Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Department of Health and Human Services

###### Health Care Financing Administration 

          - 42 CFR Part 403 
          - [HCFA-4005-IFC] 
          - RIN 0938-AJ67 

# AGENCY:

Health Care Financing Administration (HCFA), HHS. 

# ACTION:

Interim final rule with comment period. 

# SUMMARY:

This interim final rule explains the terms and conditions that apply to grants to States for counseling and assistance to Medicare beneficiaries, and makes several minor technical clarifications about program compliance. We also specify our policies regarding the treatment of funds associated with the management of this program, including user fee assessments not in effect when prior regulations were issued. This interim final rule is issued in accordance with section 4360 of the Omnibus Budget Reconciliation Act of 1990 (OBRA '90) and section 1857(e)(2) of the Social Security Act (the Act). 

# DATES:

*Effective date:*                         These regulations are effective on July 3, 2000.                     

*Comment date:*                         Comments will be considered if we receive them at the appropriate address, as provided below, no later than 5:00 p.m. on July 31, 2000.                     

# ADDRESSES:

Mail an original and 3 copies of written comments to the following address: Health Care Financing Administration, Department of Health and Human Services, Attention: HCFA-4005-IFC, P.O. Box 8010, Baltimore, MD 21244-8010. 

If you prefer, you may deliver your written comments (1 original and 3 copies) to one of the following addresses: 

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or 

Room C5-16-03, 7500 Security Boulevard, Baltimore, Maryland 21244-1850. 

Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code HCFA-4005-IFC. Comments received timely will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, in Room 443-G of the Department's offices at 200 Independence Avenue, SW., Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m., phone: (202) 690-7890). 

# FOR FURTHER INFORMATION CONTACT:

Eric Lang, (410) 786-3199. 

## I. Background 

### A. OBRA '90 

                        Section 4360 of the Omnibus Budget Reconciliation Act of 1990 (OBRA '90), Public Law 101-508, requires us to make grants to States, Commonwealths, and Territories for health insurance advisory service programs for Medicare beneficiaries. (Hereinafter, unless otherwise indicated, the term “State” or                               ( print page 34984)                            “States” includes the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.) Grants are available to provide information, counseling, and assistance relating to Medicare, Medicaid, Medicare supplemental policies, long-term care insurance, and other health insurance benefit information. This funding program is known as the State Health Insurance Assistance Program (SHIP), formerly called the Health Insurance Information Counseling and Assistance (ICA) Grants Program. The name of this program was changed to SHIP in FY 1998 when it became apparent that the most recent name of the program, Beneficiary Services and Information Grants Program (BSI), severely lacked public recognition.                     

On August 26, 1992, we published a final rule with comment period (57 FR 38616) that established the funding level for health insurance grants during Federal fiscal year (FY) 1992-1993. The provisions incorporated into our regulations at 42 CFR part 403, subpart E, defined program eligibility criteria, minimum funding levels, limitations and reporting requirements. On October 7, 1994, we published a final rule with comment period (59 FR 51125) that included amendments to the 1992 rule and established a regulatory basis for continued funding beyond FY 1993. As set forth in that rule, grant awards are based on a 12-month period, with an option to renew at the close of the fiscal year. 

Section 403.502 of our regulations, Availability of grants, specifies that HCFA awards funds to States subject to Congressional appropriations of funds and, if applicable, subject to the satisfactory progress in the State's project during the preceding grant period. The criteria by which progress is evaluated and the performance standards for determining whether satisfactory progress has been made is specified in the notice of grant award sent to each State. HCFA advises each State as to when to make application and provides information as to the timing of the grant award and the duration of the grant award. HCFA also provides an estimate of the amount of funds that may be available to the State. 

Section 403.504, Number and size of grants, establishes that each eligible State submitting an acceptable application receives a grant for new programs and enhancement of existing programs. 

Section 403.504(b)(1) provides that each State, with the exception of American Samoa, the Virgin Islands and Guam, is eligible to receive a “fixed” award of $75,000. American Samoa, the Virgin Islands and Guam are each eligible to receive a fixed grant award of $25,000. The fixed grant constitutes the minimum level of funding required by section 4360(a) of OBRA '90. In addition, § 403.504(b)(2) provides that each State is also eligible to receive a “variable” award, that is calculated according to the formula set forth therein. 

Previously, HCFA depended upon specific Congressional appropriations to fund SHIP. In 1995, the Congressional appropriations were discontinued and funding for the program since that time has been made from the HCFA program management budget. Additional funds are available from the Medicare+Choice (M+C) user fee assessment, as discussed below. 

SHIP grants are now in the seventh and final period of the initial solicitation that was issued in FY 1992. DHHS grant administration requirements, set forth in HHS Chapter 1-85, Grants Administration Manual, section 1-85-40A, Incremental Funding-Project Periods and Frequency of Competition, specify that no project may be supported longer than 7 years without recompetition. When we apply for a continuation of funding for the SHIP next year, we will also send out new solicitation and grant application packages to the States. 

### B. BBA of 1997 

Amendments to the Act have led to the creation of additional funding for SHIP. On August 5, 1997, the Act was amended by the Balanced Budget Act (the BBA) of 1997, which established a new Part C of the Medicare program, sections 1851 through 1859, known as the “Medicare+Choice Program” (M+C). 

Section 1851(d)(1) of the Act, “Providing information to promote informed choice,” requires us to provide for activities to broadly disseminate information to Medicare beneficiaries (and prospective Medicare beneficiaries) on available M+C coverage options in order to promote an active, informed selection among these options. Section 1857(e)(2)(A) of the Act, “Cost-sharing in enrollment-related costs,” authorizes us to charge and collect an administration or user fee from M+C organizations for the purpose of administering this information dissemination program. Any amounts collected in accordance with section 1857(e)(2) are specifically authorized to be appropriate only for the purpose of carrying out section 1851 (relating to enrollment and dissemination of information) and section 4360 of OBRA '90 (SHIP). 

## II. Provisions of the Interim Final Rule 

We are amending our regulations to provide for a 2-tiered approach for making grants under SHIP. Section 403.504(a) is revised to provide that for aggregate annual expenditures of up to $10 million, grants will be made according to the current procedures set forth in § 403.504. That is, each eligible State will receive a fixed as well as variable amount as set forth in paragraphs (b) and (c) of that section. We plan to continue to fund this first tier of grants from our program management budget and through any Congressional appropriations made for the purpose of implementing this program. 

With respect to the second tier, any grants that exceed a total of $10 million annually will be made at our discretion according to criteria that will be communicated to States through the grant solicitation process (See revised § 403.504(a)). We have decided to notify States of the criteria for awarding the grants rather than publish specific criteria in our regulations in order to give us the flexibility required by the dynamic nature of the health care industry. 

The statutory foundation for the current SHIP directed the focus of this program primarily on informing beneficiaries about their rights and options in regard to supplemental insurance. Since that time, changes in the climate of the health care industry, including, for example, Medicare reform, the implementation of the M+C program, and ongoing consolidation within the managed care industry, have introduced a host of issues that have profoundly changed access to services, and greatly increased the need for accurate and unbiased information to support informed choice and decision-making among beneficiaries. 

Significant issues have emerged that affect and confuse beneficiaries. For example, health care options available today require coverage and payment choices by beneficiaries. Rapidly emerging issues, such as managed care plan withdrawals, create an urgent need for quick response to the concerns of affected beneficiaries and their care givers. Greater choice for beneficiaries requires SHIPs to modify, and in many instances, expand, their programs, both in the size and scope of services they provide. 

                        Our policies must have the flexibility to accommodate changes facing the Medicare program and its beneficiaries. Therefore, we will use our discretion to allocate the additional funds in ways that will best serve beneficiaries through                               ( print page 34985)                            SHIP. This will allow us to adapt to the particular needs of beneficiaries at a given time.                     

We are revising § 403.502, Availability of grants, to reflect the change in the source of grant awards. This change clarifies that we award grants to States subject to fund availability, and if applicable, subject to the satisfactory progress in the State's project during the preceding grant period. 

We are revising § 403.504, Number and size of grants, at paragraph (a) to specify that, for available grant funds, up to and including $10,000,000, grants will be apportioned to States according to the grant award process currently in place. We are also revising paragraph (b) to highlight the availability of funds as a condition of award. 

We are revising § 403.508, Limitations, at paragraph (a) to emphasize the fact that States receiving grants under this subpart must use the grant money in accordance with the terms and conditions specified in the notice of grant award. 

## III. Response to Comments 

                        Because of the large number of items of correspondence we normally receive on                         **Federal Register**                         documents published for comment, we are not able to acknowledge or respond to them individually. We will consider all relevant comments we receive by the date and time specified in the                         **DATES**                         section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document.                     

## IV. Waiver of Proposed Rulemaking 

                        We ordinarily publish a notice of proposed rulemaking in the                         **Federal Register**                         and provide a period for public comment before the provisions of a rule are made final. Publication of a notice of proposed rulemaking may be waived if we find there is good cause that prior notice and comment are impractical, unnecessary, or contrary to public interest. Because the changes effected in this rule are not substantive, but, rather are procedural and technical in nature, and serve primarily to explain our policies, we have determined that notice and comment is not required. In addition, under 42 U.S.C. 1395hh (a)-(b), notice and comment is not required where a statute specifically permits a regulation to be issued in interim final form. Section 4207(j) of Public Law No. 101-508, the same legislation (OBRA '90) containing section 4360, which established the grants that are the subject of this regulation, specifically authorizes the Secretary to implement section 4360 by interim final rule. Nevertheless, we are providing a 60-day period for public comment on this rule. We will consider relevant comments that are received timely, and will respond to those comments and make changes in a subsequent document as appropriate and necessary.                     

## V. Collection of Information Requirements 

This interim final rule does not impose any information collection and recordkeeping requirements that are subject to review by the Office of Management and Budget under the Paperwork Reduction Act of 1995. 

## VI. Regulatory Impact Statement 

We have examined the impacts of this interim final rule as required by Executive Order (E.O.) 12866, the Unfunded Mandates Reform Act of 1995 (Public Law 104-4), the Regulatory Flexibility Act (RFA) (5 U.S.C. sections 601-612) (Public Law 96-354), and section 1102(b) of the Social Security Act. 

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for significant regulatory action that may have economically significant effects ($100 million or more annually). For purpose of E.O. 12866, this interim final rule is not expected to have an impact that meets the economically significant threshold. 

The Unfunded Mandates Reform Act of 1995 (UMRA) applies to general notices of proposed rulemaking and final rules for which a general notice of proposed rulemaking was published. Thus, this interim final rule is not subject to the requirements of the UMRA. Despite its inapplicability, this rule is not a “significant regulatory action” within the meaning of the UMRA. Section 202 of the Unfunded Mandates Reform Act of 1995 requires agencies to prepare an assessment of anticipated costs and benefits before publishing any rule that may result in an expenditure in any year by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more. We have determined that this interim final rule will not result in such an expenditure. 

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, certain non-profit organizations and small governmental jurisdictions. We generally prepare a regulatory flexibility analysis that is consistent with the RFA unless we certify that an interim final rule will not have a significant impact on a substantial number of small entities. The impact of this rule will fall primarily on States and individuals. For purposes of the RFA, we do not consider States or individuals to be small entities. We have not prepared an analysis for the RFA because we have determined, and certify, that this interim final rule has no significant economic impact on small entities. 

Section 1102(b) of the Social Security Act (the Act) requires us to prepare a regulatory impact analysis (RIA) if a rule or regulation may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 50 beds. 

We have not prepared an analysis for section 1102(b) of the Act because we have determined that this interim final rule has no significant economic impact on a substantial number of small rural hospitals. 

In accordance with the provisions of Executive Order 12866, this interim final rule with comment period was not reviewed by the Office of Management and Budget. 

# List of Subjects in 42 CFR Part 403

        - Health insurance
        - Hospitals
        - Intergovernmental relations
        - Medicare
        - Reporting and Recordkeeping requirements

42 CFR part 403 is amended as follows: 

# PART 403—SPECIAL PROGRAMS AND PROJECTS 

1. The authority citation for part 403 continues to read as follows: 

Authority:Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 

2. Section 403.502 is revised to read as follows: 

§ 403.502 

                                HCFA awards grants to States subject to availability of funds, and if applicable, subject to the satisfactory progress in the State's project during the preceding grant period. The criteria by which progress is evaluated and the performance standards for determining                                       ( print page 34986)                                    whether satisfactory progress has been made are specified in the terms and conditions included in the notice of grant award sent to each State. HCFA advises each State as to when to make application, what to include in the application, and provides information as to the timing of the grant award and the duration of the grant award. HCFA also provides an estimate of the amount of funds that may be available to the State.                             

3. In § 403.504, paragraph (a) and the introductory text of paragraph (b), are revised to read as follows: 

§ 403.504 

                                (a)                                 *General.*                                 For available grant funds, up to and including $10,000,000, grants will be made to States according to the terms and formula in paragraphs (b) and (c) of this section. For any available grant funds in excess of $10,000,000, distribution of grants will be at the discretion of HCFA, and will be made according to criteria that HCFA will communicate to the States via grant solicitation. HCFA will provide information to each State as to what must be included in the application for grant funds. HCFA awards the following type of grants:                             

(1) New program grants. 

(2) Existing program enhancement grants. 

                                (b)                                 *Grant Award.*                                 Subject to the availability of funds, each eligible State that submits an acceptable application receives a grant that includes a fixed amount (minimum funding level) and a variable amount.                             

* * * * *

4. Section 403.508(a) is revised to read as follows: 

§ 403.508 

                                (a)                                 *Use of grants.*                                 Except as specified in paragraph (b) of this section, and in the terms and conditions in the notice of grant award, a State that receives a grant under this subpart may use the grant for any reasonable expenses for planning, developing, implementing, and/or operating the program for which the grant is made as described in the solicitation for application for the grant.                             

* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplementary Medical Insurance Program) 

Dated: December 3, 1999.

Nancy-Ann Min DeParle, 

Administrator, Health Care Financing Administration. 

Donna E. Shalala, 

Secretary. 

[FR Doc. 00-13601 Filed 5-31-00; 8:45 am] 

BILLING CODE 4120-01-P