Cost Allocation Plans What & Why? August 22, 2012
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1 Cost Allocation Plans What & Why? August 22, 2012
2 Overview What is a Public Assistance Cost Allocation Plan? What are Benefiting Objectives? Cost Allocation Changes Related to Medicaid Programs & Exchanges Why it is Important to Do it Right (aka Pitfalls) Contact Page 2
3 What Is a Public Assistance Cost Allocation Plan? A public assistance agency is the state agency responsible for the administration of one or more of the State Plans for public assistance programs, including Titles IV-A, IV-B, IV-D, IV-E, XIX, and XXI of the Social Security Act. These programs require an agency to prepare a cost allocation plan in order to determine the costs and their funding sources. For example, Medicaid state plan requirements say a state must prepare a cost allocation plan to get reimbursed for administrative costs. All agencies will benefit from a cost allocation plan, even if they are part of the single state agency (e.g., a State Health Insurance Exchange). Page 3
4 What Is a Public Assistance Cost Allocation Plan? (Continued) The cost allocation plan is updated as needed in accordance with 45 CFR , while all math is calculated in support of claims, usually quarterly. Page 4
5 What Is a Public Assistance Cost Allocation Plan? (Continued) A public assistance cost allocation plan is governed by OMB A-87 (located at 2 CFR Part 225) and its companion guide ASMB C-10. More recent publications, such as the Best Practices Review Guide, help to flush out gray areas. A public assistance cost allocation plan includes all costs incurred by an agency, with the possible exception of expenditures for financial assistance, medical vendor payments, food stamps, and payments for services and goods provided directly to program recipients (OMB A-87). A cost allocation plan works with gross costs. Federal financial participant (FFP) rates are applied at the end of the process. Page 5
6 What Is a Public Assistance Cost Allocation Plan? (Continued) DCA, the cognizant agency, will coordinate review of a plan with other parts of DHHS. CMS will directly approve Advanced Planning Documents (APDs) and they must be consistent with and mentioned in cost allocation plans. An Exchange might follow a similar process. Page 6
7 What are Benefiting Objectives (Programs)? OMB A-87 and ASMB C-10 require that costs be allocated to all programs that receive benefits from expenditures, and only to these programs. If a cost benefits multiple activities, the cost must be allocated based on the activities relative benefits to each other. The costs cannot be allocated to one primary program (OGAM 98-2). Benefiting Objectives Activities or programs that are, in part or in whole, supported by an activity or cost of the agency. Page 7
8 Cost Allocation Changes related to Medicaid & Exchanges Medicaid agencies no longer focus on a single program; the advent of electronic health records (EHRs), health care reform, waivers, 90/10, etc. have created different flavors of Medicaid. State Medicaid Directors letters related to EHRs and health care reform require that Medicaid agencies update their plans. The 90/10 waiver of OMB A-87 requires costs to be identified and properly allocated to benefiting programs. Where an Exchange or eligibility system sits outside of the Medicaid agency, cost allocation plans and methodologies must be modified and/or created. Eligibility (90/10) Electronic Health Records Cost Allocation Changes Health Care Reform Waivers Note that new requirements describe both cost allocation PLANS (i.e., Medicaid agency requirement) and cost allocation methodologies (e.g., a plan to allocate costs of an exchange). Page 8
9 Why it is Important to Do it Right (aka Pitfalls) Cost allocation plans are not commodities! The goal of a CAP is to ensure that costs are accurately allocated and claimed. Every CAP can and should be used to assist the agency in justifying revenue retention. CAPs that are done correctly, properly, and accurately provide valuable data to the agency. Poor PACAPs run the risk of inaccurate claiming, lost revenue, and audit exposure. The only way to ensure proper Medicaid, systems, and 90/10 funding is via support from sound cost allocation processes (e.g., costs may not be split 50/50 without rationale; eligibility statistics must be employed, etc.). Page 9
10 Contact Amy Ferraro Manager, PCG (617) , Ext Page 10
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