[Federal Register: May 6, 2009 (Volume 74, Number 86)]
[Proposed Rules]
[Page 21229-21232]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my09-26]
[[Page 21229]]
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Part V
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 431, 433, 440, et al.
Medicaid Program; Health Care-Related Taxes; Medicaid Program:
Rescission of School-Based Services Final Rule, Outpatient Services
Definition Final Rule, and Partial Rescission of Case Management
Services Interim Final Rule; Proposed Rules
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 433
[CMS-2275-P2]
RIN 0938-AP74
Medicaid Program; Health Care-Related Taxes
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule; delay of enforcement.
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SUMMARY: This proposed rule would delay enforcement of certain portions
of the final rule entitled ``Medicaid Program; Health Care-Related
Taxes'' from the expiration of a Congressional moratorium on
enforcement on July 1, 2009 until June 30, 2010. That final rule
revised the threshold levels under the regulatory indirect guarantee
hold harmless arrangement test to reflect the provisions of the Tax
Relief and Health Care Act of 2006, amended the definition of the
``class of managed care organization services,'' and removed obsolete
transition period regulatory language. These changes would not be
affected by this delay of enforcement. The final rule also clarified
the standard for determining the existence of a hold harmless
arrangement under the positive correlation test, Medicaid payment test,
and the guarantee test. This proposed rule would delay enforcement of
these latter provisions, concerning hold harmless arrangements, for 1
year.
DATES: Comment Period. To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on June 1, 2009.
ADDRESSES: In commenting, please refer to file code CMS-2275-P2.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code to find the document
accepting comments.
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-2275-P2, P.O. Box 8010, Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By 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-2275-P2, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-8010.
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 either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201. (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.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to
deliver your comments to the Baltimore address, please call telephone
number (410) 786-9994 in advance to schedule your arrival with one of
our staff members.
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: Lisa Parker, (410) 786-4665.
SUPPLEMENTARY INFORMATION:
I. Background
Section 1903(w) of the Social Security Act (the Act) provides for a
reduction of federal Medicaid funding based on State health care-
related taxes unless those taxes are imposed on a permissible class of
health care services; broad based, applying to all providers within a
class; uniform, such that all providers within a class must be taxed at
the same rate; and are not part of hold harmless arrangements in which
collected taxes are returned, whether directly or indirectly. A similar
hold harmless restriction applies to provider-related donations.
Section 1903(w)(3)(E) of the Act specifies that the Secretary shall
approve broad based (and uniformity) waiver applications if the net
impact of the health care-related tax is generally redistributive and
the amount of the tax is not directly correlated to Medicaid payments.
The broad based and uniformity requirements are waivable through a
statistical test that measures the degree to which the Medicaid program
incurs a greater tax burden than if these requirements were met. The
permissible class of health care services and hold harmless
requirements cannot be waived. The statute and Federal regulation
identify 19 permissible classes of health care items or services that
States can tax without triggering a penalty against Medicaid
expenditures.
On February 22, 2008 we published a final rule entitled, ``Medicaid
Program; Health Care-Related Taxes'' (73 FR 9685). This final rule
amended provisions governing the determination of whether health care
provider taxes or donations constitute ``hold harmless'' arrangements
under which provider tax revenues are repaid, altered the indirect
guarantee threshold test, revised the definition of the ``class of
managed care provider,'' and deleted certain obsolete provisions. The
rule reduced the indirect guarantee threshold test in order to reduce
the threshold level of permissible taxes on health care providers for
the period of January 1, 2008, through September 30, 2011, as required
by the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432).
The February 22, 2008 final rule was scheduled to become effective
on April 22, 2008. However, section 7001(a)(3)(C) of the Supplemental
Appropriations Act of 2008, Public Law No. 110-252, imposed a partial
moratorium until April 1, 2009, prohibiting CMS from taking any action
to implement any provisions of the final rule that are more restrictive
than the provisions in effect on February 21, 2008, with the exception
of the change in the definition of the class of managed care provider
and the statutorily-required change to the indirect guarantee threshold
test. This moratorium was extended by section 5003(a) of the American
Recovery and Reinvestment Act of 2009, Public Law No. 111-5, until July
1, 2009. Although not subject to the moratorium, the change in the
definition of the ``class of managed care provider'' is subject to a
delayed compliance date of October 1, 2009, in order to permit States
time to implement necessary changes.
II. Provisions of the Proposed Rule
We propose to delay the enforcement of the changes made in the
February 22, 2008 final rule to the hold harmless
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tests under Sec. Sec. 433.54(c) and 433.68(f), other than the
statutorily-required change to the indirect guarantee threshold level,
until June 30, 2010. As discussed above, this portion of the regulation
has been the subject of Congressional moratoria and has not yet been
implemented by CMS. This additional time is necessary to determine
whether additional clarification or guidance would be necessary or
helpful to our State partners. It is our understanding that certain
States are concerned that the regulatory language is overbroad or
unclear. We believe the delay will permit more time to obtain
information about the potential impact of the rule and alternative
approaches, and to ensure appropriate implementation of the statutory
restrictions on provider taxes and donations.
III. 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.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
V. Regulatory Impact Analysis
A. Overall Impact
We have examined the impact of this proposed rule as required by
Executive Order 12866, the Congressional Review Act, the Regulatory
Flexibility Act (RFA), section 1102(b) of the Social Security Act, the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive
Order 13132 on Federalism. Executive Order 12866 (as amended) 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 final rule on health-care related taxes was estimated to result
in savings to the Federal government, by reducing its financial
participation in the Medicaid program for amounts in excess of the tax-
related threshold, with corresponding responses by States that would
partially offset these savings. Specifically, the RIA for the final
rule estimated that Federal Medicaid outlays would be reduced by $85
million in FY 2008, and $115 million in FY 2009 through FY 2011. These
savings resulted directly from applying the language in the Tax Relief
and Health Care Act of 2006 to reduce the maximum threshold on
exclusion of health care related taxes from 6 percent to 5.5 percent of
net patient revenue. We do not propose to delay application of this
reduced threshold, which is already in effect. Accordingly, we believe
that the proposed delay would not have any substantial economic effect,
and that this proposed rule is not ``economically significant'' under
E.O. 12866 or ``major'' under the Congressional Review Act.
The RFA requires agencies to analyze options for regulatory relief
of small entities if proposed or final 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. In the final rule on
health care related taxes, we analyzed potential impacts on small
entities that might result from the change in the exclusion threshold.
Some effects (reduced tax burden) were likely to be positive and some
(reductions in State reimbursement rates) could be either positive or
negative. All of these effects would depend on future State decisions
on taxation and reimbursement that could not be predicted and would in
any event be indirect effects rather than the direct result of that
rule. Regardless, because this rule does not propose to delay the
change in the exclusion threshold, we conclude, and the Secretary
certifies, that this proposed rule would not have a significant effect
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 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. Our analysis of the final
rule concluded that it would have had no significant direct effect on a
substantial number of these hospitals. This proposed rule does not
impose any new requirements. Accordingly, we are not preparing an
analysis for section 1102(b) of the Act because we have determined, and
the Secretary certifies, that this proposed 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 proposed rule
contains no mandates that will impose spending costs on State, local,
or tribal governments in the aggregate, or by the private sector, of
$130 million.
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. The original final rule, while limiting Federal
funding, did not circumscribe the States' authority to make policy
decisions regarding taxes and reimbursement. This proposed rule will
likewise not have a substantial effect on State or local government
policy discretion.
B. Anticipated Effects
As discussed in the final rule published February 22, 2008, States
had a number of options open to them in addressing any reduction in
Federal Financial Participation (FFP). They could restructure State
spending and shift funds among programs, raise funds through increases
in other forms of generally applicable tax revenue increases, or reduce
reimbursement to the tax-paying health care providers.
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Presumably most of those States have already made those decisions.
Although the delay proposed in this rule will not affect the tax
threshold, it will provide some relief to States in making other
adjustments.
C. Alternatives
We welcome comments not only on the proposed delay in enforcement,
but also on alternatives that may more constructively address the
underlying problems and their likely impacts on States and other
stakeholders.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: April 30, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: May 1, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-10460 Filed 5-1-09; 4:15 pm]
BILLING CODE 4120-01-P