FR Doc E8-3211

[Federal Register: February 22, 2008 (Volume 73, Number 36)]
[Proposed Rules]
[Page 9727-9740]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22fe08-17]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 447 and 457

[CMS-2244-P]
RIN 0938-A047

Medicaid Program; Premiums and Cost Sharing

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement and interpret the
provisions of sections 6041, 6042, and 6043 of the Deficit Reduction
Act of 2005 (DRA), and section 405(a)(1) of the Tax Relief and Health
Care Act of 2006 (TRHCA). These sections amend the Social Security Act
(the Act) by adding a new section 1916A to provide State Medicaid
agencies with increased flexibility to impose premium and cost sharing
requirements on certain Medicaid recipients. This authority is in
addition to the existing authority States have to impose premiums and
cost sharing under section 1916 of the Act. The DRA provisions also
specifically address cost sharing for non-preferred

[[Page 9728]]

drugs and non-emergency care furnished in a hospital emergency
department.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on March 24, 2008.

ADDRESSES: In commenting, please refer to file code CMS-2244-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-2244-P, P.O. Box 8016, Baltimore, MD 21244-8016.
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-2244-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
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) 786-7195 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.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by mailing your
comments to the addresses provided at the end of the ``Collection of
Information Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donna Schmidt, (410) 786-5532.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-2244-P 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. 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. To schedule an appointment to view public comments,
phone 1-800-743-3951.

I. Background

A. General

For more than a decade, States have been asking for the tools to
modernize their Medicaid programs. With the enactment of the Deficit
Reduction Act of 2005 (DRA) (Pub. L. 109-171, enacted on February 8,
2006), States now have new options to create programs that are aligned
with today's Medicaid populations and the health care environment.
Alternative cost sharing, benefit flexibility through benchmark plans,
and the health opportunity accounts (HOA) demonstration provide the
greatest opportunities to modernize Medicaid, to make the cost of the
program and health care more affordable, and to expand coverage for the
uninsured. States will be able to reconnect families to the larger
insurance system that serves most Americans and promote continuity of
coverage. The sweeping DRA provisions on Medicaid include six chapters
and 39 sections. Through a combination of new options for States and
new requirements related to program integrity, the DRA will help ensure
the sustainability of the Medicaid program over time.

B. Statutory Authority

Sections 6041, 6042, and 6043 of the DRA established a new section
1916A of the Social Security Act (the Act). Section 405(a)(1) of the
Tax Relief and Health Care Act of 2006 (TRHCA) (Pub. L. 109-432,
enacted on December 20, 2006) modified section 1916A of the Act.
Section 1916A sets forth options for alternative premiums and cost
sharing, including options for higher cost sharing for non-preferred
prescription drugs and for non-emergency use of a hospital emergency
room.
Section 6041 of the DRA established new subsections 1916A(a) and
(b), of the Act, which allow States to amend their State plans to
impose alternative premiums and cost sharing on certain groups of
individuals, for items and services other than drugs (which are subject
to a separate provision discussed below), and to enforce payment of the
premiums and cost sharing. Subsections 1916A(a) and (b) set forth
limitations on alternative premiums and cost-sharing that vary based on
family income, and exclude some specific services from alternative cost
sharing. Section 6041 also created a new section 1916(h) of the Act,
which requires the Secretary to increase the ``nominal'' cost sharing
amounts under section 1916 for each year (beginning with 2006) by the
annual percentage increase in the medical care component of the
consumer price index for all urban consumers (CPI-U) as rounded up in
an appropriate manner. Section 405(a)(1) of the TRHCA modified
subsections 1916A(a) and (b) of the Act.
Section 6042 of the DRA created section 1916A(c) of the Act, which
provides States with additional options for establishing cost sharing
requirements for drugs to encourage the use of preferred drugs. Section
405(a)(1) of the TRHCA also modified section 1916A(c) of the Act. Under
section

[[Page 9729]]

1916A(c), States may amend their State plans to require increased cost
sharing by certain groups of individuals for non-preferred drugs and to
waive or reduce the otherwise applicable cost sharing for preferred
drugs. States may also permit pharmacy providers to require the receipt
of a cost sharing payment from an individual before filling a
prescription. We believe the Congress intended to provide additional
flexibilities to States in issuing the DRA. Thus, we have not defined
preferred drugs or non-preferred drugs within a class of such drugs in
this rule and we believe defining these terms should be at State
discretion. We would anticipate that States would publish schedules of
preferred drugs as part of, or as a supplement to, the required public
schedule of cost sharing under 42 CFR 447.76.
Section 6043 of the DRA created section 1916A(e) of the Act, which
permits States to amend their State plans to allow hospitals, after an
appropriate medical screening examination under section 1867 (EMTALA)
of the Act, to impose higher cost sharing upon certain groups of
individuals for non-emergency care or services furnished in a hospital
emergency department. Section 405(a)(1) of the TRHCA modified section
1916A(e) of the Act. Under this option, if the hospital determines that
an individual does not have an emergency medical condition, before
providing the non-emergency services and imposing cost sharing, it must
inform the individual that an available and accessible alternate non-
emergency services provider can provide the services without the
imposition of the same cost sharing and that the hospital can
coordinate a referral to that provider. After notice is given, the
hospital may require payment of the cost sharing before providing the
non-emergency services to the individual.

II. Provisions of the Proposed Regulations

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

A. Overview

The Department began issuing guidance about the new flexibilities
available to States within months of the enactment of the DRA. We
released two letters to State Medicaid directors and health officials
providing guidance on sections 6041, 6042 and 6043 of the DRA, and
section 405(a)(1) of the TRHCA as it relates to sections 6041 and 6042
of the DRA respectively. States and Territories have used this guidance
to design and implement the new options. These regulations formalize
the guidance on alternative premiums and cost sharing.
These proposed regulations would amend existing Medicaid cost
sharing regulations at 42 CFR part 447 and State Children's Health
Insurance Program (SCHIP) cost sharing regulations at 42 CFR part 457.
We propose this approach to assist the reader in easily accessing all
Medicaid and SCHIP cost sharing regulations.

B. Medicaid Regulations

1. Maximum Allowable Charges (Sec. 447.54)
We are proposing to revise Sec. 447.54 to update the existing
``nominal'' Medicaid cost sharing amounts, specifically the nominal
deductible amount described at Sec. 447.54(a)(1) and the nominal
copayment amounts described at Sec. 447.54(a)(3). We are also
proposing to add Sec. 447.54(a)(4) to establish a maximum copayment
amount for services provided by a managed care organization (MCO).
Section 6041(b)(2) of the DRA requires the Secretary to increase
the nominal cost sharing amounts under section 1916 of the Act for each
year (beginning with 2006) by the annual percentage increase in the
medical care component of the consumer price index for all urban
consumers (U.S. city average) as rounded up in an appropriate manner.
In accordance with the statute, we propose to increase the nominal
amounts on the beginning of the Federal Fiscal Year (FY) (October 1) in
each calendar year by the percentage increase in the medical care
component of the Consumer Price Index for All Urban Consumers (CPI-U)
for the period of September to September ending in the preceding
calendar year. We use this period to update other amounts, such as the
Medicaid spousal impoverishment standards, by inflation. The first
adjustment would be for FY 2007, and would be based on the CPI-U
increases during the period September 2004 to September 2005. The
medical care component of the CPI-U increased by 3.9 percent between
September 2004 and September 2005, so we propose to update the nominal
amounts by that factor and then round to the next higher 10-cent
increment. We propose to round to the next higher 10-cent increment
because it will simplify calculation and collection of the amounts
involved. Based on this methodology, we propose a maximum deductible
for $2.10 per month per family for each period of Medicaid eligibility.
In addition, we propose the following copayment maximum amounts:

------------------------------------------------------------------------
Maximum
State payment for the service copayment
------------------------------------------------------------------------
$10 or less................................................ $ .60
$10.01 to $25.............................................. 1.10
$25.01 to $50.............................................. 2.10
$50.01 or more............................................. 3.20
------------------------------------------------------------------------

States should use these updated nominal amounts during FY 2007.
Thereafter, these amounts will be updated each October 1 by the
percentage increase in the medical care component of the CPI-U for the
period of September to September ending in the preceding year, rounded
to the next higher 10-cent increment.
In addition, we have proposed to specify a maximum copayment amount
for services provided by an MCO. When we published the final Medicaid
managed care rules on June 14, 2002 (67 FR 40989), we also issued at
Sec. 447.60, a requirement that contracts with MCOs limit cost sharing
charges an MCO may impose on Medicaid enrollees to the amounts that
could be imposed if fee-for-service payment rates were applicable.
Since some States do not have fee-for-service programs, we have
proposed to specify maximum copayment amounts for services provided by
an MCO.
2. Premiums and Cost Sharing: Basis, Purpose and Scope (Sec. 447.62)
Section 1916A of the Act allows States to impose alternative
premiums and cost sharing that are not subject to the limitations on
premiums and cost sharing under section 1916 of the Act. Section 1916A
of the Act does not affect the Secretary's existing waiver authority
with regard to premiums and cost sharing. Section 447.62 of the
regulations briefly describes this statutory provision which is the
basis for Sec. 447.64 through Sec. 447.82. Section 447.62 also sets
forth limitations on the scope of these regulations by indicating that
they do not limit the Secretary's waiver authority, or affect existing
waivers, concerning premiums or cost sharing.
Section 405(a)(1) of the TRHCA amended section 1916A by explicitly
providing certain exemptions from the provisions, and other
protections, for the population with family incomes at or below 100
percent of the FPL. The statute also includes protections for
individuals with family incomes between 100 and 150 percent of the FPL
and individuals with family incomes above 150 percent of the FPL.

[[Page 9730]]

3. Premiums, Enrollment Fees, or Similar Fees: State Plan Requirements
(Sec. 447.64)
Section 1916A(a)(1) of the Act requires that the State plan specify
the group or groups of individuals upon which it will impose alternate
premiums. In accordance with the statute, at Sec. 447.64(a), we
propose that the State plan describe the group or groups of individuals
that may be subject to such premiums, enrollment fees, or similar
charges. For example, States may impose premiums upon all non-exempt
childless adults (with family incomes over 150 percent of the FPL). We
further propose in Sec. 447.64(b) that the State plan must include a
schedule of the premiums, enrollment fees, or similar charges and the
process for informing recipients, applicants, providers, and the public
of the schedule. States may vary the premiums, enrollment fees, or
similar charges among the groups of individuals.
Section 1916A(b)(4) of the Act requires that the State plan specify
the manner and the period for which the State determines family income.
In accordance with the statute, at Sec. 447.64(c), we propose that the
State plan describe the methodology used to determine family income,
including the period and periodicity of those determinations. We also
propose in Sec. 447.64(d) that the State plan describe the methodology
the State will use to ensure that the aggregate amount of premiums and
cost sharing imposed for all individuals in the family does not exceed
5 percent of family income as applied during the monthly or quarterly
period specified by the State.
Section 1916A(d)(1) of the Act requires that the State specify the
group or group of individuals for whom payment of premiums is a
condition of eligibility. In accordance with the statute, at Sec.
447.64(e), we propose that the State plan, list the group or groups of
individuals. We further propose in Sec. 447.64(f) that the State plan
describe the premium payment terms for the group or groups.
4. General Premium Protections (Sec. 447.66)
Under section 1916A(b)(3)(A) of the Act, the State plan may not
impose premiums upon the following:
Individuals under 18 years of age who are required to be
provided medical assistance under section 1902(a)(10)(A)(i) of the Act,
and including individuals with respect to whom child welfare services
are made available under Part B of title IV on the basis of being a
child in foster care and individuals with respect to whom adoption or
foster care assistance is made available under part E of that title,
without regard to age;
Pregnant women;
Any terminally ill individual receiving hospice care, as
defined in section 1905(o) of the Act;
Any individual who is an inpatient in a hospital, nursing
facility, intermediate care facility, or other medical institution, if
the individual is required, as a condition of receiving services in
that institution under the State plan, to spend for costs of medical
care all but a minimal amount of the individual's income required for
personal needs;
Women who are receiving Medicaid on the basis of the
breast or cervical cancer eligibility group under sections
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act; and
Disabled children who are receiving medical assistance by
virtue of the application of sections 1902(a)(10)(A)(ii)(XIX) and
1902(cc) of the Act.
In accordance with the statute, at Sec. 447.66(a), we propose that
the State exclude these classes of individuals from the imposition of
premiums.
Section 1916A(b)(3)(C) of the Act clarifies that a State may exempt
additional classes of individuals from premiums. At proposed Sec.
447.66(b), we would implement this section.
5. Copayments, Coinsurance, Deductibles, or Similar Cost Sharing
Charges: State Plan Requirements (Sec. 447.68)
Section 1916A(a)(1) of the Act requires that the State plan specify
the group or groups of individuals upon which it opts to impose cost
sharing. In accordance with the statute, at Sec. 447.68(a), we propose
that the State plan describe the group or groups of individuals that
may be subject to cost sharing. For example, States may impose cost
sharing for non-exempt items and services to individuals in the section
1931 eligibility group with family incomes between 100 and 200 percent
of the FPL. We further propose that the State plan must include a
schedule of the copayments, coinsurance, deductibles, or similar cost
sharing charges, the items or services for which the charges apply, and
the process for informing recipients, applicants, providers, and the
public of the schedule. States may vary cost sharing among the types of
items and services.
Section 1916A(b)(4) of the Act requires that the State plan specify
the manner and the period for which the State determines family income.
In accordance with the statute, at Sec. 447.68(b), we propose that the
State plan describe the methodology used to determine family income,
including the period and periodicity of such determinations.
We also propose that the State plan describe the methodology the
State will use to ensure that the aggregate amount of premiums and cost
sharing imposed for all individuals in the family does not exceed 5
percent of family income as applied during the monthly or quarterly
period specified by the State. We further propose that the State plan
describe the State's methods for tracking cost sharing charges,
informing recipients and providers of their liability, and notifying
recipients and providers when individual recipients have reached their
aggregate limit on premiums and cost sharing. States can use the same
methods that SCHIP programs use to track cost sharing. For example,
States can program their automated systems to track and compute
recipients' cost sharing.
Finally, we propose that the State plan specify whether the State
permits a provider participating under the State plan to require
payment of authorized cost sharing as a condition for the provision of
covered care, items, or services.
6. General Cost Sharing Protections (Sec. 447.70)
Under section 1916A(b)(3)(B) of the Act, the State plan may not
impose alternative cost sharing under 1916A(a) for the following:
Services furnished to individuals under 18 years of age
who are required to be provided Medicaid under section
1902(a)(10)(A)(i) of the Act, and including services furnished to
individuals with respect to whom child welfare services are made
available under Part B of title IV on the basis of being a child in
foster care and individuals with respect to whom adoption or foster
care assistance is made available under part E of that title, without
regard to age;
Preventive services (such as well baby and well child care
and immunizations) provided to children under 18 years of age
regardless of family income;
Services furnished to pregnant women, if those services
relate to pregnancy or to any other medical condition that may
complicate the pregnancy;
Services furnished to a terminally ill individual who is
receiving hospice

[[Page 9731]]

care (as defined in section 1905(o) of the Act);
Services furnished to any individual who is an inpatient
in a hospital, nursing facility, intermediate care facility for the
mentally retarded, or other medical institution, if the individual is
required, as a condition of receiving services in that institution
under the State plan, to spend for costs of medical care all but a
minimal amount of the individual's income required for personal needs;
Emergency services as defined by the Secretary for the
purposes of section 1916(a)(2)(D) of the Act;
Family planning services and supplies described in section
1905(a)(4)(C) of the Act;
Services furnished to women who are receiving medical
assistance by virtue of the application of sections
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act (breast or cervical
cancer provisions); and
Services furnished to disabled children who are receiving
medical assistance by virtue of the application of sections
1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act.
In addition, section 1916A(c)(1)(B) of the Act prohibits the State
plan from imposing otherwise applicable cost sharing for preferred
drugs for individuals ``for whom cost sharing may not otherwise be
imposed under subsection (a) due to the application of 1916A(b)(3)(B)
of the Act.'' Therefore, in accordance with the statute, at Sec.
447.70(a)(1)(x), we propose that the State plan exclude these classes
of individuals from the imposition of cost sharing for preferred drugs
within a class.
Section 1916A(b)(3)(C) of the Act clarifies that a State may exempt
additional individuals or services from cost sharing. At proposed Sec.
447.70(c), we would implement this section.
Finally, section 1916A(c)(3) of the Act requires a State to charge
cost sharing applicable to a preferred drug in the case of a non-
preferred drug if the prescribing physician determines that the
preferred drug would not be as effective for the individual or would
have adverse effects for the individual or both. We would implement
this section at proposed Sec. 447.70(b). We further propose at Sec.
447.70(b) that such overrides meet State criteria for prior
authorization and be approved through the State prior authorization
process.
7. Premium and Cost Sharing Exemptions and Protections for Individuals
With Family Income at or Below 100 Percent of the FPL (Sec. 447.71)
Under section 1916A(a)(2)(A) of the Act, the State plan may not
impose premiums on individuals whose family income is at or below 100
percent of the FPL. In accordance with the statute, at Sec. 447.71(a)
we propose that the State plan exclude these individuals from the
imposition of premiums.
Under section 1916A(a)(2)(A) of the Act, the State plan may not
impose cost sharing on individuals whose family income is at or below
100 percent of the FPL with the exception of cost sharing for non-
preferred drugs and for non-emergency services furnished in a hospital
emergency department. However, section 1916A(c)(2)(A)(i) of the Act
prohibits a State from imposing, with respect to a non-preferred drug,
cost sharing that exceeds the nominal amount as otherwise determined
under section 1916 of the Act and described at Sec. 447.54(a)(3) or
(4) for those individuals. In addition, section 1916A(e)(2)(B) of the
Act prohibits a State from imposing, with respect to non-emergency
services furnished in a hospital emergency department, cost sharing
that exceeds the nominal amount as otherwise determined under section
1916 of the Act and described at Sec. 447.54(a)(3) or (4).
Furthermore, a State may only impose nominal cost sharing with respect
to non-emergency services so long as no cost sharing is imposed to
receive such care through an outpatient department or other alternative
health care provider in the geographic area of the hospital emergency
department involved.
In accordance with the statute, we propose at Sec. 447.71(b)(1)
that cost sharing for non-preferred drugs for those individuals not
exceed the nominal cost sharing amount. In addition, we propose at
Sec. 447.71(b)(2) that cost sharing for non-emergency services
furnished in a hospital emergency department for those individuals not
exceed the nominal cost sharing amount and be imposed only so long as
no cost sharing is imposed on those individuals to receive such care
through an outpatient department or other alternative non-emergency
services provider in the geographic area of the hospital emergency
department involved.
Section 1916A(a)(2)(B) of the Act provides that the total aggregate
amount of cost sharing imposed under sections 1916A(c), 1916A(e), and/
or 1916 of the Act upon individuals whose family income is at or below
100 percent of the FPL may not exceed 5 percent of the family income of
the family involved, as applied on a quarterly or monthly basis as
specified by the State. In accordance with the statute, we propose at
Sec. 447.71(c) that aggregate cost sharing for individuals whose
family income is at or below 100 percent of the FPL applicable to a
family of the size involved not exceed the maximum permitted under
Sec. 447.78(b). At Sec. 447.78(b), we propose that the total
aggregate amount of cost sharing may not exceed 5 percent of such
family's income for the monthly or quarterly period, as specified in
the State plan.
8. Premium and Cost Sharing Exemptions and Protections for Individuals
Whose Family Income is Above 100 Percent but Does Not Exceed 150
Percent of the FPL (Sec. 447.72)
Under section 1916A(b)(1)(A) of the Act, the State plan may not
impose premiums on individuals whose family incomes exceeds 100
percent, but does not exceed 150 percent of the FPL applicable to a
family of the size involved. In accordance with the statute, at Sec.
447.72(a), we propose that the State plan exclude these individuals
from the imposition of premiums.
Section 1916A(b)(1)(B)(i) of the Act provides that, in the case of
individuals whose family income exceeds 100 percent, but does not
exceed 150 percent of the FPL applicable to a family of the size
involved, cost sharing imposed under the State plan may not exceed 10
percent of the cost of such item or service. However, section
1916A(c)(2)(A)(i) of the Act prohibits a State from imposing, with
respect to a non-preferred drug, cost sharing that exceeds the nominal
amount as otherwise determined under section 1916 of the Act and
described at Sec. 447.54(a)(3) for those individuals. In addition,
section 1916A(e)(2)(A) of the Act prohibits a State from imposing, with
respect to non-emergency services furnished in a hospital emergency
department, cost sharing that exceeds twice the nominal amount as
otherwise determined under section 1916 of the Act and described at
Sec. 447.54(a)(3) for those individuals.
Therefore, in accordance with the statute, we propose at Sec.
447.72(b) that cost sharing for those individuals under the State plan
not exceed 10 percent of the payment the agency makes for that item or
service, with the exception that it not exceed the nominal cost sharing
amount for non-preferred drugs or twice the nominal cost sharing amount
for non-emergency services furnished in a hospital emergency
department. In the case of States that do not have fee-for-service
payment rates, we propose that

[[Page 9732]]

any copayment that the State imposes for services provided by an MCO
may not exceed $5.20 for FY 2007. This proposal would provide greater
flexibility to State Medicaid programs consistent with that provided to
State SCHIP programs. Thereafter, any copayment that the State imposes
for services provided by an MCO may not exceed this amount as updated
each October 1 by the percentage increase in the medical care component
of the CPI-U for the period of September to September ending in the
preceding calendar year and then rounded to the next highest 10-cent
increment.
Section 1916A(b)(1)(B)(ii) of the Act provides that the total
aggregate amount of cost sharing imposed under section 1916 and 1916A
of the Act may not exceed 5 percent of the family income of the family
involved, as applied on a quarterly or monthly basis as specified by
the State. In accordance with the statute, we propose at Sec.
447.72(c) that aggregate cost sharing for individuals whose family
income exceeds 100 percent, but does not exceed 150 percent of the FPL
applicable to a family of the size involved, not exceed the maximum
permitted under Sec. 447.78(a). At Sec. 447.78(a), we propose that
the total aggregate amount of cost sharing may not exceed 5 percent of
such family's income for the monthly or quarterly period, as specified
in the State plan.
9. Premium and Cost Sharing Protections for Individuals With Family
Income Above 150 Percent of the FPL (Sec. 447.74)
Under section 1916A(b)(2) of the Act, the State plan may impose
premiums upon individuals whose family income exceeds 150 percent of
the FPL applicable to a family of the size involved provided that, as
described at section 1916A(b)(2)(A)of the Act, the total aggregate
amount of premiums and cost sharing imposed under section 1916 and
1916A of the Act not exceed 5 percent of the family income. In
accordance with the statute, at Sec. 447.74(a), we state that the
State plan can impose premiums upon individuals with family income
above 150 percent of the FPL subject to the aggregate limit on premiums
and cost sharing.
Section 1916A(b)(2)(B) of the Act provides that, in the case of
individuals whose family income exceeds 150 percent of the FPL
applicable to a family of the size involved, cost sharing imposed under
the State plan may not exceed 20 percent of the cost of that item
(including a non-preferred drug) or service. Therefore, in accordance
with the statute, we propose at Sec. 447.74(b) that cost sharing for
those individuals under the State plan not exceed 20 percent of the
payment the agency makes for that item or service. In the case of
States that do not have fee-for-service payment rates, we propose that
any copayment that the State imposes for services provided by an MCO
may not exceed $5.20 for FY 2007. This proposal would provide greater
flexibility to State Medicaid programs consistent with that provided to
State SCHIP programs. Thereafter, any copayment that the State imposes
for services provided by an MCO may not exceed this amount as updated
each October 1 by the percentage increase in the medical care component
of the CPI-U for the period of September to September ending in the
preceding calendar year and then rounded to the next highest 10-cent
increment.
Section 1916A(b)(2)(A) of the Act provides that the total aggregate
amount of cost sharing imposed under section 1916 and 1916A of the Act
may not exceed 5 percent of the family income of the family involved,
as applied on a quarterly or monthly basis as specified by the State.
In accordance with the statute, we propose at Sec. 447.74(c) that
aggregate cost sharing for individuals whose family income exceeds 150
percent of the FPL applicable to a family of the size involved, not
exceed the maximum permitted under Sec. 447.78(a). At Sec. 447.78(a),
we propose that the total aggregate amount of premiums and cost sharing
may not exceed 5 percent of such family's income for the monthly or
quarterly period, as specified in the State plan.
10. Public Schedule (Sec. 447.76)
As described in this preamble, section 1916 and 1916A of the Act
provides authority for States to impose premiums and cost sharing for
items and services, including prescription drugs and non-emergency use
of a hospital emergency department, and to require a group or groups of
individuals to make payment as a condition of eligibility or of
receiving that item or service. In Sec. 447.76(a), we propose that
State plans provide for schedules of premiums and cost sharing. In
Sec. 447.76(a), we propose that the public schedule contain the
following information: (1) Current premiums, enrollment fees, or
similar fees; (2) current cost sharing charges; (3) the aggregate
limits on premiums and cost sharing or only cost sharing; (4)
mechanisms for making payments for required premiums and charges; (5)
the consequences for an applicant or recipient who does not pay a
premium or charge; and (6) a list of hospitals charging alternative
cost sharing for non-emergency use of the emergency department. In
addition, at Sec. 447.76(b) we propose that the State make the public
schedule available to recipients, at the time of enrollment and
reenrollment and when charges are revised, applicants, all
participating providers, and the general public.
11. Aggregate Limits on Premiums and Cost Sharing (Sec. 447.78)
As described above, section 1916A(b)(1)(B)(ii) of the Act provides
that the total aggregate amount of cost sharing imposed under section
1916 and 1916A of the Act upon individuals with family income above 100
percent but at or below 150 percent of the FPL may not exceed 5 percent
of the family income, as applied on a quarterly or monthly basis as
specified by the State. Section 1916A(c)(2)(C) of the Act reiterates
that this aggregate limit includes cost sharing for prescription drugs
and section 1916A(e)(2)(C) of the Act reiterates that this aggregate
limit includes cost sharing for non-emergency use of a hospital
emergency department. Section 1916A(b)(2)(A) of the Act provides that
the total aggregate amount of premiums and cost sharing imposed under
section 1916 and 1916A of the Act upon individuals with family income
above 150 percent of the FPL may not exceed 5 percent of the family
income, as applied on a quarterly or monthly basis as specified by the
State. Again, section 1916A(c)(2)(C) of the Act reiterates that this
aggregate limit includes cost sharing for prescription drugs, and
section 1916A(e)(2)(C) of the Act reiterates that this aggregate limit
includes cost sharing for non-emergency use of a hospital emergency
department. Finally, section 1916A(a)(2)(B) of the Act provides that to
the extent that cost sharing under section 1916A(c) of the Act for
prescription drugs, cost sharing under section 1916A(e) of the Act for
non-emergency use of a hospital emergency department, and/or cost
sharing under section 1916 of the Act is imposed upon individuals whose
family income is at or below 100 percent of the FPL, the total
aggregate amount of premiums and cost sharing imposed may not exceed 5
percent of the family income.
In accordance with these provisions, at Sec. 447.78(a), we propose
that for individuals with family income above 100 percent of the FPL
the aggregate amount of premiums (when applicable) and cost sharing
under section 1916 and 1916A of the Act not exceed 5 percent of a
family's income for the monthly or quarterly period, as specified by
the State in the State plan. At Sec. 447.78(b), we propose that for
individuals whose family income is at or below 100

[[Page 9733]]

percent of the FPL the aggregate amount of cost sharing under sections
1916, 1916A(c), and/or 1916A(e) of the Act not exceed 5 percent of a
family's income for the monthly or quarterly period, as specified by
the State in the State plan. We also propose at Sec. 447.78(c) that
family income shall be determined in a manner and for that period as
specified by the State in the State plan. We clarify that States may
use gross income to compute family income and that they may use a
different methodology for computing family income for purposes of
determining the aggregate limits than for determining income
eligibility.
12. Enforceability of Premiums and Cost Sharing (Sec. 447.80)
Section 1916A(d)(1) of the Act permits a State to condition
Medicaid eligibility upon the prepayment of premiums imposed under
section 1916A of the Act or to terminate Medicaid eligibility for the
failure to pay such a premium for 60 days or more. The statute provides
States flexibility to implement these requirements for some or all
groups of individuals as specified in the State plan. The statute also
provides flexibility to waive payment of any premium in any case where
the State determines that requiring that payment would create undue
hardship.
In accordance with the statute, we propose at Sec. 447.80(a) to
permit a State to condition eligibility for a group or group of
individuals upon prepayment of premiums, to terminate the eligibility
of an individual from a group or groups of individuals for failure to
pay for 60 days or more, and to waive payment in any case where
requiring the payment would create undue hardship.
Section 1916A(d)(2) of the Act permits a State to allow a provider
to require that an individual, as a condition of receiving an item or
service, pay the cost sharing charge imposed under section 1916A of the
Act. The provider is not prohibited by this authority from choosing to
reduce or waive cost sharing on a case-by-case basis. However, section
1916A(a)(2)(A) specifies that section 1916A(d)(2) shall not apply in
the case of an individual whose family income does not exceed 100
percent of the FPL applicable to a family of the size involved.
In accordance with the statute, at Sec. 447.80(b) we propose that
a State permit a provider, including a pharmacy, to require an
individual to pay cost sharing imposed under section 1916A of the Act
as a condition of receiving an item or service. However, at Sec.
447.80(b)(1) we specify that a provider, including a pharmacy or
hospital, may not require an individual whose family income is at or
below 100 percent of the FPL to pay the cost sharing charge as a
condition of receiving the item or service. In addition, at Sec.
447.80(b)(2) we propose that a hospital that has determined after an
appropriate medical screening under section 1867 of the Act that an
individual does not have an emergency medical condition must first
provide the name and location of an available and accessible alternate
non-emergency services provider, the fact that the alternate provider
can provide the services without the imposition of that cost sharing,
and a referral to coordinate scheduling of treatment before it can
require payment of the cost sharing. Finally, at Sec. 447.80(b)(3) we
propose that a provider may reduce or waive cost sharing imposed under
section 1916A of the Act on a case-by-case basis.
13. Restrictions on Payments to Providers (Sec. 447.82)
Proposed Sec. 447.82 requires States to reduce the amount of State
payments to providers by the amount of recipients' cost sharing
obligations under section 1916A of the Act. However, States have the
ability to increase total State plan rates to providers to maintain the
same level of State payment when cost sharing is introduced.

C. SCHIP Regulations

1. Maximum Allowable Cost Sharing Charges on Targeted Low-Income
Children in Families With Incomes From 101 to 150 Percent of the FPL
(Sec. 457.555)
We are revising Sec. 457.555 to update the existing ``nominal''
SCHIP cost sharing amounts, specifically the copayment amounts
described at Sec. 457.555(a)(1) and (2), (c), and (d) and the
deductible amount described at Sec. 447.555(a)(4). Section 6041(b)(2)
of the DRA requires the Secretary to increase the nominal Medicaid cost
sharing amounts under section 1916 of the Act for each year (beginning
with 2006) by the annual percentage increase in the medical care
component of the consumer price index for all urban consumers (U.S.
city average) as rounded up in an appropriate manner. While section
6041(b)(2) of the DRA does not require the Secretary to increase the
SCHIP nominal cost sharing amounts, we believe that our proposal is
consistent with sections 2103(e)(3)(A)(ii) and 2103(e)(1)(B) of the
SCHIP statute. Section 2103(e)(3)(A)(ii) of the Act specifies that a
State SCHIP plan may not impose a deductible, cost sharing, or similar
charge that exceeds an amount that is nominal as determined consistent
with Medicaid regulations at Sec. 447.54, with an appropriate
adjustment for inflation or other reasons as the Secretary determines
to be reasonable. Section 2103(e)(1)(B) of the Act prohibits a State
SCHIP plan from imposing cost sharing that favors children from
families with higher income over children from families with lower
income. By updating the existing SCHIP nominal cost sharing amounts by
the annual percentage increase in the medical care component of the
CPI-U by the period of September to September ending in the preceding
calendar year, we would retain nominal cost sharing amounts that
reflect a SCHIP recipient's ability to pay higher cost sharing. The
medical care component of the CPI-U increased by 3.9 percent between
September 2004 and September 2005, so we propose to update the nominal
amounts by that factor and then round to the next higher 10-cent
increment. We propose to round to the next higher 10-cent increment
because it will simplify calculation and collection of the amounts
involved. Based on this methodology, we propose the following copayment
maximum amounts:

------------------------------------------------------------------------
Total cost of services Maximum amount
------------------------------------------------------------------------
$15.00 or less...................................... $1.10
$15.01 to $40....................................... 2.10
$40.01 to $80....................................... 3.20
$80.01 or more...................................... 5.20
------------------------------------------------------------------------

We also propose that the copayments for services provided by an MCO
and for emergency services provided by an institution not exceed $5.20
per visit and that the copayment for non-emergency services furnished
in a hospital emergency room to targeted low-income children with
family income from 101 to 150 percent of the FPL not exceed $10.40.
Finally, we propose that a deductible not exceed $3.20 per family per
month.
States should use these updated nominal amounts during FY 2007.
Thereafter, we will update these amounts each October 1 by the
percentage increase in the medical care component of the CPI-U for the
period of September to September ending in the preceding calendar year
and then rounding to the next higher 10-cent increment.

III. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-

[[Page 9734]]

day notice in the Federal Register and solicit public comment before a
collection of information requirement is submitted to the Office of
Management and Budget (OMB) for review and approval. In order to fairly
evaluate whether an information collection should be approved by OMB,
section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires
that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements:

Section 447.64 Premiums, Enrollment Fees, or Similar Fees: State Plan
Requirements

Section 447.64 requires a State imposing premiums, enrollment fees,
or similar fees on individuals to describe in the State plan:
(a) The group or groups of individuals that may be subject to the
premiums, enrollment fees, or similar charges.
(b) The schedule of the premiums, enrollment fees, or similar fees
imposed.
(c) The methodology used to determine family income for purposes of
the limitations related to family income level that are described
below, including the period and periodicity of those determinations.
(d) The methodology used to ensure compliance with the requirements
of Sec. 447.78 that the aggregate amount of premiums and cost sharing
imposed for all individuals in the family does not exceed 5 percent of
the family income of the family involved.
(e) The process for informing the recipients, applicants,
providers, and the public of the schedule of premiums, enrollment fees,
or similar fees for a group or groups of individuals in accordance with
Sec. 447.76.
(f) The notice of, timeframe for, and manner of required premium
payments for a group or groups of individuals and the consequences for
an individual who does not pay.
The burden associated with this requirement is the time and effort
it would take for a State to include this detailed description in the
State plan. We estimate it would take one State approximately 20
minutes to incorporate this information in their plan. We believe 56
States will be affected by this requirement for a total annual burden
of 18.67 hours.

Section 447.68 Copayments, Coinsurance, Deductibles, or Similar Cost
Sharing Charges: State Plan Requirements

Section 447.68 requires a State imposing copayments, coinsurance,
deductibles, or similar cost sharing charges on individuals to describe
in the State plan:
(a) The group or groups of individuals that may be subject to the
cost sharing charge.
(b) The methodology used to determine family income, for purposes
of the limitations on cost sharing related to family income that are
described below, including the period and periodicity of those
determinations.
(c) The item or service for which the charge is imposed.
(d) The methods, such as the use of integrated automated systems,
for tracking cost sharing charges, informing recipients and providers
of their liability, and notifying recipients and providers when
individual recipients have paid the maximum cost sharing charges
permitted for the period of time.
(e) The process for informing recipients, applicants, providers,
and the public of the schedule of cost sharing charges for specific
items and services for a group or groups of individuals in accordance
with Sec. 447.76.
(f) The methodology used to ensure that:
(1) The aggregate amount of premiums and cost sharing imposed for
all individuals with family income above 100 percent of the FPL does
not exceed 5 percent of the family income of the family involved.
(2) The aggregate amount of cost sharing under sections 1916,
1916A(c), and/or 1916A(e) of the Act for individuals with family income
at or below 100 percent of the FPL does not exceed 5 percent of the
family income of the family involved.
(g) The notice of, timeframe for, and manner of required cost
sharing and the consequences for failure to pay.
The burden associated with this requirement is the time and effort
it would take for a State to include this detailed description in the
State plan. We estimate it would take one State approximately 20
minutes to incorporate this information in their plan. We believe 56
States will be affected by this requirement for a total annual burden
of 18.67 hours.

Section 447.76 Public Schedule

Section 447.76(a) requires States to make available to the groups
in paragraph (b) of this section a public schedule that contains the
following information:
(1) Current premiums, enrollment fees, or similar fees.
(2) Current cost sharing charges.
(3) The aggregate limit on premiums and cost sharing.
(4) Mechanisms for making payments for required premiums and
charges.
(5) The consequences for an applicant or recipient who does not pay
a premium or charge.
(6) A list of hospitals charging alternative cost sharing for non-
emergency use of the emergency department.
The burden associated with this requirement is the time and effort
it would take the State to prepare and make available to appropriate
parties a public schedule. We estimate that it would take 20 minutes
per State. We believe 56 States will be affected by this requirement
for an annual burden of 18.67 hours.

Section 447.80 Enforceability of Premiums and Cost Sharing

Section 447.80(b)(1) states that a hospital that has determined
after an appropriate medical screening pursuant to section 489.24, that
an individual does not have an emergency medical condition before
imposing cost sharing on an individual must provide the name and
location of an available and accessible alternate non-emergency
services provider as defined in section 1916A(e)(4)(B) of the Act, the
fact that the alternate provider can provide the services with the
imposition of a lesser cost sharing amount or no cost sharing, and a
referral to coordinate scheduling of treatment by this provider before
requiring payment of cost sharing.
The burden associated with this requirement is the time and effort
it would take for a hospital to provide the name and location of an
alternate provider who can provide services of a lesser cost sharing
amount or no cost sharing and a referral. We estimate the burden on a
hospital to be 30 minutes. We believe the number of hospital visits
will be 4 million; therefore, the total annual burden is 2 million
hours.
We have submitted a copy of this proposed rule to OMB for its
review of the information collection requirements described above.
These requirements are not effective until they have been approved by
OMB.
If you comment on these information collection and recordkeeping

[[Page 9735]]

requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Division of Regulations Development,
Attn: Melissa Musotto, [CMS-2244-P], Room C4-26-05, 7500 Security
Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503,
Attn: Katherine Astrich, CMS Desk Officer, CMS-2244-P, katherine--
astrich@omb.eop.gov. Fax (202) 395-6974.

Regulatory Impact Analysis

A. Overall Impact

We have examined the impacts 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 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) 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 rule reaches the economic threshold and thus is 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
$6.5 million to $31.5 million in any 1 year. Individuals and States are
not included in the definition of a small entity. We have determined,
and the Secretary certifies, that this rule would not have a
significant economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 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 Core-Based
Statistical Area and has fewer than 100 beds. We have determined, and
the Secretary certifies, that this rule would not have a significant
impact on the operations of a substantial number of small rural
hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in expenditures in any
1 year by State, local, or tribal governments, in the aggregate, or by
the private sector, of $100 million, updated annually for inflation.
That threshold level is currently approximately $127 million. We have
determined that this rule would require new spending in excess of the
threshold. Table 2 outlines the total increase to Medicaid enrollees
cost sharing as a result of all the provisions of the DRA. This
includes an estimated cost increase to Medicaid recipients of $105
million in 2007, $155 million in 2008, $255 million in 2009, $375
million in 2010, and $455 million in 2011.
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. We have determined that this rule would not impose
substantial direct requirement costs on State and local governments.

B. Anticipated Effects

The following chart summarizes our estimate of the anticipated
effects of this rule.

Table 1.--Estimated Savings of the Cost Sharing Provisions of the Deficit Reduction Act (DRA) of 2005
[Savings in millions of dollars]
----------------------------------------------------------------------------------------------------------------
2007 2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
Federal Share
----------------------------------------------------------------------------------------------------------------
Sec. 6041 Optional alternative premiums/cost sharing............... 65 85 135 190 220
Sec. 6042 Cost sharing for prescription drugs...................... 40 65 120 185 240
Sec. 6043(a) Copays for non-emergency care in ER................... 5 10 15 20 25
----------------------------------------------------------------------------------------------------------------
State Share
----------------------------------------------------------------------------------------------------------------
Sec. 6041 Optional alternative premiums/cost sharing............... 50 65 105 145 165
Sec. 6042 Cost sharing for prescription drugs...................... 30 50 90 140 180
Sec. 6043(a) Copays for non-emergency care in ER................... 5 5 10 15 20
----------------------------------------------------------------------------------------------------------------

Table 2.--Medicaid Enrollees Cost Sharing Impact as a Result of the Provisions of the Deficit Reduction Act
(DRA) of 2005
[Costs in millions of dollars]
----------------------------------------------------------------------------------------------------------------
2007 2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
Medicaid Enrollee Share
----------------------------------------------------------------------------------------------------------------
Total increase in Medicaid enrollee/cost sharing for all provisions 105 155 255 375 455
----------------------------------------------------------------------------------------------------------------

[[Page 9736]]

These estimates are based on data regarding copayments in the
Medicaid program derived from a 2004 Kaiser Family Foundation survey,
and data on premiums from a 2004 report by the U.S. Government
Accountability Office. In addition, we have used enrollment data from
the Medicaid Statistical Information System and utilization data from
the 2002 Medicaid Expenditure Panel Survey conducted by the Agency for
Healthcare Research and Quality.
We assume that only States that currently charge copayments and/or
premiums for some groups will take advantage of the option to expand
the use of premiums and copayments under the DRA provisions. States now
charging copayments are assumed to increase them on average to 75
percent of maximum possible levels by 2011, and states currently
charging premiums are assumed to add premiums requirements for some
groups not currently allowed, also reaching 75 percent of the maximum
possible by 2011.
In addition to direct savings from increased cost sharing, we
assume there would be declines in utilization as some enrollees subject
to new cost sharing requirements choose to decrease their use of
services. The decline is assumed to create additional savings of 75
percent of direct savings for physician and outpatient hospital
services, 100 percent for drugs, and 125 percent for dental services.
These additional savings are assumed to be reduced somewhat as a result
of some providers failing to collect copayments. Savings are split
between Federal and State governments using an average matching rate of
57 percent.
Table 2 illustrates that the estimated impact for Medicaid
enrollees as a result of all of the cost-sharing provisions of the DRA
are $105 million for 2007, $155 million for 2008, $255 million for
2009, $375 million for 2010, and $455 million for 2011. Although, these
estimates reflect an increase of costs to beneficiaries, we do not
believe this will pose a barrier to accessing health care. The law
provides that States can impose alternative cost sharing. We believe
through the use of alternative cost sharing, States will help
recipients become more educated and efficient health care consumers. We
do, however, solicit comments on these assumptions.

C. Alternatives Considered

This rule is necessary to implement section 1916A of the Social
Security Act, which was established by the Deficit Reduction Act of
2005 (DRA) and amended by the Tax Relief and Health Care Act of 2006
(TRHCA).

D. Accounting Statement and Table

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 Medicaid payment as
a result of the changes presented in this proposed rule. All savings
are classified as transfers to the Federal Government.

Table.--Accounting Statement: Classification of Estimated Expenditures, from FY 2007 to FY 2011
[In millions]
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers...................................................... 3% Units 7% Units
Discount Discount
Rate $278.2 Rate $270.7
----------------------------------------------------------------------------------------------------------------

From Whom To Whom?......................................................................................... Beneficiaries to Federal Government
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year....................................................................................................... 2007 2008 2009 2010 2011
--------------------------------------------
Annualized Monetized Transfers............................................................................. $110 $160 $270 $395 $485
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom To Whom?......................................................................................... Beneficiaries to Federal Government
--------------------------------------------------------------------------------------------------------------------------------------------------------

From Whom To Whom?......................................................................................... Beneficiaries to Federal Government
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year....................................................................................................... 2007 2008 2009 2010 2011
--------------------------------------------
Annualized Monetized Transfers............................................................................. $85 $120 $205 $300 $365
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom To Whom?......................................................................................... Beneficiaries to Federal Government
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. Conclusion

We expect that this rule would promote the modernization of the
Medicaid program. The proposed rule would provide a new option to
States to create programs that are aligned with today's Medicaid
populations and the health care environment. Through alternative cost
sharing, States would help recipients become more educated and
efficient health care consumers. Thus, this rule would help ensure the
sustainability of the Medicaid program over time.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 447

Accounting, Administrative practice and procedure, Drugs, Grant
programs--Health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.

[[Page 9737]]

42 CFR Part 457

Administrative practice and procedure, Grant programs--Health,
Health insurance, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services propose to amend 42 CFR chapter IV as set forth
below:

PART 447--PAYMENTS FOR SERVICES

1. The authority citation for part 447 continues to read as
follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).

2. Section 447.54 is amended by--
a. Republishing the introductory text to paragraph (a).
b. Revising paragraphs (a)(1) and (a)(3).
c. Adding new paragraph (a)(4).
The republication, revisions, and additions read as follows:

Sec. 447.54 Maximum allowable and nominal charges.

(a) Non-institutional services. Except as specified in paragraph
(b) of this section, for non-institutional services, the plan must
provide that the following requirements are met:
(1) For Federal Fiscal Year 2007, any deductible it imposes does
not exceed $2.10 per month per family for each period of Medicaid
eligibility. For example, if Medicaid eligibility is certified for a 3-
month period, the maximum deductible which may be imposed on a family
for the period of eligibility is $6.30. Thereafter, any deductible
should not exceed these amounts as updated each October 1 by the
percentage increase in the medical care component of the CPI-U for the
period of September to September ending in the preceding calendar year,
and then rounded to the next higher 10-cent increment.
* * * * *
(3)(i) For Federal Fiscal Year 2007, any copayments it imposes
under a fee-for-service delivery system do not exceed the amounts shown
in the following table:

------------------------------------------------------------------------
Maximum
State payment copayment
------------------------------------------------------------------------
$10 or less................................................ $.60
$10.01 to $25.............................................. 1.10
$25.01 to $50.............................................. 2.10
$50.01 or more............................................. 3.20
------------------------------------------------------------------------

(ii) Thereafter, any copayments should not exceed these amounts as
updated each October 1 by the percentage increase in the medical care
component of the CPI-U for the period of September to September ending
in the preceding calendar year and then rounded to the next higher 10-
cent increment.
(4) For Federal Fiscal Year 2007, any copayment it imposes for
services provided by an MCO may not exceed $5.20 per visit. Thereafter,
any copayment should not exceed these amounts as updated each October 1
by the percentage increase in the medical care component of the CPI-U
for the period of September to September ending in the preceding
calendar year and then rounded to the next higher 10-cent increment.
* * * * *
3. Section 447.55 is amended by revising paragraph (b) to read as
follows:

Sec. 447.55 Standard copayment.

* * * * *
(b) This standard copayment amount for any service may be
determined by applying the maximum copayment amounts specified in Sec.
447.54(a) and (b) to the agency's average or typical payment for that
service. For example, if the agency's typical payment for prescribed
drugs is $4 to $5 per prescription, the agency might set a standard
copayment of $.60 per prescription. This standard copayment may be
adjusted based on updated copayments as permitted under Sec.
447.54(a)(3).
4. New Sec. Sec. 447.62, 447.64, 447.66, 447.68, 447.70, 447.71,
447.72, 447.74, 447.76, 447.78, 447.80, and Sec. 447.82, and a new
undesignated center heading are added to read as follows:

ALTERNATIVE PREMIUMS AND COST SHARING UNDER SECTION 1916A

Sec. 447.62 Alternative premiums and cost sharing: Basis, purpose and
scope.

(a) Section 1916A of the Act sets forth options for alternative
premiums and cost sharing, which are premiums and cost sharing that are
not subject to the limitations under section 1916 of the Act as
described in Sec. 447.51 through Sec. 447.56. For States that impose
alternative premiums, Sec. 447.64 through Sec. 447.66, Sec. 447.72,
Sec. 447.74, Sec. 447.78, and Sec. 447.80 prescribe State plan
requirements and options for alternative premiums and the standards and
conditions under which States may impose them. For States that impose
alternative cost sharing, Sec. 447.68 through Sec. 447.72, Sec.
447.74, Sec. 447.78, and Sec. 447.80 prescribe State plan
requirements and options for alternative cost sharing and the standards
and conditions under which States may impose alternative cost sharing.
For other individuals, premiums and cost sharing must comply with the
requirements described in Sec. 447.50 through Sec. 447.60.
(b) Neither section 1916A of the Act nor the regulations referenced
in paragraph (a) of this section affect the following:
(1) The Secretary's authority to waive limitations on premiums and
cost sharing under this subpart.
(2) Existing waivers with regard to the imposition of premiums and
cost sharing.

Sec. 447.64 Alternative premiums, enrollment fees, or similar fees:
State plan requirements.

When a State imposes alternative premiums, enrollment fees, or
similar fees on individuals, the State plan must describe the
following:
(a) The group or groups of individuals that may be subject to the
premiums, enrollment fees, or similar charges.
(b) The schedule of the premiums, enrollment fees, or similar fees
imposed.
(c) The methodology used to determine family income for purposes of
the limitations related to family income level that are described
below, including the period and periodicity of those determinations.
(d) The methodology used to ensure compliance with the requirements
of Sec. 447.78 that the aggregate amount of premiums and cost sharing
imposed for all individuals in the family do not exceed 5 percent of
the family income of the family involved.
(e) The process for informing the recipients, applicants,
providers, and the public of the schedule of premiums, enrollment fees,
or similar fees for a group or groups of individuals in accordance with
Sec. 447.76.
(f) The notice of, time frame for, and manner of required premium
payments for a group or groups of individuals and the consequences for
an individual who does not pay.

Sec. 447.66 General alternative premium protections.

(a) States may not impose alternative premiums upon the following
individuals:
(1) Individuals under 18 years of age that are required to be
provided medical assistance under section 1902(a)(10)(A)(i) of the Act,
and including individuals with respect to whom child welfare services
are made available under Part B of title IV on the basis of being a
child in foster care and individuals with respect to whom adoption or
foster care assistance is made available under Part E of that title,
without regard to age.

[[Page 9738]]

(2) Pregnant women.
(3) Any terminally ill individual receiving hospice care, as
defined in section 1905(o) of the Act.
(4) Any individual who is an inpatient in a hospital, nursing
facility, intermediate care facility, or other medical institution, if
the individual is required, as a condition of receiving services in
that institution under the State plan, to spend for costs of medical
care all but a minimal amount of the individual's income required for
personal needs.
(5) Women who are receiving Medicaid on the basis of the breast or
cervical cancer eligibility group under sections
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act.
(6) Disabled children who are receiving medical assistance by
virtue of the application of sections 1902(a)(10)(A)(ii)(XIX) and
1902(cc) of the Act.
(b) States may exempt additional classes of individuals from
premiums.

Sec. 447.68 Alternative copayments, coinsurance, deductibles, or
similar cost sharing charges: State plan r equirements.

When a State imposes alternative copayments, coinsurance,
deductibles, or similar cost sharing charges on individuals, the State
plan must describe the following:
(a) The group or groups of individuals that may be subject to the
cost sharing charge.
(b) The methodology used to determine family income, for purposes
of the limitations on cost sharing related to family income that are
described below, including the period and periodicity of those
determinations.
(c) The item or service for which the charge is imposed.
(d) The methods, such as the use of integrated automated systems,
for tracking cost sharing charges, informing recipients and providers
of their liability, and notifying recipients and providers when
individual recipients have paid the maximum cost sharing charges
permitted for the period of time.
(e) The process for informing recipients, applicants, providers,
and the public of the schedule of cost sharing charges for specific
items and services for a group or groups of individuals in accordance
with Sec. 447.76.
(f) The methodology used to ensure that:
(1) The aggregate amount of premiums and cost sharing imposed for
all individuals with family income above 100 percent of the FPL does
not exceed 5 percent of the family income of the family involved.
(2) The aggregate amount of cost sharing under sections 1916,
1916A(c), and/or 1916A(e) of the Act for individuals with family income
at or below 100 percent of the FPL does not exceed 5 percent of the
family income of the family involved.
(g) The notice of, time frame for, and manner of required cost
sharing and the consequences for failure to pay.

Sec. 447.70 General alternative cost sharing protections.

(a)(1) States may not impose alternative cost sharing for the
following items/services. Except as indicated, these limits do not
apply to alternative cost sharing for non-preferred prescription drugs
within a class of such drugs or non-emergency use of the emergency
room.
(i) Services furnished to individuals under 18 years of age who are
required to be provided Medicaid under section 1902(a)(10)(A)(i) of the
Act, and including services furnished to individuals with respect to
whom child welfare services are made available under Part B of title IV
on the basis of being a child in foster care and individuals with
respect to whom adoption or foster care assistance is made available
under Part E of that title, without regard to age.
(ii) Preventive services (such as well baby and well child care and
immunizations) provided to children under 18 years of age regardless of
family income.
(iii) Services furnished to pregnant women, if those services
relate to pregnancy or to any other medical condition which may
complicate the pregnancy.
(iv) Services furnished to a terminally ill individual who is
receiving hospice care (as defined in section 1905(o) of the Act).
(v) Services furnished to any individual who is an inpatient in a
hospital, nursing facility, intermediate care facility for the mentally
retarded, or other medical institution, if the individual is required,
as a condition of receiving services in that institution under the
State plan, to spend for costs of medical care all but a minimal amount
of the individual's income required for personal needs.
(vi) Emergency services as defined at Sec. 447.53(b)(4), except
charges for services furnished after the hospital has determined, based
on the screening and any other services required under Sec. 489.24 of
this chapter, that the individual does not have an emergency medical
condition consistent with the requirements of paragraph (a)(2) of this
section and Sec. 447.80(b)(1).
(vii) Family planning services and supplies described in section
1905(a)(4)(C) of the Act.
(viii) Services furnished to women who are receiving medical
assistance by virtue of the application of sections
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act (breast or cervical
cancer provisions).
(ix) Services furnished to disabled children who are receiving
medical assistance by virtue of the application of sections
1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act.
(x) Preferred drugs within a class for individuals for whom cost
sharing may not otherwise be imposed as described in paragraphs
(a)(1)(i) through (a)(1)(ix) of this section.
(2) A State may impose nominal cost sharing as defined in Sec.
447.54 for services furnished in a hospital emergency department, other
than those required under Sec. 489.24 of this chapter, if the hospital
has determined based on the screening required under Sec. 489.24 that
the individual does not have an emergency medical condition, the
requirements of Sec. 447.80(b)(1) are met, and no cost sharing is
imposed to receive the care through an outpatient department or another
alternative health care provider in the geographic area of the hospital
emergency department involved.
(b) In the case of a drug that is a preferred drug within a class,
cost sharing may not exceed the levels permitted under section 1916 of
the Act. Cost sharing can be imposed that exceeds section 1916 levels
only for drugs that are not preferred drugs within a class in
accordance with section 1916A(c).
(c) In the case of a drug that is not a preferred drug, the cost
sharing is limited to the amount imposed for a preferred drug if the
following conditions are met:
(1) The prescribing physician determines that the preferred drug
would be less effective or would have adverse effects for the
individual or both.
(2) State criteria for prior authorization, if any, are met.
(d) States may exempt additional individuals, items, or services
from cost sharing.

Sec. 447.71 Alternative premium and cost sharing exemptions and
protections for individuals with family incomes at or below 100 percent
of the FPL.

(a) The State may not impose premiums under the State plan on
individuals whose family income is at or below 100 percent of the FPL.
(b) The State may not impose cost sharing under the State plan on

[[Page 9739]]

individuals whose family income is at or below 100 percent of the FPL,
with the following exceptions:
(1) The State may impose cost sharing for non-preferred drugs that
does not exceed the nominal amount as defined in Sec. 447.54.
(2) The State may impose cost sharing for non-emergency services
furnished in a hospital emergency department that does not exceed the
nominal amount as defined in Sec. 447.54 so long as no cost sharing is
imposed to receive such care through an outpatient department or other
alternative non-emergency services provider in the geographic area of
the hospital emergency department involved.
(c) Aggregate cost sharing of the family under sections 1916,
1916A(c), and/or 1916A(e) may not exceed the maximum permitted under
Sec. 447.78(b).

Sec. 447.72 Alternative premium and cost sharing exemptions and
protections for individuals with family incomes above 100 percent but
at or below 150 percent of the FPL.

(a) The State may not impose premiums under the State plan on
individuals whose family income exceeds 100 percent, but does not
exceed 150 percent, of the FPL.
(b) Cost sharing may not exceed 10 percent of the payment the
agency makes for the item or service, with the following exceptions:
(1) Cost sharing for non-preferred drugs cannot exceed the nominal
amount as defined in Sec. 447.54.
(2) Cost sharing for non-emergency services furnished in the
hospital emergency department cannot exceed twice the nominal amount as
defined in Sec. 447.54. A hospital must meet the requirements
described at Sec. 447.80 before the cost sharing can be imposed.
(3) In the case of States that do not have fee-for-service payment
rates, any copayment that the State imposes for services provided by an
MCO may not exceed $5.20 for Federal Fiscal Year 2007. Thereafter, any
copayment may not exceed this amount as updated each October 1 by the
percentage increase in the medical care component of the CPI-U for the
period of September to September ending in the preceding calendar year
and then rounded to the next highest 10-cent increment.
(c) Aggregate cost sharing of the family may not exceed the maximum
permitted under Sec. 447.78(a).

Sec. 447.74 Alternative premium and cost sharing protections for
individuals with family incomes above 150 percent of the FPL.

(a) States may impose premiums consistent with the aggregate limits
set forth in Sec. 447.78(a).
(b) Cost sharing may not exceed 20 percent of the payment the
agency makes for the item (including a non-preferred drug) or service,
with the following exception: In the case of States that do not have
fee-for-service payment rates, any copayment that the State imposes for
services provided by an MCO may not exceed $5.20 for Federal Fiscal
Year 2007. Thereafter, any copayment may not exceed this amount as
updated each October 1 by the percentage increase in the medical care
component of the CPI-U for the period of September to September ending
in the preceding calendar year and then rounded to the next highest 10-
cent increment.
(c) Aggregate premiums and cost sharing of the family may not
exceed the maximum permitted under Sec. 447.78(a).

Sec. 447.76 Public schedule.

(a) The State must make available to the groups in paragraph (b) of
this section a public schedule that contains the following information:
(1) Current premiums, enrollment fees, or similar fees.
(2) Current cost sharing charges.
(3) The aggregate limit on premiums and cost sharing or just cost
sharing.
(4) Mechanisms for making payments for required premiums and
charges.
(5) The consequences for an applicant or recipient who does not pay
a premium or charge.
(6) A list of hospitals charging alternative cost sharing for non-
emergency use of the emergency department.
(b) The State must make the public schedule available to the
following:
(1) Recipients, at the time of their enrollment and reenrollment
after a redetermination of eligibility, and when premiums, cost sharing
charges, and the aggregate limits are revised.
(2) Applicants, at the time of application.
(3) All participating providers.
(4) The general public.

Sec. 447.78 Aggregate limits on alternative premiums and cost
sharing.

(a) If a State imposes alternative premiums or cost sharing, the
total aggregate amount of premiums and cost sharing under section 1916,
1916A(c) or 1916A(e) for individuals with family income above 100
percent of the FPL may not exceed 5 percent of the family's income for
the monthly or quarterly period, as specified by the State in the State
plan
(b) The total aggregate amount of cost sharing under sections 1916,
1916A(c), and/or 1916A(e) of the Act for individuals with family income
at or below 100 percent of the FPL may not exceed 5 percent of the
family's income for the monthly or quarterly period, as specified in
the State plan.
(c) Family income shall be determined in a manner and for that
period as specified by the State in the State plan.
(1) States may use gross income or any other methodology.
(2) States may use a different methodology for determining the
aggregate limits than they do for determining income eligibility.

Sec. 447.80 Enforceability of alternative premiums and cost sharing.

(a) With respect to alternative premiums, a State may do the
following:
(1) Require a group or groups of individuals to prepay.
(2) Terminate an individual from medical assistance on the basis of
failure to pay for 60 days or more.
(3) Waive payment of a premium in any case where it determines that
requiring the payment would create an undue hardship.
(b) With respect to alternative cost sharing, a State may permit a
provider, including a pharmacy, to require an individual, as a
condition for receiving the item or service, to pay the cost sharing
charge, except as specified below.
(1) A provider, including a pharmacy and a hospital, may not
require an individual whose family income is at or below 100 percent of
the FPL to pay the cost sharing charge as a condition of receiving the
service.
(2) A hospital that has determined after an appropriate medical
screening pursuant to Sec. 489.24, that an individual does not have an
emergency medical condition, before imposing cost sharing on an
individual, must provide the name and location of an available and
accessible alternate non-emergency services provider as defined in
section 1916A(e)(4)(B), the fact that the alternate provider can
provide the services with the imposition of a lesser cost sharing
amount or no cost sharing, and a referral to coordinate scheduling of
treatment by this provider before requiring payment of cost sharing.
(3) The provider is not prohibited by this authority from choosing
to reduce or waive cost sharing on a case-by-case basis.

[[Page 9740]]

Sec. 447.82 Restrictions on payments to providers.

The plan must provide that the agency reduces the payment it makes
to any provider by the amount of a recipient's cost sharing obligation,
regardless of whether the provider successfully collects the cost
sharing.

PART 457--ALLOTMENTS AND GRANTS TO STATES

5. The authority citation for part 457 continues to read as
follows:

Authority: Section 1102 of the Social Security Act (42 U.S.C.
1302).

6. Section 457.555 is amended by--
a. Republishing paragraph (a) introductory text.
b. Revising paragraphs (a)(1), (a)(2), and (a)(4).
c. Revising paragraph (c).
d. Revising paragraph (d).
The republication and revisions read as follows:

Sec. 457.555 Maximum allowable cost sharing charges on targeted low-
income children in families with income from 101 to 150 percent of the
FPL.

(a) Non-institutional services. For targeted low-income children
whose family income is from 101 to 150 percent of the FPL, the State
plan must provide that for non-institutional services, including
emergency services, the following requirements must be met:
(1)(i) For Federal Fiscal Year 2007, any copayment or similar
charge the State imposes under a fee-for-service delivery system may
not exceed the following amounts:

------------------------------------------------------------------------
Maximum
Total cost amount
------------------------------------------------------------------------
$15.00 or less............................................. $1.10
$15.01 to $40.............................................. 2.10
$40.01 to $80.............................................. 3.20
$80.01 or more............................................. 5.20
------------------------------------------------------------------------

(ii) Thereafter, any copayments may not exceed these amounts as
updated each October 1 by the percentage increase in the medical care
component of the CPI-U for the period of September to September ending
in the preceding calendar year and then rounded to the next higher 10-
cent increment.
(2) For Federal Fiscal Year 2007, any copayment that the State
imposes for services provided by a managed care organization may not
exceed $5.20 per visit. Thereafter, any copayment may not exceed this
amount as updated each October 1 by the percentage increase in the
medical care component of the CPI-U for the period of September to
September ending in the preceding calendar year and then rounded to the
next higher 10-cent increment.
* * * * *
(4) For Federal Fiscal Year 2007, any deductible the State imposes
may not exceed $3.20 per month, per family for each period of
eligibility. Thereafter, any deductible may not exceed this amount as
updated each October 1 by the percentage increase in the medical care
component of the CPI-U for the period of September to September ending
in the preceding calendar year and then rounded to the next higher 10-
cent increment.
* * * * *
(c) Institutional emergency services. For Federal Fiscal Year 2007,
any copayment that the State imposes on emergency services provided by
an institution may not exceed $5.20. Thereafter, any copayment may not
exceed this amount as updated each October 1 by the percentage increase
in the medical care component of the CPI-U for the period of September
to September ending in the preceding calendar year and then rounded to
the next higher 10-cent increment.
(d) Non-emergency use of the emergency room. For Federal Fiscal
Year 2007, for targeted low-income children whose family income is from
101 to 150 percent of the FPL, the State may charge up to twice the
charge for non-institutional services, up to a maximum amount of
$10.40, for services furnished in a hospital emergency room if those
services are not emergency services as defined in Sec. 457.10.
Thereafter, any charge may not exceed this amount as updated each
October 1 by the percentage increase in the medical care component of
the CPI-U for the period of September to September ending in the
preceding calendar year and then rounded to the next higher 10-cent
increment.
* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)

Dated: October 5, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.

Approved: November 1, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-3211 Filed 2-21-08; 8:45 am]

BILLING CODE 4120-01-P