Medicare Program; Information, Counseling, and Assistance Grants Program

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 403

[OBS-001-FC]

Medicare Program; Information, Counseling, and Assistance Grants

Program

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This rule establishes, for fiscal years 1994 and beyond, a

minimum level of funding for grants made to States, Commonwealths, and

Territories to provide individuals eligible to receive benefits under

the Medicare program with information, counseling, and assistance

related to obtaining adequate and appropriate health insurance

coverage. It also sets forth the following in regulations: A

description of the methodology used to determine the total amount of

the grant award; the conditions for eligibility for the grant;

limitations on the use of grant funds in certain circumstances;

reporting requirements; and an opportunity to appeal our determination

regarding a State's grant application.

The provisions of this rule are in accordance with section 4360 of

the Omnibus Budget Reconciliation Act of 1990.

In addition, this rule eliminates the supplemental coordinated care

grants program.

DATES: Effective Date: October 7, 1994.

Comment Period: Comments must be received at the appropriate

address, as provided below, no later than 5 p.m. on December 6, 1994.

Because we intend to make grant awards before October 1, 1994, it is

not possible for us to consider the comments with respect to the fiscal

year (FY) 1994 grant awards. We will, however, consider the comments

for grants made available in future years and, if appropriate, for the

revision of the regulations established by this rule.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: OBS-001-FC, P.O. Box 26688,

Baltimore, MD 21207.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW.,

Washington, DC 20201, or

Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,

MD 21207.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code OBS-001-FC. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue SW., Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Eric Lang, (410) 966-3199.

SUPPLEMENTARY INFORMATION:

I. Background

Section 4360 of the Omnibus Budget Reconciliation Act of 1990 (OBRA

'90), Public Law 101-508, and applicable appropriations authorize us to

make grants to States, Commonwealths, and Territories for health

insurance advisory service programs for Medicare beneficiaries.

(Hereinafter, unless otherwise indicated, the term ``State'' or

``States'' includes the 50 States, the District of Columbia, Puerto

Rico, the Virgin Islands, Guam, and American Samoa.) Grant funds are

available to support providing information, counseling, and assistance

(ICA) relating to Medicare, Medicaid, Medicare supplemental policies,

long-term care insurance, and other health insurance benefit

information. Thus, this funding activity is known as the Health

Insurance ICA Grants Program.

Section 4360(a) of OBRA '90 specifies that, in order to be eligible

for a grant under this program, the State must have a Federally-

approved Medicare supplemental regulatory program under section 1882 of

the Social Security Act (the Act) (42 USC 1395ss). Section 1882

addresses the certification of Medicare supplemental health insurance

policies. In general, section 1882(b) provides that, if a State

establishes, under State law, a regulatory program that applies the

standards and requirements that the Secretary would apply to Medicare

supplemental health insurance policies under section 1882(c) and that

meets certain other criteria, those Medicare supplemental policies

issued by the State are deemed to meet the standards and requirements

that the Secretary would, herself, apply. Thus, in order to be eligible

for an ICA grant a State must operate a regulatory program that we

determine meets the criteria of section 1882(b) of the Act.

Section 4360(b) of OBRA '90 specifies that, in submitting an

application for an ICA grant, the State must submit a plan for a State-

wide ICA program. It also specifies the minimum information that the

program must provide to Medicare beneficiaries.

Grant funding is available to States for projects to plan,

implement, operate, and/or enhance a variety of ICA activities. States

may request grant funds to develop new health insurance ICA programs or

to enhance existing health insurance ICA programs that meet the

requirements specified in section 4360 of OBRA '90.

Section 4360(a) requires us to publish regulations to establish a

minimum level of funding for a health insurance ICA grant.

Subject to congressional appropriations, in accordance with the

requirements of section 4360 of OBRA '90, we will announce the

availability of funding for health insurance ICA grants. Solicitation

and grant application packages will be mailed to the Governor (or his

or her designee) of each eligible State. The closing date for receipt

of applications will be approximately 60 days thereafter. Awards for

health insurance ICA grants will be made before October 1 of the year

in which the solicitation is made. ICA grants will be administered in

accordance with the provisions of: 42 CFR part 403, subpart E; 45 CFR

part 74, (which concerns administration of grants) as specified by

Sec. 74.4(a)(2); 45 CFR part 92 (which concerns uniform administrative

requirements for grants and cooperative agreements to State and local

governments); the terms of the solicitation; and the terms of the

notice of grant award.

II. Provisions of this Final Rule With Comment Period

On August 26, 1992, we published an interim final rule with comment

period (57 FR 38616) that established a minimum level of funding for

health insurance ICA grants made for fiscal years 1992 and 1993. Those

provisions are contained at 42 CFR part 403, subpart E. In general,

this final rule amends those provisions in order to establish a basis

in regulations for continuation funding beyond FY 1993. It also

eliminates the program of supplemental coordinated care grants. The

provisions of this final rule with comment period are discussed below.

A. Eligibility for Grants

Based on sections 4360 (a) and (b) of OBRA '90, this rule

specifies, in Sec. 403.501, that, in order to be eligible for a health

insurance ICA grant, the State must--

Have a Federally-approved Medicare supplemental regulatory

program under section 1882 of the Act; and

Submit a timely application to us that meets the

requirements of section 4360 of OBRA '90; 42 CFR part 403, subpart E;

and our solicitation for grant applications.

B. Availability and Duration of Funds for Grants

This rule specifies, at Sec. 403.502, that grants for a fiscal

period will be approved subject to congressional appropriation of funds

and, if applicable, satisfactory progress in each State's project under

a preceding health insurance ICA grant. (The criteria by which progress

will be evaluated and the performance standards for determining whether

satisfactory progress has been made will be specified in the notice of

grant award sent to each State.) Note that we may, at our discretion,

set aside a portion of the appropriated funds to be used for ICA-

related activities. The grant award is based on a 12-month period and

is made by the close of a fiscal year for each State application

approved by that date. However, information regarding the timing of the

award and its duration will be included in the notice of grant

solicitation, rather than included in the regulations.

C. Number and Size of Grants

This rule revises the provisions at existing Sec. 403.504. We

continue to provide, at Sec. 403.504(a) for two types of grants: (1)

New program grants, and (2) existing program enhancement grants for

States with ``substantially similar'' health insurance ICA programs. We

are interested in establishing or enhancing health insurance ICA

programs in all eligible States. Therefore, under Sec. 403.504(b), each

eligible State that submits an acceptable application will receive a

grant that consists of two parts: a fixed amount (the minimum funding

level) and a variable amount. Under Sec. 403.504(b), the grant

available to each of the 50 States, Puerto Rico, and the District of

Columbia equals $75,000 (the fixed amount), plus a per capita payment

per resident Medicare beneficiary. Because of their relatively small

populations, the grant available to the Virgin Islands, Guam, and

American Samoa is $25,000 each (the fixed amount), plus a per capita

payment per Medicare beneficiary residing in the territory.

The establishment of the fixed amount portion of the grant award as

the minimum funding level is a change from the minimum funding level

described at existing Sec. 403.504(b). (Existing Sec. 403.504(b), which

was applicable for fiscal years 1992 and 1993, provided that the

minimum funding level consisted of two parts: a basic (fixed) portion

and a variable portion.) We believe it is clearer (more descriptive) to

establish as the minimum funding level a fixed, stated dollar amount

and to consider the variable amount as being in addition to the minimum

funding level. This change will not affect the amount of the grant

award. The grant award will still consist of the fixed portion amount

and the variable portion amount.

The calculation of the variable portion of the grant is described

at existing Sec. 403.405(c). We base the variable portion of the grant

on the amount of available funds and a comparison of each State with

the average of all of the States except the State being compared with

respect to three factors that relate to the size of the State's

Medicare population and where that population resides. The three

factors are: the percentage of nationwide Medicare beneficiaries

residing in the State, the State's proportion of Medicare beneficiaries

to its total population, and the percentage of the State's Medicare

beneficiary population that resides in rural areas.

Nationally, the average variable payment is 10.75 cents. A State

with a higher than average proportion of Medicare beneficiaries to its

total State population and/or a higher than average proportion of rural

Medicare beneficiaries will receive variable funds greater than 10.75

cents per beneficiary under this grant program. Of the total variable

portion of the award, approximately 75 percent is based on the number

of Medicare beneficiaries in the State; approximately 10 percent is

based on the proportion of Medicare beneficiaries to the total State

population; and approximately 15 percent is based on the percentage of

the State's Medicare beneficiary population that resides in rural

areas. (We based population estimates on the U.S. Census estimates for

1990. The Medicare beneficiary estimates came from our beneficiary

enrollment database as of July 1990. We consider ``rural areas'' to be

counties located outside of metropolitan statistical areas.)

At the time we announce the availability of grant funding, we

provide each State with an estimate of the amount of funds that may be

awarded to it. As part of its application, the State submits a budget

based on the estimated amount. When the grant awards are made, we

allocate all available monies based on the methodology described above.

If the grant amount the State receives is different than the

anticipated amount on which its budget was based, the State must

submit, along with its acceptance of the grant award, a revised budget

that is based on the amount of the award.

It has come to our attention that the provisions at existing

Sec. 403.504, particularly paragraph (d) of that section, have caused

confusion because they do not clearly reflect the above process. (Some

interpreted paragraph (d) as indicating that there was a two-step

process involved in applying for the grants. That is, that a State

applied for and was awarded a basic grant and that, if there were

additional funds available, the State submitted another application and

a subsequent award was made.) This rule revises Sec. 403.504 to more

clearly reflect the award process.

D. Limitations

In accordance with section 4360(c) of OBRA '90, this rule retains

existing Secs. 403.508 (a) and (b), with editorial changes. Paragraphs

(a) and (b) provide that a State that receives a grant under this

program may, with one exception, use the grant for any expenses

incurred in planning, developing, implementing, and/or operating the

program for which the grant is made. The exception applies to a State

that receives a grant to supplement an existing ``substantially

similar'' program. In this case, the State must not use the grant to

supplant funds for activities that were conducted immediately preceding

the date of the initial award of the grant and funded through other

sources (including in-kind contributions), but must maintain the

activities of the program at least at the level that those activities

were conducted immediately preceding that date. (States will be

required to provide information to document their maintenance of effort

and funding levels.)

E. Reporting Requirements

In accordance with section 4360(e) of OBRA '90, which requires the

State to submit to us an annual report on its ICA program, this rule

provides that a State that receives a grant under this program must

submit at least one annual report to us and any additional reports we

prescribe in the notice of grant award. It further specifies that HCFA

will advise the State of the requirements concerning the frequency,

timing, and contents of the report(s) in the notice of grant award that

it sends to the State. This rule removes existing paragraph (d)

(``Annual report'') from Sec. 403.508 and establishes a new

Sec. 403.510 (``Reporting requirements'') to set forth the reporting

requirements as described above.

F. Administration of Grants

This rule adds Sec. 403.512(a) to identify those provisions that

control the administration of the ICA grants. Section 403.512 specifies

that health insurance ICA grants are administered in accordance with

the provisions of 42 CFR part 403, subpart E; certain provisions of 45

CFR part 74 (``Administration of Grants''), 45 CFR part 92 (``Uniform

Administrative Requirements for Grants and Cooperative Agreements to

State and Local Governments''), the terms of the solicitation, and

terms of the notice of grant award. Section 403.512(a) also specifies

that, except for the minimum funding levels established by

Sec. 403.504(b)(1), in the event of conflict between a provision of the

notice of grant award and any provision of the solicitation, subpart E

of 42 CFR part 403, or of 45 CFR part 74 or part 92, the terms of the

notice of grant award prevail.

This rule adds Sec. 403.512(b) to state that HCFA provides notice

to each applicant regarding HCFA's decision on an application for grant

funding under Sec. 403.504.

This rule adds Sec. 403.512(c) to enable States to appeal, under 45

CFR part 16, HCFA's determination regarding its grant application. 45

CFR part 16 contains procedures for appealing a final decision to our

Departmental Grant Appeals Board.

G. Technical Change--Definition of ``State''

This rule revises the definition of ``State'' at Sec. 403.500(c) to

correct the inadvertent omission of ``the 50 States'' from the

definition.

H. Elimination of Supplemental Coordinated Care Grants Program

During fiscal years 1992 and 1993, supplemental grants were awarded

to States for intensive, innovative approaches to making information,

counseling, and/or assistance related to coordinated care benefits

available to Medicare beneficiaries. The purpose of the grants was to

encourage States with existing coordinated care programs to be more

active in this area. We believe that States have now had adequate

opportunity and funding to establish supplemental coordinated care

materials and/or activities and that separate funding is no longer

warranted. States should make provision in a grant awarded under

Sec. 403.502 for any previous and/or current initiatives in ICA

activities related to coordinated care. We may, however, make funds

available from time to time to fund special ICA-related activities.

III. Collection of Information Requirements

Section 403.510 of this document contains information collection

and recordkeeping requirements that were approved by the Office of

Management and Budget (OMB) under the Paperwork Reduction Act of 1980

(44 U.S.C. 3501 et seq.) on January 2, 1994. The approval number is

0938-0641 and the expiration date is January 31, 1997.

IV. Response to Comments

Because of the large number of items of correspondence we normally

receive on documents published for comment, we are not able to

acknowledge or respond to them individually. Nevertheless, we will

consider all comments that we received by the date and time specified

in the ``Dates'' section of this preamble, and if we proceed with a

subsequent document, we will respond to the comments in the preamble to

that document.

V. Waiver of Prior Notice with Comment Period and of Delayed

Effective Date

We ordinarily publish a general notice of proposed rulemaking in

the Federal Register and invite public comment on the proposed rule.

That rule would have included a reference to the legal authority under

which it is proposed, and the terms and substance of the proposed rule

or a description of the subjects and issues involved. This procedure

can be waived, however, when an agency finds good cause that a notice

and comment procedure is impracticable, unnecessary, or contrary to the

public interest, and incorporates a statement of the finding and its

reasons in the rule issued. Further, we generally provide for final

rules to be effective no sooner than 30 days after the date of

publication unless we find good cause to waive the delay.

In the case of this rule, its principal effect is to continue the

funding of an existing program rather than to implement a new program.

The affected entities, that is, the States, are already familiar with

the program and will receive separate, individual notice. Further, it

is desirable that regulations that will govern the administration of FY

1994 grants be issued as soon as possible. Therefore, we find that it

would be against the public interest to delay the publication of this

rule pending completion of a prior public comment period. For the above

reasons, we also find that it would be against the public interest to

delay the effective date of this rule.

VI. Regulatory Impact Statement

Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612), we prepare a regulatory flexibility analysis unless the

Secretary certifies that a rule will not have a significant economic

impact on a substantial number of small entities. States and

individuals are not included in the definition of small entities.

In addition, section 1102(b) of the Act requires the Secretary to

prepare a regulatory impact analysis if a rule may have a significant

impact on the operations of a substantial number of small rural

hospitals. This analysis must conform to the provisions of section 604

of the RFA. For purposes of section 1102(b) of the Act, we define a

small rural hospital as a hospital that is located outside of a

Metropolitan Statistical Area and has fewer than 50 beds.

This rule simply establishes the terms and conditions of funding

for grants. It has no independent or consequential effect on the

economy. The activities conducted under the grant may improve

competition by informing consumers of health insurance alternatives.

We are not preparing analyses for either the RFA or section 1102(b)

of the Act because we have determined, and the Secretary certifies,

that this interim final rule with comment period will not have a

significant economic impact on a substantial number of small entities

or a significant impact on the operations of a substantial number of

small rural hospitals.

In accordance with the provisions of Executive Order 12866, this

regulation was not reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 403

Health insurance, Hospitals, Intergovernmental relations, Medicare,

Reporting and recordkeeping requirements.

42 CFR chapter IV is amended as set forth below:

PART 400--INTRODUCTION; DEFINITIONS

1. The authority citation for part 400 continues to read as

follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42

U.S.C. 1302 and 1395hh) and 44 U.S.C. Chapter 35.

2. In Sec. 400.310, the table is amended by adding, at the

beginning of the listing, the numbers set forth below to read as

follows:

Sec. 400.310 Display of currently valid OMB control numbers.

------------------------------------------------------------------------

Current OMB

Sections in 42 CFR that contain collections of information control

Nos.

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403.510.................................................... 0938-0641

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* * * * *

PART 403--SPECIAL PROGRAMS AND PROJECTS

Subpart E--Beneficiary Counseling and Assistance Grants

1. The authority citation for part 403, subpart E is revised to

read as follows:

Authority: Sec. 1882 of the Social Security Act (42 U.S.C.

1395ss) and section 4360 of Pub. L. 101-508 (42 U.S.C. 1395b-4).

2. Section 403.500 is revised to read as follows:

Sec. 403.500 Basis, scope, and definition.

(a) Basis. This subpart implements, in part, the provisions of

section 4360 of Public Law 101-508 by establishing a minimum level of

funding for grants made to States for the purpose of providing

information, counseling, and assistance relating to obtaining adequate

and appropriate health insurance coverage to individuals eligible to

receive benefits under the Medicare program.

(b) Scope of subpart. This subpart sets forth the following:

(1) Conditions of eligibility for the grant.

(2) Minimum levels of funding for those States qualifying for the

grants.

(3) Reporting requirements.

(c) Definition. For purposes of this subpart, the term ``State''

includes (except where otherwise indicated by the context) the 50

States, the District of Columbia, the Commonwealth of Puerto Rico, the

Virgin Islands, Guam, and American Samoa.

3. A new Sec. 403.501 is added to read as follows:

Sec. 403.501 Eligibility for grants.

To be eligible for a grant under this subpart, the State must have

an approved Medicare supplemental regulatory program under section 1882

of the Act and submit a timely application to HCFA that meets the

requirements of--

(a) Section 4360 of Public Law 101-508 (42 USC 1395b-4);

(b) This subpart; and

(c) The applicable solicitation for grant applications issued by

HCFA.

4. Section 403.502 is revised to read as follows:

Sec. 403.502 Availability of grants.

HCFA awards funds to States subject to congressional appropriations

of funds and, if applicable, subject to the satisfactory progress in

the State's project during the preceding grant period. The criteria by

which progress is evaluated and the performance standards for

determining whether satisfactory progress has been made is specified in

the notice of grant award sent to each State. HCFA advises each State

as to when to make application and provides information as to the

timing of the grant award and the duration of the grant award. HCFA

also provides an estimate of the amount of funds that may be available

to the State.

5. Section 403.504 is revised to read as follows:

Sec. 403.504 Number and size of grants.

(a) General. HCFA awards the following types of grants:

(1) New program grants.

(2) Existing program enhancement grants.

(b) Grant Award. Each eligible State that submits an acceptable

application receives a grant including a fixed amount (minimum funding

level) and a variable amount.

(1) A fixed portion is awarded to States in the following amounts:

(i) Each of the 50 States, $75,000.

(ii) The District of Columbia, $75,000.

(iii) Puerto Rico, $75,000.

(iv) American Samoa, $25,000.

(v) Guam, $25,000.

(vi) The Virgin Islands, $25,000.

(2) A variable portion, which is based on the number and location

of Medicare beneficiaries residing in the State is awarded to each

State. The variable amount a particular State receives is determined as

set forth in paragraph (c) of this section.

(c) Calculation of variable portion of the grant. (1) HCFA bases

the variable portion of the grant on--

(i) The amount of available funds, and

(ii) A comparison of each State with the average of all of the

States (except the State being compared) with respect to three factors

that relate to the size of the State's Medicare population and where

that population resides.

(2) The factors HCFA uses to compare States' Medicare populations

comprise separate components of the variable amount. These factors, and

the extent to which they each contribute to the variable amount, are as

follows:

(i) Approximately 75 percent of the variable amount is based on the

number of Medicare beneficiaries living in the State as a percentage of

all Medicare beneficiaries nationwide.

(ii) Approximately 10 percent of the variable amount is based on

the percentage of the State's total population who are Medicare

beneficiaries.

(iii) Approximately 15 percent of the variable amount is based on

the percentage of the State's Medicare beneficiaries that reside in

rural areas (``rural areas'' are defined as all areas not included

within a Metropolitan Statistical Area).

(3) Based on the foregoing four factors (that is, the amount of

available funds and the three comparative factors), HCFA determines a

variable rate for each participating State for each grant period.

(d) Submission of revised budget. A State that receives an amount

of grant funds under this subpart that differs from the amount

requested in the budget submitted with its application must submit a

revised budget to HCFA, along with its acceptance of the grant award,

that reflects the amount awarded.

Sec. 403.506 [Removed]

6. Section 403.506 is removed.

7. Section 403.508 is revised to read as follows:

Sec. 403.508 Limitations.

(a) Use of grants. Except as specified in paragraph (b) of this

section, a State that receives a grant under this subpart may use the

grant for any reasonable expenses incurred in planning, developing,

implementing, and/or operating the program for which the grant is made.

(b) Maintenance of effort. A State that receives a grant to

supplement an existing program (that is, an existing program

enhancement grant)--

(1) Must not use the grant to supplant funds for activities that

were conducted immediately preceding the date of the initial award of a

grant made under this subpart and funded through other sources

(including in-kind contributions).

(2) Must maintain the activities of the program at least at the

level that those activities were conducted immediately preceding the

initial award of a grant made under this subpart.

8. Sections 403.510 and 403.512 are added to read as follows:

Sec. 403.510 Reporting requirements.

A State that receives a grant under this subpart must submit at

least one annual report to HCFA and any additional reports as HCFA may

prescribe in the notice of grant award. HCFA advises the State of the

requirements concerning the frequency, timing, and contents of reports

in the notice of grant award that it sends to the State.

Sec. 403.512 Administration.

(a) General. Administration of grants will be in accordance with

the provisions of this subpart, 45 CFR part 92 (``Uniform

Administrative Requirements for Grants and Cooperative Agreements to

State and Local Governments''), 45 CFR 74.4, the terms of the

solicitation, and the terms of the notice of grant award. Except for

the minimum funding levels established by Sec. 403.504(b)(1), in the

event of conflict between a provision of the notice of grant award, any

provision of the solicitation, or of any regulation enumerated in 45

CFR 74.4 or in part 92, the terms of the notice of grant award control.

(b) Notice. HCFA provides notice to each applicant regarding HCFA's

decision on an application for grant funding under Sec. 403.504.

(c) Appeal. Any applicant for a grant under this subpart has the

right to appeal HCFA's determination regarding its application. Appeal

procedures are governed by the regulations at 45 CFR part 16

(Procedures of the Departmental Grant Appeals Board).

(Catalog of Federal Domestic Assistance Program No. 93.774,

Medicare--Supplementary Medical Insurance Program)

Dated: August 25, 1994.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: September 29, 1994.

Donna E. Shalala,

Secretary.

[FR Doc. 94-24832 Filed 10-6-94; 8:45 am]

BILLING CODE 4120-01-P