[Federal Register: September 7, 2007 (Volume 72, Number 173)]
[Proposed Rules]
[Page 51397-51403]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07se07-28]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 431, 433, and 440
[CMS-2287-P]
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: Proposed rule.
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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.'' The proposed rule would eliminate reimbursement under the
Medicaid program for the costs of certain activities based on a
Secretarial finding that these activities are not necessary for the
proper and efficient administration of the State plan, nor do they meet
the definition of an optional transportation benefit. Based on these
determinations, under the proposed rule, Federal Medicaid payments
would 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 transportation from home
to school and back for school-aged children with an Individualized
Education Program (IEP) or an Individualized Family Services Plan
(IFSP) established pursuant to the Individuals with Disabilities
Education Act (IDEA).
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on November 6, 2007.
ADDRESSES: In commenting, please refer to file code CMS-2287-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-2287-P, Mail Stop S3-14-22, 7500 Security Boulevard, Baltimore, MD
21244.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-2287-P, Mail Stop S3-14-22, 7500 Security Boulevard,
Baltimore, MD 21244.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-3256 or (410) 786-9215 in advance to
schedule your arrival with one of our staff members. Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
FOR FURTHER INFORMATION CONTACT: Sharon J. Brown, (410) 786-0673, Judi
Wallace, (410) 786-3197.
Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist us in fully
considering issues and developing policies. You can assist us by
referencing the file code CMS-2287-P the specific ``issue identifier''
that precedes the section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking.
Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also 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. E.S.T. To schedule an appointment to view public
comments, phone 1-800-743-3951.
SUPPLEMENTARY INFORMATION:
I. Background
A. Medicaid Program
Title XIX of the Social Security Act (the Act) authorizes Federal
grants to States for Medicaid programs, operated by the State under an
approved State plan, that provide medical assistance to needy
individuals including low-income families, the elderly, and persons
with disabilities. Federal payment is available to States for a
proportion of expenditures for medical assistance under the approved
State plan, and qualified expenditures 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 these provisions,
administrative expenditures must be reasonable and necessary for the
operation of the governmental unit or the performance of the Federal
award.
Transportation to and from providers is not expressly mentioned in
the Medicaid statute. Since the inception of the program, however, the
Federal
[[Page 51398]]
government has recognized that transportation is essential to the
administration of the State plan, to ensure that beneficiaries have
access to covered services.
Federal regulations at 42 Code of Federal Regulations (CFR) 431.53
require that State plans ``specify that the Medicaid agency will ensure
necessary transportation for recipients to and from providers'' and
describe the methods for doing so. Alternatively, under 42 CFR
440.170(a), the option of furnishing transportation as an optional
covered service recognized under section 1905(a)(28) of the Act is
defined and specified. Whether transportation is furnished as an
administrative activity or as a covered 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 proposed
regulation.
B. Medicaid and Schools
1. Medical Assistance Furnished in Schools
A wide range of medical services are 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 411(k)(13) of the Medicare Catastrophic Coverage Act of
1988 (MCCA) amended section 1903(c) of the Act to clarify that Federal
Medicaid payment is available for otherwise covered services furnished
to children in fulfillment of requirements under IDEA. Specifically,
section 1903(c) of the Act, as amended by the MCCA, 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 are within the scope of services provided under the Medicaid
program. Medicaid covers direct medical services included in an IEP or
IFSP under the following conditions:
The direct medical services are medically necessary and
included in a Medicaid covered category (speech therapy, physical
therapy, etc.);
All other Federal and State Medicaid regulations are
followed, including those for provider qualifications, comparability of
services and the amount, duration and scope provisions; and
The direct medical services are included in the State's
approved Medicaid plan and/or available under the Early and Periodic
Screening, Diagnostic and Treatment (EPSDT) program.
As discussed in more detail below, the proposed rule would not
affect Federal reimbursement for direct medical service expenditures
(other than certain transportation costs, discussed separately below).
2. Administrative Activities Performed by School Employees or
Contractors (School-Based Administrative Activities)
CMS has previously recognized that schools and school districts may
perform activities that provide support for the Medicaid State plan. In
1997, CMS issued a guidance document entitled, ``MEDICAID AND SCHOOL
HEALTH: A TECHNICAL ASSISTANCE GUIDE,'' that interpreted existing law
and regulations to permit States to claim Federal Medicaid matching
funds for the costs of school-based administrative activities,
specifically including Medicaid outreach, eligibility intake,
information and referral, coordination and monitoring of health
services, and interagency coordination. In that guidance, CMS
emphasized that allowable activities must directly relate and support
the Medicaid State plan or waiver services.
In May 2003, CMS issued additional guidance on school-based
claiming in the ``Medicaid School-Based Administrative Claiming Guide''
(the Guide). The Guide was intended to inform schools, State Medicaid
agencies, and other interested parties on the appropriate methods for
claiming Federal reimbursement for the costs of Medicaid administrative
activities performed in the school setting. The Guide described
allowable Medicaid school-based administrative activities as including
the following:
Medicaid Outreach
Facilitating Medicaid Eligibility Determinations
Transportation Related Activities in Support of Medicaid
Covered Services
Translation Related to Medicaid Services
Program Planning, Policy Development, and Interagency
Coordination Related to Medical Services
Medical/Medicaid Related Training
Referral, Coordination, and Monitoring of Medicaid
Services
As discussed further below, this proposed rule would supersede the
prior guidance and would represent the Secretary's determination that
Medicaid expenditures for such school-based administrative activities
do not meet the statutory test under section 1903(a)(7) of being
``necessary * * * for the proper and efficient administration of the
State plan.'' However, the proposed rule does not bring into question
the legitimacy of the types of Medicaid administrative activities
provided in schools. Rather, it reflects the Secretary's determination
that such activities are only necessary for the proper and efficient
administration of the 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 allocated to Medicaid when conducted by
employees of the State or local Medicaid agency.
CMS recognizes that schools are valid settings for the delivery of
Medicaid services. Under the proposed rule, CMS would continue to
reimburse States for the costs of school-based direct medical services
under the IDEA that are covered in their approved State Medicaid plan,
and for transportation of school-age children from school to a non-
school-based provider that bills under the Medicaid program, among
other types of expenditures that will remain eligible for Federal
financial participation (FFP).
3. Transportation From Home to School and Back
Ensuring transportation to and from providers is a required
administrative activity under CMS regulations at 42 CFR 431.53 or,
alternatively, transportation to and from providers can be furnished as
a medical service recognized by the Secretary under section 1905(a)(28)
of the Act, as indicated in 42 CFR 440.170(a).
CMS previously addressed school-based transportation in the
guidance document discussed in the prior section, and in guidance
contained in a May 21, 1999, letter to State Medicaid Directors. In
those documents, CMS expressed the policy that Medicaid payment for
transporting Medicaid-eligible children to and from school was
extremely limited, including only specialized transportation that is
required under an IEP for children with disabilities, on a day when
that child receives a covered medical service from a qualified provider
at the school. In
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this guidance, CMS indicated that the same interpretation was
applicable to transportation claimed as a covered medical service.
However, as discussed further below, the proposed rule would
supersede the prior guidance and would represent the Secretary's
determination that transportation from home to school and back does not
meet the definition of an optional medical transportation service nor
is it necessary for the proper and efficient administration of the
State plan.
C. Medicaid Reimbursement
In general, States submit claims for Federal funds with respect to
expenditures under their Medicaid programs either as ``medical
assistance'' or as ``State/local administration.''
i. Medical Assistance
FFP for allowable medical assistance expenditures under the
Medicaid program is determined by the applicable Federal medical
assistance percentage (FMAP) rate for a given State. The FMAP rate is
determined annually for each State by a formula based on the
relationship of the State's average per capita income level with the
national per capita income level.
The State Medicaid Agency (SMA) reimburses participating Medicaid
providers, including school providers, for allowable direct medical
service expenditures. These reimbursement rates are set by the SMA and,
therefore, any discussions regarding the appropriateness of such rates
on the part of providers must be conducted at the State level. The
reimbursement methodology is contained in the CMS approved Medicaid
State Plan.
The proposed rule would not affect Federal reimbursement for the
costs of allowable direct medical service expenditures.
ii. Administration
According to the Medicaid statute at section 1903(a)(7) of the Act
and implementing regulations at 42 CFR 430.1 and 42 CFR 431.15, for the
costs of any administrative activities to be allowable and reimbursable
under Medicaid, the activities must be ``found necessary by the
Secretary for the proper and efficient administration of the plan''
(referring to the Medicaid 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 these provisions, administrative expenditures must be reasonable
and necessary for the operation of the governmental unit or the
performance of the Federal award.
FFP for allowable administrative expenditures in schools is
available at a matching rate of 50 percent. The proposed rule would
eliminate reimbursement for administrative expenditures conducted by
school employees or contractors, or anyone under the control of a
public or private educational agency, and certain transportation costs,
as specified below. However, under the proposed rule, Federal funding
would continue to be available for administrative overhead costs which
are integral to, or an extension of, a specified direct medical service
to the extent those costs are factored into the rate paid for such
services and reimbursed at the applicable FMAP rate. These overhead
costs 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, will remain eligible for FFP.
D. Improper Billing
CMS has had long-standing concerns about improper billing by school
districts for administrative costs and transportation services. The
U.S. Department of Health and Human Services' Office of the Inspector
General and the Government Accountability Office have identified these
categories of expenses as susceptible to widespread fraud and abuse. In
addition, costs related to education mandates have been improperly
allocated to Medicaid. Congress has also expressed concern about the
dramatic increase in Medicaid claims for school-based costs, which were
the subject of two U.S. Senate Finance Committee hearings, held in June
1999 and April 2000. In fact, examining State-reported expenditure data
related to schools reveals that, in certain years, a number of States'
reported school-based administrative expenditures approached or even
exceeded their reported school-based direct medical service
expenditures, which is clearly evidence of improper claiming in this
area. There may be certain States that do not submit claims for the
costs of direct services provided in schools, thereby accounting for
instances in which a State's school-based administrative expenditures
exceed their direct service expenditures, but such instances are an
exception to overall school-based expenditure reporting trends.
II. Provisions of the Proposed Regulations
The proposed rule would establish a Secretarial finding that
school-based administrative activities are not necessary for the proper
and efficient administration of the State plan. Moreover, this proposed
rule would establish 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 State plan, nor within the scope of
the optional medical transportation benefit. Based on these findings,
the proposed rule would specify that FFP under the Medicaid program
will not be available for school-based administrative and certain
transportation costs unless conducted by employees of the State or
local Medicaid agency.
Under the proposed rule, the following changes would apply for the
costs of the following activities or services:
FFP would no longer be available for the costs of school-
based administrative activities under Medicaid. As discussed below, by
administrative activities we refer 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 rule would supersede all previous guidance, including guidance
on school-based administrative claiming and school-based
transportation.
Under the proposed rule, CMS would continue to reimburse States for
school-based 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 would it
affect transportation of school-aged 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.
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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 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
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 will
remain eligible for FFP under the proposed rule.
CMS has determined 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.
School-based administrative activities and transportation from home
to school and back are performed primarily to support educational
programs rather than administration of the State Medicaid Plan. One of
the essential functions of schools is to ensure that students receive
all required services necessary to obtain a free appropriate public
education.
Students receive transportation from home to school and back
regardless of whether or not they are determined eligible for special
education services. Transportation from home to school and back is an
essential school function and is furnished by the school regardless of
whether medical services are received at the school. School-age
children, including children with an IEP or IFSP, are transported from
home to school primarily to receive an education, not to receive direct
medical services. Because transportation coincides with the school
schedule and is not directly related to a visit to a medical provider,
characterization of the transportation as medically necessary to gain
access to providers is inaccurate.
With respect to school-based administrative activities, section
1903(c) of the Act provides specific authority under the Medicaid
program only for reimbursement of medical assistance for specified
covered services in schools; it contains no provision authorizing
claiming for the costs of school-based Medicaid administration. CMS has
determined that the costs of school-based administrative activities
only meet the requirement of being proper and efficient for the
administration of the State plan to the extent they are conducted by
employees of the State or local Medicaid agency, rather than school
employees or contractors, or anyone under the control of a public or
private educational institution. In addition, 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. Furthermore, there is unclear and
inconsistent application of Medicaid requirements by schools to the
types of administrative activities conducted in the school setting.
Therefore, under the proposed rule, the costs of school-based
administrative activities would only be allocable to Medicaid when
provided by employees of the State or local Medicaid agency.
States receive Federal aid under IDEA to assist public schools in
delivering mandated services in pursuit of a free appropriate public
education. Section 1903(c) of the Act was intended to provide States
with access to Medicaid funding for services provided under IDEA in
addition to Federal funding provided through IDEA grants to States.
Therefore, CMS has determined that the proper and efficient operation
of the State Medicaid plan does not require payment for the cost of
administration unrelated to the provision of a covered direct medical
service or for transportation from home to school and back. Schools
must perform these activities pursuant to education requirements, even
in the absence of Medicaid payment. Activities performed by school
employees are therefore not specifically authorized by the responsible
State Medicaid agency.
The proposed rule would eliminate FFP for State claims related to
transporting school-age children from home to school and back. However,
if a Medicaid eligible student is transported from school to an
appointment for a covered service with a non-school-based direct
medical service provider that bills under the Medicaid program, the
costs of such transportation would remain eligible for FFP.
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 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.
III. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. 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
[[Page 51401]]
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). The proposed rule's savings would
exceed this economic threshold and it is therefore considered a major
rule. The proposed rule is estimated to reduce Federal Medicaid outlays
by $635 million in FY 2009 and by $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 proposed 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 some school districts have populations below
this threshold and are therefore considered small entities for purposes
of the RFA, CMS has determined the impact on local school districts as
a result of the proposed rule would not exceed the threshold of
``significant'' economic impact under the RFA, as discussed below.
However, we are specifically soliciting comments from the public
regarding the potential impact on local schools.
States have the option under the proposed rule to continue funding
school-based administrative activities using State-only 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 be required under the proposed 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.
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 plan under the IDEA,
section 1903(c) does not expressly authorize Medicaid funding for
administrative activities that schools conduct in implementing their
IDEA responsibilities.
Medicaid matching funds provided as reimbursement for
administrative activities are supplemental to the State and local
funding localities already received. Furthermore, the estimated annual
Federal savings under this proposed 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).
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 use 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 proposed rule will not
have a significant economic impact on a substantial number of small
entities. However, we welcome comments on both the stated threshold for
determining what is or is not a significant economic impact and the
conclusion we reached as a result of the chosen threshold. We are
additionally requesting comments specific to the potential impact of
the proposed rule on other programs, both Federal and State programs.
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 603 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 $130 million. This rule contains no mandates.
The proposed 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 would not have a substantial
effect on State or local government policy discretion. While the
proposed 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 would 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 would 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 State plan, nor do
they meet the
[[Page 51402]]
definition of an optional transportation benefit under Medicaid.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
B. Anticipated Effects
The proposed 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 proposed 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]
----------------------------------------------------------------------------------------------------------------
2009 2010 2011 2012 2013 2009-2013
----------------------------------------------------------------------------------------------------------------
School-Based Costs: Eliminate Reimbursement -635 -675 -720 -770 -820 -3620
for Administration/Transportation............
----------------------------------------------------------------------------------------------------------------
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 School-Based ADM and MAP claims). From
these voluntary State claiming reports, an estimate of the total amount
of claims under the Medicaid program that would be affected by the
proposed rule was developed and then projected forward using
assumptions consistent with the most recent President's Budget
projections. 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 proposed
rule on the types of transportation costs that would be affected.
VI. 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, CMS
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.
CMS has determined that the rulemaking process would be the most
effective method of implementing these policies because the rulemaking
process would better 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. We welcome comments on
this regulatory impact analysis and any additional information that
would be useful in assessing the potential impact of the proposed rule.
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 proposed 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 would be
implemented by this proposed rule. The sum total of these expenditures
is classified as savings in Federal Medicaid spending.
Table II.--Accounting Statement: Classification of Estimated Expenditures, From Fiscal Year 2009 to Fiscal Year
2013
[In millions]
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Category TRANSFERS
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
[[Page 51403]]
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 would amend 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:
Sec. 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 new section 433.20 as follows:
Sec. 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.
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:
Sec. 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.
* * * * *
(Authority: Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program)
Dated: July 20, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: August 10, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 07-4356 Filed 8-31-07; 3:00 pm]
BILLING CODE 4120-01-P