[Federal Register Volume 59, Number 161 (Monday, August 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20561]


[[Page Unknown]]

[Federal Register: August 22, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

 

42 CFR Parts 435 and 436

[MB-001-F]
RIN 0938-AA58

Medicaid Program; Eligibility and Coverage Requirements

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

ACTION: Final rule.

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SUMMARY: This final rule withdraws regulations setting forth a 
mandatory budgetary method for determining financial eligibility for 
individuals who are not receiving or deemed to be receiving Federal 
cash assistance but whose financial eligibility for Medicaid is being 
determined through the application of financial criteria of the Aid to 
Families with Dependent Children (AFDC) program. These regulations were 
previously issued as part of a final rule with comment period 
originally published on January 19, 1993, and were to be effective 
October 18, 1994.
    This final rule also makes conforming technical changes, as a 
result of this withdrawal, to the remainder of the January 19, 1993, 
final rule and reaffirms the August 18, 1994, effective date of this 
remaining part.
    These changes are being made as a result of consideration of public 
comments received.

EFFECTIVE DATE: August 18, 1994.

FOR FURTHER INFORMATION CONTACT: Marinos Svolos, (410) 966-4451.

SUPPLEMENTARY INFORMATION:

I. Background

    On January 19, 1993 (58 FR 4931), we published in the Federal 
Register a final rule with comment period that amended the requirements 
for coverage of certain groups of individuals under Medicaid and the 
requirements for determining Medicaid eligibility. Because the new 
administration wanted to fully review the policies in these 
regulations, on February 19, 1993, we published a notice in the Federal 
Register (58 FR 9120) delaying the effective dates and compliance dates 
of the final rule with comment period for 6 months. These dates were 
extended for two additional 6-month periods in subsequent notices 
published in the Federal Register on August 23, 1993 (58 FR 44457) and 
February 18, 1994 (59 FR 8138).
    These regulations incorporated into the Medicaid regulations 
substantive changes made in the composition of eligibility groups of 
individuals and in the criteria used to determine their financial 
eligibility under Medicaid. The substantive changes were initially made 
by the Omnibus Budget Reconciliation Act of 1981 (OBRA '81), Public Law 
97-35, and the Tax Equity and Fiscal Responsibility Act of 1982 
(TEFRA), Public Law 97-248, and further amended by the Deficit 
Reduction Act of 1984 (DRA), Public Law 98-369; the Consolidated 
Omnibus Budget Reconciliation Act of 1985 (COBRA), Public Law 99-272; 
the Omnibus Budget Reconciliation Act of 1986 (OBRA '86), Public Law 
99-509; the Medicare and Medicaid Patient and Program Protection Act of 
1987, Public Law 100-93; the Omnibus Budget Reconciliation Act of 1987 
(OBRA '87), Public Law 100-203; the Medicare Catastrophic Coverage Act 
of 1988 (MCCA), Public Law 100-360; the Family Support Act of 1988, 
Public Law 100-485; the Omnibus Budget Reconciliation Act of 1989 (OBRA 
'89), Public Law 101-239; and the Omnibus Budget Reconciliation Act of 
1990 (OBRA '90), Public Law 101-508. In addition, the document 
contained changes made as a result of administrative decisions to 
improve program administration and efficiency.
    Basically, the January 1993 rule had two parts with different 
effective dates. The first part codified a number of statutory changes 
dating as far back as 1981. This part was classified as a final rule. 
As extended by the subsequent notices to the January 1993 publication, 
the effective date for these regulations is August 18, 1994.
    The second part of the January 1993 rule set forth a mandated 
budgeting method for determining the financial eligibility of 
individuals who are not receiving or deemed to be receiving Federal 
cash assistance but whose financial eligibility for Medicaid is being 
determined through application of the financial criteria under the Aid 
to Families with Dependent Children (AFDC) program (referred to as 
``AFDC-related non-cash assistance individuals''). This part was 
classified as a final rule with comment period. As extended by the 
subsequent notices to the January 1993 rule, the effective date for 
this part is October 18, 1994.
    The budgetary method set forth in the regulations was developed to 
clarify contradictory provisions in the Social Security Act (the Act) 
that had resulted in litigation. Basically, title XIX of the Act 
(section 1902(a)(10)) requires that the methods of the Federal cash 
assistance program most closely related to the individual's status be 
used to determine income and resources for purposes of Medicaid 
eligibility. At the same time, title XIX (section 1902(a)(17)(D)) 
prohibits use of some of those same methods without specifying what 
should be used in their place. That is, section 1902(a)(17)(D) of the 
Act prohibits the consideration of income and resources of family 
members as available to applicants and recipients (unless actually made 
available) except (1) an applicant or recipient for his or her 
respective spouse; and (2) parents for their children who are either 
under 21 or who are blind and disabled regardless of age. This 
requirement became a problem for AFDC-related non-cash assistance cases 
when an AFDC statutory change in 1984 mandated that all family members 
living together be considered one family unit for AFDC eligibility 
purposes and that the income and resources of all family members be 
pooled. As a result, AFDC sometimes requires attributing income and 
resources from persons other than spouses or parents (siblings, 
stepparents, grandparents, legal guardians, and alien sponsors) as 
available to the applicant or recipient. Use of the AFDC methods for 
cases involving income from persons other than spouses or parents, 
however, is contrary to section 1902(a)(17)(D) of the Act.
    Since 1984, courts in a number of jurisdictions have ruled that 
section 1902(a)(17)(D) of the Act, which limits whose income and 
resources can be counted (unless actually made available), overrides 
section 1902(a)(10) of the Act, which requires that the AFDC methods be 
used to determine Medicaid eligibility for AFDC-related non-cash 
assistance cases. These rulings left open the issue of what method 
should be used uniformly among States. Currently, States are using a 
variety of methods for determining income for Medicaid eligibility 
purposes.
    In response to our request for public comments on the January 1993 
rule, we received many objections to the budgeting method set forth in 
the regulations. Specifically, we set forth in the January 1993 rule a 
prorating method of determining eligibility for AFDC-related non-cash 
assistance individuals. Under this method, individual members of the 
Medicaid budgetary unit would have their income and resource 
eligibility determined using separate standards that are calculated 
based on proration of existing standards. Parents' countable income and 
resources would be prorated equally among their dependents living in 
the home, including non-Supplemental Security Income dependents who may 
not be members of the budgetary unit. The proration would also take 
into account the needs of the parents. We also addressed how certain 
types of income would be counted and how certain types of disregards 
would be calculated.
    We received comments from 13 States and 7 special interest groups. 
With one exception, all of the commenters objected to the budgeting 
method in these regulations. These commenters stated that the new 
procedure was error prone and unnecessarily complex. In addition, they 
believed that the required system and manual changes and personnel 
retraining would result in significant administrative costs.
    We considered these comments, especially in the light of health 
care reform legislation. We also worked with the Medicaid Eligibility 
Technical Advisory Group (ETAG) to develop an acceptable policy. The 
ETAG prefers a policy that minimizes the disruption of current 
approaches. We also met with recipient advocates who endorse allowing 
States a choice of several options, but strongly oppose allowing the 
budgeting method in the referenced regulation to be one of these 
options.
    Consequently, we are withdrawing the regulations containing the 
mandatory budgetary method for determining financial eligibility for 
AFDC-related non-cash assistance individuals. By doing this, we are 
allowing States flexibility, within any constraints imposed by court 
orders or agreements with recipient advocate groups, to interpret the 
current provisions in the law. That is, at this time, in the absence of 
specific regulatory guidance on the methodologies for establishing 
income and resource eligibility for AFDC-related non-cash assistance 
individuals, States will be required to use methodologies that comply 
with the statute and any applicable court orders.

II. Provisions of the Final Regulation

    As a result of our decision to withdraw the regulations that 
require States to use a mandatory budgetary method for determining 
financial eligibility for AFDC-related non-cash assistance individuals, 
we are making the following changes to the January 1993 rule:
     We have withdrawn Secs. 435.604, 435.606, 436.604, and 
436.606. These sections contained the procedures for determining income 
and resource eligibility for AFDC-related non-cash assistance groups.
     We have removed and reserved Sec. 435.113(b) and 
Sec. 436.111(b)(2). These paragraphs required States to provide 
Medicaid to individuals denied AFDC because of the involuntary 
inclusion of all eligible siblings living in the home as members of 
AFDC filing units.
     We have removed and reserved Sec. 435.600(b) and 
Sec. 436.600(b). These sections referred respectively to Sec. 435.604 
and Sec. 436.604, which have been removed.
     We have revised Sec. 435.601 and Sec. 436.601 by removing 
paragraph (e) in each section. These paragraphs contain criteria for 
exceptions to financial application eligibility methodologies and State 
plan requirements that are no longer applicable. We also have corrected 
related cross-references in paragraph (b) and (f)(l) of each section.
     We have revised Sec. 435.602 by removing and reserving 
paragraph (d) and Sec. 436.602 by removing and reserving paragraph (c). 
These paragraphs contain requirements for determining financial 
responsibility of relatives and other individuals for AFDC-related non-
cash assistance groups. We also have corrected related cross-references 
in Secs. 435.602(a), 436.602(a), and 436.602(a)(2).
    The remainder of the January 1993 rule is unchanged and is 
effective on August 18, 1994.

III. Regulatory Impact Statement

    We generally prepare a final 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 regulation will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all Medicaid providers 
as small entities. Individuals and States are not included in the 
definition of a small entity.
    In addition, section 1102(b) of the Act requires the Secretary to 
prepare a regulatory impact analysis for any rule that may have a 
significant impact 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 with fewer than 50 beds 
that is located outside a metropolitan statistical area.
    This final rule revises the January 19, 1993, final rule with 
comment period. We have decided to withdraw the second part of that 
rule which basically codified a mandatory budgetary method for 
determining financial eligibility for AFDC-related non-cash assistance 
individuals. We concluded, along with a number of other entities, that 
this provision would result in significant administrative costs. The 
mandatory budget method has, therefore, been withdrawn.
    This final rule will take effect on August 18, 1994. We believe 
that the withdrawal of the referenced regulations minimizes any 
unnecessary burden on the public, and that the best regulatory options 
have been selected. Further, we believe that these regulations will not 
lead to increased costs. Therefore, we have determined that these 
provisions will have a negligible cost effect and that a regulatory 
impact analysis is not required.
    We have determined, and the Secretary certifies, that this final 
rule will not result in a significant economic impact on a substantial 
number of small entities and will not have a significant impact on the 
operations of a substantial number of small rural hospitals. For these 
reasons, we are not preparing analyses for either RFA or section 
1102(b) of the Act.
    This final rule does not contain information collection 
requirements; therefore, it is not subject to Office of Management and 
Budget (OMB) review under the Paperwork Reduction Act of 1980.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by OMB.

Lists of Subjects

42 CFR Part 435

    Aid to Families with Dependent Children, Grant programs--health, 
Medicaid, Reporting and recordkeeping requirements, Supplemental 
Security Income (SSI), Wages

42 CFR Part 436

    Aid to Families with Dependent Children, Grant programs--health, 
Guam, Medicaid, Puerto Rico, Supplemental Security Income (SSI), Virgin 
Islands

    42 CFR Chapter IV, Subchapter C is amended as follows:

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

    A. Part 435, as published in the Federal Register on January 19, 
1993 (58 FR 4931), and further amended to be effective on August 18, 
1994 or October 18, 1994, is amended as follows:
    1. The authority citation for part 435 continues to read as 
follows:

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


Sec. 435.113  [Amended]

    2. Section 435.113 is amended by removing and reserving paragraph 
(b).


Sec. 435.600  [Amended]

    3. Section 435.600 is amended by removing and reserving paragraph 
(b).


Sec. 435.601  [Amended]

    4. Section 435.601 is amended as follows:
    a. In paragraph (b), the phrase ``Except as specified in paragraphs 
(c), (d), and (e),'' is revised to read ``Except as specified in 
paragraphs (c) and (d),''.
    b. Paragraph (e) is removed and reserved.
    c. In paragraph (f)(1), the phrase ``except to the extent precluded 
by Secs. 435.602, 435.604, and 435.606,'' is revised to read ``except 
to the extent precluded in Sec. 435.602,''.


Sec. 435.602  [Amended]

    5. Section 435.602 is amended as follows:
    a. In paragraph (a), the phrase ``Subject to the provisions of 
paragraphs (b), (c), and (d) of this section,'' is revised to read 
``Subject to the provisions of paragraphs (b) and (c) of this 
section,''.
    b. Paragraph (d) is removed and reserved.


Sec. 435.604  [Withdrawn]

    6. Section 435.604 is withdrawn and the section number is reserved.


Sec. 435.606  [Withdrawn]

    7. Section 435.606 is withdrawn and the section number is reserved.

PART 436--ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS

    B. Part 436, as published in the Federal Register on January 19, 
1993 (58 FR 4931), and further amended to become effective on August 
18, 1994 or October 18, 1994, is amended as follows:
    1. The authority citation for part 436 continues to read as 
follows:

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


Sec. 436.111  [Amended]

    2. Section 436.111 is amended by removing and reserving paragraph 
(b)(2).


Sec. 436.600  [Amended]

    3. Section 436.600 is amended by removing and reserving paragraph 
(b).


Sec. 436.601  [Amended]

    4. Section 436.601 is amended as follows:
    a. In paragraph (b), the phrase ``Except as specified in paragraphs 
(c), (d) and (e) of this section,'' is revised to read ``Except as 
specified in paragraphs (c) and (d) of this section,''.
    b. Paragraph (e) is removed and reserved.
    c. In paragraph (f)(1), the phrase ``except to the extent precluded 
by Secs. 436.602, 436.604, and 436.606,'' is revised to read ``except 
to the extent precluded by Sec. 436.602,''.


Sec. 436.602  [Amended]

    5. Section 436.602 is amended as follows:
    a. In the introductory text of paragraph (a), the phrase ``Subject 
to the provisions of paragraphs (b), (c), and (d) of this section,'' is 
revised to read ``Subject to the provisions of paragraphs (b) and (c) 
of this section,''.
    b. In paragraph (a)(2), the phrase ``, except as specified in 
paragraphs (c) and (d) of this section'' at the end of the first 
sentence is removed.
    c. Paragraph (c) is removed and reserved.


Sec. 436.604  [Withdrawn]

    6. Section 436.604 is withdrawn and the section number is reserved.


Sec. 435.606  [Withdrawn]

    7. Section 436.606 is withdrawn and the section number is reserved.

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

    Dated: August 11, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: August 12, 1994.
Donna E. Shalala,
Secretary.
[FR Doc. 94-20561 Filed 8-18-94; 8:45 am]
BILLING CODE: 4120-01-P