DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services

Administrator
Washington, DC 20201

February 7, 2008

Lillian B. Koller, Esq.

Director
Department of Human Services
Med-QUEST Division
Policy and Program Development Office
P.O. Box 700190
Kapolei, HI 96709-0190

Dear Ms. Koller:

We are pleased to inform you that the Hawaii Medicaid section 1115 demonstration extension,
QUEST Expanded (QEx) (11-W-00001/9), is approved in accordance with section 1115(a) of the
Social Security Act (the Act) through June 30, 2013, upon which date, unless reauthorized, all
waivers and authorities granted to operate this demonstration will expire.

In addition, we are pleased to inform you of the results of our review of your request to amend the
QEx section 1115 Medicaid demonstration to add the QUEST Expanded Access (QExA) program
that will provide managed care to the aged, blind, and disabled (ABD) beneficiaries in Hawaii. This
amendment is approved through June 30, 2013, upon which date, unless reauthorized, all waivers and
authorities granted to operate this demonstration will expire. Approval of the project modifications is
granted under the authority of section 1115(a) of the Act.

The Centers for Medicare & Medicaid Services (CMS) is approving the State’s request to extend the
QEx demonstration and the following amendments:

• Waiver and Expenditure authorities to allow the State to begin the QExA program that
will enroll ABD populations into mandatory managed care delivery systems beginning
November 2008.
• Expenditure authority for the State to continue the four existing section 1915(c) home
and community-based services (HCBS) waiver programs under section 1115 authority as
“mirror image” programs during the transitional period, until the QExA managed care
program is operational. This expenditure authority will begin February 1, 2008.
• Expenditure authority for uncompensated care payments to specific governmental and
private hospitals for services provided to the uninsured, with a maximum ceiling limit of
$15 million annually, based upon successful accomplishment of the benchmarks defined
in the attached special terms and conditions (STCs).

The approval of this extension and the amendment to the demonstration are subject to the limitations
specified in the enclosed list of approved waivers and expenditure authorities. The State may deviate
from the Medicaid State plan requirements to the extent those requirements have been specifically
waived or listed as inapplicable to demonstration expansion populations, or to the extent that the State
has been granted expenditure authority for costs not otherwise matchable.
Page 2 – Lillian B. Koller, Esq.

The approval is also conditioned upon compliance with the enclosed STCs and is subject to our
receiving your acknowledgement of the award and the acceptance of the STCs, Waiver List, and
Expenditure Authorities within 30 days of the date of this letter. In addition, the State is required
to submit a Medicaid State plan amendment no later than 30 days from the date of the approval
letter in order to update its Certified Public Expenditure methodology. The State is required to
complete all section 1915(c) waiver program demonstration termination activities for the four
transitioning waivers, including reporting of outcomes and expenditures in accordance with
CMS’ policy.

Further conditional State actions that were identified during our review of the renewal request
require submission of a State Children’s Health Insurance Program (SCHIP) State plan
amendment (SPA) and corresponding Medicaid amendment. These SPAs will provide eligibility
through the Medicaid Expansion SCHIP State plan for optional targeted low-income children,
specifically children with family incomes above 200 percent up to, and including, 300 percent of
the Federal poverty level.

The State must submit the SCHIP and Medicaid SPAs with its acceptance of the enclosed STCs
within 30 days of the date of this letter. The effective date of the SPAs must be January 1, 2008,
since the current expenditure authority for this expansion population will expire in this section
1115 demonstration February 1, 2008.

In addition, CMS will be providing guidance and technical assistance regarding compliance with
the recently published rule on case management (CMS-2237-IFC) and its application in
demonstration programs. This guidance will provide specificity on expectations and timeframes
for compliance, and may require modification or amendment to the demonstration.

Your project officer is Ms. Diane Gerrits. She is available to answer any questions concerning
you section 1115 demonstration. Ms. Gerrits’ contact information is as follows:

Centers for Medicare & Medicaid Services

Center for Medicaid and State Operations
7500 Security Boulevard
Mail Stop: S2-01-16
Baltimore, MD 21244-1850
Telephone: 410-786-8681
Facsimile: 410-786-5882
E-mail: Diane.Gerrits@cms.hhs.gov

Official communications regarding program matters should be sent simultaneously to Ms. Gerrits
and to Ms. Linda Minamoto, Associate Regional Administrator in our San Francisco Regional
Office. Ms. Minamoto’s contact information is as follows:

Centers for Medicare & Medicaid Services

90 7th Street, Suite 5-300 (5W)
San Francisco, CA 94103-6706
Page 3 – Lillian B. Koller, Esq.

If you have questions regarding this correspondence, please contact Ms. Susan Cuerdon, Acting
Director, Family and Children’s Health Programs Group, Center for Medicaid and State
Operations at 410-786-5647. We look forward to continuing to work with you and your staff.

Sincerely,

/s/

Kerry Weems
Acting Administrator

Enclosures
Page 4 – Ms. Lillian B. Kohler

cc: Linda Minamoto, ARA, Region IX