46684 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 430, 433, 447, and 457 

[CMS–2292–P] 

RIN 0938–AQ32 

Medicaid and Children’s Health 

Insurance Programs; Disallowance of 

Claims for FFP and Technical 

Corrections 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule reflects 

the Centers for Medicare and Medicaid 

Services’ commitment to the general 

principles of the President’s Executive 

Order 13563 released January 18, 2011, 

entitled ‘‘Improving Regulation and 

Regulatory Review,’’ as this rule would: 

implement a new reconsideration 

process for administrative 

determinations to disallow claims for 

Federal financial participation (FFP) 

under title XIX of the Act (Medicaid); 

lengthen the time States have to credit 

the Federal Government for identified 

but uncollected Medicaid provider 

overpayments and provide that interest 

will be due on amounts not credited 

within that time period; make 

conforming changes to the Medicaid 

and Children’s Health Insurance 

Program (CHIP) disallowance process to 

allow States the option to retain 

disputed Federal funds through the new 

administrative reconsideration process; 

revise installment repayment standards 

and schedules for States that owe 

significant amounts; provide that 

interest charges may accrue during the 

new administrative reconsideration 

process if a State chooses to retain the 

funds during that period. This proposed 

rule would also make a technical 

correction to reporting requirements for 

disproportionate share hospital 

payments, revise internal delegations of 

authority to reflect current CMS 

structure, remove obsolete language, 

and correct other technical errors. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on September 2, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–2292–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2292–P, P.O. Box 8016, Baltimore, 

MD 21244–8016 . 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2292–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Robert Lane, (410) 786–2015, or Lisa 

Carroll, (410) 786–2696, for general 

information. 

Edgar Davies, (410) 786–3280, for 

Overpayments. 

Claudia Simonson, (312) 353–2115, for 

Overpayments resulting from Fraud. 

Rory Howe, (410) 786–4878, for Upper 

Payment Limit and Disproportionate 

Share Hospital. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 

8:30 a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

Title XIX of the Social Security Act 

(the Act) authorizes Federal grants to 

States to jointly fund programs that 

provide medical assistance to lowincome families, the elderly, and 

persons with disabilities. This FederalState partnership is administered by 

each State in accordance with an 

approved State plan. States have 

considerable flexibility in designing 

their programs, but must comply with 

Federal requirements specified in the 

Medicaid statute, regulations, and 

interpretive agency guidance. Federal 

financial participation (FFP) is available 

for State medical assistance 

expenditures, and administrative 

expenditures related to operating the 

State Medicaid program, that are 

authorized under Federal law and the 

approved State plan. 

Section 490l of the Balanced Budget 

Act of 1997 (Pub. L. 105–33, enacted on 

August 5, 1997) (BBA), added title XXI 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 46685 

to the Social Security Act (the Act) 

which authorizes the Children’s Health 

Insurance Program (CHIP) to jointly 

fund State efforts to initiate and expand 

the provision of child health assistance 

to uninsured, low-income children. 

Such assistance is primarily provided 

by obtaining health benefits coverage 

through (1) a separate child health 

program that meets the requirements 

specified under section 2103 of the Act; 

(2) expanded eligibility for benefits 

under the State’s Medicaid plan under 

title XIX of the Act; or (3) a combination 

of the two approaches. Available 

Federal funding is limited to an annual 

allotment. To be eligible for Federal 

funds under title XXI of the Act, States 

must submit a State child health plan, 

which must be approved by the 

Secretary. 

Prior to the passage of the Medicare 

Improvement for Patients and Providers 

Act of 2008 (Pub. L. 110–275, enacted 

on July 15, 2008) (MIPPA) in 2008, the 

administrative review of Medicaid 

claims for FFP that CMS has disallowed 

(disallowances) was governed by section 

1116(d) of the Act, which provided 

simply that States were entitled to a 

reconsideration of any disallowance. 

The current regulations, as discussed 

below, delegated that reconsideration to 

the HHS Departmental Appeals Board 

(Board). 

Section 2107(e)(2)(B) of the Act makes 

section 1116 of the Act applicable to 

CHIP, to the same extent as it is 

applicable to Medicaid, with respect to 

administrative review, unless 

inconsistent with the CHIP statute. As a 

result, the same basic administrative 

review process, with reconsideration 

through the Board process, was made 

applicable by regulation to CHIP. 

In section 204 of the MIPPA, section 

1116(d) of the Act was amended to 

remove Medicaid (and by implication 

CHIP) from the section 1116(d) process, 

and a new section 1116(e) of the Act 

was added to set forth a Medicaidspecific (and by implication CHIP) 

administrative review process. 

This new section 1116(e) of the Act 

added by MIPPA provides that the State 

shall be entitled to and, upon request, 

shall receive a reconsideration of the 

disallowance, provided that such 

request is made during the 60-day 

period that begins on the date the State 

receives notice of the disallowance. In 

addition, a State may appeal, in whole 

or in part, a disallowance by the 

Secretary, or an unfavorable 

reconsideration of a disallowance, to the 

Board by filing a notice of appeal with 

the Board during the 60-day period that 

begins on the date the State receives 

notice of the disallowance or of the 

unfavorable reconsideration. 

The current rules setting forth the 

process for administrative review for 

determinations that State claims for 

Federal funding are not allowable 

(disallowances) are set out in the 

Medicaid program at § 430.42 and for 

the CHIP program at § 457.212. Those 

rules set out a process for disallowance 

of FFP and provide for reconsideration 

of disallowances by the HHS Board 

using procedures set forth in 45 CFR 

part 16. The rules provide a framework, 

which has been used by the Department 

for resolution of an increasing range of 

disputes. 

Section 6506 of the Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010) (the 

Affordable Care Act) amended section 

1903(d)(2) of the Act to extend the 

period from 60 days to 1 year for which 

a State may collect an overpayment 

from providers before having to return 

the Federal funds. This section also 

provides for additional time beyond the 

1 year for States to recover debts due to 

fraud when a final judgment (including 

a final determination on an appeal) is 

pending. 

II. Provisions of the Proposed Rule 

This proposed rule would revise 

regulatory provisions in 42 CFR parts 

430, 433, 447, and 457. 

A. Administrative Review of 

Determinations to Disallow Claims for 

FFP 

Section 204 of the MIPPA (Review of 

Administrative Claim Determination) 

amended section 1116 of the Act by 

striking ‘‘title XIX’’ from section 1116(d) 

of the Act and adding section 1116(e) of 

the Act which provides language that 

States may obtain review by the Board 

of an agency decision or reconsidered 

agency decision. Therefore, we are 

proposing to revise § 430.42 to set forth 

new procedures to review 

administrative determinations to 

disallow claims for FFP. These new 

procedures would provide for the 

availability of an informal agency 

reconsideration and a formal 

adjudication by the HHS Board. 

Specifically, § 430.42(b) would 

provide States the option to request 

administrative reconsideration of an 

initial determination of a Medicaid 

disallowance. These revisions identify 

timeframes for the reconsideration 

process. The timeframes that we are 

proposing are short because we view 

this reconsideration process to be a 

quick and efficient process for States to 

point out clear errors or omissions in 

disallowance determinations, relating 

either to facts or policy interpretations, 

that can be corrected before the parties 

incur further time and expense in an 

appeal to the Board. Disputes that 

involve complex fact-finding or issues 

of legal authority are not appropriate for 

this expedited review process. 

Section 430.42(c) describes the 

procedures for such a reconsideration, 

§ 430.42(d) describes the option for a 

State to withdraw a reconsideration 

request, and § 430.42(e) describes the 

procedures for issuing reconsideration 

decisions and implementing such 

decisions. We propose that neither the 

State nor CMS will be limited to a 

record developed in the reconsideration 

process in any further appeal of the 

matter. This is consistent with the 

provisions of section 1116(e)(2)(B) of the 

Act which provides for the Board to 

consider ‘‘such documentation as the 

State may submit and as the Board may 

require’’ including ‘‘all relevant 

evidence.’’ 

Because section 1116(e)(2)(B) of the 

Act clarifies that the Board decision 

(and by implication the reconsideration 

decision) is to be based on 

documentation submitted by the State, 

we include a statement in the proposed 

regulations reflecting the existing 

principle that the State is responsible 

for documenting the allowability of its 

claims for FFP. Because the Medicaid 

program is State-administered, the State 

is in possession of the underlying 

factual information on its claims, and 

therefore, has the responsibility of 

documenting submitted claims. This is 

not a new principle, and is currently 

applied by the Board in reviewing 

disallowance determinations, but it is 

important to reiterate this point to make 

clear how the reconsideration and 

review process will operate. 

Section 430.42(f) provides States the 

option of appeal to the Board of either 

an initial determination of a Medicaid 

disallowance, or the reconsideration of 

such a determination under § 430.42(b). 

The procedures for such an appeal are 

set forth in § 430.42(g). For this purpose, 

we have proposed that the Board shall 

follow the procedures set forth in its 

regulations at 45 CFR part 16, but we 

have included language from section 

1116(e)(2)(B) of the Act to describe the 

scope of the Board review to include ‘‘a 

thorough review of the issues, taking 

into account all relevant evidence, 

including such documentation as the 

State may submit and as the Board may 

require.’’ In § 430.42(h), we set forth the 

procedure for issuance and 

implementation of the final decision. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46686 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

B. State Option To Retain Federal Funds 

Pending Administrative Review and 

Interest Charges on Properly Disallowed 

Funds Retained by the State 

Section 204 of the MIPPA (Review of 

Administrative Claim Determination) 

amended section 1116 of the Act by 

striking ‘‘title XIX’’ from section 1116(d) 

of the Act and adding section 1116(e) of 

the Act which provides language that 

the States may obtain review by the 

Board of an agency decision or 

reconsidered agency decision. Section 

1903(d)(5) of the Act gives a State the 

option of retaining the amount of 

Federal payment in controversy when 

such payment has been disallowed by 

the Secretary pending a final 

administrative determination upon 

review. In other words, the statute 

provides a State the option of retaining 

(or returning) the entire amount of 

Federal payment that has been 

disallowed, while that disallowance is 

being reconsidered by the agency, or 

under appeal to the Board. If a final 

administrative determination has been 

made upholding the disallowance, the 

State must return all disallowed 

amounts with interest ‘‘for the period 

beginning on the date such amount was 

disallowed and ending on the date of 

such final determination.’’ 

Specifically, we propose to revise 

§ 433.38 to clarify the application of 

interest when the State opts to retain 

Federal funds. These regulations specify 

the procedures that CMS and a State 

must follow when the State chooses to 

retain the funds pending a final 

administrative determination. The 

current regulations provide that a State 

that chooses to retain the disallowed 

funds during an appeal to the Board is 

required to pay interest on any portion 

of the disallowance that is ultimately 

sustained by the Board. Section 433.38 

would be revised to add language 

clarifying that interest would accrue on 

disallowed claims of FFP during both 

the reconsideration process and the 

Board appeal process. We are also 

providing clarifying language regarding 

interest charged on disallowed claims 

during the repayment of Federal funds 

by installments. If a State chooses to 

retain the FFP when a claim is 

disallowed and appeals the 

disallowance, the interest will continue 

to accrue through the reconsideration 

and the Board decision. If the 

disallowance is upheld, the State may 

request a repayment of FFP by 

installments. 

We are also proposing two options for 

the repayment of interest that accrues 

from the date of the disallowance notice 

until the final Board decision when a 

State elects repayment by installments. 

It has consistently been our policy that 

once the State has exhausted all of its 

administrative appeal rights and the 

disallowance has been upheld, the 

principal overpayment amount plus 

interest through the date of final 

determination becomes the new 

overpayment amount. We are proposing 

to provide States with an additional 

option for repaying that interest during 

a repayment schedule. Given States’ 

current fiscal situation, we believe that 

allowing some flexibility in the 

repayment of interest during the 

repayment schedule may further assist 

States with their budgetary concerns. 

If a State chooses to repay the 

overpayment by installments, the State 

may choose the option of: 

(1) Dividing the new overpayment 

amount (principal plus initial interest) 

by the 12-quarters of repayment. The 

initial interest is interest from the date 

of the disallowance notice until the first 

payment. The State will still be required 

to pay interest per quarter on the 

remaining balance of the overpayment 

until the final payment. To clarify how 

this option would work, we provide an 

example in Table 3; or 

(2) Paying the first installment of the 

principal plus all interest accrued from 

the date of the disallowance notice 

through the first payment. The first 

installment would include the principal 

payment plus interest calculated from 

the date of the disallowance notice. 

Each subsequent payment would 

include the principal payment plus 

interest calculated on the remaining 

balance of the overpayment amount. 

Under section 1903(d)(5) of the Act, a 

State that wishes to retain the Federal 

share of a disallowed amount will be 

charged interest, based on the average of 

the bond equivalent of the weekly 90- 

day treasury bill auction rates, from the 

date of the disallowance to the date of 

a final determination. 

A State that has given a timely written 

notice of its intent to repay by 

installments to CMS will accrue interest 

during the repayment schedule on a 

quarterly basis at the Treasury Current 

Value Fund Rate (CVFR), from: 

(1) The date of the disallowance 

notice, if the State requests a repayment 

schedule during the 60-day review 

period and does not request 

reconsideration by CMS or appeal to the 

Board within the 60-day review period. 

(2) The date of the final determination 

of the administrative reconsideration, if 

the State requests a repayment schedule 

during the 60-day review period 

following the CMS final determination 

and does not appeal to the Board. 

(3) The date of the final determination 

by the Board, if the State requests a 

repayment schedule during the 60-day 

review period following the Board’s 

final determination. 

The initial installment will be due by 

the last day of the quarter in which the 

State requests the repayment schedule. 

If the request is made during the last 30 

days of the quarter, the initial 

installment will be due by the last day 

of the following quarter. Subsequent 

repayment amounts plus interest will be 

due by the last day of each subsequent 

quarter. 

The CVFR is based on the Treasury 

Tax and Loan (TT&L) rate and is 

published annually in the Federal 

Register, usually by October 31st 

(effective on the first day of the next 

calendar year), at the following Web 

site: http://www.fms.treas.gov/cvfr/ 

index.html. 

We are soliciting comments related to 

these approaches and the best 

application of interest when a State 

chooses repayment of FFP by 

installments. We are also interested in 

any suggestions on alternative 

approaches with respect to the 

repayment of interest during the 

repayment schedule. 

C. Repayment of Federal Funds by 

Installments 

Currently, § 430.48 provides that 

States with significant repayment 

obligations in proportion to the size of 

their Medicaid programs may repay that 

liability in installments. Current 

regulations provide a 12-quarter time 

period for repayment similar to the time 

period implemented by the Federal 

Claims Collection Act. The State must 

meet two basic conditions for a 

repayment of Federal funds by 

installment. The amount to be repaid 

must exceed 2.5 percent of the 

estimated or actual annual State share of 

the Medicaid program and the State 

must provide written notice of intent to 

repay by installments before the total 

repayment is due. 

Currently, the number of quarters 

allowed for a repayment schedule is 

determined on the basis of the ratio of 

repayment amounts to the annual State 

share of Medicaid expenditures. The 

percentages of the annual State amounts 

used to determine the proposed 

amounts of quarterly installments are: 

21⁄2; percent for each of the first 4 

quarters; 5 percent for each of the 

second 4 quarters; and 171⁄2; percent for 

each of the last 4 quarters. 

This proposed rule would amend 

§ 430.48 to revise the repayment 

schedule, providing more options for 

States electing a repayment schedule for 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 46687 

the payment of Federal funds by 

installment. We are proposing three 

schedules including schedules that 

recognize the unique fiscal pressures of 

States that are experiencing economic 

distress, and to make technical 

corrections. 

The rationale for the installment 

repayment schedule is to enable States 

to continue to operate their programs 

effectively while repaying the Federal 

share. HHS has determined that the 

current provision is not sufficiently 

flexible to meet that goal. Therefore, we 

are revising the general provision to 

provide States with additional options 

for repayment. 

Current regulations provide an 

exception to the 12-quarter time period 

for repayment when amounts due 

exceed the State’s share of annual 

expenditures for the program to which 

the disallowance applies. We are not 

proposing to amend this provision. 

We are proposing to replace the 

existing repayment schedule and 

qualifying criteria for States with 

significant repayment obligations 

(repayment amounts of at least 2.5 

percent of total annual Medicaid 

expenditures) with three new 

repayment options to assist States in 

repayment of Federal funds. Two of the 

options are available to States at the 

time that the disallowance is 

established, either at the issuance of a 

disallowance letter or issuance of the 

administrative appeal decision. 

The first option is a new standard 

repayment schedule. Any State would 

have the option of electing this standard 

repayment schedule which would allow 

the State to repay on a quarterly basis 

over a 3-year period, subject to a 

minimum repayment amount of at least 

0.25 percent of total annual State share 

of Medicaid expenditures. 

The second new option would be 

available to States experiencing a period 

of economic distress as defined in this 

proposed regulation. This option would 

also allow States to return funds over a 

3-year period; however, States would 

have smaller payments in the first 2 

years when their fiscal circumstances 

are more difficult and larger payments 

in the final year to ensure payment in 

full. 

The third option is available for States 

who experience a period of economic 

distress that occurs or continues during 

an existing repayment plan. This third 

option allows the State an additional 

period of time to repay owed amounts 

dependent upon the ongoing economic 

health of the State. We describe each 

new option in this section. Furthermore, 

to clarify how the various proposed 

revised standard and alternative 

repayment schedules would work, we 

provide an example in Table 1. 

1. Standard Repayment Schedule 

In § 430.48, we propose to replace the 

current 2.5 percent threshold for 

determining whether a State would 

qualify for a repayment schedule. 

Therefore, all States that meet the new 

proposed 0.25 percent threshold would 

be eligible to choose the new standard 

repayment schedule (option 1). We 

propose a quarterly repayment schedule 

in which the State would repay the total 

overpayment amount in no more than a 

12-quarter period (3 years). The 

amounts of the quarterly installments 

and the total quarters of the repayment 

schedule will be determined by dividing 

the total overpayment amount by a 

minimum proposed amount of quarterly 

installments. In this repayment 

schedule, the State must pay at least a 

minimum repayment amount per 

quarter of 0.25 percent of the annual 

State share (plus any calculated 

interest). The State would be required to 

repay not less than this amount each 

quarter for up to a 12-quarter period. 

The total repayment amount must be 

fully repaid within the 12-quarter 

period. In many instances, due to the 

minimum quarterly payment 

requirement, the repayment amount will 

be paid in full in less than 12 quarters. 

Except in times when economic 

distress occurs during an existing 

repayment plan (option 3), as described 

below, the standard repayment period 

may not exceed 12 quarters unless the 

total repayment amount exceeds 100 

percent of the State’s estimated State 

share of annual expenditures. 

Current regulations require that the 

remaining amount of the repayment be 

in quarterly amounts equal to not less 

than 17.5 percent of the estimated State 

share of annual expenditures. If the total 

repayment amount exceeds 100 percent 

of the State’s estimated State share of 

annual expenditures, we are proposing 

a change that would allow the 

remaining amount of the repayment to 

be in quarterly amounts equal to not less 

than 81⁄3 percent of the overpayment 

amount. This change would allow for 

repayment of the total amount that 

exceeds 100 percent of the State’s 

estimated State share of annual 

expenditures to be repaid in 12 quarters. 

The proposed 12-quarter time period 

for repayment is similar to the time 

period implemented in the Federal 

Claims Collection Act (Pub. L. 89–508), 

which generally limits the repayment of 

a debt due the Federal Government to 3 

years. The Department’s implementing 

regulations at 45 CFR 30.17, provide 

that the size and frequency of the 

payments should reasonably relate to 

the size of the debt and the debtor’s 

ability to pay. Additionally, the 

installment agreement will provide for 

full payment of the debt, including 

interest and charges, in 3 years or less, 

when feasible. We believe that the 

proposed 12-quarter standard timeframe 

for repayment aligns with the intent of 

the Federal Claims Collection Act and 

implementing regulations. We are 

interested in comments related to the 

use of a minimum quarterly repayment 

amount allowing up to a 12-quarter 

repayment timeline. 

We have also proposed to eliminate 

the requirement for offsetting of 

retroactive claims. This provision would 

undermine the purpose of the revised 

repayment schedule. Offsetting 

currently requires that prior period 

increasing adjustments claimed by 

States that are over 1-year old would be 

applied against the repayment amount. 

This would have the effect of altering 

(shortening) the repayment schedule by 

the amount of prior period claims for 

unrelated expenditures. 

We are soliciting comments on the 

modifications to the standardized 

repayment schedule. We are particularly 

interested in receiving comments on our 

use of 0.25 percent of the State share as 

a minimum required repayment 

amount. 

2. Alternate Repayment Schedule 

During Periods of Economic Distress 

States owing the Federal Government 

significant amounts of Federal funds 

during a period of State economic 

downturn have requested recognition of 

the realities of their fiscal constraints 

through more flexibility in repayment 

by installment plan. We share the 

concern of States with respect to 

repayment of Federal funds during 

periods of State economic distress. We 

realize that immediate repayment of the 

entire amount or even repayment by 

installments under the new proposed 

regulations in certain instances could 

result in hardship for the health 

programs being administered by the 

State and have an adverse effect on the 

beneficiaries of these programs. 

Therefore, we are proposing an option 

(option 2) for States that have been 

experiencing economic distress. This 

option is an alternate to the standard 

repayment schedule for States 

experiencing economic distress at the 

time that a repayment schedule is 

initially developed. We are seeking 

comments not only on the creation of an 

alternate repayment schedule but also 

on all elements of the alternate 

schedule. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46688 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

We are proposing at § 430.48(d) that if 

a State has been experiencing periods of 

economic distress, defined as a negative 

percentage change in the State’s 

coincident index as determined by the 

Philadelphia Federal Reserve Bank, 

within the 6 months immediately prior 

to the start of a repayment schedule, the 

State may elect this alternate repayment 

schedule instead of the proposed 

standard repayment schedule. It still 

provides States up to 12 quarters to 

repay the full amount, but allows for 

lower payments in the earlier quarters to 

provide relief to States beginning to 

repay Federal funds in a time of 

economic hardship for the State. The 

entire overpayment amount will be 

repaid at the end of the 12-quarter 

period unless the State qualifies for an 

extension as discussed in option 3. 

In § 430.48(c)(3),we propose that 

quarterly required repayment amounts 

will depend upon the total amount 

owed. If the total amount owed divided 

by 12 is less than 0.25 percent of the 

State share, the State would make 12 

equal quarterly payments of the lesser 

amount. If the amount divided by 12 is 

greater than 0.25 percent of the State 

share, the quarterly repayment amount 

for the first 8 quarters will not be more 

than 0.25 percent of the estimated 

annual State share plus interest. The 

remaining balance of the overpayment 

amount would be divided equally over 

the remaining 4 quarters. This 12- 

quarter time period for repayment 

during periods of State economic 

distress was used because it is in 

accordance with the time period 

implemented by the Federal Claims 

Collection Act. The Federal Claims 

Collection Act generally limits the 

repayment of a debt due the Federal 

Government to 3 years. 

3. Extended Repayment Schedule 

During Periods of Economic Distress 

Additionally, we are proposing at 

§ 430.48(e), an option (option 3) to 

extend a repayment schedule if a State 

has entered into a standard repayment 

schedule or the alternative schedule 

described above and enters into or 

continues to experience a period of 

economic distress. The State may only 

request to enter into the economic 

distress extension plan once per 

repayment; a State may not repeatedly 

request to begin new repayment periods 

based on the status of its economic 

health. This extension would create a 

new repayment period, beginning the 

quarter directly following a State’s 

request (for example, 9th quarter), for 

the outstanding balance of the 

repayment amount calculated for the 

remaining quarters and any additional 

extension quarters. 

We are proposing that a State which 

is already repaying amounts using the 

standard repayment schedule may 

request a new 3-year extension period 

for economic distress. A State that is 

currently repaying funds under a 

standard repayment schedule may 

request an economic distress extension 

if at any time during the repayment 

period, the State experiences 6 

consecutive months of economic 

distress. 

We are proposing to define ‘‘economic 

distress’’ as a negative percentage 

change in the State’s coincident index 

as determined by the Philadelphia 

Federal Reserve Bank. As we discuss 

below, this index is based on four 

different State-level indicators that 

together reflect each State’s overall 

economic health. 

The consecutive period that forms the 

basis for such a request can include 

months immediately prior to the start of 

the standard repayment schedule as 

long as they create a consecutive 6- 

month period reaching into the 

repayment period. For example, when 

determining the initial repayment 

schedule, a State cannot qualify for the 

alternative payment schedule (option 2) 

because it has only experienced 4 

consecutive months of economic 

distress. If the State continues to 

experience economic distress during the 

first 2 months of its standard repayment 

plan, it may request an economic 

distress extension because it has 

experienced 6 consecutive months of 

economic distress, 4 months prior to the 

repayment schedule and 2 months 

during the first months of the repayment 

schedule. 

For States in a standard repayment 

schedule that qualify for the economic 

distress extension, the outstanding 

balance, including interest, will be used 

to recalculate a new 12-quarter 

repayment schedule using the same 

methodology as in option 2, the 

alternate repayment schedule; the 

remaining balance, including interest 

will be divided by 12. The first 8 

quarterly payments will be the lesser of 

the quotient or 0.25 percent of the 

estimated annual State share. As in 

option 2, the remainder owed will be 

divided over the final 4 quarters of the 

extension period. Interest will continue 

to accrue during the new 12-quarters 

repayment schedule at the CVFR. 

For States initially beginning 

repayment through an alternate 

repayment schedule, we propose to 

allow an extension of the repayment 

period to provide additional time to 

repay the overpayment amount if the 

State continues to find itself in 

economic distress during the original 

repayment period. If a State initially has 

an alternate repayment schedule in 

place (because it was in economic 

distress before the repayment schedule 

began) and has any qualifying periods of 

economic distress during the first 8 

quarters of the alternate repayment 

schedule, the State may request that we 

extend the alternate repayment period 

by the number of such qualifying 

quarters. For purposes of this additional 

relief, qualifying periods of economic 

distress would include those quarters in 

which the State experienced at least 1 

month of economic distress. In other 

words, for at least 1 month in that 

quarter, the State experienced economic 

distress as defined below. 

This extension, beyond the original 12 

quarters, would extend the number of 

quarters of qualifying periods of 

economic distress by the number of 

quarters in which the State experiences 

economic distress. We are proposing 

that the extension would allow a State 

to recalculate their payment amounts 

before the increased (ballooned 

payments) became due and would allow 

for no more than 8 additional quarters. 

For example, a State experiencing 

economic distress for 3 quarters of the 

first 8 quarters would receive an 

extension of 3 additional quarters for a 

total of 15 quarters to fully repay funds 

owed. 

Continuing the example above, the 

State qualifying for 15 quarters would 

pay 0.25 percent of the State share for 

the first 8 quarters. For the remaining 7 

quarters, the State would pay the 

balance of the repayment amount 

divided by 7 (the number of remaining 

quarters). 

In Table 2, we provide an example to 

demonstrate and compare a State that 

repays using the current repayment 

schedule, the proposed standard 

repayment schedule, the proposed 

alternate repayment schedule begun 

during a period of economic distress, 

the proposed standard repayment 

schedule with an economic distress 

extension, and the proposed alternate 

repayment schedule initiated in a 

period of economic distress and 

extended for continued economic 

distress. For simplicity and clarity, 

Table 2 does not include interest that 

would be charged during the repayment 

process, but we have provided Table 3 

to illustrate the application of interest 

charges. 


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TABLE 1—EXAMPLE

Total FY Medicaid State Share ................................................................................................................................................... $3,500,000,000 

Overpayment Amount .................................................................................................................................................................. 220,200,000 

Current Minimum Payment—2.5% of State Share ..................................................................................................................... 87,500,000 

Proposed Standard Minimum Payment: Higher of: 

0.25% of State Share OR .................................................................................................................................................... 8,750,000 

Disallowed amount (D/A)/12 qtrs ......................................................................................................................................... 18,350,000 

Alternate Economic Distress: 

0.25% of State Share—8 qtrs .............................................................................................................................................. 8,750,000 

D/A balance/4 qtrs ................................................................................................................................................................ 37,550,000 

D/A balance/7 qtrs ................................................................................................................................................................ 21,457,143 

TABLE 2—EXAMPLE

Quarters Current repayment 

schedule 

Proposed standard 

payment schedule 

Proposed alternate 

repayment 

schedule 

(State begins in 

economic distress 

amount) 

(no continuing 

distress) 

Proposed alternate 

repayment 

schedule 

(State begins in 

economic distress) 

requests and qualifies for economic 

distress extension 

for Qtrs 1, 2, and 6) 

Proposed alternate 

repayment 

schedule 

(State begins with 

standard repayment 

schedule, requests 

and qualifies for 

economic distress 

extension in Qtr. 4) 

1 ................................................... 87,500,000 18,350,000 8,750,000 8,750,000 18,350,000 

2 ................................................... 87,500,000 18,350,000 8,750,000 8,750,000 18,350,000 

3 ................................................... 45,200,000 18,350,000 8,750,000 8,750,000 18,350,000 

4 ................................................... ................................ 18,350,000 8,750,000 8,750,000 18,350,000 

5 ................................................... ................................ 18,350,000 8,750,000 8,750,000 8,750,000 

6 ................................................... ................................ 18,350,000 8,750,000 8,750,000 8,750,000 

7 ................................................... ................................ 18,350,000 8,750,000 8,750,000 8,750,000 

8 ................................................... ................................ 18,350,000 8,750,000 8,750,000 8,750,000 

9 ................................................... ................................ 18,350,000 37,550,000 21,457,143 8,750,000 

10 ................................................. ................................ 18,350,000 37,550,000 21,457,143 8,750,000 

11 ................................................. ................................ 18,350,000 37,550,000 21,457,143 8,750,000 

12 ................................................. ................................ 18,350,000 37,550,000 21,457,143 8,750,000 

13 ................................................. ................................ ................................ ................................ 21,457,143 19,200,000 

14 ................................................. ................................ ................................ ................................ 21,457,143 19,200,000 

15 ................................................. ................................ ................................ ................................ 21,457,142 19,200,000 

16 ................................................. ................................ ................................ ................................ ................................ 19,200,000 

17 ................................................. ................................ ................................ ................................ ................................ ................................

18 ................................................. ................................ ................................ ................................ ................................ ................................

19 ................................................. ................................ ................................ ................................ ................................ ................................

20 ................................................. ................................ ................................ ................................ ................................ ................................

Total Repaid ......................... 220,200,000 220,200,000 220,200,000 220,200,000 220,200,000 

TABLE 3—EXAMPLE

Principal Overpayment ............................................................................................................................ 220,000,000 ................................

Interest ..................................................................................................................................................... 200,000 ................................

Total Overpayment .................................................................................................................................. 220,200,000 ................................

Current Value Fund Rate ........................................................................................................................ 3% ................................

Quarters 

Proposed standard 

payment schedule 

principal 

Proposed standard 

payment schedule 

interest 

Proposed standard 

payment schedule 

total 

1 ........................................................................................................................... 18,350,000 1,628,877 19,978,877 

2 ........................................................................................................................... 18,350,000 1,481,088 19,831,088 

3 ........................................................................................................................... 18,350,000 1,348,113 19,698,113 

4 ........................................................................................................................... 18,350,000 1,198,682 19,548,682 

5 ........................................................................................................................... 18,350,000 1,026,191 19,376,191 

6 ........................................................................................................................... 18,350,000 889,932 19,239,932 

7 ........................................................................................................................... 18,350,000 750,389 19,100,389 

8 ........................................................................................................................... 18,350,000 600,958 18,950,958 

9 ........................................................................................................................... 18,350,000 441,603 18,791,603 

10 ......................................................................................................................... 18,350,000 298,776 18,648,776 

11 ......................................................................................................................... 18,350,000 152,665 18,502,665 

12 ......................................................................................................................... 18,350,000 3,234 18,353,234 

13 ......................................................................................................................... ................................ ................................ ................................

14 ......................................................................................................................... ................................ ................................ ................................

15 ......................................................................................................................... ................................ ................................ ................................

16 ......................................................................................................................... ................................ ................................ ................................


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46690 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

Quarters 

Proposed standard 

payment schedule 

principal 

Proposed standard 

payment schedule 

interest 

Proposed standard 

payment schedule 

total 

17 ......................................................................................................................... ................................ ................................ ................................

18 ......................................................................................................................... ................................ ................................ ................................

19 ......................................................................................................................... ................................ ................................ ................................

20 ......................................................................................................................... ................................ ................................ ................................

Total Repaid ................................................................................................. 220,200,000 9,820,508 230,020,508 

We are proposing that the 

determination of economic distress 

would be made on a State-specific basis 

as opposed to a national index. We 

believe this will ensure that States 

experiencing economic difficulty may 

avail themselves of this option 

regardless of whether the nation as a 

whole is facing a recession or time of 

growth. We believe that it is an 

equitable way of handling situations in 

which individual States are 

experiencing severe fiscal hardship. 

We reviewed several different data 

sources to develop qualifying criteria for 

States seeking an alternate repayment 

schedule due to economic distress. We 

looked for indicators which were 

readily available to the States and CMS, 

transparent to the public, robust in its 

measurement of economic health, based 

on the most recent data possible, 

consistent across States, and predictably 

available on a regular basis in a timely 

manner. We also attempted to find a 

measure that mirrored as closely as 

possible the criteria used by the 

National Bureau of Economic Research 

(NBER) to determine a national 

recession. 

We researched several potential 

economic distress measures and 

consulted various entities including the 

National Association of State Budget 

Officers, the Rockefeller Institute, the 

Philadelphia Federal Reserve Bank, and 

the Government Accountability Office 

(GAO). The main options we considered 

were a model used by the GAO, the 

Philadelphia Federal Reserve Bank State 

coincident index, and the measure of 

whether a State qualifies for extended 

benefits in the Unemployment 

Insurance program overseen by the U.S. 

Department of Labor. The GAO index is 

used to provide information to Congress 

on State level economic health. It 

provided much of what we believed 

would be necessary to accurately 

measure overall economic health. 

However, it is not publicly available nor 

is it replicated on a predictable basis. 

The Unemployment Insurance program 

provided data that was timely, accurate, 

and publicly available. However, it did 

not appear to be the most robust 

measure of total economic health in a 

State, nor did it closely reflect the type 

of information used by the NBER. 

We are proposing to adopt the State 

coincident index as determined by the 

Philadelphia Federal Reserve Bank. 

Unlike the other indicators we 

reviewed, this measure met all of the 

criteria we established. It is publicly 

available on the Philadelphia Federal 

Reserve Web site 

(www.philadelphiafed.org), based on 

recent data, published in a timely 

manner, and published monthly. The 

index represents a robust measure of 

economic health. In addition, the 

Philadelphia Federal Reserve Bank State 

coincident index data compilation best 

approximated the type of information 

NBER reviews in determining a national 

recession. We are inviting comments on 

this choice of measures. 

The coincident index combines four 

State-level indicators to summarize 

current economic conditions in a single 

statistic: nonfarm payroll employment; 

average hours worked in manufacturing; 

the unemployment rate; and wage and 

salary disbursements deflated by the 

consumer price index (U.S. city 

average). The trend for each State’s 

index is set to the trend of its gross 

domestic product (GDP), so long-term 

growth in the State’s index matches 

long-term growth in its GDP. The model 

and the input variables are consistent 

across the 50 States, so the State indexes 

are comparable to one another. 

We are proposing that a State 

(including the District of Columbia and 

the territories) would be eligible to 

utilize the economic distress option for 

repayment if the State had a period of 

continuous distress as demonstrated by 

negative percent changes in the 

Philadelphia Federal Reserve Bank State 

coincident index for the immediate 

prior 6 months for which data is 

available. That is, if the State’s index 

were negative for each of the 6 months 

preceding the beginning of the 

repayment period, then the State would 

be deemed to be experiencing a period 

of economic distress for purposes of the 

repayment schedule options and could 

request the alternative repayment 

schedule. 

We performed an analysis to 

determine how frequently States would 

qualify for an alternate repayment 

schedule using the 6-month period as a 

trigger. Using data from NBER, we 

identified when the last 4 recession 

periods occurred and their duration. 

The most recent NBER declared national 

recession started in December of 2007 

and continued through June 2009. The 

previous recession was from March 

2001 through November 2001. Our 

objective was to compare the measures 

and to determine if any State would 

qualify for an alternate repayment 

schedule when the nation is not in a 

recession. 

We then turned to data from the 

Philadelphia Federal Reserve Bank State 

coincident indexes to determine 

negative growth by State for the period 

of January 2005 through May 2010. We 

found that one State would have 

qualified for an alternate repayment 

schedule as early as October 2005 for a 

2-month period (for example, for each of 

those 2 months, the immediate previous 

6 months demonstrated economic 

distress). Additionally, we found other 

States that qualified as early as 

November 2007 and some that would 

qualify as late as April 2010. We only 

found one State that would not have 

met the requirements to qualify for the 

alternate repayment schedule. 

We are particularly interested in 

receiving input on the Philadelphia 

Federal Reserve State coincident index 

as the criteria for State economic health. 

We are soliciting comments on our use 

of this index as well as suggestions for 

other potential measures of State 

economic health and/or distress. We 

welcome comments on the GAO model 

and the Unemployment Insurance 

determination as well as other potential 

indicators that are not specifically 

discussed. 

We are also soliciting comments on 

whether the correct measure, if using 

the Philadelphia Federal Reserve Bank 

State coincident index, is a negative 

percent change for each of the previous 

6 months in the immediate prior 

6-month period. We considered using a 

3-month look back period, as well as to 

look only at the current months within 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 46691 

a given quarter. We encourage 

comments on this as well as suggestions 

for alternate measures. 

D. Refunding of Federal Share of 

Overpayments to Providers 

We are proposing to revise § 433.300 

through § 433.322 in accordance with 

section 6506 of the Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010) (the 

Affordable Care Act). These provisions 

amended section 1903(d)(2) of the Act 

to provide an extension of the period for 

collection of provider overpayments. 

Under the new provisions, States have 

up to 1 year from the date of discovery 

of an overpayment made to a Medicaid 

provider to recover or to attempt to 

recover such an overpayment. At the 

end of the 1 year period, the State is 

required to return to the Federal 

Government the Federal share of any 

unrecovered amount. 

In addition, for overpayments due to 

fraud, when a State is unable to recover 

the overpayment (or any portion 

thereof) within 1 year of discovery 

because no final determination of the 

amount of the overpayment has been 

made under an administrative or 

judicial process (as applicable), 

including as a result of a judgment being 

under appeal, the State will have until 

30 days after the date on which a final 

judgment (including, if applicable, a 

final determination on an appeal) is 

made in the judicial or administrative 

process to recover such overpayment 

before being required to make the 

adjustment to the Federal share. 

Previously, States had up to 60 days to 

recover an overpayment and make an 

adjustment to the Federal share. There 

was also no specific statutory basis set 

forth in the Act for a State to recover or 

seek to recover an overpayment made to 

a Medicaid provider due to fraud. This 

rule replaces ‘‘60-calendar day’’ and 

‘‘60-day’’ in § 433.316 with ‘‘1-year’’ to 

bring the regulatory language into 

alignment with the provisions of the 

Affordable Care Act. 

We are also proposing to amend the 

Departmental regulations at § 433.304 

by adding language that defines what 

constitutes ‘‘final written notice’’; when 

a Medicaid agency may treat an 

overpayment made to a Medicaid 

provider as resulting from fraud under 

§ 433.316(d); and that the State is not 

required to return the Federal share of 

overpayments until 30 days after a final 

judgment (including a final 

determination on appeal) when a State 

has not recovered an overpayment 

resulting from fraud within 1-year of 

discovery. The proposed rule would 

also amend the regulations by deleting 

the definition of ‘‘abuse’’ from § 433.304 

so that the regulatory language mirrors 

that of the statute as amended by the 

Affordable Care Act. 

We are also proposing that interest 

will be due by the State on amounts of 

Medicaid provider overpayments that 

are not timely refunded by the State. A 

State that fails to timely refund such 

amounts improperly retains the use of 

such funds and will be presumed to 

have earned interest on that use. Such 

imputed interest will be deemed 

program income and must be refunded 

along with the principal amount. 

Interest will be assessed at the Current 

Value of Funds Rate (CVFR) and will 

accrue beginning on the day after the 

end of the 1-year period following 

discovery until the last day of the 

quarter for which the State submits a 

CMS–64 report refunding the Federal 

share of the overpayment. 

These regulations do not apply to 

overpayments involving administrative 

costs. Therefore, the Federal share of all 

overpayments involving administrative 

costs must be refunded immediately 

following discovery, as required by 

section 1903(d)(2)(A) of the Act. An 

example of administrative costs would 

include any item claimed on the CMS– 

64.10 forms. 

E. Technical Corrections to Medicaid 

Regulations 

1. Grants Procedures 

The proposed rule updates references 

at § 430.30 by striking ‘‘CMS–25’’ and 

adding ‘‘CMS–37.’’ The CMS–25 was 

renamed to the CMS–37, but the 

changes were never codified in 

regulation. We took the opportunity in 

this proposed rule to make the 

correction. States are currently using the 

CMS–37 form. 

2. Deferral of Claims for FFP 

The proposed rule would revise the 

delegation of authority for deferral 

determinations under § 430.40 to reflect 

internal agency organizational changes. 

Authority to impose deferral of claims 

for FFP has been revised from the 

Regional Administrator to the 

Consortium Administrator responsible 

for the Medicaid program. 

3. Inpatient Services: Application of 

Upper Payment Limits (UPLs) 

The rule proposes technical changes 

that remove UPL transition period 

language at § 447.272 and § 447.321. 

The last transition period expired on 

September 30, 2008. 

4. Reporting Requirements for 

Disproportionate Share Hospital 

Payments 

The proposed rule would correct a 

technical error in the regulation text at 

§ 447.299(c)(15). This paragraph 

provides a narrative description of how 

‘‘total uninsured IP/OP uncompensated 

care costs’’ is to be calculated from 

component data elements. The first 

sentence unintentionally and 

incorrectly references costs associated 

with Medicaid eligible individuals in 

the description of uninsured 

uncompensated costs. This reference is 

incorrect and could not be interpreted 

reasonably to contribute to an accurate 

description of ‘‘total uninsured IP/OP 

uncompensated care costs.’’ 

Additionally, it erroneously contradicts 

section 1923(g) of the Act, § 447.299, 42 

CFR part 455 subpart D, and 

longstanding CMS policy. The second 

sentence of § 447.299(c)(15) accurately 

identifies the component data elements 

and correctly describes the calculation 

of ‘‘total uninsured IP/OP 

uncompensated care costs,’’ which does 

not include Medicaid eligible 

individuals. 

F. Conforming Changes to CHIP 

Regulations 

The CHIP regulations at § 457.210 

through § 457.212 and 457.218 mirror 

Medicaid regulations at 42 CFR parts 

430 and 433 related to deferrals, 

disallowances, and repayment of 

Federal funds by installments. We are 

proposing to make conforming changes 

to both the Medicaid and CHIP 

programs by striking § 457.210 through 

§ 457.212 and § 457.218 and 

incorporating the requirements of 42 

CFR part 430. We are incorporating 

these through reference in § 457.628(a). 

We are also incorporating the 

requirements of 42 CFR part 433 with 

respect to overpayments. Section 

2105(c)(6)(B) of the Act incorporates the 

overpayment requirements of section 

1903(d)(2) of the Act into CHIP. 

Therefore, we are also amending the 

CHIP regulations to reflect the 

overpayment requirements as revised by 

the Affordable Care Act. We are 

incorporating these through reference in 

§ 457.628(a). 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46692 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements: 

A. ICRs Regarding Disallowance of 

Claims for FFP (§ 430.42) 

Section 430.42 was revised in 

accordance with the Medicare 

Improvement for Patients and Providers 

Act of 2008 (MIPPA) to set forth new 

procedures to review administrative 

determinations to disallow claims for 

FFP. These new procedures provide for 

an informal agency reconsideration that 

must be submitted in writing to the 

Administrator within 60 day after 

receipt of a disallowance letter. The 

reconsideration request must specify the 

findings or issues with which the State 

disagrees and the reason for the 

disagreement. It also may include 

supporting documentary evidence that 

the State wishes the Administrator to 

consider. 

The burden associated with this 

requirement is the time and effort 

necessary for the State Medicaid Agency 

to draft and submit the reconsideration 

letter and supporting documentation. 

Although this requirement is subject to 

the PRA, we believe that 5 CFR 

1320.4(a)(2), exempts the 

reconsideration letter as a collection of 

information and the PRA. In this case, 

the information associated with the 

reconsideration would be collected 

subsequent to an administrative action, 

that is, a determination to disallow. 

B. ICRs Regarding Refund of Federal 

Share of Medicaid Overpayments to 

Providers (§ 433.322) 

Section 2105(c)(6)(B) of the Act 

incorporates the overpayment 

requirements of section 1903(d)(2) of the 

Act into CHIP. The overpayment 

regulations at § 433.322 require that the 

Medicaid Agency ‘‘maintain a separate 

record of all overpayment activities for 

each provider in a manner that satisfies 

the retention and access requirements of 

45 CFR 74.53.’’ We are incorporating 

these through reference in § 457.628(a). 

Accordingly, it would require CHIP 

programs to comply with § 433.322. 

States are currently required to maintain 

these records under current regulations 

for Medicaid (and by implication CHIP). 

The recordkeeping requirements set 

out under 45 CFR 92.42 (and § 433.322) 

are adopted from OMB Circular A–110. 

C. ICRs Regarding Medicaid Program 

Budget Report (CMS–37) 

The information collection 

requirements associated with CMS–37 

are approved by OMB and have been 

assigned OMB control number 0938– 

0101. This proposed rule would not 

impose any new or revised reporting or 

recordkeeping requirements concerning 

CMS–37. 

D. ICRs Regarding Quarterly Medicaid 

Statement of Expenditures for the 

Medical Assistance Program (CMS–64) 

The information collection 

requirements associated with CMS–64 

are approved by OMB and have been 

assigned OMB control number 0938– 

0067. This proposed rule would not 

impose any new or revised reporting or 

recordkeeping requirements concerning 

CMS–64. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, 2292–P 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Statement 

A. Statement of Need 

This proposed rule: (1) Implements 

changes to section 1116 of the Act as set 

forth in section 204 of the Medicare 

Improvement for Patients and Providers 

Act of 2008 (Pub. L. 110–275, enacted 

on July 15, 2008) to provide a new 

reconsideration process for 

administrative determinations to 

disallow claims for Federal financial 

participation (FFP) under title XIX of 

the Act (Medicaid); 

(2) Implements changes to section 

1903(d) (2) of the Act as set forth in 

section 6506 of the Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010) (the 

Affordable Care Act), to lengthen the 

time States have to credit the Federal 

Government for identified but 

uncollected Medicaid provider 

overpayments and provides that interest 

is due for amounts not timely credited 

within that time period; 

(3) Implements changes as set forth in 

Section 2107(e)(2)(B) of the Act which 

makes section 1116 of the Act 

applicable to CHIP, to the same extent 

as it is applicable to Medicaid, with 

respect to administrative review, unless 

inconsistent with the CHIP statute. 

(4) Implements changes as set forth by 

HHS to enable States to continue to 

operate their Medicaid programs 

effectively while repaying the Federal 

share of unallowable expenditures and 

to provide more flexibility for States to 

manage their budgets during periods of 

economic downturn. 

(5) Implements changes as set forth by 

HHS to clarify that interest charges 

accrue during the new administrative 

reconsideration process as set forth in 

section 204 of the Medicare 

Improvement for Patients and Providers 

Act of 2008 (Pub. L. 110–275, enacted 

on July 15, 2008) if a State chooses to 

retain the funds during that period. 

We conducted a review of existing 

regulations to correct a technical error 

in the regulation text at § 447.299(c)(15) 

which erroneously contradicts section 

1923(g) of the Act, § 447.299, 42 CFR 

part 455 subpart D, and longstanding 

CMS policy; revise internal delegations 

of authority to reflect current CMS 

structure; remove obsolete language; 

and correct other technical errors in 

accordance with section 6 of Executive 

Order 13563 of January 18, 2011. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), Executive Order 13563 on 

Improving Regulation and Regulatory 

Review (February 2, 2011), section 

1102(b) of the Social Security Act, 


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section 202 of the Unfunded Mandates 

Reform Act of 1995 (March 22, 1995; 

Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999) and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). 

This rule does not reach the economic 

threshold and thus is not considered a 

major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

physician practices, hospitals and other 

providers are small entities, either by 

nonprofit status or by qualifying as 

small businesses under the Small 

Business Administration’s size 

standards (revenues of less than $7.0 to 

$34.5 million in any 1 year). States and 

individuals are not included in the 

definition of a small entity. For details, 

see the Small Business Administration’s 

Web site at http://www.sba.gov/sites/ 

default/files/Size_Standards_Table.pdf. 

We are not preparing an analysis for 

the RFA because the Secretary has 

determined that this proposed rule 

would not have a significant economic 

impact on a substantial number of small 

entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a RIA if a rule 

may have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 603 

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 for Medicare payment 

regulations and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act because 

the Secretary has determined that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2011, that threshold is approximately 

$136 million. This rule would have no 

consequential effect on State, local, or 

Tribal governments in the aggregate, or 

on the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of Executive Order 

13132 are not applicable. 

C. Anticipated Effects 

1. Effects on State Medicaid Programs 

The rule provides States with the 

option to use certain provisions as well 

as proposes new requirements or 

changes to existing interpretations of 

statutory or regulatory requirements. 

This rule has multiple purposes, one of 

which is to provide for a new 

reconsideration process for 

administrative determinations to 

disallow Federal financial participation 

(FFP). This provision offers States the 

option of requesting reconsideration of 

a disallowance to CMS instead of or 

before requesting reconsideration by the 

HHS Board, which could reduce legal 

cost, time, and resources, if a 

disallowance is reversed by CMS. This 

provision concerns agency 

administrative appeals procedures and 

any direct burden that is imposed on 

States would not reach the economic 

threshold. This provision would also 

not affect substantive rights to 

administrative determinations 

consistent with existing statutes and 

regulations. 

Another provision of this rule extends 

the time period a State has to recover or 

seek to recover an overpayment made to 

a Medicaid provider before the State 

must refund the Federal share of the 

uncollected overpayment to CMS. This 

provision updates current regulations to 

reflect new statutory requirements 

without substantive changes and we 

anticipate very slight if any economic 

impact. The provision also provides that 

interest will be due from States on 

Medicaid provider overpayments that 

are not timely credited. States are 

already required to credit the Federal 

share of interest actually earned from 

overpayments collected from providers, 

but not refunded to the Federal 

government within the applicable 

regulatory timeframe. Although 

imputing interest on amounts not 

properly refunded to the Federal 

Government (whether or not interest 

was actually earned) may slightly 

increase the amount owed to the Federal 

Government, this provision will only 

affect States that do not refund the 

Federal share of uncollected provider 

overpayments to the Federal 

government within statutory and 

regulatory timeframes. States may avoid 

interest liability by returning the 

Federal share of overpayments within 

the required timeframe. We believe this 

change will eliminate an incentive for 

States to delay timely crediting the 

Federal government with amounts due. 

A third provision of this rule is to 

revise Medicaid and CHIP regulations 

related to the disallowance process to 

allow States the option to retain 

disputed Federal funds through the 

administrative review process. We 

cannot anticipate if States will choose to 

retain Federal funds through the 

administrative review process. If States 

decide to retain Federal funds, they may 

return the funds before the 

reconsideration or appeals process is 

completed without withdrawing the 

reconsideration or the appeal. 

A fourth provision of this rule is to 

provide that interest charges accrue for 

any amounts the State opts to retain 

during these processes. This provision 

is intended to implement regulations 

that impose an interest charge on 

disallowed funds that a State retains 

pending completion of the 

administrative reconsideration and/or 

appeals process. Under section 

1903(d)(5) of the Act, a State that wishes 

to retain the Federal share of a 

disallowed amount will be liable for 

interest on the retained funds, based on 

the average of the bond equivalent of the 

weekly 90-day treasury bill auction 

rates, from the date of the disallowance 

to the date of a final determination. We 

will assess interest on the funds from 

the date of the disallowance notice 

through the date we receive written 

notice from the State that it no longer 

wishes to retain the funds or a final 

determination has been reached through 

the appeals process. 

Although the application of interest 

through the final determination may 

slightly increase the amount owed to the 

Federal Government due to the 

additional interest charges, this 

provision does not implement a new 

requirement or burden to the State. It 

instead provides States with the 

opportunity to keep the Federal funds in 

question during the entire 


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determination period. However, if the 

Federal funds are found to be due back 

to the Federal Government in the final 

determination, then the State is required 

to repay the accrued interest in addition 

to the disallowed amount. States may 

opt to pay the disallowed amounts at 

the time of the original disallowance in 

order to avoid interest charges. 

We have also clarified current CMS 

policy in this rule that a State that has 

given a timely written notice of its 

intent to repay by installments to CMS 

will accrue interest during the 

repayment schedule on a quarterly basis 

at the Treasury Current Value Fund Rate 

(CVFR), from: 

(1) The date of the disallowance 

notice, if the State requests a repayment 

schedule during the 60-day review 

period and does not request 

reconsideration by CMS or appeal to the 

Board within the 60-day review period. 

(2) The date of the final determination 

of the administrative reconsideration, if 

the State requests a repayment schedule 

during the 60-day review period 

following the CMS final determination 

and does not appeal to the Board. 

(3) The date of the final determination 

by the Board, if the State requests a 

repayment schedule during the 60-day 

review period following the Board’s 

final determination. 

A fifth provision of this rule is to 

revise installment repayment standards 

and schedules. This provision will 

provide States with more flexibility in 

repaying large amounts of Federal 

funds. We anticipate that the revised 

repayment schedule will ease the 

burden for States in periods of economic 

downturn and allow them to operate 

their program more effectively. States 

may choose repayment by installments 

in lieu of returning a large sum of FFP 

in a short period of time. States could 

potentially qualify for an alternate 

repayment schedule if they meet the 

regulatory requirements. We will charge 

interest on the funds from the date of 

the disallowance notice through the 

date we receive final payment of the 

repayment schedule. Although this may 

marginally increase the amount owed to 

the Federal Government due to the 

additional interest charges, the extended 

repayment schedule is purely an option 

for States, rather than a new 

requirement. This provision provides 

States the ability to analyze what 

method and timeline of repayment 

would work best for the State given the 

circumstances within the State at the 

time. 

The remaining provisions of this rule 

make technical corrections, revise 

internal delegations of authority for 

administrative determinations, and 

remove obsolete language. These 

provisions merely update the 

regulations that are currently in effect 

without substantive changes. 

D. Alternatives Considered 

This section provides an overview of 

regulatory alternatives that we 

considered for this proposed rule. In 

determining the appropriate guidance to 

assist States in their efforts to meet 

Federal requirements, we conducted 

analysis and research in both the public 

and private sector. Based, in part, on 

this analysis and research we arrived at 

the provisions proposed in this rule. 

1. Administrative Review of 

Determinations To Disallow Claims for 

FFP 

In this section of the proposed rule, 

we are setting out procedures for States 

to request a reconsideration of a 

disallowance to the CMS Administrator. 

The proposed process is to be a quick 

and efficient process for States to point 

out clear errors or omissions in 

disallowance determinations, relating 

either to facts or policy interpretations, 

that can be corrected before the parties 

incur further time and expense in an 

appeal to the Board. Disputes that 

involve complex fact-finding or issues 

of legal authority are not appropriate for 

this expedited review process. 

We considered the use of a 

conference, which would occur once the 

Administrator had reviewed the 

reconsideration documents. Either the 

Administrator or the State would have 

been able to request to schedule an 

informal conference. The purpose of the 

conference would have been to give the 

State an opportunity to make an oral 

presentation and give both parties an 

opportunity to clarify issues and 

questions about matters which may 

have been in question. We rejected this 

process because we do not believe such 

an option would achieve the objective to 

have a quick and efficient process 

relating either to facts or policy 

interpretations. Such a process could 

cause delays in resolving the disallowed 

funds sufficient to create additional 

burden to State budgets in the form of 

interest on disallowed amounts, legal 

fees, and utilization of resources, time 

and effort. There would also be an 

additional burden to States on the 

record retention requirements. 

2. Repayment of Federal Funds by 

Installments 

In this section of the proposed rule, 

we are proposing three schedules 

including schedules that recognize the 

unique fiscal pressures of States that are 

experiencing economic distress. We 

considered eliminating the threshold, 

which is based on a percentage of the 

estimated annual State’s share of 

Medicaid expenditures, to qualify for a 

repayment schedule and establishing a 

repayment schedule based on dividing 

the overpayment amount by a standard 

12-quarter schedule. We rejected this 

option because we wanted to ensure 

that States that request a repayment 

schedule would have a substantial 

amount in overpayments to repay and 

were not merely making token 

payments. 

We also considered keeping the 

current percentage of 2.5 percent as the 

threshold, but due to the current 

economic downturn and the current 

strain on States’ budgets, we decided to 

provide some relief and flexibility to 

States in the form of reducing the 

required amount of the estimated 

annual State’s share of Medicaid 

expenditures to qualify for a repayment 

schedule. 

In developing the alternate repayment 

schedules, we considered several 

different data sources to develop 

qualifying criteria for States seeking an 

alternate repayment schedule due to 

economic distress. We looked for 

indicators which were readily available 

to the States and CMS, transparent to 

the public, robust in its measurement of 

economic health, based on the most 

recent data possible, consistent across 

States, and predictably available on a 

regular basis in a timely manner. We 

also attempted to find a measure that 

mirrored as closely as possible the 

criteria used by the National Bureau of 

Economic Research (NBER) to 

determine a national recession. 

We researched several potential 

economic distress measures and 

consulted various entities including the 

National Association of State Budget 

Officers, the Rockefeller Institute, the 

Philadelphia Federal Reserve Bank, and 

the Government Accountability Office 

(GAO). The main options we considered 

were a model used by the GAO, the 

Philadelphia Federal Reserve Bank State 

coincident index, and the measure of 

whether a State qualifies for extended 

benefits in the Unemployment 

Insurance program overseen by the U. S. 

Department of Labor. The GAO index is 

used to provide information to Congress 

on State level economic health. It 

provided much of what we believed 

would be necessary to accurately 

measure overall economic health. 

However, it is not publicly available nor 

is it replicated on a predictable basis. 

The Unemployment Insurance program 

provided data that was timely, accurate, 

and publicly available. However, it did 

not appear to be the most robust 


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measure of total economic health in a 

State, nor did it closely reflect the type 

of information used by the NBER. 

E. Conclusion 

For the reasons discussed above, we 

are not preparing analysis for either the 

RFA or section 1102(b) of the Act 

because we have determined that this 

regulation will not have a direct 

significant economic impact on a 

substantial number of small entities or 

a direct 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. 

List of Subjects 

42 CFR Part 430 

Administrative practice and 

procedure, Grant programs—health, 

Medicaid, Reporting and recordkeeping 

requirements. 

42 CFR Part 433 

Administrative practice and 

procedure, Child support, Claims, Grant 

programs—health, Medicaid, Reporting 

and recordkeeping requirements. 

42 CFR Part 447 

Accounting, Administrative practice 

and procedure, Drugs, Grant programs— 

health, Health facilities, Health 

professions, Medicaid, Reporting and 

recordkeeping requirements, Rural 

areas. 

42 CFR Part 457 

Administrative practice and 

procedure, Grant programs—health, 

Health insurance, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR Chapter IV, as set forth below: 

PART 430—GRANTS TO STATES FOR 

MEDICAL ASSISTANCE PROGRAMS 

1. The authority citation for part 430 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

Subpart C—Grants; Reviews and 

Audits; Withholding for Failure To 

Comply; Deferral and Disallowance of 

Claims; Reduction of Federal Medicaid 

Payments 

2. Section 430.30 is amended by 

revising paragraph (b) to read as follows: 

§ 430.30 Grants procedures. 

* * * * * 

(b) Quarterly estimates. The Medicaid 

agency must submit Form CMS–37 

(Medicaid Program Budget Report; 

Quarterly Distribution of Funding 

Requirements) to the central office (with 

a copy to the regional office) 45 days 

before the beginning of each quarter. 

* * * * * 

3. Section 430.33 is amended by 

revising paragraph (c)(2) to read as 

follows: 

§ 430.33 Audits. 

* * * * * 

(c) * * * 

(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 

Administrator or the Appeals Board. 

(Specific rules are set forth in § 430.42.) 

* * * * * 

4. Section 430.40 is amended by 

revising paragraphs (a)(1), (b)(1) 

introductory text, (c)(3), (c)(5), (c)(6), 

and (e)(1) to read as follows: 

§ 430.40 Deferral of claims for FFP. 

(a) * * * 

(1) The Consortium Administrator for 

Medicaid or the Administrator 

questions its allowability and needs 

additional information in order to 

resolve the question; and 

* * * * * 

(b) * * * 

(1) Within 15 days of the action 

described in paragraph (a)(2) of this 

section, the Consortium Administrator 

sends the State a written notice of 

deferral that— 

* * * * * 

(c) * * * 

(3) If the Consortium 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. 

* * * * * 

(5) The Consortium Administrator has 

90 days, after all documentation is 

available in readily reviewable form, to 

determine the allowability of the claim. 

(6) If the Consortium Administrator 

cannot complete review of the material 

within 90 days, CMS pays the claim, 

subject to a later determination of 

allowability. 

* * * * * 

(e) * * * 

(1) The Consortium Administrator or 

the Administrator gives the State 

written notice of his or her decision to 

pay or disallow a deferred claim. 

* * * * * 

5. Section 430.42 is amended by— 

A. Revising paragraphs (a) 

introductory text and paragraph (a)(9). 

B. Redesignating paragraphs (b), (c), 

and (d), as paragraphs (f), (g), and (h) 

respectively. 

C. Adding new paragraphs (b), (c), (d), 

and (e). 

D. Revising the paragraph heading of 

newly designated paragraph (f). 

E. Revising newly designated 

paragraph (f)(2). 

F. Adding new paragraph (f)(3). 

G. Revising newly designated 

paragraphs (g) and (h). 

The revisions and additions read as 

follows: 

§ 430.42 Disallowance of claims for FFP. 

(a) Notice of disallowance and of right 

to reconsideration. When the 

Consortium 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: 

* * * * * 

(9) A statement indicating that the 

disallowance letter is the Department’s 

final decision unless the State requests 

reconsideration under paragraph (b)(2) 

or (f)(2) of this section. 

(b) Reconsideration of disallowances 

determination. (1) The Administrator 

will reconsider Medicaid disallowance 

determinations. 

(2) To request reconsideration of a 

disallowance, a State must complete the 

following: 

(i) Submit the following within 60 

days after receipt of the disallowance 

letter: 

(A) A written request to the 

Administrator that includes the 

following: 

(1) A copy of the disallowance letter. 

(2) A statement of the amount in 

dispute. 

(3) A brief statement of why the 

disallowance should be reversed or 

revised, including any information to 

support the State’s position with respect 

to each issue. 

(4) Additional information regarding 

factual matters or policy considerations. 

(B) A copy of the written request to 

the Consortium Administrator. 

(C) Send all requests for 

reconsideration via registered or 

certified mail to establish the date the 

reconsideration was received by CMS. 

(ii) In all cases, the State has the 

burden of documenting the allowability 

of its claims for FFP. 


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46696 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

(iii) Additional information regarding 

the legal authority for the disallowance 

will not be reviewed in the 

reconsideration but may be presented in 

any appeal to the Departmental Appeals 

Board under paragraph (f)(2) of this 

section. 

(3) A State may request to retain the 

FFP during the reconsideration of the 

disallowance under section 1116(e) of 

the Act, in accordance with § 433.38 of 

this subchapter. 

(4) The State is not required to request 

reconsideration before seeking review 

from the Departmental Appeals Board. 

(5) The State may also seek 

reconsideration, and following the 

reconsideration decision, request a 

review from the Board. 

(6) If the State elects reconsideration, 

the reconsideration process must be 

completed or withdrawn before 

requesting review by the Board. 

(c) Procedures for reconsideration of a 

disallowance. (1) Within 60 days after 

receipt of the disallowance letter, the 

State shall, in accordance with (b)(2) of 

this section, submit in writing to the 

Administrator any relevant evidence, 

documentation, or explanation and shall 

simultaneously submit a copy thereof to 

the appropriate Consortium 

Administrator. 

(2) After consideration of the policies 

and factual matters pertinent to the 

issues in question, the Administrator 

shall, within 60 days from the date of 

receipt of the request for 

reconsideration, issue a written decision 

or a request for additional information 

as described in the following 

subparagraph. 

(3) At the Administrator’s option, 

CMS may request from the State any 

additional information or documents 

necessary to make a decision. The 

request for additional information must 

be sent via registered or certified mail to 

establish the date the request was sent 

by CMS and received by the State. 

(4) Within 30 days after receipt of the 

request for additional information, the 

State must submit to the Administrator, 

with a copy to the Consortium 

Administrator in readily reviewable 

form, all requested documents and 

materials. 

(i) If the Administrator finds that the 

materials are not in readily reviewable 

form or that additional information is 

needed, he or she shall notify the State 

via registered or certified mail that it has 

15 business days from the date of 

receipt of the notice to submit the 

readily reviewable or additional 

materials. 

(ii) If the State does not provide the 

necessary materials within 15 business 

days from the date of receipt of such 

notice, the Administrator shall affirm 

the disallowance in a final 

reconsideration decision issued within 

15 days from the due date of additional 

information from the State. 

(5) If additional documentation is 

provided in readily reviewable form 

under the paragraph (c)(4) of this 

section, the Administrator shall issue a 

written decision, within 60 days from 

the due date of such information. 

(6) The final written decision shall 

constitute final CMS administrative 

action on the reconsideration and shall 

be (within 15 business days of the 

decision) mailed to the State agency via 

registered or certified mail to establish 

the date the reconsideration decision 

was received by the State. 

(7) If the Administrator does not issue 

a decision within 60 days from the date 

of receipt of the request for 

reconsideration or the date of receipt of 

the requested additional information, 

the disallowance shall be deemed to be 

affirmed upon reconsideration. 

(8) No section of this regulation shall 

be interpreted as waiving the 

Department’s right to assert any 

provision or exemption under the 

Freedom of Information Act. 

(d) Withdrawal of a request for 

reconsideration of a disallowance. (1) A 

State may withdraw the request for 

reconsideration at any time before the 

notice of the reconsideration decision is 

received by the State without affecting 

its right to submit a notice of appeal to 

the Board. The request for withdrawal 

must be in writing and sent to the 

Administrator, with a copy to the 

Consortium Administrator, via 

registered or certified mail. 

(2) Within 60 days after CMS’ receipt 

of a State’s withdrawal request, a State 

may, in accordance with (f)(2) of this 

section, submit a notice of appeal to the 

Board. 

(e) Implementation of decisions for 

reconsideration of a disallowance. (1) 

After undertaking a reconsideration, the 

Administrator may affirm, reverse, or 

revise the disallowance and shall issue 

a final written reconsideration decision 

to the State in accordance with 

paragraph (c)(4) of this section. 

(2) If the reconsideration decision 

requires an adjustment of FFP, either 

upward or downward, a subsequent 

grant award will be issued in the 

amount of such increase or decrease. 

(3) Within 60 days after the receipt of 

a reconsideration decision from CMS a 

State may, in accordance with 

paragraph (f)(2) of this section, submit a 

notice of appeal to the Board. 

(f) Appeal of Disallowance. * * * 

* * * * * 

(2) A State that wishes to request an 

appeal of a disallowance by the Board 

must: 

(i) Submit a notice of appeal to the 

Board at the address given on the 

Departmental Appeals Board’s Web site 

within 60 days after receipt of the 

disallowance letter. 

(A) If a reconsideration of a 

disallowance was requested, within 60 

days after receipt of the reconsideration 

decision; or 

(B) If reconsideration of a 

disallowance was requested and no 

written decision was issued, within 60 

days from the date the decision on 

reconsideration of the disallowance was 

due to be issued by CMS. 

(ii) Include all of the following: 

(A) A copy of the disallowance letter. 

(B) A statement of the amount in 

dispute. 

(C) A brief statement of why the 

disallowance is wrong. 

(3) The Board’s decision of an appeal 

under paragraph (f)(2) of this section 

shall be the final decision of the 

Secretary and shall be subject to 

reconsideration by the Board only upon 

a motion by either party that alleges a 

clear error of fact or law and is filed 

during the 60-day period that begins on 

the date of the Board’s decision or to 

judicial review in accordance with 

paragraph (f)(2)(i) of this section. 

(g) Appeals procedures. The 

reconsideration procedures are those set 

forth in 45 CFR part 16 for Medicaid 

and for many other programs 

administered by the Department. 

(1) In all cases, the State has the 

burden of documenting the allowability 

of its claims for FFP. 

(2) The Board shall conduct a 

thorough review of the issues, taking 

into account all relevant evidence, 

including such documentation as the 

State may submit and the Board may 

require. 

(h) Implementation of decisions. (1) 

The Board may affirm the disallowance, 

reverse the disallowance, modify the 

disallowance, or remand the 

disallowance to CMS for further 

consideration. 

(2) The Board will issue a final 

written decision to the State consistent 

with 45 CFR Part 16. 

(3) If the appeal decision requires an 

adjustment of FFP, either upward or 

downward, a subsequent grant award 

will be issued in the amount of increase 

or decrease. 

6. Section 430.48 is revised to read as 

follows: 

§ 430.48 Repayment of Federal funds by 

installments. 

(a) Basic conditions. When Federal 

payments have been made for claims 


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that are later found to be unallowable, 

the State may repay the Federal funds 

by installments if all of the following 

conditions are met: 

(1) The amount to be repaid exceeds 

0.25 percent of the estimated or actual 

annual State share for the Medicaid 

program. 

(2) The State has given the 

Consortium Administrator written 

notice, before total repayment was due, 

of its intent to repay by installments. 

(b) Annual State share determination. 

CMS determines whether the amount to 

be repaid exceeds 0.25 percent of the 

annual State share as follows: 

(1) If the Medicaid program is 

ongoing, CMS uses the annual estimated 

State share of Medicaid expenditures for 

the current year, as shown on the State’s 

latest Medicaid Program Budget Report 

(CMS–37). The current year is the year 

in which the State requests the 

repayment by installments. 

(2) If the Medicaid program has been 

terminated by Federal law or by the 

State, CMS uses the actual State share 

that is shown on the State’s CMS–64 

Quarterly Expense Report for the last 

four quarters filed. 

(c) Standard 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 

maximum number of quarters allowed 

for the standard repayment schedule is 

12 quarters (3 years), except as provided 

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

section. 

(3) Quarterly repayment amounts. (i) 

The quarterly repayment amounts for 

each of the quarters in the repayment 

schedule will be the larger of the 

repayment amount divided by 12 

quarters or the minimum repayment 

amount; 

(ii) The minimum quarterly 

repayment amounts for each of the 

quarters in the repayment schedule is 

0.25 percent of the estimated State share 

of the current annual expenditures for 

Medicaid; 

(iii) The repayment period may be 

less than 12 quarters when the 

minimum repayment amount is 

required. 

(4) Extended schedule. (i) The 

repayment schedule may be extended 

beyond 12 quarterly installments if the 

total repayment amount exceeds 100 

percent of the estimated State share of 

the current annual expenditures; 

(ii) The quarterly repayment amount 

will be 81⁄3 percent of the estimated 

State share of the current annual 

expenditures until fully repaid. 

(5) Repayment process. (i) Repayment 

is accomplished through deposits into 

the State’s Payment Management 

System (PMS) account; 

(ii) A State may choose to make 

payment by Automated Clearing House 

(ACH) direct deposit, by check, or by 

Fedwire transfer. 

(6) Reductions. 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. 

(d) Alternate repayment amounts, 

schedules, and procedures for States 

experiencing economic distress 

immediately prior to the repayment 

period. (1) Repayment amount. The 

repayment amount may not include 

amounts previously approved for 

installment repayment if a State initially 

qualifies for the alternate repayment 

schedule at the onset of an installment 

repayment period. 

(2) Qualifying period of economic 

distress. (i) A State would qualify to 

avail itself of the alternate repayment 

schedule if it demonstrates the State is 

experiencing a period of economic 

distress; 

(ii) A period of economic distress is 

one in which the State demonstrates 

distress for at least each of the previous 

6 months, ending the month prior to the 

date of the State’s written request for an 

alternate repayment schedule, as 

determined by a negative percent 

change in the monthly Philadelphia 

Federal Reserve Bank State coincident 

index. 

(3) Repayment schedule. The 

maximum number of quarters allowed 

for the alternate repayment schedule is 

12 quarters (3 years), except as provided 

in paragraph (d)(5) of this section. 

(4) Quarterly repayment amounts. (i) 

The quarterly repayment amounts for 

each of the first 8 quarters in the 

repayment schedule will be the smaller 

of the repayment amount divided by 12 

quarters or the maximum quarterly 

repayment amount; 

(ii) The maximum quarterly 

repayment amounts for each of the first 

8 quarters in the repayment schedule is 

0.25 percent of the annual State share 

determination as defined in paragraph 

(b) of this section; 

(iii) For the remaining 4 quarters, the 

quarterly repayment amount equals the 

remaining balance of the overpayment 

amount divided by the remaining 4 

quarters. 

(5) Extended schedule. (i) For a State 

that initiated its repayment under an 

alternate payment schedule for 

economic distress, the repayment 

schedule may be extended beyond 12 

quarterly installments if the total 

repayment amount exceeds 100 percent 

of the estimated State share of current 

annual expenditures; 

(A) In these circumstances, paragraph 

(d)(3) of this section is followed for 

repayment of the amount equal to 100 

percent of the estimated State share of 

current annual expenditures. 

(B) The remaining amount of the 

repayment is in quarterly amounts equal 

to 81⁄3 percent of the estimated State 

share of current annual expenditures 

until fully repaid. 

(ii) Upon request by the State, the 

repayment schedule may be extended 

beyond 12 quarterly installments if the 

State has qualifying periods of economic 

distress in accordance with paragraph 

(d)(2) of this section during the first 8 

quarters of the alternate repayment 

schedule. 

(A) To qualify for additional quarters, 

the States must demonstrate a period of 

economic distress in accordance with 

paragraph (d)(2) of this section for at 

least 1 month of a quarter during the 

first 8 quarters of the alternate 

repayment schedule. 

(B) For each quarter (of the first 8 

quarters of the alternate payment 

schedule) identified as qualified period 

of economic distress, one quarter will be 

added to the remaining 4 quarters of the 

original 12 quarter repayment period. 

(C) The total number of quarters in the 

alternate repayment schedule shall not 

exceed 20 quarters. 

(6) Repayment process. (i) Repayment 

is accomplished through deposits into 

the State’s Payment Management 

System (PMS) account; 

(ii) A State may choose to make 

payment by Automated Clearing House 

(ACH) direct deposit, by check, or by 

Fedwire transfer. 

(7) 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. 

(e) Alternate repayment amounts, 

schedules, and procedures for States 

entering into distress during a standard 

repayment schedule. (1) Repayment 

amount. The repayment amount may 

include amounts previously approved 

for installment repayment if a State 

enters into a qualifying period of 

economic distress during an installment 

repayment period. 

(2) Qualifying period of economic 

distress. (i) A State would qualify to 

avail itself of the alternate repayment 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46698 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

schedule if it demonstrates the State is 

experiencing economic distress; 

(ii) A period of economic distress is 

one in which the State demonstrates 

distress for each of the previous 6 

months, that begins on the date of the 

State’s request for an alternate 

repayment schedule, as determined by a 

negative percent change in the monthly 

Philadelphia Federal Reserve Bank State 

coincident index. 

(3) Repayment schedule. The 

maximum number of quarters allowed 

for the alternate repayment schedule is 

12 quarters (3 years), except as provided 

in paragraph (e)(5) of this section. 

(4) Quarterly repayment amounts. (i) 

The quarterly repayment amounts for 

each of the first 8 quarters in the 

repayment schedule will be the smaller 

of the repayment amount divided by 12 

quarters or the maximum repayment 

amount; 

(ii) The maximum quarterly 

repayment amounts for each of the first 

8 quarters in the repayment schedule is 

0.25 percent of the annual State share 

determination as defined in paragraph 

(b) of this section; 

(iii) For the remaining 4 quarters, the 

quarterly repayment amount equals the 

remaining balance of the overpayment 

amount divided by the remaining 4 

quarters. 

(5) Extended schedule. (i) For a State 

that initiated its repayment under the 

standard payment schedule and later 

experienced periods of economic 

distress and elected an alternate 

repayment schedule, the repayment 

schedule may be extended beyond 12 

quarterly installments if the total 

repayment amount of the remaining 

balance of the standard schedule, 

exceeds 100 percent of the estimated 

State share of the current annual 

expenditures; 

(ii) In these circumstances, paragraph 

(d)(3) of this section is followed for 

repayment of the amount equal to 100 

percent of the estimated State share of 

current annual expenditures; 

(iii) The remaining amount of the 

repayment is in quarterly amounts equal 

to 81⁄3 percent of the estimated State 

share of the current annual expenditures 

until fully repaid. 

(6) Repayment process. (i) Repayment 

is accomplished through deposits into 

the State’s Payment Management 

System (PMS) account; 

(ii) A State may choose to make 

payment by Automated Clearing House 

(ACH) direct deposit, by check, or by 

Fedwire transfer. 

(7) 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. 

PART 433—STATE FISCAL 

ADMINISTRATION 

7. The authority citation for part 433 

continues as follows: 

Authority: Sec. 1102 of the Social Security 

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

Subpart A—Federal Matching and 

General Administration Provisions 

8. Section 433.38 is amended by 

revising paragraphs (a) introductory 

text, (b)(1), (b)(3), (c), (e)(1)(i),(e)(1)(ii), 

(e)(1)(iii), (e)(1)(iv), and by adding 

paragraphs (e)(1)(v), and (e)(1)(vi) to 

read as follows: 

§ 433.38 Interest charge on disallowed 

claims for FFP. 

(a) Basis and scope. This section is 

based on section 1903(d)(5) of the Act, 

which requires that the Secretary charge 

a State interest on the Federal share of 

claims that have been disallowed but 

have been retained by the State during 

the administrative appeals process 

under section 1116(e) of the Act and the 

Secretary later recovers after the 

administrative appeals process has been 

completed. This section does not apply 

to— 

* * * * * 

(b) * * * 

(1) CMS will charge the State interest 

on FFP when— 

(i) CMS has notified the Medicaid 

agency under § 430.42 of this subpart 

that a State’s claim for FFP is not 

allowable; 

(ii) The agency has requested a 

reconsideration of the disallowance to 

the Administrator under § 430.42 of this 

chapter and has chosen to retain the 

FFP during the administrative 

reconsideration process in accordance 

with paragraph (c)(2) of this section; 

(iii)(A) CMS has made a final 

determination upholding part or all of 

the disallowance; 

(B) The agency has withdrawn its 

request for administrative 

reconsideration on all or part of the 

disallowance; or 

(C) The agency has reversed its 

decision to retain the funds without 

withdrawing its request for 

administrative reconsideration and CMS 

upholds all or part of the disallowance. 

(iv) The agency has appealed the 

disallowance to the Departmental 

Appeals Board under 45 CFR Part 16 

and has chosen to retain the FFP during 

the administrative appeals process in 

accordance with paragraph (c)(2) of this 

section. 

(v)(A)The Board has made a final 

determination upholding part or all of 

the disallowance; 

(B) The agency has withdrawn its 

appeal on all or part of the 

disallowance; or 

(C) The agency has reversed its 

decision to retain the funds without 

withdrawing its appeal and the Board 

upholds all or part of the disallowance. 

* * * * * 

(3) Unless an agency decides to 

withdraw its request for administrative 

reconsideration or appeal on part of the 

disallowance and therefore returns only 

that part of the funds on which it has 

withdrawn its request for administrative 

reconsideration or appeal, any decision 

to retain or return disallowed funds 

must apply to the entire amount in 

dispute. 

* * * * * 

(c) State procedures. (1) If the 

Medicaid agency has requested 

administrative reconsideration to CMS 

or appeal of a disallowance to the Board 

and wishes to retain the disallowed 

funds until CMS or the Board issues a 

final determination, the agency must 

notify the CMS Consortium 

Administrator in writing of its decision 

to do so. 

(2) The agency must mail its notice to 

the CMS Consortium Administrator 

within 60 days of the date of receipt of 

the notice of the disallowance, as 

established by the certified mail receipt 

accompanying the notice. 

(3) If the agency withdraws its 

decision to retain the FFP or its request 

for administrative reconsideration or 

appeal on all or part of the FFP, the 

agency must notify CMS in writing. 

* * * * * 

(e) * * * 

(1) * * * 

(i) On the date of the final 

determination by CMS of the 

administrative reconsideration if the 

State elects not to appeal to the Board, 

or final determination by the Board; 

(ii) On the date CMS receives written 

notice from the State that it is 

withdrawing its request for 

administrative reconsideration and 

elects not to appeal to the Board, or 

withdraws its appeal to the Board on all 

of the disallowed funds; or 

(iii) If the agency withdraws its 

administrative reconsideration on part 

of the funds on— 

(A) The date CMS receives written 

notice from the agency that it is 

withdrawing its request for 

administrative reconsideration on a 

specified part of the disallowed funds 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 46699 

for the part on which the agency 

withdraws its request for administrative 

reconsideration; and 

(B) The date of the final determination 

by CMS on the part for which the 

agency pursues its administrative 

reconsideration; or 

(iv) If the agency withdraws its appeal 

on part of the funds, on— 

(A) The date CMS receives written 

notice from the agency that it is 

withdrawing its appeal on a specified 

part of the disallowed funds for the part 

on which the agency withdraws its 

appeal; and 

(B) The date of the final determination 

by the Board on the part for which the 

agency pursues its appeal; or 

(v) If the agency has given CMS 

written notice of its intent to repay by 

installment, in the quarter in which the 

final installment is paid. Interest during 

the repayment of Federal funds by 

installments will be at the Current Value 

of Funds Rate (CVFR); or 

(vi) The date CMS receives written 

notice from the agency that it no longer 

chooses to retain the funds. 

* * * * * 

Subpart F—Refunding of Federal 

Share of Medicaid Overpayments to 

Providers 

9. Section 433.300 is amended by 

revising paragraph (b) to read as follows: 

§ 433.300 Basis. 

* * * * * 

(b) Section 1903(d)(2)(C) and (D) of 

the Act, which provides that a State has 

1 year from discovery of an 

overpayment for Medicaid services to 

recover or attempt to recover the 

overpayment from the provider before 

adjustment in the Federal Medicaid 

payment to the State is made; and that 

adjustment will be made at the end of 

the 1-year period, whether or not 

recovery is made, unless the State is 

unable to recover from a provider 

because the overpayment is a debt that 

has been discharged in bankruptcy or is 

otherwise uncollectable. 

* * * * * 

10. Section 433.302 is revised to read 

as follows: 

§ 433.302 Scope of subpart. 

This subpart sets forth the 

requirements and procedures under 

which States have 1 year following 

discovery of overpayments made to 

providers for Medicaid services to 

recover or attempt to recover that 

amount before the States must refund 

the Federal share of these overpayments 

to CMS, with certain exceptions. 

11. Section 433.304 is amended by 

removing the definition of ‘‘Abuse’’ and 

adding the definition of ‘‘Final written 

notice’’ to read as follows: 

§ 433.304 Definitions. 

* * * * * 

Final written notice means that 

written communication, immediately 

preceding the first level of formal 

administrative or judicial proceedings, 

from a Medicaid agency official or other 

State official that notifies the provider of 

the State’s overpayment determination 

and allows the provider to contest that 

determination, or that notifies the State 

Medicaid agency of the filing of a civil 

or criminal action. 

* * * * * 

12. Section 433.312 is amended by 

revising paragraph (a) to read as follows: 

§ 433.312 Basic requirements for refunds. 

(a) Basic rules. (1) Except as provided 

in paragraph (b) of this section, the State 

Medicaid agency has 1 year from the 

date of discovery of an overpayment to 

a provider to recover or seek to recover 

the overpayment before the Federal 

share must be refunded to CMS. 

(2) The State Medicaid agency must 

refund the Federal share of 

overpayments at the end of the 1-year 

period following discovery in 

accordance with the requirements of 

this subpart, whether or not the State 

has recovered the overpayment from the 

provider. 

* * * * * 

13. Section 433.316 is amended by 

revising paragraphs (a), (c) introductory 

text, (d), (f), and (g) to read as follows: 

§ 433.316 When discovery of overpayment 

occurs and its significance. 

(a) General rule. The date on which an 

overpayment is discovered is the 

beginning date of the 1-year period 

allowed for a State to recover or seek to 

recover an overpayment before a refund 

of the Federal share of an overpayment 

must be made to CMS. 

* * * * * 

(c) Overpayments resulting from 

situations other than fraud. An 

overpayment resulting from a situation 

other than fraud is discovered on the 

earliest of— 

* * * * * 

(d) Overpayments resulting from 

fraud. (1) An overpayment that results 

from fraud is discovered on the date of 

the final written notice (as defined in 

§ 433.304 of this subchapter) of the 

State’s overpayment determination. 

(2) When the State is unable to 

recover a debt which represents an 

overpayment (or any portion thereof) 

resulting from fraud within 1 year of 

discovery because no final 

determination of the amount of the 

overpayment has been made under an 

administrative or judicial process (as 

applicable), including as a result of a 

judgment being under appeal, no 

adjustment shall be made in the Federal 

payment to such State on account of 

such overpayment (or any portion 

thereof) until 30 days after the date on 

which a final judgment (including, if 

applicable, a final determination on an 

appeal) is made. 

(3) The Medicaid agency may treat an 

overpayment made to a Medicaid 

provider as resulting from fraud under 

subsection (d) of this section only if it 

has referred a provider’s case to the 

Medicaid fraud control unit, or 

appropriate law enforcement agency in 

States with no certified Medicaid fraud 

control unit, as required by § 455.15, 

§ 455.21, or § 455.23 of this chapter, and 

the Medicaid fraud control unit or 

appropriate law enforcement agency has 

provided the Medicaid agency with 

written notification of acceptance of the 

case; or if the Medicaid fraud control 

unit or appropriate law enforcement 

agency has filed a civil or criminal 

action against a provider and has 

notified the State Medicaid agency. 

* * * * * 

(f) Effect of changes in overpayment 

amount. Any adjustment in the amount 

of an overpayment during the 1-year 

period following discovery (made in 

accordance with the approved State 

plan, Federal law and regulations 

governing Medicaid, and the appeals 

resolution process specified in State 

administrative policies and procedures) 

has the following effect on the 1-year 

recovery period: 

(1) A downward adjustment in the 

amount of an overpayment subject to 

recovery that occurs after discovery 

does not change the original 1-year 

recovery period for the outstanding 

balance. 

(2) An upward adjustment in the 

amount of an overpayment subject to 

recovery that occurs during the 1-year 

period following discovery does not 

change the 1-year recovery period for 

the original overpayment amount. A 

new 1-year period begins for the 

incremental amount only, beginning 

with the date of the State’s written 

notification to the provider regarding 

the upward adjustment. 

(g) Effect of partial collection by State. 

A partial collection of an overpayment 

amount by the State from a provider 

during the 1-year period following 

discovery does not change the 1-year 

recovery period for the balance of the 

original overpayment amount due to 

CMS. 

* * * * * 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
46700 Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 

14. Section 433.318 is amended by 

revising paragraphs (a)(2), (b) 

introductory text, (c) introductory text, 

(c)(1), (d)(1), and (e), to read as follows: 

§ 433.318 Overpayments involving 

providers who are bankrupt or out of 

business. 

(a) * * * 

(2) The agency must notify the 

provider that an overpayment exists in 

any case involving a bankrupt or out-ofbusiness provider and, if the debt has 

not been determined uncollectable, take 

reasonable actions to recover the 

overpayment during the 1-year recovery 

period in accordance with policies 

prescribed by applicable State law and 

administrative procedures. 

(b) Overpayment debts that the State 

need not refund. Overpayments are 

considered debts that the State is unable 

to recover within the 1-year period 

following discovery if the following 

criteria are met: 

* * * * * 

(c) Bankruptcy. The agency is not 

required to refund to CMS the Federal 

share of an overpayment at the end of 

the 1-year period following discovery, 

if— 

(1) The provider has filed for 

bankruptcy in Federal court at the time 

of discovery of the overpayment or the 

provider files a bankruptcy petition in 

Federal court before the end of the 1- 

year period following discovery; and 

* * * * * 

(d) * * * 

(1) The agency is not required to 

refund to CMS the Federal share of an 

overpayment at the end of the 1-year 

period following discovery if the 

provider is out of business on the date 

of discovery of the overpayment or if the 

provider goes out of business before the 

end of the 1-year period following 

discovery. 

* * * * * 

(e) Circumstances requiring refunds. If 

the 1-year recovery period has expired 

before an overpayment is found to be 

uncollectable under the provisions of 

this section, if the State recovers an 

overpayment amount under a courtapproved discharge of bankruptcy, or if 

a bankruptcy petition is denied, the 

agency must refund the Federal share of 

the overpayment in accordance with the 

procedures specified in § 433.320 of this 

subpart. 

15. Section 433.320 is amended by— 

A. Revising paragraphs (a)(2), (b)(1), 

(d), (f)(2), (g)(1), and (h)(1). 

B. Adding paragraph (a)(4). 

The revisions and addition read as 

follows: 

§ 433.320 Procedures for refunds to CMS. 

(a) * * * 

(2) The agency must credit CMS with 

the Federal share of overpayments 

subject to recovery on the earlier of— 

(i) The Form CMS–64 submission due 

to CMS for the quarter in which the 

State recovers the overpayment from the 

provider; or 

(ii) The Form CMS–64 due to CMS for 

the quarter in which the 1-year period 

following discovery, established in 

accordance with Sec. 433.316, ends. 

* * * * * 

(4) If the State does not refund the 

Federal share of such overpayment as 

indicated in paragraph (a)(2), the State 

will be liable for interest on the amount 

equal to the Federal share of the nonrecovered, non-refunded overpayment 

amount. Interest during this period will 

be at the Current Value of Funds Rate 

(CVFR), and will accrue beginning on 

the day after the end of the 1-year 

period following discovery until the last 

day of the quarter for which the State 

submits a CMS–64 report refunding the 

Federal share of the overpayment. 

(b) * * * 

(1) The State is not required to refund 

the Federal share of an overpayment at 

the end of the 1-year period if the State 

has already reported a collection or 

submitted an expenditure claim reduced 

by a discrete amount to recover the 

overpayment prior to the end of the 1- 

year period following discovery. 

* * * * * 

(d) Expiration of 1-year recovery 

period. If an overpayment has not been 

determined uncollectable in accordance 

with the requirements of § 433.318 of 

this subpart at the end of the 1-year 

period following discovery of the 

overpayment, the agency must refund 

the Federal share of the overpayment to 

CMS in accordance with the procedures 

specified in paragraph (a) of this 

section. 

* * * * * 

(f) * * * 

(2) The Form CMS–64 submission for 

the quarter in which the 1-year period 

following discovery of the overpayment 

ends. 

(g) * * * 

(1) If a provider is determined 

bankrupt or out of business under this 

section after the 1-year period following 

discovery of the overpayment ends and 

the State has not been able to make 

complete recovery, the agency may 

reclaim the amount of the Federal share 

of any unrecovered overpayment 

amount previously refunded to CMS. 

CMS allows the reclaim of a refund by 

the agency if the agency submits to CMS 

documentation that it has made 

reasonable efforts to obtain recovery. 

* * * * * 

(h) * * * 

(1) Amounts of overpayments not 

collected during the quarter but 

refunded because of the expiration of 

the 1-year period following discovery; 

* * * * * 

16. Section 433.322 is revised to read 

as follows: 

§ 433.322 Maintenance of Records. 

The Medicaid agency must maintain a 

separate record of all overpayment 

activities for each provider in a manner 

that satisfies the retention and access 

requirements of 45 CFR 92.42. 

PART 447—PAYMENTS FOR 

SERVICES 

17. The authority citation for part 447 

continues as follows: 

Authority: Sec. 1102 of the Social Security 

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

Subpart C—Payment for Inpatient 

Hospital and Long-Term Care Facility 

Services 

§ 447.272 [Amended] 

18. Section 447.272 is amended by 

removing paragraphs (e) and (f). 

Subpart E—Payment Adjustments for 

Hospitals That Serve a 

Disproportionate Number of LowIncome Patients 

19. Section 447.299 is amended by 

revising paragraph (c)(15) to read as 

follows: 

§ 447.299 Reporting requirements. 

* * * * * 

(c) * * * 

(15) Total uninsured IP/OP 

uncompensated care costs. Total annual 

amount of uncompensated IP/OP care 

for furnishing inpatient hospital and 

outpatient hospital services to 

individuals with no source of third 

party coverage for the hospital services 

they receive. 

(i) The amount should be the result of 

subtracting paragraphs (c)(12) and 

(c)(13), from paragraph (c)(14) of this 

section. 

(ii) The uncompensated care costs of 

providing physician services to the 

uninsured cannot be included in this 

amount. 

(iii) The uninsured uncompensated 

amount also cannot include amounts 

associated with unpaid co-pays or 

deductibles for individuals with third 

party coverage for the inpatient and/or 

outpatient hospital services they receive 

or any other unreimbursed costs 


emcdonald on DSK2BSOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 149 / Wednesday, August 3, 2011 / Proposed Rules 46701 

associated with inpatient and/or 

outpatient hospital services provided to 

individuals with those services in their 

third party coverage benefit package. 

(iv) The uncompensated care costs do 

not include bad debt or payer discounts 

related to services furnished to 

individuals who have health insurance 

or other third party payer. 

* * * * * 

Subpart F—Payment Methods for 

Other Institutional and NonInstitutional Services 

§ 447.321 [Amended] 

20. Section 447.321 is amended by 

removing paragraphs (e) and (f). 

PART 457—ALLOTMENTS AND 

GRANTS TO STATES 

21. The authority citation for part 457 

continues as follows: 

Authority: Sec. 1102 of the Social Security 

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

Subpart B—General Administration— 

Reviews and Audits; Withholding for 

Failure To Comply; Deferral and 

Disallowance of Claims; Reduction of 

Federal Medical Payments 

§ 457.210 [Removed] 

22. Section 457.210 is removed. 

§ 457.212 [Removed] 

23. Section 457.212 is removed. 

§ 457.218 [Removed] 

24. Section 457.218 is removed. 

Subpart F—Payments to States 

25. Section 457.628 is amended by 

revising paragraph (a) to read as follows: 

§ 457.628 Other applicable Federal 

regulations. 

* * * * * 

(a) HHS regulations in § 433.312 

through § 433.322 of this chapter 

(related to Overpayments); § 433.38 of 

this chapter (Interest charge on 

disallowed claims of FFP); § 430.40 

through § 430.42 of this chapter 

(Deferral of claims for FFP and 

Disallowance of claims for FFP); 

§ 430.48 of this chapter (Repayment of 

Federal funds by installments); § 433.50 

through § 433.74 of this chapter (sources 

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

Donations); and § 447.207 of this 

chapter (Retention of Payments) apply 

to State’s CHIP programs in the same 

manner as they apply to State’s 

Medicaid programs. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: February 2, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: July 27, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–19528 Filed 8–2–11; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Part 67 

[Docket ID FEMA–2011–0002; Internal 

Agency Docket No. FEMA–B–1207] 

Proposed Flood Elevation 

Determinations 

AGENCY: Federal Emergency 

Management Agency, DHS. 

ACTION: Proposed rule. 

SUMMARY: Comments are requested on 

the proposed Base (1% annual-chance) 

Flood Elevations (BFEs) and proposed 

BFE modifications for the communities 

listed in the table below. The purpose 

of this proposed rule is to seek general 

information and comment regarding the 

proposed regulatory flood elevations for 

the reach described by the downstream 

and upstream locations in the table 

below. The BFEs and modified BFEs are 

a part of the floodplain management 

measures that the community is 

required either to adopt or to show 

evidence of having in effect in order to 

qualify or remain qualified for 

participation in the National Flood 

Insurance Program (NFIP). In addition, 

these elevations, once finalized, will be 

used by insurance agents and others to 

calculate appropriate flood insurance 

premium rates for new buildings and 

the contents in those buildings. 

DATES: Comments are to be submitted 

on or before November 1, 2011. 

ADDRESSES: The corresponding 

preliminary Flood Insurance Rate Map 

(FIRM) for the proposed BFEs for each 

community is available for inspection at 

the community’s map repository. The 

respective addresses are listed in the 

table below. 

You may submit comments, identified 

by Docket No. FEMA–B–1207, to Luis 

Rodriguez, Chief, Engineering 

Management Branch, Federal Insurance 

and Mitigation Administration, Federal 

Emergency Management Agency, 500 C 

Street SW., Washington, DC 20472, 

(202) 646–4064, or (e-mail) 

luis.rodriguez1@dhs.gov. 

FOR FURTHER INFORMATION CONTACT: Luis 

Rodriguez, Chief, Engineering 

Management Branch, Federal Insurance 

and Mitigation Administration, Federal 

Emergency Management Agency, 500 C 

Street SW., Washington, DC 20472, 

(202) 646–4064, or (e-mail) 

luis.rodriguez1@dhs.gov. 

SUPPLEMENTARY INFORMATION: The 

Federal Emergency Management Agency 

(FEMA) proposes to make 

determinations of BFEs and modified 

BFEs for each community listed below, 

in accordance with section 110 of the 

Flood Disaster Protection Act of 1973, 

42 U.S.C. 4104, and 44 CFR 67.4(a). 

These proposed BFEs and modified 

BFEs, together with the floodplain 

management criteria required by 44 CFR 

60.3, are the minimum that are required. 

They should not be construed to mean 

that the community must change any 

existing ordinances that are more 

stringent in their floodplain 

management requirements. The 

community may at any time enact 

stricter requirements of its own or 

pursuant to policies established by other 

Federal, State, or regional entities. 

These proposed elevations are used to 

meet the floodplain management 

requirements of the NFIP and also are 

used to calculate the appropriate flood 

insurance premium rates for new 

buildings built after these elevations are 

made final, and for the contents in those 

buildings. 

Comments on any aspect of the Flood 

Insurance Study and FIRM, other than 

the proposed BFEs, will be considered. 

A letter acknowledging receipt of any 

comments will not be sent. 

National Environmental Policy Act. 

This proposed rule is categorically 

excluded from the requirements of 44 

CFR part 10, Environmental 

Consideration. An environmental 

impact assessment has not been 

prepared. 

Regulatory Flexibility Act. As flood 

elevation determinations are not within 

the scope of the Regulatory Flexibility 

Act, 5 U.S.C. 601–612, a regulatory 

flexibility analysis is not required. 

Executive Order 12866, Regulatory 

Planning and Review. This proposed 

rule is not a significant regulatory action 

under the criteria of section 3(f) of 

Executive Order 12866, as amended. 

Executive Order 13132, Federalism. 

This proposed rule involves no policies 

that have federalism implications under 

Executive Order 13132. 


emcdonald on DSK2BSOYB1PROD with PROPOSALS