Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Rules and Regulations 73635 

Minority Populations and Low-Income 

Populations (59 FR 7629, February 16, 

1994). 

Since tolerances and exemptions that 

are established on the basis of a petition 

under section 408(d) of FFDCA, such as 

the tolerance in this final rule, do not 

require the issuance of a proposed rule, 

the requirements of the Regulatory 

Flexibility Act (RFA) (5 U.S.C. 601 et 

seq.) do not apply. 

This final rule directly regulates 

growers, food processors, food handlers, 

and food retailers, not States or tribes, 

nor does this action alter the 

relationships or distribution of power 

and responsibilities established by 

Congress in the preemption provisions 

of section 408(n)(4) of FFDCA. As such, 

the Agency has determined that this 

action will not have a substantial direct 

effect on States or tribal governments, 

on the relationship between the national 

government and the States or tribal 

governments, or on the distribution of 

power and responsibilities among the 

various levels of government or between 

the Federal Government and Indian 

tribes. Thus, the Agency has determined 

that Executive Order 13132, entitled 

Federalism (64 FR 43255, August 10, 

1999) and Executive Order 13175, 

entitled Consultation and Coordination 

with Indian Tribal Governments (65 FR 

67249, November 6, 2000) do not apply 

to this rule. In addition, This rule does 

not impose any enforceable duty or 

contain any unfunded mandate as 

described under Title II of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Public Law 104–4). 

This action does not involve any 

technical standards that would require 

Agency consideration of voluntary 

consensus standards pursuant to section 

12(d) of the National Technology 

Transfer and Advancement Act of 1995 

(NTTAA), Public Law 104–113, section 

12(d) (15 U.S.C. 272 note). 

VII. Congressional Review Act 

The Congressional Review Act, 5 

U.S.C. 801 et seq., generally provides 

that before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report to each House of 

the Congress and to the Comptroller 

General of the United States. EPA will 

submit a report containing this rule and 

other required information to the U.S. 

Senate, the U.S. House of 

Representatives, and the Comptroller 

General of the United States prior to 

publication of this final rule in the 

Federal Register. This final rule is not 

a ‘‘major rule’’ as defined by 5 U.S.C. 

804(2). 

List of Subjects in 40 CFR Part 180 

Environmental protection, 

Administrative practice and procedure, 

Agricultural commodities, Pesticides 

and pests, Reporting and recordkeeping 

requirements. 

Dated: December 14, 2007. 

Lois Rossi, 

Director, Registration Division, Office of 

Pesticide Programs. 

■ Therefore, 40 CFR chapter I is 

amended as follows: 

PART 180—[AMENDED] 

■ 1. The authority citation for part 180 

continues to read as follows: 

Authority: 21 U.S.C. 321(q), 346a and 371. 

■ 2. Section 180.535 is amended by 

alphabetically adding the following 

commodities to the table in paragraph 

(a), removing the expired time-limited 

tolerances in paragraph (b), and 

reserving it to read as follows: 

§ 180.535 Fluroxypyr 1-methylheptyl ester; 

tolerances for residues. 

(a) * * * 

Commodity Parts per 

million 

*****

Fruit, pome, group 11 ............... 0.02 

*****

Millet, forage ............................. 12.0 

Millet, grain ............................... 0.5 

Millet, hay ................................. 20.0 

Millet, proso, straw ................... 12.0 

*****

(b) Section 18 emergency exemptions. 

[Reserved] 

* * * * * 

[FR Doc. E7–25092 Filed 12–27–07; 8:45 am] 

BILLING CODE 6560–50–S 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 431, 433, and 440 

[CMS–2287–F] 

RIN 0938–AP13 

Medicaid Program; Elimination of 

Reimbursement Under Medicaid for 

School Administration Expenditures 

and Costs Related to Transportation of 

School-Age Children Between Home 

and School 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: Under the Medicaid program, 

Federal payment is available for the 

costs of administrative activities ‘‘as 

found necessary by the Secretary for the 

proper and efficient administration of 

the State plan.’’ This final rule 

eliminates Federal Medicaid payment 

for the costs of certain school-based 

administrative and transportation 

activities because the Secretary has 

found that these activities are not 

necessary for the proper and efficient 

administration of the Medicaid State 

plan and are not within the definition 

of the optional transportation benefit. 

Based on these determinations, under 

this final rule, Federal Medicaid 

payments will no longer be available for 

administrative activities performed by 

school employees or contractors, or 

anyone under the control of a public or 

private educational institution, and for 

transportation from home to school. In 

addition, this final rule responds to 

public comments received on the 

September 7, 2007 proposed rule. 

EFFECTIVE DATE: These regulations are 

effective on February 26, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Sharon J. Brown, (410) 786–0673, Judi 

Wallace, (410) 786–3197. 

SUPPLEMENTARY INFORMATION: We 

published a proposed rule in the 

Federal Register on September 7, 2007, 

at 72 FR 51397 that would eliminate 

Federal Medicaid payment for schoolbased administrative activities, based on 

a Secretarial finding that such activities 

are not necessary for the proper and 

efficient administration of the Medicaid 

State plan. Moreover, the proposed rule 

would also eliminate Federal Medicaid 

payment based on a finding that 

transportation from home to school and 

back for school-age children is neither 

necessary for the proper and efficient 

administration of the Medicaid State 


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plan, nor within the scope of the 

optional medical transportation benefit. 

We received 1,240 timely public 

comments on the proposed rule. After 

careful consideration of these 

comments, we are adopting the rule as 

proposed without change. We discuss 

later in this preamble our response to 

comments and our reasons for going 

forward with the proposed rule. Below, 

we first summarize the background and 

provisions of the proposed rule. 

I. Background 

A. Administrative Activities and 

Transportation Services Under the 

Medicaid Program 

Title XIX of the Social Security Act 

(the Act) authorizes Federal grants to 

States for Medicaid programs, operated 

by each State under an approved 

Medicaid State plan that provide 

medical assistance to needy individuals 

including low-income families, the 

elderly, and persons with disabilities. 

Federal payment is available to a State 

for a proportion of expenditures for 

medical assistance under the approved 

Medicaid State plan, and of 

expenditures necessary for 

administration of the State plan. This 

joint Federal-state financing of 

expenditures is described in section 

1903(a) of the Act, which sets forth the 

rates of Federal financing for different 

types of expenditures. 

Under section 1903(a)(7) of the Act, 

Federal payment is currently available 

at a rate of 50 percent of amounts 

expended by a State ‘‘as found 

necessary by the Secretary for the 

proper and efficient administration of 

the State plan.’’ In addition, OMB 

Circular A–87, which contains the cost 

principles for State, local and Indian 

tribal governments for the 

administration of Federal awards, states 

that, ‘‘Governmental units are 

responsible for the efficient and 

effective administration of Federal 

awards.’’ Under either of these 

provisions, administrative expenditures 

must be reasonable and necessary for 

the performance of functions funded by 

the Federal award. 

Transportation to and from providers 

is not expressly mentioned in the 

Medicaid statute, but States can claim 

Federal matching dollars for such 

transportation in one of two ways. Since 

the inception of the program the Federal 

government has recognized that 

transportation is essential to the 

administration of the Medicaid State 

plan, to ensure that beneficiaries have 

access to covered services. Federal 

regulations at 42 Code of Federal 

Regulations (CFR) 431.53 require that 

Medicaid State plans ‘‘specify that the 

Medicaid agency will ensure necessary 

transportation for recipients to and from 

providers’’ and describe the methods for 

doing so. Under 42 CFR 440.170(a), 

States are afforded the option of 

furnishing transportation as an optional 

covered medical service recognized 

under section 1905(a)(28) of the Act as 

defined and specified. Under this 

section, transportation is defined as 

‘‘expenses for transportation and other 

related travel expenses determined 

necessary by the agency to secure 

medical examination and treatment 

(emphasis added) for a recipient.’’

Travel expense is defined to include the 

cost of the actual transportation 

necessary to the medical service, meals 

and lodging en route to medical care 

and the cost of attendees to the 

beneficiary if necessary. 

Whether transportation is furnished 

as an administrative activity under 42 

CFR 431.53 or as an optional covered 

medical service could affect the Federal 

Medicaid matching rate and the 

flexibility available to the State, but 

these issues are not relevant for 

purposes of this final regulation. 

B. Medicaid and Schools 

A wide range of medical services may 

be furnished to students in school 

settings. In particular, pursuant to 

requirements under the Individuals 

with Disabilities Education Act (IDEA), 

schools deliver a broad range of 

educational and related services (e.g., 

educational, social, and medical 

services) to students with disabilities to 

address their diverse needs. Section 

1903(c) of the Act prohibits the 

Secretary from denying or restricting 

Federal Medicaid payment to States for 

covered services furnished to a child 

with a disability on the basis that the 

services are included in the child’s 

Individualized Education Program (IEP) 

or Individualized Family Services Plan 

(IFSP) established pursuant to the IDEA. 

Some of the special education and 

related services required by the IDEA 

may be within the scope of medical 

assistance services covered under the 

Medicaid program. Medicaid covers 

medically necessary direct medical 

services included in an IEP or IFSP that 

are in a Medicaid covered category 

under the approved State Medicaid plan 

(such as speech therapy or physical 

therapy, but also including Early and 

Periodic Screening Diagnosis and 

Treatment), and that meet all other 

Federal and State Medicaid regulations 

(including provider qualifications and 

any amount, duration and scope 

limitations). 

Schools and school districts perform 

a myriad of administrative activities that 

arise directly from the educational 

mission of the schools. Though these 

activities may include coordinating the 

delivery of Medicaid services with 

educational services, they are primarily 

associated with educational program 

requirements including IDEA 

requirements. Transportation to and 

from the school for most students is also 

part of the schools’ educational 

responsibility. 

C. Prior Agency Experience With 

School-Based Administration and 

Transportation 

As detailed in the proposed rule, CMS 

had previously issued several guidance 

documents on school-based 

administration and transportation. In 

those interpretive guidance documents, 

CMS set forth a complex set of 

principles permitting State claims for 

school-based administration and 

transportation. The claims that resulted 

from this guidance were the subject of 

several audits by the Office of the 

Inspector General finding widespread 

fraud and abuse as well as improper 

claiming of costs to the Medicaid 

program that were incurred to meet 

mandates under educational programs. 

II. Provisions of the Proposed 

Regulations 

We published a proposed rule on 

September 7, 2007, at 72 FR 51397, that 

would eliminate Federal Medicaid 

payment for school-based 

administrative activities, based on a 

Secretarial finding that such activities 

are not necessary for the proper and 

efficient administration of the State 

plan. Moreover, the proposed rule 

would also eliminate Federal Medicaid 

payment based on a Secretarial finding 

that transportation from home to school 

and back for school-age children is 

neither necessary for the proper and 

efficient administration of the State 

plan, nor within the scope of the 

optional medical transportation benefit. 

Based on these findings, the proposed 

rule specified that Federal financial 

participation (FFP) under the Medicaid 

program will not be available for schoolbased administrative and certain 

transportation costs, with the exception 

of administrative activities conducted 

by employees of the State or local 

Medicaid agency. 

Under the proposed rule, the 

following changes would apply to the 

costs of the following activities or 

services: 

• FFP would no longer be available 

for the costs of school-based 

administrative activities under 


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Medicaid. By administrative activities, 

we referred to activities that are not 

properly included in the scope of a 

covered service. School-based 

administrative expenditures are 

expenditures under the administrative 

control of a public or private 

educational institution and that are 

conducted by school employees or 

contractors, or anyone under the control 

of a public or private educational 

agency. 

• FFP would no longer be available 

for the costs of transportation from 

home to school and back for school-age 

children with an IEP or IFSP established 

pursuant to the IDEA. 

The proposed rule would supersede 

all previous guidance, including 

guidance on school-based 

administrative claiming and schoolbased transportation. 

Under the proposed rule, CMS would 

continue to reimburse States for schoolbased direct Medicaid services in their 

approved State plans. That is, the 

proposed rule would not affect the 

treatment of expenditures for direct 

medical services that are included in the 

approved State Medicaid plan and 

provided in schools, nor did it affect 

transportation of school-aged children 

from school or home to a non-schoolbased direct medical service provider 

that bills under the Medicaid program, 

or from the non-school-based provider 

to school or home. 

Furthermore, under the proposed 

rule, CMS would continue to reimburse 

States for transportation costs related to 

children who are not yet school-age and 

are being transported from home to 

another location, including a school, 

and back to receive direct medical 

services, as long as the visit does not 

include an educational component or 

any activity unrelated to the covered 

direct medical service. 

Federal funding would also continue 

to be available for administrative 

overhead costs that are integral to, or an 

extension of, a direct medical service 

and, as such, are claimed as medical 

assistance. These activities are properly 

reimbursed at the applicable Federal 

medical assistance percentage (FMAP) 

rate for the related direct medical 

service, and include patient follow-up, 

assessment, counseling, education, 

parent consultations, and billing 

activities. Furthermore, school-based 

administrative activities, such as 

Medicaid outreach and eligibility 

intake, that are conducted by employees 

of the State or local Medicaid agency 

would remain eligible for FFP under the 

proposed rule. 

The proposed rule was based on a 

determination that administrative 

activities performed by schools, and 

transportation of school-age children 

from home to school and back, are not 

necessary for proper and efficient 

administration of the State Medicaid 

plan, and are not within the scope of the 

transportation services recognized by 

the Secretary under 42 CFR 440.170(a), 

for the following reasons: 

(1) The activities or services support 

the educational program and do not 

specifically benefit the Medicaid 

program; 

(2) The activities or services are 

performed by school systems to further 

their educational mission and/or to 

meet requirements under the IDEA, 

even in the absence of any Medicaid 

payment; 

(3) The types of school-based 

administrative activities for which 

claims are submitted to Medicaid 

largely overlap with educational 

activities that do not directly benefit the 

Medicaid program; and 

(4) Transportation from home to 

school and back is not properly 

characterized as transportation to or 

from a medical provider. 

III. Analysis of and Responses to Public 

Comments 

We received approximately 1,240 

timely comments from State officials, 

school districts and consortia, 

educational organizations, child 

advocacy groups, health care 

organizations, school nurses, parents, 

teachers, school officials, providers, and 

other interested individuals. The largest 

group of comments came through a 

write-in campaign initiated by an 

organization titled the Council for 

Exceptional Children (CEC). The State 

with which the largest number of 

commenters identified themselves was 

California. All comments were reviewed 

and analyzed. After associating like 

comments, we placed them in categories 

based on subject matter. Summaries of 

the public comments received and our 

responses to those comments are set 

forth below. 

General 

Most commenters opposed the 

proposed regulation, for the reasons 

specified below. Of the commenters 

supporting the proposed rule, they 

either concurred that Medicaid funds 

should not be used to fulfill educational 

requirements or appreciated the 

potential for savings in Federal 

expenditures. The categorized 

comments and our responses are listed 

below. 

Funding Issues 

Comment: The largest number of 

comments focused on funding issues, 

arguing that any loss of funding would 

potentially ‘‘* * * reduce the funds 

available to our already strained special 

education budgets,’’ according to one 

commenter. Another commenter argued 

that ‘‘* * * if States cannot take up the 

slack, and most of them are struggling 

to provide non-medical transportation 

to get children to school, as well as to 

satisfy other Federal requirements, this 

funding cut will be yet another 

unfunded * * * mandate.’’ Many 

commenters noted that in their districts, 

schools are already strapped with tight 

budgets, some even specifying the exact 

amount of revenue they believed would 

be lost under the proposed regulation. 

One commenter noted that ‘‘Should 

administrative claiming be eliminated, 

we would have to shift funds from other 

areas in our budgets to cover the cost or 

raise taxes if this proposal should 

become a reality.’’ And: ‘‘Our school 

division struggles daily with dwindling 

local resources and increasing demand 

* * *. Loss of these funds * * * would 

unfairly exacerbate a dire situation.’’ It 

is unrealistic, many commenters argued, 

to assume that any State or school 

would be able to replace the loss of 

Federal Medicaid reimbursement that 

would result from finalization of the 

proposed rule. 

Response: Such comments appear to 

support our view and concern that Title 

XIX funds are being used as a funding 

source without specific benefit to the 

Medicaid program. Constrained local 

and State funding for education is not 

the basis for determining whether a cost 

is properly claimed under Medicaid. 

Specifically, administrative 

expenditures must be deemed necessary 

for the proper and efficient 

administration of the Medicaid State 

plan in order for reimbursement to be 

available. The need for schools to obtain 

additional funding in itself does not 

justify continued Federal Medicaid 

reimbursement. Limitation of Medicaid 

claims to administrative and 

transportation activities that are directly 

related to the furtherance of the 

Medicaid State plan is necessary to 

maintain the financial integrity of the 

Medicaid program. None of these 

commenters provided any factual basis 

to conclude that the activities in 

question were, indeed, necessary for the 

proper and efficient administration of 

the Medicaid State plan (or 

transportation necessary to ensure that 

individuals obtain access to Medicaid 

providers). 


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Comment: Some commenters focused 

on the fact that Medicaid 

reimbursement is used to meet other 

educational needs and augment 

underfunded budgets. Commenters 

noted that reimbursement for schoolbased administrative activities is used 

for a wide variety of unrelated, but 

important, purposes, such as 

instructional materials and equipment, 

or to fund staff positions, and that 

schools rely on this funding for such 

purposes. According to one commenter, 

Medicaid reimbursement is used to 

allow service staff to attend workshops 

and to purchase ‘‘* * * needed 

technology and materials to better 

educate our children.’’ Some asked how 

States and schools would make up for 

any funding shortfalls that result from 

finalization of the proposed rule. As one 

commenter noted: ‘‘* * * this * * * 

action by the Federal government would 

force us to make cuts in other essential 

educational programs to ensure that 

federally required services can continue, 

despite the lack of funding,’’ such as 

electives, after-school activities, or arts 

and music programs. The loss of 

Medicaid payments could also result in 

schools having to lay off staff or curtail 

referral services, according to some 

commenters. 

Response: Federal matching funds 

under Medicaid are only available for 

Medicaid services provided to Medicaid 

eligible individuals as described in the 

Medicaid State plan. The commenters 

expressly identified non-Medicaid costs 

that are clearly educational in nature. 

Constrained local and State funding for 

education is not the basis for 

determining whether a cost is properly 

claimed under Medicaid. We believe the 

final rule is necessary to maintain the 

financial integrity of the Medicaid 

program and there is nothing in this 

final rule which would eliminate 

funding for necessary direct medical 

services eligible for Medicaid funding. 

Comment: Some commenters noted 

the fact that Congress has never fully 

funded the IDEA, and in lieu of such 

funding, Medicaid reimbursement must 

be used. One commenter stated the 

following: ‘‘At a time when the Federal 

government is funding barely 18 percent 

of the national average per-pupil 

expenditures for each child in special 

education instead of the 40 percent that 

Congress promised to pay when IDEA 

was first enacted, major cutbacks in 

Medicaid reimbursements will severely 

restrict the ability of State and local 

school districts to provide much-needed 

health care services to disabled 

children.’’ Without a commensurate 

increase in funding for IDEA-related 

requirements to offset cuts resulting 

from the proposed rule, they argue, 

critical services may be cut. The 

proposed rule makes no attempt to 

explain how States and school districts 

might compensate for the reduction in 

funding under Medicaid and the 

inadequate funding of IDEA-related 

mandates, they noted. 

Response: The desire for 

supplemental funds to augment IDEA 

funding does not justify Medicaid 

payments that are not authorized by the 

Medicaid statute, regulations and 

applicable cost accounting principles. 

Under Office of Management and 

Budget Circular A–87, ‘‘governmental 

units are responsible for the efficient 

and effective administration of Federal 

awards.’’ It is not consistent with 

efficient and effective administration of 

the Medicaid program to pay for 

administrative activities (including 

transportation from home to school and 

back) that are performed as part of a 

school’s educational mission, do not 

specifically benefit the Medicaid 

program, are neither controlled nor 

supervised by the Medicaid program, 

and would be performed by the schools 

even in the absence of the Medicaid 

program. As stated earlier, we believe 

the final rule is necessary to maintain 

the financial integrity of the Medicaid 

program. Such comments appear to 

support our view and concern that Title 

XIX funds are being used for nonMedicaid purposes and that the request 

for additional funding for educational 

activities should be more appropriately 

directed to other Federal, State, and 

local funding sources. 

Provision of Services 

Comment: Some commenters worried 

that the proposed rule would adversely 

impact the provision of needed services 

to school-age children. One commenter 

noted that ‘‘* * * schools are providing 

necessary medical/psychological 

services and/or referrals that others are 

able to be reimbursed for, so this should 

not be cut.’’ Some argued that any 

changes to the Medicaid program would 

have a detrimental effect on the medical 

care provided to students. 

Response: The provision of, and 

reimbursement for, school-based 

medical services are not affected by the 

changes specified in the final rule. CMS 

will continue to recognize schools as 

valid settings for the delivery of direct 

medical services recognized in the 

Medicaid State plan. Medicaid 

reimbursement would remain available 

for covered services provided to 

children pursuant to an IEP or IFSP, 

whether they are provided in school or 

in the community. That is, CMS will 

continue to reimburse States for schoolbased Medicaid service costs authorized 

in their approved Medicaid State plans, 

including transportation of school-aged 

children from school or home to a nonschool-based direct medical service 

provider that bills under the Medicaid 

program, and from the non-school-based 

provider to school or home. CMS will 

also continue to reimburse States for 

transportation costs related to children 

who are not yet school-age and are being 

transported from home to another 

location, including a school, and back to 

receive direct medical services, as long 

as the transportation is not primarily for 

purposes other than gaining access to a 

Medicaid provider for covered services 

(such as when it is regularly scheduled 

transportation to a day care program). 

We do not believe the final rule will 

impact children eligible for Medicaid. 

IDEA mandates that services prescribed 

by a child’s IEP or IFSP be provided to 

children. Section 1903(c) of the Act 

provides clearly that Medicaid 

reimbursement be made available for 

such services, when provided to 

Medicaid-eligible children, covered 

under the State plan, and provided by 

qualified providers that properly bill the 

Medicaid program. These requirements 

will not change as a result of the final 

rule. As a result, these services will 

continue to be provided to children 

pursuant to their IEP or IFSP, and will 

continue to be paid by Medicaid. 

Comment: One commenter noted that 

‘‘* * * while the proposed regulation 

does not directly affect reimbursement 

for these services, a school district’s 

inability to be reimbursed for 

administrative services related to the 

provision of the medically necessary 

services will in fact have a chilling 

effect on a school district’s ability to 

deliver these services.’’ To deny Federal 

Medicaid matching for administrative 

activities provided by school employees 

or its contractors would, in the words of 

one commenter, ‘‘* * * improperly 

shift the cost of allowable Medicaid 

services entirely to State and localities, 

without regard for the reduction in 

service that would result.’’

Response: Federal funding would 

continue to be available for 

administrative overhead costs that are 

integral to, or an extension of, a direct 

medical service and, as such, are 

claimed as medical assistance. These 

activities are properly reimbursed at the 

applicable FMAP rate for the related 

direct medical service, and can include 

administrative activities under the 

direction of the medical service 

provider, such as patient follow-up, 

parent consultations, and billing 

activities, when included in the 


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negotiated rate paid for direct medical 

services. 

Comment: In certain comments, it was 

noted that Medicaid funding helps 

school pay for other types of services, 

such as mental health services, which 

would not otherwise be available to 

students. One commenter argued that if 

the proposed rule is promulgated, 

school-based services will be less 

effective and more costly for CMS, State 

Medicaid agencies, and schools. 

Another commenter noted that while 

the proposed rule does not explicitly 

restrict access to services in schools, it 

would make it less desirable for 

Medicaid programs to use school 

settings to provide services, and could 

inadvertently make it more difficult to 

meet Medicaid’s original intent to fund 

necessary medical assistance ‘‘* * * to 

promote growth and development and 

prevent or ameliorate disabilities and 

conditions.’’

Response: Medicaid payment remains 

available for all covered services 

furnished in a school setting and for 

children. These covered services 

include the broadest possible range of 

services under the mandatory Medicaid 

covered benefit for early and periodic 

screening, diagnostic and treatment 

(EPSDT) services. As Medicaid will still 

provide funding for such services that 

qualify under the Medicaid State plan, 

this will likely mean that the 

availability of such services in a school 

setting will not diminish as a result of 

this rule. 

Comment: A few commenters pointed 

to past and ongoing litigation over the 

failure to provide mandated services to 

children with disabilities and suggested 

that the likely consequences of the 

proposed rule would be a reduction in 

funding for necessary services they have 

fought in court to secure for these 

children. Specifically, some 

commenters cited the ruling in the 

Bowen v. Massachusetts case (487 U.S. 

879 (1988) No. 87–712), in which an 

appellate court ruled that ‘‘* * * it is 

the nature of the services, not what the 

services are called or who provided 

them’’ that determines whether the 

services qualify for Medicaid 

reimbursement. By eliminating Federal 

Medicaid reimbursement for 

administrative activities engaged in by 

school employees, the proposed rule 

goes against Federal court 

interpretations of the Medicaid statute, 

they argue. Others interpret that ruling 

to mean that any attempt to eliminate 

Medicaid reimbursement for 

transportation as a covered service in a 

State plan based solely on the child’s 

participation in an educational program 

would be in violation of the court’s 

ruling in Bowen. The court ruling, they 

contend, nullifies CMS’s attempts to 

justify elimination of reimbursement for 

school-based administrative and 

transportation service expenditures by 

labeling such expenditures as 

‘‘educational’’ in nature. 

Response: The final rule clarifies that 

Federal Medicaid funding is available 

for direct medical services provided by 

schools. To the extent that a State elects 

to reimburse transportation as an 

optional medical service, Federal 

reimbursement will still be available to 

the extent that the primary purpose of 

that transportation is access to a medical 

service. That is, CMS will continue to 

reimburse States for transportation of 

school-aged children from school or 

home to a non-school-based direct 

medical service provider that bills 

under the Medicaid program, and from 

the non-school-based provider to school 

or home. Furthermore, CMS will 

continue to reimburse States for 

transportation costs related to children 

who are not yet school-age and are being 

transported from home to another 

location, including a school, and back to 

receive direct medical services, as long 

as the transportation is not primarily for 

purposes other than gaining access to a 

Medicaid provider (such as when it is 

regularly scheduled transportation to a 

day care program). However, routine 

transportation from home to school and 

back for school age children is primarily 

educational in nature and will not be 

eligible for Medicaid reimbursement as 

part of a medical service. 

Potential Impact on EPSDT 

Comment: Some commenters argued 

that the proposed rule will make it 

difficult for States to fulfill requirements 

under the Early and Periodic Screening, 

Diagnostic and Treatment (EPSDT) 

benefit specified in section 1905(a) of 

the Act. This mandate, they note, 

requires States to inform families about 

the availability of EPSDT services and 

assist them in accessing services. Many 

school systems have contracted with 

States so that school nurses and staff 

inform families about EPSDT. As 

currently written, the proposed rule 

would limit reimbursement for these 

activities to employees of the State 

Medicaid agency. This potential conflict 

between the EPSDT mandate and the 

proposed rule, they argue, would 

severely restrict the ability for States to 

meet their responsibility under ESPDT 

and hamper access to necessary services 

for children. Under EPSDT 

requirements, one commenter noted, 

States are urged to make use of other 

public, health, mental health and 

educational programs in order to ensure 

an effective child health program. They 

cited the State Medicaid Manual as not 

only encouraging State Medicaid 

agencies to coordinate EPSDT 

administrative activities with ‘‘school 

health programs of State and local 

health agencies,’’ but also offering FFP 

to cover the costs to public agencies of 

providing direct support to the 

Medicaid agency in administering the 

EPSDT program. 

Response: Under the final rule, States 

will still be required to meet EPSDT 

requirements and are afforded flexibility 

in meeting these requirements. We do 

not believe it is consistent with proper 

and efficient administration of the 

Medicaid State plan, however, to 

commingle EPSDT outreach functions 

with other school administrative or 

direct service activities. We continue to 

encourage States to coordinate Medicaid 

EPSDT programs with school health 

programs and State, local and other 

Federal health care or social welfare 

programs. Schools employ health care 

providers and other educational staff as 

information points for a variety of 

medical and social services far beyond 

simply the Medicaid program. This 

function is specific to the nature of a 

school-based provider and is not 

directly related to the administration of 

the Medicaid State plan. Coordination 

and information dissemination efforts 

that are not under the control and 

supervision of the State agency and are 

performed by schools, however, are 

fundamentally functions that further the 

mission of the schools to ensure that 

students receive necessary services 

using available Medicaid resources. 

Such activities are not directly for 

administration of the State Medicaid 

plan. 

Support for School-Based 

Administration 

Comment: A substantial number of 

commenters urged CMS to continue its 

support for school-based Medicaid 

administrative activities because, they 

argued, it can be an effective way to 

reach children in need of services and 

to ensure adequate medical care for 

disabled students and their families, 

who are often low-income and 

uninsured. One commenter noted that: 

‘‘Families are familiar and comfortable 

with the people and the school, which 

makes schools a logical place to families 

to access health care. The unique role 

played by schools as a health service 

portal is irreplaceable.’’ Some thought 

the proposed regulation would decrease 

the opportunities for children and 

families to learn about the availability of 

Medicaid, and the services provided to 

those eligible for coverage. As a result, 


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the proposed rule could result in 

increased health care costs through 

missed opportunities to enroll eligible 

children in Medicaid and connect them 

to needed services before they become 

catastrophic. A recurring theme was that 

the proposed rule fails to recognize that 

certain administrative activities 

performed by school-based staff are 

instrumental to ensuring access to 

covered Medicaid services for eligible 

low-income children. 

Response: We acknowledge the 

importance of outreach and referral 

activities, and in no way preclude State 

or local Medicaid agencies from 

engaging in such activities. Nor do we 

preclude school employees from 

conducting activities that inform 

individuals of the availability of 

Medicaid services. But we disagree that 

such school employee activities are 

properly considered administration of 

the State plan. Such activities are 

performed as part of the normal 

operation of the school to ensure that 

students receive educational and related 

services, and to coordinate with other 

payers for those services. These 

activities are not performed for the 

purpose of State Medicaid plan 

administration. Moreover, this rule 

protects the financial integrity of the 

Medicaid program from the improper 

claiming and cost shifting found in 

Inspector General audits. 

Comment: Other commenters cited 

the success of their school-based 

Medicaid programs and provided 

specific examples of such successes, 

noting the number of children enrolled 

in Medicaid as a result of their efforts 

and the ability to connect such children 

to needed services. One commenter 

stated that ‘‘* * * the proposed rule 

goes beyond reducing waste and abuse 

among the few by eliminating for all 

schools the positive benefits the 

program was designed to achieve.’’

Another noted that the proposed rule 

does not take into account the 

appropriateness of schools providing 

administrative activities, especially to 

students with disabilities. 

Response: CMS applauds the 

numerous examples of successful 

school-based Medicaid outreach and 

referral programs submitted by 

commenters. The success of these 

programs, however, does not compel a 

finding that school-based administration 

activities are a proper and efficient 

method for administration of a Medicaid 

State plan. In determining that these 

activities are not a proper and efficient 

method for administration of a State 

Medicaid program, we considered the 

extent to which such activities are 

conducted as a normal part of the 

operation of school education programs. 

We further considered the costs of 

improper Medicaid claiming because 

these activities are commingled with 

other school administrative activities 

and cannot be accurately allocated to 

Medicaid. Because these activities 

should occur in schools regardless of 

the availability of Medicaid funding and 

because the primary purpose of these 

activities is not the administration of the 

Medicaid program, we believe Medicaid 

should not provide funding for them. 

Comment: Some commenters pointed 

to the May 2003 CMS Medicaid SchoolBased Administrative Claiming Guide, 

which states that ‘‘* * * the school 

setting provides a unique opportunity to 

enroll * * * and to assist’’ Medicaid 

eligible children ‘‘access the benefits 

available to them’’ as evidence that 

school-based Medicaid administrative 

claims should remain eligible for FFP. 

Another quote cited by commenters can 

be found in the 1997 CMS Medicaid and 

School Health: A Technical Assistance 

Guide, which stated: 

′ ‘‘Because of the proximity of schools to 

the target population, HCFA (now CMS) has 

always encouraged the participation of 

schools in the Medicaid program * * * 

[s]chool-based health services can represent 

an effective tool which can be used to bring 

more Medicaid-eligible children into 

preventive and appropriate follow-up care. In 

addition, schools present a wonderful 

opportunity for Medicaid outreach. That is, 

because schools are by definition ‘‘in the 

business of serving children,’’ they can be a 

catalyst for encouraging otherwise eligible 

Medicaid children to obtain primary and 

preventive services as well as other necessary 

treatment services * * * we encourage 

efforts to inform potential eligibles about the 

Medicaid program and the EPSDT benefit.’’

The proposed rule, they believe, will 

force many States to curtail successful 

school-based initiatives to identify and 

enroll eligible low-income children in 

Medicaid that were encouraged by CMS 

itself, which is now promulgating a 

regulation to discontinue funding. Some 

commenters argued the proposed rule is 

a misguided approach and that it 

contradicts CMS’ position that States 

should enroll eligible children. 

Response: Schools remain a gateway 

for the delivery of health services for 

many children. As our response to the 

prior comment indicated, the issue is 

whether school-based administrative 

activities are a proper and efficient 

methodology for administration of the 

Medicaid State plan. We expect the 

central role of schools to continue, and 

we expect that many of these schoolbased administrative activities will 

continue as a normal part of the 

operation of a school program. We also 

expect that State or local Medicaid 

agencies will continue outreach efforts 

under their direction and control. This 

rule simply sets forth a clear test for the 

administrative activities that are 

appropriately claimed as necessary for 

the proper and efficient administration 

of the Medicaid State plan, and 

distinguishes those activities from the 

administration of a school program. 

Better Guidance Needed 

Comment: Some commenters argued 

that the solution to evidence of 

improper claiming for costs related to 

school-based Medicaid administration 

and transportation from home to school 

and back should be increased oversight, 

enforcement, and/or additional 

guidance, rather than elimination of 

reimbursement for such costs. They 

encouraged CMS to review the program 

and identify strategies for eliminating 

improper claiming practices without 

eliminating reimbursement for 

administrative costs. One commenter 

stated that ‘‘* * * Numerous alternative 

solutions exist, the most obvious of 

which is to install safeguards and 

auditing procedures that would 

eliminate the possibility of such 

fraudulent activity taking place in the 

future, thereby solving the problem 

while keeping the services intact.’’

Many believe that clarifying guidance 

and controls on claiming are better 

alternatives to promulgating the 

proposed regulation, which was seen as 

draconian and dismissive of medical 

necessity. They believe the proposed 

rule is ‘‘* * * an overreaction to 

perceived problems in the past.’’ CMS 

should focus its efforts on working with 

States to ensure proper claiming rather 

than promulgating new regulations. One 

commenter stated the following: ‘‘If 

CMS eliminates funding for every type 

of service, activity, or delivery system 

where it identifies inappropriate or even 

abusive claiming practices by some 

providers, funds would no longer be 

available for any benefits under the 

Medicaid program today.’’

Response: As described in Section VII 

of the responses, titled Alternatives 

Considered, we ultimately rejected the 

types of alternatives suggested by many 

of the commenters because the 

intervening years have proven that 

administrative activities cannot be 

adequately regulated or overseen within 

the resource limits available to CMS and 

the States. Plainly stated, we have 

concluded that it is not an effective 

approach to administration of the 

Medicaid State plan to rely on audits 

and monitoring to ensure that all claims 

are allowable. 

Comment: One commenter 

recommended that ‘‘* * * CMS use its 


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rulemaking authority in a more 

constructive manner by defining clear 

guidance, criteria and limitations’’ and 

suggested applying the results of OIG’s 

previous audits of States’ school-based 

Medicaid claiming programs to develop 

better guidance and more effective 

oversight. That, they argue, would 

preserve the original intent of the 

program to reimburse States for 

legitimate activities performed by 

schools in support of Medicaid. As an 

alternative to the proposed rule, some 

suggested that CMS revisit past 

guidance and improve reporting 

requirements for school and States. One 

commenter suggested that ‘‘* * * 

Congress and the Administration * * * 

work together to achieve consensus on 

the appropriate policies and 

procedures.’’ According to one 

commenter, CMS should work with 

representatives from State Medicaid 

agencies, schools systems, and other 

interested parties to ‘‘* * *resolve 

questions and areas of confusion’’

stemming from the 2003 Guide, develop 

clear claiming protocols, and reach 

consensus on related issues. According 

to some commenters, many of the 

claiming problems, stemmed from 

differing interpretations of Federal 

guidelines for claiming administrative 

and transportation costs based on 

inconsistent guidance from CMS Central 

and Regional Offices, and a lack of 

detailed guidelines on how to 

implement the programs. Commenters 

also recommended that CMS identify 

claiming issues in particular States and 

work with the appropriate State 

agencies to improve those programs 

rather than eliminating reimbursement 

for programs that are compliant with 

Federal requirements. 

Response: Schools repeatedly 

complained that CMS guidance and 

oversight was burdensome and added 

substantially to the cost of activities that 

the schools were undertaking to fulfill 

their educational mission. More 

fundamentally, however, we disagree 

with the commenters’ assumption that 

the problem is related to Federal 

oversight. Instead, we believe there is an 

inherent structural conflict of interest in 

commingling school administrative 

activities with Medicaid administrative 

activities. 

Better Data Needed 

Comment: Some commenters believe 

there needs to be clear set of data 

demonstrating the need to eliminate 

such reimbursement before the 

proposed regulation takes effect. They 

asked for data supporting the Secretary’s 

finding that school-based administrative 

activities are not necessary for the 

proper and efficient administration of 

the State plan. One commenter stated: 

‘‘[The proposed rule] does not provide 

evidence * * * in the form of an 

estimated dollar amount of fraudulent 

claims that have continued to occur 

after 2003.’’ These commenters 

requested specific examples of the noted 

fraud and abuse, and suggested a clear, 

chronological accounting of improper 

billing is required before promulgating 

new regulations. One commenter urged 

CMS to ‘‘* * * examine thoroughly and 

report on the current effects of policies 

implementation through’’ its 2003 

Guide before promulgating new 

regulations. There is no evidence, they 

note, to suggest that the 2003 Guide was 

inadequate. 

Other commenters pointed to the fact 

that the Senate Finance Committee 

hearings cited in the preamble were 

held more than five years ago, and 

preceded the issuance of new guidance 

by CMS in 2003, which was intended to 

improve compliance with claiming 

requirements. CMS should carefully 

scrutinize current claims for schoolbased administrative expenditures, they 

argue, which would put the agency in 

a better position to establish regulations 

to ensure proper claiming. 

Response: Detailed data on schoolbased Medicaid claiming is not 

available to CMS, due to limitations 

with respect to reporting requirements. 

Reporting for school-based Medicaid 

expenditures is voluntary; therefore, the 

data CMS used in calculating the 

projected cost savings may not match 

actual current spending. The proposed 

rule specifically requested public 

comment on potential fiscal impact. 

Commenters did not provide any clear 

data that were at variance with CMS 

assumptions. The limited data of which 

CMS is aware support the findings 

underlying the final rule. 

Comment: Many commenters found it 

disingenuous for CMS to use as the 

rationale for the proposed rule OIG and 

GAO reports regarding alleged abuses 

that occurred in the early 1990s, prior 

to the issuance of any directives or 

guidelines on school-based Medicaid 

claiming. Furthermore, some 

commenters argued, these audits only 

took into account an insignificant 

number of schools, and the findings 

should not be extrapolated to all schools 

and claiming programs nationwide. 

Some commenters were troubled by 

‘‘* * * dubious enforcement actions 

and audits’’ that have appeared ‘‘* * * 

more focused on limiting Federal 

expenditures than improving the 

appropriateness or effective 

administration’’ of the Medicaid State 

plan. Moreover, one commenter 

contended, the instances of 

inappropriate billing fall within the low 

to moderate range of similar billing 

problems elsewhere in overall Medicaid 

claiming. Another commenter noted 

that the proposed rule does not 

highlight the fact that their have been 

OIG audits of school-based Medicaid 

administrative claiming programs that 

did not identify any significant claiming 

errors. 

Commenters highlighted the fact that 

the proposed rule refers to negative 

audit findings from a few States without 

indicating the prevalence CMS has 

found such practices among all States. 

Nor does the proposed rule describe the 

efforts CMS and the offending States 

have taken since those audit to 

remediate noncompliance. One 

commenter suggested that CMS conduct 

compliance audits on school-based 

administrative activities that have been 

conducted pursuant to the 2003 Guide 

before promulgating new regulations. As 

one commenter stated: ‘‘CMS has not 

yet fulfilled its own responsibility to 

conduct appropriate, consistent, and 

complete oversight and to provide 

reliable localized guidance.’’ Overall, 

these commenters believe the negative 

audit findings referred to in the 

proposed rule do not establish an 

appropriate basis to eliminate a 

nationwide program. 

Some focused on references in the 

proposed rule to OIG and GAO findings 

and Congressional concern over the 

dramatic increase in Medicaid claims 

for school-based costs. They argued that 

Congress expressed more concern for 

how CMS was administering the 

program, rather than how they were 

being operated, with the overall 

conclusion from the Senate Finance 

Committee hearings held in June 1999 

and April 2000 being that there was a 

need for greater Federal oversight. 

Response: The final rule is not based 

on any particular audit findings; but 

rather, the overall claiming trends and 

improper billing practices. We disagree 

with the premise that more Federal 

oversight could address the basic 

structural conflict of interest in 

commingling school administration 

with Medicaid administration; there is a 

strong incentive to shift costs to 

Medicaid for activities that would have 

been performed by schools in the 

normal course of their operation. As 

important, the activities are not under 

the supervision or control of the State or 

local Medicaid agency, and are not 

undertaken for the purpose of 

administration of the Medicaid State 

plan. 

Comment: One commenter suggested 

that as an alternative to the proposed 


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regulation, CMS should consider 

investing resources from the Medicaid 

Integrity Program (MIP), established in 

the Deficit Reduction Act of 2005 (Pub. 

L. 109–432), to address school-based 

policy and reimbursement concerns and 

strengthen the integrity of the Medicaid 

program rather than impose a general 

prohibition on such reimbursement. 

They believe MIP resources could assist 

State agencies in determining when it is 

reasonable to bill Medicaid and develop 

cost-effectiveness guidelines related to 

school-based administration and 

transportation services. 

Response: CMS may in the future 

utilize MIP funding to address schoolbased Medicaid issues. But this 

approach alone would not be sufficient 

to address the underlying problems with 

school-based administrative claiming 

and transportation. There is an inherent 

structural conflict of interest in 

commingling school administrative 

activities with Medicaid administrative 

activities and, as a result, we do not 

believe an audit approach would be 

adequate or the most efficient use of 

limited Federal resources in addressing 

these issues. 

Statutory Intent 

Comment: Some commenters argued 

that the proposed rule contradicts the 

intent of the Medicaid statute and other 

Federal regulations by reversing a policy 

that made Federal matching funds 

available for transportation provided to 

children with special health care needs 

who receive health care services while 

they are at school. Others argue that the 

policy determination underlying the 

provisions of the proposed rule 

contradicts the Medicaid statute insofar 

as it allows States flexibility in 

administering their Medicaid plans and 

collaborating with other State agencies. 

One commenter stated that ‘‘* * * 

singling out children and school 

districts is an arbitrary application of 

the ‘‘efficiency and economy’’ tenets 

central to Medicaid law and the 

administration of the State plan within 

it.’’ Another commenter suggested the 

proposed rule would contradict existing 

law and circumvent Congressional 

intent were CMS to promulgate the 

regulations without specific legislative 

guidance. 

A number of commenters focused on 

the intent of the Medicare Catastrophic 

Coverage Act of 1988 (Pub. L. 100–360), 

which amended the Medicaid statute to 

allow States to begin receiving Medicaid 

reimbursement for services delivered to 

Medicaid-eligible children in schools 

pursuant to the IDEA. Therefore, they 

argue, Congressional intent is clear that 

Medicaid reimbursement should not be 

refused for activities performed in 

school settings. According to one 

commenter, the proposed rule ‘‘* * * 

obstruct[s] the Congressional directive 

establishing Medicaid funds to share in 

the cost of providing health care 

services to children in conjunction with 

their educational program.’’ These 

commenters believe there to be firm 

legal standing for the allowable use of 

Medicaid claiming for the costs of 

transportation and administration, and 

that the proposed rule contradicts 

current law, citing section 1903(c) of the 

Act, which prohibits payment for 

covered services provided pursuant to 

the IDEA. Historically, they note, 

Congress and the Federal government 

have encouraged Medicaid to share in 

schools’’ costs for meeting the medical 

needs of students with disabilities. 

Some commenters argued that the 

proposed rule would arbitrarily and 

capriciously reverse legal and historical 

precedents. They note that the 

underlying statutory basis for such 

activities has not changed in any way, 

and, as a result, CMS should not seek 

to reinterpret statutory basis to enforce 

new definitions for necessity and proper 

and efficient administration of the 

Medicaid State plan. 

Response: Section 1903(c) of the 

Social Security Act authorized Medicaid 

funding for covered medical services 

included in an individualized education 

program (IEP) under the IDEA and 

covered in the Medicaid State plan, it 

does not, however authorize Medicaid 

funding for administrative activities that 

schools conduct in implementing their 

IDEA responsibilities. As a result, the 

final rule does not contradict the 

Medicaid statute. 

Nor does the Medicaid statute 

specifically authorize payment for 

transportation to and from school. 

Transportation from home to school and 

back is central to the operation of a 

school program and, as such, Federal 

Medicaid payment will not be available 

for the transportation services to and 

from school. However, Medicaid 

payment will remain available for direct 

medical services that might be required 

under an IEP or IFSP in the course of 

such transportation. For example, if a 

student with a disability needs to be 

accompanied by a personal care 

attendant or a home health aide during 

transportation from home to school and 

back, Federal Medicaid payment would 

be available to the extent that the 

service was covered under the approved 

Medicaid State plan. 

Comment: Some commenters 

suggested that with the proposed rule, 

CMS is attempting to base policy 

determination on how a State 

subdivides its functions, which is 

contrary to the Medicaid statute. The 

distinction in the proposed rule 

between education and Medicaid 

personnel is in conflict with the 

Medicaid statute because funding 

cannot be denied based on what arm of 

the State conducts the Medicaid 

activity, they argue. 

Response: This rule is not based on 

the way the State subdivides its 

functions, but on the inherent structural 

problems in commingling 

administrative functions of the 

Medicaid program with school 

administration. 

Secretarial Authority 

Comment: Some commenters believe 

the Secretary is without authority under 

section 1903(a)(7) of the Act to find that 

amounts expended for administrative 

activities are not necessary for the 

proper and efficient administration of 

the Medicaid State plan solely because 

they are carried out by school personnel 

or staff under the control of a school 

rather by State or local Medicaid agency 

staff. One commenter argued that States 

are accorded the administrative 

flexibility in operating their Medicaid 

programs to have reimbursable activities 

performed by school personnel and that 

the Secretary may not limit that 

flexibility with an unsupported findings 

that conditions FFP by finding certain 

activities necessary only when carried 

out by certain employees. Furthermore, 

they argue, CMS cites no authority for 

eliminating FFP completely for all 

providers in response to adverse audit 

findings related to a few States. The 

Secretarial finding that school-based 

administrative and transportation are 

not necessary for the proper and 

efficient administration of the Medicaid 

State plan ‘‘* * * fails to include any 

analysis of fixed criteria or standards for 

which the Secretary would typically 

apply to reach that ‘‘not necessary’’

conclusion,’’ according to one 

commenter. 

Response: Under section 1903(a)(7), of 

the Act, it is the Secretary, not the State, 

that determines whether amounts 

expended are necessary for the proper 

and efficient administration of the 

Medicaid State plan. Therefore, it is 

within the Secretary’s discretion to 

make a determination that certain 

administrative activities (including 

transportation from home to school and 

back) are not eligible for reimbursement. 

Specifically, section 1903(a)(7) states 

that Federal Medicaid funding is 

available for administrative 

expenditures ‘‘as found necessary by the 

Secretary for the proper and efficient 

administration of the State plan.’’ In this 


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section, the statute explicitly imbues the 

Secretary with the ultimate authority 

and ability to make such 

determinations. As a result, we do not 

believe the provisions of the final rule 

exceed Secretarial authority. 

Comment: Some commenters 

suggested that the activities targeted by 

the proposed rule are specifically 

authorized by the approved Medicaid 

State plan and that it is the State that 

should determine whether activities are 

proper and efficient within the 

approved plan. The proposed rule, they 

argue, would needlessly hinder the 

ability of States to provide essential 

services in a manner in which it deems 

most effective. 

Response: As a matter of practice, 

States generally do not include 

reimbursement for administrative 

services as part of their approved 

Medicaid State plan. The relevant 

portions of the Medicaid State plan as 

mentioned in the comment describes 

covered services eligible for Medicaid 

payments and the reimbursement 

methodologies for those services. The 

rule will not affect medical services as 

defined in the Medicaid State plan nor 

the States’’ ability to offer those services 

in schools. 

Comment: Some commenters 

questioned CMS’ assertion that section 

1903(c) of the Act contains no provision 

authorizing claiming for the costs of 

school-based Medicaid administration. 

They argue that because section 1903(c) 

does not specifically prohibit 

administrative claiming, the general 

practice is (and should be) to allow it to 

continue under current practice unless 

explicitly forbidden. Because the 

Medicaid statute specifically provides 

that the Secretary cannot prohibit or 

restrict coverage of Medicaid services 

simply because those services are 

included in an IEP or IFSP, the 

Secretary should not be allowed to 

impinge on States’ abilities to claim for 

related costs. 

Response: The rule does not prohibit 

States from claiming Federal matching 

funds for covered medical services 

pursuant to a child’s IEP or IFSP. States 

may also claim for administrative costs 

directly related to the provision of a 

medical service, such as billing costs as 

part of the medical service 

reimbursement. Section 1903(c) 

specifically discusses medical services 

and does not address claiming for the 

administrative costs associated with the 

administration of the State’s Medicaid 

program. The statute provides the 

Secretary with considerable discretion 

to determine allowable administrative 

activities. Under section 1903(a)(7), of 

the Act, it is the Secretary, not the State, 

that determines whether amounts 

expended are necessary for the proper 

and efficient administration of the 

Medicaid State plan. Therefore, it is 

within the Secretary’s discretion to 

make a determination that certain 

administrative activities (including 

transportation from home to school and 

back) are not eligible for Federal 

Medicaid reimbursement. 

Reversal of Policy 

Comment: Some commenters argued 

that the proposed rule represents a 

significant reversal of long-standing 

policy and a revision of long-standing 

Medicaid regulations, policies, and 

guidance, noting that CMS first 

developed detailed guidance in 1997 

regarding school-based Medicaid 

program. Three years later, a report 

issued by HHS in collaboration with the 

U.S. Department of Agriculture and the 

U.S. Department of Education and cited 

by many commenters stated that schools 

are a ‘‘natural setting’’ for conducting 

children’s health insurance program 

outreach, and that ‘‘State Medicaid and 

SCHIP agencies seeking the best return 

on outreach investments often find that 

working with schools simplifies 

targeting audiences, distributing 

information, reaching families, and 

enrolling children.’’ (Report to the 

President on School-Based Outreach for 

Children’s Health Insurance, July 2000). 

The proposed rule, they argue, would 

directly contradict this July 2000 report, 

which sought to encourage agreements 

between States Medicaid agencies and 

schools so that the latter could receive 

financial assistance for administrative 

activities to enroll eligible children. The 

proposed rule, they argue, would be 

‘‘* * * regressive and a departure from 

acknowledged best practices in 

identifying and serving Medicaid 

beneficiaries.’’

Several commenters cited the 1999 

and 2000 Senate Finance Committee 

hearings on school-based Medicaid 

claiming as a evidence of CMS’

recognition that schools play an 

important role in ensuring that children 

receive needed health care services. 

Response: The statute provides the 

Secretary with considerable discretion 

to determine allowable administrative 

activities and the scope of covered 

transportation services. Consistent with 

the Administrative Procedure Act, this 

final rule supersedes prior statements 

and issuances to establish a new policy 

concerning school based administration 

activities and covered transportation 

services. This final rule reflects careful 

consideration of years of experience, 

and of the public input provided in the 

rulemaking process. CMS believes this 

final rule is necessary to maintain the 

financial integrity of the Medicaid 

program. 

Differential Treatment of Schools 

Comment: Many commenters opposed 

the rule in its entirety because, they 

argued, it reflects a differential, more 

restrictive treatment of schools in 

comparison to other settings in which 

the same Medicaid-related activities are 

provided and for which funding would 

continue. There is no way to justify the 

inference in the proposed rule that 

school employees are deemed capable 

and necessary for the delivery of 

covered services, but are somehow 

incapable and unnecessary to conduct 

associated administrative activities, 

according to one commenter. If the 

proposed rule is promulgated, they 

argue, schools alone would be 

designated as ineligible for 

reimbursement as a provider of 

Medicaid administrative functions 

while other entities would remain 

eligible to receive reimbursement as the 

State Medicaid agency’s designee. 

School employees would still be eligible 

for reimbursement for covered medical 

services, so it is inconsistent to deem 

them ineligible to conduct Medicaid 

administrative activities, they argue. 

Certain commenters argued that 

allowable activities should be deemed 

necessary for the proper and efficient 

administration of the Medicaid State 

plan regardless of who employs the 

individuals performing the activities. 

The proposed rule, they argue, unfairly 

and incorrectly suggested that a State 

agency employee public health nurse 

can conduct Medicaid administrative 

activities, but a school nurse, who has 

the same qualifications, cannot. The 

proposed rule, they note, contains no 

recognition of the comparable 

professional qualifications of both 

school and employees and State 

Medicaid agency employees conducting 

these activities. One commenter noted 

that it is unfair to infer, as the proposed 

rule does, that only the school-based 

claiming methodology is invalid, while 

CMS will continue to permit similar 

claiming procedures in various other 

contexts. 

Response: Under the rule, CMS will 

continue to recognize schools as valid 

settings for the delivery of Medicaid 

services. As a result, CMS will continue 

to reimburse States for covered schoolbased Medicaid service costs pursuant 

to a child’s IEP or IFSP. The final rule 

reflects a determination that schools are 

unique settings, and that there is an 

inherent structural conflict when school 

administrative responsibilities and 

Medicaid administrative activities are 


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commingled that precludes accurate 

claims. As a result, the final rule reflects 

a conclusion that school-based 

administrative activities are only 

necessary for the proper and efficient 

administration of the Medicaid State 

plan when conducted by employees of 

the State or local Medicaid agency. 

Due to inconsistent application of 

Medicaid requirements by schools to the 

types of administrative activities 

conducted in the school setting, the 

Secretary has determined that such 

activities can only be properly 

conducted, overseen and appropriately 

claimed under Medicaid when 

conducted by employees of the State or 

local Medicaid agency. School staff may 

continue to perform these types of 

administrative activities. The final rule 

will merely limit the availability of 

Federal matching funds based on the 

finding that it is not necessary for the 

proper and efficient administration of 

the Medicaid State plan for school staff 

to do so. We believe the final rule is 

necessary to maintain the financial 

integrity of the Medicaid program. The 

final rule does not question the 

importance of these types of 

administrative activities when 

performed by employees of the State 

Medicaid agency and still recognizes 

schools as valid settings for the delivery 

of Medicaid services. 

Comment: One commenter argued 

that Office of Management and Budget 

Circular A–87 (OMB A–87) contradicts 

the proposed rule by including school 

districts in its definition of local 

governments eligible to participate in 

Federal awards. Insofar as school 

districts are defined as units of 

government, they should not be 

excluded from Medicaid participation 

in any way. Furthermore, it represents 

a reversal of recent Federal guidance on 

school participation in Medicaid 

claiming and contradictions of Federal 

definitions of ‘‘governmental units’’ and 

‘‘local governments’’ that may 

participate in Medicaid claiming. 

Response: This rule in no way 

addresses the status of schools and 

school districts as units of government. 

OMB Circular A–87 describes cost 

allocation requirements for units of 

government that receive Federal grants 

and must account for costs associated 

with those grants. OMB Circular A–87 

does not, however, supplant the 

determination of the program agency as 

to the administrative activities 

necessary for the proper and efficient 

administration of the Medicaid program. 

Comment: Some commenters pointed 

to Section 5230 of the State Medicaid 

Manual, which requires Medicaid 

agencies to coordinate services with 

local education agencies, title VI 

grantees, providers, and other public 

and private agencies, as support for the 

role of schools in helping the State 

administer the Medicaid program. The 

statute is replete with examples of the 

extent to which State agencies are 

expected to rely on other public agency 

staff to carry out Medicaid State plan 

obligations, one commenter noted. As 

another stated: ‘‘Collaboration with 

other public agencies is a consistent 

statutory theme; indeed, the statute both 

contemplates the involvement of other 

public agencies and give[s] States broad 

discretion over plan administration.’’

The proposed rule would, in the words 

of one commenter, ‘‘* * * establish an 

operational barrier to using schools as a 

venue for performing administrative 

activities that support the Medicaid 

program.’’ Singling out schools, school 

contractors, and school districts and 

eliminating their ability to receive 

reimbursement for Medicaid 

administrative activities will result in a 

less effective, less efficient Medicaid 

outreach and referral system. 

A number of commenters took issue 

with the statement in the proposed rule 

that administrative activities provided 

in schools ‘‘* * * largely overlap with 

educational activities that do not 

directly benefit the Medicaid program.’’

In reality, they argue, such activities do 

directly benefit the Medicaid program 

insofar as they help Medicaid eligible 

children to access covered services. One 

commenter stated the following: ‘‘The 

Secretary is * * * remiss in failing to 

consider that compulsory school 

attendance laws provide schools with a 

captive audience of underserved 

Medicaid eligible school-based children, 

thus providing an optimal setting for 

addressing their * * * needs.’’ From a 

public policy perspective, they note, 

providing Medicaid activities in schools 

should be encouraged, rather than 

restricted, yet the proposed rule singles 

out schools settings for disparate 

restrictions and prohibitions that are not 

imposed on other eligible providers. 

Response: The final rule clarifies that 

Medicaid is not the appropriate funding 

source for school-based administrative 

activities or for transportation from 

home to school and back. These 

activities or services are fundamentally 

undertaken for the educational mission 

of the school, rather than for 

administration of the Medicaid State 

plan. Based on our experience, we do 

not believe it is possible to develop and 

implement claiming methodologies that 

accurately allocate costs to Medicaid. 

The costs of such accounting exceed any 

incremental benefits to the Medicaid 

program from these activities and 

services, and we have concluded that it 

would be more efficient for States not to 

commingle Medicaid and school 

administration and transportation. 

Potential for Outstationed State 

Medicaid Agency Employees 

Comment: Some commenters argued 

that State Medicaid agencies are 

unlikely to send their own employees 

into schools to conduct administrative 

activities, and that to do so would be 

inefficient. These commenters believe 

that school-based outreach and 

enrollment efforts are successful 

precisely because of the involvement of 

school staff who are trusted by families 

and already in contact with children 

and their families. These commenters 

believe State and local Medicaid 

agencies can more efficiently carry out 

Medicaid administrative activities 

through relationships with other public 

entities, including schools. One 

commenter believes that States would 

have to hire thousands of eligibility 

workers to do the work currently carried 

out by school employees, at a far greater 

cost. To the extent State agency 

employees were outstationed in schools, 

they argue, this would establish a 

duplicative bureaucracy at State and 

Federal levels for activities that are 

more efficiently performed by school 

staff. They argue that this scenario 

would be financially and operationally 

inefficient compared to the current 

system. 

Response: CMS cannot direct State or 

local Medicaid agencies to utilize their 

own staff to provide Medicaid 

administrative activities in schools, as 

each State Medicaid program differs, 

and States have flexibility in 

administering their programs. However, 

there is precedent to use agency 

outstation workers in alternative service 

delivery venues to administer the 

Medicaid State plan. Furthermore, 

outstationing eligibility workers is likely 

to result in enrolling eligible children 

more rapidly as they can make the 

actual eligibility determination, while 

school employees cannot. 

While we agree that school employees 

often enjoy a special trust relationship 

with the families of students, this 

special relationship is more likely based 

on an employees’’ broad knowledge of 

a variety of health, education and social 

service programs. Because of the 

difficulty in determining specific 

administrative activities that are for the 

purpose of administration of the 

Medicaid State plan, we have 

determined that it is not proper and 

efficient to use school employees’’ for 

the administration of the State Medicaid 

program. 


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Comment: One commenter cited the 

Family Educational Rights and Privacy 

Act (FERPA), 20 U.S.C. Section 1232(g), 

under which schools must keep student 

records confidential, as a serious 

impediment to having non-school 

employees (i.e., State Medicaid agency 

employees) engage in Medicaid 

outreach, enrollment, and other 

administrative functions. 

Response: CMS does not believe the 

final rule will, in any way, impact 

education mandates under FERPA, with 

which schools must continue to comply. 

Furthermore, we believe non-school 

employees can conduct effective 

Medicaid outreach and enrollment for 

students without access to individual 

student school records. 

Transportation-Specific Issues 

Comment: Some commenters focused 

on the impact of the proposed rule on 

Medicaid reimbursement for costs 

related to transportation from home to 

school and back. These commenters 

asserted that specialized transportation 

to school is necessary for a special 

needs student and is necessary for the 

proper and efficient administration of 

the Medicaid State plan, as required by 

1903(a)(7) of the Act. One commenter 

argued that CMS should preserve 

authority for States to submit claims in 

limited situations, specifically for 

transporting Medicaid eligible children 

from home to school and back if the 

child’s health status requires monitoring 

or medical related services during 

transport. 

These commenters argued that the 

proposed rule ignores the needs of many 

students with disabilities who require 

specialized transportation between 

home and school to facilitate frequent 

contact with school-based Medicaid 

services providers to treat chronic 

health conditions that are most costeffectively treated during the course of 

the school day. 

Response: Medical services provided 

in schools or as part of transportation to 

school are eligible for Medicaid 

reimbursement. However, Medicaid will 

not reimburse the school for actual 

transportation to school. Some 

comments seem to suggest that children 

with disabilities are in school systems 

primarily to receive medical services 

rather than to receive an education. 

Schools are educational institutions, 

and children are transported to schools 

to receive an education. Schools are 

required to provide access to medical 

care to allow children with medical 

needs to participate as fully in the 

educational system as children without 

special medical needs. Children are 

already in the school for the purpose of 

receiving their education when medical 

services are received and no additional 

transportation is medically necessary. 

Characterizing transportation from 

home to school as being for the purpose 

of obtaining medical services overlooks 

the fundamental purpose of the 

transportation. 

Comment: Some commenters pointed 

to CMS’ assertion that schools are 

required to provide transportation from 

home to school and back. On the 

contrary, they argue that there is no 

State or Federal requirement for schools 

to provide transportation from home to 

school and back for all in students in 

every State. For example, one 

commenter noted, some schools do not 

provide bus transportation for students 

who live within walking distance. Some 

commenters argue that the proposed 

rule incorrectly compares specialized 

transportation services for children with 

significant health problems and 

traditional school bus transportation. 

They argue that States set forth 

conditions that must be met in order for 

a student to qualify for the 

transportation benefit. For these 

reasons, they note, schools throughout 

the country have utilized Federal 

funding through Medicaid to transport 

children to school for medical 

appointments and provide bus aides 

when deemed necessary. The proposed 

rule, however, would prohibit Medicaid 

funding for these expenditures. 

Response: Schools are educational 

institutions that may be required, under 

an Individualized Education Program to 

provide transportation to and from 

school for any individual child that may 

require transport to participate in the 

public education system even if that 

school does not provide transportation 

to other children in the community. 

Medicaid will not reimburse school 

districts for transportation requirements 

to and from school that the school must 

meet as part of the IEP. Once at the 

school, a student may obtain medical 

services but no additional transportation 

is required at that point. 

With respect to transportation to and 

from school, however, Medicaid 

payment will remain available for direct 

medical services that might be required 

under an IEP or IFSP in the course of 

such transportation. For example, if a 

disabled individual needs to be 

accompanied by a personal care 

attendant or a home health aide, Federal 

Medicaid payment would be available 

to the extent that the service was 

covered under the approved Medicaid 

State plan. 

Comment: Others argued that there 

was no basis to change previous CMS 

guidance, such as a May 2003 Guide 

and a 1997 technical assistance guide, 

that supported and offered guidelines 

for claiming costs related to 

transportation. These commenters 

pointed to section 1903(c) of the Social 

Security Act, which requires Medicaid 

to be primary to the U.S. Department of 

Education for payment of covered 

health-related services that are included 

in an IEP or IFSP, as support for 

reimbursing costs related to 

transportation from home to school and 

back. They noted that transportation is 

often prescribed in a child’s IEP or IFSP. 

Response: This regulation is not 

inconsistent with section 1903(c) of the 

Social Security Act because it addresses 

whether transportation between home 

and school is a covered Medicaid 

service, and does not affect the general 

obligation of the Medicaid program to 

pay for covered Medicaid services that 

are prescribed in an IEP or IFSP primary 

to education programs. This regulation 

departs from previous guidance because 

it properly acknowledges that the 

purpose of the transportation between 

home and school is for education rather 

than medical services. Such 

transportation is for the purpose of 

securing attendance at the school for 

educational reasons, and not for the 

purpose of obtaining access to medical 

providers. As such, we do not believe 

that such transportation is within the 

scope of covered Medicaid 

transportation, either as an 

administrative activity or as a covered 

medical assistance benefit in the 

approved Medicaid State plan. 

Comment: Some commenters asserted 

that, in exempting from the proposed 

rule the costs of transportation from 

home to school and back for children 

who are not yet school age, that CMS is 

acknowledging the potential for schools 

to provide Medicaid services and 

perform Medicaid activities not solely to 

serve an educational purpose, which 

undercuts this provision of the 

proposed rule. Additionally, some 

commenters noted, Federal Medicaid 

funding remains available for the 

transportation of all other groups of 

Medicaid-covered individuals to 

medical services providers; it is only 

school-age children receiving medical 

services at school whose transportation 

will not be reimbursable. They argue 

that this funding exception violates 

Federal regulations that require 

comparability in the amount, duration, 

and scope of services for all those who 

qualify for Medicaid services 42 CFR 

Section 440.240. As one commenter 

noted, Medicaid policy regarding 

medical transportation does not restrict 

the beneficiary from participating in any 

other activity before returning home 


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from the place of treatment, as is the 

case in schools. And still another 

commenter argued that the proposed 

regulatory text is contradictory by 

continuing to make Federal Medicaid 

reimbursement available ‘‘for recipients 

to and from providers,’’ while ignoring 

the fact that a school district can be a 

qualified Medicaid provider. 

Response: For school-aged children, 

transportation between home and 

school is for the purpose of attending an 

educational institution, and not for the 

purpose of obtaining access to medical 

providers. This reasoning does not 

apply for individuals who are not yet 

school-aged, and thus we did not 

include this population in the rule’s 

prohibition. The commenters err in 

assuming that transportation obtained 

for purposes other than to obtain access 

to medical providers is within the scope 

of covered Medicaid transportation. For 

instance, when an individual needs 

transportation for the purpose of 

attending a medical appointment in a 

nearby city, transportation to that 

provider would be covered even if the 

individual also shopped or engaged in 

other incidental activities on the trip. 

But when an individual is employed in 

that nearby city and commutes on a 

daily basis for the purpose of engaging 

in employment, the daily commute 

would not become covered Medicaid 

transportation when the individual 

attends a medical appointment at work. 

While this distinction is not always 

clear, it is clear in the instance of 

transportation between home and 

school for school-aged children. 

Comment: Some commenters 

suggested that the proposed regulation 

may create new, unanticipated 

transportation costs if children begin to 

receive more services with a 

community-based provider, rather than 

in school, because many school districts 

will not be able to absorb transportation 

costs that were once matched with 

Medicaid funds. Other commenters 

asserted that the cost of providing 

specialized transportation is 

significantly more expensive than 

transportation provided to regular 

students, and should be reimbursable 

for that reason. 

Response: This final rule will not 

interfere in any way with the ability of 

States to determine school 

transportation policy, but simply 

recognizes that routine school 

transportation from home to school and 

back and related administrative 

activities are not authorized under the 

Medicaid statute as necessary for the 

proper and efficient administration of 

the Medicaid State plan, nor do they 

meet the definition of an optional 

transportation benefit under Medicaid. 

Children are transported to school 

primarily to receive an education, not to 

receive medical services. The final rule 

will merely eliminate Medicaid as a 

funding source; it will not affect the 

provision of such transportation. 

Moreover, this rule will not affect the 

status of covered medical services 

furnished in the course of transportation 

such as services of a personal care 

attendant or a home health aide. 

Comment: One commenter suggested 

that CMS may have overlooked the fact 

that, in some cases, a child’s disability 

is so severe that he or she is unable to 

attend a mainstream district school, or 

even a special day class within the 

district. In those cases, the child must 

attend an out-of-district public school, a 

non-public school placement, or a 

residential facility, to-and-from which 

districts are not automatically providing 

transportation. In cases where children 

would receive covered medical services 

at one of these sites, and the district 

must send the child to these placements 

because of their particular medical 

needs, the proposed regulations would 

preclude billing for the costs of such 

transportation, they note. 

Response: We do not believe a school 

district’s election to educate students in 

one location or another affects the basic 

purpose of the transportation to ensure 

attendance at an educational institution. 

Even in these circumstances, the 

transportation to and from school is for 

educational purposes. 

We agree, however, that when an 

individual is transported for the 

provision of medical services to a 

location that is not a school, such as a 

community provider, the transportation 

would be covered because that 

transportation was necessary to access a 

medical service that is not available at 

the school. 

Comment: Another commenter 

pointed to Executive Order 13330, 

issued February 24, 2004, which directs 

the Secretary of the U.S. Department of 

Health and Human Services to promote 

interagency cooperation in the provision 

of transportation services and argued 

that the proposed rule contradicts this 

Executive Order. The commenter stated: 

‘‘To determine that transportation is 

only necessary when performed by 

employees of the State or local Medicaid 

agency fails to recognize the efficiencies 

available when transportation is a 

coordinated effort.’’

Response: The quoted language 

reflects confusion about this rule. This 

rule reflects a determination that 

transportation to and from school is not 

for the purpose of administration of the 

Medicaid State plan, nor is such 

transportation necessary to ensure 

beneficiary access to medical providers. 

We encourage the coordination of 

covered Medicaid transportation with 

other programs, but Medicaid 

reimbursement of transportation 

services is limited to ensuring 

beneficiary access to medical providers 

in the community. It does not include 

transportation routinely provided for 

other purposes. 

Comment: Some commenters noted 

that school districts often rely on 

Medicaid reimbursements for the costs 

of outfitting buses with specialized 

equipment. These commenters urged 

that such funding remain available. 

Response: Medicaid payment will 

continue to be available to pay for 

medical equipment, appliances and 

supplies that are covered under the 

home health benefit, to the extent 

medically necessary for a particular 

individual and, when furnished by 

schools, included in an IEP or IFSP. 

Medical necessity is determined under 

State-established medical necessity 

criteria. Nothing in the final rule will 

affect claiming under Medicaid for these 

types of expenditures. Medicaid 

reimbursement will not be available, 

however, for costs of permanently 

outfitting buses with equipment for 

general use in accommodating 

individuals with disabilities or other 

medical issues. Such costs are not 

within the scope of a covered Medicaid 

benefit. Instead such costs are integral to 

the uncovered transportation between 

home and school. 

Impact Analysis 

Comment: Some commenters argued 

that the estimated savings represents a 

cost shifting, rather than a cost savings, 

from the Federal government to State 

and local school districts that are 

obligated to provide these services. As 

a result, they believe the projected cost 

savings specified in the proposed rule 

are misleading. Another commenter 

argued that it is disingenuous to state 

that the proposed rule would not have 

a ‘‘significant economic impact on local 

school districts.’’ Schools may lose up 

to $600 million in the first year of the 

proposed rule’s implementation, one 

commenter noted in referencing the 

projected cost savings. While this may 

be a very small component of the overall 

Medicaid budget, they contend, it is not 

insignificant to the school districts and 

States that rely on this funding to 

maintain the quality of services 

provided to students with disabilities. 

Still other commenters question the 

projected savings resulting to the 

proposed rule, suggesting that these 

savings could be primarily attributable 


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to one of the two issues addressed in the 

proposed rule; specifically, 

transportation for school-age children. 

As a result, they argue the two parts of 

the proposed rule should be considered 

separately and their potential impact 

separately calculated. There is also no 

estimate in the impact analysis of the 

number of children who would not be 

identified and enrolled in Medicaid if 

States cannot maintain school-based 

outreach programs without Federal 

support, one commenter was 

disappointed to find. 

Response: The final rule anticipates 

Federal savings of approximately $635 

million in the first year following 

implementation, but does not require 

States to replace that Federal funding 

with State funding or take any other 

particular steps. Any mandates 

regarding school transportation 

spending arise under State 

constitutions, or other Federal or State 

laws. School-based Medicaid 

administrative activities and 

transportation from home to school and 

back are not required activities under 

the Medicaid statute. 

As stated in the proposed and final 

versions of the rule, there is admitted 

uncertainty in the projected cost savings 

to the extent that State-reported 

expenditures related to school-based 

administration and transportation may 

not match actual current spending, and 

to the extent that the impact of the 

proposed rule is greater than or less 

than assumed. The cost savings are 

based upon State voluntary reporting of 

quarterly expenditures to CMS. Since 

this reporting for school-based activities 

is voluntary, these estimates may not 

match actual current spending. 

Furthermore, claims related to the costs 

of transportation from home to school 

and back as a direct service are included 

in the total amount claimed for all 

medical assistance. Therefore, it is 

difficult, if not impossible, to determine 

the impact of the final rule on the types 

of transportation costs that would be 

affected. 

Comment: One commenter believed 

the rationale for the estimated cost 

savings is flawed because not all school 

districts currently claim or receive FFP 

for administrative and transportation 

services, and that Federal funding is 

spread unevenly among States, districts, 

and schools. Therefore, they suggest, 

comparing the costs of the proposed 

rule to overall nationwide spending for 

elementary and secondary education 

minimizes its financial impact. Instead, 

one commenter argued that a more 

realistic financial analysis is necessary, 

one which would: 

1. Examine the financial impact of the 

proposed cuts only on districts that 

actually claim for reimbursements; 

2. Take into consideration the unique 

aspects (such as fixed costs) of school 

district budgets; and 

3. Include the likely loss of State 

Medicaid funding that would result 

from schools no longer being able to 

sustain these programs. 

Response: The proposed and final 

rules reference total elementary and 

secondary spending in 2004, as defined 

by the Bureau of the Census, in 

determining the projected impact on 

expenditures. It is difficult, if not 

impossible, to reach consensus on a 

single expenditure total to be used as 

the basis for calculating the potential 

impact of the proposed rule. We 

determined the Census data to be the 

most reliable and accurate data 

available. As stated in Section VI., the 

estimated annual Federal savings under 

this final rule is only about one eighth 

of one percent of total annual spending 

on elementary and secondary schools 

(in 2004 total elementary and secondary 

spending was $453 billion according to 

the Statistical Abstract of the United 

States, Table 245, at http:// 

www.census.gov/compendia/statab/ 

education). 

Comment: Other commenters 

disagreed with the assessment in the 

proposed rule that it would not have a 

significant impact on a substantial 

number of small entities, either 

disagreeing with the threshold 

definition of significant impact or that 

of small governmental jurisdictions. 

This was an issue for which CMS 

specifically solicited public comment. 

Under the definition of small 

governmental jurisdiction used by CMS, 

that is, those with a population of less 

than fifty thousand, nearly every school 

district in certain States would qualify 

as small entities, according to one 

commenter. This commenter went on to 

note that these smaller districts are often 

rural with a high percentage of students 

receiving free or reduced priced 

lunches. As a result, schools that are 

poor, rural, isolated and small will be 

disproportionately impacted due to 

existing budget constraints and 

extremely limited resources. 

Certain commenters believe the cost 

benefit analysis to be flawed. One 

commenter stated that the analysis 

presumes that most school districts are 

uniform in size, which is not the case. 

Another argued that the proposed rule 

aggregates all Federal spending on 

elementary and secondary education 

‘‘* * * as a means to minimize the 

rule’s financial impact on school 

districts.’’ Some stated that the 

proposed rule inaccurately minimizes 

the fiscal impact the proposed 

rulemaking would have on school 

districts, stating that it is ‘‘* * * 

misleading and inaccurate for CMS to 

compare the cost of school-based health 

care to the entire budgets for K–12 

education.’’ Rather than ‘‘one eighth of 

one percent of total annual spending, 

the proposed rule, they argue, would 

impose a 50 percent impact insofar as 

the matching rate for allowable 

administrative expenditures is 50 

percent FFP. 

Response: As noted in Section VI., for 

purposes of the Regulatory Flexibility 

Act, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions, 

including school districts. ‘‘Small’’

governmental jurisdictions are defined 

as having a population of less than fifty 

thousand. Admittedly, there is 

uncertainty in this estimate to the extent 

that State-reported expenditures related 

to school-based administration and 

transportation may not match actual 

current spending and to the extent that 

the impact of the proposed rule is 

greater than or less than assumed. We 

nevertheless believe, as indicated in our 

calculations and in the absence of 

reliable data to the contrary, that the 

impact of this rule will be only a small 

percentage of administrative and 

transportation expenditures by such 

entities. Furthermore, the input we 

received in response to the solicitation 

for public comments on the potential 

impact on small entities offered only 

speculation and did not provide 

sufficient quantitative data to argue for 

a reassessment of the potential impact. 

Comment: One commenter believes 

the discussion in the Impact Analysis of 

Executive Order 13132 is flawed by a 

failure to accurately assess the impact 

on State and local governments and by 

the factual error inherent in 

characterizing as ‘‘routine’’ the 

transportation needs of school-based 

children receiving Medicaid services in 

a school setting pursuant to an IEP. 

Response: As stated in Section VI., 

with respect to transportation 

specifically, States and/or schools will 

be required under the final rule to 

continue funding transportation of 

school-age children from home to 

school and back to the extent it is 

required by education statute(s). That is 

because schools provide transportation 

to and from school for all students, not 

just (or even primarily) special 

education or Medicaid eligible students. 

Regulatory Text 

Comment: One commenter asked for 

clarification of what is meant in the 


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proposed Section 433.20 by ‘‘under the 

control of’’ a public or private 

educational institution. This commenter 

also asked for clarification in the 

regulatory text that activities required to 

support the provision of medical 

services are eligible for FFP if they are 

included in the rate paid for direct 

medical services, and requested a 

definition for ‘‘administrative overhead 

costs’’ to appear in the regulatory text. 

Response: The reference in Section 

433.20 to anyone ‘‘under the control of’’

a public or private educational 

institution is meant to incorporate any 

and all subcontracting arrangements 

that schools or other educational 

institutions may enter into for the 

provision of services or administrative 

activities in schools. The definition of 

administrative overhead costs cannot be 

specified in the regulatory text because 

it is dependent upon the types of costs 

that are included in the rate paid for 

direct medical services, which is 

negotiated by each State and specified 

in the approved Medicaid State plan. 

These reimbursement rates are set by 

the State Medicaid agency and, 

therefore, any discussions regarding the 

appropriateness of such rates on the part 

of providers must be conducted at the 

State level. 

Furthermore, CMS does not believe it 

is necessary to specify in the regulatory 

text that administrative activities that 

are integral to, or an extension of, a 

direct medical service remain eligible 

for FFP insofar as they are reimbursed 

through the rate paid for the service. 

This is because the regulatory text only 

limits the availability of FFP for 

Medicaid administration, not services 

(except insofar as transportation from 

home to school and back is defined as 

a service). That is, the final rule does 

not affect Federal reimbursement for the 

costs of allowable direct medical service 

expenditures. 

Comment: One commenter requested 

that the regulatory text explicitly note 

the continued availability of FFP for the 

costs of transporting school-age children 

from school or home to a non-school 

based direct medical service provider 

that bills under the Medicaid program 

or from the non-school based provider 

to school or home. Another commenter 

asked for language to be included in the 

regulatory text specifying that FFP is 

available for transportation services 

provided to children who are ‘‘not yet 

school-age’’ to and from providers, even 

if the site of service is a school. 

Response: CMS does not believe it is 

necessary to specify in the regulatory 

text that Federal Medicaid 

reimbursement remains available for 

transportation provided to children who 

are not yet school-age to and from 

providers, even if the site of service is 

a school, because the regulatory text 

lists only those costs for which 

reimbursement will not be available. 

Similarly, it is not necessary to note in 

the regulatory text the continued 

availability of FFP for the costs of 

transporting school-age children from 

school or home to a non-school based 

direct medical service provider that bills 

under the Medicaid program or from the 

non-school based provider to school or 

home. Any such costs not included in 

the regulatory text are thereby exempt 

from the general prohibition on 

reimbursement. 

Comment: One commenter requested 

a definition of ‘‘school-age’’ and ‘‘not 

yet school-age.’’

Response: The regulatory text 

purposely does not provide a definition 

for ‘‘school-age’’ and ‘‘not yet schoolage’’ because such definitions may differ 

by State and no such distinction exists 

in the Medicaid statute; rather, such 

determinations are based on education 

requirements. We do intend the term 

‘‘school-age children’’ to be defined by 

age. It is specifically worded as such to 

differentiate between children who are 

of the age to attend school for education 

and children who are not yet school-age. 

Comment: One commenter asked for 

clarification in proposed Section 431.53 

of whether transportation is only 

available to and from services that are 

included in a child’s IEP or whether 

transportation is also available to and 

from other Medicaid services that are 

not included in a child’s IEP. 

Response: Federal Medicaid 

reimbursement for school-based services 

is generally available only for covered 

services provided pursuant to an IEP or 

IFSP, because non-IEP services are 

typically subject to Medicaid third party 

liability rules and ‘‘free care’’ policies, 

which limit the ability of schools to bill 

Medicaid for some of these health 

services and associated administrative 

costs. Third party liability requirements 

preclude Medicaid from paying for 

Medicaid coverable services provided to 

Medicaid beneficiaries if another third 

party (e.g., other third party health 

insurer or other Federal or state 

program) is legally liable and 

responsible for providing and paying for 

the services. The ‘‘free care’’ principle 

precludes Medicaid programs from 

recognizing as a cost of Medicaidcoverable services and activities any 

amount for services and activities which 

are available without charge or liability, 

and for which no other sources for 

reimbursement are pursued. 

IV. Provisions of the Final Regulations 

This final rule incorporates the 

provisions of the proposed rule in its 

entirety and does not in any way differ 

from the proposed rule. 

V. 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). 

VI. Regulatory Impact Statement 

A. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–534), 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 (as amended by 

Executive Order 13258 and Executive 

Order 13422) directs agencies to assess 

all costs and benefits of all 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 final rule’s savings will exceed this 

economic threshold and it is therefore 

considered a major rule. The final rule 

is estimated to reduce Federal Medicaid 

outlays by $635 million in FY 2009 and 

by a total of $3.6 billion over the first 

five years (FY 2009–2013). 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities if final rules have a ‘‘significant 

economic impact on a substantial 

number of small entities.’’ For purposes 

of the RFA, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions, 

including school districts. ‘‘Small’’

governmental jurisdictions are defined 

as having a population of less than fifty 

thousand. Individuals and States are not 

included in the definition of a small 

entity. Although many school districts 

have populations below this threshold 

and are therefore considered small 

entities for purposes of the RFA, we 

have determined the impact on local 

school districts as a result of the final 

rule will not exceed the threshold of 


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Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Rules and Regulations 73649 

‘‘significant’’ economic impact under 

the RFA, as discussed below. 

States have the option under the final 

rule to continue funding school-based 

administrative activities using Stateonly funds; this rule simply eliminates 

the availability of Federal Medicaid 

matching funds for these expenditures 

when they are performed by employees 

of the school or contractors, or anyone 

under the control of a public or private 

educational institution, rather than 

employees of the Medicaid agency. 

However, with respect to transportation 

specifically, States and/or schools will 

continue transporting school-age 

children from home to school and back 

to the extent it is required by education 

statute(s). That is because schools 

provide transportation to and from 

school for all students, not just (or even 

primarily) special education or 

Medicaid eligible students. 

The Individuals with Disabilities 

Education Act (IDEA) requires public 

schools to provide a free appropriate 

public education to children with 

disabilities. The IDEA authorizes 

funding through the U.S. Department of 

Education (not Medicaid) for special 

education and related services for 

children with disabilities. While section 

1903(c) of the Social Security Act 

authorized Medicaid funding for 

covered services included in an 

Individualized Education Program (IEP) 

under the IDEA, section 1903(c) does 

not expressly authorize Medicaid 

funding for administrative activities that 

schools conduct in implementing their 

IDEA responsibilities. 

The estimated annual Federal savings 

under this final rule are only about one 

eighth of one percent of total annual 

spending on elementary and secondary 

schools (in 2004 total elementary and 

secondary spending was $453 billion 

according to the Statistical Abstract of 

the United States, Table 245, at http:// 

www.census.gov/compendia/statab/ 

education). According to the ‘‘Guidance 

on Proper Consideration of Small 

Entities in Rulemakings of the U.S. 

Department of Health and Human 

Services (May 2003),’’ if the average 

annual impact on small entities is 3 to 

5 percent or more, it is to be considered 

significant. Because we used a threshold 

of 3 to 5 percent of annual revenues or 

costs in determining whether a 

proposed or final rule has a 

‘‘significant’’ economic impact on small 

entities, we have determined that this 

final rule will 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 regulatory 

impact analysis 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 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. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this rule 

would not have a direct 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. 

That threshold level is currently 

approximately $127 million. This final 

rule contains no mandates that will 

impose spending costs on State, local, or 

tribal governments in the aggregate, or 

by the private sector, of $127 million. 

The final rule anticipates Federal 

savings of approximately $635 million 

in the first year following 

implementation, but does not require 

States to replace that Federal funding 

with State funding or take any other 

particular steps. Any mandates 

regarding school transportation 

spending arise under State 

constitutions, or other Federal or State 

laws. School-based Medicaid 

administrative activities and 

transportation from home to school and 

back are not required activities under 

the Medicaid statute. 

Executive Order 13132 on Federalism 

establishes certain requirements that an 

agency must meet when it promulgates 

a proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirements on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

EO 13132 focuses on the roles and 

responsibilities of different levels of 

government, and requires Federal 

deference to State policy making 

discretion when States make decisions 

about the uses of their own funds or 

otherwise make State-level decisions. 

We find that this rule will not have a 

substantial effect on State or local 

government policy discretion. While 

this final rule would eliminate the 

ability of States to claim Federal 

Medicaid funding for school-based 

administrative and certain 

transportation costs, notably routine 

home-to-school and back bus 

transportation, it will not impose any 

requirement as to how States or 

localities administer or pay for such 

activities, or interfere in any way with 

the ability of States to determine school 

transportation policy. The rule will 

simply recognize that routine school 

transportation from home to school and 

back and related administrative 

activities are not authorized under the 

Medicaid statute as necessary for the 

proper and efficient administration of 

the Medicaid State plan, nor do they 

meet the definition of an optional 

transportation benefit under Medicaid. 

B. Anticipated Effects 

The final rule is a major rule because 

it is estimated to result in $635 million 

in savings during the first year and $3.6 

billion in savings over the first five 

years. The following chart summarizes 

our estimate of the anticipated effects of 

this final rule. 

TABLE I.—ESTIMATED REDUCTION IN FEDERAL MEDICAID OUTLAYS RESULTING FROM THE ELIMINATION OF

REIMBURSEMENT FOR SCHOOL-BASED ADMINISTRATION AND CERTAIN TRANSPORTATION COSTS IN PROPOSED RULE

[Amounts in millions per Federal fiscal year] 

2009 2010 2011 2012 2013 2009–2013 

School-Based Costs: Eliminate Reimbursement for Administration/Transportation ............................................ ¥$635 ¥$675 ¥$720 ¥$770 ¥$820 ¥$3620 

Conclusion 

These estimates assume 

implementation beginning in the 2008–

09 school year and are based on recent 

reviews of State reported school-based 

administrative and direct medical 

service expenditures reported on the 

quarterly CMS expenditure forms 

(MBES/CBES Form 64.10I and Form 

64.10PI Information Forms for SchoolBased ADM and MAP claims). From 


pwalker on PROD1PC71 with RULES
73650 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Rules and Regulations 

these voluntary State claiming reports, 

an estimate of the total amount of claims 

under the Medicaid program that would 

be affected by the final rule was 

developed and then projected forward 

using the most recent assumptions 

available. There is uncertainty in this 

estimate to the extent that State-reported 

expenditures related to school-based 

administration and transportation may 

not match actual current spending and 

to the extent that the impact of the 

proposed rule is greater than or less 

than assumed. Furthermore, claims 

related to the costs of transportation 

from home to school and back as a 

direct service are included in the total 

amount claimed for all medical 

assistance. Therefore, it is difficult, if 

not impossible, to determine the impact 

of the final rule on the types of 

transportation costs that would be 

affected. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

VII. Alternatives Considered 

In developing this regulation, various 

alternatives were considered. We 

considered the possibility of conducting 

stronger review of reimbursement 

methodologies for the costs of Medicaid 

administrative activities provided in 

schools and transportation from home to 

school and back. We also considered 

seeking to implement policies requiring 

greater accountability and oversight 

responsibility for school-based 

administrative and transportation 

expenditures, and clarification of 

Federal requirements without any new 

regulation (using existing statutory and 

regulatory authority). In addition, we 

considered developing standard 

parameters applicable to claiming for all 

school-based Medicaid administration 

and transportation costs. However, we 

attempted, by issuing the May 2003 

Medicaid School-Based Administrative 

Claiming Guide, to provide specific 

guidance on the requirements for 

claming costs related to school-based 

activities. In the end, we ultimately 

rejected these alternatives because the 

intervening years have proven that such 

activities cannot be adequately 

regulated or overseen. 

We determined that the rulemaking 

process was the most effective method 

of implementing these policies because 

the rulemaking process was the best 

way to inform affected parties, allow for 

public input, and make clear that the 

requirements set forth are uniform, fair 

and consistent with the underlying 

statutory intent. 

A. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in the table below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this final rule. This table 

provides our best estimate of the 

decrease in Federal Medicaid outlays 

resulting from the elimination of 

reimbursement for school-based 

administration and certain 

transportation costs that will be 

implemented by this final rule. The sum 

total of these expenditures is classified 

as savings in Federal Medicaid 

spending. 

TABLE II.—ACCOUNTING STATEMENT

Category Transfers 

Accounting Statement: Classification of Estimated Expenditures, From Fiscal Year 2009 to Fiscal Year 2013 (in millions) 

Negative Transfer-Estimated decrease in expenditures: 

Annualized Monetized Transfers ...................... 3% Units Discount Rate ................................... 7% Units Discount Rate 

$721 .................................................................. $718 

From Whom To Whom? ................................... Federal Government to States 

List of Subjects 

42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid Privacy 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 440 

Grant programs—health, Medicaid. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

Chapter IV as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

■ 2. Section 431.53 is revised to read as 

follows: 

§ 431.53 Assurance of Transportation. 

(a) A State plan must—

(1) Specify that the Medicaid agency 

will ensure necessary transportation for 

recipients to and from providers; and 

(2) Describe the methods that the 

agency will use to meet this 

requirement. 

(b) For purposes of this assurance, 

necessary transportation does not 

include transportation of school-age 

children between home and school. 

PART 433—STATE FISCAL 

ADMINISTRATION 

■ 3. The authority citation for part 433 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

■ 4. Part 433 is amended by adding a 

new § 433.20 to read as follows: 

§ 433.20 Rates of FFP for Administration: 

Reimbursement for School-Based 

Administrative Expenditures. 

Federal financial participation under 

Medicaid is not available for 

expenditures for administrative 

activities by school employees, school 

contractors, or anyone under the control 

of a public or private educational 

institution. 


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Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Rules and Regulations 73651 

PART 440—SERVICES: GENERAL 

PROVISIONS 

■ 5. The authority citation for part 440 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

■ 6. Section 440.170(a)(1) is revised to 

read as follows: 

§ 440.170 Any other medical care or 

remedial care recognized under State law 

and specified by the Secretary. 

(a) Transportation. (1) 

‘‘Transportation’’ includes expenses for 

transportation and other related travel 

expenses determined to be necessary by 

the agency to secure medical 

examinations and treatment for a 

recipient. Such transportation does not 

include transportation of school-age 

children from home to school and back. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: December 13, 2007. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: December 14, 2007. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 07–6220 Filed 12–21–07; 10:00 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

44 CFR Part 64 

[Docket No. FEMA–8005] 

Suspension of Community Eligibility 

AGENCY: Federal Emergency 

Management Agency, DHS. 

ACTION: Final rule. 

SUMMARY: This rule identifies 

communities, where the sale of flood 

insurance has been authorized under 

the National Flood Insurance Program 

(NFIP), that are scheduled for 

suspension on the effective dates listed 

within this rule because of 

noncompliance with the floodplain 

management requirements of the 

program. If the Federal Emergency 

Management Agency (FEMA) receives 

documentation that the community has 

adopted the required floodplain 

management measures prior to the 

effective suspension date given in this 

rule, the suspension will not occur and 

a notice of this will be provided by 

publication in the Federal Register on a 

subsequent date. 

EFFECTIVE DATES: The effective date of 

each community’s scheduled 

suspension is the third date (‘‘Susp.’’) 

listed in the third column of the 

following tables. 

ADDRESSES: If you want to determine 

whether a particular community was 

suspended on the suspension date, 

contact the appropriate FEMA Regional 

Office. 

FOR FURTHER INFORMATION CONTACT: 

David Stearrett, Mitigation Directorate, 

Federal Emergency Management 

Agency, 500 C Street SW., Washington, 

DC 20472, (202) 646–2953. 

SUPPLEMENTARY INFORMATION: The NFIP 

enables property owners to purchase 

flood insurance which is generally not 

otherwise available. In return, 

communities agree to adopt and 

administer local floodplain management 

aimed at protecting lives and new 

construction from future flooding. 

Section 1315 of the National Flood 

Insurance Act of 1968, as amended, 42 

U.S.C. 4022, prohibits flood insurance 

coverage as authorized under the NFIP, 

42 U.S.C. 4001 et seq.; unless an 

appropriate public body adopts 

adequate floodplain management 

measures with effective enforcement 

measures. The communities listed in 

this document no longer meet that 

statutory requirement for compliance 

with program regulations, 44 CFR part 

59. Accordingly, the communities will 

be suspended on the effective date in 

the third column. As of that date, flood 

insurance will no longer be available in 

the community. However, some of these 

communities may adopt and submit the 

required documentation of legally 

enforceable floodplain management 

measures after this rule is published but 

prior to the actual suspension date. 

These communities will not be 

suspended and will continue their 

eligibility for the sale of insurance. A 

notice withdrawing the suspension of 

the communities will be published in 

the Federal Register. 

In addition, FEMA has identified the 

Special Flood Hazard Areas (SFHAs) in 

these communities by publishing a 

Flood Insurance Rate Map (FIRM). The 

date of the FIRM, if one has been 

published, is indicated in the fourth 

column of the table. No direct Federal 

financial assistance (except assistance 

pursuant to the Robert T. Stafford 

Disaster Relief and Emergency 

Assistance Act not in connection with a 

flood) may legally be provided for 

construction or acquisition of buildings 

in identified SFHAs for communities 

not participating in the NFIP and 

identified for more than a year, on 

FEMA’s initial flood insurance map of 

the community as having flood-prone 

areas (section 202(a) of the Flood 

Disaster Protection Act of 1973, 42 

U.S.C. 4106(a), as amended). This 

prohibition against certain types of 

Federal assistance becomes effective for 

the communities listed on the date 

shown in the last column. The 

Administrator finds that notice and 

public comment under 5 U.S.C. 553(b) 

are impracticable and unnecessary 

because communities listed in this final 

rule have been adequately notified. 

Each community receives 6-month, 

90-day, and 30-day notification letters 

addressed to the Chief Executive Officer 

stating that the community will be 

suspended unless the required 

floodplain management measures are 

met prior to the effective suspension 

date. Since these notifications were 

made, this final rule may take effect 

within less than 30 days. 

National Environmental Policy Act. 

This rule is categorically excluded from 

the requirements of 44 CFR part 10, 

Environmental Considerations. No 

environmental impact assessment has 

been prepared. 

Regulatory Flexibility Act. The 

Administrator has determined that this 

rule is exempt from the requirements of 

the Regulatory Flexibility Act because 

the National Flood Insurance Act of 

1968, as amended, 42 U.S.C. 4022, 

prohibits flood insurance coverage 

unless an appropriate public body 

adopts adequate floodplain management 

measures with effective enforcement 

measures. The communities listed no 

longer comply with the statutory 

requirements, and after the effective 

date, flood insurance will no longer be 

available in the communities unless 

remedial action takes place. 

Regulatory Classification. This final 

rule is not a significant regulatory action 

under the criteria of section 3(f) of 

Executive Order 12866 of September 30, 

1993, Regulatory Planning and Review, 

58 FR 51735. 

Executive Order 13132, Federalism. 

This rule involves no policies that have 

federalism implications under Executive 

Order 13132. 

Executive Order 12988, Civil Justice 

Reform. This rule meets the applicable 

standards of Executive Order 12988. 

Paperwork Reduction Act. This rule 

does not involve any collection of 

information for purposes of the 

Paperwork Reduction Act, 44 U.S.C. 

3501 et seq. 

List of Subjects in 44 CFR Part 64 

Flood insurance, Floodplains. 


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