[Federal Register: October 3, 2006 (Volume 71, Number 191)]
[Notices]
[Page 58398-58415]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc06-77]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-2243-N]
RIN 0938-AO75
Medicaid Program; Fiscal Year Disproportionate Share Hospital
Allotments and Disproportionate Share Hospital Institutions for Mental
Disease Limits
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
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SUMMARY: Consistent with the provisions of section 1923 of the Social
Security Act, as amended by section 1001(a) of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 and
section 6054 of the Deficit Reduction Act of 2005, this notice
announces the final Federal share disproportionate share hospital (DSH)
allotments for Federal fiscal year (FFY) 2005, the preliminary Federal
share DSH allotments for FFY 2006, and the preliminary Federal share
DSH allotments for FFY 2007. This notice also announces the final FFY
2005, the preliminary FFY 2006, and the preliminary FFY 2007
limitations on aggregate DSH payments that States may make to
institutions for mental disease and other mental health facilities. In
addition, this notice includes background information describing the
[[Page 58399]]
methodology for determining the amounts of States' FFY DSH allotments.
FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.
SUPPLEMENTARY INFORMATION:
I. Background
A. Disproportionate Share Hospital Allotments for Federal Fiscal Year
2003
Under section 1923(f)(3) of the Social Security Act (the Act),
States' Federal fiscal year (FFY) 2003 disproportionate share hospital
(DSH) allotments are calculated by increasing the amounts of the FFY
2002 allotments for each State (as specified in the chart, entitled
``DSH Allotment (in millions of dollars),'' contained in section
1923(f)(2) of the Act) by the percentage change in the Consumer Price
Index for all Urban Consumers (CPI-U) for the prior fiscal year. The
allotment, determined in this way, is subject to the limitation that an
increase to a State's DSH allotment for a fiscal year cannot result in
the DSH allotment exceeding the greater of the State's DSH allotment
for the previous fiscal year or 12 percent of the State's total medical
assistance expenditures for the allotment year (this is referred to as
the 12 percent limit).
Because the actual FFY 2002 DSH allotments were determined in
accordance with section 1923(f)(4) of the Act rather than the amount
specified in the chart in section 1923(f)(2) of the Act, for most
States the calculation of States' FFY 2003 allotments was not based on
the States' actual FFY 2002 DSH allotments. The exception to this is
the calculation of the FFY 2003 DSH allotments for certain ``Low-DSH
States'' (defined in section 1923(f)(5) of the Act). Under the Low-DSH
State provision, there is a special calculation methodology for the
Low-DSH States only. Under this methodology, the FFY 2003 allotments
were determined by using (that is, increasing) such States' actual FFY
2002 DSH allotments (not their FFY 2002 allotments specified in the
chart in section 1923(f)(2) of the Act) by the percentage change in the
CPI-U for the previous fiscal year.
B. DSH Allotments for FFY 2004
Section 1001(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173, enacted on December
8, 2003) amended section 1923(f)(3) of the Act to provide for a
``Special, Temporary Increase In Allotments On A One-Time, Non-
Cumulative Basis.'' Under this provision, States' FFY 2004 DSH
allotments were determined by increasing their FFY 2003 allotments by
16 percent, and the fiscal year DSH allotment amounts so determined
were not subject to the 12 percent limit.
C. DSH Allotments for Non-Low DSH States for FFY 2005, and Fiscal Years
Thereafter
Under the methodology contained in section 1923(f)(3)(C) of the
Act, as amended by section 1001(a)(2) of the MMA, the non-Low-DSH
States' DSH allotments for FFY 2005 and subsequent fiscal years
continue at the same level as the States' DSH allotments for FFY 2004
until a ``fiscal year specified'' occurs. The ``fiscal year specified''
is the first fiscal year for which the Secretary estimates that a
State's DSH allotment equals (or no longer exceeds) the DSH allotment
as would have been determined under the statute in effect before the
enactment of the MMA. We determine whether the fiscal year specified
has occurred under a special parallel process. Specifically, under this
process, a DSH allotment is determined for FFYs after 2003 by
increasing the State's DSH allotment for the previous fiscal year by
the percentage change in the CPI-U for the prior fiscal year, subject
to the 12 percent limit. The fiscal year specified will be the fiscal
year when the DSH allotment calculated under this special parallel
process finally equals or exceeds the FY 2004 DSH allotment, as
determined under the MMA provisions. Once the fiscal year specified
occurs for a State, that State's fiscal year DSH allotment will be
calculated by increasing the State's previous actual fiscal year DSH
allotment (which would be equal to the FY 2004 DSH allotment) by the
percentage change in the CPI-U for the previous fiscal year, subject to
the 12 percent limit. The following example illustrates how the fiscal
year DSH allotment would be calculated for fiscal years after FFY 2004.
Example. A State's FFY 2003 DSH allotment is $100 million. Under
the MMA, the State's FFY 2004 DSH allotment would be $116 million
($100 million increased by 16 percent). The State's DSH allotment
for FFY 2005 and subsequent fiscal years would continue at the $116
million FFY 2004 DSH allotment for fiscal years following FFY 2004
until the ``fiscal year specified'' occurs. In the separate parallel
process, we determine whether the fiscal year specified has occurred
by calculating the State's DSH allotments in accordance with the
statute in effect before the enactment of the MMA. Under this
special process, we determine the State's DSH allotment each fiscal
year by increasing the State's DSH allotment for the previous fiscal
year (as also determined under the special parallel process) by the
percentage change in the CPI-U for the previous fiscal year, and
subject to the 12 percent limit. Assume for purposes of this example
that, in accordance with this special process, the State's FFY 2007
DSH allotment was determined to be $115 million and the percentage
change in the CPI-U for FFY 2007 (the previous fiscal year) relevant
for the calculation of the FFY 2008 DSH allotment was 2 percent.
That is, the percentage change for the CPI-U for FFY 2007, the year
before FFY 2008, was 2 percent. Therefore, the State's special
parallel process FFY 2008 DSH allotment amount would be calculated
by increasing the special parallel process FFY 2007 DSH allotment
amount of $115 million by 2 percent; this results in a special DSH
allotment process amount for FFY 2008 of $117.3 million. Since
$117.3 million is greater than $116 million (the FFY 2004 DSH
allotment calculated under the MMA), we would determine that FFY
2008 is the ``fiscal year specified'' (the first year that the FFY
2004 allotment equals or no longer exceeds the parallel process
allotment). We would then determine the State's FFY 2008 allotment
as the State's actual FFY 2007 DSH allotment ($116 million)
increased by the percentage change in the CPI-U for FFY 2007 (2
percent). Therefore, the State's FFY 2008 DSH allotment would be
$118.32 million ($116 million increased by 2 percent); for purposes
of this example, the application of the 12 percent limit has no
effect. For FFY 2009 and thereafter, the State's DSH allotment would
be calculated by increasing the State's previous fiscal year's DSH
allotment by the percentage change in the CPI-U for the previous
fiscal year, subject to the 12 percent limit.
However, as amended by section 1001(b)(4) of the MMA, section
1923(f)(5)(B) of the Act also contains new criteria for determining
whether a State is a Low-DSH State, beginning with FFY 2004. This
provision is described in section I.D.
Finally, this notice implements the provisions of section 6054 of
the Deficit Reduction Act (DRA) of 2006 Public Law 109-171, enacted
February 8, 2006) with respect to the determination of the DSH
allotment for the District of Columbia. Under section 6054 of the DRA,
for purposes of determining only the FFY 2006 and subsequent fiscal
year DSH allotments for the District of Columbia, the table in section
1923(f)(2) of the Act is amended by increasing the FFY DSH allotment
amounts indicated in that table for the District of Columbia for FFYs
2000, 2001, and 2002 to $49 million for each of those fiscal years.
Before the DRA amendment, the amount in the chart in section 1923(f)(2)
of the Act for the District of Columbia for each of those fiscal years
was $32 million. This DRA provision increases the fiscal year DSH
allotment for the District of Columbia effective with the FFY 2006 DSH
allotment. This change is because the DSH allotments for FFY 2003 are
based on the amounts of States' DSH allotments for FFY 2002 as
contained in the chart in section 1923(f)(2) of the Act. Since (for
purposes of ultimately
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determining the FFY 2006 allotment) the DRA provision increases the FFY
2002 allotment for the District of Columbia, as indicated above, the
FFY 2003 allotment was increased. Furthermore, for this purpose, the
FFY 2004 allotment for the District of Columbia would then be
determined by increasing the FFY 2003 allotment (as so determined) by
16 percent. For fiscal years subsequent to FFY 2006, the DSH allotments
are determined as described above. The preliminary FFY 2006 DSH
allotment for the District of Columbia contained in this notice
reflects the provision of section 6054 of the DRA.
As described below, in accordance with section 6054 of the DRA, the
FFY 2006 DSH allotment for the District of Columbia is $57,692,600. As
amended by section 6054 of the DRA, the FFY 2002 DSH allotment amount
for the District of Columbia contained in the chart in section
1923(f)(2) of the Act was increased to $49,000,000. In accordance with
section 1923(f)(3)(A) of the Act, the FFY 2003 DSH allotment is
determined by increasing the $49,000,000 DSH Allotment for FFY 2002 (as
referenced in section 1923(f)(2) of the Act) by the percentage change
in the CPI-U for 2002 (in this case, 1.5 percent) to $49,735,000. In
accordance with section 1923(f)(3)(C)(i) of the Act, the FFY 2004 DSH
allotment is determined by increasing the $49,735,000 FFY 2003 DSH
allotment amount by 16 percent to $57,692,600. In accordance with the
provisions of section 1923(f)(3)(C) of the Act, the District of
Columbia's DSH allotments for FFYs 2005, 2006, and 2007 are also
$57,692,600. Finally, in accordance with section 6054 of the DRA, the
District of Columbia's DSH allotment is increased as described above,
effective beginning with FFY 2006.
D. DSH Allotments for Low-DSH States for FFYs 2004, and Fiscal Years
Thereafter
Section 1001(b)(1) of the MMA amended section 1923(f)(5) of the Act
regarding the calculation of the fiscal year DSH allotments for ``Low-
DSH'' States for FFY 2004 and subsequent fiscal years. Specifically,
under section 1923(f)(5)(B) of the Act, as amended by section
1001(b)(4) of the MMA, a State is considered a Low-DSH State for FFY
2004 if its total DSH payments under its State plan for FFY 2000
(including Federal and State shares) as reported to us as of August 31,
2003, are greater than 0 percent and less than 3 percent of the State's
total FFY 2000 expenditures under its State plan for medical
assistance. For States that meet the new Low-DSH criteria, their FFY
2004 DSH allotments are calculated by increasing their FFY 2003 DSH
allotments by 16 percent. Therefore, for FFY 2004, Low-DSH States'
fiscal year DSH allotments are calculated in the same way as the DSH
allotments for regular States, which under section 1923(f)(3) of the
Act get the special temporary increase for FFY 2004.
Furthermore, for States meeting the new MMA's Low-DSH definition,
the DSH allotments for FFYs 2005 through 2008 will continue to be
determined by increasing the previous fiscal year's DSH allotment by 16
percent. The Low-DSH States' DSH allotments for FFYs 2004 through 2008
are not subject to the 12 percent limit. The Low-DSH States' DSH
allotments for FFYs 2009 and subsequent fiscal years are calculated by
increasing those States' DSH allotments for the prior fiscal year by
the percentage change in the CPI-U for that prior fiscal year. For FFYs
2009 and thereafter, the DSH allotments so determined would be subject
to the 12-percent limit.
E. Institutions for Mental Diseases DSH Limits for FFYs 1998 and
Thereafter
Under section 1923(h) to the Act, Federal financial participation
(FFP) is not available for DSH payments to institutions for mental
diseases (IMDs) and other mental health facilities that are in excess
of State-specific aggregate limits. Under this provision, this
aggregate limit for DSH payments to IMDs and other mental health
facilities is the lesser of a State's FFY 1995 total computable (State
and Federal share) IMD and other mental health facility DSH
expenditures applicable to the State's FFY 1995 DSH allotment (as
reported on the Form CMS-64 as of January 1, 1997), or the amount equal
to the product of the State's current year total computable DSH
allotment and the applicable percentage.
Each State's IMD limit on DSH payments to IMDs and other mental
health facilities was calculated by first determining the State's total
computable DSH expenditures attributable to the FFY 1995 DSH allotment
for mental health facilities and inpatient hospitals. This calculation
was based on the total computable DSH expenditures reported by the
State on the Form CMS-64 as mental health DSH and inpatient hospital as
of January 1, 1997. We then calculate an ``applicable percentage.'' The
applicable percentage for FFY 1998 through FFY 2000 (1995 IMD DSH
percentage) is calculated by dividing the total computable amount of
IMD and mental health DSH expenditures applicable to the State's FFY
1995 DSH allotment by the total computable amount of all DSH
expenditures (mental health facility plus inpatient hospital)
applicable to the FFY 1995 DSH allotment. For FFY 2001 and thereafter,
the applicable percentage is defined as the lesser of the applicable
percentage as calculated above (for FFYs 1998 through 2001) or 50
percent for FFY 2001; 40 percent for FFY 2002; and 33 percent for each
subsequent FFY.
The applicable percentage is then applied to each State's total
computable FFY DSH allotment for the current FFY. The State's total
computable FFY DSH allotment is calculated by dividing the State's
Federal share DSH allotment for the FFY by the State's Federal medical
assistance percentage (FMAP) for that FFY.
In the final step of the calculation of the IMD DSH Limit, the
State's total computable IMD DSH limit for the FFY is set at the lesser
of the product of a State's current fiscal year total computable DSH
allotment and the applicable percentage for that fiscal year, or the
State's FFY 1995 total computable IMD and other mental health facility
DSH expenditures applicable to the State's FFY 1995 DSH allotment as
reported on the Form CMS-64.
The MMA legislation did not amend the Medicaid statute with respect
to the calculation of the IMD DSH limit.
F. DSH Allotments and IMD DSH Limits Published in the Federal Register
on August 26, 2005
On August 26, 2005, we published a notice (70 FR 50358) in the
Federal Register that announced the final Federal share DSH allotments
for Federal fiscal years (FFYs) 2003 and 2004, and the preliminary
Federal share DSH allotments for FFY 2005. It also announced the final
FFYs 2003 and 2004, and the preliminary FFY 2005, limitations on
aggregate DSH payments that States may make to institutions for mental
disease (IMDs) and other mental health facilities.
G. Publication in the Federal Register of Preliminary and Final Notice
for DSH Allotments and IMD DSH Limits
In general, we initially determine States' DSH allotments and IMD
DSH limits for a fiscal year using estimates of medical assistance
expenditures, including DSH expenditures in their Medicaid programs.
These estimates are provided by States each year on the August
quarterly Medicaid budget reports (Form CMS-37) before the Federal
fiscal year for which the DSH allotments and IMD DSH limits are being
determined. The DSH allotments and IMD DSH limits determined using
[[Page 58401]]
these estimates are referred to as ``preliminary.'' Only after we
receive States'' reports of the actual related medical assistance
expenditures through the quarterly expenditure report (Form CMS-64),
which occurs after the end of the fiscal year, are the ``final'' DSH
Allotments and IMD DSH limits determined.
As indicated in the section I.F. of this notice, the notice
published in the Federal Register on August 26, 2005 announced the
final FFYs 2003 and 2004 DSH allotments and the final FFYs 2003 and
2004 IMD DSH limits (since they were based on the actual expenditures
related to those years), the preliminary FFY 2005 DSH allotments (based
on estimates), and the preliminary IMD DSH limits (since they were
based on the preliminary DSH allotments for FFY 2005).
This notice announces the final FFY 2005 DSH allotments and the
final FFY 2005 IMD DSH limits (since these are now based on the actual
expenditures for those fiscal years), the preliminary FFY 2006 and FFY
2007 DSH allotments (based on estimates), and the preliminary IMD DSH
limits for FFY 2006 and FFY 2007 (since they are based on the
preliminary DSH allotments for FFY 2006 and FFY 2007, respectively).
II. Calculation of the Final FFY 2005 Federal Share State DSH
Allotments, the Preliminary FFY 2006 Federal Share State DSH
Allotments, and the Preliminary FFY 2007 Federal Share State DSH
Allotments
Chart 1 of the Addendum to this notice provides the States'
``final'' FFY 2005 DSH allotments. The final FFY 2005 DSH allotments
for each State were computed in accordance with the provisions of the
Medicaid statute as amended by the MMA. As required by the provisions
of the MMA, the final FFY 2004 DSH allotments for the ``Low-DSH''
States and all the other States were calculated by increasing the FFY
2003 DSH allotments by 16 percent. In the notice published on March 26,
2004 in the Federal Register, we explained the definition and
determination of the ``Low-DSH'' States under the MMA provisions.
However, for following fiscal years, the DSH allotments are determined
under a process which incorporates a parallel process described in
section I.C. of this notice. Under that parallel process, States final
FFY 2005 DSH allotments were determined using the States' expenditure
reports (Form CMS-64) for FFY 2005.
Chart 3 of the Addendum to this notice provides the States'
``preliminary'' FFY 2006 DSH allotments. These preliminary allotments
were determined using the States' August 2005 expenditure estimates
submitted by the States on the Form CMS-37. We will publish the final
FFY 2006 DSH allotments for each State following receipt of the States'
four quarterly Medicaid expenditure reports (Form CMS-64) for FFY 2006.
III. Calculation of the FFYs 2005 Through 2007 IMD DSH Limits
Section 1923(h) of the Act specifies the methodology to be used to
establish the limits on the amount of DSH payments that a State can
make to IMDs and other mental health facilities. FFP is not available
for IMD/DSH payments that exceed the lesser of the State's FFY 1995
total computable mental health DSH expenditures applicable to the
State's FFY 1995 DSH allotment as reported to us on the Form CMS-64 as
of January 1, 1997; or the amount equal to the product of the State's
current FFY total computable DSH allotment and the applicable
percentage. We are publishing the final FFY 2005 IMD DSH limit, the
preliminary FFY 2006 IMD DSH limit, and the preliminary FFY 2007 IMD
DSH limit, along with an explanation of the calculation of these
limits.
For FFY 2003 and following fiscal years, the applicable percentage
is the lesser of 33 percent or the 1995 DSH IMD percentage of the
amount computed for FFY 2000. This percentage was applied to the
State's fiscal year total computable DSH allotment. This result was
then compared to the State's FFY 1995 total computable mental health
DSH expenditures applicable to the State's FFY 1995 DSH allotment as
reported on the Form CMS-64 as of January 1, 1997. The lesser of these
two amounts was the State's limitation on total computable IMD/DSH
expenditures for FFY 2003 and following fiscal years.
Charts 4, 5, and 6 of the Addendum to this notice detail each
State's final IMD/DSH limitation for FFY 2005, the preliminary IMD/DSH
limitation for FFY 2006, and the preliminary IMD/DSH limitation for FFY
2007, respectively, in accordance with section 1923(h) of the Act.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).
V. Regulatory Impact Statement
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This notice
does not reach the economic threshold and thus is not considered a
major rule.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6 million to $29 million in any 1 year. Individuals and States are not
included in the definition of a small entity. Due to the various
controlling statutes, the effects on providers are not impacted by a
result of any independent regulatory impact and not this notice. The
purpose of the notice is to announce the latest distributions as
required by the statute.
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 Core-Based
Statistical Area for Medicaid payment regulations and has fewer than
100 beds.
The MMA set statutorily defined limits on the amount of Federal
share DSH expenditures available for FFY 2004 and subsequent fiscal
years. Specifically, section 1001 of the MMA increased the DSH
allotment for States beginning with fiscal year 2004. While overall the
statute mandated some increases in DSH payments, we do not
[[Page 58402]]
believe that this notice will have a significant economic impact on a
substantial number of small entities.
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 $120 million. This notice will have no
consequential effect on State, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. Since this notice does not impose any costs on State or
local governments, the requirements of E.O. 13132 are not applicable.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.
Addendum
This addendum contains the charts 1 through 6 (including associated
keys) that are referred to in the preamble of this notice.
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Authority: Section 1923(a)(2), (f), and (h) of the Social
Security Act (42 U.S.C. 1396r-4(a)(2), (f), and (h), and Pub. L.
105-33).
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: August 30, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Dated: September 14, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-8421 Filed 9-29-06; 8:45 am]
BILLING CODE 4120-01-P