[Federal Register Volume 75, Number 108 (Monday, June 7, 2010)]
[Notices]
[Pages 32182-32183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-13680]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES


Medicaid Program: Proposed Implementation of Section 614 of the 
Children's Health Insurance Program Reauthorization Act of 2009 for 
Adjustments to the Federal Medical Assistance Percentage for Medicaid 
Federal Matching Funds

AGENCY: Office of the Secretary, Department of Health and Human 
Services.

ACTION: Notice with comment period.

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SUMMARY: For purposes of Title XIX (Medicaid) of the Social Security 
Act, the Federal Medical Assistance Percentage (FMAP), defined in 
section 1905(b) of the Social Security Act, for each state beginning 
with fiscal year 2006 is subject to adjustment pursuant to section 614 
of the Children's Health Insurance Program Reauthorization Act of 2009 
(CHIPRA), Public Law 111-3. Section 614 provides for a recalculation of 
the FMAP disregarding identifiable significantly disproportionate 
employer pension or insurance fund contributions for a state. These 
contributions, when counted, increase state personal income and, by 
operation of the statutory formula to calculate the FMAP, would 
decrease the FMAP for the state. This notice announces the proposed 
methodology that the U.S. Department of Health and Human Services will 
use to determine the need for, and amount of, any such recalculation of 
the FMAP for a state.

DATES: Comment Date: To be assured consideration, comment must be 
received at the address provided below, no later than 5 p.m. EST on 
July 7, 2010.

ADDRESSES: Because of staff and resource limitations, we can only 
accept comments by regular mail. You may mail written comments (one 
original and one copy) to the following address only: Department of 
Health and Human Services, Room 447D, Attention: FMAP Adjustment 
Notice--CHIPRA, 200 Independence Ave., SW., Washington, DC 20201.
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this notice with comment period to assist us in 
fully considering issues and developing policies. Please provide a 
reference to the section on which you choose to comment.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 1905(b) of the Social Security Act defines the Federal 
Medical Assistance Percentage (FMAP), which is used to determine the 
share of federal matching funds paid to each state for medical 
assistance payments under an approved Medicaid State plan under Title 
XIX of the Social Security Act. These FMAP rates are also used to 
determine federal matching fund rates for state expenditures for 
assistance payments under certain social service programs under Title 
IV of the Social Security Act and for child health assistance 
expenditures under the Children's Health Insurance Program under title 
XXI of the Social Security Act. In other Federal Register issuances, we 
have addressed changes to these FMAP rates required under the American 
Recovery and Reinvestment Act of 2009 (Pub. L. 111-5).
    This notice addresses adjustments to the FMAP rates that are 
applicable only to the Medicaid program and required by Section 614 of 
the Children's Health Insurance Program Reauthorization Act of 2009 
(CHIPRA). Section 614 specifies that certain significantly 
disproportionate employer pension or insurance fund contributions shall 
be disregarded when computing the per capita income used to calculate 
the FMAP. The statutory formula for calculating the FMAP is based on 
the ratio of the state's per capita income to the per capita income of 
the entire United States. Under this formula, states with higher per 
capita income levels could have lower FMAP rates than states with lower 
per capita income levels. Significantly disproportionate employer 
pension or insurance fund contributions increase state personal income 
and, by operation of the statutory formula, could result in lower FMAPs 
than if those contributions were disregarded. CHIPRA requires 
adjustments to the Fiscal Year 2006

[[Page 32183]]

(FY06) through Fiscal Year 2010 (FY10) Medicaid FMAP rates and to any 
future FMAP calculation.

B. Calculation of the FMAP Adjustment under CHIPRA

    Section 614 of CHIPRA requires that the Title XIX Medicaid FMAP 
shall be adjusted for any states that had significantly 
disproportionate employer pension and insurance fund contributions. A 
significantly disproportionate employer contribution is defined as any 
identifiable employer contribution towards pension or other employee 
insurance funds that is estimated to accrue to residents of such state 
for a calendar year if the increase exceeds 25 percent of the total 
increase in state personal income. The personal income data set 
originally used in calculating FMAP rates shall be used for making this 
adjustment to the FMAP rates.
    The required adjustment is a recalculation of the FMAP rate 
disregarding any significantly disproportionate employer pension or 
insurance fund contribution in computing the state per capita income, 
but not disregarding such contributions in computing the United States 
per capita income used in the FMAP calculation. Section 614(c) provides 
that in no case shall a state have its FMAP reduced because of the 
application of this disregard.
    Section 614(b)(3) specifies a special adjustment for negative 
growth in state personal income. In that instance, for the purposes of 
calculating the FMAP for a calendar year, an employer pension and 
insurance fund contribution shall be disregarded to the extent that it 
exceeds 125 percent of the amount of employer contribution in the 
previous calendar year. The methodology to implement this provision 
will be addressed in a future Federal Register notice.

C. Methodology Utilized in the Calculation of the Adjustment to the 
Medicaid FMAP

    This Notice announces the methodology that the U.S. Department of 
Health and Human Services (HHS) proposes to use in implementing the 
employer contribution disregard required by Section 614 of CHIPRA. The 
proposed approach reflects the absence of a federal source of reliable 
and timely data on pension and insurance contributions by individual 
employer and state.
    We propose to identify significantly disproportionate employer 
pension or insurance contributions for a state by reviewing 
contributions identified by the state. We believe that states may have 
greater access to timely and relevant data on such contributions than 
is available from federal data sources. We would request that any state 
that believes an individual employer has made a significantly 
disproportionate employer or insurance contribution provide data on 
that individual employer contribution to HHS. The state may submit 
official audited financial statements for the employer for the year of 
the contribution (starting with the year 2003) and the prior year. If 
the state does not submit official audited financial statements for the 
employer, the state may submit other evidence that the increase in the 
employer's contribution is likely to exceed 25 percent of the increase 
in the state's personal income in that year.
    After a state submits written notification that such a contribution 
occurred, HHS will verify the state's data. As part of this 
verification process, HHS will search the Security Exchange Commission 
(SEC) filings or the Internal Revenue Service (IRS) 5500 Annual Return/
Report of Employee Benefit Plan database to find the employer's 
contributions for the relevant two-year period. If HHS is unable to 
verify the state's submitted data, no FMAP adjustment will be made 
after the state's data for an employer is verified, HHS will allocate 
employer contributions in both years to the state according to the 
methodology used by the Department of Commerce Bureau of Economic 
Analysis. Under that methodology, employer contributions to pension and 
insurance funds are distributed according to state wages and salaries 
by the employer's industry subsector. Then, HHS will determine whether 
the state increase in the employer contribution exceeds the trigger of 
25 percent of the increase in total state personal income.
    If the employer contribution is significantly disproportionate, HHS 
will disregard the state-allocated contribution, i.e., subtract it from 
the state's personal income in that year. HHS will calculate the FMAP 
adjustment for the state using the revised state per capita income 
based on the newly calculated state personal income. Since the FMAP 
calculation involves the average per capita income for three years, the 
FMAP adjustment will be calculated for each fiscal year affected by the 
state's revised per capita income. For instance, a significantly 
disproportionate employer contribution in 2003 would affect the FMAPs 
for FY06 (based on state per capita income for calendar years 2001, 
2002, and 2003), FY07 (based on state per capita income for calendar 
years 2002, 2003, and 2004), and FY08 (based on state per capita income 
for calendar years 2003, 2004, and 2005).
    HHS will release a final Notice of the CHIPRA methodology after 
receipt and review of comments to this Notice. Following the release of 
the final Notice, states may submit data on disproportionate employer 
contributions made between 2003 and 2008 to HHS by the end of FY 2010. 
Future submissions of data shall be submitted by the end of the next 
fiscal year following the year end of the employer's annual financial 
statement that includes the disproportionate employer contribution.
    To summarize this methodology, after receipt of a state submission, 
HHS will verify the employer contributions from SEC filings or IRS 5500 
reports for the year of the contribution and the prior year. If the 
employer contributions are verified, HHS will allocate the employer 
contributions for the state for both years and determine whether the 
state increase in the employer contribution exceeds the trigger of 25 
percent of the increase in the state's personal income. If the employer 
contribution meets the definition of significantly disproportionate by 
exceeding the trigger, HHS will recalculate the FMAP rates for the 
corresponding fiscal years. The Centers for Medicare & Medicaid 
Services (CMS) will then calculate the changes in federal medical 
assistance payments resulting from the adjusted FMAP rates for the 
state's applicable fiscal years. If HHS is unable to verify the state's 
submitted data, then no FMAP adjustment will be made.
    In addition to comments on the proposed methodology, we request 
comments on how prevalent significantly disproportionate employer 
contributions to pension or insurance funds may be in a particular 
state or industry and whether a state may currently qualify for this 
adjustment.
    Effective Dates: The adjusted percentages will be effective under 
title XIX of the Social Security Act for fiscal years 2006 and beyond, 
beginning October 1, 2005.

FOR FURTHER INFORMATION CONTACT: Rose Chu or Thomas Musco, Office of 
Health Policy, Office of the Assistant Secretary for Planning and 
Evaluation, Room 447D, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, (202) 690-6870.

    Dated: May 18, 2010.
 Kathleen Sebelius,
Secretary.
[FR Doc. 2010-13680 Filed 6-4-10; 8:45 am]
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