[Federal Register Volume 70, Number 165 (Friday, August 26, 2005)]
[Rules and Regulations]
[Pages 50214-50220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-16973]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 433

[CMS-2210-IFC]
RIN 0938-AO04


Medicaid Program; State Allotments for Payment of Medicare Part B 
Premiums for Qualifying Individuals: Federal Fiscal Year 2005

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

ACTION: Interim final rule with comment period.

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

SUMMARY: This interim final rule with comment period sets forth the 
methodology used to compute State allotments that are available to pay 
Medicare Part B premiums for qualifying individuals, allows changes to 
the State allotments and describes the methodology used to determine 
the changes to each State's allotment.

DATES: Effective date: These regulations are effective August 26, 2005 
for allotments for payment of Medicare Part B premiums from the 
allocation for fiscal year 2005.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on October 25, 2005.

ADDRESSES: In commenting, please refer to file code CMS-2210-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-2210-IFC, P.O. Box 8011, Baltimore, MD 21244-8011.
    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 (one 
original and two copies) to the following address ONLY: Centers for 
Medicare &

[[Page 50215]]

Medicaid Services, Department of Health and Human Services, Attention: 
CMS-2210-IFC, 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 (one original and two copies) before the 
close of the comment period to one of the following addresses. 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. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH 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.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: Christine Gerhardt, (410) 786-0693.
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-2210-IFC and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    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 electronic 
comments received before the close of the comment period on its public 
Web site as soon as possible after they have been received. Hard copy 
comments received timely will 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.

SUPPLEMENTARY INFORMATION:

I. Background

[If you choose to comment on issues in this section, please include the 
caption ``BACKGROUND'' at the beginning of your comments.]

    Section 1902 of the Social Security Act (the Act) sets forth the 
requirements for State plans for medical assistance. Prior to August 5, 
1997, section 1902(a)(10)(E) of the Act specified that the State 
Medicaid plan must provide for some or all types of Medicare cost-
sharing for three eligibility groups of low-income Medicare 
beneficiaries. These three groups included qualified Medicare 
beneficiaries (QMBs), specified low-income Medicare beneficiaries 
(SLMBs), and qualified disabled and working individuals (QDWIs).
    A QMB is an individual entitled to Medicare Part A with income at 
or below the Federal poverty line (FPL) and resources below $4,000 for 
an individual and $6,000 for a couple. A SLMB is an individual who 
meets the QMB criteria, except that his or her income is above 100 
percent of the FPL and does not exceed 120 percent of the FPL. A QDWI 
is a disabled individual who is entitled to enroll in Medicare Part A 
under section 1818A of the Act, whose income does not exceed 200 
percent of the FPL for a family of the size involved, whose resources 
do not exceed twice the amount allowed under the Supplementary Security 
Income (SSI) program, and who is not otherwise eligible for Medicaid. 
The definition of Medicare cost-sharing at section 1905(p)(3) of the 
Act includes payment for premiums for Medicare Part B.
    Section 4732 of the Balanced Budget Act of 1997 (BBA), enacted on 
August 5, 1997, amended section 1902(a)(10)(E) of the Act to require 
States to provide for Medicaid payment of the Medicare Part B premiums 
for two additional eligibility groups of low-income Medicare 
beneficiaries, referred to as qualifying individuals (QIs). 
Specifically, a new section 1902(a)(10)(E)(iv)(I) of the Act was added, 
under which States must pay the full amount of the Medicare Part B 
premium for qualifying individuals who would be QMBs but for the fact 
that their income level is at least 120 percent of the FPL but less 
than 135 percent of the FPL for a family of the size involved. These 
individuals cannot otherwise be eligible for medical assistance under 
the approved State Medicaid plan. The second group of QIs added under 
section 1902(a)(10)(E)(iv)(II) of the Act includes Medicare 
beneficiaries who would be QMBs except that their income is at least 
135 percent but less than 175 percent of the FPL for a family of the 
size involved, who are not otherwise eligible for Medicaid under the 
approved State plan. These QIs were eligible for only a portion of 
Medicare cost sharing consisting only of a percentage of the increase 
in the Medicare Part B premium attributable to the shift of Medicare 
home health coverage from Part A to Part B (as provided in section 4611 
of the BBA).
    Coverage of the second group of QIs ended on December 31, 2002 and 
the 2003 Welfare Reform Bill (Pub. L. 108-89) eliminated reference to 
the QI-2 benefit. In each of the years 2002 and 2003, Continuing 
Resolutions extended the coverage of the first group of QIs (whose 
income is at least 120 percent but less than 135 percent of the Federal 
poverty line) through the next fiscal year, but maintained the annual 
funding at the FY 2002 level. In 2004, ``A Bill to Amend Title XIX of 
the Social Security Act to Extend Medicare Cost-Sharing for the 
Medicare Part B Premium for Qualifying Individuals'' (Pub. L. 108-448) 
continued coverage of this group through September 30, 2005, again with 
no change in funding.
    The BBA also added a new section 1933 to the Act to provide for 
Medicaid payment of Medicare Part B premiums for QIs. (The previous 
section 1933 was re-designated as section 1934.) Section 1933(a) 
specifies that a State plan must provide, through a State plan 
amendment, for medical assistance to pay for the cost of Medicare cost-
sharing on behalf of QIs who are selected to receive assistance.
    Section 1933(b) of the Act sets forth the rules that States must 
follow in selecting QIs and providing payment for Medicare Part B 
premiums. Specifically, the State must permit all qualifying 
individuals to apply for assistance and must select individuals on a 
first-come, first-served basis (that is, the State must select QIs in 
the order in which they apply). Under section 1933(b)(2)(B) of the Act, 
in selecting persons who will receive assistance in years after 1998, 
States must give preference to those individuals who received 
assistance as QIs, QMBs, SLMBs, or QDWIs in the last month of the 
previous year and who continue to be (or become) QIs. Under section 
1933(b)(4) of the Act, persons selected to receive assistance in a 
calendar year are entitled to receive assistance for the remainder of 
the year, but not beyond, as long as they continue to qualify. The fact 
that an individual is selected to receive assistance at any time during 
the year does not entitle the individual to continued assistance for 
any succeeding year. Because the State's

[[Page 50216]]

allotment is limited by law, section 1933(b)(3) of the Act provides 
that the State must limit the number of QIs so that the amount of 
assistance provided during the year is approximately equal to the 
allotment for that year.
    Section 1933(c) of the Act limits the total amount of Federal funds 
available for payment of Part B premiums for QIs each fiscal year and 
specifies the formula that is to be used to determine an allotment for 
each State from this total amount. For States that executed a State 
plan amendment in accordance with section 1933(a) of the Act, a total 
of $1.5 billion was allocated over 5 years as follows: $200 million in 
FY 1998; $250 million in FY 1999; $300 million in FY 2000; $350 million 
in FY 2001; and $400 million in FY 2002. In 1999, the Department 
published a notice (64 FR 14931, March 29, 1999) to advise States of 
the methodology used to calculate allotments and each State's specific 
allotment for that year. Following that notice, there was no change in 
methodology and States have been notified annually of their allotments. 
We did not include the methodology for computing the allocation in our 
regulations. Although the BBA originally provided coverage of QIs only 
through FY 2002, through several continuing resolutions, coverage has 
been continued through the current fiscal year, but without any 
increase in total allocation over the FY 2002 level.
    The Federal medical assistance percentage for Medicaid payment of 
Medicare Part B premiums for qualifying individuals is 100 percent for 
expenditures up to the amount of the State's allotment. No Federal 
funds are available for expenditures in excess of the State allotment 
amount. The Federal matching rate for administrative expenses 
associated with the payment of Medicare Part B premiums for QIs remains 
at the 50 percent matching level. Federal financial participation in 
the administrative expenses is not counted against the State's 
allotment.
    The amount available for each fiscal year is to be allocated among 
States according to the formula set forth in section 1933(c)(2) of the 
Act. The formula provides for an amount to each State that is to be 
based on each State's share of the Secretary's estimate of the ratio 
of: (a) An amount equal to the total number of individuals in the State 
who meet all but the income requirements for QMBs, whose incomes are at 
least 120 percent but less than 135 percent of the Federal poverty 
line, and who are not otherwise eligible for Medicaid, to (b) the sum 
of all those individuals for all eligible States.
    In FY 2005, some States have exhausted their current allotments 
before the end of the fiscal year, which has caused them to deny 
benefits to eligible persons under section 1933(b)(3) of the Act, while 
other States project a surplus in their allotments. We asked those 
States which have exhausted or expect to exhaust their FY 2005 
allotments before the end of the fiscal year to project the amount of 
funds that would be required to grant eligibility to all eligible 
persons in their State, that is, their need. We also asked those States 
which do not expect to use their full allotments in FY 2005 to project 
the difference between the amount they expect to spend and their 
allotment, that is, their surplus. All States reported these figures, 
and it was evident that the total surplus exceeds the total need. In 
spite of there being adequate overall funding for the QI benefit, some 
eligible individuals are being denied benefits due to the allocation 
methodology used to determine the FY 2005 allotments. We believe that 
it is the clear intent of the statute to provide benefits to eligible 
persons up to the full amount of funds made available for the program. 
We attribute this to imprecision in the data which we used to provide 
States with their initial allocations under section 1933 of the Act. 
This interim final rule would attempt to compensate for this 
imprecision and enable States to enroll those QIs whom they would have 
been able to enroll had the data been more precise.

II. Provisions of the Interim Final Rule

[If you choose to comment on issues in this section, please include the 
caption ``PROVISIONS'' at the beginning of your comments.]

    This interim final rule amends 42 CFR 433.10(c) to specify the 
formula and the data to be used to determine States' allotments and to 
revise, under certain circumstances, individual State allotments for a 
Federal fiscal year for the Medicaid payment of Medicare Part B 
premiums for qualifying individuals identified under section 
1902(a)(10)(E)(iv) of the Act.
    The FY 2005 allotments were derived by applying U.S. Census Bureau 
data to the formula set forth in section 1933(c)(2)of the Act. However, 
the statute requires that the allocation of the fiscal year allotment 
be based upon a ratio of the amount of ``total number of individuals 
described in section 1902(a)(10)(E)(iv) in the State'' to the sum of 
these amounts for all States. Because this formula requires an estimate 
of an unknown number, that is, the number of individuals who could be 
QIs (rather than the number of individuals who were QIs in a previous 
period), our use of the Census Bureau data in the formula was a rough 
proxy to attain the statutory number. Actual expenditure data recently 
received, however, reveal that the Census Bureau data yielded an 
inappropriate distribution of the total appropriated fund as evidenced 
by the fact that several States have projected significant shortfalls 
in their allotments, while many other States project a significant 
surplus by the end of the fiscal year 2005. Census Bureau data may not 
have been accurate for the purpose of projecting States' needs because 
the data could not take into consideration all variables that 
contribute to QI eligibility and enrollment, such as resource levels 
and the application process itself. While section 1933 of the Act 
requires the Secretary to estimate the allocation of the allotments 
among the States, it does not preclude a subsequent readjustment of 
that allocation, when it becomes clear that the data used for that 
estimate did not effectuate the statutory objective.
    This interim final rule permits, in this specific circumstance, a 
redistribution of surplus funds, as it has been demonstrated that the 
projections and estimates resulted in an inequitable initial 
allocation, such that some States were granted an allocation in excess 
of their total projected need, while the allocation granted to other 
States proved insufficient to meet their projected QI expenditures.
    In this interim final rule, we are codifying the methodology we 
have been using to approximate the statutory formula for determining 
State allotments. However, since certain States project a deficit in 
their allotment before the end of fiscal year 2005, this rule permits 
fiscal year 2005 funds to be reallocated from the surplus States to the 
need States. The regulation specifies the methodology for computing the 
annual allotments, and for reallocating funds in this circumstance. The 
formula used to reallocate funds is intended to minimize impact on 
surplus States, to equitably distribute the total needed amount among 
those surplus States, and to meet the immediate needs for those States 
projecting deficits. Since the authorization for the QI benefit expires 
at the end of calendar year 2005 and currently no funds have been 
appropriated for the QI benefit beyond September 30, 2005, this 
regulation will sunset at the end of calendar year 2005. Should the 
Congress authorize an extension of the QI benefit and appropriate 
additional funds for allocation among the States, we will

[[Page 50217]]

amend the sunset date in this regulation to take into account any 
extension.
    The resulting allotments are shown by State in the table below. In 
this table each column contains data defined as follows:

Chart--Revised FY 2005 Qualified Individuals Allotments

    Column A--State. Column A shows the name of each State. Columns B 
through D shows the calculation of the prior FY 2005 QI Allotments.
    Column B--Number of Individuals. Column B contains the estimated 
number of eligibles for each State, in thousands, as obtained from the 
Census Bureau.
    Column C--State Share of Column B. Column C provides the percentage 
of total eligibles for each State, determined as the number of 
individuals for the State in Column B divided by the Total Number of 
Individuals for all States in Column B.
    Column D--Prior FY 2005 QI Allotments. Column D contains each 
State's prior FY 2005 QI allotments, calculated as the State's 
percentage of total eligibles in Column C multiplied by the total 
amount available for FY 2005 for all States ($400,000,000).
    Columns E through J shows the determination of the States' revised 
FY 2005 QI allotments.
    Column E--FY 2005 Estimated QI Expenditures. Column E contains the 
States' most recent estimates of their total QI expenditures for FY 
2005.
    Column F--Need (Difference). Column F contains the additional 
amount of QI allotment needed for those States whose estimated 
expenditures in Column E exceed their original FY 2005 QI allotment in 
Column D; for such States Column E shows the difference of Column E 
minus Column D. For other States, Column F shows ``NA''.
    Column G--Reduction Pool for Non-Need States. Column G contains the 
amount of the pool of surplus FY 2005 QI allotments for those States 
that project they will not need all of their FY 2005 QI allotment. For 
States whose estimates of QI expenditures for FY 2005 in Column E are 
equal to or less than their original FY 2005 QI allotment in Column D 
(referred to as non-need States), Column G shows the difference of 
Column D minus Column E.
    Column H--Percent of Total Non-Need States. Column H shows the 
percentage of the total excess FY 2005 allotments for each Non-Need 
State, determined as the amount for each Non-Need State in Column G 
divided by the sum of the amounts for all states in Column G.
    Column I--Reduction for Non-Need States. Column I shows the amount 
of reduction to Non-Need States' prior FY 2005 QI allotments in Column 
D in order provide for the total need shown in Column F (due to 
rounding adjustments, this total need is $8,914,634). The amount in 
Column I is determined as the percentage in Column H for Non-Need 
States multiplied by the total in Column F.
    Column J--Revised FY 2005 QI Allotments. Column J contains the 
revised FY 2005 QI allotments for each State. For States that needed 
additional amounts based on their estimates, Column J is equal to the 
amount in Column D plus the additional need in Column F. For Non-Need 
States, Column J is equal to the amount in Column D minus the amount in 
Column I.
BILLING CODE 4120-01-P

[[Page 50218]]

[GRAPHIC] [TIFF OMITTED] TR26AU05.000

BILLING CODE 4120-01-C

[[Page 50219]]

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Waiver of Notice With Comment and 30-Day Delay in Effective Date

[If you choose to comment on issues in this section, please include the 
caption ``WAIVER OF ADVANCE PUBLIC COMMENT'' at the beginning of your 
comments.]

    We ordinarily publish an advance notice in the Federal Register for 
substantive rules to provide a period for public comment. However, we 
may waive that procedure if we find good cause that notice and comment 
are impractical, unnecessary, or contrary to the public interest. In 
addition, we also normally provide a delay of 30 days in the effective 
date. However, if adherence to this procedure would be impractical, 
unnecessary, or contrary to public interest, we may waive the delay in 
the effective date.
    We are publishing this rule as an interim final rule because of the 
need to notify individual States of the limitations on Federal funds 
for their Medicaid expenditures for payment of Medicare Part B premiums 
for qualifying individuals. Some States have experienced deficits in 
their current allotments that have caused them to deny benefits to 
eligible applicants, while other States project a surplus in their 
allotments. This rule permits redistribution of funds and will allow 
all eligible applicants to receive QI benefits during this calendar 
year. Because access to Medicare Part B coverage for QIs, who without 
this coverage would have difficulty paying for needed health care, is 
critically important, we believe that it is in the public interest to 
waive the usual notice and comment procedure which we undertake before 
making a rule final.
    Also, for the reasons discussed above, we find that good cause 
exists to dispense with the normal requirement that a regulation cannot 
become effective any earlier than 30 days after its publication. States 
which will have access to additional funds to enroll QIs need to know 
that these funds are available as soon as possible, so they can begin 
enrolling QIs. While we believe those States which will have diminished 
amounts available for this fiscal year will have sufficient funds for 
enrolling all potential QIs in their States, they also need to know as 
soon as possible that a certain amount of their unused allocation will 
no longer be available to them for this fiscal year.
    We are publishing this interim final rule, with a 60-day period for 
public comment. However, if we decide that changes are necessary as a 
result of our consideration of timely comments, we will issue a final 
rule and respond to the comments in that rule.

V. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs 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 
for small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1 year. Individuals and States are not 
included in the definition of a small entity.
    This interim final rule with comment period codifies our procedures 
for implementing provisions of the Balanced Budget Act of 1997 to 
allocate, among the States, Federal funds to provide Medicaid payment 
for Medicare Part B premiums for low-income Medicare beneficiaries. The 
total amount of Federal funds available during a Federal fiscal year 
and the formula for determining individual State allotments are 
specified in the law. We have applied the statutory formula for the 
State allotments. Because the data specified in the law were not 
initially available, we used comparable data from the U.S. Census 
Bureau on the number of possible qualifying individuals in the States. 
This rule also permits, in a specific circumstance, reallocation of 
funds to enable enrollment of all eligible individuals to the extent of 
the available funding.
    We believe that the statutory provisions implemented in this 
interim final rule with comment period will have a positive effect on 
States and individuals. Federal funding at the 100 percent matching 
rate is available for Medicare cost-sharing for Medicare Part B premium 
payments for qualifying individuals and, with the reallocation of the 
State allotments a greater number of low-income Medicare beneficiaries 
will be eligible to have their Medicare Part B premiums paid under 
Medicaid. In no States will the changes in allotments result in fewer 
individuals receiving the QI benefit. The FY 2005 cost for this 
provision has been included in the FY 2006 President's Budget.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any rule that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. The 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 a Core-Based 
Statistical Area and has fewer than 100 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined and certify that this interim 
final rule with comment period will not have a significant economic 
impact on a substantial number of small entities or a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This rule will have no consequential effect on 
the governments mentioned 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 E.O. 13132 are not 
applicable.

[[Page 50220]]

    In accordance with the provisions of Executive Order 12866, this 
interim final rule with comment period was reviewed by the Office of 
Management and Budget.

List of Subjects in 42 CFR Part 433

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


0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR Chapter IV as set forth below:

PART 433--STATE FISCAL ADMINISTRATION

0
1. The authority citation for part 433 continues to read as follows:

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


0
2. Section 433.10 is amended by adding new paragraph (c)(5) to read as 
follows:


Sec.  433.10  Rates of FFP for program services.

* * * * *
    (c) * * *
    (5) (i) Under section 1933(d) of the Act, the Federal share of 
State expenditures for Medicare Part B premiums described in section 
1905(p)(3)(A)(ii) of the Act on behalf of Qualifying Individuals 
described in section 1902(a)(10)(E)(iv) of the Act, is 100 percent, to 
the extent that the assistance does not exceed the State's allocation 
under paragraph (c)(5)(ii) of this section. To the extent that the 
assistance exceeds that allocation, the Federal share is 0 percent.
    (ii) Under section 1933(c)(2) of the Act and subject to paragraph 
(c)(5)(iii) of this section, the allocation to each State is equal to 
the total allocation specified in section 1933(c)(1) of the Act 
multiplied by the Secretary's estimate of the ratio of the total number 
of individuals described in section 1902(a)(10)(E)(iv) of the Act in 
the State to the total number of individuals described in section 
1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating 
that ratio, the Secretary will use data from the U.S. Census Bureau.
    (iii) If, based on projected expenditures for a fiscal year, the 
Secretary determines that the expenditures described in paragraph 
(c)(5)(i) of this section for one or more States are projected to 
exceed the allocation made to the State, the Secretary may adjust each 
State's fiscal year 2005 allocation, as follows:
    (A) The Secretary will compare each State's new projected total 
expenditures for the expenses described in paragraph (c)(5)(i) of this 
section to the State's initial allocation, to determine the extent of 
each State's projected surplus or deficit.
    (B) The surplus of each State with a projected surplus, as 
determined in accordance with paragraph (c)(5)(iii)(A) of this section 
will be added together to arrive at the Total Projected Surplus.
    (C) The deficit of each State with a projected deficit, as 
determined in accordance with paragraph (c)(5)(iii)(A) of this section 
will be added together to arrive at the Total Projected Deficit.
    (D) Each State with a projected deficit will receive an additional 
allocation equal to the amount of its projected deficit. The amount to 
be reallocated from each State with a projected surplus will be equal 
to A x B, where A equals the Total Projected Deficit and B equals the 
amount of the State's projected surplus as a percentage of the Total 
Projected Surplus.
    (iv) CMS will notify States of any changes in allotments resulting 
from any reallocations without opportunity for prior comment. CMS will 
follow applicable rulemaking procedures in publishing revisions to the 
allotments resulting from changes other those that specified above.
    (v) The provisions of this paragraph (c)(5) will be in effect 
though the end of calendar year 2005.

    Authority: Sections 1902(a)(10), 1933 of the Social Security Act 
(42 U.S.C. 1396a), and Pub. L. 105-33.

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

    Dated: August 9, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: August 15, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-16973 Filed 8-23-05; 9:19 am]
BILLING CODE 4120-01-P