[Federal Register Volume 70, Number 165 (Friday, August 26, 2005)]
[Notices]
[Pages 50358-50372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-16997]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2209-N]
RIN 0938-AJ74


Medicaid Program; Fiscal Year Disproportionate Share Hospital 
Allotments and Disproportionate Share Hospital Institutions for Mental 
Disease Limits

AGENCY: Notice.
SUMMARY: This notice announces the final Federal share disproportionate 
share hospital (DSH) allotments for Federal fiscal years (FFYs) 2003 
and

[[Page 50359]]

2004, and the preliminary Federal share DSH allotments for FFY 2005. It 
also announces the final FFYs 2003 and 2004, and the preliminary FFY 
2005, limitations on aggregate DSH payments that States may make to 
institutions for mental disease (IMDs) and other mental health 
facilities. This notice also includes a background describing the 
methodology for determining the amounts of States' FFY DSH allotments 
for FFY 1998 and thereafter.

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

SUPPLEMENTARY INFORMATION:

I. Background

A. Disproportionate Share Hospital (DSH) Allotments and Institutions 
for Mental Disease (IMD) DSH Limits Published in the Federal Register 
on October 8, 1998

    We published a notice in the October 8, 1998 Federal Register (63 
FR 54142) that announced the Federal share DSH allotments for FFYs 1998 
through 2002 and the IMD DSH limits for FFYs 1998 and 1999. The DSH 
allotments and IMD DSH limits published in that notice specified and 
were determined in accordance with sections 1923(f) and 1923(h) of the 
Social Security Act (the Act), as amended by the Balanced Budget Act of 
1997 (BBA), Pub. L. 105-33 (enacted on August 5, 1997). The notice also 
reflected the FFY 1998 DSH allotment for one State, specified in 
accordance with section 601 of Pub. L. 105-78 (enacted on November 13, 
1997).
    Additional legislative changes relating to the amounts or 
methodologies for calculating the States' DSH allotments or IMD DSH 
limits were made to the Act since the publication of the October 8, 
1998 notice. In this section and in section II of this notice, we 
describe subsequent legislative changes related to the DSH calculation 
of the DSH allotments and IMD DSH limits for fiscal years.

B. Disproportionate Share Hospital Allotments for Federal Fiscal Years 
(FFYs) 1998 Through 2000

    Section 4721(a) of the BBA amended section 1923(f) of the Act to 
require that Federal Medicaid DSH expenditures be limited by the 
statutorily defined Federal share DSH allotments for FFYs 1998 through 
2002 specified in a chart in section 1923(f)(2) of the Act. Section 601 
of Pub. L. 105-78 amended the DSH allotment contained in this chart for 
the State of Minnesota for FFY 1998. On October 8, 1998, we published a 
notice of the statutorily prescribed DSH allotments for all States for 
FFYs 1998 through 2002, in accordance with the amounts specified in the 
chart at section 1923(f)(2) of the Act, as established by the BBA and 
as amended by Pub. L. 105-78. Subsequent to the publication of the DSH 
allotments for these years, a number of legislative actions revised the 
DSH allotments specified in the chart at section 1923(f)(2) of the Act, 
for certain States. Specifically, sections 702, 703, and 704 of Pub. L. 
105-277 (enacted on October 21, 1998) amended the FFY 1999 DSH 
allotments for Minnesota, New Mexico, and Wyoming, respectively, and 
section 601(a) of the Medicare, Medicaid, SCHIP Balanced Budget 
Refinement Act of 1999 (BBRA) (Pub. L. 106-113, enacted on November 29, 
1999) amended the FFYs 2000, 2001, and 2002 DSH allotments for the 
District of Columbia, Minnesota, New Mexico, and Wyoming.

C. DSH Allotments for FFYs 2001 and 2002

    Section 701(a) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554, enacted 
on December 21, 2000) added a new section 1923(f)(4) of the Act that 
provided for a ``Special Rule for Fiscal Years 2001 and 2002,'' under 
which States' DSH allotments for FFY 2001 and 2002 would be determined 
through the application of a methodology. The DSH allotments for FFYs 
2001 and 2002 as calculated under this methodology superseded the DSH 
allotments for those years specified in the chart at section 1923(f)(2) 
of the Act.
    Under section 1923(f)(4) of the Act, the DSH allotments for FFY 
2001 and FFY 2002 were determined by increasing the States' prior FFY 
DSH allotments by the Consumer Price Index for all Urban Consumers 
(CPI-U) for the prior fiscal year, subject to the limitation that an 
increase to a State's DSH allotment for a fiscal year could not result 
in the DSH allotment exceeding the greater of the State's DSH allotment 
for the previous fiscal year or 12 percent of the State's total medical 
assistance expenditures for the allotment year (referred to as the 12 
percent limit). For example, if increasing a State's FY 2001 DSH 
allotment by the CPI-U for FY 2001 resulted in an amount that was 
higher than 12 percent of the State's total medical assistance 
expenditures for FY 2002, and the 12 percent limit was higher than the 
States' FY 2001 DSH allotment, the State's FY 2002 DSH allotment would 
be limited to the 12 percent limit. The application of this special 
rule for FFY 2001 and FFY 2002 had the effect of increasing States' DSH 
allotments for those years, as compared to the allotments they would 
have received under the chart at section 1923(f)(2) of the Act. In 
fact, the chart contained at section 1923(f)(2) of the Act generally 
would have provided for a decrease or no change in States' DSH 
allotments over the fiscal years 1998 through 2002.
    BIPA also added a new section 1923(f)(5) of the Act (Pub. L. 106-
554 section 701(a)(2)), which established a ``Special Rule for 
Extremely Low DSH States.'' Under this rule, States with FFY 1999 DSH 
expenditures that were greater than zero percent and less than 1 
percent of the States' FFY 1999 total medical assistance expenditures 
were considered to be ``low-DSH States.'' Under section 1923(f)(5) of 
the Act, the Low-DSH States' FFY 2001 DSH allotments were increased to 
1 percent of the States' total FFY 2001 medical assistance 
expenditures. The Low-DSH States' increased FFY 2001 DSH allotments 
were the basis for calculating the States' FFY 2002 DSH allotments. 
That is, similar to the methodology applied for determining the other 
(non-Low-DSH) States' allotments, the Low-DSH States' FFY 2002 
allotments were determined by increasing their FFY 2001 allotment (as 
determined under the Low-DSH provision at section 1923(f)(5) of the 
Act) by the CPI-U for the prior fiscal year, subject to the 12 percent 
limit.

D. DSH Allotments for FFY 2003

    Section 1923(f)(3) of the Act, as established by the BBA and 
amended by the BIPA, provided for States' FFY 2003 DSH allotments to be 
calculated by increasing their FFY 2002 allotments (as specified in the 
chart in section 1923(f)(2) of the Act) by the CPI-U for the prior 
fiscal year, subject to the 12 percent limit. That is, the FFY 2003 
allotments were not based on the FFY 2002 DSH allotments as were 
determined under section 1923(f)(4) of the Act. Since the FFY 2002 DSH 
allotments specified in the chart in section 1923(f)(2) of the Act were 
lower than the actual FFY 2002 DSH allotments (determined under section 
1923(f)(4) of the Act), in general, States' FFY 2003 DSH allotments 
were lower than their FFY 2002 allotments. The exception to this were 
the FFY 2003 DSH allotments for the Low-DSH States. Under the Low-DSH 
State provision, the Low-DSH States' FFY 2003 allotments were 
determined by increasing their actual FFY 2002 DSH allotments (not 
their FFY 2002 allotments specified in the chart in section 1923(f)(2) 
of the Act) by the CPI-U for the previous fiscal year. Therefore, Low-
DSH States' DSH

[[Page 50360]]

allotments increased (in general by the CPI-U) from FFY 2002 to FFY 
2003.

E. DSH Allotments for FFY 2004

    Section 1001(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173, enacted on December 
8, 2003) amended section 1923(f)(3) of the Act to provide for a 
``Special, Temporary Increase In Allotments On A One-Time, Non-
Cumulative Basis.'' Under this provision, States' FFY 2004 DSH 
allotments were determined by increasing their FFY 2003 allotments by 
16 percent, and the fiscal year DSH allotment amounts so determined 
were not subject to the 12 percent limit.

F. DSH Allotments for Non-Low DSH States for FFY 2005, and Fiscal Years 
Thereafter

    Under the methodology contained in section 1923(f)(3)(C) of the 
Act, as amended by the MMA, the non-Low-DSH States' DSH allotments for 
FFY 2005 and subsequent fiscal years continues at the same level as the 
States' DSH allotments for FFY 2004 until a ``fiscal year specified'' 
occurs. The ``fiscal year specified'' is the first fiscal year for 
which the Secretary estimates that a State's DSH allotment equals (or 
no longer exceeds) the DSH allotment as would have been determined 
under the statute in effect before the enactment of the MMA. We 
determine whether the fiscal year specified has occurred under a 
special parallel process. Specifically, under this process, a DSH 
allotment is determined for FFYs after 2003 by increasing the State's 
DSH allotment for the previous fiscal year by the CPI-U for the prior 
fiscal year, subject to the 12 percent limit. The fiscal year specified 
will be the fiscal year when the DSH allotment calculated under this 
special parallel process finally equals or exceeds the FY 2004 DSH 
allotment, as determined under the MMA provisions. Once the fiscal year 
specified occurs for a State, that State's fiscal year DSH allotment 
will be calculated by increasing the State's previous actual fiscal 
year DSH allotment (which would be equal to the FY 2004 DSH allotment) 
by the CPI-U, subject to the 12 percent limit. The following example 
illustrates how the fiscal year DSH allotment would be calculated for 
fiscal years after FFY 2004.

    Example --A State's FFY 2003 DSH allotment is $100 million. 
Under the MMA, the State's FFY 2004 DSH allotment would be $116 
million ($100 million increased by 16 percent). The State's DSH 
allotment for subsequent fiscal years would continue at $116 million 
for fiscal years following FFY 2004 until the ``fiscal year 
specified'' occurs. In a separate parallel process, we determine 
whether the fiscal year specified has occurred by calculating the 
State's DSH allotments in accordance with the statute in effect 
before the enactment of the MMA. Under this special process, we 
determine the State's DSH allotment each fiscal year by increasing 
the State's DSH allotment for the previous fiscal year (as also 
determined under the special parallel process) by the CPI-U for the 
previous fiscal year, and subject to the 12 percent limit. Assume 
for purposes of this example that, in accordance with this special 
process, the State's FFY 2007 DSH allotment was determined to be 
$115 million and the CPI-U for FFY 2007 was 2 percent. Therefore, 
under the special parallel process, the State's FFY 2008 DSH 
allotment would be $117.3 million (that is, $115 million increased 
by the 2 percent CPI-U for FFY 2007). Since $117.3 is greater than 
$116 million (the FFY 2004 DSH allotment calculated under the MMA), 
we would determine that FFY 2008 is the ``fiscal year specified.'' 
We would then determine the State's FFY 2008 allotment as the FFY 
2007 actual allotment ($116 million) increased by the CPI-U for FFY 
2007 (2 percent). Therefore, the State's FFY 2008 DSH allotment 
would be $118.32 million ($116 million increased by 2 percent); for 
purposes of this example, the application of the 12 percent limit 
has no effect. For FFY 2009 and thereafter, the State's DSH 
allotment would be calculated by increasing the previous fiscal 
year's DSH allotment by the CPI-U, subject to the 12 percent limit.

    However, as amended by the MMA, section 1923(f)(5)(B) of the Act 
contains new criteria for determining whether a State is a Low-DSH 
State, beginning with FFY 2004. This provision is described in section 
I.G below.

G. DSH Allotments For Low-DSH States for FFYs 2004, and Fiscal Years 
Thereafter

    The MMA amended section 1923(f)(5) of the Act regarding the 
calculation of the fiscal year DSH allotments for ``Low-DSH'' States 
for FFY 2004 and subsequent fiscal years. Specifically, under section 
1923(f)(5)(B) of the Act, as amended by the MMA, a State is considered 
a Low-DSH State for FFY 2004 if its total DSH payments under its State 
plan for FFY 2000 (including Federal and State shares) as reported to 
us as of August 31, 2003, are greater than 0 percent and less than 3 
percent of the State's total FFY 2000 expenditures under its State plan 
for medical assistance. For States that meet the new Low-DSH criteria, 
their FFY 2004 DSH allotments are calculated by increasing their FFY 
2003 DSH allotments by 16 percent. Therefore, for FFY 2004, Low-DSH 
States' fiscal year DSH allotments are calculated in the same way as 
the DSH allotments for regular States, which under the Act section 
1923(f)(3) get the special temporary increase for FFY 2004.
    Furthermore, for States meeting the new MMA Low-DSH definition, the 
DSH allotments for FFYs 2005 through 2008 will continue to be 
determined by increasing the previous fiscal year's DSH allotment by 16 
percent. The Low-DSH States' DSH allotments for FFYs 2004 through 2008 
are not subject to the 12 percent limit. The Low-DSH States' DSH 
allotments for FFYs 2009 and subsequent fiscal years are calculated by 
increasing those States' DSH allotments for the prior fiscal year by 
the CPI-U for that prior fiscal year. For FFYs 2009 and thereafter, the 
DSH allotments so determined would be subject to the 12 percent limit.

H. IMD DSH Limits for FFYs 1998 and Thereafter

    Section 4721(b) of the BBA added section 1923(h) to the Act which 
provides that Federal financial participation (FFP) is not available 
for DSH payments to IMDs and other mental health facilities that are in 
excess of State-specific aggregate limits.
    In implementing the IMD DSH limit under the BBA in the October 8, 
1998 Federal Register notice as codified in section 1923(h)(1) of the 
Act, we indicated that the aggregate limit of IMD and other mental 
health facilities to be the lesser of a State's FFY 1995 total 
computable (State and Federal share) IMD and other mental health 
facility DSH expenditures applicable to the State's FFY 1995 DSH 
allotment (as reported on the Form CMS-64 as of January 1, 1997), or 
the amount equal to the product of the State's current year total 
computable DSH allotment and the applicable percentage.
    Each State's IMD limit on DSH payments to IMDs and other mental 
health facilities is calculated by first determining the State's total 
computable DSH expenditures attributable to the FFY 1995 DSH allotment 
for mental health facilities and inpatient hospitals. This was based on 
the total computable DSH expenditures reported by the State on the Form 
CMS-64 as mental health DSH and inpatient hospital as of January 1, 
1997.
    Once we determine the total computable amount of DSH expenditures 
applicable to the FFY 1995 DSH allotment, we then calculate an 
``applicable percentage.'' The applicable percentage for FFY 1998 
through FFY 2000 (1995 IMD DSH percentage) is calculated by dividing 
the total computable amount of IMD and mental health DSH expenditures 
applicable to the State's FFY 1995 DSH allotment by the total 
computable amount of all DSH

[[Page 50361]]

expenditures (mental health facility plus inpatient hospital) 
applicable to the FFY 1995 DSH allotment. For FFY 2001 and thereafter, 
the applicable percentage is defined as the lesser of the applicable 
percentage as calculated above (for FFYs 1998 through 2001) or 50 
percent for FFY 2001; 40 percent for FFY 2002; and 33 percent for each 
subsequent FFY.
    The applicable percentage is then applied to each State's total 
computable FFY DSH allotment for the current FFY. The State's total 
computable FFY DSH allotment is calculated by dividing the State's 
Federal share DSH allotment for the FFY by the State's Federal medical 
assistance percentage (FMAP) for that FFY.
    In the final step of the calculation, the State's total computable 
IMD DSH limit for the FFY is set at the lesser of the product of a 
State's current fiscal year total computable DSH allotment and the 
applicable percentage for that fiscal year, or the State's FFY 1995 
total computable IMD and other mental health facility DSH expenditures 
applicable to the State's FFY 1995 DSH allotment as reported on the 
Form CMS-64.
    The MMA legislation did not amend the Medicaid statute with respect 
to the calculation of the IMD DSH limit.

I. DSH Allotments and IMD DSH Limits Published in the Federal Register 
on March 26, 2004

    On March 26, 2004, we published in the Federal Register (69 FR 
15850) the final Federal share DSH allotments for FFYs 2001 and 2002, 
and the preliminary Federal share DSH allotments for FFY 2003 (as 
determined under the Medicaid statute in effect before the enactment of 
the MMA). The March 26, 2004 notice also announced the preliminary FFY 
2004 Federal share DSH allotments (as determined under the MMA 
provisions).
    The March 26, 2004 Federal Register notice also announced the final 
FFYs 2000, 2001, and 2002, and the preliminary FFYs 2003 and 2004, 
limitations on aggregate DSH payments that States may make to IMDs and 
other mental health facilities.
    The March 26, 2004 Federal Register notice also described the 
methodologies for determining the amounts of States' FFY DSH allotments 
for FFY 2001 and thereafter, and it republished the Federal share DSH 
allotments for FFYs 1998 through 2000, and the final FFYs 1998 and 1999 
limitations on aggregate DSH payments that States may make to IMDs and 
other mental health facilities.

J. Publication in the Federal Register of Preliminary and Final Notice 
for DSH Allotments and IMD DSH Limits

    In general, we initially determine States' DSH allotments and IMD 
DSH limits for a fiscal year using estimates of medical assistance 
expenditures, including DSH expenditures in their Medicaid programs. 
These estimates are provided by States each year on the August 
quarterly Medicaid budget reports (Form CMS-37) before the Federal 
fiscal year for which the DSH allotments and IMD DSH limits are being 
determined. The DSH allotments and IMD DSH limits determined using 
these estimates are referred to as ``preliminary.'' Only after we 
receive States' reports of the actual related medical assistance 
expenditures through the quarterly expenditure report (Form CMS-64), 
are the ``final'' DSH Allotments and IMD DSH limits determined. In this 
regard, the DSH allotments for FFY 1998 through FFY 2000, as published 
in the October 8, 1998 Federal Register notice were considered as final 
since these allotments were prescribed in the chart in section 
1923(f)(2) of the Act. Similarly, the FFY 1998 and FFY 1999 IMD DSH 
limits published in the October 8, 1998 Federal Register were also 
considered as final, since these limits were based on the actual 
expenditures from FFY 1995 and the final FFY 1998 and FFY 1999 DSH 
allotments.
    As indicated in the previous paragraph I, the notice published in 
the Federal Register on March 26, 2004 announced the final FFY 2001 and 
2002 DSH allotments (since they were based on the actual related 
expenditures), the preliminary FFY 2003 and 2004 DSH allotments (since 
they were based on estimated expenditures), the final FFY 2000 through 
2002 IMD DSH limits (based on the final DSH allotments for those fiscal 
years), and the preliminary FFY 2003 and 2004 IMD DSH limits (since 
they were based on the preliminary DSH allotments for those years).
    This notice announces the final FFYs 2003 and 2004 DSH allotments 
and the final FFYs 2003 and 2004 IMD DSH limits (since they are based 
on the actual related expenditures), the preliminary FFY 2005 DSH 
allotments (based on estimates), and the preliminary IMD DSH limits 
(since they are based on the preliminary DSH allotments for FFY 2005).

II. Calculation of the Final FFY 2003 Federal Share State DSH 
Allotments, the Final FFY 2004 Federal Share State DSH Allotments, and 
the Preliminary FFY 2005 Federal Share State DSH Allotments

    Charts 1 and 2 of the Addendum to this notice provide the States' 
``final'' FFY 2003 and FFY 2004 DSH allotments. The final FFY 2003 DSH 
allotments for each State were computed using the States' expenditure 
reports (Form CMS-64) for FFY 2003. As required by the provisions of 
the MMA, the final FFY 2004 DSH allotments for the ``Low-DSH'' States 
and all the other States were calculated by increasing the FFY 2003 DSH 
allotments by 16 percent. The definition and determination of the 
``Low-DSH'' States under the MMA provisions were explained and 
published in the March 26, 2004 Federal Register notice.
    Chart 3 of the Addendum to this notice provides the States' 
``preliminary'' FFY 2005 DSH allotments. These preliminary allotments 
were determined using the States' August 2004 expenditure estimates 
submitted by the States on the Form CMS-37. We will publish the final 
FFY 2005 DSH allotments for each State following receipt of the States' 
four quarterly Medicaid expenditure reports (Form CMS-64) for FFY 2005. 
As discussed earlier in this notice, the criteria and determination of 
the ``Low-DSH'' States were also explained and published in the March 
26, 2004 Federal Register notice.

III. Calculation of the FFYs 2000 Through 2005 IMD DSH Limits

    Section 1923(h) of the Act specifies the methodology to be used to 
establish the limits on the amount of DSH payments that a State can 
make to IMDs and other mental health facilities. FFP is not available 
for IMD/DSH payments that exceed the lesser of the State's FFY 1995 
total computable mental health DSH expenditures applicable to the 
State's FFY 1995 DSH allotment as reported to us on the Form CMS-64 as 
of January 1, 1997; or the amount equal to the product of the State's 
current FFY total computable DSH allotment and the applicable 
percentage. The amounts of the limits on IMD DSH expenditures were made 
available to the States as part of their CMS-64 report. We are 
publishing the final FFY 2003 and FFY 2004 IMD DSH limit limits, and 
the preliminary FFY 2005 IMD DSH limit along with an explanation of the 
calculation of these limits.

[[Page 50362]]

    For FFY 2000, the applicable percentage was computed as the ratio 
of--
    (1) The State's FFY 1995 total computable (Federal and State share) 
mental health DSH payments applicable to the State's FFY 1995 DSH 
allotment and as reported on the Form CMS-64 as of January 1, 1997; 
compared to
    (2) The State's FFY 1995 total computable amount of all DSH 
expenditures (mental health facility and inpatient hospital) applicable 
to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as 
of January 1, 1997.
    For FFY 2000, the applicable percentage was calculated and applied 
to the State's FFY 2000 total computable DSH allotment. States' total 
computable FFY 2000 DSH allotment was calculated by dividing each 
State's Federal share DSH allotment for FFY 2000 by the State's Federal 
medical assistance percentage (FMAP) for FFY 2000. This result was then 
compared to the State's FFY 1995 total computable mental health DSH 
expenditures applicable to the State's FFY 1995 DSH allotment as 
reported on the Form CMS-64 as of January 1, 1997. The lesser of these 
two amounts was the State's limitation on total computable IMD/DSH 
expenditures for FFY 2000.
    For FFY 2001, the applicable percentage was the lesser of 50 
percent or the 1995 DSH IMD percentage of the amount computed for FFY 
2000.
    This percentage was applied to the State's FFY 2001 total 
computable DSH allotment. This result was then compared to the State's 
FFY 1995 total computable mental health DSH expenditures applicable to 
the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of 
January 1, 1997. The lesser of these two amounts was the State's 
limitation on total computable IMD/DSH expenditures for FFY 2001.
    For FFY 2002, the applicable percentage was the lesser of 40 
percent or the 1995 DSH IMD percentage of the amount computed for FFY 
2000. This percentage was applied to the State's FFY 2002 total 
computable DSH allotment. This result was then compared to the State's 
FFY 1995 total computable mental health DSH expenditures applicable to 
the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of 
January 1, 1997. The lesser of these two amounts was the State's 
limitation on total computable IMD/DSH expenditures for FFY 2002.
    For FFY 2003 and following fiscal years, the applicable percentage 
was the lesser of 33 percent or the 1995 DSH IMD percentage of the 
amount computed for FFY 2000. This percentage was applied to the 
State's fiscal year total computable DSH allotment. This result was 
then compared to the State's FFY 1995 total computable mental health 
DSH expenditures applicable to the State's FFY 1995 DSH allotment as 
reported on the Form CMS-64 as of January 1, 1997. The lesser of these 
two amounts was the State's limitation on total computable IMD/DSH 
expenditures for FFY 2003 and following fiscal years.
    Charts 4 through 6 of the Addendum to this notice detail each 
State's final IMD/DSH limitation for FFYs 2003 and 2004, and the 
preliminary IMD/DSH limitation for FFY 2005, respectively, in 
accordance with section 1923(h) of the Act.

IV. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501).

V. Regulatory Impact Statement

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 through 612, 
requires a regulatory flexibility analysis for every rule subject to 
proposed rulemaking procedures under the Administrative Procedure Act, 
5 U.S.C. 553, unless we certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
For purposes of the RFA, States and individuals are not considered 
small entities. However, providers with receipts ranging from less than 
$6 million to less than $29 million depending on their provider type 
are considered small entities (65 FR 69432, November 17, 2000). Due to 
the various controlling statutes, the effects on providers are not a 
result of any independent regulatory impact and not this notice. The 
purpose of the notice is to simply announce the latest distributions as 
required by the statute.
    Additionally, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a notice may have a significant impact on 
the operations of a substantial number of small rural hospitals. Such 
an analysis must conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds.
    The BBA and the BBRA set statutorily defined limits on the amount 
of Federal share DSH expenditures available for FFYs 1998 through 2002.
    The BIPA amended sections of the Act that set forth these 
statutorily defined Federal DSH allotments.
    Based on these amendments to the DSH allotment provisions of the 
Medicaid statute, the limits initially imposed by the BBA and the BBRA 
had a negative impact on the availability of FFP to States by reducing 
the DSH allotments available to States, thus potentially negatively 
impacting the availability of Medicaid expenditures to hospitals, 
especially IMDs. However, the BIPA reduced the Federal savings, thus 
increasing the amount of Federal funding available to States under the 
DSH program. Finally, section 1001 of the MMA increased the DSH 
allotment for States beginning with fiscal year 2004. While overall the 
statute mandated some reduction in DSH payments, we do not believe that 
this notice will have a significant economic impact on a substantial 
number of small entities because it reflects no new policies or 
procedures.
    In section 202, the Unfunded Mandates Reform Act requires that 
agencies prepare an assessment of anticipated costs and benefits for 
any rule that may result in an annual expenditure by State, local, or 
tribal governments, in the aggregate, or by the private sector, of $110 
million or more. This notice has no consequential effect on State, 
local, or tribal governments, or the private sector, and will not 
create an unfunded mandate.
    We have reviewed this notice under the threshold criteria of 
Executive Order 13132, Federalism. We have determined that it does not 
significantly affect the rights, roles, and responsibilities of States.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

Addendum

    This addendum contains the charts 1 through 6 (including associated 
keys) that are referred to in the preamble of this notice.

[[Page 50363]]



                   Chart 1.--Final 2003 DSH Allotments
         [Key to the chart of the final FFY 2003 DSH Allotments]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
Column A..........................  State
Column B..........................  FY 2003 FMAPS--FFY 2003 Federal
                                     Medical Assistance Percentage
                                     (FMAP).
Column C..........................  FY 2002 Federal Share DSH Allotment--
                                     This column contains the final FFY
                                     2002 DSH allotments from section
                                     1923(f)(2) of the Act.
Column D..........................  FY 2002 DSH Allotment INCR. By CPIU.
                                     This column contains the FFY 2002
                                     DSH allotments in Column C
                                     increased by the CPIU for that
                                     fiscal year.
Column E..........................  FY 2003 TC MAP EXP including DSH.
                                     This column contains the total
                                     computable medical assistance
                                     expenditures including DSH for FFY
                                     2003.
Column F..........................  FY 2003 TC DSH Expenditures. This
                                     column contains the actual total
                                     computable DSH expenditures for FFY
                                     2003.
Column G..........................  FY 2003 TC MAP EXP. Net of DSH. This
                                     column contains the total
                                     computable medical assistance
                                     expenditures, net of DSH
                                     expenditures, for FFY 2003.
Column H..........................  12 Percent Limit (IN FS). This
                                     column contains the 12 Percent
                                     Limit; this is a Federal share
                                     amount.
Column I..........................  Greater of COL H OR COL C. This
                                     column contains an amount which is
                                     the greater of Column H (the 12
                                     percent limit) or Column C (the
                                     Federal share FFY 2002 DSH
                                     allotment).
Column J..........................  FY 2003 DSH Allotments Federal
                                     Share. This column contains the
                                     lesser of Column I or Column D This
                                     is the final Federal share DSH
                                     Allotment for FY 2003.
------------------------------------------------------------------------


           Chart 2.--Final DSH Allotments for Fiscal Year 2004
  [Key to the chart of the final FFY 2004 DSH Allotments. The final FFY
   2004 DSH allotments for the regular States are presented in the top
section of this chart and the final FFY 2004 DSH allotments for the Low-
      DSH States are presented in the bottom section of the chart.]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
Column A..........................  State.
Column B..........................  FY 2003 Final Federal Share DSH
                                     Allotment. This column contains the
                                     final FFY 2003 DSH allotments.
Column C..........................  FY 2004 FS DSH Allotment = COL B x
                                     116. This column contains the FFY
                                     2003 DSH allotments in Column C
                                     increased by 16 percent.
Column D..........................  MMA Low DSH Status. This column
                                     indicates the LOW DSH Status of
                                     each State.
------------------------------------------------------------------------


            Chart 3.--Preliminary DSH Allotments for FY 2005
    [Key to the Chart of the Preliminary FFY 2005 DSH Allotments. The
preliminary FFY 2005 DSH Allotments for the regular States are presented
    in the top section of this chart and the preliminary FFY 2005 DSH
Allotments for the Low-DSH States are presented in the bottom section of
                               the chart.]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
For Non-Low-DSH States:
    Column A......................  State.
    Column B......................  Final FY 2004 DSH Allotment Federal
                                     Share--This column contains the
                                     final FFY 2004 DSH Allotments.
    Column C......................  FY 2005 DSH Allotment Federal Share--
                                     This column contains the
                                     preliminary FFY 2005 DSH
                                     Allotments.
    Column D......................  MMA Low-DSH Status--This column
                                     indicates the MMA Low-DSH Status of
                                     each State.
For Low-DSH States:
    Column A......................  State.
    Column B......................  Prior FY DSH Allotment--This column
                                     contains the final FFY 2004 DSH
                                     Allotments.
    Column C......................  FY 2005 DSH Allotments Federal
                                     Share--This column contains the
                                     preliminary FFY 2005 DSH Allotments
                                     = Column B multiplied by 1.16.
    Column D......................  MMA Low-DSH Status--This column
                                     indicates the MMA Low-DSH Status of
                                     each State.
------------------------------------------------------------------------


                 Chart 4.--Final FFY 2003 IMD DSH Limits
           [Key to the Chart of the FFY 2003 IMD Limitations]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
Column A..........................  State.
Column B..........................  Inpatient Hospital Services FY 95
                                     DSH Total Computable. This column
                                     contains the States' total
                                     computable FFY 1995 inpatient
                                     hospital DSH expenditures as
                                     reported on the Form CMS-64.
Column C..........................  IMD and Mental Health Services FY 95
                                     DSH Total Computable. This column
                                     contains the total computable FFY
                                     1995 mental health facility DSH
                                     expenditures as reported on the
                                     Form CMS-64 as of January 1, 1997.
Column D..........................  Total Inpatient & IMD & Mental
                                     Health FY 95 DSH Total Computable,
                                     Col. B + C. This column contains
                                     the total computation of all
                                     inpatient hospital DSH expenditures
                                     and mental health facility DSH
                                     expenditures for FFY 1995 as
                                     reported on the Form CMS-64 as of
                                     January 1, 1997 (representing the
                                     sum of Column B and Column C).

[[Page 50364]]

 
Column E..........................  Applicable Percentage Col. C/D. This
                                     column contains the ``applicable
                                     percentage'' representing the total
                                     computable FFY 1995 mental health
                                     facility DSH expenditures divided
                                     by total computable all inpatient
                                     hospital and mental health facility
                                     DSH expenditures for FFY 1995 (the
                                     amount in Column C divided by the
                                     amount in Column D). Per section
                                     1923(h)(2)(A)(ii)(II) of the Act,
                                     for FFYs after FY 2002, the
                                     applicable percentage can be no
                                     greater than 33 percent.
Column F..........................  FY 2003 Federal Share DSH Allotment.
                                     This column contains the States'
                                     final FFY 2003 DSH Allotments.
Column G..........................  FFY 2003 FMAP.
Column H..........................  FY 2003 DSH Allotment Total
                                     Computable Col. F/G. This column
                                     contains FFY 2003 total computable
                                     DSH Allotment (determined as Column
                                     F/Column G).
Column I..........................  Applicable Percent of FY 2003 DSH
                                     Allotment. Col. E x H. This column
                                     contains the applicable percent of
                                     FFY 2003 total computable DSH
                                     Allotment (calculated as Column E x
                                     Column H).
Column J..........................  FY 2003 IMD DSH Limit Total
                                     Computable Lesser of Col. C or I.
                                     The column contains the lesser of
                                     the lesser of Column I or C.
Column K..........................  FY 2003 IMD DSH Limit Federal Share,
                                     Col. G x J. This column contains
                                     the total computable IMD DSH Limit
                                     from Col. J and converts that
                                     amount into a Federal share
                                     (calculated as Col. G x Col. J).
------------------------------------------------------------------------


                 Chart 5.--Final FFY 2004 IMD DSH Limits
 [Key to the Chart of the FFY 2004 IMD Limitations.--The final FFY 2004
 IMD DSH Limits for the regular States are presented in the top section
  of this chart and the final FFY IMD DSH Limits for the Low-DSH States
           are presented in the bottom section of the chart.]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
Column A..........................  State.
Column B..........................  Inpatient Hospital Services FY 95
                                     DSH Total Computable. This column
                                     contains the States' total
                                     computable FFY 1995 inpatient
                                     hospital DSH expenditures as
                                     reported on the Form CMS-64.
Column C..........................  IMD and Mental Health Services FY 95
                                     DSH Total Computable. This column
                                     contains the total computable FFY
                                     1995 mental health facility DSH
                                     expenditures as reported on the
                                     Form CMS-64 as of January 1, 1997.
Column D..........................  Total Inpatient & IMD & Mental
                                     Health FY 95 DSH Total Computable,
                                     Col B + C. This column contains the
                                     total computation of all inpatient
                                     hospital DSH expenditures and
                                     mental health facility DSH
                                     expenditures for FFY 1995 as
                                     reported on the Form CMS-64 as of
                                     January 1, 1997 (representing the
                                     sum of Column B and Column C).
Column E..........................  Applicable Percentage Col C/D. This
                                     column contains the ``applicable
                                     percentage'' representing the total
                                     computable FFY 1995 mental health
                                     facility DSH expenditures divided
                                     by total computable all inpatient
                                     hospital and mental health facility
                                     DSH expenditures for FFY 1995 (the
                                     amount in Column C divided by the
                                     amount in Column D) Per section
                                     1923(h)(2)(A)(ii)(II) of the Act,
                                     for FFYs after FY 2002, the
                                     applicable percentage can be no
                                     greater than 33 percent.
Column F..........................  FY 2004 Federal Share DSH Allotment.
                                     This column contains the States'
                                     final FFY 2004 DSH allotments.
Column G..........................  FFY 2004 FMAP.
Column H..........................  FY 2004 DSH Allotment Total
                                     Computable. Col. F/G. This column
                                     contains FFY 2004 total computable
                                     DSH allotment (determined as Column
                                     F/Column G).
Column I..........................  Applicable Percent of FY 2004 DSH
                                     Allotment. Col. E x H. This column
                                     contains the applicable percent of
                                     FFY 2004 total computable DSH
                                     allotment (calculated as Column E x
                                     Column H).
Column J..........................  FY 2004 IMD DSH Limit Total
                                     Computable. Lesser of Col. C or I.
                                     The column contains the lesser of
                                     the lesser of Column I or C.
Column K..........................  FY 2004 IMD DSH Limit Federal Share,
                                     Col. G x J. This column contains
                                     the total computable IMD DSH Limit
                                     from Col. J and converts that
                                     amount into a Federal share
                                     (calculated as Col. G xCol. J).
Column L..........................  LOW DSH Status. This column contains
                                     Low DSH status for each State.
------------------------------------------------------------------------


              Chart 6.--Preliminary FFY 2005 IMD DSH Limits
 [Key to the Chart of the FFY 2005 IMD Limitations.--The preliminary FFY
   2005 IMD DSH Limits for the regular States are presented in the top
  section of this chart and the preliminary FFY 2005 IMD DSH Limits for
  the Low-DSH States are presented in the bottom section of the chart.]
------------------------------------------------------------------------
              Column                             Description
------------------------------------------------------------------------
Column A..........................  State.
Column B..........................  Inpatient Hospital Services FY 95
                                     DSH Total Computable. This column
                                     contains the States' total
                                     computable FFY 1995 inpatient
                                     hospital DSH expenditures as
                                     reported on the Form CMS-64.
Column C..........................  IMD and Mental Health Services FY 95
                                     DSH Total Computable. This column
                                     contains the total computable FFY
                                     1995 mental health facility DSH
                                     expenditures as reported on the
                                     Form CMS-64 as of January 1, 1997.
Column D..........................  Total Inpatient & IMD & Mental
                                     Health FY 95 DSH Total Computable,
                                     Col. B + C. This column contains
                                     the total computation of all
                                     inpatient hospital DSH expenditures
                                     and mental health facility DSH
                                     expenditures for FFY 1995 as
                                     reported on the Form CMS-64 as of
                                     January 1, 1997 (representing the
                                     sum of Column B and Column C).

[[Page 50365]]

 
Column E..........................  Applicable Percentage Col. C/D. This
                                     column contains the ``applicable
                                     percentage'' representing the total
                                     computable FFY 1995 mental health
                                     facility DSH expenditures divided
                                     by total computable all inpatient
                                     hospital and mental health facility
                                     DSH expenditures for FFY 1995 (the
                                     amount in Column C divided by the
                                     amount in Column D) Per section
                                     1923(h)(2)(A)(ii)(II) of the Act,
                                     for FFYs after FY 2002, the
                                     applicable percentage can be no
                                     greater than 33 percent.
Column F..........................  FY 2005 Federal Share DSH Allotment.
                                     This column contains the States'
                                     final FFY 2005 DSH allotments.
Column G..........................  FFY 2005 FMAP.
Column H..........................  FY 2005 DSH Allotment Total
                                     Computable Col. F/G. This column
                                     contains FFY 2005 total computable
                                     DSH allotment (determined as Column
                                     F/Column G).
Column I..........................  Applicable Percent of FY 2005 DSH
                                     Allotment Col. E x H. This column
                                     contains the applicable percent of
                                     FFY 2004 total computable DSH
                                     allotment (calculated as Column E x
                                     Column H)
Column J..........................  FY 2005 IMD DSH Limit Total
                                     Computable. Lesser of Col. C or I.
                                     The column contains the lesser of
                                     the lesser of Column I or C.
Column K..........................  FY 2005 IMD DSH Limit Federal Share,
                                     Col. G x J. This column contains
                                     the total computable IMD DSH Limit
                                     from Col. J and converts that
                                     amount into a Federal share
                                     (calculated as Col. G x Col. J).
Column L..........................  Low DSH Status. This column contains
                                     Low DSH status for each State.
------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 50366]]

[GRAPHIC] [TIFF OMITTED] TN26AU05.001


[[Page 50367]]


[GRAPHIC] [TIFF OMITTED] TN26AU05.002


[[Page 50368]]


[GRAPHIC] [TIFF OMITTED] TN26AU05.003


[[Page 50369]]


[GRAPHIC] [TIFF OMITTED] TN26AU05.004


[[Page 50370]]


[GRAPHIC] [TIFF OMITTED] TN26AU05.005


[[Page 50371]]


[GRAPHIC] [TIFF OMITTED] TN26AU05.006

BILLING CODE 4120-01-C


[[Page 50372]]


    Authority: Section 1923(a)(2), (f), and (h) of the Social 
Security Act (42 U.S.C. 1396r-4(a)(2), (f), and (h), and Pub. L. 
105-33).

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

    Dated: May 6, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 20, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-16997 Filed 8-25-05; 8:45 am]
BILLING CODE 4120-01-P