period between the effective date of such individual's most recent determination or redetermination at renewal, as applicable, and the end of the month prior to the month in which the individual enrolls in coverage in a group or an applicable section 1115 demonstration subject to community engagement. The end date of this review period ensures that the beneficiary's compliance is not assessed for any month for which the beneficiary did not have the entire month to demonstrate community engagement. In assessing compliance within this review period, the State would need to determine whether the beneficiary demonstrated or is deemed to have demonstrated community engagement for the lesser of the number of months the State elects under Sec. 435.556(a)(2) or, consistent with the requirement at Sec. 435.556(b), the number of months in the review period. This means the State will assess compliance with community engagement during a change in circumstances for the same number of months it requires at renewal except in situations when the number of months the State assesses compliance at renewal exceeds the number of months in the review period.

We note that most beneficiaries enrolled on another basis who become applicable individuals when the State acts on a change in circumstances will be deemed to have demonstrated community engagement for all months in the relevant review period because they meet one or more mandatory exceptions (as described in section II.D. of this IFC). There may be limited circumstances in which such deeming is not applicable, depending on the optional groups a State elects to cover and/or the section 1115 demonstrations a State has implemented. (2) Changes in an Individual's Status as a Specified Excluded Individual

States will also encounter instances in which an individual who was previously determined to be a specified excluded individual loses that status during their eligibility period. The change in status may be identified outside of the regularly scheduled renewal process and could be a beneficiary-reported change in status, a change identified by the State, or an anticipated change, such as when a

parent's dependent child turns age 14, causing the parent to no longer be a specified excluded individual on the basis of being the parent of a dependent child as defined at Sec. 435.554(a). Unless the individual is a specified excluded individual on another basis specified at Sec. 435.554, the individual becomes an applicable individual who is subject to the community engagement requirement.

As with the case of someone previously enrolled in an eligibility group or section 1115 demonstration not subject to community engagement newly becoming an applicable individual, when a State determines that an individual is no longer a specified excluded individual and has become an applicable individual, the State must ensure the individual demonstrates community engagement or is deemed to have demonstrated community engagement during the period specified at Sec. 435.556(a)(2)(iii). In assessing compliance within this review period, a State must consider an applicable individual compliant with the community engagement requirement if they demonstrated or are deemed to have demonstrated community engagement for the lesser of the number of months the State elects under Sec. 435.556(a)(2) or, consistent with the requirement in Sec. 435.556(b), the number of months in the review period.

It is important to note that having been a specified excluded individual is a mandatory exception, as specified at Sec. 435.553(a)(4), that results in the applicable individual being deemed to have demonstrated community engagement in a month for which the applicable individual was a specified excluded individual for all or part of the month. As such, the State must deem an applicable individual to have demonstrated community engagement in all month(s) of the review period in which they were a specified excluded individual. Because of this deeming, in most cases, a person will continue to be eligible for Medicaid at the time they lose their status as a specified excluded individual. e. Notifying Individuals About Eligibility Decisions and Changes in Eligibility Requirements

States are required to provide all applicants and beneficiaries with “timely and adequate written notice of any decision affecting their eligibility” (Sec. 435.917(a)), which includes eligibility approvals, denials, and terminations. In the case of eligibility terminations, such notice must be provided at least 10 days in advance of the date of action (Sec. Sec. 431.201, 431.211). Further, States must provide individuals with information on their eligibility requirements and rights and responsibilities (Sec. 435.905). Eligibility determination notices must include a clear statement of the basis of eligibility, consistent with Sec. 435.917(b)(1)(i), or a statement of the State's intended action and the specific reasons for the action, consistent with Sec. 431.210(a) and (b), as applicable.

In the context of eligibility under Sec. 435.119 or a section 1115 demonstration that includes applicable individuals as specified at Sec. 435.556(d), the State must inform applicants and beneficiaries of the State's eligibility determination. The notice must address whether the individual meets the criteria as a specified excluded individual as defined at Sec. 435.554. If the individual does not meet the criteria for a specified excluded individual and is an applicable individual as defined at Sec. 435.551, the notice must also address if the individual demonstrates community engagement under Sec. 435.552, including if the individual meets the criteria for an exception under Sec. 435.553 or, if applicable, Sec. 435.555, to be deemed as demonstrating community engagement, for the month(s) specified under Sec. 435.556(a). Applicants and beneficiaries have the right to request a fair hearing to appeal the State's decision that an individual meets the criteria to be a specified excluded individual and their compliance with the community engagement requirement (including meeting the criteria for an exception), consistent with Sec. 431.220(a)(1).

We also consider the loss of a beneficiary's status as a specified excluded individual and becoming an applicable individual to be an “action” under Sec. 431.201. This change reduces eligibility because it adds new eligibility requirement that the individual must meet to maintain their eligibility. Therefore, the State must provide a beneficiary who is losing their specified excluded individual status with a minimum of 10 days advance notice and fair hearing rights consistent with Sec. Sec. 435.917 through 435.918 and part 431 subpart E. The advance notice must include the outreach material at Sec. 435.561(c), consistent with Sec. 435.561(b)(3)(iv)(C).