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Supplemental Guidance on Cost Allocation for Exchange and Medicaid Information Technology (IT) Systems Questions and Answers

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  1. Is there new policy in these questions and answers?
  2. Why do Exchange systems have to be cost allocated with other programs?
  3. Can a state allocate the costs of certain “enterprise-wide” assets among the Exchange(s), Medicaid and CHIP if they are necessary for those programs, and use them for other programs and purposes in the state without having to charge those other users?
  4. Does allowing an exception to Circular A-87 cost allocation principles mean that HHS is promoting integrated IT systems across health and human services programs?
  5. If the participation of other human services programs adds costs to the Exchange/Medicaid/CHIP IT build, does a state have to separately identify and charge those costs to the program(s) adding those requirements?
  6. On what basis does a state allocate costs?
  7. Can a state still take advantage of the exception to Circular A-87 cost allocation principles if the state does not qualify for enhanced funding from Medicaid (e.g., the state fails to meet the seven standards and conditions), or if the state fails to meet Exchange requirements?
  8. Is the state CHIP program eligible for enhanced funding for eligibility systems modernization?
  9. What if things change after the cost allocation plan has been approved? Does the state have to readjust the cost allocation plan?
  10. How does cost allocation among an Exchange establishment grant and Medicaid administrative funding work if the state is using a Federally facilitated Exchange, or engaged in a partnership model with the Federal government?
  11. What if a state is ready to move forward on a Medicaid IT build, but not ready to decide on an Exchange? If the state later opts to establish a state-based Exchange and therefore request grant funds to make the transformation, does it allocate costs to the Exchange grant in order to make that transformation?
  12. Does a state need to allocate core Medicaid system development costs to the Federally-facilitated Exchange (FFE) for a state-operated Medicaid system that will be used to assess eligibility for Exchange-related insurance affordability programs and then transfer the application to the Exchange?
  13. If a state requests Exchange establishment funding to design, build and test the state-based Exchange eligibility system, what services does it need to cost allocate? Similarly, if a Medicaid or CHIP agency applies for Medicaid or CHIP funds related to the business requirements, design, build and testing of the systems required to determine MAGI-based (modified adjusted gross income-based) eligibility for Medicaid or enrollment in a Qualified Health Plan (QHP) through the Exchange, what services does the agency need to cost-allocate between the programs?
  14. What if a state needs to expand the system to accommodate the human services programs?
  15. Does a state need to cost allocate non-IT activities, like establishing a call center?
  16. In November 2010, HHS and the U.S. Department of Agriculture (USDA) issued guidance to states related to cost allocation methodologies for programs participating in a shared information technology (IT) system. How does the exception to OMB Circular A-87 cost allocation principles interact with this guidance?
Page updated: December 10, 2021

The contents of this guidance document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.