Medicaid Transformation Grants

To provide Federal payments to States for the adoption of innovative methods to improve the effectiveness and efficiency in providing Medical Assistance.

Agency - Department of Health and Human Services

The Department of Health and Human Services is the Federal government's principal agency for protecting the health of all Americans and providing essential human services, especially to those who are least able to help themselves.

Program Accomplishments


Uses and Use Restrictions

Funds from the program may be used to fund the following examples of innovative methods to improve the effectiveness and efficiency in providing Medical Assistance and are not limited to: (1) methods for reducing patient error rates through the implementation and use of electronic health record, electronic clinical decision support tool, or e-prescribing programs, (2) methods for improving rates of collection from estates of amounts owed under Medicaid, (3) methods to reduce waste, fraud and abuse under Medicaid, such as reducing improper payment rates as measured by annual error rate measurement (PERM), (4) implementation of medication risk management program as part of a drug use review program under section 1927(g), (5) methods for reducing, in clinically appropriate ways Medicaid expenditures for covered outpatient drugs, particularly in the categories of greatest drug utilization, by increasing the utilization of generic drugs through the use of education programs and other incentives to promote greater use of generic drugs, and (6) methods of improving access to primary and specialty physician care for the uninsured using integrated university-based hospital and clinic systems.

RESTRICTIONS -- States may not use funds as the State's share of the Medicaid program costs or as supplemental Disproportionate Share Hospital (DSH) payments.

Eligibility Requirements

Applicant Eligibility

Grant applicants are limited to the 51 State Medicaid Agencies and the Medicaid Agencies in the Federal Territories.

Beneficiary Eligibility

State Medicaid Agencies and the Medicaid Agencies in the Federal Territories.


Federal funds will be directed to the State Medicaid Agency with the grant award amount identified in the award approval letter. Permissible administrative costs will be determined in accordance with Office of Management and Budget (OMB), Circular No. 87, "Cost Principals for States and Local Governments."

Aplication and Award Process

Preapplication Coordination

The Centers for Medicare and Medicaid Services (CMS) will issue guidance to States via a State Medicaid Director (SMD) letter regarding the application requirements.

This program is excluded from coverage under E.O.


Application Procedures

A State may submit only one application. More than one program concept proposal and budget may be included in the application. Applications must be submitted electronically to CMS via E-mail:

Award Procedures

CMS will make a decision for each application received. Each applicant will receive written notification of CMS' decision. Applicants approved for a grant award must submit a letter of acceptance to CMS within 30 days of the date of the award, agreeing to the terms and conditions of the award letter.


All applications are due to CMS by October 2, 2009.


Deficit Reduction Act of 2005, Public Law 109-171, enacted February 8, 2006, Section 6081, Medicaid Transformation Grants.

Range of Approval/Disapproval Time

60 to 90 days.





Assistance Considerations

Formula and Matching Requirements

The law specifies that the method of allocating funds to States shall prefer States that design programs that target health providers that treat significant numbers of Medicaid beneficiaries. Such method shall provide that not less than 25 percent of such funds shall be allocated among States the population of which (as determined according to data collected by the United States Census Bureau) as of July 1, 2004, was more than 105 percent of the population of the respective State (as so determined) as of April 1, 2000. No matching funds are required for this program.

Length and Time Phasing of Assistance

Project Period: Under the legislation, a total of $150,000,000 has been made available for the Medicaid Transformation grants. $75,000,000 is available for obligation in FY 2007 and another $75,000,000 is available for obligation in FY 2008. All $150,000,000 will be awarded in a single grant solicitation at the beginning of FY 2007 that will cover both years of the program. Funds for FY 2008 activities/obligations will not be available until FY 2008. Budget Period: FY 2007 and FY 2008.

Post Assistance Requirements


States will be required to submit an annual report to CMS related to the programs supported by this award and the report shall include at a minimum: (1) the specific uses of the funds (2) an assessment of quality improvements and clinical outcomes under this program and (3) estimates of cost savings resulting from this program.

In addition, States will be required to submit financial reports as required by CMS.


In accordance with the provisions of OMB Circular No. A-133 (Revised, June 24, 1997).


Financial records, supporting documents and progress/annual reports and all other records pertinent to this program shall be retained 3 years.

Financial Information

Account Identification



(Grants) FY 07 $75,000,000; FY 08 $75,000,000; and FY 09 est not available.

Range and Average of Financial Assistance

Grant funds will be allocated based on the number of States that apply and meet the grant criteria.

Regulations, Guidelines, and Literature

CMS will provide application guidance in the form of a State Medicaid Director letter. The letter may be located at

Information Contacts

Regional or Local Office


Headquarters Office

Program Contacts: Tonya Moore, Health Insurance Specialist, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Mail Stop S2-01-16, Baltimore, MD 21244. Telephone: (410) 786-0019, E-mail: and Wanda Pigatt-Canty, Health Insurance Specialist, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Mail Stop S2-01-16, Baltimore, MD 21244. Telephone: (410) 786-6177 E-mail:

Criteria for Selecting Proposals

Each application will be reviewed by a team of CMS staff. The applicant selection criteria will consist of the following but will not be limited to only these factors: the project abstract, project narrative and budget.

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