In order to implement parts of the Affordable Care Act (ACA), CMS has proposed a new rule to adjust programs for payment errors and eligibility quality control under Medicaid and CHIP.

The agency said in a press release the changes would “reduce state burden and increase the focus on the continuous reduction of improper payment rates.”

The biggest proposed change to the Payment Error Rate Measurement (PERM) would be tougher standards on states which have higher rates of improper payments. The proposed rule states improper payments would be cited for incorrect federal share amounts (rather than basing the decision on the federal and state shares combined). If improper payments for ineligible enrollees exceed the national standard of 3 percent, states will be subject to “more stringent requirements” in correcting those actions.

Among the other proposed PERM changes:

• The review period of Medicaid and CHIP payments will be changed from July-June to October-September to match the federal government’s fiscal year.
• A federal contractor will conduct PERM reviews, with state support, rather than rely solely on states to report on eligibility to CMS.
• Eligibility reviews (in addition to medical and data processing reviews) on be conducted on fee-for-service and managed care payments sampled, rather than “the current practice of states creating separate universes of eligible individuals that are sampled for eligibility review.”

For the separate Medicaid Eligibility Quality Control (MEQC) program, CMS is proposing changing it to a pilot program that states must conduct during PERM “off years.” States would be allowed flexibility on where to focus their reviews unless their eligibility improper payment rates under PERM exceed 3 percent in consecutive reviews.

The deadline to comment on the proposed rule is August 22.