Medicaid Program; Allocation of Enhanced Federal Matching Funds for Increased Administrative Costs Resulting From Welfare Reform

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[MB-103-NC]

RIN 0938-AH90

Medicaid Program; Allocation of Enhanced Federal Matching Funds

for Increased Administrative Costs Resulting From Welfare Reform

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

ACTION: Notice with comment period.

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SUMMARY: This notice with comment period announces the methodology used

to determine the allocation, among the States and certain Territories,

of a $500 million fund to assist them with the additional expenses

attributable to eligibility determinations incurred as a result of the

provisions of the Personal Responsibility and Work Opportunity

Reconciliation Act of 1996, which decouples Medicaid eligibility from

receipt of cash assistance for families and children. Also, it

announces the actual allocation amount for each State and Territory.

The special fund is available for matching a State's or Territory's

allowable administrative expenditures incurred only during Federal

fiscal years 1997 through 2000, and only during the first 12 calendar

quarters in which the State's Temporary Assistance to Needy Families

program, which replaced the Aid to Families with Dependent Children

program, is in effect after August 21, l996.

DATES: Effective Date: This notice is effective on May 14, 1997.

Comment Period: Written comments will be considered if we receive

them at the appropriate address, as provided below, no later than 5

p.m. on June 13, 1997.

ADDRESSES: Mail comments (one original and three copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: MB-103-NC, P.O. Box 7517,

Baltimore, MD 21207-0517.

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

and three copies) to one of the following addresses:

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

Washington, DC 20221, or

Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. When you comment, please

refer to file code MB-103-NC. 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).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date

of the issue requested and enclose a check or money order payable to

the Superintendent of Documents, or enclose your Visa or MasterCard

number and expiration date. Credit card orders can also be placed by

calling the order desk at (202) 512-1800 or by faxing to (202) 512-

2250. The cost for each copy is $8. As an alternative, you can view and

photocopy the Federal Register document at most libraries designated as

Federal Depository Libraries and at many other public and academic

libraries throughout the country that receive the Federal Register.

FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.

SUPPLEMENTARY INFORMATION:

I. Background

Under title XIX of the Social Security Act (the Act), Federal funds

are available at specified Federal matching rates for expenditures for

medical assistance and administrative expenditures under the States'

approved Medicaid plans. State Medicaid agencies are required to submit

quarterly reports of expenditures (on Form HCFA-64) in order to claim

Federal financial participation (FFP), that is, Federal matching funds

for these expenditures.

II. Recent Legislation

The Personal Responsibility and Work Opportunity Reconciliation Act

of 1996 (PRWORA) amended title IV-A of the Act to repeal the Aid to

Families with Dependent Children (AFDC) program. The AFDC program

provided an entitlement to cash assistance for eligible families with

dependent children and was funded by an openended, jointly funded

Federal-State program. PRWORA replaced AFDC with a program of block

grants for States for Temporary Assistance for Needy Families (TANF).

The repeal of AFDC becomes effective not later than July 1,

[[Page 26546]]

1997, or for most purposes on the date that the Secretary receives a

State's TANF plan. Under TANF, States have broad flexibility to provide

assistance for the purpose of ending the dependence of needy parents on

government benefits by promoting job preparation, work, and marriage;

preventing out-of-wedlock pregnancies; and encouraging the formation

and maintenance of two-parent families. Prior to the passage of PRWORA,

Medicaid eligibility for families with children receiving AFDC was

automatic.

With the implementation of each State's TANF program, there is no

longer an automatic link between eligibility for cash assistance under

the AFDC program and eligibility under the Medicaid program. Section

114(a) of PRWORA amended title XIX of the Act to add a new section 1931

that, in general, requires State agencies to provide Medicaid

eligibility to low income families, if they had been eligible under the

AFDC plan in effect on July 16, 1996. With the advent of the TANF

program, State Medicaid agencies are expected to incur additional

administrative costs related to the need to determine Medicaid

eligibility for individuals in accordance with section 1931 of the Act.

These expenditures include the costs of outreach to potential eligible

individuals who will no longer receive automatic Medicaid eligibility

through the cash assistance linkage. It is essential that State

Medicaid agencies ensure and protect continued Medicaid eligibility for

current Medicaid recipients who would have been eligible under the July

16, 1996 AFDC rules or who are otherwise eligible under section 1931 of

the Act, and that the State agencies successfully implement new

procedures for identifying potential new Medicaid recipients and

determining their eligibility.

To assist State agencies with additional administrative costs

involved in this transition, section 114(a) of PRWORA created a new

section 1931(h) of the Act, which establishes a $500 million fund that

is available as Federal matching funds for the State Medicaid agencies'

administrative costs of Medicaid eligibility determinations incurred as

a result of the delinking of Medicaid eligibility from eligibility for

cash assistance under title IV-A of the Act. The additional Federal

funds will be provided to State agencies through an enhanced Federal

matching rate for the applicable administrative expenditures. A State

agency is eligible to claim the enhanced Federal matching funds for

allowable expenditures incurred during the first 12 calendar quarters

(3 years) in which the State's TANF program is in effect. Furthermore,

the enhanced Federal matching funds are only available for allowable

expenditures for the period beginning with Federal fiscal year 1997

(that is October 1, 1996) and ending with Federal fiscal year 2000

(that is September 30, 2000). The law requires the Secretary to

increase the usual Federal matching percentage of 50 percent for

States' claims for administrative expenditures from this fund and to

ensure the equitable distribution of the increased matching funds.

Under section 1931(h) of the Act, the $500 million fund is

available only for the administrative costs of Medicaid eligibility

determinations attributable to the application of the requirements of

section 1931 of the Act, that is, the rules of the States' former AFDC

programs. The fund is not available for the costs of determining

Medicaid eligibility for individuals with respect to other provisions

of PRWORA, such as those related to alien and immigration status or the

Supplemental Security Income (SSI) program, unless those individuals

are screened for Medicaid eligibility through provisions of section

1931 of the Act. HCFA estimates that $500 million provide adequate

funds to offset additional administrative costs that States will incur

attributable to the requirements of section 1931 of the Act.

III. Provisions of the Notice

This notice with comment period announces the enhanced Federal

matching rates, the allocation formula and the factors included in that

formula, the dollar amounts allocated to each State, and the activities

for which FFP will be available at enhanced matching rates, which are

established under section 1931(h) of the Act. Specifically, sections

1931 (h)(1), (h)(2), and (h)(3) of the Act, respectively, authorize the

Secretary to: specify the enhanced Federal matching rates; determine

the allowable expenditures; and ensure the equitable distribution of

the funds among States by establishing the allocation formula and

factors included in the formula, and the dollar amounts allocated to

each State.

We are allocating two amounts to each State agency from the $500

million fund: A minimum (base) allocation, which is generally the same

for all States; and an additional allocated amount (secondary

allocation), which differs by State and is determined by a formula

using factors discussed in detail in section VI. of this notice. State

agencies may claim Federal funding for allowable activities against the

base allocation at a 90-percent matching rate. State agencies may claim

Federal funding against the secondary allocation at one of two Federal

matching rates: A 90-percent enhanced matching rate for specified

activities considered critical to protecting beneficiaries (for example

outreach and beneficiary education); and a 75-percent enhanced rate for

other allowable activities. In claiming Federal matching for

expenditures for these activities, States must identify them separately

on the form HCFA-64. States may draw down funds for their allocation as

they incur allowable expenditures.

IV. Activities Subject to Enhanced Funding

Under section 1931(h) of the Act, the $500 million fund may only be

used for administrative expenditures shown by State agencies to be

attributable to the administrative costs of Medicaid eligibility

determinations required as a result of the TANF legislation and the

delinking of Medicaid eligibility from AFDC status. The following

activities are those for which Federal funding is already available and

for which additional funding is available at one of the enhanced

Federal matching rates, 90 percent or 75 percent. States can claim 90-

percent matching for any of the allowable activities listed below, up

to the basic allocation for the State. For the States' secondary

allocation, items indicated by an asterisk may be claimed at a 90-

percent matching rate and items not noted with an asterisk can be

claimed at the 75-percent matching rate.

We established the higher 90-percent enhanced Federal matching rate

associated with the base allocation in recognition that there are

pressing startup and other common costs among States related to the

transition from AFDC to the TANF program. The higher Federal matching

rate for the base allocation serves to expedite funds to States for

such costs.

We established the two enhanced Federal matching rates associated

with the secondary allocation to recognize two priorities of activities

related to this provision. The first priority, with the higher 90-

percent Federal matching rate, is associated with beneficiary oriented

activities such as outreach, public service announcements, and

education. The higher enhanced rate encourages such activities and

recognizes the importance of ensuring that individuals do not lose

their eligibility inappropriately, are correctly determined (or

redetermined) eligible, and understand program requirements during the

critical period of transition to TANF. Each of these higher rate (90

percent) activities is indicated below by

[[Page 26547]]

an asterisk. The lower 75-percent enhanced Federal matching rate

addresses the other activities performed during the transition period.

Allowable Activities

Educational activities (relating to current or potential

beneficiaries).*

Public service announcements (PSAs).*

Outstationing of eligibility workers (more workers or new

locations, for example, churches, day care centers, WIC offices, health

care providers).*

Training related to the section 1931 provisions--*

Eligibility workers.

Providers.

Outstationed eligibility workers and others.

Community.

Outreach activities (for example, general or targeted

mailing campaigns, contracts to assist beneficiaries with the

redetermination process).*

Developing and disseminating new publications (targeted to

at-risk populations).*

Local community activities (for example, meetings with

community leaders and speeches to community groups).*

Hiring new Medicaid eligibility workers (related to

section 1931 determinations).

Designing new eligibility forms, for example, a single

application for TANF and Medicaid whether eligibility is linked or not.

Identification of ``at-risk'' TANF recipients (in this

context, at-risk refers to vulnerability to losing Medicaid eligibility

as a result of the TANF provisions).

State and local government organizational changes related

to the section 1931 provisions.

Intergovernmental activities.

Eligibility systems related changes.

Other activities identified by States and approved by the

Secretary as applicable to the enhanced matching fund provisions.

In order for State agencies to claim Federal funds at the

appropriate enhanced rates associated with the two allocated amounts

for allowable activities, they will need to identify and report the

administrative expenditures for such activities to HCFA on specified

lines on the States' quarterly medical assistance expenditure report

(Form HCFA-64), in accordance with HCFA guidance and instructions

related to the form HCFA-64.

V. Special Issues

We conducted a series of consultations with advocacy, provider, and

intergovernmental groups to gather suggestions and recommendations on

how to equitably distribute the enhanced matching funds. These groups

included the National Governors' Association, the American Public

Welfare Association, and the National Conference of State Legislatures.

The criteria and requirements included in this notice reflect

consideration of their suggestions and recommendations.

A. Federal Matching Rate To Be Increased

Under section 1931(h)(2) of the Act, the Federal matching rate,

which will be used for State claims related to the $500 million fund,

applies only to those administrative expenditures of a State agency's

Medicaid program described in section 1903(a)(7) of the Act

(administrative expenditures that are Federally matched at a 50-percent

rate). These administrative expenditures include the costs associated

with eligibility determination activities.

Because of the specific reference to section 1903(a)(7) of the Act,

section 1931(a) of the Act precludes the $500 million fund from being

available for matching expenditures referenced in other sections of

section 1903(a) of the Act. For example, section 1903(a)(3) of the Act

refers to administrative activities related to electronic claims

processing systems and the associated Federal matching rates of 90 and

75 percent. Section 1903(a)(4) refers to the costs of systems for

verifying immigration status and the associated Federal matching rate

of 100 percent. The $500 million fund is not available for these

categories of administrative expenditures or others referenced in

sections 1903 (a)(1) through (a)(6) of the Act.

We note that, under existing Medicaid regulations published in

1989, the administrative costs associated with automated eligibility

systems are not considered part of the mechanized claims process and

information retrieval systems, and therefore are not eligible for the

75-percent or 90-percent Federal matching rate referred to in section

1903(a)(3) of the Act. Therefore, these costs are matched at the 50

percent rate under section 1903(a)(7) of the Act, and may be claimed

against the State's allocation from the $500 million fund at the higher

matching rate if they meet the other requirements.

B. Retroactive Claims

Under sections 1931 (h)(3) and (h)(4) of the Act, the $500 million

dollar fund is only available for claims for administrative costs

incurred during Federal fiscal years 1997 through 2000 (that is,

October 1, 1996 through September 30, 2000), and with respect to any

specific State, only during the first 12 calendar quarters that the

TANF program is in effect in that State beginning no earlier than

October 1, 1996. As long as claims of that State are for expenditures

incurred during this period and meet timely filing and other relevant

requirements, they would not be precluded from being submitted and

allowed retroactively.

C. Equitable Distribution of Funds Among All States

Section 1931(h)(3) of the Act requires the Secretary to ``ensure

the equitable distribution'' of the $500 million dollar fund among the

States. We interpret this to mean that all States should receive an

equitable share of the fund unless the State does not incur any cost

associated with the implementation of section 1931 of the Act. Through

the consultive process, discussed earlier in this section, States and

other groups have expressed the position that every State agency should

be able to receive at least some portion of the fund. We agree that the

requirement for an equitable distribution must result in each State

receiving a portion of the fund against which qualifying expenditures

would be claimed. For purposes of the Medicaid program, the definition

of ``State'' includes the District of Columbia and the five Territories

of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and

the Virgin Islands. However, we have not provided an allocation for the

Northern Mariana Islands or American Samoa because they do not have an

AFDC program and did not have an AFDC program at the time of the

enactment of PRWORA. Therefore, only three Territories, Guam, Puerto

Rico and the Virgin Islands, will incur administrative expenditures as

a result of the transition from AFDC to TANF.

The three Territories affected by section 1931 of the Act are still

subject to the existing cap on Federal Medicaid expenditures for the

Territories at section 1108(c) of the Act. This cap will not increase

with the availability of a portion of the $500 million fund. However,

these Territories could still receive benefits under the $500 million

fund provisions because, with an enhanced Federal matching rate, less

total territorial matching funds would be required for a given level of

administrative costs unless the Territory exceeded its cap. Since these

Territories, like the other States, will likely incur additional

Medicaid expenditures due to the transition to TANF, a portion of the

$500 million

[[Page 26548]]

enhanced Federal matching fund should be available to them.

D. Reduction of States' Allocations as Claims Are Made

Section 1931(h) of the Act provides for enhanced Federal matching

for States' claims against the additional $500 million fund. The

enhanced rates and additional Federal funds are in addition to those

that would otherwise be Federally matched at the usual 50-percent rate.

States' claims for allowable administrative activities will reduce

their base and secondary allocations only by the amounts that are in

excess of the usual 50-percent FFP and not by the entire Federal

matching amount. Specifically, States' allocations will be reduced by

the amount of the claim multiplied by the difference between the

enhanced Federal matching rate percentage and 50 percent.

To illustrate how State claims against the allocations would work,

we provide the following example: The State claim for allowable

outreach expenditures is $500,000. This claim would usually be

Federally matched at 50 percent, and the usual FFP amount for this

claim would be $250,000 (50 percent of $500,000). Assuming the State is

claiming these expenditures against the $2 million base allocation, the

enhanced Federal matching rate would be 90 percent. Thus, the enhanced

FFP amount would be $450,000 (90 percent of 500,000). However, the base

allocation would not be reduced by the entire $450,000. Rather, for

this claim the base allocation would be reduced by $200,000, which is

40 percent of $500,000. Forty percent represents the excess of the

enhanced Federal matching rate amount (90 percent) above the usual

Federal matching rate amount (50 percent). If the amount of the State's

base allocation was at $2 million prior to this claim, there would be

$1.8 million remaining after the claim ($2 million-$200,000).

VI. Factors for Determining State Allotments

We have established several factors that will be considered in

determining the allotment for each State from the $500 million fund. We

have divided the fund into two parts, an allocation of minimum State

amounts and an allocation of the remainder of the fund. These two parts

are discussed below.

A. Base Allocation Amount

The first part of the distribution will consist of a minimum

allocation amount of $2 million set aside for each State, the District

of Columbia and Puerto Rico. Guam and the Virgin Islands will receive a

lesser amount proportionate to the level of their administrative

expenditures. This base allocation recognizes that States will incur

certain costs that will not vary by the size of their Medicaid

programs. The total of the base allocations for all States and

Territories is $104,352,470.

B. Secondary Allocation Amount

The amount of the $500 million fund remaining after distribution of

the base allocations to each State will be allocated among the States

according to a formula designed to ensure equity. As indicated in the

previous section, the total base allocations for all States and

Territories is $104,352,470. Therefore the total amount to be

distributed to the States and Territories as secondary allocations is

$395,647,530. This secondary allocation will be allocated based on the

following four factors and weights.

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

Weight

Factor (percent)

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

State AFDC-Related Caseload.................................. 60

State Medicaid Administrative Expenditures................... 20

SSI Childhood Disability Case Reevaluations.................. 10

SSI Immigrant Caseload....................................... 10

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

With respect to Factor 1, State AFDC-related caseload, each State

was credited with the higher of their caseloads for FY 1995 and FY

1994, or the arithmetic average of their caseloads for FY 1992, FY

1993, and FY 1994. This served as the basis for allocating

$237,388,518, which represents 60 percent of the States' total

secondary allocations.

With respect to Factor 2, State Medicaid administrative

Expenditures, each State was credited with the higher of certain of its

administrative expenditures related to these provisions for FY 1995, FY

1994, or the arithmetic average of its expenditures for FYs 1992, 1993,

and 1994. Specifically, we are using a State's Medicaid administrative

expenditures reported on its expenditure report (Form HCFA-64) in

categories related to operation of systems, third party liability and

assignment of rights activities, systems for verification of

immigration status, outstationed eligibility workers, and other

administrative costs Federally matched at 50 percent. This served as a

basis for allocating $79,129,506, which represents 20 percent of the

States' total secondary allocations.

With respect to Factors 3 and 4, SSI childhood disability case

reevaluations (in States requiring reevaluation under PWRORA) and SSI

immigrant caseload, respectively, each State was credited with

appropriate caseloads, as provided by the Social Security

Administration for FY 1996. The caseload estimates are proxy estimates

intended to show the relative administrative burden that each State

agency faces under welfare reform. This served as the basis for

allocating $39,564,753, which represents 10 percent of the State's

total secondary allocations for each of Factors 3 and 4.

The allocations for each State agency are as follows:

State Allocations for Enhanced Matching

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

Base Secondary Total

STATE allocation allocation allocation

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Alabama......................................................... $2,000,000 $4,504,897 $6,504,897

Alaska.......................................................... 2,000,000 1,039,335 3,039,335

Arizona......................................................... 2,000,000 5,961,603 7,961,603

Arkansas........................................................ 2,000,000 3,095,513 5,095,513

California...................................................... 2,000,000 81,719,458 83,719,458

Colorado........................................................ 2,000,000 3,166,316 5,166,316

Connecticut..................................................... 2,000,000 3,756,737 5,756,737

Delaware........................................................ 2,000,000 801,757 2,801,757

Dis. Columbia................................................... 2,000,000 1,259,072 3,259,072

Florida......................................................... 2,000,000 20,262,23 22,262,239

Georgia......................................................... 2,000,000 9,591,549 11,591,549

Hawaii.......................................................... 2,000,000 1,435,742 3,435,742

[[Page 26549]]

Idaho........................................................... 2,000,000 1,288,535 3,288,535

Illinois........................................................ 2,000,000 17,363,894 19,363,894

Indiana......................................................... 2,000,000 5,545,162 7,545,162

Iowa............................................................ 2,000,000 2,782,362 4,782,362

Kansas.......................................................... 2,000,000 2,496,386 4,496,386

Kentucky........................................................ 2,000,000 5,269,014 7,269,014

Louisiana....................................................... 2,000,000 7,029,185 9,029,185

Maine........................................................... 2,000,000 1,569,238 3,569,238

Maryland........................................................ 2,000,000 5,595,943 7,595,943

Massachusetts................................................... 2,000,000 7,463,490 9,463,490

Michigan........................................................ 2,000,000 13,975,445 15,975,445

Minnesota....................................................... 2,000,000 5,708,769 7,708,769

Missouri........................................................ 2,000,000 6,561,956 8,561,965

Mississippi..................................................... 2,000,000 4,617,604 6,617,604

Montana......................................................... 2,000,000 764,134 2,764,134

Nebraska........................................................ 2,000,000 1,308,247 3,308,247

Nevada.......................................................... 2,000,000 1,258,808 3,258,808

New Hampshire................................................... 2,000,000 875,952 2,875,952

New Jersey...................................................... 2,000,000 9,012,253 11,012,253

New Mexico...................................................... 2,000,000 2,860,333 4,860,333

New York........................................................ 2,000,000 35,034,556 37,034,556

North Carolina.................................................. 2,000,000 9,550,703 11,550,703

North Dakota.................................................... 2,000,000 537,922 2,537,922

Ohio............................................................ 2,000,000 14,909,161 16,909,161

Oklahoma........................................................ 2,000,000 3,938,082 5,938,082

Oregon.......................................................... 2,000,000 3,740,656 5,740,656

Pennsylvania.................................................... 2,000,000 15,553,339 17,553,339

Rhode Island.................................................... 2,000,000 1,459,771 3,459,771

South Carolina.................................................. 2,000,000 4,221,783 6,221,783

South Dakota.................................................... 2,000,000 642,597 2,642,597

Tennessee....................................................... 2,000,000 7,250,889 9,250,889

Texas........................................................... 2,000,000 25,523,806 27,523,806

Utah............................................................ 2,000,000 2,006,172 4,006,172

Vermont......................................................... 2,000,000 891,672 2,891,672

Virginia........................................................ 2,000,000 6,531,522 8,531,522

Washington...................................................... 2,000,000 8,443,170 10,443,170

West Virginia................................................... 2,000,000 3,420,593 5,420,593

Wisconsin....................................................... 2,000,000 5,023,766 7,023,766

Wyoming......................................................... 2,000,000 475,344 2,475,344

Guam............................................................ 176,235 94,204 270,439

Puerto Rico..................................................... 2,000,000 6,325,084 8,325,084

Virgin Islands.................................................. 176,235 131,810 308,045

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

Total....................................................... 104,352,470 395,647,530 500,000,000

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

VII. Alternative Approaches

We considered an alternative approach to set aside a portion of the

variable amount of each State agency's allocation (for example, 20

percent) and earmark the funds for specified activities. States and

intergovernmental groups did not support this approach because it

restricted their flexibility to respond to their different

circumstances across States. We also considered tying receipt of some

or all of each State's allocation to successful performance in

transitioning their determination of eligibility processes in response

to their eligibility for cash assistance and TANF. States and

intergovernmental groups also did not support this approach because it

would restrict State flexibility. Furthermore, HCFA and the States and

intergovernmental groups were not able to arrive at an appropriate

measure which accurately correlated successful performance with receipt

of allocation funds.

VIII. Waiver of Proposed Notice and Delay in Effective Date

While the Administrative Procedure Act generally requires a 30-day

delayed effective date for all rules and also requires an opportunity

for public comment prior to the effective date of a rule, it also

provides that we may waive those procedures if we find good cause that

notice and comment are impracticable, unnecessary, or contrary to the

public interest. Similarly, title 5 U.S.C. 801 provides for a 60 day

delayed effective date for a major rule until the later of the receipt

by Congress of a report on the rule or publication of the rule in the

Federal Register. This delay provides Congress with an opportunity to

review a major rule prior to its implementation. However, title 5

U.S.C. 808 also provides that the rule may take effect without regard

to the delay period if the agency finds good cause that notice and

public procedure on the rule are impracticable, unnecessary, or

contrary to the public interest.

We are making the terms of this notice effective without

publication of a proposed notice because we believe it would be

impractical and contrary to public interest to delay its effective date

in order to consider public comments. States have been implementing

their TANF programs since the enactment of PRWORA and more States

continue to do so each day. We believe that it is imperative that these

States be able to receive the enhanced Federal matching funds as soon

as possible so that they

[[Page 26550]]

are able to make an effective transition to the post-AFDC environment

at the time they incur the additional administrative expenses resulting

from the decoupling of Medicaid eligibility from receipt of cash

assistance under title IV-A of the Act. Further delays in furnishing

States with this funding could result in delays in making the

determination that individuals are entitled to necessary medical

services, with the attendant severe consequences for individuals who

need them. It is also similarly important and in the public interest

that States are able to conduct outreach efforts to prevent eligible

needy individuals losing contact with the Medicaid program which they

would otherwise have established because of its previous connection to

cash assistance. Moreover, in developing the terms of this notice we

have actively worked with intergovernmental and other interested groups

to obtain their counsel. Accordingly, we find that good cause exists to

waive prior notice and comment, the 30 day delay, and the 60 day delay

for advance Congressional review.

IX. Impact Statement

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

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

certify that a notice such as this will not have a significant economic

impact on a substantial number of small entities. For purposes of the

RFA, individuals and States are not included in the definition of a

small entity.

In addition, section 1102(b) of the Act requires us to prepare a

regulatory impact analysis if a notice such as this may have a

significant impact on the operations of a substantial number of small

rural hospitals. Such an 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.

The fund distribution announced by this notice is required by the

Personal Responsibility and Work Opportunity Reconciliation Act of

1996. In addition, the amount of money involved, $500 million divided

among 50 States, the District of Columbia, and 3 Territories over a

period of 3 years will not have a significant effect on any State or

Territory, or the Medicare program.

For these reasons, we are not preparing analyses for either the RFA

or section 1102(b) of the Act because we have determined, and we

certify, that this notice 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

notice was reviewed by the Office of Management and Budget. Costs

attributable to State activities covered by this notice will be paid

for by Federal funds according to the matching rates outlined in the

allocation formula analysis described earlier. Further, States will

incur some additional costs based on the State share associated with

these matching rates.

X. Information Collection Requirements

This document does not impose new information collection

requirements that are subject to review by the Office of Management and

Budget under the provisions of the Paperwork Reduction Act of 1995.

States will be required to claim FFP for administrative expenditures

attributable to the eligibility determination activities resulting from

enactment of PRWORA. The only information that is required will be

reported on existing Form HCFA-64. This form has been approved by the

Office of Management and Budget under approval number 0938-0067, which

expires on March 30, 1998.

Authority: Secs. 1102 and 1931(h) of the Social Security Act (42

U.S.C. 1302 and 1396uu).

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical

Assistance Program)

Dated: March 24, 1997.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: April 11, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-12429 Filed 5-13-97; 8:45 am]

BILLING CODE 4120-01-P