Medicaid Program: Rescission of School-Based Services Final Rule, Outpatient Services Definition Final Rule, and Partial Rescission of Case Management Services Interim Final Rule, 21232-21237 [E9-10494]

Agencies

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

[Federal Register Volume 74, Number 86 (Wednesday, May 6, 2009)]
[Proposed Rules]
[Pages 21232-21237]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10494]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 431, 433, 440 and 441

[CMS-2287-P2; CMS-2213-P2; CMS 2237-P]
RIN 0938-AP75


Medicaid Program: Rescission of School-Based Services Final Rule, 
Outpatient Services Definition Final Rule, and Partial Rescission of 
Case Management Services Interim Final Rule

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to rescind the December 28, 2007 final rule 
entitled ``Elimination of Reimbursement Under Medicaid for School 
Administration Expenditures and Costs Related to Transportation of 
School-Age Children Between Home and School''; the November 7, 2008 
final rule entitled ``Clarification of Outpatient Hospital Facility 
(Including Outpatient Hospital Clinic) Services Definition''; and 
certain provisions of the December 4, 2007 interim final rule with 
comment period entitled ``Optional State Plan Case Management 
Services.'' These regulations have been the subject of Congressional 
moratoria and have not yet been implemented (or, with respect to case 
management interim final rule, have only been partially implemented) by 
CMS. In light of concerns raised about the adverse effects that could 
result from these regulations, in particular the potential restrictions 
on services available to beneficiaries, potential deleterious effect on 
state partners in the economic downturn, and the lack of clear evidence 
demonstrating that the approaches taken in the regulations are 
warranted, CMS is proposing to rescind the two final rules in full, and 
to partially rescind the interim final rule. Rescinding these 
provisions will permit further opportunity to determine the best 
approach to further the objectives of the Medicaid program in providing 
necessary health benefits coverage to needy individuals.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 1, 2009.

ADDRESSES: In commenting, please refer to file code CMS-2287-P2. 
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 this 
regulation to https://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2287-P2, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    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 to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2287-P2, 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 before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey 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. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 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 FURTHER INFORMATION CONTACT: Lisa Parker, (410) 786-4665.

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 a 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. Elimination of Reimbursement Under Medicaid for School 
Administration Expenditures and Costs Related to Transportation of 
School-Age Children Between Home and School

    Under the Medicaid program, Federal payment is available for the 
costs of administrative activities as found

[[Page 21233]]

necessary by the Secretary for the proper and efficient administration 
of the State plan. On December 28, 2007, we published a final rule to 
eliminate Federal Medicaid payment for the costs of certain school-
based administrative and transportation activities based on a 
Secretarial finding that these activities are not necessary for the 
proper and efficient administration of the Medicaid State plan and are 
not within the definition of the optional transportation benefit (72 FR 
73635). Under the final rule, Federal Medicaid payments were not 
available for administrative activities performed by school employees 
or contractors, or anyone under the control of a public or private 
educational institution, and for transportation between home and 
school. Federal financial participation (FFP) remained available for 
covered services furnished at or through a school that are included in 
a child's individualized education plan (IEP), and for transportation 
from school to a provider in the community for a covered service. FFP 
also remained available for the costs of school-based Medicaid 
administrative activities conducted by employees of the State or local 
Medicaid agency, and for transportation to and from a school for 
children who are not yet school age but are receiving covered direct 
medical services at the school.
    The December 28, 2007, final rule became effective on February 26, 
2008. Subsequent to publication of the final rule, section 206 of the 
Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. No. 110-
173) imposed a moratorium until June 30, 2008, that precluded CMS from 
imposing any restrictions contained in the rule that are more stringent 
than those applied as of July 1, 2007. Section 7001(a)(2) of the 
Supplemental Appropriations Act of 2008 (Pub. L. No. 110-252) extended 
this moratorium until April 1, 2009 and section 5003(b) of the American 
Recovery and Reinvestment Act (ARRA) further extended the moratorium 
until July 1, 2009.

B. Clarification of Outpatient Hospital Facility (Including Outpatient 
Hospital Clinic) Services Definition

    Outpatient hospital services are a required service under Medicaid. 
On November 7, 2008, we published a final rule to introduce new 
limitations on which treatments could be billed and paid as an 
outpatient hospital service, thereby altering the pre-existing 
definition of ``outpatient hospital services.'' The final rule became 
effective on December 8, 2008. Section 5003(c) of ARRA precludes CMS 
from taking any action to implement the final rule with respect to 
services furnished between December 8, 2008 and June 30, 2009.

C. Optional State Plan Case Management Services

    On December 4, 2007, we published an interim final rule with 
comment period that revised current Medicaid regulations to incorporate 
changes made by section 6052 of the Deficit Reduction Act of 2005 (DRA) 
(72 FR 68077). In addition, we placed new limitations on the services 
and activities that could be covered and paid as an optional targeted 
case management service or optional case management service.
    The interim final rule became effective on March 3, 2008. Section 
7001(a)(3)(B)(I) of the Supplemental Appropriations Act imposed a 
partial moratorium until April 1, 2009, precluding CMS from taking any 
action to impose restrictions on case management services that were 
more restrictive than those in effect on December 3, 2007. The law 
contained an exception for the portion of the regulation as it related 
directly to implementing the definition of case management services and 
targeted case management services. That partial moratorium was extended 
by section 5003(a) of ARRA until July 1, 2009.

II. Provisions of the Proposed Regulation

    Since the publication of these final regulations, we have received 
additional public input about the adverse effects that could result 
from these regulations. In addition, the statutory moratoria indicate 
strong concern in Congress about the effects of these regulations. In 
particular, we have become aware that the provisions of these rules 
could result in restrictions on services available to beneficiaries and 
there is a lack of clear evidence demonstrating that the approaches 
taken in the regulations are warranted at this time. In order to ensure 
that beneficiaries are not harmed while we reconsider the approaches 
taken in these rules, as discussed in detail below, we propose to 
rescind the November 7, 2008 final rule entitled ``Clarification of 
Outpatient Hospital Facility (Including Outpatient Hospital Clinic) 
Services Definition''; the December 28, 2007 final rule entitled 
``Elimination of Reimbursement Under Medicaid for School Administration 
Expenditures and Costs Related to Transportation of School-Age Children 
Between Home and School''; and certain provisions of the December 4, 
2007 interim final rule with comment period entitled ``Optional State 
Plan Case Management Services.''
    We are soliciting public comments on the proposal to rescind these 
rules and to aid our consideration of the many complex questions 
surrounding these issues and the need for regulation in these areas. In 
particular, we seek the following:
     Information, including specific examples where feasible, 
of problems that would result from rescission of these final rules, and 
potential approaches to resolve those problems if these final rules are 
rescinded;
     Information, including specific examples where feasible, 
addressing the scope and nature of problems that would result if these 
final rules were implemented;
     Information, including specific examples, and the scope 
and nature of the potential problem where feasible, on whether 
implementation of these final rules would reduce beneficiary access to 
program information and covered health care services;
     Comment on whether these final rules provide sufficient 
clarity to ensure sound Medicaid program operation; and
     Comment on whether the objectives of the rules might also 
be accomplished through alternative approaches, such as program 
guidance and technical support, to ensure valid Medicaid claiming 
procedures.

A. Elimination of Reimbursement Under Medicaid for School 
Administration Expenditures and Costs Related to Transportation of 
School-Age Children Between Home and School

    We propose to rescind the December 28, 2007 final rule in its 
entirety. We have become aware that the adverse consequences of the 
final rule may be more significant than previously assumed, and that 
the consideration of alternative approaches may be warranted. These 
concerns were suggested by the public comments submitted in response to 
the September 7, 2007 proposed rule (72 FR 51397), but we may not have 
been fully aware of the magnitude of the potential adverse 
consequences. Since issuing the final rule, we have become aware that 
the limitations on Federal Medicaid funding under the final rule could 
substantively affect State outreach efforts in schools, and the 
availability of Medicaid services for eligible beneficiaries. We 
previously assumed that, since such activities were within the scope of 
the overall mission of the schools, the activities would continue with 
funding from other sources available for educational activities. 
Because this assumption may be invalid, we are concerned that 
implementation of the rule could

[[Page 21234]]

adversely affect Medicaid beneficiaries. We are requesting comments on 
this issue.
    Moreover, we are concerned that there is insufficient evidence on 
the need for the particular approach taken by the final rule. The 
oversight reviews that we cited in issuing the final rule, indicating 
some deficiencies in procedures for claiming school-based 
administrative expenditures and necessary transportation, were several 
years old and based on data collected more than 5 years ago. These 
claims did not reflect CMS guidance issued after the review data was 
collected; nor did they reflect the greater administrative oversight 
and technical assistance that we have made available more recently. 
Moreover, CMS has tools at its disposal to address inappropriate 
claiming that could arise in any setting, so we will continue to 
evaluate the efficacy of these tools in addressing any claiming issues.
    In light of these concerns, we propose to rescind the provisions of 
the final rule while we further review the underlying issues and 
determine whether a different approach is necessary, and revise the 
regulations to remove the regulatory provisions added by the December 
28, 2007 final rule. We would instead apply the policies in effect 
before the December 28, 2007 final rule became effective, as set forth 
in guidance on school-based administrative claiming and school 
transportation.
    Specifically, we propose to revise Sec. Sec.  431.53(a) and 
440.170(a) to remove language indicating that, for purposes of Medicaid 
reimbursement, transportation does not include transportation of 
school-age children from home to school and back when a child is 
receiving a Medicaid-covered service at school. In addition, we propose 
to remove Sec.  433.20, which provides that Federal financial 
participation under Medicaid is not available for expenditures for 
administrative activities by school employees, school contractors, or 
anyone under the control of a public or private educational 
institution.

B. Clarification of Outpatient Hospital Facility (Including Outpatient 
Hospital Clinic) Services Definition

    We propose to rescind the November 7, 2008 final rule in its 
entirety. While we previously perceived the rule as having little 
impact (because it affected only the categorization of covered 
services), we have become aware that this perception may have been 
based on inaccurate assumptions. In particular, we assumed that, to the 
extent that covered services were no longer within the outpatient 
hospital benefit category, those services could be easily shifted to 
other benefit categories. We have received input indicating that such 
shifts may be difficult in light of the complexity of State funding and 
payment methodologies and health care service State licensure and 
certification limits. As a result, the November 7, 2008 final rule 
could have an adverse impact on the availability of covered services 
for beneficiaries.
    Therefore, we propose to rescind the November 7, 2008 final rule in 
its entirety and reinstate the regulatory definition of ``outpatient 
hospital services'' at 42 CFR 440.20 that existed before the final rule 
became effective. Specifically, we propose to remove the provisions at 
Sec.  440.20(a)(4)(i), which define Medicaid outpatient hospital 
services to include those services recognized under the Medicare 
outpatient prospective payment system (defined under 42 CFR 419.2(b)) 
and those services paid by Medicare as an outpatient hospital service 
under an alternate payment methodology. We would also remove the 
requirement at Sec.  440.20(a)(4)(ii) that services be furnished by an 
outpatient hospital facility or a department of an outpatient hospital 
as described at Sec.  413.65. Finally, we propose to remove the 
provision at Sec.  440.20(a)(4)(iii) that limits the definition of 
outpatient services to exclude services that are covered and reimbursed 
under the scope of another Medicaid service category under the Medicaid 
State plan.
    In addition, we are proposing to withdraw Sec.  447.321 of the 
proposed rule published on September 28, 2007 (72 FR 55158) upon which 
we reserved action in the final rule. These provisions contained 
regulatory guidance on the calculation of the outpatient hospital and 
clinic services upper payment limit (UPL).

C. Optional State Plan Case Management Services

    We propose to rescind certain provisions of the December 4, 2007 
interim final rule with comment period. In discussions with States 
about the implementation of case management requirements, we have 
become concerned that certain provisions of the interim final rule may 
unduly restrict beneficiary access to needed covered case management 
services, and limit State flexibility in determining efficient and 
effective delivery systems for case management services. In particular, 
we are concerned that the interim final rule may be overly narrow in 
defining individuals transitioning to community settings, and we are 
concerned that beneficiary access to services may be affected by the 
limitations in the interim final rule on payment methodologies, on 
provision of case management services by other agencies or programs, on 
qualified providers, on administrative case management activities, and 
on coverage of services furnished in different settings.
    Many of these same concerns were expressed by public commenters and 
we are concerned that adverse consequences may occur for beneficiaries 
and the program as a whole if these provisions were implemented. We 
believe that these same concerns were also reflected by the 
Congressional moratorium on the implementation of this rule. That 
moratorium indicated a particular concern with administrative 
requirements and limitations included in the interim final rule. 
Therefore, we propose to rescind certain provisions of the December 4, 
2007 interim final rule.
    Specifically, we propose to remove Sec. Sec.  440.169(c) and 
441.18(a)(8)(viii), because we believe that these provisions may be 
overly restrictive in defining ``individuals transitioning to a 
community setting,'' for whom case management services may be covered 
under Sec.  440.169(a). Until we address the comments submitted on the 
interim final rule, we believe that States should have additional 
flexibility to provide coverage using a reasonable definition of this 
term. We are also proposing to remove Sec. Sec.  441.18(a)(5) and 
(a)(6). We believe that these provisions may unduly limit States' 
delivery systems for case management services. We further propose to 
remove Sec.  441.18(a)(8)(vi) because the requirement for payment 
methodologies in this provision may be administratively burdensome, may 
result in restrictions on available providers of case management 
services, and generally may limit beneficiary access to services. For 
similar reasons, in Sec.  441.18, we propose to rescind paragraphs 
(c)(1), (c)(4), and (c)(5) that limit the provision of case management 
activities that are an integral component of another covered Medicaid 
service, another non-medical program, or an administrative activity. On 
the issues addressed by these rescinded provisions, we will continue to 
apply the interpretive policies in force prior to issuance of the 
interim final rule.
    We propose to rescind parts of Sec.  441.18(c)(2) and (c)(3) to 
remove references to programs other than the foster care program, 
because we are concerned that these provisions may be overly 
restrictive in narrowing State options for delivery of case management 
services. We propose to consolidate the

[[Page 21235]]

remaining provisions of these paragraphs as paragraph (c) to read as 
follows:
    ``(c) Case management does not include, and FFP is not available in 
expenditures for, services defined in Sec.  441.169 of this chapter 
when the case management activities constitute the direct delivery of 
underlying medical, educational, social, or other services to which an 
eligible individual has been referred, including for foster care 
programs, services such as, but not limited to, the following:
    (1) Research gathering and completion of documentation required by 
the foster care program.
    (2) Assessing adoption placements.
    (3) Recruiting or interviewing potential foster care parents.
    (4) Serving legal papers.
    (5) Home investigations.
    (6) Providing transportation.
    (7) Administering foster care subsidies.
    (8) Making placement arrangements.''
    We would retain the remaining provisions of the interim final rule 
with comment period, and finalize those provisions in a future 
rulemaking.

III. 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.

IV. 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.

V. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impact of this proposed rule as required by 
Executive Order 12866, the Congressional Review Act, the Regulatory 
Flexibility Act (RFA), 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. Executive Order 12866 (as amended) directs 
agencies to assess all costs and benefits of all 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).
    One of the three rules we propose to rescind was estimated to save 
the Federal government, by reducing its financial participation in the 
Medicaid program, amounts in excess of this threshold, with 
corresponding increases in costs to States (or in some cases to local 
entities or to other Federal programs) that would essentially offset 
these savings. That is, the primary economic effect predicted under 
this rule was to change the sources of ``transfer payments'' among 
government entities rather than the levels of actual services 
delivered. For example, the RIA for the final rule regarding Medicaid 
reimbursement for school administration and transportation of school-
aged children assumed that localities would continue to provide such 
transportation even though one source of funding was reduced. 
Rescission of these rules would simply restore the status quo ante. 
That is, the Medicaid program would not gain these savings and other 
Federal, State, or local programs would not lose the Medicaid funding. 
(We acknowledge that many commenters were concerned that these three 
rules would have additional and substantial adverse effects on service 
provision and that the conclusions of the original RIAs did not reflect 
on this point. As explained earlier in this preamble, we share some of 
those concerns.) Except for portions of the case management interim 
final rule, these rules have not yet taken ``real world'' effect 
because of the moratoriums on enforcement. Accordingly, we believe that 
the proposed rescissions would have no economic effect, assuming that 
the situation before July 1, 2009 is taken as the ``counterfactual'' 
case.
    In the alternative, it might be argued that the appropriate 
counterfactual is that rescinding these rules would create 
``economically significant'' benefits and costs of the same magnitude 
but exactly the opposite of those analyzed in the original RIAs. For 
example, the final rule regarding school administration expenditures 
and costs related to transportation was estimated to reduce Federal 
Medicaid outlays by $635 million in FY 2009 and by a total of $3.6 
billion over the first 5 years (FY 2009-2013). The proposed rescission 
would eliminate these Federal savings with a corresponding offset in 
State, local, and Federal funding increases that would otherwise be 
needed to maintain existing services.
    In the current economic climate, and with the drastic budgetary 
reductions being made in most States, the assumption of an essentially 
offsetting change in spending responsibilities that leaves service 
provision unchanged is completely unrealistic. However, because these 
rules are being proposed for rescission without ever having been 
enforced, no purpose would be served in re-estimating hypothetically 
the effects of the original rules, or in estimating hypothetically the 
potential effects of more realistically estimated current responses.
    Accordingly, we have decided for purposes of this rulemaking that 
the most straightforward assumption to make is that we are preserving 
the status quo, and that under the criteria of EO 12866 and the 
Congressional Review Act this is not an economically significant (or 
``major'') rule. However, we welcome comments on this conclusion. We 
also welcome comments on an alternative that the original final rules 
did not specifically address, namely rescinding these final rules 
without prejudicing future promulgation of rules that might restrict 
Federal spending (though perhaps not as substantially).
    The RFA requires agencies to analyze options for regulatory relief 
of small entities if final rules have a ``significant economic impact 
on a substantial number of small entities.'' For purposes of the RFA, 
small entities include small businesses, nonprofit organizations, and 
small governmental jurisdictions, including school districts. ``Small'' 
governmental jurisdictions are defined as having a population of less 
than fifty thousand. Individuals and States are not included in the 
definition of a small entity. Although many school districts have 
populations below this threshold and are therefore considered small 
entities for purposes of the RFA, we originally determined that the 
impact on local school districts as a result of the final rule on 
School Administration Expenditures and Costs Related to Transportation 
of School-Age Children would not exceed the threshold of 
``significant'' economic impact under the RFA, for a number of reasons. 
Most simply, the estimated annual Federal savings under this final rule 
were only about one eighth of one percent of total annual spending on 
elementary and secondary schools, far below the threshold of 3 to 5 
percent of annual revenues or costs used by HHS in determining whether 
a proposed or final

[[Page 21236]]

rule has a ``significant'' economic impact on small entities. 
Accordingly, regardless of the counterfactual, rescission of this rule 
would not have a ``significant'' impact on a substantial number of 
small entities. Our analyses of the final rules regarding Case 
Management and Outpatient Hospital Facilities concluded that neither 
rule would have a significant impact on a substantial number of small 
entities. Accordingly, rescinding those final rules in whole or in part 
and preserving the status quo ante would likewise fail to trigger the 
``significant'' impact threshold. We further note that in all three 
cases any impact of this rulemaking would be positive rather than 
negative on affected entities. Accordingly, the Secretary certifies 
that this proposed rule would not have a significant impact on a 
substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. Of the three final rules 
we propose to rescind in whole or in part, only the Outpatient Hospital 
Facility rule would have had any possible effect on small rural 
hospitals. Our analysis of that rule concluded that it would have had 
no direct effect on these hospitals, and that any indirect effect as a 
result of State adjustments could not be predicted. Regardless, any 
effects of this proposed rescission on small rural hospitals would be 
positive, not negative. Accordingly, we are not preparing an analysis 
for section 1102(b) of the Act because we have determined, and the 
Secretary certifies, that this proposed rule would not have a direct 
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 whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $130 million. This proposed rule 
contains no mandates that will impose spending costs on State, local, 
or tribal governments in the aggregate, or by the private sector, of 
$130 million. Our analyses of all three final rules concluded that they 
would impose no mandates of this magnitude, and these proposed 
rescissions create no mandates of any kind.
    Executive Order 13132 on Federalism establishes certain 
requirements that an agency must meet when it promulgates a proposed 
rule (and subsequent final rule) that imposes substantial direct 
requirements on State and local governments, preempts State law, or 
otherwise has Federalism implications. EO 13132 focuses on the roles 
and responsibilities of different levels of government, and requires 
Federal deference to State policy-making discretion when States make 
decisions about the uses of their own funds or otherwise make State-
level decisions. The original final rules, however much they might have 
limited Federal funding, did not circumscribe States' authority to make 
policy decisions regarding transportation, case management, or hospital 
outpatient services. This proposed rule will likewise not have a 
substantial effect on State or local government policy discretion.

B. Anticipated Effects

    As discussed above, one of the three final rules was predicted to 
have substantial effects on the use of Federal Medicaid funds for 
services that were arguably not the responsibility of Medicaid to fund. 
While rescission of this rule will have little or no immediate fiscal 
effect since the projected changes never occurred, other important 
effects will remain. For one thing, continuing controversy and 
uncertainty over the proper boundaries between Medicaid and other 
funding sources will remain, particularly for services that are not 
medical and for services that are also the primary responsibility of 
other programs.

C. Alternatives

    We welcome comments not only on the proposed rescission of each 
rule, in whole or in part, but also on alternatives that may more 
constructively address the underlying problems and their likely impacts 
on State beneficiaries of the Medicaid program.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 431

    Grant programs--health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 433

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

42 CFR Part 440

    Grant programs--health, Medicaid.

42 CFR Part 441

    Family planning, Grant programs--health, Infants and children, 
Medicaid, Penalties, Prescription drugs, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services would amend 42 CFR chapter IV as set forth below:

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

Subpart B--General Administrative Requirements

    1. The authority citation for part 431 continues to read as 
follows:

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

    2. Section 431.53 is revised to read as follows:


Sec.  431.53  Assurance of transportation.

    A State plan must--
    (a) Specify that the Medicaid agency will ensure necessary 
transportation for recipients to and from providers; and
    (b) Describe the methods that the agency will use to meet this 
requirement.

PART 433--STATE FISCAL ADMINISTRATION

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

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


Sec.  433.20  [Removed]

    4. Part 433 is amended by removing Sec.  433.20

PART 440 SERVICES: GENERAL PROVISIONS

    5. The authority citation for part 440 continues to read as 
follows:

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

    6. Section 440.20 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec.  440.20  Outpatient hospital services and rural health clinic 
services.

    (a) Outpatient hospital services means preventive, diagnostic, 
therapeutic, rehabilitative, or palliative services that--
    (1) Are furnished to outpatients;
    (2) Are furnished by or under the direction of a physician or 
dentist; and

[[Page 21237]]

    (3) Are furnished by an institution that--
    (i) Is licensed or formally approved as a hospital by an officially 
designated authority for State standard-setting; and
    (ii) Meets the requirements for participation in Medicare as a 
hospital;
    (4) May be limited by a Medicaid agency in the following manner: A 
Medicaid agency may exclude from the definition of ``outpatient 
hospital services'' those types of items and services that are not 
generally furnished by most hospitals in the State.
* * * * *


Sec.  440.169  [Amended]

    7. Section 440.169 is amended by removing and reserving paragraph 
(c).
    8. Section 440.170(a)(1) is revised to read as follows:


Sec.  440.170  Any other medical care or remedial care recognized under 
State law and specified by the Secretary.

    (a) Transportation. (1) ``Transportation'' includes expenses for 
transportation and other related travel expenses determined to be 
necessary by the agency to secure medical examinations and treatment 
for a recipient.
* * * * *

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC 
SERVICES

    9. The authority citation for part 441 continues to read as 
follows:

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

    10. Section 441.18 is amended by removing and reserving paragraphs 
(a)(4), (a)(5), and (a)(8)(vi); removing (a)(8)(viii); and revising 
paragraph (c) to read as follows:


Sec.  441.18  Case management services.

* * * * *
    (c) Case management does not include, and FFP is not available in 
expenditures for, services defined in Sec.  441.169 of this chapter 
when the case management activities constitute the direct delivery of 
underlying medical, educational, social, or other services to which an 
eligible individual has been referred, including for foster care 
programs, services such as, but not limited to, the following:
    (1) Research gathering and completion of documentation required by 
the foster care program.
    (2) Assessing adoption placements.
    (3) Recruiting or interviewing potential foster care parents.
    (4) Serving legal papers.
    (5) Home investigations.
    (6) Providing transportation.
    (7) Administering foster care subsidies.
    (8) Making placement arrangements.
* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773, Medical 
Assistance Program)

    Dated: April 30, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 1, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-10494 Filed 5-1-09; 4:15 pm]
BILLING CODE 4120-01-P