Medicaid Program; Redeterminations of Medicaid Eligibility Due to Welfare Reform

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 435

[MB-105-FC]

Medicaid Program; Redeterminations of Medicaid Eligibility Due to

Welfare Reform

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

ACTION: Final rule with comment period.

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SUMMARY: The Personal Responsibility and Work Opportunity

Reconciliation Act of 1996 and the Contract with America Advancement

Act of 1996 created changes in Federal law affecting the eligibility of

large numbers of Medicaid recipients. These changes include revisions

to the definition of disability for children and to the eligibility

requirements of non-U.S. citizens and individuals receiving disability

cash assistance based on a finding of alcoholism and drug addiction.

This final rule with comment period protects Federal financial

participation

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(FFP) in State Medicaid expenditures for States with unusual volumes of

eligibility redeterminations caused by these recent changes in the law.

We are making changes to the regulations to provide for additional time

for States to process these redeterminations and provide services

pending the redeterminations.

DATES: Effective date. These regulations are effective on January 13,

1997.

Comments. Written comments will be considered if we receive them at

the appropriate address, as provided below, no later than 5:00 p.m. on

March 14, 1997.

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

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: MB-105-FC, P.O. Box 7517,

Baltimore, Maryland 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 20201, or

Room C5-09-26, Central Building, 7500 Security Boulevard, Baltimore,

Maryland 21244-1850

Office of Information and Regulatory Affairs.

Because of staffing and resource limitations, we cannot accept

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

to file code MB-105-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: Bob Tomlinson, (410) 786-4463.

SUPPLEMENTARY INFORMATION:

I. Background

Two recent laws have brought about major changes in the cash

assistance programs under title IV-A (Aid to Families with Dependent

Children (AFDC)) and title XVI (Supplemental Security Income (SSI)) of

the Social Security Act, with substantial implications for Medicaid

eligibility. These two laws are: the Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 (Public Law 104-193), enacted on

August 22, 1996, and the Contract with America Advancement Act of 1996

(Public Law 104-121), enacted on March 29, 1996. These laws have

affected the eligibility of individuals receiving cash payments by

replacing the Aid to Families with Dependent Children (AFDC) program

with a block grant to States for Temporary Assistance for Needy

Families (TANF) and eliminated the automatic linkage between cash

assistance to families and children and Medicaid. It replaced the

automatic link with special Medicaid eligibility rules primarily based

on whether the individuals would have received AFDC benefits under the

program in effect on July 16, 1996. These laws also affected the

eligibility of children who are receiving disability benefits under

SSI, individuals receiving SSI disability benefits based on a finding

of alcoholism and drug addiction, and non-U.S. citizens.

In most States, individuals who are eligible for AFDC or SSI are

(or were) also automatically eligible for Medicaid. These legislative

changes will result in a large number of individuals losing cash

assistance eligibility and therefore Medicaid. Under existing

regulations at 42 CFR 435.916 and 435.1003, States are required to

perform a redetermination of Medicaid eligibility in any case in which

an individual loses eligibility based on receipt of cash assistance and

that termination affects the individual's eligibility for Medicaid.

The legislative changes have created a substantial new workload for

States in the administration of their programs. We estimate that States

will have to perform redeterminations on approximately 1.6 million

individuals, most of which must occur by July 1, 1997. Considering this

volume of redeterminations, we believe that our existing regulations do

not allow sufficient time for States to comply with the requirements

without risking loss of FFP in their administrative expenditures. Our

existing regulations at Sec. 435.916 require that States must

``redetermine the eligibility of Medicaid recipients, with respect to

circumstances that may change, at least every 12 months * * * .'' The

regulations also require the State to promptly redetermine eligibility

when the State agency receives information about changes in a

recipient's circumstances that may affect the recipient's eligibility;

and, at the appropriate time, when the agency has information about

anticipated changed in a recipient's circumstances, such as the loss of

SSI payments because the individual has been found ineligible for SSI.

This requirement also applies when changes in Federal or State law

occur affecting the Medicaid eligibility of individuals or groups.

Regulations at Sec. 435.1003 provide that, with respect to individuals

who had been eligible for SSI, FFP is available until the end of the

month if the SSI termination notice is received from SSA by the 10th of

the month; and until the end of the following month if the SSA notice

is received after the 10th of the month. Both regulations require that

States determine or redetermine eligibility promptly.

States are required to redetermine the Medicaid eligibility of any

recipient who loses eligibility based on receipt of cash assistance.

The redetermination must examine whether or not the individual would be

Medicaid eligible on any other available basis under the State's

approved plan. For example, a person who loses SSI may still be

eligible for Medicaid as medically needy, optional categorically needy,

or even based on receipt of cash assistance under title IV-A. This

policy derives in part from the court decisions in Stenson v. Blum, 476

F.Supp., 1331 (S.D.N.Y. 1979) aff'd without opinion, 628 F.2d 1345 (2d

Cir. 1980) and Massachusetts Association of Older Americans v. Sharp

(700 F.2d 749 (1st Cir. 1983). In these cases, the courts ruled that

before a State may terminate an individual's Medicaid eligibility, it

must redetermine the individual's Medicaid eligibility on any other

available basis under the State's approved plan.

Section 435.1003 allows States a limited period of time to perform

redeterminations of individuals who have been determined ineligible for

SSI in order to be eligible for FFP. The time allowed varies between 20

and 45 days based on the date of receipt of information from SSA about

the individual's SSI eligibility.

States have expressed concerns regarding the time required to

perform these redeterminations, and thus the implications for potential

loss of FFP, given the current regulatory constraints and the

complexity of Medicaid eligibility determination and redetermination

processes. In situations such as those created by these recent laws, in

which States have large redetermination workloads and short timeframes

for adjusting the eligibility of affected beneficiaries, they believe

that more time is needed. States and HCFA are concerned that retaining

the existing time constraints would not allow sufficient time to

process such a volume adequately, and would result in sharply increased

appeals workloads, and the concomitant delays and expense attendant on

such appeals. In some cases, it possibly may result in the

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inappropriate loss of Medicaid eligibility and potential harm to the

health of recipients. We believe that this approach may also shift the

burden of finding a basis for eligibility to the recipient, who may be

the least knowledgeable in this area.

II. Provisions of the Final Rule With Comment Period

Under current rules, when changes in Federal law cause a

significant change in eligibility for Medicaid and a consequent

increase in the eligibility determination/redetermination workload, two

equally undesirable results may occur. In an effort to comply with the

regulations, States may make inadequate or cursory redeterminations

that, in some cases, may result in inappropriate termination of

Medicaid eligibility. The affected recipients may be denied medical

care or become impoverished attempting to pay for care they do receive.

In the alternative, the State may take longer than permitted to make

the redetermination and thus risk denial of FFP. In either case, the

State risks loss of FFP or incurs increased administrative costs coping

with appeals or increased application workloads, while the individual

is unnecessarily deprived of the means to pay for needed medical care

with attendant adverse consequences.

To promote the proper and efficient administration of the Medicaid

program, we believe that when there is a change in Federal law that

significantly affects Medicaid eligibility, the Secretary should be

able to grant States additional time to redetermine eligibility without

risk of loss of FFP and to assure that redeterminations are not

performed hastily. We believe the Secretary is best able to determine

when additional time and FFP should be granted, because the granting of

additional time is intended to be used only when Federal law makes

significant changes in Medicaid eligibility requiring voluminous

redeterminations of eligibility.

Therefore, we have determined that when changes in Federal law

cause sharp increases in State eligibility redetermination workloads,

the Secretary should have the flexibility to authorize additional time

during which FFP would be available. Such flexibility assures that FFP

will be available to meet the redetermination workload while assuring

that the time and FFP available are directly proportional to the

expected volume of redeterminations arising from the particular

legislation.

A grant of additional time would be made only in exceptional

circumstances, such as the passage of recent Public Laws 104-193 and

104-121. This legislation requires a significant volume of

redeterminations, estimated at upwards of 1.6 million, most of which

must be performed within the next 9 months. It is for this reason that

we are providing in this notice that States may take up to 120 days to

process all redeterminations of Medicaid eligibility governed by 42 CFR

Sec. 435.1003 through the end of calendar year 1997 unless the

Secretary further extends the waiver.

The issue of whether more time should be routinely available to

States for completing redeterminations will likely be dealt with in a

separate regulation at a future date. We are not addressing that issue

in this regulation because we do not believe it is an appropriate

subject for an emergency regulation.

We considered providing a fixed but longer period of time than that

currently provided in Sec. 435.1003. However, such a fixed period would

not address the type of extraordinary circumstance, such as welfare

reform, which necessitates the changes we are making in this final rule

with comment period.

An alternative approach to providing more time, consistent with the

theme that a uniform time for redeterminations be used, would be to

provide 60 days to redetermine Medicaid eligibility for anyone losing

SSI or cash assistance under title IV-A, or in cases where there is a

change in circumstances of the recipient. This alternative would

include an escape clause similar to one already in existence in

Sec. 435.911, which permits States to take longer to make eligibility

determinations than the generally specified time period, when

extraordinary circumstances prevent adherence to the time standards.

Such an escape clause would permit States to take longer when a change

in Federal law necessitates large numbers of redeterminations without

risking loss of FFP. We did not adopt this option because of concerns

that such an open-ended redetermination period would require

substantially more monitoring by the Federal Government and

recordkeeping by States to ensure that when a State uses the escape

clause, the use is justified and the period of time for which it is

used is reasonable.

We are adding a new paragraph (c) to Sec. 435.1003 to provide that

when a change in Federal law affects the eligibility of large numbers

of Medicaid recipients, the Secretary may waive the otherwise

applicable FFP requirements and redetermination time limits. This is

done to make FFP available for a reasonable period of time, designated

by the Secretary, while States redetermine the eligibility of Medicaid

recipients. These recipients may otherwise lose Medicaid eligibility,

possibly due to loss of SSI eligibility, because of a change in Federal

law. In such situations, the States are given a reasonable period of

time, designated by the Secretary, to do the redetermination.

III. Waiver of Proposed Rule and 30-Day Delay in the Effective Date

We ordinarily publish a notice of proposed rulemaking in the

Federal Register for a substantive rule to provide a period for public

comment. However, we may waive that procedure if we find good cause

that notice and comment are impractical, unnecessary, or contrary to

the public interest. In addition we also normally provide a delay of 30

days in the effective date. However, if adherence to this procedure

would be impractical, unnecessary, or contrary to public interest, we

may waive the delay in the effective date.

We are adopting this regulation as a final with comment period

without publication of a notice of proposed rule making because of the

urgent need to provide the States with FFP in their Medicaid

expenditures for additional time for completing the massive number of

redeterminations caused by the recent statutory changes. This need is

critical because States must begin redetermining eligibility for large

numbers of individuals who may lose Medicaid or SSI beginning January

1, 1997. Publication of a proposed rule with a 60-day comment period

prior to publication of a final rule would cost valuable time in

processing the mandated redeterminations, and would leave large numbers

of beneficiaries without Medicaid or SSI beginning January 1, 1997.

Thus, we believe that it is contrary to the public interest to delay

implementation of the statutory provisions until the process of

publishing both proposed and final rules can be completed. Therefore,

we find good cause to waive proposed rulemaking and to issue these

regulations as final.

Also, because States must begin such redeterminations as of January

1, 1997, we are not making the effective date of the regulation the

usual 30 days after publication. Instead, we will make the regulation

effective on the date of publication. For the reasons discussed above,

we find good cause to waive the usual 30-day delay so that the

provisions may take effect upon publication of this final rule with

comment period.

Although we are publishing this as a final rule, we are providing a

60-day period for public comment. Because of the large number of items

of

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correspondence we normally receive concerning regulations, we are not

able to acknowledge or respond to the comments individually. However,

if we decide that changes are necessary as a result of our

consideration of timely comments, we will issue a final rule and

respond to the comments in the preamble of that rule.

IV. Regulatory Impact Statement

For final rules with comment period, we generally prepare a

regulatory flexibility analysis that is consistent with the Regulatory

Flexibility Act (RFA) (5 U.S.C. 601 through 612), unless we certify

that a final rule will not have a significant economic impact on a

substantial number of small entities. For purposes of a RFA,

individuals and States are not considered to be small entities.

In addition, section 1102(b) of the Social Security Act requires us

to prepare a regulatory impact analysis for any final rule that 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. With the exception of hospitals located in

certain rural counties adjacent to urban areas, 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.

We estimate that the costs of performing the redeterminations

arising from recent Federal laws will be substantial. We expect that

nearly 1,600,000 individuals will have their eligibility redetermined.

Of this number, most are SSI-eligible individuals, and of these,

500,000 involve redetermination of disability. We estimate that the

cost to the Medicaid program, emanating from Public Laws 104-193 and

104-121, of allowing a longer period of time to make eligibility

redeterminations on those individuals who may lose benefits to be

approximately $50 million (Federal share) in FY 1998. This is estimated

on the basis of the redeterminations occurring within one year of

implementation of this rule and requiring an approximate extra 75 days

to complete.

Because these final regulations affect only States and individuals,

which are not defined as small entities, we have determined, and we

certify, that this rule will not have a significant economic impact

under the threshold criteria of the RFA. Further, we certify, for the

same reasons, that this final rule does not have a significant impact

on the operations of a substantial number of small rural hospitals.

Therefore, we have not prepared a regulatory flexibility analysis or an

analysis of the effects of this rule on small rural hospitals.

In accordance with the provisions of Executive Order 12866, this

regulation was reviewed by the Office of Management and Budget.

V. Collection of Information Requirements

This rule does not impose any new information collection or

recordkeeping requirements that are subject to review by the Office of

Management and Budget under the Paperwork Reduction Act of 1995 (44

U.S.C. 3501 et seq.) The existing collection requirements under

Sec. 435.1003 are currently approved under OMB approval number 0938-

0247 through May 31, 1997.

Redetermination of eligibility is currently required for all

individuals whose eligibility is affected either by change in law or

change in individual circumstances. The passage of Public Laws 104-193

and 104-121 requires that SSA redetermine the SSI eligibility of large

numbers of recipients. Once SSA issues redetermination notices to the

affected individuals, States must redetermine Medicaid eligibility of

these individuals. Regulations at Sec. 435.1003 require that such

redeterminations be performed promptly. These new rules will not change

the redetermination requirement and the associated paperwork needed to

perform a redetermination. However, because of the change in Federal

law, there will be a substantial increase in the volume of

redeterminations States will have to make. These regulations are

designed to relieve the States of the pressures and costs of these

redeterminations by providing both more time and FFP to conduct the

redeterminations and to provide FFP in Medicaid expenditures while the

redeterminations are pending.

We estimate that each redetermination will involve approximately 18

hours.

List of Subjects in 42 CFR Part 435

Aid to Families with Dependent Children, Grant programs--health,

Medicaid, Reporting and recordkeeping requirements, Supplemental

Security Income (SSI), Wages.

42 CFR Part 435 is amended as follows:

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE

NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

1. The authority citation for part 435 continues to read as

follows:

Authority: Section 1102 of the Social Security Act (42 U.S.C.

1302).

2. In Sec. 435.1003, the title is revised, and a new paragraph (c)

is added to read as follows:

Sec. 435.1003 FFP for redeterminations.

* * * * *

(c) When a change in Federal law affects the eligibility of

substantial numbers of Medicaid recipients, the Secretary may waive the

otherwise applicable FFP requirements and redetermination time limits

of this section, in order to provide a reasonable time to complete such

redeterminations. The Secretary will designate an additional amount of

time beyond that allowed under paragraphs (a) and (b) of this section,

within which FFP will be available, to perform large numbers of

redeterminations arising from a change in Federal law.

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

Assistance Program)

Dated: December 10, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: December 20, 1996.

Donna E. Shalala,

Secretary.

[FR Doc. 97-673 Filed 1-10-97; 8:45 am]

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