State Child Health; State Children's Health Insurance Program Allotments and Payments to States
Federal RegisterMar 4, 1999
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 447, 457, and 45 CFR Parts 92 and 95
[HCFA-2114-P]
RIN 0938-AI65
State Child Health; State Children's Health Insurance Program
Allotments and Payments to States
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule sets forth the methodologies and procedures
to determine the Federal fiscal year allotments of Federal funds
available to individual States, Commonwealths and Territories for the
new State Children's Health Insurance Program (CHIP) established under
title XXI of the Social Security Act. This rule also proposes the
allotment, payment, and grant award process that will be used for the
States, the Commonwealths and Territories to claim and receive Federal
financial participation (FFP) for expenditures under the State
Children's Health Insurance Program and related Medicaid program
provisions.
Established by section 4901 of the Balanced Budget Act of 1997
(Pub. L. 105-33) and amended by technical amendments made by Pub. L.
105-100, the State Children's Health Insurance Program provides Federal
matching funds to States to initiate and expand health insurance
coverage to uninsured, low-income children. Aggregate Federal funding
is limited to a fixed amount for each Federal fiscal year. This
aggregate amount is divided into allotments for each State. State
allotments are determined based on a statutory formula that divides the
total available appropriation among all States with approved child
health plans. Once determined, the amount of a State's allotment for a
fiscal year is available for 3 years.
We are publishing this proposed rule in accordance with the
provisions of sections 2104 and 2105 the Act that relate to allotments
and payments to States under title XXI.
DATES: Written comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5:00 p.m. on May
3, 1999.
ADDRESSES: Mail written comments (one original and three copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-2114-P, PO 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 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW,
Washington, DC, or
Room C5-09-27, Central Building, 7500 Security Boulevard, Baltimore,
Maryland.
If you wish to submit written comments on the information
collection requirements contained in this proposed rule, you may submit
written comments to the following:
Allison Eydt, HCFA Desk Officer, Office of Information and Regulatory
Affairs, Room 3001, New Executive Office Building, Washington, DC
20503; and
Health Care Financing Administration, Office of Information Services,
Security and Standards Group, Division of HCFA Enterprise Standards,
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850, ATTN:
Louis Blank, HCFA-2114-P.
FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019
SUPPLEMENTARY INFORMATION:
Comments, Procedures, Availability of Copies, and Electronic Access
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-2114-P. 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 443-G of
the Department's office at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 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, PO Box
[[Page 10413]]
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 Master Card 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.
This Federal Register document is also available from the Federal
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Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web; the Superintendent of Documents home page address
is http://www.access.gpo.gov/nara__docs/, by using local WAIS client
software, or by telnet to swais.access.gpo.gov, then login as guest (no
password required). Dial-in users should use communications software
and modem to call 202-512-1661; type swais, then login as guest (no
password required).
I. Background
Section 490l of the Balanced Budget Act of 1997 (BBA), Public Law
105-33, as amended by Public Law 105-100, added Title XXI to the Social
Security Act (the Act). Title XXI authorizes a new State Children's
Health Insurance Program (CHIP) to assist State efforts to initiate and
expand child health assistance to uninsured, low-income children. Child
health assistance is provided primarily for obtaining health benefits
coverage through (1) obtaining coverage that meets requirements
specified in the law under section 2103 of the Act; or (2) expanding
benefits under the State's Medicaid plan under title XIX of the Act; or
(3) a combination of both.
Under title XXI, funds are appropriated to carry out this basic
purpose. Section 2104(a) of the Act specifies appropriated amounts for
each fiscal year to be used to provide allotments to each State.
Section 2104 of the Act provided for the total amount of funds
available nationally for each Federal fiscal year and sets forth a
general methodology to calculate the State specific allotments.
Section 2105 of the Act requires the Secretary to make payments to
each State with an approved State child health plan from its available
allotment equal to a certain percentage (referred to as the enhanced
Federal medical assistance percentage (EFMAP)) of the State
expenditures under the plan. These expenditures are primarily for child
health assistance for targeted low-income children that meet the health
benefits coverage requirements in section 2103 of the Act. Section 2105
of the Act authorizes the Secretary to establish a process for making
payments to States for State expenditures under their title XXI
programs. Under this section, no more than 10 percent of a State's
total expenditures may be used for the total costs of: other child
health assistance for targeted low-income children; health services
initiatives; outreach; and administrative costs.
This proposed rule will implement these title XXI State CHIP and
related title XIX Medicaid program financial provisions, including the
allotment process, the payment process, financial reporting
requirements, and the grant award process.
II. Provisions of the Proposed Rule
A. Overview
Under our proposal, the new regulations for the Children's Health
Insurance Program would be set forth in regulations at 42 CFR part 457
subchapter D. We note that some sections and subparts would be reserved
for regulations currently under development related to other statutory
requirements of the Children's Health Insurance Program. We intend to
address these and other statutory requirements in subsequent Federal
Register documents.
The overall existing regulations for the Medicaid program
containing general financial and related provisions were used as a
model for the Children's Health Insurance Program. In this regard,
proposed regulations at Secs. 457.200 through 457.238, subpart B,
mirror existing Medicaid regulations related to program administration
and conformed to the title XXI program. The most significant inclusion
in these regulations would be our proposal to set forth proposed
regulations at Secs. 457.600 through 457.630, subpart F. This subpart
would specify the methodologies and procedures to determine the Federal
allotments, and the grant award process that will be used for payment
to States.
The proposed organizational format for new part 457, subchapter D
is as follows:
Subchapter D--Children's Health Insurance Programs (CHIPs)
Part 457--Allotments and Grants to States
Subpart A--[Reserved]
Subpart B--General Administration--Reviews and Audits; Withholding for
Failure To Comply; Deferral and Disallowance of Claims; Reduction of
Federal Medical Payments
Sec.
457.200 Program reviews.
457.202 Audits.
457.204 Withholding of payment for failure to comply with Federal
requirements.
457.206 Administrative appeals under the State CHIP.
457.208 Judicial review.
457.210 Deferral of claims for FFP.
457.212 Disallowance of claims for FFP.
457.216 Treatment of uncashed or canceled (voided State CHIP
checks).
457.218 Repayment of Federal funds by installments.
457.220 Public funds as the State share of financial participation.
457.222 FFP for equipment.
457.224 FFP: Conditions relating to cost sharing.
457.226 Fiscal policies and accountability.
457.228 Cost allocation.
457.230 FFP for State ADP expenditures.
457.232 Refunding of Federal share of CHIP overpayments to
providers and referral of allegations of waste, fraud or abuse to
the Office of Inspector General.
457.234 State plan requirements.
457.236 Audit of records.
457.238 Documentation of payment rates.
Subparts C through E--[Reserved]
Subpart F--Payment to States
457.600 Purpose and basis of this subpart.
457.602 Applicability.
457.606 Conditions for State allotments and Federal payments for a
fiscal year.
457.608 Process and calculation of State allotments for a fiscal
year.
457.610 Period of availability for State allotments for a fiscal
year.
457.614 General payment process.
457.616 Application and tracking of payments against the fiscal
year allotments.
457.618 Ten percent limit on certain Children's Health Insurance
Program expenditures
457.622 Rate of FFP for State expenditures.
457.624 Limitations on certain payments for certain expenditures.
457.626 Prevention of duplicate payments.
457.628 Other applicable Federal regulations.
457.630 Grants procedures.
B. Program administration
Subpart B--General Administration--Reviews and Audits; Withholding for
Failure to Comply; Deferral and Disallowance of Claims; Reduction of
Federal Medical Payments
We would add new Secs. 457.200 through 457.234 subpart B that would
[[Page 10414]]
specify the provisions necessary for program administration of the
State CHIP plan.
1. Program Reviews (Sec. 457.200)
Section 457.200 would specify that HCFA reviews State and local
administration of the State CHIP plan in order to determine whether the
State is complying with the Federal requirements and provisions of its
plan.
2. Audits (Sec. 457.202)
The Department's Office of Inspector General (OIG) periodically
audits State operations. Section 457.202 would specify the purpose of
these audits, OIG's audit reports, and action that a State agency may
take on audit exceptions.
3. Withholding of Payment for Failure To Comply With Federal
Requirements (Sec. 457.204)
Section 457.204 would specify the basis for withholding payment,
noncompliance of a State plan and noncompliance practices.
4. Administrative Appeals Under the State CHIP (Sec. 457.206)
Section 457.206 would specify the three types of disputes that may
be appealed under the State CHIP.
5. Judicial Review (Sec. 457.208)
A State dissatisfied with the Administrator's final determination
approval of plan material or compliance with Federal requirements has a
right to judicial review. In Sec. 457.208, we would specify the
procedure for judicial review.
6. Deferral of Claims for FFP (Sec. 457.210)
Section 457.210 would specify the requirements for deferral for
payment of a claim or any portion of a claim for FFP. This section
would also specify that the HCFA Regional Administrator must notify the
State in writing of a deferral and the State's responsibility.
7. Disallowance of Claims for FFP (Sec. 457.212)
Section 457.212 would specify when the Regional Administrator or
Administrator determines that a claim or portion of a claim is not
allowable the State will be notified of the dissallowance and a right
for reconsideration. This section would also specify the procedure for
reviews of disallowances of FFP under CHIP, and implementation of
reconsideration decisions.
8. Treatment of Uncashed or Canceled (voided) State CHIP Checks
(Sec. 457.216)
Section 457.216 would specify the rule to ensure that States refund
the amount of FFP related to checks not cashed after 180 days or
canceled (voided) checks, issued by a State or a fiscal agent to CHIP
payees under title XXI.
9. Repayment of Federal Funds (Sec. 457.218)
New Sec. 457.218 would set forth the basic conditions when Federal
payments have been made for claims that are later found to be
unallowable. This section would specify the repayment schedule,
quarterly repayment amounts, extended schedule and repayment process.
It would also specify the process for offsetting of retroactive claims.
10. Public Funds as the State Share of Financial Participation
(Sec. 457.220)
Section 457.220 would specify that public funds may be considered
for the State's share in claiming FFP if they meet the conditions
specified in this section of the regulations. These public funds may
also be subject to the limitation on the use of donations and taxes
that are set forth in Medicaid regulations, which we propose to
incorporate for purposes of the CHIP in Sec. 457.628 below. HCFA is
considering whether there is a need to issue additional regulations for
provider related-donations and health care related-taxes for CHIP.
11. FFP for Equipment (Sec. 457.222)
Section 457.222 would specify how claims for Federal financial
participation in the cost of equipment under the State CHIP are
determined, and the requirements concerning the management and how
disposition of equipment under the State CHIP Program are prescribed.
12. FFP: Conditions Relating to Cost Sharing (Sec. 457.224)
New Sec. 457.224 would specify the conditions for which no FFP in
the State's expenditures for services is available or for which the
amount of expenditures are reduced related to cost-sharing received by
the State.
13. Fiscal Policies and Accountability (Sec. 457.226) and Cost
Allocation (Sec. 457.228)
Section 457.226 would set forth fiscal policies and accountablity
for a State that has a CHIP plan. Section 457.228 would require a State
plan to provide that the single or appropriate State CHIP agency will
have an approved cost allocation plan on file with the Department.
14. Federal Financial Participation for State ADP Expenditures
(457.230)
Section 457.230 would specify that FFP is available for State ADP
expenditures for the design, development, or installation of mechanized
claims processing and information retrieval systems and for the
operation of certain systems. This section would also specify where
additional HHS regulations and HCFA procedures for implementing these
regulations are specified.
15. Refunding of Federal Share of CHIP Overpayments to Providers and
Referral of Allegations of Waste, Fraud or Abuse to the Office of
Inspector General (Sec. 457.232)
Section 457.232 would specify how refunding of the Federal share of
CHIP overpayments to providers will be handled. In addition, this
section would specify that allegations or indications of waste, fraud
and abuse with respect to the CHIP program must be referred to the
Office of Inspector General.
16. State Plan Requirements (Sec. 457.234)
This section would specify that the State must provide that the
requirements in this subpart are met.
17. Audits of Records (Sec. 457.236) and Documentation of Payment Rates
(Sec. 457.238)
Sections 457.236 and 457.238 would specify that the CHIP agency
must assure appropriate audit of records, and maintain documentation of
payment rates and make it available to HHS.
C. Allotment Process
We would add new Secs. 457.600 through 457.632, subpart F, that
would implement the provisions of section 2104 of the Act, relating to
the process for establishing the national total amounts available and
the State specific allotments for a fiscal year, and section 2105 of
the Act, relating to the process for making payments to States from
their allotments. We would also add a new section on Medicaid
presumptive eligibility at Sec. 447.88 to subpart A, as discussed
below.
1. Purpose, Basis and Applicability of This Part (Secs. 457.600 and
457.602)
Section 457.600 specifies the purpose and basis of this new part.
Section 457.602 will specify that this subpart applies to the 50
States, the District of Columbia, and the Commonwealths and
Territories.
[[Page 10415]]
2. Conditions for State Allotments for a Fiscal Year and Payments
(Sec. 457.606)
In Sec. 457.606, we specify the conditions necessary in order for a
State to receive an allotment for a fiscal year and Federal payments
for allowable State expenditures under its State child health plan.
Specifically, a State will receive an allotment for a fiscal year only
if HCFA has approved its State child health plan by the end of the
fiscal year, and Federal payments are available only for the State's
allowable expenditures under the approved State child health plan at an
enhanced Federal medical assistance percentage. States could be at risk
for expenditures made under a State child health plan that was
submitted, but not yet approved.
Public Law 105-174, enacted on May 1, 1998, provides that if a
State child health plan is approved by HCFA on or after October 1,
1998, and before October 1, 1999, the plan must be treated as having
been approved for both FY 1998 and FY 1999. Thus, for example, if a
State submits its initial child health plan during FY 1999 and the plan
is approved in FY 1999, the State will receive a CHIP fiscal year
allotment for both FY 1998 and FY 1999. However, a State's allotment
for a fiscal year may only be used for CHIP and/or CHIP-related
Medicaid expenditures that are allowable under the approved State child
health plan or the Medicaid State plan. FFP would not be available for
expenditures made in and claimed for periods prior to the effective
date of the approved State child health plan or the Medicaid State
plan. Sec. 457.606 specifies the conditions contained in Public Law
105-174 relating to approval of State child health plans for FYs 1998
and 1999.
3. Process and Calculation of Allotments for a Fiscal Year
(Sec. 457.608)
We specify in Sec. 457.608 the provisions for determining the
amounts of State allotments for a fiscal year. The total amount of the
Federal funds available for the purpose of funding States' Title XXI
programs is limited for each fiscal year nationally, and the statute
provides a basis for determining State-specific allotments of this
national total amount. There are two determinations involved in the
overall allotment process. In the first determination, the total
amounts available for allotment to the States, the District of
Columbia, and the Commonwealths and Territories for a fiscal year are
established. The second determination potentially involves three State
specific allotment determinations by the Secretary for a fiscal year:
the reserved allotment; the final allotment; and the redistribution of
the amounts of unused fiscal year allotments from States that have not
expended all of the amount of that fiscal year's allotment, to States
that have fully expended the amount of their allotments for that fiscal
year.
Section 457.608 specifies the methodology and formula for
calculating the total amount available nationally for allotment to
States and the District of Columbia for a fiscal year. Section 2104(a)
of the Act specifies the total appropriated amount available nationally
for allotment to each State and the District of Columbia with a State
child health plan approved under this title based on the formula
specified in section 2104(b)(1) of the Act. The total appropriations
for each fiscal year, representing the total amounts available
nationally for allotment to States are: $4.295 billion for FY 1998;
$4.275 billion for fiscal years 1999 through 2001; $3.150 billion for
fiscal years 2002 through 2004; $4.050 billion for fiscal years 2005
and 2006; and $5 billion for FY 2007. The total amount available
nationally for allotment for each fiscal year is determined by
subtracting certain amounts in a specified order, as specified in
statute, from the total appropriation for all States for a given fiscal
year. The example below illustrates the methodology used for
calculating the total amount available nationally for allotment to
States for FY 1998.
Total Allotment Available for FY 1998 for All States
Formula: ATA =
S2104(a)-T2104(c)-D4921-D4922
ATA = National total amount available for allotment to all
States and the District of Columbia for the fiscal year.
S2104(a) = Total appropriation for the fiscal year specified
in section 2104(a) of the Act. Under section 2104(a)(1) of the Act for
FY 1998, this is $4,295,000,000.
T2104(c) = Total allotment amount for a fiscal year
available for allotment to the Commonwealths and Territories;
determined under section 2104(c) of the Act as 0.25 percent of the
total appropriation for the fiscal year. For FY 1998, this is: .0025
x $4,295,000,000 = $10,737,500
D4921 = Amount of total grant for children with Type I
Diabetes under section 4921 of Pub. L. 105-33. This is $30,000,000 for
each of fiscal years 1998 through 2002.
D4922 = Amount of total grant for diabetes programs for
Indians under section 4922 of Pub. L. 105-33. This is $30,000,000 for
each of fiscal years 1998 through 2002.
In accordance with the above formula, the total amount available for
allotment to the 50 States and the District of Columbia for fiscal year
1998 is $4,224,262,500, determined as follows:
ATA =
S2104(a)-T2104(c)-D4921-D4922
$4,224,262,500 = $4,295,000,000 -$10,737,500 -$30,000,000 -$30,000,000
4. Individual State Allotments to the 50 States and District of
Columbia
Section 2104(b) of the Act provides for allotments from the total
amount available nationally to the 50 States and the District of
Columbia. For fiscal years 1998 through 2000, each State with an
approved State child health plan will receive an allotment based on two
factors for the fiscal year: the number of children and the State cost
factor.
Section 2104(b)(2) of the Act specifies that the number of children
used in determining a State's allotment for a fiscal year is a
determination of the number of low-income children (and of low income
children who have no health insurance coverage) for a State for a
fiscal year made on the basis of the arithmetic average of the number
of such children, as reported and defined in the 3 most recent March
supplements to the Current Population Survey (CPS) of the Bureau of the
Census before the beginning of the fiscal year.
For fiscal years 1998 through 2000 the number of children factor
used in calculating a State's allotment for a fiscal year is based on
each State's total number of low-income children with no health
insurance coverage. For fiscal year 2001, the number of children factor
is the sum of: (1) 75 percent of the number of low-income children with
no health insurance coverage; and (2) 25 percent of the number of low-
income children in the State. For each succeeding fiscal year after
2001, the number of children factor is the sum of: (1) 50 percent of
the number of low-income children with no health insurance coverage;
and (2) 50 percent of the number of low-income children in the State.
Section 2104(b)(1)(A)(ii) and (b)(3) of the Act specifies that the
State cost factor used in determining a State's allotment refers to
geographic variations in State health costs and is based on the average
of the annual wages per employee for the State or the District of
Columbia, or for all States and the District of Columbia, for employees
in
[[Page 10416]]
the health services industry (although SIC Code 8000 is referenced in
the statute, the Bureau of Labor and Statistics is using the more
general SIC code 80) as reported by the Bureau of Labor Statistics of
the Department of Labor for each of the most recent 3 years before the
beginning of the fiscal year involved.
As specified in the statute, the sources of the number of children
and the annual average wages for employees in the health services
industry are the Bureau of the Census and the Bureau of Labor
Statistics, respectively. Both of the relevant sections of the Act
refer to these data ``as reported and defined'' under the authorities
of these Federal organizations for the 3 most recent years before the
beginning of the fiscal year involved. In light of the clear language
of the statute, in our calculations of the State allotments we will use
the data regarding the number of children and the annual average wages
as provided by the Bureau of the Census and the Bureau of Labor
Statistics. That is, we will not make any adjustments or corrections to
this data provided by the Bureau of the Census or the Bureau of Labor
Statistics.
In order for HCFA to determine State CHIP allotments for a fiscal
year within a reasonable time period at the beginning of the fiscal
year, we intend to use the most recent official data that are available
from the Bureau of the Census and Bureau of Labor Statistics,
respectively, just prior to the beginning of the fiscal year on October
1. We will use this approach beginning with FY 2000, which begins on
October 1, 1999.
We used a different approach for FY 1998 and FY 1999. In
calculating the FY 1998 reserved CHIP allotments, which were published
in the Federal Register on September 12, 1997, we used the most recent
official data that were available from the Bureau of the Census and
Bureau of Labor Statistics, respectively, prior to the September 1
before the beginning of FY 1998 (that is, through August 31, 1997).
In particular, through August 31, 1997, the only official data
available from the Bureau of the Census on the numbers of children were
data from the 3 March CPSs conducted in March 1994, 1995, and 1996 that
reflected data for the 3 calendar years 1993, 1994, and 1995. If we had
waited for the official data available from the Bureau of the Census
through September 30, 1997, we would have had to delay publication of
the FY 1998 CHIP allotments until after the beginning of FY 1998. Since
this was a new program, we believed that for the first year States
needed to be able to plan in advance.
Section 457.608 specifies that in determining a fiscal year
allotment, we will use the most recent official data that are available
from the Bureau of the Census and the Bureau of Labor Statistics prior
to the October 1 before the beginning of the fiscal year.
HCFA does not modify or adjust the Bureau of Census compilation of
CPS data on the number of children. HCFA is, however, incorporating a
correction made by the Bureau of Census to more accurately reflect
underlying reported CPS data. The Bureau of Census recognized that the
data collected and reported on the numbers of children in the March
Supplements to the CPS were not accurately reflected in the compilation
provided to HCFA for the September 12, 1997 calculation of the FY 1998
reserved allotments. In particular, children who had access to services
through the Indian Health Services (IHS), but no other health insurance
coverage, were identified in the compiled number of children as having
health insurance coverage. The Bureau of Census has adjusted the
compiled numbers of children to reflect the fact that the data shows
that these children do not actually have health insurance coverage. In
light of this adjustment to more accurately reflect reported CPS data,
HCFA recalculated and republished the FY 1998 reserved allotments in
the Federal Register on February 8, 1999 (64 FR 6102). This is
consistent with the express incorporation of this Bureau of Census
adjustment into the FY 1999 allotment calculation under Public Law 105-
277.
In accordance with Pub. L. 105-277, the FY 1999 reserved allotments
were based on the same data as the revised FY 1998 reserved allotments.
These reserved allotments were also published in the Federal Register
on February 8, 1999 (64 FR 6102).
Specifically, for FY 1999, the Number of Children for each State
(provided in thousands) was determined and provided by the Bureau of
the Census based on the arithmetic average of the number of low-income
children and low-income children with no health insurance as calculated
from the 1994, 1995 and 1996 March supplements to the CPS, as adjusted
in August 1998. The State Cost Factor was calculated based on the final
State Cost Factor data for each of the most recent 3 years before the
beginning of the fiscal year, through August 31, 1997 available from
BLS. This is the same data that was used in the calculation of the FY
1998 allotments.
In accordance with section 2104(b)(4) of the Act, Sec. 457.608(e)
specifies that each State, (including the District of Columbia) with an
approved State plan will receive a minimum allotment for a fiscal year
of $2 million. This section also provides that in the event that a
State's allotment as determined by the formula described above is below
this $2 million minimum, it will be increased to $2 million; and the
increase will be offset by a pro rata reduction in allotments to other
States so that the total amount of allotments to all States in a fiscal
year does not exceed the total amount available nationally for
allotment to the States and the District of Columbia.
We specify in Sec. 457.608(f) the formula for determining
individual allotments for the 50 States and the District of Columbia.
The formula for determining each State's allotment of the total
available allotment is indicated in section 2104(b)(1) of the Act. The
example below shows the methodology for determining each State
allotment amount for FY 1998.
5. Formula for Calculating the State Allotment for a Fiscal Year
(Sec. 457.608(d))
The methodology for determining the State allotment for a fiscal
year is in accordance with the following formula:
[GRAPHIC] [TIFF OMITTED] TP04MR99.000
SAi = Allotment for a State for a fiscal year.
Ci = Number of children in a State (section
2104(b)(1)(A)(i)) for a fiscal year.
This number is based on the number of low-income children for a State
for a fiscal year and the number of low-income children for a State for
a fiscal year with no health insurance coverage for the fiscal year
determined on the basis of the arithmetic average of the number of such
children as reported and defined in the 3 most recent March supplements
to the Current Population Survey of the Bureau of the Census before the
beginning of the fiscal year. (section 2104(b)(2)(B) of the Act). As
discussed above, the number of children will be the most recent data
officially available and reported ad defined by the Bureau of the
Census prior to October 1 before the beginning of the fiscal year.
For each of the fiscal years 1998 through 2000, the number of
children is equal to the number of low-income children in the State for
the fiscal year with no health insurance coverage. For fiscal year
2001, the number of children is equal to the sum of 75 percent of the
number of low-income children in the State for the fiscal year with no
health insurance coverage and 25 percent of
[[Page 10417]]
the number of low-income children in the State for the fiscal year. For
fiscal years 2002 and thereafter, the number of children is equal to
the sum of 50 percent of the number of children in the State for the
fiscal year with no health insurance coverage and 50 percent of the
number of low-income children in the State for the fiscal year (section
2104(b)(2)(B)).
SCFi = State cost factor for a State (section
2104(b)(1)(A)(ii)).
For a fiscal year, this is equal to:
.15 + .85 x (Wi/WN) (Section 2104(b)(3)(A)).
Wi = The annual average wages per employee for a State
(section 2104(b)(3)(A)(ii)(I)).
WN = The annual average wages per employee for the 50 States
and the District of Columbia for such year (section
2104(b)(3)(A)(ii)(II)).
The annual average wages per employee for a State or for all States and
the District of Columbia for a fiscal year is equal to the average of
such wages for employees in the health industry (SIC code 80), as
reported by the Bureau of Labor Statistics for the Department of Labor
for each of the 3 years before the beginning of the fiscal year.
Although section 2104(b)(3)(B) of the Act refers to the SIC code 8000,
the Bureau of Labor Statistics reports the wages for employees in the
health services industry using SIC code 80, which is more general. As
discussed above, the health industry wages will be the most recent data
available and reported and defined by the Bureau of Labor Statistics
prior to October 1 before the beginning of the fiscal year. (section
2104(b)(3)(B)).
(Ci x SCFi) = This is the sum of
the products of Ci x SCFi for each State
(section 2104(b)(1)(B)).
ATA = Total amount available for allotment to all States and
the District of Columbia for the fiscal year. For FY 1998, this is
$4,224,262,500.
6. Reserved Allotment for Each State (Sec. 457.608(g))
Although the statute provides that the Secretary shall make an
allotment to a specific state if it has an approved State child health
plan, we are proposing a process under which State CHIP allotments will
be determined and ``reserved'' for each and every State for the fiscal
year, regardless of whether the States have submitted and have an
approved State child health plan. The amount of the ``reserved''
allotment for each State would be determined in accordance with the
formula provided for in section 2104(b) of the Act.
In accordance with this approach, Sec. 457.608 specifies that for
each fiscal year, HCFA will develop the reserved allotments for the 50
States and the District of Columbia and the Commonwealths and
Territories based on the principle that an allotment amount should be
reserved and available for each State, regardless of whether the State
has submitted a State child health plan or whether that plan is
approved. This will provide States with the flexibility and time to
develop their programs and submit their State child health plans. The
reserved allotment does not represent an actual allotment for a State.
The reserved allotment may be established as a State's actual allotment
for a fiscal year only upon submission and approval of the States'
child health assistance plan by the end of the fiscal year (or, in the
case of fiscal year 1998, by the end of fiscal year 1999). Furthermore,
as discussed below, the State's final allotment for the fiscal year may
differ from the State's reserved allotment. Since the effective date
for the States' CHIP plans could have been as early as October 1, 1997,
we published the FY 1998 reserved allotments for the States, District
of Columbia and Commonwealths and Territories, in a separate Federal
Register notice (67 FR 48098) on September 12, 1997, as if they all had
approved State child health plans. We believe it is important for
States to be informed of a reserved allotment at the beginning of the
fiscal year so that States have an opportunity to plan accordingly.
Reserved allotments are determined through the method described in
section 4 in accordance with the formula provided for in section
2104(b) of the Act.
7. Final Allotment for Each State (Sec. 457.608(h))
The statute requires that final State allotments for each fiscal
year be determined based only on the States that have approved State
child health plans by the end of the fiscal year. This regulation
proposes that the factors used in calculating each State's final
allotments for a fiscal year, the number of children and the State cost
factor, will be the same as the factors used in determining and
publishing the reserved allotments. As discussed previously, in section
4 above, in general we propose to use the official data for these
factors available from the Bureau of the Census and the BLS prior to
October 1 before the beginning of the fiscal year. More recent data
than that used in calculating the reserved allotments for a fiscal year
will not be used in determining the final allotments for that fiscal
year. This will establish a consistent basis for States in planning
their State children's health insurance programs, and will mitigate the
potentially significant fluctuations in allotments that could occur
because of changes in these factors.
However, as discussed above in section 4, on reserved allotments,
the Bureau of the Census has recently changed the way it reports
children having access to IHS services. In order to reflect this Bureau
of Census adjustment in the calculation of the final allotments for FY
1998, we propose to use the revised number of children factor reflected
in the revised reserved FY 1998 allotments published in the Federal
Register on February 8, 1999 (64 FR 6102). These numbers are slightly
different from what was used when the reserved allotments were
published in the Federal Register on September 12, 1997.
The Bureau of Census will continue to use this new reporting
methodology of children with access to IHS services in the future, and
therefore it will be reflected in the reserved state allotments and the
final CHIP allotments.
8. Allotments for the Commonwealths and Territories (Sec. 457.608(f))
New Sec. 457.608(f) specifies the amount of the total allotment
available for a fiscal year to the Commonwealths and the Territories
and the amount of the specific allotment for each Commonwealth and
Territory. Section 2104(c) of the Act provides for allotments to the
Commonwealths and Territories of Puerto Rico, Guam, the Virgin Islands,
American Samoa, and the Northern Mariana Islands. This section of the
Act specifies that for a fiscal year, the Secretary shall allot 0.25
percent of the total amount appropriated for the fiscal year among each
of the Commonwealths and Territories in accordance with the following
percentages specified in section 2104(b)(2) of the Act:
Puerto Rico--91.6 percent
Guam--3.5percent
Virgin Islands--2.6 percent
American Samoa--1.2 percent
Northern Mariana Islands--1.1 percent
For fiscal year 1998 a total of $10,737,500 (.25 percent of
$4,295,000,000) is available for allotment to the Commonwealths and
Territories. For FY 1999 the Commonwealths and Territories will receive
$10,687,500 (.25 percent of $4,275,000,000) under the formula described
above. In addition, under Pub. L. 105-277, an additional $32 million
[[Page 10418]]
was appropriated for allotment only to the Commonwealths and
Territories and only for FY 1999. This newly appropriated $32 million
does not reduce the previous FY 1999 CHIP appropriation ($4.275
billion) and is in addition to the 0.25 percent of the amount discussed
above ($10,687,500). Therefore, for FY 1999, a total of $42,687,500
will be available for allotment to the Commonwealths and Territories.
We will determine the reserved allotments for a fiscal year for the
Commonwealths and Territories in accordance with the above methodology,
as if every Commonwealth and Territory has an approved child health
plan. If all the Commonwealths and Territories do not have an approved
plan, the final allotments will be determined based only on those with
approved child health plans and allotted in proportion to the above
percentages.
9. Period of Availability of State Allotments for a Fiscal year
(Sec. 457.610)
Section 457.610 specifies that a State's final allotment for a
fiscal year as determined in accordance with the formula in
Sec. 457.608, remains available for the State, District of Columbia,
and Commonwealth and Territory expenditures claimed in a 3-year period
of availability beginning with the fiscal year, and ending at the end
of the second fiscal year following the fiscal year. For example, for
the FY 1998 final allotment, the period of availability is FY 1998
through FY 2000.
In addition, as discussed below, there may be a redistribution
process to reallot unexpended amounts of States' allotments for a
fiscal year. Section 457.610 specifies that the amounts of
redistributed allotments for a fiscal year will be available through
the end of the fiscal year immediately following the 3-year period of
availability for a fiscal year. For example, for the redistribution of
the unexpended amounts of the FY 1998 final allotments, the
redistributed amounts would be available to States through the end of
FY 2001.
10. Redistribution Process
We intend that at the end of the 3-year period of availability for
a fiscal year allotment, HCFA will redistribute to States the unused
amounts of allotments for that fiscal year. Section 2104(f) of the Act
requires the Secretary to determine an appropriate procedure for
redistribution of allotments from States that ``do not expend all of
the amount of such allotments during the period in which such
allotments are available'' under section 2104(e) of the Act, ``to
States that have fully expended the amount of their allotments''. Under
section 2104(e) of the Act, the period for which a particular fiscal
year States' allotments are available is through the end of the second
year following the fiscal year for which the allotment was established.
That is, an allotment for a particular fiscal year is available to each
State for up to a total of 3 years, the fiscal year and the 2 years
following. For example, the FY 1998 allotments, would be available from
the beginning of FY 1998 (October 1, 1997) through the end of FY 2000
(September 30, 2000). Any unused amounts of States' allotments for a
fiscal year at the end of the 3-year period will be distributed to
States that have fully spent their allotments. HCFA intends to apply
the redistribution process as soon as possible after the end of the 3-
year period, after determining the amount of the unused allotments and
the States to which such amounts should be redistributed.
At this time HCFA is not addressing the redistribution process.
D. Payment to States
General Payment Process (Sec. 457.614)
New Sec. 457.614 specifies that a State may make claim for payment
for expenditures incurred during the period of availability related to
that fiscal year. This section also specifies that in order to receive
a claim for payment, a State must submit budget estimates of quarterly
funding requirements for Medicaid and the Children's Health Insurance
Programs, and submit an expenditure report. In turn, HCFA will issue an
advance grant to a State as described in Sec. 457.630; track and apply
a State's reported expenditures against the State allotment; and track
and apply relevant State expenditures for establishing and tracking the
10 percent limit.
As discussed previously, section 2105 requires the Secretary to
make payments to each State with an approved State child health plan
for child health assistance for targeted low-income children who meet
the coverage requirements in section 2103, after reducing for
expenditures for presumptive eligibility provided under section 1920A
of the Act and Medicaid expansions for which the State receives a CHIP-
related enhanced matching rate. Section 2105 also specifies that no
more than 10 percent of a State's payment may be used for the total
costs of: other child health assistance for targeted low-income
children; health services initiatives; outreach; and administrative
costs.
E. Application and Tracking of Payments Against the Fiscal Year
Allotments (Sec. 457.616)
Section 457.616 of this regulation specifies the principles that
will be used for tracking payments and States' title XIX and title XXI
expenditures against the States' title XXI allotments.
Sections 2105(a) and 2104(d) of the Act require that title XXI
fiscal year allotments be reduced by the following categories of
expenditures:
(1) Payments made to a State under its title XIX Medicaid program
with respect to section 1903(a) of the Act for expenditures claimed by
the State during a fiscal year that are attributable to the provision
of medical assistance to a child described in section 1905(u)(2) of the
Act on the basis of the enhanced FMAP described in sections 1905(b) and
2105(b) of the Act.
(2) Payments made to a State under its title XIX Medicaid program
with respect to section 1903(a) of the Act for expenditures claimed by
the State during a fiscal year that are for attributable to the
provision of medical assistance to a child described in section
1905(u)(3) of the Act on the basis of the enhanced FMAP described in
sections 1905(b) and 2105(b) of the Act.
(3) Payments made to a State under section 1903(a) of the Act for
expenditures claimed by the State during a fiscal year that are
attributable to the provision of medical assistance to a child during a
presumptive eligibility period under section 1920A of the Act.
(4) Payments made to a State under its title XXI children's health
insurance program with respect to section 2105(a) of the Act for
expenditures claimed by the State during a fiscal year.
HCFA will use the following principles, referenced in
Sec. 457.616(c) of this regulation, to: Coordinate the application of
the title XIX and title XXI expenditures against the title XXI fiscal
year allotments; determine the order of these expenditures; and
determine how expenditures apply against multiple fiscal year
allotments.
Principle 1. Apply title XIX Medicaid payments before
title XXI CHIP payments (section 2104(d)). Federal payments for title
XIX expenditures must be applied against the title XXI fiscal year
allotments before payment for title XXI expenditures are applied.
Specifically, u2 (the total computable expenditures claimed for the
fiscal year under section 1905(u)(2) of the Act), u3 (the total
computable expenditures claimed for the fiscal year under section
1905(u)(3) of the Act), and PE (presumptive
[[Page 10419]]
eligibility) payments under section 1920A of the Act in the Medicaid
program are applied before any title XXI payments are applied.
Principle 2. Federal payments for expenditures must be
applied against a fiscal year allotment based on the quarter in which
they are claimed (section 2104(b), (d), and section 2105(a)). Federal
payment for title XIX and title XXI expenditures must be applied
against a fiscal year allotment based on the quarter in which they are
claimed. Thus, Principle 1 above applies only on the basis of the
quarter the expenditures are claimed. For example, if title XXI
expenditures were claimed in one quarter and title XIX expenditures
were claimed in a second, subsequent quarter, the title XXI
expenditures claimed in the first quarter would be applied against the
fiscal year allotment before the title XIX expenditures claimed in the
second quarter.
Principle 3. Expenditures should be applied consistently
over the 3-year period of availability for fiscal year allotment
(Section 2101(a), section 2104(e), and (f)). Federal payment for
expenditures should be applied consistently over the 3-year period of
availability for fiscal year allotments. In order to treat States
consistently in the redistribution process, as appropriate, HCFA will
apply the same ordering of expenditures and allotments for all States.
Principle 4. Title XIX expenditures should be applied in
the order which provides the most benefits for States. Federal payment
for title XIX expenditures should be applied in the order that
maximizes Federal reimbursement for States. We believe the order that
most benefits States is as follows: u2 expenditures first, then u3
expenditures, and lastly PE expenditures. This is because u2 and u3
expenditures are funded at the enhanced FMAP rate which drops to the
regular FMAP rate when the allotment is exhausted. PE expenditures are
always matched at the regular (lower) FMAP, and also continue to be
matched after the allotment is exhausted.
Principle 5. Apply expenditures and allotments in the
least administratively burdensome, most effective and efficient manner
(section 2101(a). To the greatest extent possible HCFA will use
processes which are the least administratively burdensome, and the most
effective and efficient. For example, we believe a ``first-in-first-
out'' (FIFO) method should be applied both with respect to the
application of claims for FFP for expenditures against the allotment
and the availability of the fiscal year allotments. Thus, Federal
payments for expenditures would be applied against a fiscal year
allotment in the order they are claimed, and an earlier fiscal year
allotment would be used before a subsequent fiscal year allotment. For
example, in the case of a State for which FY 1988 allotment amounts are
carried over to FY 1999, Federal payments for expenditures claimed in
FY 1999 would first be applied against the FY 1998 carryover allotment
amounts before being applied against subsequent fiscal year allotments
(see Principle 7).
Principle 6. Application of claims for Federal payments in
expenditures for 1 fiscal year against a subsequent fiscal year
allotment (section 2104(e), (f)). Federal payment for expenditures
claimed in one fiscal year would be applied against a subsequent fiscal
year's allotment, if the earlier fiscal year's allotment was exhausted.
However, this could not be done until the subsequent year's allotment
was actually available. For example, Federal payments for expenditures
claimed in FY 1998 after the FY 1998 allotment was exhausted would be
applied against the FY 1999 allotment, but only after FY 1999 had begun
and the FY 1999 allotment had become available.
Principle 7. Amounts of a State's fiscal year allotments
for prior years that have not been expended and are ``carried over,''
are available for matching expenditures within the 3-year period of
availability (section 2104(e), (f)). Under the FIFO method (see
Principle 5), unexpended amounts of an allotment for a fiscal year
would be carried over for use in subsequent fiscal years and through
the end of the 3-year period of availability. Furthermore, the carried
over allotment would be used before the subsequent fiscal year
allotment was used. For example, unspent amounts of the FY 1998
allotment may be carried over up through FY 2000. The carried over
amounts of the FY 1998 allotment would be used before the allotments
for FYs 1999 and 2000; that is, expenditures for FYs 1999 and 2000
would be applied against the FYs 1998 carryover amount before being
applied against the FYs 1999 and 2000 allotments (Principle 5).
Application of Principles 2, and 5 through 7 may mitigate the necessity
of having to go through a redistribution process because earlier
allotments would be exhausted by Federal payments for expenditures as
they were claimed during the period of availability.
The following examples illustrate the above principles.
Example 1--Illustration of Principle 1. The amount
remaining of the fiscal year 1998 allotment is $5 million. Claims
for payments for title XIX expenditures in a quarter are $4 million.
Title XXI claims for payments for expenditures in the same quarter
are $3 million. Under Principle 1, the $4 million in title XIX
expenditures are applied against the remaining $5 million of the FY
1998 allotment first, leaving $1 million remaining of the fiscal
year 1998 allotment. Therefore, FFP would be available for only $1
million of the $3 million in claims for title XXI expenditures; and
at that point, the fiscal year 1998 allotment would be exhausted.
The remaining $2 million in claims for title XXI expenditures would
have to be funded by the State.
Example 2--Illustration of Principle 2. The fiscal year
1998 allotment is $5 million. In quarter 1 of FY 1998, $3 million in
title XXI expenditures are claimed. In quarter 2 of fiscal year 1998
there are $4 million in claims for title XIX expenditures. Since the
$3 million in claims for title XXI expenditures are claimed (first)
in quarter 1, under Principle 2, they would be applied first against
the fiscal year 1998 allotment. This would leave $2 million
remaining under the fiscal year 1998 allotment. In quarter 2 only $2
million in FFP would be available from the fiscal year 1998
allotment with respect to the $4 million title XIX claims for
expenditures in that quarter. At that point, the fiscal year 1998
allotment would be exhausted, and FFP for the remaining $2 million
in claims for title XIX expenditures would be available under
Medicaid at the regular Medicaid FMAP.
Example 3--Illustration of Principle 4. The fiscal year
1998 allotment is $5 million. There are the following claims for
expenditures in Quarter 4 of fiscal year 1998: u2 $5 million, u3 $4
million, and PE $1 million. In accordance with Principle 4, in this
case the $5 million in claims for u2 expenditures would be applied
against the fiscal year 1998 allotment first. Since the amounts of
the claims for u2 expenditures and the fiscal year 1998 allotment
are the same, the entire amount of u2 expenditures would be
reimbursed at the enhanced FMAP. Although the $5 million fiscal year
1998 allotment has been exhausted, the claims for u3 and PE
expenditures would still be reimbursed under the Medicaid program at
the regular FMAP rate. Again, this is because the regular Medicaid
FMAP rate continues for these groups, even though the fiscal year
1998 allotment was exhausted.
Example 4--Illustration of Principle 6. The fiscal year
1998 and 1999 allotments are $5 million for each fiscal year. The
State claims $6 million for title XXI expenditures for fiscal year
1998, and $4 million for title XXI expenditures for fiscal year
1999. In this case, the $6 million in claims for fiscal year 1998
expenditures reduce the fiscal year 1998 allotment to $0 with $1
million of the fiscal year 1998 expenditures remaining unpaid. When
the fiscal year 1999 allotment becomes available, the remaining $1
million in claims for fiscal year 1998 expenditures would be applied
against the fiscal year 1999 allotment, leaving $4 million remaining
of the fiscal year 1999 allotment. The $4 million
[[Page 10420]]
in claims for title XXI fiscal year 1999 expenditures claimed would
then be paid from the fiscal year 1999 allotment, thereby exhausting
the remaining fiscal year 1999 allotment.
Example 5--Illustration of Principles 5 and 7. The
fiscal year 1998 and fiscal year 1999 allotments are $5 million for
each fiscal year. The State claims $4 million for title XXI
expenditures for fiscal year 1998 and $6 million for title XXI
expenditures for fiscal year 1999. Since the fiscal year 1998 was
only reduced by the $4 million amount in claims for fiscal year 1998
title XXI expenditures, the $1 million remaining of the fiscal year
1998 allotment would be ``carried over'' to fiscal year 1999. In
applying the claims for fiscal year 1999 expenditures, $1 million of
the $6 million would first be applied against the carryover of the
fiscal year 1998 allotment. The remaining $5 million for the fiscal
year 1999 claims would be applied against the remaining $5 million
allotment for fiscal year 1999, reducing the remaining fiscal year
1999 allotment to $0.
F. Ten Percent Limit on Certain Children's Health Insurance Program
Expenditures (Sec. 457.618)
1. Limit on Four Categories of Expenditures (Sec. 457.618(a))
Sections 2105(a)(2) and 2105(c)(2) of the Act specifies that there
are 4 categories of expenditures for which State claims for Federal
funds at the enhanced FMAP are limited: administrative expenditures,
outreach, health initiatives, and certain other child health
assistance.
2. No Federal Payment for Expenditures in Excess of the Limit
(Sec. 457.618(b))
Section 457.618(b) specifies that Federal payments for the
categories of limited expenditures claimed by a State for a fiscal year
will not be available to the extent the total of such expenditures
exceeds the 10 percent limit calculation.
3. Ten Percent Limit (Sec. 457.618(c))
Under section 2105(c)(2)(A) of the Act, States may receive funds at
the enhanced FMAP for administrative expenditures, outreach, health
services initiatives, and certain other child health assistance, only
up to a ``10 Percent Limit.'' The ``10 Percent Limit'' specifies that
the ``total computable'' amount of these expenditures (the combined
total State and Federal share of an expenditure) for which FFP may be
claimed cannot exceed 10 percent of the sum of the total computable
expenditures made under section 2105(a) of the Act and the total
computable expenditures based on the enhanced match made under sections
1905(u)(2) and (u)(3) of the Act.
This 10 Percent Limit is applied on an annual fiscal year basis,
and may be waived by the Secretary under section 2105(c)(2)(B) of the
Act when coverage is provided through cost-effective community based
health delivery systems. This proposed rule does not address the waiver
process or standards.
Significant technical corrections were made to the 10 percent limit
in Pub. L. 105-100. Prior to those amendments, the statute required
calculation of the limit on a quarterly basis. This was changed to an
annual basis. Furthermore, prior to the technical amendments, the limit
was calculated on the basis of the Federal share of the expenditures
while the expenditures applied against the limit were in total
computable amounts. The technical amendments made both the calculation
of the 10 percent limit and the expenditures applied against the 10
percent limit based on the total computable amounts of such
expenditures.
These provisions along with the formula for calculating the 10
percent limit indicated below are specified in new Sec. 457.618(c).
4. Formula for Calculating the 10-Percent Limit (Sec. 457.618(c)(3))
The following formula for the 10 Percent Limit (L10%) is in
accordance with the referenced statutory provisions.
L10% = (a1 + u2 + u3)/9
a1 = Total computable expenditures claimed for the fiscal year under
section 2105(a)(1) of the Act
u2 = Total computable expenditures claimed for the fiscal year under
section 1905(u)(2) of the Act for which Federal payments under section
1903(a)(1) of the Act are based on the EFMAP
u3 = Total computable expenditures claimed for the fiscal year under
section 1905(u)(3) of the Act for which Federal payments under section
1903(a)(1) of the Act are based on the EFMAP
Under this formula, the 10 percent limit is determined by dividing
the State's CHIP program expenditures (meaning those expenditure that
are not subject to the 10 percent limit) by 9. Calculating the 10
percent limit in this way ensures that the capped expenditures (meaning
those expenditures that are applied against the 10 percent limit) are
no more than 10 percent of the total expenditures including such capped
expenditures. However, the amounts of the State's CHIP allotment(s)
available in the fiscal year also provides the overall limit on the
State's total CHIP expenditures in the fiscal year. In effect, the
total of all the State's CHIP expenditures (that is, the program
expenditures plus the expenditures capped by the 10 percent limit)
cannot exceed the amounts of the State's CHIP allotment(s) available in
the fiscal year. Therefore, we specify in Sec. 457.618(c)(5) that a
State's 10 percent limit for a fiscal year may be no greater than 10
percent of the total computable amounts of the State's allotment(s)
available in the fiscal year, even if the application of the formula
indicated above resulted in a larger amount. Thus, the 10 percent limit
is the lower of: the amount determined under the formula indicated
above; or 10 percent of the total computable amount of the CHIP
allotment(s) available in that fiscal year.
The following example illustrates the calculation of the 10 Percent
Limit based on a State's expenditures claimed for the fiscal year:
Example: The State's title XXI enhanced FMAP is 65 percent (that
is, .65). The total computable expenditures claimed for the fiscal
year under the section 2105(a)(1) category (a1) is $10 million; the
Federal share claimed for those expenditures is $6.5 million (0.65 x
$10 million). The total computable expenditure claimed for the
fiscal year that are applicable against the 10 percent limit (for
example, administrative expenditures) is $3 million. The total
computable expenditures claimed for the fiscal year for the section
1905(u)(2) category (u2) is $3 million; the Federal share claimed
for these expenditures is $1,95 million (.65 x $3 million). The
total computable expenditures claimed for fiscal year for the
section 1905(u)(3) category (u3) is $2 million; and the Federal
share claimed for those expenditures is $1.3 million (.65 x $2
million).
In this example, the 10 Percent Limit is a total computable
amount of $1,666,667, calculated as follows:
L10% = (a1 + u2 + u3)/9
a1 = Total computable expenditures for the fiscal year under section
2105(a)(1) of the Act.
u2 = Total computable expenditures for the fiscal year under section
1905(u)(2) of the Act.
u3 = Total computable expenditures for the fiscal year under section
1905(u)(3) of the Act.
L10% = (($10 million (a1) + $3 million (u2) + $2 million (u3))/)9 =
$15 million/9 = $1,666,667.
In this example, FFP would not be available for that portion of the
section 2105(a)(2) expenditures applicable against the 10 percent limit
that are in excess of the 10 Percent Limit of $1,666,667, a total
computable amount. Thus, although the State submitted $3 million in
total computable amounts of section 2105(a)(2) expenditures, only
$1,666,667 of the $3 million total computable amount would be
allowable, and the remainder of the $1,333,333 total computable amount
would be potentially disallowable.
[[Page 10421]]
Under this example, the allowable amount of Federal funds available
under the 10 Percent Limit would be $1,083,334 (.65 x 0000666,667);
and the unreimbursable amount of Federal funds in excess of the 10
Percent Limit would be $866,667 (.65 x $1,333,333).
The following example illustrates the ``limit on the 10 percent
limit'' related to the available allotments in the fiscal year:
Example: The fiscal year is FY 1999. The State's carryover
allotment from FY 1998 is $3 million and the FY 1999 allotment is
$10 million. The enhanced EMAP for each of the FYs 1998 and 1999 is
65 percent. Therefore, the total computable amount of the total
allotment available in FY 1999 is $20 million determined as:
($3 million (the FY 1998 carryover allotment) + $10 million (the FY
1999 allotment))/.65 (the EFMAP) = $13 million/.65 = $20 million
Ten percent of $20 million is $2 million. Therefore, the 10 percent
limit is limited to $ 2 million.
Under title XXI, FFP is available at the enhanced FMAP for a
State's program and administrative expenditures (including related
startup costs) during a period for which the State has an approved
title XXI plan in effect. Initial State plans can be approved effective
as early as October 1, 1997. As indicated above, such administrative
expenditures (under section 2105(a)(2) of the Act) are subject to the
10 Percent Limit which is calculated on a fiscal year basis. Therefore,
startup costs will be limited by the amount of sections 2105(a)(1),
1905(u)(2) and 1905(u)(3) expenditures claimed during the fiscal year
in which the startup period occurs. The following example illustrates
the availability of FFP for startup costs.
Example: The 10 Percent Limit formula is:
L10% = (a1 + u2 + u3)/9
a1 = Sec. 2105(a)(1) expenditures
u2 = Sec. 1905(u)(2) expenditures
u3 = Sec. 1905(u)(3) expenditures
In the first two quarters of the fiscal year, the State's a1, u2,
and u3 expenditures are $0 and the State's start up administration
expenditures (a2 expenditures) are $2.0 million. In the third
quarter of the fiscal year, the a1, u2, and u3 expenditures total
$.5 million and the startup and other (a2) administrative
expenditures are $1.5 million. In the fourth quarter of the fiscal
year, the a1, u2, and u3 expenditures total $8.5 million and the
startup and other (a2) administrative expenditures are $1.0 million.
The totals for the fiscal year are: $9.0 million ($0 + $.5 million +
$8.5 million) in a1, u2, and u3 expenditure, and $4.5 ($2.0 + $1.5
million + $1.0 million) in startup and other (a2) administrative
expenditures. In this example, the 10 Percent Limit is $1.0 million,
calculated as follows:
L10% = (a1 + u2 + u3)/9 = $9.0 million/9 = $1.0 million
In this example, FFP would be available at the enhanced FMAP for
$1.0 million of the $4.5 million of administrative costs. Thus, the
relatively lower benefit expenditures at the beginning of the fiscal
year combined with the relatively higher benefits expenditures at
the end of the fiscal year serve as the basis for calculating the
final 10 Percent Limit, determined on a fiscal year basis.
It is important to note that if a State has no expenditures other than,
for example, startup administrative expenditures under section
2105(a)(2)(D) of the Act during a fiscal year, no FFP under Title XXI
will be available for such expenditures. This is because the 10 Percent
Limit in this example would be $0, calculated as follows:
L10% = (a1 + u2 + u3)/9 = ($0 + $0 + $0)/9 = $0
States may mitigate the effect of little or no program expenditures
on the calculation of the 10 percent limit in one fiscal year by
delaying the claiming of administrative expenditures until a subsequent
fiscal year. In that case, the delayed administrative expenditures
could be applied against the subsequent year's 10 percent limit, which
may be calculated using presumably higher program expenditures.
5. Administrative Expenditures
For purposes of payment under section 2105(a) of the Act,
administrative costs are differentiated from the program costs referred
to as ``child health assistance'' in section 2105(a)(1) of the Act
(child health assistance is further defined in section 2110(a) of the
Act). Child health assistance is generally referred to as ``payment for
part or all of the cost of health benefits coverage for targeted low-
income children.'' Payment for such program costs which are within the
scope of the State's CHIP benefit package meeting the requirements of
section 2103 of the Act are not considered to be payment for
administrative costs, and are generally not subject to the 10 Percent
Limit.
6. Waiver of 10 Percent-Limit
Under section 2105(c)(2)(B) of the Act, the Secretary may waive the
10 percent limit on the expenditures described in section 2105(a)(2) of
the Act if 3 conditions are met: (1) Coverage provided to targeted low-
income children through such expenditures meet the requirements of
section 2103 of the Act, (2) the cost of such coverage is cost
effective, and (3) such coverage is provided through the use of a
community-based health delivery system such as through contacts with
health centers receiving funds under section 330 of the Public Health
Service Act or with hospitals such as those that receive
disproportionate share payment adjustments under section 1886(d)(5)(F)
or section 1923 of the Act. We are developing the requirements and
conditions to implement the provision for waiver of the 10 percent
limit. Therefore, this proposed rule does not address these issues.
HCFA will address waiver procedures and standards at a later time.
7. FFP for State Expenditures (Sec. 457.622)
Under section 2105(a) of the Act, FFP in all allowable title XXI
expenditures, and certain title XIX expenditures is available at the
enhanced FMAP rate. As specified in Sec. 457.622(b) and (c), a number
of conditions apply with respect to the availability of FFP in States'
expenditure claims at the enhanced FMAP.
Section 2105(b) of the statute defines the enhanced FMAP as the
regular Medicaid FMAP for the State, increased by a number of
percentage points equal to 30 percent of the number of percentage
points by which that FMAP is less than 100 percent, but in no case more
than 85 percent. This formula, mathematically, could be expressed as
the lesser of 85 percent or FMAP + [0.3 x (100 percent--FMAP)]. In
our proposed regulations, we simplify the statutory formula by
multiplying the terms and arriving at a formula of the lesser of 85
percent or (0.7 x FMAP) + 30 percent. This formula is mathematically
equal to the statutory formula.
The enhanced FMAP rate is available in a State's expenditures only
if the State has an approved title XXI State child health plan.
The enhanced FMAP rate is available only if amounts of States'
allotments for a fiscal year are available, that is, States' allotments
have not been fully expended.
8. CHIP Related Title XIX Administrative Expenditures (Sec. 457.622(e))
As specified in Sec. 457.622(e)(1), States have several options on
how to claim FFP for CHIP related title XIX administrative
expenditures. These administrative activities refer to the costs of
State activities in support of certain Medicaid State plan options;
specifically, the following provisions: coverage of children under
section
[[Page 10422]]
1905(u)(2) and (3); and coverage of presumptive eligibility under
section 1920A of the Act.
There are a number of factors a State must consider in deciding
which option to choose for claiming FFP for CHIP-related Medicaid
administrative costs:
The FFP rate for the administrative costs in the Medicaid
and the CHIP programs. For example, if the Medicaid administrative FFP
rate is 50 percent for a certain administrative activity and the CHIP
enhanced FMAP rate was 65 percent, a State might decide on the basis of
this factor to claim the expenditure under the CHIP program.
The CHIP fiscal year 10 percent limit. Any administrative
costs claimed under the CHIP program are subject to the 10 percent
limit. However, claiming CHIP related Medicaid administrative costs
under the 10 percent limit could affect the availability of FFP for
other CHIP-only administrative costs, if the 10 percent limit was an
issue. Note, if the 10 percent limit was reached, a State could still
claim CHIP related Medicaid administrative costs that were over the 10
percent limit under the Medicaid program.
The availability of the CHIP fiscal year allotment. Any
administrative costs claimed under the CHIP program are also subject to
the State fiscal year allotment. Thus, whether any allotment amounts
were available and how much they would be affected would be an issue.
Note, that if the allotment was exhausted, a State could still claim
CHIP related Medicaid administrative costs that were over the limit
under the Medicaid program.
A State has a choice of two options on how it may claim the CHIP-
related Medicaid administrative costs. These are administrative costs
related to the provision of medical assistance for expenditures
described under sections 1905(u)(2) and (3), and section 1920A of the
Act when a State's Medicaid expansion is also referenced in an approved
State child health plan. The option a State chooses determines how the
State will report the estimated and actual expenditures related to
these administrative costs.
Under the first option, States may choose to claim CHIP related
title XIX Medicaid administrative expenditures under the title XXI
CHIP, at the enhanced FMAP rate. States choosing this option must
continue to claim these expenditures as administrative expenditures in
a fiscal year until the 10 percent limit and/or the State allotment for
the fiscal year is reached, at which point the State could claim these
administrative expenditures under the Medicaid program.
Under the second option, States may choose to claim CHIP related
title XIX Medicaid administrative expenditures under the title XIX
Medicaid program.
States may select and apply each option with respect to any or all
of the categories of FFP for administrative expenditures available in
the title XIX Medicaid program, and specified in Sec. 433.15 of this
part. There are potentially 4 FFP rates for the different categories of
administrative expenditures indicated in that section: 50, 75, 90, and
100 percent.
The regulation further specifies that once a State has chosen to
claim CHIP related title XIX administrative expenditures under one of
the options for one or more of the FFP claiming categories for
administrative expenditures listed in title XIX, it must continue to
claim these administrative expenditures consistently on a fiscal year
basis.
As specified in Sec. 457.622(e)(2), allowable title XXI
administrative expenditures support the operation of the State child
health plan. Therefore, FFP for administration under title XXI is not
available for costs of activities related to other programs. For
example, FFP would not be available for generalized activities related
to health education or social services.
Section 457.622(e)(3) specifies that FFP for allowable title XXI
administrative expenditures is not available in payments for
expenditures that are paid for as part of another payment. That is, the
effective and efficient operation of the State plan should include
reasonable costs which do not duplicate payments that are already
included and paid as part of another payment mechanism, for example:
Rates for outpatient clinic services;
Case management services;
Part of capitation rate;
Other provider rate; and
Other program payments (including Federal, State, or local
governmental programs.
Section 457.622(e)(4) specifies that FFP is available for
administrative expenditures for activities defined in sections
2102(c)(1) and 2105(a)(2)(C) of the Act as outreach to families of
children likely to be eligible for child health assistance under the
plan or under other public or private health coverage programs to
inform these families of the availability of, and to assist them in
enrolling their children in, such a program. Section 457.622(e)(2)
provides that States have the option to choose how to claim FFP for
expenditures for title XIX Medicaid administrative activities,
including outreach, related to the title XXI CHIP. If claimed under
title XXI, FFP for outreach expenditures is available at the enhanced
FMAP rate and subject to the 10 Percent Limit (unless subject to a
waiver of such limit under section 2105(c)(2)(B) of the Act); if
claimed under title XIX, FFP for such expenditures would be available
at the regular Medicaid FFP rate for administration.
Section 457.622(e)(5) specifies that FFP is available for
administrative expenditures for activities specified in sections
2102(c)(2) of the Act as coordination of the administration of the
State children's health insurance program with other public and private
health insurance programs. Furthermore, Sec. 457.622(e)(2) specifies
that States may choose how to claim FFP for expenditures for title XIX
Medicaid coordination administrative activities related to the title
XXI CHIP. If claimed under title XXI, FFP for such expenditures is
available at the enhanced FMAP rate and subject to the 10 Percent
Limit; if claimed under title XIX, FFP for such expenditures would be
available at the regular Medicaid FFP rate for administration.
Therefore, FFP at the enhanced FMAP rate is available under title
XXI specifically for coordination activities related to the
administration of title XXI with other public and private health
insurance programs. Section 457.622(e)(3) specifies that FFP would not
be available for the costs of administering the other public and
private health insurance programs. Coordination activities must be
distinguished from other administrative activities common among
different programs.
9. Limitations on Certain Payments for Certain Expenditures
(Sec. 457.624)
Section 457.624 implements provisions of sections 2105(c) of the
Act, which limit the availability of FFP for certain coverage.
Under section 2105(c)(1) and (7), payment for health insurance
coverage under a State's child health insurance program may only be
made to States for coverage of abortions that are necessary to save the
life of the mother, or if the pregnancy is the result of rape or
incest. Otherwise, payment may not be used to pay for abortions or
assist in the purchase, whole or in part, of health benefit coverage
that includes coverage of abortion.
Section 2105(c)(3) of the Act provides for waiver for purchase of
family coverage. Payment may be made to a State with an approved State
child health plan for the purchase of family
[[Page 10423]]
coverage under a group plan or health insurance coverage that includes
coverage of targeted low-income children only if the State establishes
to the satisfaction of HCFA that--
(1) Purchase of this coverage is cost-effective relative to the
amounts that the State would have paid to obtain comparable coverage
only of the targeted low-income children involved; and
(2) This coverage shall not be provided if it would otherwise
substitute for health insurance coverage that would be provided to such
children but for the purchase of family coverage.
10. Prevention of Duplicate Payments (Sec. 457.626)
This section implements section 2105(c)(6) of the Act, which limits
payments for child health assistance when such payments would duplicate
certain other health insurance coverage.
Section 2105(c)(6) of the Act specifies that no payment will be
made to a State for expenditures for child health assistance provided
for a targeted low-income child under its State child health plan to
the extent that a private insurer defined by the Secretary by
regulation and including a group health plan (as defined in section
607(l) of the Employee Retirement Income Security Act of 1974, a
service benefit plan, and a health maintenance organization) would have
been obligated to provide such assistance but for a provision of its
insurance contract which has the effect of limiting or excluding such
obligation because the individual is eligible for or is provided child
health assistance under the State child health plan.
As specified under section 2105(c)(6)(B) of the Act, except as
otherwise provided by statute, no payment will be made to a State under
its State child health plan for child health assistance provided for a
targeted low-income child under its plan to the extent that payment has
been made or can reasonably be expected to be made promptly as defined
in accordance with regulations under any other Federally operated or
financed health care insurance program, other than an insurance program
operated or financed health care insurance program, other than an
insurance program operated or financed by the Indian Health Service, as
identified by the Secretary.
11. Other Applicable Federal Regulations (Sec. 457.628)
Section 2107(e) provides that certain provisions of the Act outside
of title XXI shall apply to title XXI ``in the same manner as they
apply to a State under title XIX.'' HCFA continues to study how to best
apply these provisions to title XXI ``in the same manner.'' As an
interim measure, in Sec. 457.628, we propose to make certain Medicaid
regulations directly applicable to title XXI.
Section 457.628 specifies other regulations that are applicable to
State CHIP programs. These are existing Medicaid and other Departmental
programs and include, for example, the Medicaid regulations at 42 CFR
subpart B, Sec. 433.50 related to the donations and taxes provisions
issue. Under section 2107(e)(1)(C) of the Act, the limitations on
provider taxes and donations (as referred to in section 1903(w) of the
Act) must apply in States' CHIPs in the same manner as they do in the
Medicaid program. Other Medicaid provisions, that are also applicable
in States' CHIPs, include deferral and disallowance procedures
(Secs. 457.210 and 457.212), appeals procedures, record keeping.
G. Grants
Grant Procedures (Sec. 457.630)
Section 457.630 specifies the grant procedures that HCFA will use
to issue grants awards to States with approved title XXI State plans.
In general, based on the title XXI appropriation language the
entire title XXI appropriation amount for each fiscal year referred to
in section 2104(a) of the Act must be ``obligated'' by the Federal
government by the end of such fiscal year. Any funds not obligated by
the Federal government by the end of the fiscal year (that is, prior to
the close of the related Federal government's accounting system for
that fiscal year) will no longer be available to any State.
However, as indicated in section C. 2. above, Pub. L. 105-174,
enacted on May 1, 1998, provides that if a State child health plan is
approved by HCFA on or after October 1, 1998, and before October 1,
1999, the plan must be treated as having been approved for both FY 1998
and FY 1999. Pub. L. 105-174 affects the general grant award process
discussed above for FYs 1998 and 1999. Under the provisions of Pub. L.
105-174, the FY 1998 allotments may not be finalized until the end of
FY 1999, because States have until then to have their child health
plans approved. Therefore, the Federal government must obligate the FY
1998 CHIP allotments by issuing grant awards (for purposes of meeting
the ``obligation'' requirements) equal to the total of the allotments
for FY 1998, by the end of FY 1999. The Federal government must also
obligate the FY 1999 allotments by the end of FY 1999 by issuing grant
awards for FY 1999 equal to the total of the fiscal year allotments for
each State by the end of FY 1999. Section 457.630 will reflect these
requirements for issuance of the grant awards in order to obligate the
allotment funds for each fiscal year.
The funds are obligated by issuing title XXI grant awards. To
ensure that all of the appropriated funds are available to States, HCFA
will issue grant awards to all States with title XXI State plans
approved by the end of the fiscal year (or by the end of fiscal year
1999, for fiscal year 1998) which equal, in total, the national amount
available for allotment to the 50 States, the District of Columbia, and
the Commonwealths and Territories for that fiscal year (on September
30). Such grant awards must be issued by the time the HCFA/HHS
accounting system closes with respect to that fiscal year. The total of
the grant awards for the fiscal year will equal the States'',
Commonwealths'', and Territories' final allotments, described earlier.
Therefore, in order for HCFA to act to approve each States' State child
health plan by September 30 of a fiscal year, it is important for
States to submit such plans as soon as possible and no later than July
1 of that fiscal year.
H. FFP for Expenditures Provided During Presumptive Eligibility (PE)
Period
Section 4912 of the BBA amended the Medicaid statute to add a new
section 1920A of the Act, which authorizes States to make medical
assistance available in their Medicaid programs to low-income children
on a cursory assessment of family income by a qualified entity, during
a presumptive eligibility period pending submission and processing of a
complete Medicaid application. Although the CHIP statute, title XXI of
the Act, does not contain an explicit section similarly authorizing
presumptive eligibility in States' CHIPs, we believe that States could
implement a similar policy under title XXI as a health services
initiative under section 2105(a)(2)(B) of the Act.
We believe it would be useful to discuss some payment implications
of different administrative approaches to claiming presumptive
eligibility expenditures. Federal payments for presumptive eligibility
expenditures for children who are not later determined to be Medicaid
or CHIP eligible fall under the definition of title XXI health services
initiatives, and therefore, are subject to the State's CHIP 10 percent
limit (discussed in section II. F. 7. of this preamble and in
Sec. 457.622) as well as the State's CHIP allotment. Because of this,
States will need to carefully consider how they claim Federal payments
for presumptive eligibility
[[Page 10424]]
expenditures, both in Medicaid and CHIP. We believe that States have a
number of options in characterizing their presumptive expenditures that
may increase available Federal funding for their programs, with respect
to both the CHIP and Medicaid programs. For example:
1. Presumptive Eligibility (PE) Under Title XIX--Section 1920A of
the Act permits States to provide medical assistance under their title
XIX Medicaid programs for up to two months to children during a PE
period. Expenditures classified as Medicaid PE expenditures under
section 1920A of the Act may only be claimed as medical assistance and
matched at the regular FMAP under section 1905(b) of the Act; that is,
the enhanced FMAP is not available for Medicaid PE expenditures.
Furthermore, if the State has an approved title XXI child health plan,
such payments for PE expenditures under section 1920A of the Act must
be tracked and applied against the title XXI allotment.
There are a number of options available to States for classifying
and reporting medical assistance expenditures provided to children
during the section 1920A PE period. In particular, the actual
eligibility category in which PE children are ultimately placed through
the regular eligibility determination may also determine the treatment
of States' expenditures for these children. The options a State chooses
with respect to reporting expenditures during the PE period and the
ultimate category of eligibility (or ineligibility) will determine how
the payments for expenditures provided during the PE period can be
treated for purposes of application against the title XXI allotment and
the FMAP rate (regular or enhanced) that is available for the
expenditures.
The following options are available to a State for classifying and
reporting expenditures as PE expenditures in its Medicaid program when
the State has an approved title XXI Child Health Plan and an associated
fiscal year State allotment; these provisions will be set forth in new
Sec. 447.88:
(a) Identify and Claim PE Expenditures on Ongoing Basis--No
Subsequent Adjustments.--A State can identify and claim FFP for all PE
medical assistance expenditures on an ongoing basis. That is, under
this option the State would claim FFP for PE expenditures as they are
incurred and billed by providers, and would not make any further
subsequent adjustments when the actual eligibility determination is
made. Under this option, the amounts of the Federal payments for the PE
expenditures would be applied against the States's CHIP allotments and
would be claimed at the regular title XIX FMAP. This approach may be
the easiest for States to administer, since no further adjustment or
tracking of the payments would be necessary.
(b) Delay Reporting PE-Related Expenditures Until After Actual
Eligibility Determination.--Under this option a State would delay
reporting of PE-related medical assistance expenditures until after the
actual determination of eligibility. Under this option, a State would
classify the expenditures as follows, in accordance with the actual
eligibility determination, and would not claim for such expenditures
until after the actual eligibility determination was made:
Expenditures for children determined to be in a regular
Medicaid eligibility category (for example, the Temporary Assistance
for Needy Families (TANF) program related eligibility under section
1931 of the Act) and not within a CHIP-related Medicaid expansion.
These expenditures would be reported by the States as Medicaid title
XIX expenditures under the Medicaid Budget and Expenditure System
(MBES) and would be claimed and funded under the regular Medicaid
eligibility category at the regular Medicaid FMAP. The associated
Federal payments for expenditures in this category would not be applied
against the CHIP allotment as a PE expenditure.
Expenditures for children determined to be eligible in
CHIP-related Medicaid expansions for children described in sections
1905(u)(2) and/or (u)(3) of the Act in States with an approved title
XXI child health plan. These expenditures would be reported as Medicaid
title XIX expenditures under the MBES, and claimed, and funded under
the Medicaid program at the enhanced FMAP, not the regular FMAP
associated with PE expenditures. The associated Federal payments for
these expenditures would be treated as expenditures under section
1905(u)(2) or (3) of the Act, not as PE expenditures, and applied
against the States' CHIP allotments.
Expenditures for children determined to be eligible under
a State's approved title XXI State child health plan. These
expenditures would be reported as CHIP title XXI expenditures under the
CBES, and claimed, and funded under the CHIP at the enhanced FMAP. The
associated Federal payments for these expenditures would be applied
against the States' CHIP allotments as payments for CHIP expenditures
would be, not as payments for Medicaid PE expenditures.
Expenditures for children ultimately determined not to be
eligible for either the Medicaid or CHIP programs. These expenditures
would be reported as Medicaid title XIX PE expenditures under the MBES,
and claimed and funded at the regular Medicaid FMAP as PE expenditures.
If the State has a title XXI allotment, the associated Federal payments
would be applied against the CHIP allotment. Payments for these
expenditures are treated and reported as PE expenditures.
(c) Identify and Claim PE on Ongoing Basis--Adjust After Actual
Eligibility Determination.--Similar to the process under subsection (a)
above, on an ongoing basis States can identify and claim FFP for all
section 1920A PE expenditures, as such expenditures are billed to and
paid by the State. Under this option, after the actual eligibility
determination is made, adjustments to the previous claims would be made
to reflect the actual eligibility category determination. The PE
expenditures would be reported on an ongoing basis as PE expenditures
under title XIX, the payments for such expenditures would be applied
against the CHIP allotments, and claimed at the regular title XIX FMAP
rate. After the actual eligibility determination, the State would make
an adjustment to the previously reported expenditures as in section II.
H. 1.(b) above.
2. Presumptive Eligibility (PE) Under Title XXI--A State may make
PE expenditures under its State title XXI CHIP as an expenditure
described in section 2105(a)(2)(B) of the Act, which permits health
services initiatives. These expenditures would be reported as CHIP
title XXI expenditures. As described in the previous sections on the 10
percent limit, CHIP PE expenditures provided as a health services
initiative are subject to the 10 percent limit and are counted against
the State's title XXI allotment. The State has several options for
claiming such expenditures which could mitigate the effect of such
expenditures on the 10 percent limit and the CHIP allotment. The
following options are available to a State for classifying and
reporting expenditures as PE expenditures in its CHIP, and are similar
to those discussed above with respect to the title XIX Medicaid PE
program.
In summary, States may:
Identify and claim CHIP PE health services initiative
expenditures on an ongoing basis--no subsequent adjustments.
Delay reporting CHIP PE health services initiative
expenditures until
[[Page 10425]]
after actual eligibility determination (and claim under final
eligibility category).
Identify and claim PE on an ongoing basis--adjust after
actual eligibility determination to reflect final eligibility status.
I. Other Regulations Similar to the Medicaid Program
Certain existing general Departmental regulations in part 45 of the
Code of Federal Regulations (CFR) subparts 92 and 95 were conformed to
the title XXI program. We revised the sections in these subparts.
J. Relationship of the CHIP, the CHIP Fiscal Year Allotments, and the
Limit on FFP for the Commonwealths and Territories Under Section 1108
of the Act
1. Commonwealth/Territory Limit Under Section 1108 of the Act
Sections 1108(f) and (g) of the Act specifies limits on the amounts
of FFP available to the Commonwealths and Territories for expenditures
under the Medicaid program. However, under the CHIP legislation, the
limits on FFP for the Commonwealths and Territories under section 1108
of the Act do not apply with respect to FFP for expenditures that are
attributable to the provision of Medical assistance to a child for
which payment is made under section 1903(a)(1) of the Act on the basis
of an enhanced FMAP under section 1905(b) of the Act (which in turn
refers to the Federal matching rate specified at section 2105(b) of the
Act). That is, if the Federal payments for expenditures are made at the
enhanced FMAP referenced at section 2105(b) of the Act, such payments
would not apply to the Commonwealth/Territory limit under section 1108
of the Act. However, these payments would apply against the CHIP
allotments established for the Commonwealths or Territories. However,
if the Federal payments are for expenditures for which payment is not
at the enhanced FMAP, such payments would be applicable against the
Commonwealth and Territory limit under section 1108 of the Act. This
issue is discussed in sections below.
2. Family Planning
As indicated in previous sections, in general under the Medicaid
program the Federal matching for States' family planning provided to
CHIP related Medicaid expansion groups is not at the enhanced FMAP, but
rather is at the regular Medicaid FMAP rates associated with such
expenditures: 90 percent. Since the family planning FMAP rate is not at
the enhanced FMAP referenced in section 2105(b) of the Act, in the
States the Federal payments for such expenditures would not be
applicable to the States' CHIP allotments. In general, this is also
true for the Commonwealths and Territories. However, as indicated in
section II. J. 1. above, if the Federal payments are not at the
enhanced FMAP, but are at the ``regular'' Medicaid FMAP rate associated
with the services (in the case of family planning, 90 percent), the
Federal payments would be applied against the Commonwealth/Territory
limit under section 1108 of the Act.
Because of the potential effect that FFP claims for family planning
may have on the Commonwealth and Territory limit on Federal payments
under section 1108 of the Act, we believe the Commonwealths and
Territories have two options for claiming for such expenditures. Under
the first option, the Commonwealths/Territories could claim FFP for
family planning at the ``regular'' Medicaid FMAP rates associated with
such expenditures (90 percent). Under this option, the Federal payments
would not apply against the Commonwealth/Territory CHIP allotment, but
would apply against the Commonwealth/Territory limit established under
section 1108 of the Act.
Under the second option, the Commonwealths/Territories could choose
to claim FFP for family planning (provided to the CHIP related Medicaid
expansion groups) at the enhanced FMAP (which is lower than the regular
Federal matching rate for such expenditures). Under this option, the
Federal payments available at the enhanced FMAP rate would apply
against the Commonwealth/Territory CHIP allotment, but would not apply
against the Commonwealth/Territory limit under section 1108 of the Act.
3. Family Planning Expenditures Based on Presumptive Eligibility Under
Section 1920A of the Act
As indicated in section II. J. 2. above, under the Medicaid program
the title XIX Federal matching rates for States' family planning
provided to CHIP related Medicaid expansion groups are not the enhanced
FMAP rates, but rather are the regular Medicaid FMAP rates associated
with such expenditures: 90 percent. Furthermore, as amended by section
4911(a) of the BBA, the Federal matching rate for expenditures made on
the basis of the presumptive eligibility provisions of section 1920A of
the Act may not be at the enhanced FMAP. Therefore, with respect to
family planning and IHS expenditures provided on the basis of a section
1920A presumptive eligibility determination, the only available Federal
matching rates would be 90 and 100 percent. Therefore, the options
offered under section 2 above are not available if the basis for the
expenditures is the section 1920A presumptive eligibility provisions.
In such case, in the Commonwealths and Territories, the Federal
payments are at the ``regular'' Medicaid FMAP rate associated with such
expenditures; such payments are not applied against the CHIP allotment;
and such payments would be applicable against the section 1108
Commonwealth/Territorial limit.
III. Regulatory Impact Statement
We have examined the impacts of this proposed rule as required by
Executive Order 12866, the Unfunded Mandate Reform Act of 1995 (Pub. L.
104-4), and the Regulatory Flexibility Act (RFA) (Pub. L. 96-354).
Executive Order 12866 directs agencies to assess all costs and benefits
of available regulatory alternatives and, when regulations are
necessary, to select regulatory approaches that maximize net benefits
(including potential economic environments, public health and safety,
other advantages, distributive impacts, and equity). In addition, a
Regulatory Impact Analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more annually).
The Unfunded Mandates Reform Act of 1995 requires that agencies
prepare an assessment of anticipated costs and benefits before
proposing any rule that may result in an annual expenditure by State,
local, and tribal governments, in the aggregate, or by the private
sector, of $100,000,000 or more (adjusted annually for inflation).
Because participation in the CHIP program on the part of States is
voluntary, any payments and expenditures States make or incur on behalf
of the program that are not reimburse by the federal government are
made voluntarily. These regulations would implement narrowly defined
statutory language on the allocation of funds for CHIP and will not
create unfunded mandate on States, tribal or local governments.
Therefore we are not required to perform an assessment of the costs and
benefits of these regulations.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis for any proposed 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
[[Page 10426]]
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.
This proposed rule sets forth the methodologies and procedures to
determine the Federal fiscal year allotments of Federal funds available
to individual States, Commonwealths and Territories for the new State
CHIP established under title XXI of the Social Security Act. This rule
would also establish in regulations the payment and grant award process
that will be used for the States, the Commonwealths and Territories to
claim and receive FFP for expenditures under the State CHIP and related
Medicaid program provisions.
Budget authority for title XXI is statutorily specified in section
2104(a) of the BBA with additional money authorized in Pub. L. 105-100.
The total national amount available for allotment to the 50 States, the
District of Columbia, and the Commonwealths and Territories for the
life of CHIP, is established as follows:
Total Amount of Allotments
------------------------------------------------------------------------
Year Amount
------------------------------------------------------------------------
1998................................................. $4,235,000,000
1999................................................. 4,215,000,000
2000................................................. 4,215,000,000
2001................................................. 4,215,000,000
2002................................................. 3,090,000,000
2003................................................. 3,090,000,000
2004................................................. 3,150,000,000
2005................................................. 4,050,000,000
2006................................................. 4,050,000,000
2007................................................. 5,000,000,000
------------------------------------------------------------------------
The spending levels shown in the table above are based entirely on
the spending and allocation formulas contained in the statute. The
Secretary has no discretion over these spending levels and initial
allotments of funds allocated to States. In addition, under Pub. L.
105-277, an additional $32 million was appropriated for allotment only
to the Commonwealths and Territories, and only for FY 1999.
Administrative resources needed in HCFA's Program Management
account to carry out the new responsibilities of the Children's Health
Insurance Program have been estimated at $10.1 million. This estimate
has been included in the baseline of HCFA's FY 1999 President's Budget
to Congress.
For these reasons, we are not preparing an analysis for either the
RFA or section 1102(b) of the Act because we have determined, and we
certify, that this rule 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 reviewed by the Office of Management and Budget.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, agencies are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995
requires that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the information collection requirements discussed below.
Section 457.226 Fiscal Policies and Accountability
A State plan must provide that the State CHIP agency and, where
applicable, local agencies administering the plan will; (a) maintain
supporting fiscal records to assure that claims for Federal funds are
in accord with applicable Federal requirements, (b) retain records for
3 years from date of submission of a final expenditure report, (c)
maintain records beyond the 3-year period if audit findings have not
been resolved, and (d) retain certain records for nonexpendable
property acquired under a Federal grant for 3 years from the date of
final disposition of that property.
We have determined that these record keeping requirements meet the
criteria set forth in 5 CFR 1320.3, (b)(2) and (b)(3) (usual and
customary burden). Therefore, there is no burden imposed by these
requirements.
Section 457.234 State Plan Requirements
A State plan must describe the policy and the methods to be used in
setting payment rates for each type of service included in the State's
CHIP program.
The burden associated with this requirement is captured pursuant to
the completion of HCFA collection, HCFA-R-211, approved under OMB
number 0938-0707.
Section 457.238 Documentation of Payment Rates
The CHIP agency must maintain documentation of payment rates and
make it available to HHS upon request.
We have determined that these record keeping requirements meet the
criteria set forth in 5 CFR 1320.3, (b)(2) and (b)(3) (usual and
customary burden). Therefore, there is no burden imposed by these
requirements.
Section 457.606 Conditions for State Allotments and Federal Payments
for a Fiscal Year
In order to receive a State allotment for a fiscal year, a State
must have a State child health plan submitted in accordance with
section 2106 of the Act and approved by the end of the fiscal year.
The burden associated the submission of the State Child Health Plan
is currently captured pursuant to the completion of the HCFA-R-211,
approved under OMB number 0938-0707.
Section 457.614 General Payment Process
In order to receive Federal financial participation for a State's
claims for payment for the State's expenditures, a State must submit
budget estimates of quarterly funding requirements for Medicaid and the
Children's Health Insurance Programs and submit an expenditure report.
The burden associated with these reporting requirements are
currently captured pursuant to the completion of HCFA collections,
HCFA-21, HCFA-37, and HCFA-64. Respectively, the OMB control numbers
for these collections are 0938-0731, 0938-0101, and 0938-0067.
Section 457.630 Grants Procedures
A State must submit a budget request in an appropriate format for
the first 3 quarters of the fiscal year. In addition a State must
submit a budget request for the fourth quarter of the fiscal year.
The State Children's Health Insurance Program agency must submit
Form HCFA-21B (Children's Health Insurance Program Budget Report for
Children's
[[Page 10427]]
Health Insurance Program State expenditures) to the HCFA central office
(with a copy to the HCFA regional office) 45 days before the beginning
of each quarter.
The State must submit Form HCFA-64 (Quarterly Medicaid Statement of
Expenditures for the Medical Assistance Program) and Form HCFA-21
(Quarterly Children's Health Insurance Program Statement of
Expenditures for title XXI), to central office (with a copy to the
regional office) not later than 30 days after the end of the quarter.
The burden associated with these reporting requirements are
currently captured pursuant to the completion of HCFA collections,
HCFA-21, HCFA-37, and HCFA-64. Respectively, the OMB control numbers
for these collections are 0938-0731, 0938-0101, and 0938-0067.
We have submitted a copy of this proposed rule to OMB for its
review of the information collection requirements in Secs. 457.226,
457.234, 457.238, 457.606, 457.614, and 457.630.
Organizations and individuals desiring to submit comments on the
information collection and recordkeeping requirements should direct
them to the OMB official and HCFA/OIS whose names appear in the
ADDRESSES section of this preamble.
VI. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATE
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
List of Subjects
42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Children's Health Insurance Program, Reporting and recordkeeping
requirements.
45 CFR Part 92
Accounting, Grant programs, Indians, Intergovernmental relations,
Reporting recordkeeping requirements.
45 CFR Part 95
Claims, Computer technology, Grant programs--Health, Grant
programs--social programs, Reporting and recordkeeping requirements.
42 CFR chapter IV, would be amended as set forth below:
A. 42 CFR part 447 is amended as follows:
PART 447--PAYMENTS FOR SERVICES
1. The authority citation continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. Section 447.88 is added to read as follows:
Subpart A--Payments: General Provisions
Sec. 447.88 Options for claiming FFP payment for section 1920A
presumptive eligibility medical assistance payments.
(a) The FMAP rate for medical assistance payments made available to
a child during a presumptive eligibility period under section 1920A of
the Act is the regular FMAP under title XIX, based on the category of
medical assistance; that is, the enhanced FMAP is not available for
section 1920A presumptive eligibility expenditures.
(b) States have the following 3 options for identifying Medicaid
section 1920A presumptive eligibility expenditures and the application
of payments for those expenditures:
(1) A State may identify Medicaid section 1920A presumptive
eligibility expenditures in the quarter expended with no further
adjustment based on the results of a subsequent actual eligibility
determination (if any).
(2) A State may identify Medicaid section 1920A presumptive
eligibility expenditures in the quarter expended but may adjust
reported expenditures based on results of the actual eligibility
determination (if any) to reflect the actual eligibility status of the
individual, if other than presumptively eligible.
(3) A State may elect to delay submission of claims for payments of
section 1920A presumptive eligibility expenditures until after the
actual eligibility determination (if any) is made and, at that time
identify such expenditures based on the actual eligibility status of
individuals if other than presumptively eligible. At that time, the
State would, as appropriate, recategorize the medical assistance
expenditures made during the section 1920A presumptive eligibility
period based on the results of the actual eligibility determination,
and claim them appropriately.
B. Subchapter D is redesignated as subchapter F--PEER REVIEW
ORGANIZATIONS; Parts 462, 466, 473, and 476 are redesignated as parts
475, 476, 478 and 480, respectively; and the section numbers are
revised to conform to the new parts numbers.
C. Subchapter E is redesignated as subchapter G--STANDARDS AND
CERTIFICATION with no changes in part designations.
D. A new subchapter D--CHILDREN'S HEALTH INSURANCE PROGRAMS,
consisting of part 457, is added to read as follows:
SUBCHAPTER D--CHILDREN'S HEALTH INSURANCE PROGRAMS (CHIPs)
PART 457--ALLOTMENTS AND GRANTS TO STATES
Subpart A--[Reserved]
Subpart B--General Administration--Reviews and Audits; Withholding for
Failure To Comply; Deferral and Disallowance of Claims; Reduction of
Federal Medical Payments
Sec.
457.200 Program reviews.
457.202 Audits.
457.204 Withholding of payment for failure to comply with Federal
requirements.
457.206 Administrative appeals under the State CHIP.
457.208 Judicial review.
457.210 Deferral of claims for FFP.
457.212 Disallowance of claims for FFP.
457.216 Treatment of uncashed or canceled (voided State CHIP)
checks.
457.218 Repayment of Federal funds by installments.
457.220 Public funds as the State share of financial participation.
457.222 FFP for equipment.
457.224 FFP: Conditions relating to cost sharing.
457.226 Fiscal policies and accountability.
457.228 Cost allocation.
457.230 FFP for State ADP expenditures.
457.232 Refunding of Federal share of CHIP overpayments to
providers and referral of allegations of waste, fraud or abuse of
the Office of Inspector General.
457.234 State plan requirements.
457.236 Audit of records.
457.238 Documentation of payment rates.
Subparts C through E--[Reserved]
Subpart F--Payment to States
457.600 Purpose and basis of this subpart.
457.602 Applicability.
457.606 Conditions for State allotments and Federal payments for a
fiscal year.
457.608 Process and calculation of State allotments for a fiscal
year.
457.610 Period of availability for State allotments for a fiscal
year.
457.614 General payment process.
457.616 Application and tracking of payments against the fiscal
year allotments.
[[Page 10428]]
457.618 Ten percent limit on certain Children's Health Insurance
program expenditures.
457.622 Rate of FFP for State expenditures.
457.624 Limitations on certain payments for certain expenditures.
457.626 Prevention of duplicate payments.
457.628 Other applicable Federal regulations.
457.630 Grants procedures.
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart A--[Reserved]
Subpart B--General Administration--Reviews and Audits; Withholding
for Failure To Comply; Deferral and Disallowance of Claims;
Reduction of Federal Medical Payments
Sec. 457.200 Program reviews.
(a) Review of State and local administration of the State CHIP
plan. In order to determine whether the State is complying with the
Federal requirements and the provisions of its plan, HCFA reviews State
and local administration of the State CHIP plan through analysis of the
State's policies and procedures, on-site reviews of selected aspects of
agency operation, and examination of samples of individual case
records.
(b) Action on review findings. If Federal or State reviews reveal
serious problems with respect to compliance with any Federal or State
plan requirement, the State must correct its practice accordingly.
Sec. 457.202 Audits.
(a) Purpose. The Department's Office of Inspector General (OIG)
periodically audits State operations in order to determine whether --
(1) The program is being operated in a cost-efficient manner; and
(2) Funds are being properly expended for the purposes for which
they were appropriated under Federal and State law and regulations.
(b) Reports. (1) The OIG releases audit reports simultaneously to
State officials and the Department's program officials.
(2) The reports set forth OIG opinion and recommendations regarding
the practices it reviewed, and the allowability of the costs it
audited.
(3) Cognizant officials of the Department make final determinations
on all audit findings.
(c) Action on audit exceptions. (1) Concurrence or clearance. The
State agency has the opportunity of concurring in the exceptions or
submitting additional facts that support clearance of the exceptions.
(2) Appeal. Any exceptions that are not disposed of under
paragraph(c)(1) of this section are included in a disallowance letter
that constitutes the Department's final decision unless the State
requests reconsideration by the Appeals Board. (Specific rules are set
forth in Sec. 457.212.)
(3) Adjustment. If the decision by the Board requires an adjustment
of FFP, either upward or downward, a subsequent grant award promptly
reflects the amount of increase or decrease.
Sec. 457.204 Withholding of payment for failure to comply with Federal
requirements.
(a) Basis for withholding. HCFA withholds payments to the State, in
whole or in part, only if, after giving the State notice, a reasonable
opportunity for correction, and an opportunity for a hearing, the
Administrator finds--
(1) That the plan is in substantial noncompliance with the
requirements of title XXI of the Act; or
(2) That the State is conducting its program in substantial
noncompliance with either the State plan or the requirements of title
XXI of the Act.
(Hearings are generally not called until a reasonable effort has been
made to resolve the issues through conferences and discussions. These
efforts may be continued even if a date and place have been set for the
hearing.)
(b) Noncompliance of the plan. A question of noncompliance of a
State plan may arise from an unapprovable change in the approved State
plan or the failure of the State to change its approved plan to conform
to a new Federal requirement for approval of State plans.
(c) Noncompliance in practice. A question of noncompliance in
practice may arise from the State's failure to actually comply with a
Federal requirement, regardless of whether the plan itself complies
with that requirement.
(d) Notice, reasonable opportunity for correction, and
implementation of withholding. If the Administrator makes a finding of
noncompliance under paragraph (a) of this section, the following steps
apply:
(1) Preliminary notice. The Administrator provides a preliminary
notice to the State--
(i) Of the findings of noncompliance;
(ii) The proposed enforcement actions to withhold payments; and
(iii) If enforcement action is proposed, that the State has a
reasonable opportunity for correction, described in paragraph (d)(2) of
this section, before the Administrator takes final action.
(2) Opportunity for corrective action. If enforcement actions are
proposed, the State must submit evidence of corrective action related
to the findings of noncompliance to the Administrator within 30 days
from the date of the preliminary notification.
(3) Final notice. Taking into account any evidence submitted by the
State under paragraph (d)(2) of this section, the Administrator makes a
final determination related to the findings of noncompliance, and
provides a final notice to the State--
(i) Of the final determination on the findings of noncompliance;
(ii) If enforcement action is appropriate--
(A) No further payments will be made to the State (or that payments
will be made only for those portions or aspects of the programs that
are not affected by the noncompliance); and
(B) The total or partial withholding will continue until the
Administrator is satisfied that the State's plan and practice are, and
will continue to be, in compliance with Federal requirements.
(4) Hearing. An opportunity for a hearing will be provided to the
State prior to withholding under paragraph (d)(5) of this section.
(5) Withholding. HCFA withholds payments, in whole or in part,
until the Administrator is satisfied regarding the State's compliance.
Sec. 457.206 Administrative appeals under the State CHIP.
Three distinct types of determinations are subject to Departmental
reconsideration upon request by a State.
(a) Compliance with Federal requirements. A determination that a
State's plan or proposed plan amendments, or its practice under the
plan do not meet (or continue to meet) Federal requirements are subject
to the hearing provisions of 42 CFR part 430, subpart D of this
chapter.
(b) FFP in State CHIP expenditures. Disallowances of FFP in State
CHIP expenditures (mandatory grants) are subject to Departmental
reconsideration by the Departmental Appeals Board (the Board) in
accordance with procedures set forth in 45 CFR part 16.
(c) Discretionary grants disputes. Determinations listed in 45 CFR
part 16, appendix A, pertaining to discretionary grants, such as grants
for special demonstration projects under section 1115 of the Act, that
may be awarded to a State CHIP agency, are subject to reconsideration
by the Departmental Grant Appeals Board.
Sec. 457.208 Judicial review.
(a) Right to judicial review. Any State dissatisfied with the
Administrator's final determination on approvability of plan material
or compliance with
[[Page 10429]]
Federal requirements (Sec. 457.204) has a right to judicial review.
(b) Petition for review. (1) The State must file a petition for
review with the U.S. Court of Appeals for the circuit in which the
State is located, within 60 days after it is notified of the
determination.
(2) After the clerk of the court files a copy of the petition with
the Administrator, the Administrator files in the court the record of
the proceedings on which the determination was based.
(c) Court action. (1) The court is bound by the Administrator's
findings of fact, if they are supported by substantial evidence.
(2) The court has jurisdiction to affirm the Administrator's
decision, to set it aside in whole or in part, or, for good cause, to
remand the case for additional evidence.
(d) Response to remand. (1) If the court remands the case, the
Administrator may make new or modified findings of fact and may modify
his or her previous determination.
(2) The Administrator certifies to the court the transcript and
record of the further proceedings.
(e) Review by the Supreme Court. The judgment of the appeals court
is subject to review by the U.S. Supreme Court upon certiorari or
certification, as provided in 28 U.S.C. 1254.
Sec. 457.210 Deferral of claims for FFP.
(a) Requirements for deferral. Payment of a claim or any portion of
a claim for FFP is deferred only if--
(1) The Regional Administrator or the Administrator questions its
allowability and needs additional information in order to resolve the
question; and
(2) HCFA takes action to defer the claim (by excluding the claimed
amount from the grant award) within 60 days after the receipt of a
Quarterly Statement of Expenditures (prepared in accordance with HCFA
instructions) that includes that claim.
(b) Notice of deferral and State's responsibility. (1) Within 15
days of the action described in paragraph (a)(2) of this section, the
Regional Administrator sends the State a written notice of deferral
that--
(i) Identifies the type and amount of the deferred claim and
specifies the reason for deferral; and
(ii) Requests the State to make available all the documents and
materials the HCFA regional office believes are necessary to determine
the allowability of the claim.
(2) It is the responsibility of the State to establish the
allowability of a deferred claim.
(c) Handling of documents and materials. (1) Within 60 days (or
within 120 days if the State requests an extension) after receipt of
the notice of deferral, the State must make available to the HCFA
regional office, in readily reviewable form, all requested documents
and materials except any that it identifies as not being available.
(2) HCFA regional office staff initiates review within 30 days
after receipt of the documents and materials.
(3) If the Regional Administrator finds that the materials are not
in readily reviewable form or that additional information is needed, he
or she promptly notifies the State that it has 15 days to submit the
readily reviewable or additional materials.
(4) If the State does not provide the necessary materials within 15
days, the Regional Administrator disallows the claim.
(5) The Regional Administrator has 90 days, after all documentation
is available in readily reviewable form, to determine the allowability
of the claim.
(6) If the Regional Administrator cannot complete review of the
material within 90 days, HCFA pays the claim, subject to a later
determination of allowability.
(d) Effect of decision to pay a deferred claim. Payment of a
deferred claim under paragraph (c)(6) of this section does not preclude
a subsequent disallowance based on the results of an audit or financial
review. (If there is a subsequent disallowance, the State may request
reconsideration as provided in paragraph (e)(2) of this section.)
(e) Notice and effect of decision on allowability. (1) The Regional
Administrator or the Administrator gives the State written notice of
his or her decision to pay or disallow a deferred claim.
(2) If the decision is to disallow, the notice informs the State of
its right to reconsideration in accordance with 45 CFR part 16.
Sec. 457.212 Disallowance of claims for FFP.
(a) Notice of disallowance and of right to reconsideration. When
the Regional Administrator or the Administrator determines that a claim
or portion of claim is not allowable, he or she promptly sends the
State a disallowance letter that includes the following, as
appropriate:
(1) The date or dates on which the State's claim for FFP was made.
(2) The time period during which the expenditures in question were
made or claimed to have been made.
(3) The date and amount of any payment or notice of deferral.
(4) A statement of the amount of FFP claimed, allowed, and
disallowed and the manner in which these amounts were computed.
(5) Findings of fact on which the disallowance determination is
based or a reference to other documents previously furnished to the
State or included with the notice (such as a report of a financial
review or audit) that contain the findings of fact on which the
disallowance determination is based.
(6) Pertinent citations to the law, regulations, guides and
instructions supporting the action taken.
(7) A request that the State make appropriate adjustment in a
subsequent expenditure report.
(8) Notice of the State's right to request reconsideration of the
disallowance and the time allowed to make the request.
(9) A statement indicating that the disallowance letter is the
Department's final decision unless the State requests reconsideration
under paragraph (b)(2) of this section.
(b) Reconsideration of FFP disallowance. (1) The Departmental
Appeals Board reviews disallowances of FFP under title XXI.
(2) A State may request reconsideration with a request to the
Chair, Departmental Appeals Board, within 30 days after receipt of the
disallowance letter, which must include--
(i) A copy of the disallowance letter;
(ii) A statement of the amount in dispute; and
(iii) A brief statement of why the disallowance is wrong.
(c) Reconsideration procedures. The reconsideration procedures are
those set forth in 45 CFR part 16.
(d) Implementation of decisions. If the reconsideration decision
requires an adjustment of FFP, either upward or downward, a subsequent
grant award promptly reflects the amount of increase or decrease.
Sec. 457.216 Treatment of uncashed or canceled (voided State CHIP)
checks.
(a) Purpose. This section provides rules to ensure that States
refund the Federal portion of uncashed or canceled (voided) checks
under title XXI.
(b) Definitions. As used in this section--
Canceled (voided) check means a CHIP check issued by a State or
fiscal agent that prior to its being cashed is canceled (voided) by the
State or fiscal agent, thus preventing disbursement of funds.
Fiscal agent means an entity that processes or pays vendor claims
for the State CHIP agency.
[[Page 10430]]
Uncashed check means a CHIP check issued by a State or fiscal agent
that has not been cashed by the payee.
Warrant means an order by which the State CHIP agency or local
agency without the authority to issue checks recognizes a claim.
Presentation of a warrant by the payee to a State officer with
authority to issue checks will result in release of funds due.
(c) Refund of Federal financial participation (FFP) for uncashed
checks--(1) General provisions. If a check remains uncashed beyond a
period of 180 days from the date it was issued; that is, the date of
the check, it is no longer regarded as an allowable program
expenditure. If the State has claimed and received FFP for the amount
of the uncashed check, it must refund the amount of FFP received.
(2) Report of refund. At the end of each calendar quarter, the
State agency must identify those checks that remain uncashed beyond a
period of 180 days after issuance. The State CHIP agency must refund
all FFP that it received for uncashed checks by adjusting the Quarterly
Statement of Expenditures for that quarter. If an uncashed check is
cashed after the refund is made, the State may file a claim. The claim
will be considered to be an adjustment to the costs for the quarter in
which the check was originally claimed. This claim will be paid if
otherwise allowed by the Act and the regulations issued in accordance
with the Act.
(3) If the State does not refund the appropriate amount as
specified in paragraph (c)(2) of this section, the amount will be
disallowed.
(d) Refund of FFP for canceled (voided) checks--(1) General
provisions. If the State has claimed and received FFP for the amount of
a canceled (voided) check, it must refund the amount of FFP received.
(2) Report of refund. At the end of each calendar quarter, the
State CHIP agency must identify those checks that were canceled
(voided). The State must refund all FFP that it received for canceled
(voided) checks by adjusting the Quarterly Statement of Expenditures
for that quarter.
(3) If the State does not refund the appropriate amount as
specified in paragraph (d)(2) of this section, the amount will be
disallowed.
Sec. 457.218 Repayment of Federal funds by installments.
(a) Basic conditions. When Federal payments have been made for
claims that are later found to be unallowable, the State may repay the
Federal Funds by installments if the following conditions are met:
(1) The amount to be repaid exceeds 2\1/2\ percent of the estimated
or actual annual State share for the State CHIP program; and
(2) The State has given the Regional Administrator written notice,
before total repayment was due, of its intent to repay by installments.
(b) Annual State share determination. HCFA determines whether the
amount to be repaid exceeds 2\1/2\ percent of the annual State share as
follows:
(1) If the State CHIP program is ongoing, HCFA uses the annual
estimated State share of State CHIP expenditures. This is the sum of
the estimated State shares for four consecutive quarters, beginning
with the quarter in which the first installment is to be paid, as shown
on the State's latest HCFA-21B form.
(2) If the State CHIP program has been terminated by Federal law or
by the State, HCFA uses the actual State share. The actual State share
is that shown on the State's Quarterly Statement of Expenditures
reports for the last four quarters before the program was terminated.
(c) Repayment amounts, schedules, and procedures--(1) Repayment
amount. The repayment amount may not include any amount previously
approved for installment repayment.
(2) Repayment schedule. The number of quarters allowed for
repayment is determined on the basis of the ratio of the repayment
amount to the annual State share of State CHIP expenditures. The higher
the ratio of the total repayment amount is to the annual State share,
the greater the number of quarters allowed, as follows:
------------------------------------------------------------------------
Number of
Total repayment amount as percentage of State share of quarters to
annual expenditures for State CHIP make
repayment
------------------------------------------------------------------------
2.5 percent or less..................................... 1
Greater than 2.5, but not greater than 5................ 2
Greater than 5, but not greater than 7.5................ 3
Greater than 7.5, but not greater than 10............... 4
Greater than 10, but not greater than 15................ 5
Greater than 15, but not greater than 20................ 6
Greater than 20, but not greater than 25................ 7
Greater than 25, but not greater than 30................ 8
Greater than 30, but not greater than 47.5.............. 9
Greater than 47.5, but not greater than 65.............. 10
Greater than 65, but not greater than 82.5.............. 11
Greater than 82.5, but not greater than 100............. 12
------------------------------------------------------------------------
(3) Quarterly repayment amounts. The quarterly repayment amounts
for each of the quarters in the repayment schedule may not be less than
the following percentages of the estimated State share of the annual
expenditures for State CHIP:
------------------------------------------------------------------------
Repayment
installment
may not be
For each of the following quarters less than
these
percentages
------------------------------------------------------------------------
1 to 4.................................................. 2.5
5 to 8.................................................. 5.0
9 to 12................................................. 17.5
------------------------------------------------------------------------
(4) Extended schedule. The repayment schedule may be extended
beyond 12 quarterly installments if the total repayment amount exceeds
100 percent of the estimated State share of annual expenditures. In
these circumstances, the repayment schedule in paragraph (c)(2) of this
section is followed for repayment of the amount equal to 100 percent of
the annual State share. The remaining amount of the repayment is in
quarterly amounts equal to not less than 17.5 percent of the estimated
State share of annual expenditures.
[[Page 10431]]
(5) Repayment process. Repayment is accomplished through adjustment
in the quarterly grants over the period covered by the repayment
schedule. If the State chooses to repay amounts representing higher
percentages during the early quarters, any corresponding reduction in
required minimum percentages is applied first to the last scheduled
payment, then to the next to the last payment, and so forth as
necessary.
(6) Offsetting of retroactive claims. (i) The amount of a
retroactive claim to be paid a State is offset against any amounts to
be, or already being, repaid by the State in installments. Under this
provision, the State may choose to:
(A) Suspend payments until the retroactive claim due the State has,
in fact, been offset; or
(B) Continue payments until the reduced amount of its debt
(remaining after the offset), has been paid in full. This second option
would result in a shorter payment period.
(ii) A retroactive claim for the purpose of this regulation is a
claim applicable to any period ending 12 months or more before the
beginning of the quarter in which HCFA would pay that claim.
Sec. 457.220 Public funds as the State share of financial
participation.
(a) Public funds may be considered as the State's share in claiming
FFP if they meet the conditions specified in paragraphs (b) and (c) of
this section.
(b) The public funds are appropriated directly to the State or
local State CHIP agency, or transferred from other public agencies
(including Indian tribes) to the State or local agency and under its
administrative control, or certified by the contributing public agency
as representing expenditures eligible for FFP under this section.
(c) The public funds are not Federal funds, or are Federal funds
authorized by the Federal law to be used to match other Federal funds.
Sec. 457.222 FFP for equipment.
Claims for Federal financial participation in the cost of equipment
under the State CHIP are determined in accordance with subpart G of 45
CFR part 95. Requirements concerning the management and disposition of
equipment under the State CHIP Program are also prescribed in subpart G
of 45 CFR part 95.
Sec. 457.224 FFP: Conditions relating to cost sharing.
(a) No FFP is available for the following amounts, even when
related to services or benefit coverage which is or could be provided
under a State CHIP program--
(1) Any cost sharing amounts that beneficiaries should have paid as
enrollment fees, premiums, deductibles, coinsurance, copayments, or
similar charges.
(2) Any amounts paid by the agency for health benefits coverage or
services furnished to individuals who would not be eligible for that
coverage or those services under the approved State child health plan,
whether or not the individual paid any required premium or enrollment
fee.
(b) The amount of expenditures under the State child health plan
must be reduced by the amount of any premiums and other cost-sharing
received by the State.
Sec. 457.226 Fiscal policies and accountability.
A State plan must provide that the State CHIP agency and, where
applicable, local agencies administering the plan will--
(a) Maintain an accounting system and supporting fiscal records to
assure that claims for Federal funds are in accord with applicable
Federal requirements;
(b) Retain records for 3 years from date of submission of a final
expenditure report;
(c) Retain records beyond the 3-year period if audit findings have
not been resolved; and
(d) Retain records for nonexpendable property acquired under a
Federal grant for 3 years from the date of final disposition of that
property.
Sec. 457.228 Cost allocation.
A State plan must provide that the single or appropriate State CHIP
Agency will have an approved cost allocation plan on file with the
Department in accordance with the requirements contained in subpart E
of 45 CFR part 95. Subpart E also sets forth the effect on FFP if the
requirements contained in that subpart are not met.
Sec. 457.230 FFP for State ADP expenditures.
FFP is available for State ADP expenditures for the design,
development, or installation of mechanized claims processing and
information retrieval systems and for the operation of certain systems.
Additional HHS regulations and HCFA procedures regarding the
availability of FFP for ADP expenditures are in 45 CFR part 74, 45 CFR
part 95, subpart F, and part 11, State Medicaid Manual.
Sec. 457.232 Refunding of Federal Share of CHIP overpayments to
providers and referral of allegations of waste, fraud or abuse to the
Office of Inspector General.
(a) Quarterly Federal payments to the States under title XXI (CHIP)
of the Act are to be reduced or increased to make adjustment for prior
overpayments or underpayments that the Secretary determines have been
made.
(b) The Secretary will consider the pro rata Federal share of the
net amount recovered by a State during any quarter to be an
overpayment.
(c) Allegations or indications of waste fraud and abuse with
respect to the CHIP program shall be referred promptly to the Office of
Inspector General.
Sec. 457.234 State plan requirements.
The State plan is a comprehensive written statement submitted by
the agency describing the nature and scope of its Children's Health
Insurance Program and giving assurance that it will be administered in
conformity with the specific requirements of title XXI, the applicable
regulations in Chapter IV, and other applicable official issuance of
the Department. The State plan contains all information necessary for
HCFA to determine whether the plan can be approved to serve as a basis
for FFP in the State plan program.
Sec. 457.236 Audits.
The CHIP agency must assure appropriate audit of records on costs
of provider services.
Sec. 457.238 Documentation of payment rates.
The CHIP agency must maintain documentation of payment rates and
make it available to HHS upon request.
Subparts C Through E--[Reserved]
Subpart F--Payments to States
Sec. 457.600 Purpose and basis of this subpart.
This subpart interprets and implements--
(a) Section 2104 of the Act which specifies the total allotment
amount available for allotment to each State for child health
assistance for fiscal years 1998 through 2007, the formula for
determining each State allotment for a fiscal year, including the
Commonwealth and Territories, and the amounts of payments for
expenditures that are applied to reduce the State allotments.
(b) Section 2105 of the Act which specifies the provisions for
making payment to States, the limitations and conditions on such
payments, and the
[[Page 10432]]
calculation of the enhanced Federal medical assistance percentage.
Sec. 457.602 Applicability.
The provisions of this subpart apply to the 50 States and the
District of Columbia, and the Commonwealths and Territories.
Sec. 457.606 Conditions for State allotments and Federal payments for
a fiscal year.
(a) Basic conditions. In order to receive a State allotment for a
fiscal year, a State must have a State child health plan submitted in
accordance with section 2106 of the Act, and
(1) For fiscal years 1998 and 1999, the State child health plan
must be approved before October 1, 1999;
(2) For fiscal years after 1999, the State child health plan must
be approved by the end of the fiscal year;
(3) An allotment for a fiscal year is not available to a State
prior to the beginning of the fiscal year; and
(4) Federal payments out of an allotment are based on State
expenditures which are allowable under the approved State child health
plan.
(b) Federal payments for States' Children's Health Insurance
program (CHIP) expenditures under an approved State child health plan
are--
(1) Limited to the amount of available funds remaining in State
allotments calculated in accordance with the allotment process and
formula specified in Secs. 457.608 and 457.610, and payment process in
Secs. 457.614 and 457.616.
(2) Available based on a percentage of State CHIP expenditures, at
a rate equal to the enhanced Federal medical assistance percentage
(FMAP) for each fiscal year, calculated in accordance with
Sec. 457.622.
(3) Available through the grants process specified in Sec. 457.630.
Sec. 457.608 Process and calculation of State allotments for a fiscal
year.
(a) General. (1) State allotments are determined by HCFA for each
State and the District of Columbia with an approved State child health
plan, as described in paragraph (d) of this section, and for each
Commonwealth and Territory, as described in paragraph (f) of this
section.
(2) In order to determine each State allotment, HCFA determines the
national total allotment amount for each fiscal year available to the
50 States and the District of Columbia, as described in paragraph (b)
of this section, and the total allotment amount available for each
fiscal year for allotment to the Commonwealths and Territories, as
described in paragraph (c) of this section.
(b) National total allotment amount for the 50 States and the
District of Columbia. (1) The national total allotment amount available
for allotment to the 50 States and the District of Columbia is
determined by subtracting the following 3 amounts in the following
order from the total appropriation specified in section 2104(a) of the
Act for the fiscal year--
(i) The total allotment amount available for allotment for each
fiscal year to the Commonwealths and Territories, as determined in
paragraph (c)(1) of this section;
(ii) The total amount of the grant for the fiscal year for children
with Type I Diabetes under section 4921 of Pub. L. 105-33. This is
$30,000,000 for each of the fiscal years 1998 through 2002; and
(iii) The total amount of the grant for the fiscal year for
diabetes programs for Indians under section 4922 of Pub. L. 105-33.
This is $30,000,000 for each of the fiscal years 1998 through 2002.
(2) The formula below illustrates the calculation of the national
total allotment amount for a fiscal year available for allotment to the
50 States and the District of Columbia:
ATA = S2104(a) - T2104(c)
-D4921 - D4922
ATA = National total allotment amount available for
allotment to the 50 States and the District of Columbia for the fiscal
year.
S2104(a) = Total appropriation for the fiscal year indicated
in section 2104(a) of the Act.
T2104(c) = Total allotment amount for a fiscal year
available for allotment to the Commonwealths and Territories; as
determined under paragraph (c)(1) of this section.
D4921 = Amount of total grant for children with Type I
Diabetes under section 4921 of Pub. L. 105-33. This is $30,000,000 for
each of the fiscal years 1998 through 2002.
D4922 = Amount of total grant for diabetes programs for
Indians under section 4922 of Pub. L. 105-33. This is $30,000,000 for
each of the fiscal years 1998 through 2002.
(c) Total allotment amount available to the Commonwealths and the
Territories.--(1) General.--The total allotment amount available to all
the Commonwealths and Territories equals .25 percent of the total
appropriation for the fiscal year indicated in section 2104(a) of the
Act.
(2) Additional Amount for Allotment to the Commonwealths and
Territories for FY 1999. For FY 1999, $32 million in addition to the
amount specified in paragraph (1) of this section, is available for
allotment to the Commonwealths and Territories. This additional
appropriation was provided for the Commonwealths and Territories under
Pub. L. 105-277.
(d) Methodology for determining the State allotments for a fiscal
year.--(1) General methodology and data used for FY 2000 and subsequent
fiscal years. The methodology for determining the State allotment
amount for a fiscal year is in accordance with the following formula:
Formula for Calculating the State Allotment for a Fiscal Year
[GRAPHIC] [TIFF OMITTED] TP04MR99.001
SAi = Allotment for a State for a fiscal year.
Ci = Number of children in a State (section
2104(b)(1)(A)(I)) for a fiscal year.
This number is based on the number of low-income children for a State
for a fiscal year and the number of low-income children for a State for
a fiscal year with no health insurance coverage for the fiscal year
determined on the basis of the arithmetic average of the number of such
children as reported and defined in the 3 most recent March supplements
to the Current Population Survey of the Bureau of the Census officially
available prior to October 1 before the beginning of the fiscal year.
(section 2104(b)(2)(B)).
For each of the fiscal years 1998 through 2000, the number of
children is equal to the number of low-income children in the State for
the fiscal year with no health insurance coverage. For fiscal year
2001, the number of children is equal to the sum of 75 percent of the
number of low-income children in the State for the fiscal year with no
health insurance coverage and 25 percent of the number of low-income
children in the State for the fiscal year. For fiscal years 2002 and
thereafter, the number of children is equal to the sum of 50 percent of
the number of low-income children in the State for the fiscal year with
no health insurance coverage and 50 percent of the number of low-income
children in the State for the fiscal year.
SCFi = State cost factor for a State (section
2104(b)(1)(A)(ii)of the Act).
For a fiscal year, this is equal to:
.15 + .85 x (Wi/WN) (Section 2104(b)(3)(A)).
Wi = The annual average wages per employee for a State for
such year (section 2104(b)(3)(A)(ii)(I)).
WN = The annual average wages per employee for the 50 States
and the District of Columbia (section 2104(b)(3)(A)(ii)(II)).
[[Page 10433]]
The annual average wages per employee for a State or for all States and
the District of Columbia for a fiscal year is equal to the average of
such wages for employees in the health services industry (SIC 80), as
reported by the Bureau of Labor Statistics of the Department of Labor
for each of the most recent 3 years officially available prior to the
beginning of the fiscal year on October 1. (section 2104(b)(3)(B)).
(Ci x SCFi) = The sum of the products
of (Ci x SCFi) for each State (section
2104(b)(1)(B)).
ATA = Total amount available for allotment to the 50 States
and the District of Columbia for the fiscal year as determined under
paragraph (b) of this section.
(2) Data used for calculating the FY 1998 CHIP allotments. The FY
1998 CHIP allotments, were calculated in accordance with the
methodology described in paragraph (d)(1) of this section, using the
most recent official data that were available from the Bureau of the
Census and Bureau of Labor Statistics, respectively, prior to the
September 1 before the beginning of FY 1998 (that is, through August
31, 1997). In particular, through August 31, 1997, the only official
data available on the numbers of children were data from the 3 March
CPSs conducted in March 1994, 1995, and 1996 that reflected data for
the 3 calendar years 1993, 1994, and 1995.
(3) Data used for calculating the FY 1999 CHIP allotments. In
accordance with Public Law 105-277, the FY 1999 allotments were
calculated in accordance with the methodology described in paragraph
(d)(1) of this section, using the same data as were used in calculating
the FY 1998 CHIP allotments.
(e) Minimum State allotment for a fiscal year. Each State and the
District of Columbia with an approved State child health plan will
receive a minimum allotment for a fiscal year in the amount of $2
million. In the event that a State allotment for a fiscal year
determined under the formula in Sec. 457.608(d) is below the $2 million
minimum and needs to be increased, the increase will be offset by
reducing the State allotments for the other States and the District of
Columbia in a pro rata manner (but not below $2 million) so that the
total of such State allotments in a fiscal year does not exceed the
national total allotment amount available for allotment to the 50
States and the District of Columbia, determined under Sec. 457.608(b).
(f) Methodology for determining the Commonwealth and Territory
allotments for a fiscal year. The total amount available for the
Commonwealths and Territories for each fiscal year, as determined under
paragraph (c) of this section, is allotted to each Territory and
Commonwealth below which has an approved State child health plan. These
allotments are in the proportion that the following percentages for
each Commonwealth Territory bear to the sum of such percentages, as
specified in section 2104(b)(2) of the Act:
Puerto Rico--91.6 percent
Guam--3.5 percent
Virgin Islands--2.6 percent
American Samoa--1.2 percent
Northern Mariana Islands--1.1 percent
(g) Reserved State allotments for a fiscal year. (1) In order to
provide an estimate of each States' fiscal year allotments, HCFA uses
the formula and methodology described in paragraphs (a) through (f) of
this section, and applies it as if all 50 States, the District of
Columbia, and the Commonwealths and Territories have an approved State
child health plan for the fiscal year.
(2) For FY 2000 and subsequent fiscal years, HCFA determines and
publishes the State reserved allotments for a fiscal year for each
State, the District of Columbia, and Commonwealths and Territories in
the Federal Register based on the most recent official data available
prior to the beginning of the fiscal year on October 1 for the number
of children and the State cost factor. For FY 1998 and FY 1999, HCFA
determines and published the State reserved allotments using the
available data described in paragraphs (d)(2) and (d)(3) of this
section, respectively.
(h) Final allotments. (1) Final State allotments for fiscal year
1998 for each State, the District of Columbia, and the Commonwealths
and Territories are determined by HCFA based only on those States, the
District of Columbia, and the Commonwealths and Territories that have
approved State child health plans by the end of fiscal year 1999, in
accordance with the formula and methodology specified in paragraphs (a)
through (g) of this section.
(2) Final State allotments for a fiscal year for each State, the
District of Columbia, and the Commonwealths and Territories are
determined by HCFA for each State fiscal year after fiscal year 1998
based only on those States, the District of Columbia, and the
Commonwealths and Territories that have approved State child health
plans by the end of the fiscal year, in accordance with the formula and
methodology specified in paragraphs (a) through (g) of this section.
(3) HCFA determines and publishes the States' final fiscal year
allotments in the Federal Register based on the same data, with respect
to the number of children and State cost factor, as were used in
determining the reserved allotments for the fiscal year.
(3) If all States, the District of Columbia, and the Commonwealths
and Territories have approved State child health plans in place prior
to the beginning of the fiscal year, as appropriate, HCFA may publish
the reserved and final fiscal year allotments in the Federal Register
concurrently.
Sec. 457.610 Period of availability for State allotments for a fiscal
year.
The amount of a final allotment for a fiscal year, as determined
under Sec. 457.608(h) and reduced to reflect certain Medicaid
expenditures in accordance with Sec. 457.616, remains available until
expended for Federal payments based on expenditures claimed during a 3-
year period of availability, beginning with the fiscal year of the
final allotment and ending with the end of the second fiscal year
following the fiscal year.
Sec. 457.614 General payment process.
(a) A State may make claims for Federal payment based on
expenditures incurred by the State prior to or during the period of
availability related to that fiscal year.
(b) In order to receive Federal financial participation (FFP) for a
State's claims for payment for the State's expenditures, a State must--
(1) Submit budget estimates of quarterly funding requirements for
Medicaid and the Children's Health Insurance Programs; and
(2) Submit an expenditure report.
(c) Based on the State's quarterly budget estimates, HCFA--
(1) Issues an advance grant to a State as described in
Sec. 457.630;
(2) Tracks and applies Federal payments claimed quarterly by each
State, the District of Columbia, and each Commonwealth and Territory to
ensure that payments do not exceed the applicable allotments for the
fiscal year; and
(3) Track and apply relevant State, District of Columbia,
Commonwealth and Territory expenditures reported each quarter against
the 10 percent limit on expenditures other than child health assistance
for standard benefit package, on a fiscal year basis as specified in
Sec. 457.618.
Sec. 457.616 Application and tracking of payments against the fiscal
year allotments.
(a) In accordance with the principles described in paragraph (c) of
this
[[Page 10434]]
section, the following categories of payments are applied to reduce the
State allotments for a fiscal year:
(1) Payments made to the State for expenditures claimed during the
fiscal year under its title XIX Medicaid program, to the extent the
payments were made on the basis of the enhanced FMAP described in
sections 1905(b) and 2105(b) of the Act for expenditures attributable
to children described in section 1905(u)(2) of the Act.
(2) Payments made to the State for expenditures claimed during the
fiscal year under its title XIX Medicaid program, to the extent the
payments were made on the basis of the enhanced FMAP described in
sections 1905(b) and 2105(b) of the Act for expenditures attributable
to children described in section 1905(u)(3) of the Act.
(3) Payments made to a State under section 1903(a) of the Act for
expenditures claimed by the State during a fiscal year that are
attributable to the provision of medical assistance to a child during a
presumptive eligibility period under section 1920A of the Act.
(4) Payments made to a State under its title XXI Children's Health
Insurance Program with respect to section 2105(a) of the Act for
expenditures claimed by the State during a fiscal year.
(b) HCFA applies the principles in paragraph (c) of this section
to--
(1) Coordinate the application of the payments made to a State for
the State's expenditures claimed under the Medicaid and State child
health insurance program against the State allotment for a fiscal year;
(2) Determine the order of these payments in that application; and
(3) Determine the application of payments against multiple State
child health insurance program fiscal year allotments.
(c) Principles for applying Federal payments against the allotment.
HCFA--
(1) Applies the payments attributable to Medicaid expenditures
specified in paragraphs (a)(1) through (a)(3) of this section, against
the State child health plan allotment for a fiscal year before State
child health plan expenditures specified in paragraph (a)(4) of this
section are applied.
(2) Applies the payments attributable to Medicaid and State child
health plan expenditures specified in paragraph (a) of this section
against the applicable allotments for a fiscal year based on the
quarter in which the expenditures are claimed by the State.
(3) Applies payments against the State allotments for a fiscal year
in a manner that is consistent for all States.
(4) Applies payments attributable to Medicaid expenditures
specified in paragraphs (a)(1) through (a)(3) of this section, in an
order that maximizes Federal reimbursement for States. Expenditures for
which the enhanced FMAP is available are applied before expenditures
for which the regular FMAP is available.
(5) Applies payments for expenditures against State Child Health
Insurance Program fiscal year allotments in the least administratively
burdensome, and most effective and efficient manner; payments are
applied on a quarterly basis as they are claimed by the State, and are
applied to reduce the earliest fiscal year State allotments before the
payments are applied to reduce later fiscal year allotments.
(6) Applies payments for expenditures for a fiscal year's allotment
against a subsequent fiscal year's allotment; however, the subsequent
fiscal year's allotment must be available at the time of application.
For example, if the allotment for fiscal year 1998 has been fully
expended, payments for expenditures claimed in fiscal year 1998 are
carried over for application against the fiscal year 1999 allotment
when it becomes available.
(7) Carries over unexpended amounts of a State's allotment for a
fiscal year for use in subsequent fiscal years through the end of the
3-year period of availability. For example, if the amounts of the
fi
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