Medicaid Program; State Allotments for Payment of Medicare Part B Premiums for Qualifying Individuals: Federal Fiscal Year 2008 and Federal Fiscal Year 2009, 70886-70894 [E8-27810]

Agencies

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

[Federal Register Volume 73, Number 227 (Monday, November 24, 2008)]
[Rules and Regulations]
[Pages 70886-70894]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-27810]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 433

[CMS-2290-IFC]
RIN 0938-AP38


Medicaid Program; State Allotments for Payment of Medicare Part B 
Premiums for Qualifying Individuals: Federal Fiscal Year 2008 and 
Federal Fiscal Year 2009

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period makes technical 
changes to the existing methodology and process used to compute and 
issue each State's preliminary and final allotments available to pay 
the Medicare Part B premiums for qualifying individuals (QIs). The 
technical revisions conform the existing regulations to reflect 
continued funding of this program. Additionally, this rule contains 
charts providing the States' final QI allotments for the Federal fiscal 
year (FY) 2008 and preliminary QI allotments for FY 2009, determined in 
accordance with the methodology set forth in the October 2006 final 
rule, and reflecting funding for the QI program made available under 
recent legislation.

DATES: Effective dates: These regulations are effective on November 24, 
2008. The final allotments for payment of Medicare Part B premiums for 
FY 2008 are effective October 1, 2007. The preliminary allotments for 
FY 2009 are effective October 1, 2008.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on January 23, 2009.

ADDRESSES: In commenting, please refer to file code CMS-2290-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.regulations.gov. Follow the 
instructions for ``Comment or Submission'' and enter the filecode to 
find the document accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-2290-IFC, P.O. Box 8016, Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-2290-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)

    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in the comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Allotments Prior to Fiscal Year (FY) 2005

    Section 1902 of the Social Security Act (the Act) sets forth the 
requirements for State plans for medical assistance. Before August 5, 
1997, section 1902(a)(10)(E) of the Act specified that State Medicaid 
plans must provide for some or all types of Medicare cost-sharing for 
three eligibility groups of low-income Medicare beneficiaries. These 
three groups included qualified Medicare beneficiaries (QMBs), 
specified low-income Medicare

[[Page 70887]]

beneficiaries (SLMBs), and qualified disabled and working individuals 
(QDWIs).
    A QMB is an individual entitled to Medicare Part A with income at 
or below 100 percent of the Federal poverty level (FPL) and resources 
at the Supplemental Security Income (SSI) limit, which is below $4,000 
for an individual and $6,000 for a couple. A SLMB is an individual who 
meets the QMB criteria, except that his or her income is above 100 
percent of the FPL and does not exceed 120 percent of the FPL. A QDWI 
is a disabled individual who is entitled to enroll in Medicare Part A 
under section 1818A of the Act, whose income does not exceed 200 
percent of the FPL, for a family of the size involved, whose resources 
do not exceed twice the amount allowed under SSI program, and who is 
not otherwise eligible for Medicaid. The definition of Medicare cost-
sharing at section 1905(p)(3) of the Act includes payment for premiums 
for Medicare Part B.
    Section 4732 of the Balanced Budget Act of 1997 (BBA), (Pub. L. 
105-33), enacted on August 5, 1997, amended section 1902(a)(10)(E) of 
the Act to require States to provide for Medicaid payment of the 
Medicare Part B premiums for two additional eligibility groups of low-
income Medicare beneficiaries, referred to as qualifying individuals 
(QIs).
    Specifically, under BBA, a new section 1902(a)(10)(E)(iv)(I) of the 
Act was added, under which States must pay the full amount of the 
Medicare Part B premium for QIs who are eligible QMBs but their income 
level is at least 120 percent of the FPL but less than 135 percent of 
the FPL for a family of the size involved. These individuals cannot 
otherwise be eligible for medical assistance under the approved State 
Medicaid plan. The BBA also added the second group of QIs added under 
section 1902(a)(10)(E)(iv)(II) of the Act, which includes Medicare 
beneficiaries who would be QMBs except that their income is at least 
135 percent but less than 175 percent of the FPL for a family of the 
size involved, who are not otherwise eligible for Medicaid under the 
approved State plan. These QIs were eligible for only a portion of 
Medicare cost-sharing consisting of a percentage of the increase in the 
Medicare Part B premium attributable to the shift of Medicare home 
health coverage from Part A to Part B (as provided in section 4611 of 
the BBA).
    Coverage of the second eligibility group of QIs ended on December 
31, 2002, and section 401 of the Welfare Reform Bill (Pub. L. 108-89), 
enacted on October 1, 2003, eliminated reference to the second QI 
benefit (for the Medicare beneficiaries who would be QMBs except that 
their income is at least 135 percent but less than 175 percent of the 
FPL for a family of the size involved, who are not otherwise eligible 
for Medicaid under the approved State plan). In 2002 and 2003, 
continuing resolutions extended the coverage of the first group of QIs 
(whose income is at least 120 percent but less than 135 percent of the 
FPL) through the following fiscal year, but maintained the annual 
funding at the FY 2002 level. Section 1933(g) of the Act was amended by 
the Extension of Medicare Cost-Sharing for Medicare Part B Premium for 
Qualifying Individuals Act, (Pub. L. 108-448), enacted December 8, 
2004, which continued coverage of this group of QIs (whose income is at 
least 120 percent but less than 135 percent of the FPL) through 
September 30, 2005, again, with no change in funding.
    The BBA also added a new section 1933 to the Act to provide for 
Medicaid payment of Medicare Part B premiums for QIs. (The previous 
section 1933 of the Act was re-designated as section 1934.) Section 
1933(a) of the Act specifies that a State plan must provide, through a 
State plan amendment, for medical assistance to pay for the cost of 
Medicare cost-sharing on behalf of QIs who are selected to receive 
assistance. Section 1933(b) of the Act sets forth the rules that States 
must follow in selecting QIs and providing payment for Medicare Part B 
premiums. Specifically, the State must permit all qualifying 
individuals to apply for assistance and must select individuals on a 
first-come, first-served basis (that is, the State must select QIs in 
the order in which they apply). Further, under section 1933(b)(2)(B) of 
the Act, in selecting persons who will receive assistance in years 
after 1998, States must give preference to those individuals who 
received assistance as QIs, QMBs, SLMBs, or QDWIs in the last month of 
the previous year and who continue to be (or become) QIs.
    Under section 1933(b)(4) of the Act, persons selected to receive 
assistance in a calendar year are entitled to receive assistance for 
the remainder of the year, but not beyond, as long as they continue to 
qualify. The fact that an individual is selected to receive assistance 
at any time during the year does not entitle the individual to 
continued assistance for any succeeding year. Because the State's QI 
allotment is limited by law, section 1933(b)(3) of the Act provides 
that the State must limit the number of QIs so that the amount of 
assistance provided during the year is approximately equal to the 
allotment for that year.
    Section 1933(c) of the Act limits the total amount of Federal funds 
available for payment of Part B premiums for QIs each fiscal year and 
specifies the formula that is to be used to determine an allotment for 
each State from this total amount. For States that executed a State 
plan amendment in accordance with section 1933(a) of the Act, a total 
of $1.5 billion was allocated over 5 years as follows: $200 million in 
FY 1998; $250 million in FY 1999; $300 million in FY 2000; $350 million 
in FY 2001; and $400 million in FY 2002.
    On March 29, 1999, we published a notice in the Federal Register 
(64 FR 14931) to advise States of the methodology used to calculate 
allotments and each State's specific allotment for that year. Following 
that notice, there was no change in methodology and States have been 
notified annually of their allotments. We did not include the 
methodology for computing the allocation in our regulations. Although 
the BBA originally provided coverage of QIs through FY 2002, based on 
several legislative actions, coverage has been continued through 
December 31, 2009.
    The Federal medical assistance percentage, for Medicaid payment of 
Medicare Part B premiums for QIs, is 100 percent for expenditures up to 
the amount of the State's allotment. No Federal funds are available for 
expenditures in excess of the State allotment amount. The Federal 
matching rate for administrative expenses associated with the payment 
of Medicare Part B premiums for QIs remains at the 50 percent matching 
level. Federal financial participation in the administrative expenses 
is not counted against the State's allotment.
    The amount available for each fiscal year is to be allocated among 
States according to the formula set forth in section 1933(c)(2) of the 
Act. The formula provides for an amount to each State that is based on 
each State's share of the Secretary's estimate of the ratio of: (a) An 
amount equal to the total number of individuals in the State who meet 
all but the income requirements for QMBs, whose incomes are at least 
120 percent but less than 135 percent of the Federal poverty level, and 
who are not otherwise eligible for Medicaid, to (b) the sum of all 
individuals for all eligible States.

B. Allotments for FY 2005

    In FY 2005, some States exhausted their FY 2005 allotments before 
the end of the fiscal year, which caused States to deny benefits to 
eligible persons under section 1933(b)(3) of the Act, while other 
States projected a surplus in

[[Page 70888]]

their allotments. We asked those States that exhausted or expected to 
exhaust their FY 2005 allotments before the end of the fiscal year to 
project the amount of funds that would be required to grant eligibility 
to all eligible persons in their State, that is, their need. We also 
asked those States that did not expect to use their full allotments in 
FY 2005 to project the difference between the amount they expected to 
spend and their allotment, that is, their surplus. After all States 
reported these figures, it was evident that the total surplus exceeded 
the total need. In spite of there being adequate overall funding for 
the QI benefit, some eligible individuals would have been denied 
benefits due to the allocation methodology initially used to determine 
the FY 2005 allotments.
    We believe that it was the clear intent of the statute to provide 
benefits to eligible persons up to the full amount of funds made 
available for the program. We attributed the difference between the 
surplus in available QI allotments for some States and the need in 
other States in FY 2005 as due to the imprecision in the data that we 
used to provide States with their initial allocations under section 
1933 of the Act. Therefore, on August 26, 2005, we published an interim 
final rule in the Federal Register (70 FR 50214) under which we 
compensated for this imprecision in order to enable States to enroll 
those QIs whom they would have been able to enroll had the data been 
more precise.
    The August 26, 2005 interim final rule amended 42 CFR 433.10(c) to 
specify the formula and the data to be used to determine States' 
allotments and to revise, under certain circumstances, individual State 
allotments for a Federal fiscal year for the Medicaid payment of 
Medicare Part B premiums for qualifying individuals identified under 
section 1902(a)(10)(E)(iv) of the Act. Section 433.10(c)(5)(iv) states 
that CMS will notify States of any changes in allotments resulting from 
any reallocations.
    The FY 2005 allotments were determined by applying the U.S. Census 
Bureau data to the formula set forth in section 1933(c)(2) of the Act. 
However, the statute requires that the allocation of the fiscal year 
allotment be based upon a ratio of the amount of ``total number of 
individuals described in section 1902(a)(10)(E)(iv) in the State'' to 
the sum of these amounts for all States. Because this formula requires 
an estimate of an unknown number, that is, the number of individuals 
who could be QIs (rather than the number of individuals who were QIs in 
a previous period), our use of the Census Bureau data in the formula 
represented a rough proxy to attain the statutory number. Actual 
expenditure data, however, revealed that the Census Bureau data yielded 
an inappropriate distribution of the total appropriated funds as 
evidenced by the fact that several States projected significant 
shortfalls in their allotments, while many other States projected a 
significant surplus by the end of the FY 2005. Census Bureau data were 
not accurate for the purpose of projecting States' needs because the 
data could not take into consideration all variables that contribute to 
QI eligibility and enrollment, such as resource levels and the 
application process itself. While section 1933 of the Act requires the 
Secretary to estimate the allocation of the allotments among the 
States, it did not preclude a subsequent readjustment of that 
allocation, when it became clear that the data used for that estimate 
did not effectuate the statutory objective. The interim final rule 
published in the Federal Register on August 26, 2005 permitted in this 
specific circumstance a redistribution of surplus funds, as it was 
demonstrated that the States' projections and estimates resulted in an 
inequitable initial allocation for FY 2005, such that some States were 
granted an allocation in excess of their total projected need, while 
the allocation granted to other States proved insufficient to meet 
their projected QI expenditures.
    In the August 26, 2005 interim final rule, we codified the 
methodology we have been using to approximate the statutory formula for 
determining State allotments. However, since certain States projected a 
deficit in their allotment before the end of FY 2005, the rule 
permitted FY 2005 funds to be reallocated from the surplus States to 
the need States. The regulation specified the methodology for computing 
the annual allotments, and for reallocating funds in this circumstance. 
The formula used to reallocate funds was intended to minimize the 
impact on States with fiscal year QI allotments that might be greater 
than their QI expenditures for the fiscal year, to equitably distribute 
the total needed amount among those surplus States, and to meet the 
immediate needs for those States projecting deficits. At the time of 
the publication of the interim final rule on August 26, 2005, the 
authorization for the QI benefit was scheduled to expire at the end of 
calendar year (CY) 2005, and no additional funds were appropriated for 
the QI benefit beyond September 30, 2005; therefore, the regulation 
specified a sunset at the end of CY 2005.

C. Allotments for FY 2006 and FY 2007

    On October 20, 2005, the QI, TMA, and Abstinence Programs Extension 
and Hurricane Katrina Unemployment Relief Act of 2005 (Pub. L. 109-91) 
was enacted. Section 101 of Public Law 109-91 extended the QI program 
through September 30, 2007 with no change in the level of funding; that 
is, under this legislation $400 million per fiscal year was 
appropriated for each of FY 2006 and FY 2007. The provisions of section 
101 of Public Law 109-91 were effective as of September 30, 2005.
    On October 16, 2006, we published a final rule in the Federal 
Register (71 FR 60663), which implemented the provisions of section 101 
of Public Law 109-91 relating to the QI allotments for final FY 2006 
allotments and preliminary FY 2007 allotments. As we stated in that 
final rule, we believe that the clear intent of the statute is to 
provide benefits to eligible persons up to the full amount of funds 
made available for the program in each fiscal year. We recognized that 
because of the imprecise data for computing the States' QI allotments 
for a fiscal year, some States would experience either surpluses or 
shortages in their FY 2006 and FY 2007 allotments. In accordance with 
42 CFR 433.10(c), the FY 2006 and FY 2007 QI allotments were designed 
to compensate for the imprecise data to permit shortage States to 
enroll more QIs than otherwise would have been possible.

D. Allotments for FY 2008 and Thereafter

    Section 3 of the TMA, Abstinence Education, and QI Program 
Extension Act of 2007, Public Law 110-90 (enacted on September 29, 
2007) provided $100 million and extended the QI program through 
December 31, 2007. Section 203 of the Medicare, Medicaid, and SCHIP 
Extension Act of 2007 (MMSEA) (Pub. L. 110-173, enacted on December 29, 
2007) provided an additional $200 million and extended the QI program 
through June 30, 2008. Most recently, section 111 of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 
110-275) enacted on July 15, 2008, and section 2 of the QI Program 
Supplemental Funding Act of 2008 (the SFA) enacted on October 8, 2008, 
(Pub. L. 110-379), extended and provided additional funds for the QI 
program. Under the current Medicaid statute, as amended by MIPPA and 
the SFA, a total of $415 million is available for the QI program for FY 
2008, and $480 million

[[Page 70889]]

is available for the QI program for FY 2009. Additionally, $150 million 
is available for the QI program for the first quarter of FY 2010 (that 
is, October 1, 2009 through December 31, 2009). However, the existing 
regulation at Sec.  433.10(c)(5)(v) authorizes the methodology for 
determining each State's QI allotment under the QI program only through 
CY 2007.

II. Provisions of the Interim Final Rule With Comment Period

    Because Sec.  433.10(c)(5) explicitly references funding for the QI 
program only through calendar year 2007, we are making minor, non-
substantive technical changes to the regulation to address the funding 
availability for FY 2008 and thereafter. In Sec.  433.10, we are 
revising paragraph (c)(5)(ii) by changing the statutory reference 
``section 1933(c)(1)'' to ``section 1933(g)''. We are also revising 
paragraphs (c)(5)(iii) introductory text, (c)(5)(iii)(D), and (c)(5)(v) 
to more generally refer to the period for which QI program funding is 
available under the statute, rather than referring to particular years. 
These revisions implement the funding authority available under section 
1933 of the Act. Henceforth, legislative extensions of QI program 
funding will not require revisions to our regulations. We would, 
however, continue to issue a notice in the Federal Register to announce 
the amount of the States' QI allotments to be provided in accordance 
with the extending legislation, and determined in accordance with the 
methodology referenced in the regulation.
    The regulation at Sec.  433.10(c)(5) currently specifies the 
methodology, formula, data, and process to be used for determining and 
issuing States' QI allotments. This methodology and process provides 
for an adjustment in the amounts of the QI allotments preliminarily 
determined for the Medicaid payment of Medicare Part B premiums for 
qualifying individuals identified under section 1902(a)(10)(E)(iv) of 
the Act.
    As discussed in section I.B of this preamble, the methodology and 
process described in the existing regulation for determining States' QI 
allotments is currently based on the availability of funds with respect 
to a full fiscal year. It does not address a situation, such as existed 
for FY 2008 prior to the enactment of MIPPA and SFA, where funding 
under the applicable statute was available only for part of the fiscal 
year (that is, through June 30, 2008).
    The statute and existing regulation both provide that the 
``initial'' fiscal year QI allotments be determined by applying U.S. 
Census Bureau data to the formula set forth in section 1933(c)(2) of 
the Act. The current regulation sets forth a two step/two phase 
methodology and process for determining States' QI allotments for a 
fiscal year. Under the first step of phase one, an ``initial'' 
allocation is determined for each State under the formula specified in 
section 1933 of the Act and based only on the data obtained from the 
Census Bureau (the 3-year average of the number of Medicare 
beneficiaries in the State who are not enrolled in the Medicaid program 
but whose incomes are at least 120 percent of the FPL and less than 135 
percent of the FPL). We further obtain States' projected QI 
expenditures for the fiscal year.
    Under the second step of the process referenced in the existing 
regulation, we adjust the States' initial allocations by considering 
the States' updated projections of QI expenditures for the fiscal year. 
This would be done by proportionately reducing the QI allotments of 
States with surpluses for the fiscal year by the amount of the total 
need for States that do not have sufficient QI allotments for the 
fiscal year.
    In this interim final rule, we are continuing to apply this 
methodology and process in two phases in each fiscal year. At the 
beginning of each fiscal year, we would determine the initial 
allocations based on the Census Bureau data, obtain States' projections 
of QI expenditures for the fiscal year, and make any adjustments based 
on the projected surpluses/needs for the fiscal year. The amounts of 
the States' QI allotments determined under this first phase at the 
beginning of the fiscal year are considered the States' ``preliminary'' 
QI allotments for the fiscal year. Then, under phase two of the process 
during the fourth quarter of the fiscal year, we obtain States' updated 
projected QI expenditures for the fiscal year. We then establish the 
``final'' QI allotments for the fiscal year based on these updated 
projections.
    The formula used to reallocate the available funds to need States 
is intended to minimize the impact on surplus States, to equitably 
distribute the total needed amount among those surplus States, and to 
meet the needs for those States projecting deficits.
    Under the existing regulation, the methodology and process for 
determining the QI allotments is determined with respect to a full 
fiscal year. The existing regulation does not address situations in 
which the QI allotments may need to be determined for periods that are 
less than a full fiscal year. Furthermore, the current regulation only 
addresses situations in which the total projected surplus for States is 
greater than the amount of the total projected deficit; this has been 
the case with respect to the determination of fiscal year QI allotments 
for fiscal years before FY 2008. The existing regulation does not 
address situations in which the total projected deficits may be greater 
than the total projected surpluses.
    Under the Medicaid statute, as existed just prior to the enactment 
of the MIPPA, the QI program was funded in FY 2008 only for the period 
October 1, 2008 through June 30, 2008 at a level of $300 million; in 
particular, this provided funding only with respect to 9 months or 75 
percent of FY 2008. Additionally, under States' initial QI expenditure 
projections the total projected deficit for the 9-month period was 
greater than the total projected surplus. Although, with the enactment 
of the MIPPA, the QI program was funded for the entirety of FY 2008 at 
a level of $400 million, the States' current QI expenditure projections 
for the full FY 2008 is greater than the total projected allocation for 
the fiscal year. However, with the enactment of the SFA, funding for 
the QI program for FY 2008 is at a level of $415 million; this amount 
is sufficient to fully fund the program for FY 2008 based on the 
States' QI expenditure projections for FY 2008.
    In order to ensure that our regulations address the different 
possible funding situations, for example, such as was the case prior to 
enactment of the SFA, we are making revisions to Sec.  
433.10(c)(5)(iii) to cover the full range of possibilities. We want to 
emphasize that the changes we are making do not change the fundamental 
process by which we determine State allocations. We are clarifying the 
language describing the QI allotment methodology included in the 
current regulations to address situations where the total amount of the 
funding available for the period is projected to be insufficient for 
the projected national needs for that period, such that the States' 
total projected deficits exceed total projected surpluses; situations 
that have occurred for past fiscal years (that is, when there were full 
levels of funding for a full fiscal year and the total projected 
surpluses exceeded total projected deficits); and situations that 
existed for FY 2008 prior to the enactment of the MIPPA (that is, where 
funding for the fiscal year was for a period that was less than the 
full fiscal year).
    The methodology used to reallocate the available funds to need 
States is

[[Page 70890]]

intended to minimize the impact on surplus States and to equitably 
redistribute such surpluses from such States. In order to meet the 
needs for those States projecting deficits, we are adding a new 
paragraph (E), in Sec.  433.10(c)(5)(iii). The final fiscal year QI 
allotments for a State with a surplus could only be reduced by no more 
than the State's projected surplus; and, in cases where the total 
projected deficits exceed the total projected surpluses, the States 
with such deficits would only receive a prorated proportion of the 
total surpluses.
    Based on the timing of the recent enactment of the MIPPA and the 
SFA, we are not publishing preliminary FY 2008 allotments; rather, in 
this rule with respect to FY 2008, we are only publishing the final FY 
2008 QI allotments. That is, as discussed above, just prior to the 
enactment of the MIPPA on July 15, 2008, funding for the QI program in 
FY 2008 would only have been with respect to the period ending June 30, 
2008. As a result of the enactment of MIPPA and the SFA, funding for 
the QI program for FY 2008 has been extended for the entire fiscal 
year. Therefore, after obtaining States' updated QI expenditure 
estimates for FY 2008, we are now able to determine the final FY 2008 
QI allotments. Thus, the publication of the preliminary FY 2008 QI 
allotments is unnecessary. The resulting final allotments for the 
entire FY 2008 are shown by State in the Chart 1 of this rule. Chart 2 
presents the preliminary FY 2009 QI allotments:

Chart 1--Final Qualifying Individuals Allotments for October 1, 2007 
through September 30, 2008
Chart 2--Preliminary Qualifying Individuals Allotments for October 1, 
2008 through September 30, 2009
    The following describes the information contained in the columns of 
Chart 1 and Chart 2:
    Column A--State. Column A shows the name of each State.
    Columns B through D show the determination of the States' Initial 
FY 2008 (Chart 1) or FY 2009 (Chart 2) QI Allotments, based on Census 
Bureau data.
    Column B--Number of Individuals. Column B contains the estimated 
average number of Medicare beneficiaries for the years 2005 through 
2007 (Chart 1, with respect to the Final FY 2008 QI allotment 
determination) or the years 2006 through 2007 (Chart 2, with respect to 
the Preliminary FY 2009 QI allotment) that are not covered by Medicaid 
whose family income is between 120 and 135 percent of the poverty level 
for each State, in thousands, as obtained from the Census Bureau's 
Annual Social and Economic Supplement to the Current Population Survey 
through December of 2007 (Chart 1) or through December 2008 (Chart 2).
    Column C--Percentage of Total. Column C provides the percentage of 
the total number of individuals for each State, that is, the number of 
individuals for the State in Column B divided by the sum total of the 
number of individuals for all States in Column B.
    Column D--Initial QI Allotment. Column D contains each State's 
initial FY 2008 (Chart 1) or FY 2009 (Chart 2) QI allotment, calculated 
as the State's percentage of total in Column C multiplied by 
$415,000,000 (Chart 1, for the Final FY 2008 QI Allotment) or 
$480,000,000 (Chart 2, for the Preliminary FY 2009 QI allotment), the 
total amount available for FY 2008 (Chart 1) or FY 2009 (Chart 2) for 
all States.
    Columns E through L show the determination of the States' Final QI 
allotments for FY 2008 (Chart 1) or Preliminary QI allotments for FY 
2009 (Chart 2).
    Column E--FY 2008 Estimated QI Expenditures. Column E contains the 
States' estimates of their total QI expenditures for FY 2008 (Chart 1) 
or FY 2009 (Chart 2) as obtained from States in the summer of 2008.
    Column F--Need (Difference). Column F contains the additional 
amount of QI allotment needed for those States whose estimated 
expenditures in Column E exceeded their Initial FY 2008 (Chart 1) or FY 
2009 (Chart 2) QI allotments in Column D; for such States, Column F 
shows the amount in Column E minus the amount in Column D. For other 
``Non-Need'' States, Column F shows ``NA''.
    Column G--Percent of Total Need States. For States whose projected 
QI expenditures in Column E is greater than their Initial QI allotment 
in Column D for FY 2008 (Chart 1) or FY 2009 (Chart 2), Column G shows 
the percentage of total need, determined as the amount for each Need 
State in Column F divided by the sum of the amounts for all States in 
Column F. For Non-Need States, the entry in Column G is ``NA''.
    Column H--Reduction Pool for Non-Need States. Column H shows the 
amount of the pool of surplus FY 2008 (Chart 1) or FY 2009 (Chart 2) QI 
allotments for those States that project QI expenditures for the fiscal 
year that are less than the initial QI allotment for the fiscal year 
(referred to as non-need States). For States whose estimates of QI 
expenditures for FY 2008 or FY 2009 in Column E are equal to or less 
than their Initial FY 2008 or FY 2009 QI allotments in Column D for FY 
2008 or FY 2009, Column H shows the amount in Column D minus the amount 
in Column E. For the States with a need, Column H shows ``Need.'' The 
reduction pool of excess QI allotments is equal to the sum of the 
amounts in Column H.
    Column I--Percent of Total Non-Need States. For States whose 
projected QI expenditures in Column E is less than their Initial QI 
allotment in Column D for FY 2008 (Chart 1) or FY 2009 (Chart 2), 
Column I shows the percentage of the total reduction pool in Column H, 
determined as the amount for each Non-Need State in Column H divided by 
the sum of the amounts for all States in Column H. For Need States, the 
entry in Column I is ``Need''.
    Column J--Reduction Adjustment for Non-Need States. Column J shows 
the amount of adjustment to reduce the Initial FY 2008 (Chart 1) or FY 
2009 (Chart 2) QI allotments in Column D for Non-Need States in order 
to address the total need shown in Column F. The amount in Column J is 
determined as the percentage in Column I for Non-Need States multiplied 
by the lesser of the total need in Column F (equal to the sum of Needs 
in Column F) or the total Reduction Pool in Column H (equal to the sum 
of the Non-Need amounts in Column H). For Need States, the entry in 
Column J is ``Need''.
    Column K--Increase Adjustment for Need States. Column K shows the 
amount of adjustment to increase the Initial QI Allotment for FY 2008 
(Chart 1) or FY 2009 (Chart 2) in Column D for Need States in order to 
address the total need shown in Column F. The amount in Column K is 
determined as the percentage in Column G for Need States multiplied by 
the lesser of the total need in Column F (equal to the sum of Needs in 
Column F) or the total Reduction Pool in Column H (equal to the sum of 
the Non-Need amounts in Column H). For Non-Need States, the entry in 
Column K is ``NA''.
    Column L--Final FY 2008 QI Allotment (Chart 1) of Preliminary FY 
2009 QI Allotment (Chart 2). Column L contains the Final QI allotment 
for each State for FY 2008 (Chart 1) or the Preliminary QI Allotment 
for FY 2009 (Chart 2). For States that need additional amounts based on 
their FY 2008 or FY 2009 Estimated QI Expenditures in Column E (States 
with a projected need amount in Column F), Column L is equal to the 
Initial FY 2008 or FY 2009 QI Allotment in Column D plus the amount 
determined in Column K for Need States. For Non-Need States

[[Page 70891]]

(States with a projected surplus in Column H), Column L is equal to the 
QI Allotment in Column D reduced by the Reduction Adjustment amount in 
Column J.
[GRAPHIC] [TIFF OMITTED] TR24NO08.000


[[Page 70892]]


[GRAPHIC] [TIFF OMITTED] TR24NO08.001

III. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, 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 DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

IV. Waiver of Notice With Comment and 30-Day Delay in Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    In addition, we also normally provide a delay of 30 days in the 
effective date. However, if adherence to this procedure would be 
impractical, unnecessary, or contrary to public interest, we may waive 
the delay in the effective date.
    We are publishing this rule as an interim final rule with comment 
period because of the need to notify individual States of the 
limitations on Federal funds for their Medicaid expenditures for 
payment of Medicare Part B premiums for qualifying individuals. Some 
States have experienced deficits in their current allotments that have 
caused them to deny benefits to eligible applicants, while other States 
project a surplus in their allotments. This rule adjusts the allocation 
of Federal funds, which will reduce the impact of States denying 
coverage to eligible QIs when there is sufficient funding to cover all 
or some of these individuals. Because access to Medicare Part B 
coverage for QIs, who without this coverage would have difficulty 
paying for needed health care, is critically important we believe that 
it is in the public interest to waive the usual notice and comment 
procedure which we undertake before making a rule final.
    In addition, we are not making any fundamental changes to the 
process we use for redistributing surpluses to States whose estimated 
QI expenditures exceed their initial allotments. We are simply ensuring 
that the process currently included in the regulations accounts for 
partial funding in some fiscal years as well as situations where total 
deficits may exceed total surpluses. For these reasons, we also believe 
a notice and comment process would be unnecessary.
    Also, for the reasons discussed above, we find that good cause 
exists to dispense with the normal requirement that a regulation cannot 
become effective any earlier than 30 days after its publication. States 
that will have access to additional funds for QIs need to know that 
these funds are available as soon as possible. While we believe the 
surplus States that will have diminished amounts available for this 
fiscal year will have sufficient funds for enrolling all potential QIs 
in their States, they also need to know as soon as possible that a 
certain amount of their unused allocation will no longer be available 
to them for this fiscal year.
    With respect to the changes and additions to the regulatory text, 
we are waiving the delay in effective date because, as noted above, the 
rule does not make any fundamental changes in

[[Page 70893]]

the methodology for allocating funds between States, but accounts for 
those years in which Congressional allocations may not meet total QI 
expenditures. The provision sets out a methodology which merely reduces 
allocations to States by a pro-rata amount. Consequently, because this 
rule is essentially one of agency procedure, we believe that delaying 
the effective date of the provision is unnecessary.
    We are publishing this interim final rule with a 60-day period for 
public comment. We will respond to public comments and as a result make 
necessary changes in the final rule.

V. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

VI. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132 on 
Federalism and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This rule 
does not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
for small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7 million to $34.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity.
    This interim final rule codifies our procedures for implementing 
provisions of the Balanced Budget Act of 1997 to allocate, among the 
States, Federal funds to provide Medicaid payment for Medicare Part B 
premiums for low-income Medicare beneficiaries. The total amount of 
Federal funds available during a Federal fiscal year and the formula 
for determining individual State allotments are specified in the law. 
We have applied the statutory formula for the State allotments. Because 
the data specified in the law were not initially available, we used 
comparable data from the U.S. Census Bureau on the number of possible 
qualifying individuals in the States. This rule also permits, in a 
specific circumstance, reallocation of funds to enable enrollment of 
all eligible individuals to the extent of the available funding.
    We believe that the statutory provisions implemented in this rule 
will have a positive effect on States and individuals. Federal funding 
at the 100 percent matching rate is available for Medicare cost-sharing 
for Medicare Part B premium payments for qualifying individuals and, 
with the reallocation of the State allotments, a greater number of low-
income Medicare beneficiaries will be eligible to have their Medicare 
Part B premiums paid under Medicaid. The changes in allotments will not 
result in fewer individuals receiving the QI benefit in any State. The 
FY 2008 and FY 2009 costs for this provision have been included in the 
Mid-session Review of the FY 2009 President's Budget.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any rule that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. The analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
metropolitan statistical area and has fewer than 100 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined and 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.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $130 million. This rule will have no consequential effect on 
the governments mentioned or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has federalism implications. Since this regulation 
does not impose any costs on State or local governments, the 
requirements of E.O. 13132 are not applicable.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 433

    Administrative practice and procedure, Child support, Claims, Grant 
programs--health, Medicaid, Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR Chapter IV as set forth below:

PART 433--STATE FISCAL ADMINISTRATION

0
1. The authority citation for part 433 continues to read as follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).


0
2. Section 433.10 is amended by--
0
A. Revising paragraph (c)(5)(ii).
0
B. Revising paragraph (c)(5)(iii) introductory text.
0
C. Revising paragraph (c)(5)(iii)(D).
0
D. Adding a new paragraph (c)(5)(iii)(E).
0
E. Revising paragraph (c)(5)(v).
    The revisions and additions read as follows:


Sec.  433.10  Rates of FFP for program services.

* * * * *
    (c) * * *
    (5) * * *
    (ii) Under section 1933(c)(2) of the Act and subject to paragraph 
(c)(5)(iii) of this section, the allocation to each State is equal to 
the total allocation specified in section 1933(g) of the Act multiplied 
by the Secretary's estimate of the ratio of the total number of 
individuals described in section 1902(a)(10)(E)(iv) of the Act in the 
State to the total number of individuals described in section 
1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating 
that ratio, the Secretary will use data from the U.S. Census Bureau.
    (iii) If, based on projected expenditures for a fiscal year, or for 
a

[[Page 70894]]

shorter period for which funding is available under section 1933 of the 
Act, the Secretary determines that the expenditures described in 
paragraph (c)(5)(i) of this section for one or more States are 
projected to exceed the allocation made to the State, the Secretary may 
adjust each State's fiscal year allocation, as follows:
* * * * *
    (D) Each State with a projected deficit will receive an additional 
allocation equal to the amount of its projected deficit, or a prorated 
amount of such deficit, if the Total Projected Deficit is greater than 
the Total Projected Surplus. Except as described in paragraph 
(c)(5)(iii)(E) of this section, the amount to be reallocated from each 
State with a projected surplus will be equal to A x B, where A equals 
the Total Projected Deficit and B equals the amount of the State's 
projected surplus as a percentage of the Total Projected Surplus.
    (E) If the Total Projected Deficit determined under paragraph 
(c)(5)(iii)(C) of this section is greater than the Total Projected 
Surplus determined under paragraph (c)(5)(iii)(B) of this section, each 
State with a projected deficit will receive an additional allocation 
amount equal to the amount of the Total Projected Surplus multiplied by 
the amount of the projected deficit for such State as a percentage of 
the Total Projected Deficit. The amount to be reallocated from each 
State with a projected surplus will be equal to the amount of the 
projected surplus.
* * * * *
    (v) The provisions in paragraph (c)(5) of this section will be in 
effect through the end of the period for which funding authority is 
available under section 1933 of the Act.

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

    Dated: September 19, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Dated: September 19, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-27810 Filed 11-21-08; 8:45 am]
BILLING CODE 4120-01-P