33616 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

45 CFR Parts 92 and 95

Health Care Financing Administration

42 CFR Parts 447 and 457

[HCFA–2114–F]

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: Final rule.

SUMMARY: This rule sets forth the

methodologies and procedures to

determine the allotments of Federal

funds for each Federal fiscal year (FY)

available to individual States,

Commonwealths and Territories under

title XXI of the Social Security Act. This

rule also specifies 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 (SCHIP) and related

Medicaid program provisions.

Established by section 4901 of the

Balanced Budget Act of 1997 (Public

Law 105–33), amended by technical

amendments (made by Public Law 105–

100), and most recently amended by the

Medicare, Medicaid and SCHIP

Balanced Budget Refinement Act

(BBRA) of 1999 (Public Law 106–113,

enacted November 29, 1999), the State

Children’s Health Insurance Program

provides Federal matching funds to

States to initiate and expand health

insurance coverage to uninsured, lowincome 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 final rule in

accordance with the provisions of

sections 2104 and 2105 of the Act that

relate to allotments and payments to

States under title XXI.

DATES: Effective Date: These regulations

are effective on June 23, 2000.

FOR FURTHER INFORMATION CONTACT:

Richard Strauss, (410) 786–2019

SUPPLEMENTARY INFORMATION:

I. Background

We published on March 4, 1999 a

proposed rule in the Federal Register

(64 FR 10412), that set forth the

methodologies and procedures to

determine allotments of federal funds

for each federal fiscal year that will be

available to individual States,

Commonwealths and Territories under

title XXI of the Social Security Act (the

Act). This rule also specified the

allotment, payment, and grant award

process that would be used for the

States, the Commonwealths and

Territories to claim and receive Federal

financial participation (FFP) for

expenditures under SCHIP and related

Medicaid program provisions.

Section 4901 of the Balanced Budget

Act of 1997 (BBA), Public Law 105–33,

as amended by Public Law 105–100,

added title XXI to the Act, to assist State

efforts to initiate and expand child

health assistance to uninsured, lowincome children. Under title XXI, 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.

Section 2104(a) of the Act

appropriates funds for each of ten fiscal

years and directs the Secretary to

calculate allotments of these

appropriated funds for each State that

will be available to match the State

expenditures for that fiscal year. Section

2104(b) of the Act sets forth a specific

methodology for calculating allotments

to the fifty States, while section 2104(c)

of the Act sets forth a methodology for

calculating allotments to the

Commonwealths and Territories.

Section 2104(d) of the Act requires the

reduction of the title XXI allotment to

account for Medicaid expansions

funded through the enhanced rate

authorized by title XXI. Section 2104(e)

of the Act provides for a 3-year period

of availability for each State’s annual

allotment, and section 2104(f)

authorizes redistribution of unspent

allotments at the end of that period of

availability.

Section 2105(a) and (b) 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

(enhanced FMAP)) of the State

expenditures under the plan. These

expenditures are primarily for child

health assistance for targeted lowincome 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. According to

section 2105(c) of the Act, 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 lowincome children; health services

initiatives; outreach; and administrative

costs.

This final rule implements these title

XXI SCHIP 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

Under our March 4, 1999 proposal,

the new regulations for the State

Children’s Health Insurance Program

would be set forth in regulations at 42

CFR part 457 subchapter D. The existing

regulations for the Medicaid program

containing similar general financial and

related provisions were used as a model

for SCHIP regulations. We note that

some sections and subparts would be

reserved for regulations currently under

development related to other statutory

requirements of the State Children’s

Health Insurance Program. We intend to

address these and other statutory

requirements in subsequent Federal

Register documents. In particular, a

SCHIP proposed rule was published on

November 8, 1999 in the Federal

Register (64 FR 60882).

We proposed a new subpart B in Part

457 that would address requirements for

financial administration of the SCHIP

plan. We also proposed a new subpart

F that would specify the methodologies

and procedures to determine the Federal

allotments, and the grant award process

that will be used for payment to States.

Specifically, we proposed to add

§§ 457.200 through 457.238 in Subpart

B to set forth financial administration

requirements to govern the

documentation of claims for Federal

payment, the standard accounting

practices to be used in determining

claims, and the process for resolving

disputes about those claims. We

proposed to add §§ 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

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33617

allotments for a fiscal year, and section

2105 of the Act, relating to the process

for making payments to States from

their allotments. We also proposed to

add a new section on Medicaid

presumptive eligibility at § 447.88 to

subpart A.

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.

III. Analysis of and Responses to Public

Comments

We received one letter of comment on

the March 4, 1999 proposed rule. A

summary of the comments contained in

that letter, and our responses follows.

A. Resubmission of Claims

Comment: The commenter noted that

the proposed regulations seem to

confirm that States may carry forward

SCHIP claims in excess of their

allotments for particular fiscal years and

have those claims satisfied out of the

following year’s allotments, once those

funds become available. The commenter

suggested that claims exceeding a fiscal

year’s allotment should not have to be

resubmitted.

Response: This commenter is

concerned that a State should only have

to report expenditures once, without

having to resubmit them again in the

case where the expenditures reported

for a fiscal year are in excess of the

SCHIP fiscal year allotments available in

that fiscal year. This is already the case

under the proposed rule as published in

the Federal Register on March 4, 1999.

Under § 457.616(c)(2), a State’s reported

payments are applied against the State’s

allotment ‘‘based on the quarter in

which the expenditures are claimed by

the State.’’ This provides the State with

flexibility to decide the quarter in which

a particular expenditure will be

reported and claimed. As further

provided in § 457.616(c)(6), if the State

reports expenditures in one fiscal year

and these expenditures are in excess of

the allotment(s) available in that fiscal

year, the amount of the excess

expenditures are carried over for

application against the allotment(s)

available in the following fiscal year

when they become available. We

designed the expenditure reporting

system to automatically track and carry

over the amounts of excess

expenditures. Therefore, States do not

need to resubmit expenditures once

they are submitted.

B. Regulations Related to Provider

Related Donations and Health Care

Related Taxes

Comment: The commenter suggested

that HCFA should not issue SCHIP

regulations in the area of providerrelated donations and health carerelated taxes. This commenter indicated

that: ‘‘In the overview regarding the

section, Public Funds as the State Share

of Financial Participation (§ 457.220), a

statement is made that HCFA is

considering whether there is need to

issue additional regulations for

provider-related donations and health

care-related taxes for SCHIP. It does not

seem appropriate or warranted under

the title XXI legislation to have different

regulations regarding provider-related

donations and health care-related taxes

for various programs. Additions to the

current regulations for provider-related

donations and health care-related taxes

would bring unnecessary confusion and

complication to SCHIP. We strongly

urge HCFA against promulgating

regulations in this area.’’

Response: We agree that there is the

potential for confusion if different

regulations on the provider-related

donations and health care-related taxes

provisions applied in the SCHIP and the

Medicaid program. The quoted language

was intended to reflect recognition that,

after we have more experience with the

SCHIP program, we may need to clarify

how the basic tax and donation

principles set forth in the Medicaid

statute would apply to a SCHIP

program. At this time, we do not intend

to incorporate special provisions on

provider-related donations and health

care-related taxes into the SCHIP

regulations. As indicated in the

preamble to the proposed rule

published on March 4, 1999, in

§§ 457.220 and 457.628, we will retain

the references to the Medicaid

regulatory provisions on this issue

contained in 42 CFR subpart B §§ 433.51

through 433.74.

C. Carryover of Expenditures and the 10

Percent Limit

Comment: The commenter notes that

the 10 percent limit on certain

categories of costs—administrative costs

and costs of outreach, health services

initiatives, and payment for services

other than coverage—is applied on an

annual fiscal year basis. The commenter

further noted that SCHIP guidance

documents prepared by HCFA would

permit States to withhold submission of

claims for expenditures, which would

have the effect of allowing a carryover

period for the 10 percent limit. The

commenter requested that the final

regulation expressly authorize such a

carryover period for the 10 percent

limit.

Response: We are clarifying the

regulation in this regard. While we agree

with the commenter that we would

permit States the flexibility to time the

submission of claimed expenditures, we

would not permit the carryover of

claims for administrative costs once

claimed in a particular fiscal year (even

when no Federal payment is made

based on those expenditures paid

because they exceed the 10 percent limit

for that fiscal year). HCFA believes its

position faithfully adheres to the intent

of the statute while permitting some

administrative flexibility in the

submission of claims and administrative

simplicity in calculating whether the

limit has been exceeded.

As indicated in proposed

§ 457.616(c)(2), for purposes of applying

expenditures against the available fiscal

year allotments, we intended to permit

States flexibility in deciding the quarter

in which they will submit the

expenditures. We would make the same

flexibility available to States with

respect to the 10 percent limit referred

to in § 457.618. As specified below, in

this final rule, we are amending

§457.618 to make clear that both the

expenditures used in calculating the 10

percent limit, and the expenditures

applied against the 10 percent limit, are

based on the quarter in which the

expenditures are claimed by a State. We

are also amending § 457.616 to make

clear that the expenditures that are

within a particular fiscal year’s 10

percent limit may be applied against a

subsequent fiscal year’s available

allotment or allotments for purposes of

Federal reimbursement. This could

occur when the available allotment or

allotments for a fiscal year was

exhausted. In that case, even though the

amounts of the expenditures were

within the 10 percent limit, and

therefore, otherwise reimbursable, no

Federal payment would be available for

the expenditures because there would

be no available allotment for that fiscal

year. Therefore, we are clarifying that

expenditures in excess of the 10 percent

limit for the fiscal year during which

they are claimed may not be applied

against an allotment available only in a

subsequent fiscal year.

Consistent with this position that

expenditures subject to the limits are

counted in the fiscal year claimed, we

are also clarifying that, for purposes of

calculating the 10 percent limit, total

program expenditures are counted in

the fiscal year claimed as well. These

expenditures cannot be used in more

than one Federal fiscal year. For

33618 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

example, the amount of the

expenditures referenced in section

2105(a)(1) of the Act as claimed and

reported by a State on the 4 quarterly

expenditure reports for FY 1998, would

be used in calculating a State’s 10

percent limit for FY 1998. These

expenditures may not be used again for

calculating a 10 percent limit for

another fiscal year, such as for FY 1999.

Similarly, the amount of the

expenditures referenced in section

2105(a)(2) of the Act, as reported on the

4 quarterly expenditure reports for FY

1998 would be applied against the 10

percent limit for FY 1998; these

expenditures may not be applied against

a 10 percent limit for another fiscal year,

such as for FY 1999. Therefore, based on

when they claim and report

expenditures, States have the flexibility

to determine the fiscal year 10 percent

limit regarding which such

expenditures will be applied.

IV. Provisions of the Final Regulations

After consideration of the comments

reviewed and further analysis of specific

issues, we are adopting the March 4,

1999 proposed rule as final with minor

editorial clarification and revisions

discussed and identified in Section III of

this preamble.

In addition, the Medicare, Medicaid

and SCHIP Balanced Budget Refinement

Act (BBRA) of 1999 (Public Law 106–

113, enacted on November 29, 1999)

contained certain provisions which are

being implemented in this final

regulation. As detailed below, these

provisions are explicit, clear and

straightforward in the statute, and we

believe, self-implementing. Therefore,

we are implementing the new

provisions of BBRA of 1999 discussed

below in this final regulation as final

without need for public comment.

A. Inapplicability of Enhanced Match

Under the SCHIP to Medicaid DSH

Payments

Section 605(a) of the BBRA of 1999

amends section 1905(b) of the Act to

preclude the availability of the

enhanced Federal medical assistance

percentage (enhanced FMAP) for

disproportionate share hospital (DSH)

payments made by States under section

1923 of the Act. Under section 606(b) of

Public Law 106–113, this amendment

‘‘takes effect on October 1, 1999, and

applies to expenditures made on or after

such date.’’ In general, the Federal

matching rate available for expenditures

described in sections 1905(u)(2) and (3)

of the Act, relating to the Medicaid

SCHIP expansion groups, is the

enhanced FMAP specified in section

2105(b) of the Act and by reference in

section 1905(b) of the Act. However,

section 605(a) of the BBRA of 1999

amended section 1905(b) of the Act to

specifically preclude the availability of

the enhanced FMAP for DSH payments

made under section 1923 of the Act.

Sections 457.616(a)(1) and (2) of this

final regulation refer to the reduction of

a State’s Title XXI allotment by the

amount of Medicaid payments made to

the State on the basis of the enhanced

FMAP. As indicated above, enhanced

FMAP is no longer available for DSH

expenditures under section 1923 of the

Act, regardless of whether the

expenditures meet other conditions for

enhanced FMAP. Therefore, there is no

need to modify these SCHIP regulations,

as contained in this Federal Register

publication. However, we also note that

the proposed SCHIP regulations

published on November 8, 1999 in the

Federal Register at sections 42 CFR

433.10 and 433.11 would have provided

for the availability of the enhanced

FMAP under the Medicaid program.

These proposed regulations will need to

be revised to reflect the provisions of

section 605(a) of the BBRA of 1999,

which precludes enhanced match for

DSH expenditures under section 1923 of

the Act.

B. Stabilizing the SCHIP Allotment

Formula

1. Acceleration of the Phase-in of LowIncome Children.

Section 701(a)(1) of the BBRA of 1999

amended section 2104(b) of the Act to

accelerate the phase-in of the blend of

the numbers of uninsured low-income

children and low-income children

specified in the statute, which are used

in determining the Number of Children

factor. Prior to this legislative change,

the Number of Children for FYs 1998

through 2000 would have been based on

the total number of low-income

uninsured children in the State. As a

result of the legislative change, the total

number of uninsured low-income

children in the State is only used for

determining the Number of Children

factor for FYs 1998 and 1999. Under

section 2104(b) of the Act, as amended

by section 701(a)(1) of the BBRA of

1999, for FY 2000 the Number of

Children is now calculated as the sum

of 75 percent of the low-income,

uninsured children in the State, and 25

percent of the number of low-income

children in the State. Furthermore, for

FY 2001 and succeeding fiscal years

through FY 2007, the Number of

Children is calculated as the sum of 50

percent of the low-income, uninsured

children in the State, and 50 percent of

the number of low-income children in

the State. Section 457.608 of the final

regulation incorporates this change.

2. Floors and Ceiling in State

Allotments.

Section 701(a)(2) of the BBRA of 1999

significantly amended and revised

section 2104(b)(4) of the Act to impose

floors and ceilings in the determination

of the SCHIP allotments for a fiscal year,

for the purpose of providing increased

stability in SCHIP funding from fiscal

year to fiscal year and cumulatively over

a number of fiscal years, as compared to

FY 1999. For purposes of this provision,

the floors and ceilings are only

applicable to a ‘‘Subsection (b) State,’’

which as defined in section

2104(b)(4)(D)(ii) of the Act, ‘‘means one

of the 50 States or the District of

Columbia.’’ More specifically, the floors

and ceilings apply only to the

determination of the ‘‘Allotments to 50

States and District of Columbia’’ under

section 2104(b) of the Act, as

distinguished from the determination of

the ‘‘Allotments to Territories’’ under

section 2104(c) of the Act. The floors

and ceilings imposed by section

701(a)(2) of the BBRA of 1999 do not

apply with respect to the determinations

of allotments for the Commonwealths or

Territories as prescribed in section

2104(c) of the Act.

Under section 2104(b)(4)(D) of the

Act, as amended by section 701(a)(2) of

the BBRA of 1999, for a fiscal year each

State is allotted a ‘‘proportion’’ of the

total amount available for funding under

title XXI to all States for the fiscal year.

The term ‘‘proportion,’’ as defined in

section 2104(b)(4)(D)(i) of the Act, refers

to the amount of the allotment for a

State for a fiscal year divided by the

total amount available nationally for all

States for the fiscal year. The proportion

for each State is the State’s percentage

share of the total amount available

nationally for that fiscal year to all

States. Therefore, in order for the entire

total amount available nationally to be

allotted to the States, the sum of the

proportions for all States must exactly

equal one; in other words, the sum of

each State’s percentage share, must

exactly equal 100 percent. The

determination of the proportion for each

State is in accordance with the

provisions of section 2104(b) of the Act,

and as amended by section 701(a)(2) of

the BBRA of 1999, the proportions will

reflect the application of floors, ceilings,

and a reconciliation process, if

appropriate.

In general, a State’s allotment for a

fiscal year is calculated by multiplying

the State’s proportion for the fiscal year

by the national total amount available

for allotment for that fiscal year. In

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33619

accordance with the statutory formula

for determining allotments, the State

proportions are determined under two

steps, which are described below in

further detail.

Under the first step, each State’s

proportion is calculated by multiplying

the State’s Number of Children and the

State Cost Factor to determine a

‘‘product’’ for each State. The

determination of the Number of

Children and the State Cost Factor are

described in other sections. The

resulting products for all States are then

summed. Finally, the product for a State

is divided by the sum of the products

for all States, thereby yielding that

State’s preadjusted proportion, referring

to the State’s proportion before the

imposition of the floors and ceilings and

related reconciliation provisions.

Under the second step, the

preadjusted proportions are subject to

the application of the floors and ceilings

provisions. The amended SCHIP statute

specifies three proportion floors, or

minimum proportions, that apply in

determining States’ allotments. The first

proportion floor is equal to $2,000,000

divided by the total of the amount

available nationally. The second

proportion floor is equal to 90 percent

of the allotment proportion for the State

for the previous fiscal year; that is, a

State’s proportion for a fiscal year must

not be lower than 10 percent below the

previous fiscal year’s proportion. The

third proportion floor is equal to 70

percent of the proportion for the State

for FY 1999; that is, the proportion for

a fiscal year must not be lower than 30

percent below the State’s FY 1999

proportion.

Each State’s proportion for a fiscal

year is limited by a maximum ceiling

amount, equal to 145 percent of the

State’s proportion for FY 1999; that is,

a State’s proportion for a fiscal year

must not be higher than 45 percent

above the State’s proportion for FY

1999. The floors and ceilings are

intended to minimize the fluctuation of

State allotments from year to year and

over the life of the program.

As determined under the first step,

which is applied prior to the application

of any floors or ceilings, the sum of

these preadjusted proportions for all the

States will be exactly equal to one.

However, the application of the floors

and ceilings under the second step may

change the proportions for certain

States; that is, some States’ proportions

may need to be raised to the proportion

floors, while other States’ proportions

may need to be lowered to the

maximum proportion ceiling. After

application of the fixed floors and

ceilings, the sum of the (adjusted)

proportions for all States may not

exactly equal one. In that case, section

2104(b)(4)(B) of the Act requires a

further ‘‘reconciliation’’ of the

proportions, under which the

proportions will be adjusted to make the

sum of the proportions exactly equal to

one. This reconciliation process is

determined in accordance to whether

the sum of the proportions after

application of the fixed floors and

ceiling, but before reconciliation, is

greater than or less than one.

The sum of the proportions would be

greater than one if the application of the

fixed floors and ceilings resulted in the

raising of the proportions of States (due

to the floors) to a greater degree than the

lowering of the proportions of other

States (due to the ceilings). The sum of

the proportions would be lower than

one, if the application of the fixed floors

and ceilings resulted in the lowering of

the proportions of States (due to the

ceilings) to a greater degree than the

raising of the proportions of other States

(due to the floors). It is at least

theoretically possible, though highly

unlikely, that the sum of the States’

proportions would still exactly equal

one after the application of the fixed

floors and ceilings. In that case, no

further reconciliation would be

necessary, and the proportions would be

the same as the preadjusted proportions.

Finally, section 2104(b)(4)(C) of the

Act, requires that the floors and ceilings

provisions under section 2104(b)(4) of

the Act, must not apply or take into

account the amounts of allotments that

might be redistributed in accordance

with section 2104(f) of the Act.

Therefore, the total amount available to

States nationally in a fiscal year, would

not include any redistributed amounts

in that year.

Under the reconciliation process, if

the application of the fixed floors and

ceilings results in the sum of the States’

proportions being greater than one,

section 2104(b)(4)(B)(i) of the Act

requires the Secretary to establish a

maximum percentage increase in States’

proportions, such that when applied to

the State proportions the sum of the

proportions would exactly equal one. If

the application of the fixed floors and

ceilings results in the sum of the States’

proportions being less than one, section

2104(b)(4)(B)(ii) of the Act requires the

Secretary to increase States’ proportions

(as computed before the application of

the fixed floors) in a pro rata manner

(but not to exceed the 145 percent

ceiling), such that when applied to the

State proportions the sum of the

proportions would exactly equal one.

These final regulations are revised to

conform to the provisions of section

701(a)(2) of BBRA of 1999 discussed

above, specifically:

Section 457.608(e)(3)(A) specifies the

provisions in section 2104(b)(4)(A) of

the Act related to the fixed floors and

ceilings.

Section 457.608(e)(3)(B) specifies the

provisions in section 2104(b)(4)(B) of

the Act related to the reconciliation

process.

Section 457.608(b) specifies the

provision in section 2104(b)(4)(D) of the

Act related to the definition of

proportion.

Section 457.608(a)(3) specifies the

provisions in section 2104(b)(4)(C) of

the Act related to the redistribution

process.

3. Availability of Data From the Bureau

of the Census

Under section 2104(b)(2)(B) of the

Act, as amended by section 701(a)(3) of

the BBRA of 1999, the Number of

Children for each State (provided in

thousands) for a fiscal year is

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 three most recent March

supplements to the Current Population

Survey (CPS) officially available from

the Bureau of the Census before the

beginning of the calendar year in which

the fiscal year begins. For example, FY

2000 begins on October 1, 1999; that is,

FY 2000 begins during calendar year

1999. Therefore, the Number of

Children for each State for FY 2000

would be based on the most recent 3

years of the Bureau of the Census CPS

data officially available before January

1, 1999 (the beginning of the calendar

year in which FY 2000 begins), that is,

it would be based on the Bureau of the

Census CPS data officially available

through December 31, 1998. Section

457.608(e)(2) of the final regulation in

the discussion for ‘‘Number of

Children’’ incorporates this change.

4. Availability of Data From the Bureau

of Labor Statistics

Under section 2104(b)(3)(B) of the

Act, as amended by section 701(a)(4) of

the BBRA of 1999, the State Cost Factor

for each State for a fiscal year is

calculated based on the average of the

annual wages for employees in the

health industry for each State as

reported, determined, available as final,

and provided to HCFA by the Bureau of

Labor Statistics (BLS) in the Department

of Labor for each of the most recent 3

years available before the beginning of

the calendar year in which the fiscal

year begins. For example, FY 2000

33620 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

begins on October 1, 1999, that is, FY

2000 begins during calendar year 1999.

Therefore, the State cost factor for FY

2000 would be based on the most recent

3 years of BLS data available as final

before January 1, 1999 (the beginning of

the calendar year in which FY 2000

begins); that is, it would be based on the

BLS data available as final through

December 31, 1998. Section

457.608(e)(2) of the final regulation in

the discussion for ‘‘State Cost Factor for

a State’’ incorporates this change.

C. Increased Allotments for Territories

Under SCHIP

Section 702 of the BBRA of 1999,

provides for additional funds available

for allotment only to the

Commonwealths and Territories. Under

this new provision, an additional $34.2

million is made available for allotment

to the Commonwealths and Territories

in fiscal years 2000 and 2001; $25.2

million in FYs 2002 through 2004; $32.4

million for fiscal years 2005 and 2006;

and $40 million for FY 2007. These

amounts would be added to the

amounts previously available for

allotment to the Commonwealths and

Territories, that is, the amount

determined as .25 percent of the

appropriation amount for the fiscal year

specified at section 2104(a) of the Act.

Section 457.608(d) of these final

regulations contains the amounts

available for allotment to the

Commonwealths and Territories.

D. References to SCHIP and State

Children’s Health Insurance Program

Section 704 of the BBRA of 1999

requires the Secretary of the U.S.

Department of Health and Human

Services or any other Federal officer or

employee, with respect to any reference

to the program under title XXI of the Act

in any publication or official

communication, to use the term

‘‘SCHIP’’ instead of the term ‘‘CHIP,’’

and the term ‘‘State children’s health

insurance program’’ instead of

‘‘children’s health insurance program.’’

This final regulation incorporates the

application of these terms, as required

by section 704 of the BBRA of 1999.

V. Regulatory Impact Statement

We have examined the impacts of this

final rule as required by Executive

Order 12866, the Unfunded Mandate

Reform Act of 1995 (Public Law 104–4),

and the Regulatory Flexibility Act (RFA)

(Public Law 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 expenditure in any year

by State, local, and tribal governments,

in the aggregate, or by the private sector,

of $100,000,000 or more (adjusted each

year for inflation). Because participation

in the SCHIP program on the part of

States is voluntary, any payments and

expenditures States make or incur on

behalf of the program that are not

reimbursed by the federal government

are made voluntarily. These regulations

will implement narrowly defined

statutory language on the allocation of

funds for SCHIP 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 final rule that

may have a significant impact on the

operations of a substantial number of

small rural hospitals. Such an analysis

must conform to the provisions of

Section 604 of the RFA. With the

exception of hospitals located in certain

rural counties adjacent to urban areas,

for purposes of Section 1102(b) of the

Act, we define a small rural hospital as

a hospital that is located outside of a

Metropolitan Statistical Area and has

fewer than 50 beds.

This final 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 established

under title XXI of the Act. This rule also

establishes 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 SCHIP 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 Public Law 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 SCHIP, is

established as follows:

TOTAL AMOUNT OF ALLOTMENTS

Year Amount

1998 ................................ $4,235,000,000

1999 ................................ 4,247,000,000

2000 ................................ 4,249,200,000

2001 ................................ 4,249,200,000

2002 ................................ 3,115,200,000

2003 ................................ 3,175,200,000

2004 ................................ 3,175,200,000

2005 ................................ 4,082,400,000

2006 ................................ 4,082,400,000

2007 ................................ 5,040,000,000

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

Public Law 105–277, an additional $32

million was appropriated for allotment

only to the Commonwealths and

Territories, and only for FY 1999, and

is included in the amount listed for FY

1999 in the chart above. Section 702 of

the BBRA of 1999 also provided for

additional funds available for allotment

only to the Commonwealths and

Territories. Under this new provision,

an additional $34.2 million is made

available for allotment to the

Commonwealths and Territories in

fiscal years 2000 and 2001; $25.2

million in fiscal years 2002 through

2004; $32.4 million for fiscal years 2005

and 2006; and $40 million for fiscal year

2007.

Furthermore, under sections 4921 and

4922 of Public Law 105–33, the total

amount available for allotment to the 50

States and the District of Columbia is

reduced by an additional total of

$60,000,000; $30,000,000 each for a

special diabetes research program for

Type I diabetes and special diabetes

programs for Indians. The diabetes

programs are funded from FYs 1998

through 2002 only.

Administrative resources needed in

HCFA’s Program Management account

to carry out the new responsibilities of

the State Children’s Health Insurance

Program have been estimated at $10.1

million.

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.

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33621

IV. Federalism

Under Executive Order 13132, this

regulation will not significantly affect

the States beyond what is required by

title XXI of the Act. It follows the intent

and letter of the law and does not

preempt State authority beyond what

title XXI requires. This regulation

describes only the methodologies and

procedures to determine the Federal

fiscal year allotments of Federal funds

and proposes the allotment, payment,

and grant award processes applicable to

individual States, Commonwealths, and

Territories for SCHIP, established under

title XXI of the Act.

We have included various provisions

throughout this regulation that

demonstrate our intention to cooperate

with the States. For example, in the

implementation of title XXI and the

development of these regulations, we

established a process under which,

during the period when States were

developing their programs, SCHIP

allotments were determined and

‘‘reserved’’ for each State for the fiscal

year, regardless of whether the State had

submitted and had an approved State

child health plan. Accordingly, for FYs

1998 and 1999, we published

‘‘reserved’’ allotments at the beginning

of each fiscal year; the ‘‘final’’

allotments to be published at a later

date. By publishing the ‘‘reserved’’

allotments during the early stages of

title XXI implementation, our intention

was to provide States with the flexibility

and time needed to develop their

programs and to submit their State child

health plans. Every State,

Commonwealth and Territory qualified

for an allotment by having an approved

State child health plan prior to the start

of FY 2000. As a result, so long as all

States, Commonwealths, and Territories

continue to qualify for allotments, the

allotments for FY 2000 and future years

can be published as ‘‘final’’ rather than

‘‘reserved.’’

In addition, training sessions led by

HCFA were held throughout the country

in 1998, with almost all States in

attendance, on the financial and

reporting aspects of title XXI. These

presentations were designed to initiate a

dialogue with the States and to obtain

their input. States also provided

substantial input following distribution

of a December 8, 1998, all State letter

intended to provide guidance to States

on reporting for purposes of program

monitoring and evaluation, including

the submission of quarterly expenditure

and financial/statistical reports and the

Federal fiscal year 1998 annual reports.

States were among those who provided

comments on the March 4, 1999,

proposed rule, as well as the Federal

Register notices of September 12, 1997

(62 FR 48098), and February 8, 1999 (64

FR 6102), both of which listed reserved

allotments for the States, District of

Columbia, and Commonwealth and

Territories.

V. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, agencies are required to provide

30-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.

Section 457.226 Fiscal Policies and

Accountability

A State plan must provide that the

SCHIP 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 SCHIP 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 SCHIP 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

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 with the

submission of the State Child Health

Plan is currently captured in accordance

with the completion of the HCFA–R–

211, approved under OMB number

0938–0707.

Section 457.614 General Payment

Process

In order to receive FFP 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 State

Children’s Health Insurance Programs

and submit an expenditure report.

The burden associated with these

reporting requirements are currently

captured in accordance with the

completion of HCFA collections,

HCFA–21, HCFA–37, and HCFA–64.

The OMB control numbers for these

collections are 0938–0731, 0938–0101,

and 0938–0067, respectively.

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 (State Children’s Health

Insurance Program Budget Report for

State Children’s 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

State Children’s Health Insurance

33622 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

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 in accordance with the

completion of HCFA collections,

HCFA–21, HCFA–37, and HCFA–64.

The OMB control numbers for these

collections are 0938–0731, 0938–0101,

and 0938–0067, respectively.

We have submitted a copy of this final

rule to OMB for its review of the

information collection requirements in

§§ 457.226, 457.234, 457.238, 457.606,

457.614, and 457.630.

If you comment on any of these

information collection and

recordkeeping requirements, please mail

3 copies directly to the following:

Health Care Financing Administration,

Office of Information Services,

Information Technology Investment

Management Group, Division of

HCFA Enterprise Standards, Room

N2–14–16, 7500 Security Boulevard,

Baltimore, MD 21244–1850. ATTN:

John Burke, HCFA–2114–F, and

Office of Information and Regulatory

Affairs, Office of Management and

Budget, Room 10235, New Executive

Office Building, Washington, DC

20503. ATTN: Allison Herron Eydt,

HCFA Desk Officer

List of Subjects

42 CFR Part 447

Accounting, Administrative practice

and procedure, Drugs, Grant programshealth, Health facilities, Health

professions, Medicaid, Reporting and

recordkeeping requirements, Rural

areas.

42 CFR Part 457

Administrative practice and

procedure, Grant programs-health, State

Children’s Health Insurance Program,

Reporting and record keeping

requirements.

42 CFR Part 92

Accounting, Grant Programs, Indians,

Intergovernmental Relations, Reporting

& record keeping requirements.

42 CFR Part 95

Claims, Computer technology, Grant

programs—Health, Grant programs—

Social programs, Reporting and

recordkeeping requirements.

42 CFR chapter IV, and 45 CFR

subtitle A are amended as set forth

below:

A. 45 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

§ 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. A new subchapter D—CHILDREN’S

HEALTH INSURANCE PROGRAMS is

added, to read as follows:

SUBCHAPTER D—STATE CHILDREN’S

HEALTH INSURANCE PROGRAMS (SCHIPs)

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

SCHIP.

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 SCHIP 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

SCHIP 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.

457.618 Ten percent limit on certain State

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: Section 1102 of the Social

Security Act (42 U.S.C. 1302).

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33623

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

§ 457.200 Program reviews.

(a) Review of State and local

administration of the SCHIP 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 SCHIP 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.

§ 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 § 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.

§ 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.

§ 457.206 Administrative appeals under

SCHIP.

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 SCHIP expenditures.

Disallowances of FFP in State SCHIP

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

an SCHIP agency, are subject to

reconsideration by the Departmental

Grant Appeals Board.

§ 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

Federal requirements (§ 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.

33624 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

(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.

§ 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.

§ 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.

§ 457.216 Treatment of uncashed or

canceled (voided SCHIP 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 an

SCHIP 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

SCHIP agency.

Uncashed check means an SCHIP

check issued by a State or fiscal agent

that has not been cashed by the payee.

Warrant means an order by which the

SCHIP 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

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33625

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 SCHIP 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 SCHIP 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.

§ 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

21⁄2 percent of the estimated or actual

annual State share for the State SCHIP

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 22 percent of the

annual State share as follows:

(1) If the State SCHIP program is

ongoing, HCFA uses the annual

estimated State share of State SCHIP

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 SCHIP 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 SCHIP 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:

Total repayment amount as

percentage of State share of

annual expenditures for State

SCHIP

Number of

quarters to

make repayment

2.5 pct. 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 SCHIP:

For each of the following

quarters

Repayment installment may

not be less

than these

percentages

1 to 4 .................................... 2.5

5 to 8 .................................... 5.0

For each of the following

quarters

Repayment installment may

not be less

than these

percentages

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.

(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.

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.

§ 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 SCHIP

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.

33626 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

(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.

§ 457.222 FFP for equipment.

Claims for Federal financial

participation in the cost of equipment

under SCHIP are determined in

accordance with subpart G of 45 CFR

part 95. Requirements concerning the

management and disposition of

equipment under SCHIP are also

prescribed in subpart G of 45 CFR part

95.

§ 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

SCHIP 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.

§ 457.226 Fiscal policies and

accountability.

A State plan must provide that the

SCHIP 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.

§ 457.228 Cost allocation.

A State plan must provide that the

single or appropriate SCHIP 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.

§ 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.

§ 457.232 Refunding of Federal Share of

SCHIP 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 (SCHIP) 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

SCHIP program shall be referred

promptly to the Office of Inspector

General.

§ 457.234 State plan requirements.

The State plan is a comprehensive

written statement submitted by the

agency describing the nature and scope

of its State 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.

§ 457.236 Audits.

The SCHIP agency must assure

appropriate audit of records on costs of

provider services.

§ 457.238 Documentation of payment

rates.

The SCHIP 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

§ 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

calculation of the enhanced Federal

medical assistance percentage.

§ 457.602 Applicability.

The provisions of this subpart apply

to the 50 States and the District of

Columbia, and the Commonwealths and

Territories.

§ 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

(SCHIP) 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 §§ 457.608 and 457.610, and payment

process in §§ 457.614 and 457.616.

(2) Available based on a percentage of

State SCHIP expenditures, at a rate

equal to the enhanced Federal medical

assistance percentage (FMAP) for each

fiscal year, calculated in accordance

with § 457.622.

(3) Available through the grants

process specified in § 457.630.

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33627

§ 457.608 Process and calculation of State

allotments for a fiscal year.

(a) General—(1) State allotments for a

fiscal year are determined by HCFA for

each State and the District of Columbia

with an approved State child health

plan, as described in paragraph (e) 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 (c) of this section, and the

total allotment amount available for

each fiscal year for allotment to the

Commonwealths and Territories, as

described in paragraph (d) of this

section.

(3) The amount of allotments

redistributed under section 2104(f) of

the Act will not be applied or taken into

account in determining the amounts of

a fiscal year allotment for a State and

the District of Columbia under this

section.

(b) Definition of Proportion. As used

in this section, proportion means the

amount of the allotment for a State or

the District of Columbia for a fiscal year,

divided by the national total allotment

amount available for allotment to all

States and the District of Columbia, as

specified in paragraph (c) of this

section, for that fiscal year.

(c) 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 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

(d)(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 Public

Law 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 Public

Law 105–33. This is $30,000,000 for

each of the fiscal years 1998 through

2002.

(2) The following formula illustrates

the calculation of the national total

allotment amount available for

allotment to the 50 States and the

District of Columbia for a fiscal year:

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 (d)(1) of this section.

D4921 = Amount of total grant for

children with Type I Diabetes under

Section 4921 of Public Law 105–33.

This is $30,000,000 for each of the

fiscal years 1998 through 2002.

(d) Total allotment amount available

to the Commonwealths and Territories.

(1) General. The total allotment amount

available to all the Commonwealths and

Territories for a fiscal year is equal to

.25 percent of the total appropriation for

the fiscal year indicated in section

2104(a) of the Act, plus the additional

amount for the fiscal year specified in

paragraph (d)(2) of this section.

(2) Additional amounts for allotment

to the Commonwealths and Territories.

The following amounts are available for

allotment to the Commonwealths and

Territories for the indicated fiscal years

in addition to the amount specified in

paragraph (d)(1) of this section: For FY

1999, $32 million; for each of FY 2000

and FY 2001, $34.2 million; for each

fiscal year FY 2002 through 2004, $25.2

million; for each fiscal year FY 2005 and

FY 2006, $32.4 million; and for FY

2007, $40 million. The additional

amount for allotment for FY 1999 for the

Commonwealths and Territories was

provided under Public Law 105–277.

The additional amounts for allotment

for FY 2000 through FY 2007 were

provided for the Commonwealths and

Territories under section 702 of Public

Law 106–113.

(e) Determination of State allotments

for a fiscal year. (1) General. The

allotment for a State and the District of

Columbia for a fiscal year is the product

of:

(i) The proportion for the State or the

District of Columbia for the fiscal year,

as defined in paragraph (b) of this

section, and determined after

application of the provisions of

paragraphs (e)(2) and (3), related to the

preadjusted proportion, and the floors,

ceilings, and reconciliation process,

respectively; and

(ii)(A) The national total allotment

amount available for allotment for the

fiscal year, as specified in paragraph (c)

of this section. The State and the

District of Columbia’s allotment for a

fiscal year is determined in accordance

with the following general formula:

SAi = Pi × ATA

SAi = Allotment for a State or District

of Columbia for a fiscal year.

Pi = Proportion for a State or District of

Columbia for a fiscal year.

ATA = Total amount available for

allotment to the 50 States and the

District of Columbia for the fiscal

year.

(B) There are two steps for

determining the proportion for a State

and the District of Columbia. The first

step determines the preadjusted

proportions, and is described under

paragraph (e)(2) of this section. The first

step applies in determining the

proportion for all fiscal years. The

second step applies floors and ceilings

and, if necessary, applies a

reconciliation to the preadjusted

proportion. The second step is

described in paragraph (e)(3) of this

section. The second step applies in

determining the proportion only for FY

2000 and subsequent fiscal years. For

FY 1998 and FY 1999, the preadjusted

proportion is the State or District of

Columbia’s proportion for the fiscal

year.

(2) Determination of the Preadjusted

Proportions for a Fiscal Year. (i)The

methodology for determining the State

preadjusted proportion, referring to the

determination of the proportion before

the application of floors and ceilings

and reconciliation for a fiscal year is in

accordance with the following formula:

PPi = (Ci × SCFi)/ Σ(Ci ×x SCFi)

PPi = Preadjusted proportion for a State

or District of Columbia for a fiscal

year.

Ci = Number of children in a State

(section 2104(b)(1)(A)(I) of the Act)

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 (CPS) of

the Bureau of the Census, and for

FY 2000 and subsequent fiscal

years, officially available before the

beginning of the calendar year in

which the fiscal year begins. For FY

1998 and FY 1999, the availability

of the CPS data obtained from the

Bureau of the Census is as specified

in paragraphs (e)(4) and (5) of this

33628 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

section, respectively. (section

2104(b)(2)(B) of the Act).

(ii)For each of the fiscal years 1998

and 1999, 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 2000, 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 2001 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.

(section 2104(b)(2)(A) of the Act).

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 × (Wi/WN) (section

2104(b)(3)(A) of the Act).

Wi = The annual average wages per

employee for a State for such year

(section 2104(b)(3)(A)(ii)(I) of the

Act).

WN = The annual average wages per

employee for the 50 States and the

District of Columbia (section

2104(b)(3)(A)(ii)(II) of the Act). 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, and for FY 2000 and

subsequent fiscal years, finally

available before the beginning of the

calendar year in which the fiscal

year begins. For FY 1998 and FY

1999, the availability of the wage

data obtained from the Bureau of

Labor Statistics is as specified in

paragraphs (e)(4) and (5),

respectively. (section 2104(b)(3)(B)

of the Act).

Σ(Ci × SCFi) = The sum of the products

of (Ci × SCFi) for each State (section

2104(b)(1)(B) of the Act).

ATA = Total amount available for

allotment to the 50 States and the

District of Columbia for the fiscal

year as determined under paragraph

(c) of this section.

(3) Application of floors and ceilings

and reconciliation in determining

proportion. (i) Floors and ceilings in

proportions. The preadjusted State

proportions for a fiscal year are subject

to the application of floors and ceilings

in paragraphs (e)(3)(i)(A) and (B) of this

section..

(A) The proportion floors, or

minimum proportions, that apply in

determining a State’s proportion for the

fiscal year are:

(1) $2,000,000 divided by the total of

the amount available nationally;

(2) 90 percent of the State’s

proportion for the previous fiscal year;

and

(3) 70 percent of the State’s

proportion for FY 1999.

(B) The proportion ceiling, or

maximum proportion, for a fiscal year

that applies in determining the State’s

fiscal year proportion is 145 percent of

the State’s proportion for FY 1999.

(ii) Reconciliation of State

proportions. If, after the application of

the floors and ceilings in paragraph

(e)(3)(i), the sum of the States’

proportions is not equal to one, the

Secretary will reconcile the States’

proportions by applying either

paragraph (e)(3)(i)(A) or (B) of this

paragraph, as appropriate, such that the

sum of the proportions after

reconciliation equals one. If, after the

application of the floors and ceilings in

paragraph (e)(3)(i), the sum of the States’

proportions is equal to one, no

reconciliation is necessary, and the

States’ proportions will be the same as

the preadjusted proportions determined

under paragraph (e)(2) of this section.

(A) If, after the application of the

floors and ceilings under paragraphs

(e)(3)(i)(A) and (B) of this section, the

sum of the States’ proportions is greater

than one, the Secretary will establish a

maximum percentage increase in States’

proportions, such that when applied to

the States’ proportions, the sum of the

proportions is exactly equal to one.

(B) If, after the application of the

floors and ceilings under paragraphs

(e)(3)(i)(A) and (B), the sum of the

proportions is less than one, the

Secretary will increase States’

proportions (as computed before the

application of the floors under

paragraph (e)(3)(i)(A)) in a pro rata

manner (but not to exceed the 145

percent ceiling computed under

paragraph (e)(3)(i)(B)), such that when

applied to the States’ proportions, the

sum of the proportions is exactly equal

to one.

(4) Data used for calculating the FY

1998 SCHIP allotments. The FY 1998

SCHIP allotments were calculated in

accordance with the methodology

described in paragraphs (e)(1) and (2) of

this section, using the most recent

official and final data that were

available from the Bureau of the Census

and the 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.

(5) Data used for calculating the FY

1999 SCHIP allotments. In accordance

with section 101(f) of Public Law 105–

277, the FY 1999 allotments were

calculated in accordance with the

methodology described in paragraph

(e)(2) of this section, using the same

data as were used in calculating the FY

1998 SCHIP allotments.

(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 (d) 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(c)(2) of the Act:

Puerto Rico—91.6%

Guam—3.5%

Virgin Islands—2.6%

American Samoa—1.2%

Northern Mariana Islands—1.1%

(g) Reserved State allotments for a

fiscal year. (1) 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 and final data available

before the beginning of the calendar

year in which the fiscal year begins for

the number of children and the State

cost factor.

(2) For FY 1998 and FY 1999, HCFA

determined and published the State

reserved allotments using the available

data described in paragraphs (e)(4) and

(e)(5) of this section, respectively, on the

basis of the statutory allotment formula

as it existed prior to the enactment of

Public Law 106–113.

(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

allotments as final in the Federal

Register, without the need for

publication as reserved allotments.

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33629

(h) Final allotments. (1) Final State

allotments for FY 1998 and FY 1999 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 after FY 1999 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 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.

§ 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

§ 457.608(h) and reduced to reflect

certain Medicaid expenditures in

accordance with § 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.

§ 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 State 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 § 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

§ 457.618.

§ 457.616 Application and tracking of

payments against the fiscal year allotments.

(a) Categories of payments applied to

reduce the State allotments. In

accordance with the principles

described in paragraph (c) of this

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 State 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) Application of principles. 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 Children’s Health

Insurance programs 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) Subject to paragraphs (c)(6)(i) and

(ii) of this section, 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.

(i) In accordance with § 457.618, the

amount of non-primary expenditures

that are within the 10 percent limit for

the fiscal year for which they are

claimed may be applied against a fiscal

year allotment or allotments available in

a subsequent fiscal year.

(ii) In accordance with § 457.618, the

amounts of non-primary expenditures

that exceed the 10 percent limit for the

fiscal year for which they are claimed

may not be applied against a fiscal year

allotment or allotments available in a

subsequent fiscal year.

33630 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

(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 fiscal year 1998 allotment are not

fully expended by the end of fiscal year

1998, these amounts are carried over to

fiscal year 1999 and are available to

provide FFP for expenditures claimed

by the State for that fiscal year.

(d) Amount of Federal payment for

expenditures claimed. The amount of

the Federal payment for expenditures

claimed by a State, District of Columbia,

or the Commonwealths and Territories

is determined by the enhanced FMAP

applicable to the fiscal year in which

the State paid the expenditure. For

example, Federal payment for an

expenditure paid by a State in fiscal

year 1998 that was carried over to fiscal

year 1999 (in accordance with

paragraph(c)(6) of this section), because

the State exceeded its fiscal year 1998

allotment, is available at the fiscal year

1998 enhanced FMAP rate.

§ 457.618 Ten percent limit on certain

State Children’s Health Insurance Program

expenditures.

(a) Expenditures. (1) Primary

expenditures are expenditures under a

State plan for child health assistance to

targeted low-income children in the

form of a standard benefit package, and

Medicaid expenditures claimed during

the fiscal year to the extent Federal

payments made for these expenditures

on the basis of the enhanced FMAP

described in sections 1905(b) and

2105(b) of the Act that are used to

calculate the 10 percent limit.

(2) Non-primary expenditures are

other expenditures under a State plan.

Subject to the 10 percent limit described

in paragraph (c) of this section, a State

may receive Federal funds at the

enhanced FMAP for 4 categories of nonprimary expenditures:

(i) Administrative expenditures;

(ii) Outreach;

(iii) Health initiatives; and

(iv) Certain other child health

assistance.

(b) Federal payment. Federal payment

will not be available based on a State’s

non-primary expenditures for a fiscal

year which exceed the 10 percent limit

of the total of expenditures under the

plan, as specified in paragraph (c) of

this section.

(c) 10 Percent Limit. The 10 percent

limit is —

(1) Applied on an annual fiscal year

basis;

(2) Calculated based on the total

computable expenditures claimed by

the State on quarterly expenditure

reports submitted for a fiscal year.

Expenditures claimed on a quarterly

report for a different fiscal year may not

be used in the calculation; and

(3) Calculated using the following

formula:

L10% = (a1+ u2+ u3)/9;

L10% = 10 Percent Limit for a fiscal year

a1 = Total computable amount of

expenditures for the fiscal year under

section 2105(a)(1) of the Act for which

Federal payments are available at the

enhanced FMAP described in Section

2105(b) of the Act;

U2 = Total computable expenditures for

medical assistance for which Federal

payments are made during the fiscal

year based on the enhanced FMAP

described in sections 1905(b) and

2105(b) of the Act for individuals

described in section 1905(u)(2) of the

Act; and

u3 = Total computable expenditures for

medical assistance for which Federal

payments are made during the fiscal

year based on the enhanced FMAP

described in sections 1905(b) and

2105(b) of the Act for individuals

described in section 1905(u)(3) of the

Act.

(d) The expenditures under section

2105(a)(2) of the Act that are subject to

the 10 percent limit are applied —

(1) On an annual fiscal year basis; and

(2) Against the 10 percent limit in the

fiscal year for which the State submitted

a quarterly expenditure report including

the expenditures. Expenditures claimed

on a quarterly report for one fiscal year

may not be applied against the 10

percent limit for any other fiscal year.

(e)(1) The 10 percent limit for a fiscal

year, as calculated under paragraph

(c)(3) of this section, may be no greater

than 10 percent of the total computable

amount (determined under paragraph

(e)(2) of this section) of the State

allotment or allotments available in that

fiscal year. Therefore, the 10 percent

limit is the lower of the amount

calculated under paragraph (c)(3) of this

section, and 10 percent of the total

computable amount of the State

allotment available in that fiscal year.

(2) As used in paragraph (e)(1) of this

section, the total computable amount of

a State’s allotment for a fiscal year is

determined by dividing the State’s

allotment for the fiscal year by the

State’s enhanced FMAP for the year. For

example, if a State allotment for a fiscal

year is $65 million and the enhanced

FMAP rate for the fiscal year is 65

percent, the total computable amount of

the allotment for the fiscal year is $100

million ($65 million/.65). In this

example, the 10 percent limit may be no

greater than a total computable amount

of $10 million (10 percent of $100

million).

§ 457.622 Rate of FFP for State

expenditures.

(a) Basis. Sections 1905(b), 2105(a)

and 2105(b) of the Act provides for

payments to States from the States’

allotments for a fiscal year, as

determined under § 457.608, for part of

the cost of expenditures for services and

administration made under an approved

State child health assistance plan. The

rate of payment is generally the

enhanced Federal medical assistance

percentage described below.

(b) Enhanced Federal medical

assistance percentage (Enhanced

FMAP)— Computations. The enhanced

FMAP is the lower of the following:

(1) 70 percent of the regular FMAP

determined under section 1905(b) of the

Act, plus 30 percentage points; or

(2) 85 percent.

(c) Conditions for availability of

enhanced FMAP based on a State’s

expenditures—The enhanced FMAP is

available for payments based on a

State’s expenditures claimed under the

State’s title XXI program from the

State’s fiscal year allotment only under

the following conditions:

(1) The State has an approved title

XXI State child health plan;

(2) The expenditures are allowable

under the State’s approved title XXI

State child health plan;

(3) State allotment amounts are

available in the fiscal year, that is, the

State’s allotment or allotments (as

reduced in accordance with § 457.616)

remain available for a fiscal year and

have not been fully expended.

(4) Expenditures claimed against the

10 percent limit are within the State’s

10 percent limit for the fiscal year.

(5) The State is in compliance with

the maintenance of effort requirements

of Section 2105(d)(1) of the Act.

(d) Categories of expenditures for

which enhanced FMAP are available.

Except as otherwise provided below, the

enhanced FMAP is available with

respect to the following States’

expenditures:

(1) Child health assistance under the

plan for targeted low-income children in

the form of providing health benefits

coverage that meets the requirements of

section 2103 of the Act; and

(2) Subject to the 10 percent limit

provisions under § 457.618(a)(2), the

following expenditures:

(i) Payment for other child health

assistance for targeted low-income

children;

(ii) Expenditures for health services

initiatives under the State child health

assistance plan for improving the health

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33631

of children (including targeted lowincome children);

(iii) Expenditures for outreach

activities; and

(iv) Other reasonable costs incurred

by the State to administer the State

child health assistance plan.

(e) SCHIP administrative expenditures

and SCHIP related title XIX

administrative expenditures. (1) General

rule. Allowable title XXI administrative

expenditures should support the

operation of the State child health

assistance plan. In general, FFP for

administration under title XXI is not

available for costs of activities related to

the operation of other programs.

(2) Exception. FFP is available under

title XXI, at the enhanced FFP rate, for

Medicaid administrative expenditures

attributable to the provision of medical

assistance to children described in

sections 1905(u)(2) and 1905(u)(3), and

during the presumptive eligibility

period described in section 1920A of the

Act, to the extent that the State does not

claim those costs under the Medicaid

program.

(3) FFP is not available in

expenditures for administrative

activities for items or services included

within the scope of another claimed

expenditure.

(4) FFP is available in 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.

(5) FFP is available in 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. 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.

§ 457.624 Limitations on certain payments

for certain expenditures.

(a) Abortions. (1) General rule.

Payment is not made for any State

expenditures to pay for abortions or to

assist in the purchase, whole or in part,

of health benefit coverage that includes

coverage of abortion.

(2) Exception. Payment may be made

for expenditures for health benefits

coverage and services that include

abortions that are necessary to save the

life of the mother or if the pregnancy is

the result of rape or incest.

(b) 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

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 costeffective 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 will 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.

§ 457.626 Prevention of duplicate

payments.

(a) General rule. No payment shall be

made to a State for expenditures for

child health assistance under its State

child health plan to the extent that:

(1) A non-governmental health insurer

would have been obligated to pay for

those services but for a provision of its

insurance contract that has the effect of

limiting or excluding those obligations

based on the actual or potential

eligibility of the individual for child

health assistance under the State child

health insurance plan.

(2) Payment has been made or can

reasonably be expected to be made

promptly under any other Federally

operated or financed health insurance or

benefits program, other than a program

operated or financed by the Indian

Health Service.

(b) Definitions. As used in paragraph

(a) of this section —

Non-governmental health insurer

includes any health insurance issuer,

group health plan, or health

maintenance organization, as those

terms are defined in 45 CFR 144.103,

which is not part of, or wholly owned

by, a governmental entity.

Prompt payment can reasonably be

expected when payment is required by

applicable statute, or under an approved

State plan.

Programs operated or financed by the

Indian Health Service means health

programs operated by the Indian Health

Service, or Indian tribe or tribal

organization pursuant to a contract,

grant, cooperative agreement or compact

with the Indian Health Service under

the authority of the Indian SelfDetermination and Education

Assistance Act (25 U.S.C. 450, et seq.),

or by an urban Indian organization in

accordance with a grant or contract with

the Indian Health Service under the

authority of title V of the Indian Health

Care Improvement Act (25 U.S.C. 1601,

et seq.).

§ 457.628 Other applicable Federal

regulations.

Other regulations applicable to SCHIP

programs include the following:

(a) HHS regulations in 42 CFR

Subpart B—433.51–433.74 sources of

non-Federal share and Health CareRelated Taxes and Provider-Related

Donations; these regulations apply to

States’ SCHIPs in the same manner as

they apply to States’ Medicaid

programs.

(b) HHS Regulations in 45 CFR

subtitle A:

Part 16—Procedures of the

Departmental Appeals Board.

Part 74—Administration of Grants

(except as specifically excepted).

Part 80—Nondiscrimination Under

Programs Receiving Federal

Assistance Through the Department of

Health and Human Services:

Effectuation of title VI of the Civil

Rights Act of 1964.

Part 81—Practice and Procedure for

Hearings Under 45 CFR part 80.

Part 84—Nondiscrimination on the

Basis of Handicap in Programs and

activities Receiving or Benefiting

From Federal Financial Assistance.

Part 95—General Administration—grant

programs (public assistance and

medical assistance).

§ 457.630 Grants procedures.

(a) General provisions. Once HCFA

has approved a State child health plan,

HCFA makes quarterly grant awards to

the State to cover the Federal share of

expenditures for child health assistance,

other child health assistance, special

health initiatives, outreach and

administration.

(1) For fiscal year 1998, a State must

submit a budget request in an

appropriate format for the 4 quarters of

the fiscal year. HCFA bases the grant

awards for the 4 quarters of fiscal year

1998 based on the State’s budget

requests for those quarters.

(2) For fiscal years after 1998, a State

must submit a budget request in an

appropriate format for the first 3

quarters of the fiscal year. HCFA bases

the grant awards for the first 3 quarters

of the fiscal year on the State’s budget

requests for those quarters.

(3) For fiscal years after 1998, a State

must also submit a budget request for

the fourth quarter of the fiscal year. The

amount of this quarter’s grant award is

based on the difference between a

33632 Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations

State’s final allotment for the fiscal year,

and the total of the grants for the first

3 quarters that were already issued in

order to ensure that the total of all grant

awards for the fiscal year are equal to

the State’s final allotment for that fiscal

year.

(4) The amount of the quarterly grant

is determined on the basis of

information submitted by the State (in

quarterly estimate and quarterly

expenditure reports) and other pertinent

information. This information must be

submitted by the State through the

Medicaid Budget and Expenditure

System (MBES) for the Medicaid

program, and through the Child Health

Budget and Expenditure System (CBES)

for the title XXI program.

(b) Quarterly estimates. The State

Children’s Health Insurance Program

agency must submit Form HCFA–21B

(State Children’s Health Insurance

Program Budget Report for State

Children’s 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.

(c) Expenditure reports. (1) The State

must submit Form HCFA–64 (Quarterly

Medicaid Statement of Expenditures for

the Medical Assistance Program) and

Form HCFA–21 (Quarterly State

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.

(2) This report is the State’s

accounting of actual recorded

expenditures. This disposition of

Federal funds may not be reported on

the basis of estimates.

(d) Additional required information.

A State must provide HCFA with the

following information regarding the

administration of the title XXI program:

(1) Name and address of the State

Agency/organization administering the

program;

(2) The employer identification

number (EIN); and

(3) A State official contact name and

telephone number.

(e) Grant award. (1) Computation by

HCFA. Regional office staff analyzes the

State’s estimates and sends a

recommendation to the central office.

Central office staff considers the State’s

estimates, the regional office

recommendations and any other

relevant information, including any

adjustments to be made under

paragraph (e)(2) of this section, and

computes the grant.

(2) Content of award. The grant award

computation form shows the estimate of

expenditures for the ensuing quarter,

and the amounts by which that estimate

is increased or decreased because of an

increase or overestimate for prior

quarters, or for any of the following

reasons:

(i) Penalty reductions imposed by

law.

(ii) Deferrals or disallowances.

(iii) Interest assessments.

(iv) Mandated adjustments such as

those required by Section 1914 of the

Act.

(3) Effect of award. The grant award

authorizes the State to draw Federal

funds as needed to pay the Federal

share of disbursements.

(4) Draw procedure. The draw is

through a commercial bank and the

Federal Reserve system against a

continuing letter of credit certified to

the Secretary of the Treasury in favor of

the State payee. (The letter of credit

payment system was established in

accordance with Treasury Department

regulations—Circular No.1075.)

(f) General administrative

requirements. With the following

exceptions, the provisions of 45 CFR

part 74, that establish uniform

administrative requirements and cost

principles, apply to all grants made to

States under this subpart:

(1) Subpart G—Matching and Cost

Sharing; and

(2) Subpart I—Financial Report

Requirement.

C. 45 CFR part 92 is amended as

follows:

PART 92—UNIFORM

ADMINISTRATION REQUIREMENTS

FOR GRANTS AND COOPERATIVE

AGREEMENTS TO STATE AND LOCAL

GOVERNMENTS

1. The authority citation for part 92

continues to read as follows:

Authority: 42 U.S.C. 301.

2. Section 92.4 is amended by revising

paragraphs (a)(3)(iv) and (a)(3)(v), and

adding a new paragraph (a)(3)(vi) to

read as follows:

§ 92.4 Applicability.

(a) * * *

(3) * * *

(iv) Aid to the Aged, Blind, and

Disabled (titles I, X, XIV, and XVI–

AABD of the Act);

(v) Medical Assistance (Medicaid)

(title XIX of the Act) not including the

State Medicaid Fraud Control program

authorized by Section 1903(a)(6)(B); and

(vi) State Children’s Health Insurance

Program (title XXI of the Act).

* * * * *

D. 45 CFR part 95 is amended as

follows:

1. The title of part 95 is revised to

read as follows:

PART 95—GENERAL

ADMINISTRATION—GRANT

PROGRAMS (PUBLIC ASSISTANCE,

MEDICAL ASSISTANCE AND STATE

CHILDREN’S HEALTH INSURANCE

PROGRAMS)

2. The authority citation for part 95 is

revised to read as follows:

Authority: Sec. 452(a), 83 Stat. 2351, 42

U.S.C. 652(a); sec. 1102, 49 Stat. 647, 42

U.S.C. 1302; sec. 7(b), 68 Stat. 658, 29 U.S.C.

37(b); sec. 139, 84 Stat. 1323, 42 U.S.C.

2577b; sec. 144, 81 Stat. 529, 42 U.S.C. 2678;

sec. 1132, 94 Stat. 530, 42 U.S.C. 1320b-2;

sec. 306(b), 94 Stat. 530, 42 U.S.C. 1320b2note, unless otherwise noted.

Subpart A—Time Limits for States To

File Claims

3. In § 95.1(a), title XXI is added in

numerical order immediately following

title XX as follows:

§ 95.1 Scope.

(a) * * *

Title XXI—Grants to States for State

Children’s Health Insurance Programs.

4. In § 95.4, the definition of ‘‘State

agency’’ is revised to read as follows:

§ 95.4 Definitions.

* * * * *

State agency for the purposes of

expenditures for financial assistance

under title IV–A and for support

enforcement services under title IV–D

means any agency or organization of the

State or local government which is

authorized to incur matchable expenses;

for purposes of expenditures under

titles XIX and XXI, means any agency of

the State, including the State Medicaid

agency or State Child Health Agency, its

fiscal agents, a State health agency, or

any other State or local organization

which incurs matchable expenses; for

purposes of expenditures under all

other titles, see the definitions in the

appropriate program’s regulations.

* * * * *

5. In § 95.13, paragraph (b) and the

first sentence of paragraph (d) are

revised to read as follows:

§ 95.13 In which quarter we consider an

expenditure made.

* * * * *

(b) We consider a State agency’s

expenditure for services under title I,

IV–A, IV–B, IV–D, IV–E, X, XIV, XVI

(AABD) , XIX, or XXI to have been made

in the quarter in which any State agency

made a payment to the service provider.

* * * * *

Federal Register / Vol. 65, No. 101 / Wednesday May 24, 2000 / Rules and Regulations 33633

(d) We consider a State agency’s

expenditure for administration or

training under titles I, IV–A, IV–B, IV–

D, IV–E, X, XIV, XVI (AABD), XIX, or

XXI to have been made in the quarter

payment was made by a State agency to

a private agency or individual; or in the

quarter to which the costs were

allocated in accordance with the

regulations for each program. * * *

Subpart E—Cost Allocation Plans

6. Section 95.503 is revised to read as

follows:

§ 95.503 Scope.

This subpart applies to all State

agency costs applicable to awards made

under titles I, IV–A, IV–B, IV–C, IV–D,

IV–E, X, XIV, XVI (AABD), XIX, and

XXI, of the Social Security Act, and

under the Refugee Act of 1980, title IV,

Chapter 2 of the Immigration and

Nationality Act (8 U.S.C. 1521 et seq.),

and under title V of Pub. L. 96–422, the

Refugee Education Assistance Act of

1980.

7. Section 95.507(a)(3) is revised to

read as follows:

§ 95.507 Plan requirements.

(a) * * * (3) Be compatible with the

State plan for public assistance

programs described in 45 CFR Chapter

II, III and XIII, and 42 CFR Chapter IV

Subchapters C and D; and

* * * * *

Subpart F—Automatic Data Processing

Equipment and Services—Conditions

for Federal Financial Participation

(FFP)

8. Section 95.601 is revised to read as

follows:

§ 95.601 Scope and applicability.

This subpart prescribes part of the

conditions under which the Department

of Health and Human Services will

approve Federal financial participation

(FFP) at the applicable rates for the costs

of automatic data processing incurred

under an approved State plan for titles

I, IV–A, IV–B, IV–D, IV–E, X, XIV,

XVI(AABD), XIX, or XXI of the Social

Security Act and title IV chapter 2 of the

Immigration and Nationality Act. The

conditions of approval of this subpart

add to the statutory and regulatory

requirements for acquisition of ADP

equipment and services under the

specified titles of the Social Security

Act.

9. In § 95.605, the definitions of

‘‘approving component’’, ‘‘operation’’,

‘‘regular matching rate’’, and ‘‘State

agency’’ are revised to read as follows:

§ 95.605 Definitions.

* * * * *

Approving component means an

organization within the Department that

is authorized to approve requests for the

acquisition of ADP equipment or ADP

services. Family Support

Administration (FSA) for cash

assistance for titles I, IV–A, X, XIV, and

XVI(AABD); Office of Human

Development Services (OHDS) for social

services for titles IV–B (child welfare

services) and IV–E (foster care and

adoption assistance); Family Support

Administration (FSA) for title IV–D; and

Health Care Financing Administration

(HCFA) for titles XIX and XXI of the

Social Security Act.

* * * * *

Operation means the automated

processing of data used in the

administration of State plans for titles I,

IV–A, IV–B, IV–D, IV–E, X, XIV,

XVI(AABD), XIX, and XXI of the Social

Security Act. Operation includes the use

of supplies, software, hardware, and

personnel directly associated with the

functioning of the mechanized system.

See 45 CFR 205.38 and 307.10 for

specific requirements for titles IV–A and

IV–D, and 42 CFR 433.112 and 42 CFR

433.113 for specific requirements for

title XIX.

Regular matching rate means the

normal rate of FFP authorized by titles

IV–A, IV–B, IV–D, IV–E, X, XIV,

XVI(AABD), XIX, and XXI of the Social

Security Act for State and local agency

administration of programs authorized

by those titles.

* * * * *

State agency means the State agency

administering or supervising the

administration of the State plan under

titles I, IV, X, XIV, XVI(AABD), XIX or

XXI of the Social Security Act.

* * * * *

10. In § 95.703 the definition of

‘‘Public Assistance Programs’’ is revised

to read as follows:

§ 95.703 Definitions.

* * * * *

Public Assistance Programs means

programs authorized by titles I, IV–A,

IV–B, IV–C, IV–D, IV–E, X, XIV, XVI

(AABD), XIX and XXI of the Social

Security Act, and programs authorized

by the Immigration and Nationality Act

as amended by the Refugee Act of 1980

(Pub. L. 96–212).

* * * * *

(Section 1102 of the Social Security Act (42

U.S.C. 1302)

(Catalog of Federal Domestic Assistance

Program No. 00.000, State Children’s Health

Insurance Program)

Dated: March 22, 2000.

Nancy Ann-Min DeParle,

Administrator, Health Care Financing

Administration.

Dated: March 28, 2000.

Donna E. Shalala,

Secretary.

[FR Doc. 00–12879 Filed 5–23–00; 8:45 am]

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