[Federal Register Volume 59, Number 21 (Tuesday, February 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2115]


[[Page Unknown]]

[Federal Register: February 1, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 431

[MB-068-IFC]
RIN 0938-AG63

 

Medicaid Program; Freedom of Choice Waiver; Conforming Changes

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule amends existing Medicaid regulations 
on freedom of choice waivers granted under section 1915(b) of the 
Social Security Act (the Act) to conform them to the amendments made to 
the Act by sections 4604 and 4742 of the Omnibus Budget Reconciliation 
Act of 1990. This rule:
     Specifies that the Secretary may not waive the requirement 
that the State plan provide for adjustments in payment for inpatient 
hospital services furnished to infants under one year of age, or to 
children under 6 years of age who receive these services in 
disproportionate share hospitals.
     Extends to any provider participating under a section 
1915(b)(4) waiver the same prompt payment standards that apply to all 
other health care practitioners furnishing Medicaid services.
    This rule also makes technical changes in the regulations relating 
to a recipient's free choice of providers of family planning services 
and cost-sharing requirements under waivers.

DATES: Effective Date: This interim final rule is effective on March 3, 
1994. Comment Date: Written comments will be considered if we receive 
them at the appropriate address, as provided below, no later than 5 
p.m. on April 4, 1994.

ADDRESSES: Mail comments (original and three copies) to the following 
address: Health Care Financing Administration, Department of Health and 
Human Services, Attention: MB-068-IFC, P.O. Box 7518, Baltimore, MD 
21207-0518
    If you prefer, you may deliver your written comments (original and 
three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD, 21207.

    Due to staffing and resource limitations, we cannot accept comments 
by facsimile (FAX) transmission. In commenting, please refer to file 
MB-068-IFC. Comments received timely will be available for public 
inspection as they are received, beginning approximately three weeks 
after publication of this document, in room 309-G of the Department's 
offices at 200 Independence Avenue, SW, Washington DC, on Monday 
through Friday of each week from 8:30 a.m. to 5 p.m. (phone: 202-690-
7890).

FOR FURTHER INFORMATION CONTACT: Carole Benner, (410) 966-4464

SUPPLEMENTARY INFORMATION:

I. Background

    Title XIX of the Social Security Act (the Act) provides authority 
for the States to operate Medicaid programs to provide medical 
assistance to needy individuals. States with Medicaid programs must 
meet State plan requirements specified in section 1902 of the Act to 
qualify for Federal financial participation (FFP). The costs of both 
administration and health care services furnished under approved State 
Medicaid plans qualify for FFP.
    Under section 1915(b) of the Act, a State may request the Secretary 
to waive certain State plan requirements of section 1902 of the Act, if 
the Secretary finds such waivers to be cost effective, efficient, and 
consistent with Medicaid program objectives. The waivers permit a 
State, under its Medicaid program, to restrict a recipient's free 
choice of provider by:
     Implementing a case management system or a specialty 
physician services arrangement that restricts the provider from or 
through whom the recipients can obtain primary care services (other 
than emergency services), so long as the restriction does not 
substantially impair access to services of adequate quality;
     Allowing a locality to act as a central broker in 
assisting beneficiaries in selecting among competing health care plans;
     Sharing with recipients any cost savings (through 
provision of additional health services) resulting from the use by a 
recipient of more cost effective medical care service arrangements; and
     Restricting the provider from or through whom the 
recipient can receive services (other than emergency services) to 
providers or practitioners who comply with State plan payment, quality, 
efficiency, and utilization standards so long as this restriction does 
not discriminate among classes of providers on grounds unrelated to 
their demonstrated effectiveness and efficiency in providing those 
services. (This provision has been expanded to provide for timely 
payment to providers, as explained later in this preamble.)
    No section 1915(b) waiver may restrict the choice of a recipient in 
receiving family planning services.
    Congress has prohibited the Secretary from granting, under section 
1915(b), waivers of certain State plan requirements through amendments 
made by sections 4604 and 4742 of the Omnibus Budget Reconciliation Act 
of 1990 (OBRA '90), Public Law 101-508. Section 4604(c) of OBRA '90 
amended section 1915(b) of the Act to prohibit waiver of the 
requirement that the State plan provide for adjustments in payment for 
inpatient hospital services furnished to infants who have not attained 
one year of age or to children who have not attained 6 years of age and 
who receive these services in disproportionate share hospitals. Section 
4742(a) of OBRA '90 amended section 1915(b)(4) of the Act to specify 
that the same prompt payment requirements that apply to health care 
practitioners under Medicaid under section 1902(a)(37)(A) must be 
extended to any type of provider who participates in the Medicaid 
program under a section 1915(b)(4) freedom of choice waiver.

II. Discussion of Legislative Changes and Provisions of Regulations

A. Medicaid Payments for Services Provided in Disproportionate Share 
Hospitals

    Section 4604 (a) and (b) of OBRA '90 amended section 1902 of the 
Act by adding sections 1902(a)(55) and 1902(s). Section 1902(a)(55) 
specifies that a State Medicaid plan must provide, in accordance with 
section 1902(s), for adjustments in payments for certain inpatient 
hospital services. Section 1902(s) specifies that a State plan must 
provide that payments to hospitals for inpatient hospital services 
furnished to infants who have not attained age one and to children who 
have not attained age six and who receive these services in 
disproportionate share hospitals must provide outlier adjustments for 
inpatient hospital services involving exceptionally high costs, or 
exceptionally long lengths of stay, if payment is made on a prospective 
basis (whether per diem, per case, or otherwise). Also, section 1902(s) 
provides that these payments must not be limited by (1) the imposition 
of day limits with respect to delivery of these services to the 
specified individuals; and (2) the imposition of dollar limits (other 
than limits resulting from the outlier adjustments specified above) 
with respect to the delivery of these services to infants who have not 
attained their first birthday (or in the case of an infant who is an 
inpatient on his first birthday, until the infant is discharged).
    Section 4604(c) of OBRA '90 amended section 1915(b) of the Act to 
specifically prohibit any waiver of the section 1902(s) requirements. 
Section 4604 became effective with respect to payments for calendar 
quarters beginning on or after July 1, 1991, without regard to whether 
or not final regulations to carry out the amendments have been 
promulgated by that date. However, if a State requires State 
legislation to meet the requirements, the State will not be held out of 
compliance with the requirement before the first day of the calendar 
quarter beginning after the close of the first regular session of the 
State legislature that begins after November 5, 1990.
    This interim final rule amends Sec. 431.55 of the Medicaid 
regulations by adding a new paragraph (b)(5) that prohibits the waiver 
of the section 1902(s) requirements of the Act under section 1915(b) 
waivers.

B. Timely Payment of Claims to Health Care Providers

    Under section 1902(a)(37) of the Act, as interpreted under 
Sec. 447.45 of the Medicaid regulations, a State's Medicaid plan must 
require the following prompt payment standards with regard to the 
payment of Medicaid claims made by health care practitioners in 
individual or group practice, or in shared health facilities:
     Claims can be submitted no later than 12 months from the 
date of service.
     The agency must pay 90 percent of all clean claims within 
30 days of the receipt of the claim unless a waiver is granted for good 
faith effort to comply.
     The agency must pay 99 percent of all clean claims within 
90 days of receipt of the claim unless a waiver is granted for good 
faith effort to comply.
     The agency must pay all other claims within 12 months of 
receipt of the claim. This limitation does not apply to retroactive 
adjustments to providers who are paid under a retrospective payment 
system; to claims filed timely under Medicare; to claims of providers 
under investigation for fraud or abuse; or to claims for which this 
limitation is superseded by a court order, a hearing decision, or other 
corrective action.
    Section 447.45 also requires that the State plan contain a 
definition of a claim to be used in meeting the requirements of timely 
claims payments; specifies the conditions for approving waiver 
requests; and requires that the State agency provide compliance reports 
and documentation.
    Section 1902(a)(37) of the Act and Sec. 447.45 do not apply to 
claims from hospitals and other institutions.
    Section 4742(a) of OBRA '90 amended section 1915(b)(4) of the Act 
to require timely payment of claims for services provided under the 
freedom of choice waivers. This provision specifies that each State 
must meet the same prompt payment standards for providers under a 
section 1915(b)(4) waiver that are currently required for payment of 
other health care practitioners who furnish services under Medicaid, as 
provided for in section 1902(a)(37)(A) of the Act. Section 4742(a) of 
OBRA '90 became effective on January 1, 1991.
    This interim final rule amends Sec. 431.55 of the Medicaid 
regulations by adding a new paragraph (f)(4) that requires States to 
make timely payments to any provider who participates in a Medicaid 
program under a section 1915(b)(4) waiver in the same manner that is 
required for payment to other health care practitioners furnishing 
Medicaid services, as specified in Sec. 447.45.

III. Technical Changes

A. Freedom of Choice of Providers of Family Planning Services

    Section 1902(a)(23) of the Act provides that Medicaid recipients 
may obtain services from any qualified provider that undertakes to 
provide services to them. Under section 1915(b) of the Act, a State may 
request that the Secretary waive the freedom of choice of provider 
requirement of section 1902(a)(23) in certain specified circumstances, 
but the law prohibits any restriction on a recipient's choice of a 
provider of family planning services.
    One of the circumstances for waiving the section 1902(a)(23) 
freedom of choice requirement is to allow the State to implement 
primary care case management systems (PCCMs) or specialty physician 
services arrangements, under which the State may restrict the provider 
through whom a recipient can receive medical care services. Under a 
PCCM, the State must assure that a specific person or agency will be 
responsible for locating, coordinating, and monitoring all primary and 
other medical services on behalf of recipients involved in the program. 
A specialty services arrangement allows the State to restrict 
recipients of specialty services to designated providers even in the 
absence of a PCCM, for example, restricting recipients in need of 
maternity related services to specific clinics. Emergency services and 
family planning services may not be restricted under these waivers, nor 
may the waiver substantially impair a recipient's access to services of 
adequate quality.
    Section 431.51(b)(1) of the existing regulations specifies that a 
recipient has a freedom of choice of providers, with certain allowed 
exceptions (one of which is under a section 1915(b) waiver). Section 
431.51(b)(2) of the existing regulations specifically states that a 
State plan must provide that a recipient enrolled in a primary care 
case management system, an HMO, or other similar entity will not be 
restricted in freedom of choice of providers of family planning 
services. However, the existing regulations at Sec. 431.55(b) that set 
forth the general requirements for waivers under section 1915(b), 
including waivers relating to implementing case management systems 
(Sec. 431.55(c)), do not specifically reference the prohibited 
restriction of a recipient's freedom of choice of providers of family 
planning services. We believe this reference oversight may result in 
some misunderstanding if Sec. 431.55 is read alone and not in the 
context of the complete subpart which contains both Secs. 431.51 and 
431.55. Therefore we are revising Sec. 431.55(b) by adding a new 
paragraph (b)(2)(iv) to clarify that the prohibition against limiting a 
recipient's freedom of choice of family planning services applies to 
all section 1915(b) waivers (including waivers relating to case 
management systems).

B. Waiver of Cost-Sharing Requirements

    For organizational purposes, we are separating the provisions on 
waiver of cost-sharing requirements that appear under the existing 
paragraph (g) of Sec. 431.55 from other requirements and establishing 
them as a new Sec. 431.57, with some minor editorial changes. We have 
made conforming changes in paragraph (a) of Sec. 431.55 to reflect this 
transfer.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking for a 
regulation in the Federal Register to provide a period for public 
comment.
    Section 4207(j) of OBRA '90 permits the Secretary to issue interim 
final regulations in order to implement the provisions of that Act. 
Therefore, we are dispensing with prior notice and comment rulemaking 
in this case and promulgating this rule on an interim final basis. 
However, we are providing a 60-day period for public comments on the 
interim final rule as indicated at the beginning of this preamble.

V. Response to Comments

    Because of the large volume of correspondence we normally receive 
on an interim final rule, we are not able to acknowledge or respond to 
them individually. However, we will consider all comments that we 
receive by the date and time specified in the DATES section of this 
preamble, and if we proceed with the final rule, we will respond to the 
comments in the final rule.

VI. Regulatory Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) unless the Secretary certifies that a rule would not have 
a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, States are not considered to be 
small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis for any interim final rule that may have a 
significant effect on the operations of a substantial number of small 
rural hospitals. Such an 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 50 beds. We are not 
preparing a rural hospital impact statement since we have determined, 
and the Secretary certifies, that this interim final rule would not 
have a significant economic impact on the operations of a substantial 
number of small rural hospitals.

VII. Collection of Information Requirements

    This final rule contains no information collection requirements. 
Consequently, this rule need not be reviewed by the Office of 
Management and Budget under the authority of the Paperwork Reduction 
Act of 1980 (44 U.S.C. 3501 et seq.).

List of Subjects in 42 CFR Part 431

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

    42 CFR part 431 is amended as follows:

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

    1. The authority citation for part 431 continues to read as 
follows:

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

    2. In Sec. 431.55, paragraph (a) is revised, paragraph (b)(2) is 
revised, a new paragraph (b)(5) is added, a new paragraph (f)(4) is 
added, and paragraph (g) is removed to read as follows:


Sec. 431.55  Waiver of other Medicaid requirements.

    (a) Statutory basis. Section 1915(b) of the Act authorizes the 
Secretary to waive most requirements of section 1902 of the Act to the 
extent he or she finds proposed improvements or specified practices in 
the provision of services under Medicaid to be cost effective, 
efficient, and consistent with the objectives of the Medicaid program. 
Sections 1915 (f) and (h) prescribe how such waivers are to be 
approved, continued, monitored, and terminated.
    (b) General requirements.
* * * * *
    (2) In applying for a waiver to implement an approvable project 
under paragraph (c), (d), (e), or (f) of this section, a Medicaid 
agency must document in the waiver request and maintain data regarding:
    (i) The cost-effectiveness of the project;
    (ii) The effect of the project on the accessibility and quality of 
services;
    (iii) The anticipated impact of the project on the State's Medicaid 
program and;
    (iv) Assurances that the restrictions on free choice of providers 
do not apply to family planning services.
* * * * *
    (5) The requirements of section 1902(s) of the Act, with regard to 
adjustments in payments for inpatient hospital services furnished to 
infants who have not attained age 1 and to children who have not 
attained age 6 and who receive these services in disproportionate share 
hospitals, may not be waived under a section 1915(b) waiver.
* * * * *
    (f) Restriction of freedom of choice.
* * * * *
    (4) The agency must make payments to providers furnishing services 
under a freedom of choice waiver under this paragraph (f) in accordance 
with the timely claims payment standards specified in Sec. 447.45 of 
this chapter for health care practitioners participating in the 
Medicaid program.
    3. A new Sec. 431.57 is added to read as follows:


Sec. 431.57  Waiver of cost-sharing requirements.

    (a) Sections 1916(a)(3) and 1916(b)(3) of the Act specify the 
circumstances under which the Secretary is authorized to waive the 
requirement that cost-sharing amounts be nominal.
    (b) For nonemergency services furnished in a hospital emergency 
room, the Secretary may by waiver permit a State to impose a copayment 
of up to double the ``nominal'' copayment amounts determined under 
Sec. 447.54(a)(3) of this subchapter.
    (c) Nonemergency services are services that do not meet the 
definition of emergency services at Sec. 447.53(b)(4) of this 
subchapter.
    (d) In order for a waiver to be approved under this section, the 
State must establish to the satisfaction of HCFA that alternative 
sources of nonemergency, outpatient services are available and 
accessible to recipients.
    (e) Although, in accordance with Sec. 431.55(b)(3) of this part, a 
waiver will generally be granted for a 2-year duration, HCFA will 
reevaluate waivers approved under this section if the State increases 
the nominal copayment amounts in effect when the waiver was approved.
    (f) A waiver approved under this section cannot apply to services 
furnished before the waiver was granted.

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

    Dated: August 5, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: December 2, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-2115 Filed 1-31-94; 8:45 am]
BILLING CODE 4120-01-P