FR Doc 05-1139

[Federal Register: January 19, 2005 (Volume 70, Number 12)]
[Notices]
[Page 3036-3044]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19ja05-67]

[[Page 3036]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2230-NC]

State Children's Health Insurance Program (SCHIP); Redistribution
of Unexpended SCHIP Funds From the Appropriation for Fiscal Year 2002

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

ACTION: Notice with comment period.

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SUMMARY: This notice with comment period describes the procedure for
redistribution of States' unexpended Federal fiscal year (FY) 2002
SCHIP allotments remaining at the end of FY 2004 to those States that
fully expended such allotments. These redistributed allotments will be
available through the end of FY 2005 (September 30, 2005).

DATES: Comment Date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on February 18, 2005.
Effective Date: January 19, 2005.

ADDRESSES: In commenting, please refer to file code CMS-2230-NC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of three ways (no duplicates,
please):
1. Electronically. You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments
(attachments should be in

Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft
Word).
2. By mail. You may mail written comments (one original and two
copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-2230-NC, P.O. Box 8010, Baltimore, MD
21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members.
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD
21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

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

SUPPLEMENTARY INFORMATION:
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. You can assist us by
referencing the file code CMS-2230-NC and the specific ``issue
identifier'' that precedes the section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. CMS posts all electronic
comments received before the close of the comment period on its public
Web site as soon as possible after they have been received. Hard copy
comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, at the headquarters of the Centers for
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore,
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4
p.m. To schedule an appointment to view public comments, phone 1-800-
743-3951.
This Federal Register document is available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.gpoaccess.gov/fr/index.html
.

I. Background

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

A. Extension of Availability and Redistribution of SCHIP Fiscal Year
1998 Through 2001 Allotments

Title XXI of the Social Security Act (the Act) sets forth the State
Children's Health Insurance Program (SCHIP) to enable States, the
District of Columbia, and specified Commonwealths and Territories to
initiate and expand health insurance coverage to uninsured, low-income
children. In this notice, unless otherwise indicated, the terms
``State'' and ``States'' refer to any or all of the 50 States, the
District of Columbia, and the Commonwealths and Territories. States may
implement SCHIP through a separate child health program under title XXI
of the Act, an expanded program under title XIX of the Act, or a
combination of both.
Under section 2104(e) of the Act, the SCHIP allotments for a
Federal fiscal year are available to match expenditures under an
approved State child health plan for an initial 3-fiscal year ``period
of availability,'' including the fiscal year for which the allotment
was provided. After the initial period of availability, the amount of
unspent allotments are reallotted and continue to be available during a
subsequent period of availability, specified in SCHIP statute. With the
exception described below for the allotments made in FYs 1998 through
2001, allotments that are unexpended at the end of the initial 3-year
period of availability would be redistributed from the States that did
not fully spend such allotments to States that fully spent their
allotments for that fiscal year.
The Medicare, Medicaid and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), enacted as part of Pub. L. 106-554 on
December 21, 2000, amended title XXI of the Act in part by establishing
requirements for a subsequent extended period of availability with
respect to the amounts of States' FY 1998 and FY 1999 allotments that
were unspent during the initial 3-year period of availability. Under
the BIPA amendments, the subsequent period of availability (after the
initial 3-year period of availability) for States' unspent FY 1998 and
1999 allotments was extended to the end of FY 2002.
Section 1 of the Extension of Availability of SCHIP Allotments Act,
Pub. L. 108-74, enacted on August 15, 2003, amended title XXI of the
Act to establish further requirements for the subsequent period of
availability associated with the unexpended amounts of States' FYs
1998, 1999, 2000, and 2001 allotments during the initial 3-year period
of availability, or

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subsequent period of availability, relating to those fiscal years.
Specifically, Pub. L. 108-74 amended section 2104(g) of the Act to
extend the subsequent period of availability associated with the
allotments and redistribution of allotments for FYs 1998 through 2000
through the end of fiscal year 2004. Pub. L. 108-74 also extended the
subsequent period of availability for the redistributed and extended FY
2001 allotments through the end of fiscal year 2005.
As amended by Pub. L. 108-74, section 2104(g) of the Act prescribes
a methodology and process that includes the retention of certain
amounts of unspent FY 2000 and FY 2001 allotments that would remain
available to the States that did not fully expend their FY 2000 or FY
2001 allotments (retained allotments), and the redistribution of
unspent FY 2000 or FY 2001 allotments that would not be retained but
which would be redistributed to those other States that fully spent
their FY 2000 or FY 2001 allotments (redistributed allotments).

B. Availability and Redistribution of SCHIP Fiscal Year 2002 Allotments

As discussed previously, section 2104(e) of the Act states that
amounts allotted to a State shall remain available for expenditures by
the State through the end of the second succeeding fiscal year, except
that amounts reallotted to a State are available for expenditure by the
State through the end of the fiscal year in which they are reallotted.
Section 2104(f) of the Act requires the Secretary to ``determine an
appropriate procedure for redistribution of allotments'' from States
that have not expended the allotment for the fiscal year to States that
have fully expended their allotments. As discussed previously, section
2104(g) of the Act, as added by BIPA and amended by Pub. L. 108-74,
sets forth the process for reallotting unexpended amounts of SCHIP
allotments for FY 1998 through FY 2001 (as well as for the extension of
the period of time to expend allotments). Section 2104(g) of the Act
did not address the treatment of States' unexpended SCHIP allotments
for FY 2002 and the following fiscal years. Under sections 2104(e) and
(f) of the Act, we are required to establish a procedure that provides
for the treatment of States' unused SCHIP allotments for FY 2002 and
following fiscal years. In particular, applying section 2104(f) of the
Act, following the initial 3-year period of availability referenced in
section 2104(e) of the Act, the Secretary must determine an
``appropriate procedure for redistribution'' of the amounts of States'
FY 2002 SCHIP allotments from States that did not expend such
allotments during the 3-year period of availability for such fiscal
year (that is, FY 2002 through FY 2004) to States that fully expended
their FY 2002 allotments during such 3-year period of availability.

C. Expenditures, Authority for Qualifying States To Use Available SCHIP
Allotments for Medicaid Expenditures, and Ordering of Elections

Under section 2105(a)(1)(A) through (D) and (a)(2) of the Act and
before enactment of Pub. L. 108-74, only Federal payments for the
following Medicaid and SCHIP expenditures were applied against States'
available SCHIP allotments in the following order: (1) Medical
assistance provided under title XIX (Medicaid) at the SCHIP enhanced
Federal medical assistance percentage (FMAP) matching rate with respect
to the States' Medicaid SCHIP expansion population; (2) medical
assistance provided on behalf of a child during presumptive eligibility
under section 1920A of the Act (these funds are matched at the regular
Medicaid FMAP rate); (3) child health assistance to targeted low income
children that meets minimum benefit requirements under SCHIP; and (4)
certain expenditures in the SCHIP that are subject to the 10-Percent
Limit on non-primary expenditures (including other child health
assistance for targeted low-income children, health services
initiatives, outreach, and administrative costs).
However, section 1(b) of Pub. L. 108-74, as amended by Pub. L. 108-
127, added new section 2105(g) to the Act under which certain
``Qualifying States'' that met prescribed criteria may elect to use up
to 20 percent of any of the States' available SCHIP allotments for FY
1998, 1999, 2000, or 2001 as additional Federal financial participation
for expenditures under their Medicaid program, instead of expenditures
under the State's SCHIP. As described in the Federal Register published
on July 23, 2004 (69 FR 44013), if a Qualified State submits both 20
percent allowance expenditures and other ``regular'' SCHIP expenditures
at the same time in a quarter, the 20 percent allowance expenditures
will be applied first against the available fiscal year reallotments.
However, the 20 percent allowance expenditures may be applied only
against the specified available fiscal year allotment funds upon which
the 20 percent allowances were based.

II. Provisions of This Notice

[If you choose to comment on issues in this section, please include
the caption ``Provisions of This Notice'' at the beginning of your
comments.]
The purpose of this notice with comment period is to set forth our
procedure for redistributing FY 2002 unexpended allotments. This notice
applies solely to the redistribution of FY 2002 unexpended allotments.
We anticipate publishing regular notices on redistribution procedures
for FY 2003 and subsequent years, unless Congress otherwise amends the
Act to set forth procedures for redistributing unexpended allotments.

A. Status of Extended Availability and Redistribution of SCHIP Fiscal
Year 1998 Through 2001 Allotments and Qualifying State Provisions

The implementation by CMS of the provisions of Pub. L. 108-74,
including the provisions for extension of unexpended FY 1998 and FY
1999 redistributed and/or retained allotments, the methodologies for
retention and/or redistribution of SCHIP allotments for FY 2000 and FY
2001, and the qualifying States provisions, was described in the
Federal Register published on July 23, 2004 (69 FR 44013). The SCHIP
statute has not been amended to address further availability of the
SCHIP allotments for FY 1998 through FY 2000. Therefore, the unexpended
amounts of such allotments became unavailable to States following the
end of FY 2004. Neither has the SCHIP statute been amended with respect
to the extended availability and redistribution of the FY 2001
allotments. Under the existing SCHIP statute, the FY 2001 reallotments
are available to States only until the end of FY 2005. Finally, the
SCHIP statute has not been amended with respect to the Qualifying State
provisions under section 2105(g) of the Act. The FY 1998 through 2000
allotment funds became unavailable to States at the end of FY 2004.
Since the 20 percent allowances related to those years are contingent
on the actual availability of the allotments for those years, the FY
1998 through FY 2000 20 percent allowances are not available to the
Qualified States, effective with FY 2005. Therefore, only the amounts
of the 20 percent allowances related to the FY 2001 allotment funds,
which are available in FY 2005, will remain available through the end
of FY 2005.

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B. Redistribution of the FY 2002 SCHIP Allotments

1. Current Law
Under section 2104(e) of the Act, the amount of a State's allotment
for a fiscal year is available to the State for matching allowable
State expenditures for an initial 3-year period of availability: the
fiscal year for which the funds are allotted, and the two following
fiscal years. For the FY 2002 SCHIP allotments, the initial 3-year
period of availability is FY 2002 through FY 2004 (October 1, 2002
through September 30, 2004). With respect to the FY 2002 SCHIP
allotments, the initial 3-year period of availability (FY 2002 through
FY 2004) ended with the end of FY 2004 on September 30, 2004; at that
time, the unexpended FY 2002 allotments became unavailable to those
States that did not fully expend such allotments. That is, for such
States there is no provision under the current SCHIP statute for the
retention of any portion of the unexpended amounts of the SCHIP FY 2002
allotments (or the allotments for the following fiscal years).
Under section 2104(f) of the Act, the Secretary must determine an
appropriate procedure to redistribute the entire amount of States'
unexpended SCHIP allotments following the end of the related initial 3-
year period of availability only to those States that fully expended
such allotments by the end of the initial 3-year period of availability
(referred to in this notice as the redistribution States). In
determining the appropriate procedure for reallocating the unused FY
2002 allotments, our primary consideration was to address, to the
greatest extent possible, any projected State shortfalls for each of
the redistribution States that would occur in FY 2005, the fiscal year
in which the FY 2002 redistribution would occur. We determined the
shortfalls by considering for each redistribution State: (1) The
projected SCHIP-related expenditures in FY 2005, as reflected in the
State's November 15, 2004 quarterly budget submission (Forms CMS-37
and/or CMS-21B), and (2) the total SCHIP allotments available in FY
2005 for the State, exclusive of any FY 2002 redistribution. For a
redistribution State whose FY 2005 projected SCHIP-related expenditures
are greater than its total SCHIP allotments available in FY 2005, the
difference between the amounts under (1) and (2) for a State represents
that State's ``shortfall,'' for FY 2005.
In the FY 2002 redistribution described in this notice, only after
accounting for the shortfall amounts of the redistribution States will
we further redistribute any remaining unexpended FY 2002 allotments to
the redistribution States. For purposes of consistency with previous
fiscal year redistribution methodologies, we based the redistribution
of the remaining unexpended FY 2002 allotments (after accounting for
the total shortfalls for each redistribution State) on the same
redistribution methodology as set forth in the BIPA legislation
regarding section 2104(g)(1) of the Act. Specifically, we allocated the
remaining amounts of the unexpended FY 2002 allotments based on the
difference between each of the redistribution States' total SCHIP-
related expenditures for the 3-year period of availability related to
FY 2002 (that is, FY 2002 through FY 2004) and the State's FY 2002
allotment. The allocation basis is the percentage determined by
dividing this difference for each redistribution State (including those
redistribution States with a shortfall) by the total of such
differences for all redistribution States.
2. Ordering of Expenditures
In applying State's expenditures against their available SCHIP
allotments, we follow the order of expenditures as provided under
section 2105(a)(1)(A) through (D) and (a)(2) of the Act as follows:
(1) Title XIX SCHIP-related expenditures for which payment is made
at the enhanced Federal medical assistance percentage (FMAP) (section
2105(a)(1)(A) of the Act);
(2) Title XIX expenditures for medical assistance provided during a
presumptive eligibility period under section 1920A of the Act (section
2105(a)(1)(B) of the Act);
(3) Child health assistance for targeted low-income children in the
form of providing health benefits coverage that meets the requirements
of section 2103 (section 2105(a)(1)(C) of the Act);
(4) Expenditures listed in section 2105(a)(1)(D)(i) through (iv) of
the Act, respectively: Other child health assistance for targeted low-
income children; health services initiatives under the plan for
improving the health of children (including targeted low-income
children and other low-income children); expenditures for outreach
activities; and administration expenditures.
As discussed previously, Pub. L. 108-74, as amended by Pub. L. 108-
127, also added new section 2105(g) to the Act, under which a
``Qualifying State'' meeting specified criteria could, at its option,
elect to use up to 20 percent of any of the State's available SCHIP
allotments for FY 1998, 1999, 2000, or 2001 for payments under the
State's Medicaid program, instead of expenditures under the State's
SCHIP. As described in the Federal Register published on July 23, 2004
(69 FR 44013), if a Qualified State submits both 20 percent allowance
expenditures and other ``regular'' SCHIP expenditures at the same time
in a quarter (based on the allotment priority order they both must
apply against any available fiscal year allotments), the 20 percent
allowance expenditures will be applied first against any remaining 20
percent allowance allotments amounts.
In general, in accordance with the ordering of allotments and
expenditures provisions, the expenditures of States eligible for the FY
2002 redistribution will be applied against the FY 2002 redistribution
amounts.
3. Ordering Election for FY 2002 Redistributed Amounts
We believe that the States eligible for the FY 2002 redistribution
should be afforded the flexibility to decide whether the FY 2002
redistributed funds would be used before or after other available
allotment funds to allow them to optimize the use of such funds.
Therefore, we offered States that will receive FY 2002 redistributed
amounts the option of choosing the order of when the funds would be
expended during FY 2005 among the other available allotments during FY
2005. In the previous redistributions for the unexpended FY 1998, FY
1999, and FY 2000 allotments, the redistribution States had the same
ordering of allotment choice for the redistributed allotment.
An FY 2002 redistribution State (a State that has fully expended
its FY 2002 allotment) may have a maximum of five possible choices for
the order of the application of FY 2002 redistribution funds in FY
2005, depending on what other fiscal year allotments are available to
the State in FY 2005: (1) before FY 2001 retained allotments; (2) after
FY 2001 retained allotments and before FY 2003 allotments; (3) after FY
2003 and before FY 2004 allotments; (4) after FY 2004 allotments and
before FY 2005 allotments; and (5) after FY 2005 allotments.
Note, with respect to the unexpended FY 2001 allotments at the end
of FY 2003, the FY 2001 ``redistribution States'' also had the option
of selecting the ordering of the FY 2001 redistributed allotments which
were provided to such States in FY 2004. Now, with respect to the FY
2002 redistributed allotments, the FY 2002 redistribution States that
also had FY

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2001 redistributed amounts have the option of ordering the FY 2002
redistributed allotments in reference to their FY 2001 redistributed
allotments ordering selections.
As specified in section 2104(e) of the Act, the FY 2002
redistributed amounts for a fiscal year will be available for allowable
SCHIP expenditures reported by the redistribution States through the
end of the fiscal year in which such amounts are redistributed.
Therefore, for FY 2002, the redistributed amounts will be available
through September 30, 2005 (the end of FY 2005).
As part of the redistribution process, prior to making FY 2002
redistribution funds actually available, we contact all of the States
eligible for the FY 2002 redistribution in order to explain the
provisions of this notice and to obtain their ordering elections for
the FY 2002 redistributed amounts. In this regard, all of the
redistribution States must provide their decision to us regarding their
elections for the ordering of the FY 2002 redistributed allotments.
This is the same process we have used in prior years for obtaining
prior fiscal year redistribution States' ordering elections. Consistent
with the past fiscal year redistribution processes, under the FY 2002
redistribution methodology, once a State chooses the order of the FY
2002 redistribution amounts, it cannot change that order at a later
date. We then include the States' FY 2002 redistributed amounts and
their ordering elections on Form CMS-21C (Allocation of Title XIX and
Title XXI Expenditures to the SCHIP Fiscal Year Allotment). Form CMS-
21C is used for tracking States' expenditures against their available
SCHIP allotments. The FY 2002 redistributed allotment amounts will be
automatically entered on this form, and the Medicaid and SCHIP
expenditure system will automatically apply expenditures reported on
the quarterly expenditure reports for the period of October 1, 2004
through September 30, 2005 against the FY 2002 redistributed amounts
available through September 30, 2005 and the other SCHIP allotments
available in FY 2005.
4. Determination of FY 2002 Redistribution Amounts
In Table 2 of this notice, we set forth the amount of States'
unexpended FY 2002 allotments as reflected by the States' expenditure
submissions through November 30, 2004. These amounts are used in
determining the States' FY 2002 redistribution amounts. We established
the amount of States' unexpended FY 2002 allotments at the end of the
initial 3-year period of availability based on the SCHIP-related
expenditures, as reported and certified by States to us on the
quarterly expenditure reports (Form CMS-64 and/or Form CMS-21) by
November 30, 2004. These expenditures are applied and tracked against
the States' FY 2002 allotments (as published in the Federal Register on
October 26, 2001 (66 FR 54246), and on November 13, 2001 (correction
notice (66 FR 56902)), and other available allotments, on Form CMS-21C,
Allocation of the Title XIX and Title XXI Expenditures to SCHIP Fiscal
Year Allotment.
By November 30, 2004, all States reported and certified their FY
2004 fourth quarter expenditures (representing the last quarter of the
3-year period of availability for FY 2002). Expenditures reflected in
Table 2 below were taken from our Medicaid Budget and Expenditure
System/State Children's Health Program Budget and Expenditure System
(MBES/CBES) ``masterfile'', which represents the State's official
certified SCHIP and Medicaid expenditure reporting system records
related to FY 2002 allotments. Based on States' expenditure reports
submitted and certified through November 30, 2004, the total amounts of
States' FY 2002 SCHIP allotments that were unexpended at the end of the
3-year period ending September 30, 2004, is $642,617,724.
5. Application of the Maintenance of Effort Provision
The unexpended FY 2002 allotments reflect the application of the
``maintenance of effort'' (MOE) provisions specified in the SCHIP
statute at section 2105(d)(2) of the Act. Under section 2105(d)(2) of
the Act, the amount of certain States' allotments in a fiscal year,
beginning with fiscal year 1999, is reduced if the State does not meet
specified spending levels on children's health insurance. There were no
MOE reductions necessary with respect to the FY 2002 allotments.
6. Redistribution for the Commonwealths and Territories for FY 2002
Allocations
Section 2104(g)(1)(A)(ii) of the Act specifies the methodology for
determining the FY 1998 through FY 2001 redistributed allotments for
the Commonwealths and Territories that fully expended their SCHIP
allotments related to those fiscal years. We applied the same
methodology for purposes of determining an appropriate procedure under
section 2104(f) of the Act, to redistribute the unexpended FY 2002
allotments remaining at the end of FY 2004. Under this procedure, the
total FY 2002 allotment amount available for redistribution to the
Commonwealths and Territories is determined by multiplying the total
amount of the unexpended FY 2002 allotments available for
redistribution nationally by 1.05 percent. For the FY 2002
redistribution calculation, this amount is $6,747,486 (1.05 percent of
$642,617,724). Only those Commonwealths and Territories that have fully
expended their FY 2002 allotments will receive an allocation of this
amount, equal to a specified percentage of the 1.05 percent amount;
with respect to the FY 2002 allotments, all 5 Commonwealths and
Territories fully expended such allotments by the end of FY 2004. This
specified percentage is the amount determined by dividing the
respective SCHIP FY 2002 allotment for each Commonwealth or Territory
(that has fully expended its FY 2002 allotment) by the total of all the
FY 2002 allotments for those Commonwealths and Territories that fully
expended their FY 2002 allotments.
7. Redistribution for the States and the District of Columbia for FY
2002 Allocations
Section 2104(f) of the Act requires the Secretary to determine an
appropriate procedure for calculating the redistribution amounts for
each of those States and the District of Columbia that have fully
expended their allotments. This notice sets forth the procedure for the
FY 2002 redistribution. The attached tables and table descriptions
provide detailed information on how the reallotment amounts are
calculated. Generally, the FY 2002 redistribution amounts for the 50
States and the District of Columbia were determined as follows:
First, the total amount available for redistribution nationally was
established by determining the total amount of unexpended FY 2002
allotments remaining at the end of FY 2004, as reported by the States
through November 30, 2004.
Second, the total amount available for redistribution to the States
and the District of Columbia (not including the Commonwealths and
Territories) was determined by subtracting the total of the FY 2002
redistribution amounts for the Commonwealths and Territories from the
total available nationally for redistribution.
Third, the allocation of this total amount available for
redistribution to the States and District of Columbia is determined by
determining the ``shortfall'' amounts (if any) for these redistribution
States that would occur in FY 2005, the fiscal year in which the

[[Page 3040]]

unexpended FY 2002 allotments are actually redistributed. The FY 2005
shortfall amount, described previously, was determined as the excess
(if any) of the FY 2002 redistribution States' projected FY 2005
expenditures (taken from the States' November 2004 budget quarterly
budget report submissions) over such States' total SCHIP allotments
available in FY 2005 (not including any potential FY 2002
redistribution amounts). In this regard, the total available allotments
in FY 2005 include the following: any remaining FY 2001 reallotments
carried over from FY 2004, any remaining 2003 allotments carried over
from FY 2004, any remaining 2004 allotments carried over from FY 2004,
and the FY 2005 allotments (available beginning with FY 2005).
Fourth, the amount of any unexpended FY 2002 allotments remaining
after determining and accounting for the shortfall amounts was
multiplied by a percentage specific to each FY 2002 redistribution
State. This percentage is determined for each FY 2002 redistribution
State by dividing the difference between such State's total reported
applicable expenditures for the FY 2002 3-year period of availability
and the State's FY 2002 allotment related to that period of
availability, by the total of these differences for all redistribution
States.
8. Tables for Calculating the SCHIP FY 2002 Redistributed Allotments
Following, is a description of Table 1 and Table 2, which presents
the calculation of each redistribution State's FY 2002 SCHIP
redistribution amount.
A total of $3,115,200,000 was allotted nationally for FY 2002,
representing $3,082,125,000 in allotments to the 50 States and the
District of Columbia, and $33,075,000 in allotments to the
Commonwealths and Territories. Based on the quarterly expenditure
reports, submitted and certified by November 30, 2003, 28 States fully
expended their FY 2002 allotments, 23 States and the District of
Columbia did not fully expend their FY 2002 allotments, and all 5 of
the Commonwealths and Territories fully expended their FY 2002
allotments. For the States and the District of Columbia that did not
fully expend their FY 2002 allotments, their total FY 2002 allotments
were $1,413,648,379 and the total expenditures applied against their FY
2002 allotments were $771,030,655. Therefore, the total amount of
unexpended FY 2002 allotments at the end of FY 2004 equaled
$642,617,724 ($1,413,648,379 minus $771,030,655). In addition, as
discussed above, no MOE reductions were necessary with respect to the
FY 2002 allotments. Therefore, the total amount of the FY 2002
allotments unexpended at the end of FY 2004 equaled $642,617,724
($642,617,724 plus $0 related to the MOE provision).
In accordance with the redistribution calculation for FY 2002
described above, $6,747,486 is redistributed to the five Commonwealths
and Territories, and $635,870,238 redistributed to the 28
redistribution States. The total $642,617,724 in FY 2002 redistributed
allotment amounts will remain available to these States through the end
of FY 2005.

Key to Table 1--FY 2005 Shortfall Calculation

Table 1 Presents the FY 2005 shortfall calculation for the 50
States and the District of Columbia.
Column/Description
Column A = State. Name of State, District of Columbia, the
Commonwealth or Territory. This is the only column in Table 1 that
includes Commonwealths and Territories; the shortfall calculation in
Table 1 is not applicable to the jurisdictions.
Column B = FY 2001 Retained/Redistributed Allotments Carried Over
From FY 2004. This column contains the amounts of States' FY 2001
redistributed or retained allotments carried over from FY 2004 and
available in FY 2005.
Column C = FY 2003 Allotments Carried Over From FY 2004. This
column contains the amounts of States' FY 2003 allotments carried over
from FY 2004 and available in FY 2005.
Column D = FY 2004 Allotments Carried Over From FY 2004. This
column contains the amounts of States' FY 2004 allotments carried over
from FY 2004 and available in FY 2005.
Column E = FY 2005 Allotments Initially Available Beginning FY
2005. This column contains the FY 2005 SCHIP allotments, which are
initially available in FY 2005, and were published in the Federal
Register on August 27, 2004 (69 FR 52700).
Column F = Total Available Allotments In FY 2005 Not Including FY
2002 Redistribution. This column contains the States' total allotment
amounts (not including any FY 2002 redistribution amounts) available in
FY 2005. This amount is the sum of Columns B through E.
Column G = Projected Expenditures FY 2005. This column contains the
amounts of States' projected FY 2005 SCHIP and SCHIP-related
expenditures as contained in the States' November 15, 2004 quarterly
budget submission.
Column H = Projected FY 2005 Shortfall Not Including FY 2002
Redistribution. This column contains the States' projected FY 2005
shortfall amounts, calculated as Column G minus Column F.

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Key to Table 2--Calculation of the SCHIP Redistribution of the
Unexpended Allotments for Fiscal Year: 2002

Table 2 Contains the calculation of States' FY 2002 redistribution.
Column/Description
Column A = State. Name of State, District of Columbia, the
Commonwealth or Territory.
Column B = FY 2002 Allotment. This column contains the FY 2002
SCHIP allotments for all States, which were published in the Federal
Register on October 26, 2001 (66 FR 54246) and in the correction notice
on November 13, 2001 (66 FR 56902).
Column C = Expenditures Applied Against FY 2002 Allotment. This
column contains the cumulative expenditures applied against the FY 2002
allotments, as reported and certified by all States through November
30, 2004.
Column D = Unexpended FY 2002 Allotments Or ``Redistribution.''
This column contains the amounts of unexpended FY 2002 SCHIP allotments
for States that did not fully expend the allotments during the 3-year
period of availability for FY 2002 (FYs 2002 through 2004), and is
equal to the difference between the amounts in Column B and Column C.
For States that did fully expend their FY 2002 allotments during the
period of availability, the entry in this column is ``REDISTRIBUTION.''
The MOE amount is added to the total of the amounts of the States'
unexpended FY 2002 allotments in this column at the bottom of Column D.
However, since the MOE is $0, $642,617,724 represents the total amount
available for the FY 2002 redistribution ($642,617,724, the total
unexpended FY 2002 allotments, plus $0, the MOE provision amount).
Column E = Projected FY 2005 Shortfall. This column contains the
projected ``shortfall'' amounts for the redistribution States, taken
from Column H, Table 1. If there is no projected shortfall for the
redistribution State, the entry in this column is ``NO Shortfall.'' If
the State is not a redistribution State, the entry in this column is
``na.'' For the Commonwealths and Territories, the entry in Column E is
``NA.''
Column F = For Redistribution States Only FY 2002--FY 2004
Expenditures. For the redistribution States only (States that have
fully expended their FY 2002 allotments), this column contains the
total amounts of such States' reported SCHIP/SCHIP-related expenditures
for the years FY 2002 through FY 2004, representing the FY 2002 3-year
period of availability. For those States, Commonwealths, and
Territories that did not fully expend their FY 2002 allotments during
the period of availability, the entry in Column F is ``NA.''
Column G = Redistribution States Only FY 02-04 Expenditures Minus
FY 02 Allotment. This column contains the amounts of redistribution
States' reported SCHIP/SCHIP-related expenditures for each of the years
FY 2002 through FY 2004 minus the FY 2002 allotment, calculated as the
entry in Column F minus the entry in Column B.
Column H = For Redistribution States Percent Of Total
Redistribution. This column contains each redistribution State's
redistribution percentage of the total amount available for
redistribution, calculated as the entry in Column G divided by the
total (for redistribution States only, and exclusive of the
Commonwealths and Territories) of Column G.
Column I = FY 2002 Redistributed Allotment Amounts. This column
contains the amounts of States' unexpended FY 2002 SCHIP allotments
that are being redistributed to the redistribution States in addition
to any shortfall amounts being provided to such States, calculated as
the percentage in Column H multiplied by the total additional amount
available for redistribution. For the 28 States that have fully
expended their FY 2002 allotments, the additional FY 2002
redistribution amounts totals $398,883,304. For the Commonwealths and
Territories that have fully expended their FY 2002 allotments, the
amounts in Column I represent their respective proportionate shares
(allocated based on their FY 2002 allotments) of the total amount
available for redistribution to the Commonwealths and Territories,
$6,747,486 (representing 1.05 percent of the total amount for
redistribution of $642,617,724). For those States and the District of
Columbia, that did not fully expend their FY 2002 allotments during the
3-year period of availability, the entry in Column I is ``NA.''
Column J = FY 2005 Shortfall Amount. This column contains the
shortfall amounts for the redistribution States; the amounts in this
column are the same as the entries in Column E. The total shortfall
amount is $236,986,934.
Column K = Total FY 2002 Redistribution Including FY 2005
Shortfall. For the redistribution States, this column reflects the
total FY 2002 redistribution including the FY 2005 shortfall amount,
calculated as the sum of Column I and Column J. For the States and the
District of Columbia, the total FY 2002 redistribution amount in FY
2005 is $635,870,238. For the Commonwealths and Territories, the total
FY 2002 redistribution amount in FY 2005 is $6,747,486. The total FY
2002 redistribution amount available nationally is $642,617,724.

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III. Regulatory Impact Statement

[If you choose to comment on issues in this section, please include
the caption ``Regulatory Impact Statement'' at the beginning of your
comments.]
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980 Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and benefits
of available regulatory alternatives and, if regulation is necessary,
to select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). A regulatory impact analysis (RIA)
must be prepared for major rules with economically significant effects
($100 million or more in any one year). We have determined that this
notice is not a major rule. The States' FY 2002 SCHIP allotments,
totaling $3,115,200,000 were originally published in a notice in the
Federal Register and allotted to States in FY 2002. This notice with
comment period does not revise the amount of the 2002 allotment
originally made available to the States, but rather, sets forth the
procedure for redistributing those FY 2002 allotments, which were
unexpended at the end of FY 2004 (the end of the 3-year period of
availability referenced in section 2104(e) of the Act), and announces
the amount of the FY 2002 allotments to be redistributed to the
redistribution States and the availability of such unexpended FY 2002
allotment amounts to the end of 2005. Because participation in the
SCHIP program on the part of States is voluntary, any payments and
expenditures States make or incur on behalf of the program that are not
reimbursed by the Federal Government are made voluntarily. This notice
will not create an unfunded mandate on States, tribal, or local
governments. Therefore, we are not required to perform an assessment of
the costs and benefits of this notice.
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We have reviewed this notice and have determined that it
does not significantly affect States' rights, roles, and
responsibilities.
Low-income children will benefit from payments under this program
through increased opportunities for health insurance coverage. We
believe this notice will have an overall positive impact by informing
States, the District of Columbia, and Commonwealths and Territories of
the extent to which they are permitted to expend funds under their
child health plans using the FY 2002 allotment's redistribution
amounts.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.

IV. Waiver of Notice of Proposed Rulemaking and Delayed Effective Date

[If you choose to comment on issues in this section, please include
the caption ``Waiver of Notice of Proposed Rulemaking and Delayed
Effective Date'' at the beginning of your comments.]
We ordinarily publish a proposed notice in the Federal Register to
provide a period of public comment before the provisions of a notice,
such as this, are effective in accordance with section 553(b) of the
Administrative Procedure Act (APA) (5 U.S.C. 553(b)). We also
ordinarily provide a 30-day delay in the effective date of the
provisions of a notice in accordance with section 553(d) of the APA (5
U.S.C 553(d)). However, we can waive both the notice of proposed
rulemaking and the 30-day delay in effective date if the Secretary
finds, for good cause, that it is impracticable, unnecessary, or
contrary to the public interest, and incorporates a statement of the
finding and the reasons in the notice.
We find there is good cause to waive notice of proposed rulemaking
and the delay in the effective date of this issuance of the FY 2002
redistributed allotments because such notice of proposed rulemaking and
the delay in the effective date would be contrary to the public
interest.
We determined the amounts of the FY 2002 redistributed allotments
as expeditiously as possible in order to make them available to the
States as soon as possible. To that end, all States had until November
30, 2004 to submit their required fourth quarter FY 2004 expenditure
reports. In determining the FY 2002 redistributed amounts, we used
State projected expenditures as contained in the most recent (November,
2004) States' quarterly budget report submissions. The redistributed FY
2002 allotments make available Federal funds to the recipient
redistribution States, which is especially important for those
redistribution States that may need such funds.
Furthermore, under section 2104(e) of the Act, redistributed
allotments are only available through the end of the fiscal year in
which they are redistributed; in the case of the FY 2002 redistributed
allotments, that would be until the end of FY 2005 (September 30,
2005). We believe it is important that we issue these redistributed
allotments as soon as possible. Therefore, in the interest of ensuring
that the FY 2002 redistributed allotments are made available without
delay to those States that need such funds, we are waiving notice of
proposed rulemaking and the 30-day delay in effective date, and are
publishing this issuance of the Federal Register as a notice with
comment period.
Accordingly, we provisionally will make the FY 2002 redistributed
funds available to any State that has spent all of its available SCHIP
allotments effective immediately upon publication of this notice with
comment period. These FY 2002 redistributed funds are subject to final
adjustment based on comments received in response to this notice with
comment period. Any such adjustments resulting from review and analysis
of comments will be published in the Federal Register within 60 days of
the close of the comment period. (Section 1102 of the Social Security
Act (42 U.S.C. 1302).)

(Catalog of Federal Domestic Assistance Program No. 93.767, State
Children's Health Insurance Program)

Dated: January 5, 2005.
Mark McClellan,
Administrator, Centers for Medicare & Medicaid Services.

Dated: January 14, 2005.
Tommy G. Thompson,
Secretary.
[FR Doc. 05-1139 Filed 1-18-05; 8:45 am]

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