[Federal Register Volume 60, Number 67 (Friday, April 7, 1995)]
[Rules and Regulations]
[Pages 17628-17631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8492]



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DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272 and 273

[Amendment No. 359]
RIN 0584-AB78


Food Stamp Program: Medical Expense Deduction

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule finalizes an interim rulemaking published on October 
3, 1994. The interim rulemaking amended food stamp regulations to 
simplify the means by which households with elderly and disabled 
members claim deductions from income for verified, prospective, non-
reimbursed medical expenses.

DATES: The amendments to Sec. 272.1(g)(138), Sec. 273.10(d)(4), and 
Sec. 273.21(f)(2)(iv), Sec. 273.21(i) and Sec. 273.21(j)(3)(ii)(C) are 
effective May 8, 1995 and must be implemented no later than September 
5, 1995. The remaining provisions of the interim rule which are being 
adopted as final without change, were effective October 1, 1994.

FOR FURTHER INFORMATION CONTACT: Eligibility and Certification 
Rulemaking Section, Certification Policy Branch, Program Development 
Division, Food and Consumer Service, USDA, 3101 Park Center Drive, 
Alexandria, Virginia, 22302, (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget under Executive Order 12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR 3015, Subpart V and related Notice (48 FR 29115), this 
Program is excluded from the scope of Executive Order 12372 which 
requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas, the 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this interim rule will not have a significant economic 
impact on a substantial number of small entities. State and local 
welfare agencies will be the most affected to the extent that they 
administer the Program.

Paperwork Reduction Act

    This rule does not contain reporting or recordkeeping requirements 
subject to approval by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Executive Order 12778

    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the EFFECTIVE DATE paragraph of this preamble. 
Prior to any judicial challenge to the provisions of this rule or the 
application of its provisions, all applicable administrative procedures 
must be exhausted. In the Food Stamp Program the administrative 
procedures are as follows: (1) For Program benefit recipients--State 
administrative procedures issued pursuant to 7 U.S.C. 2020(e)(1) and 7 
CFR 273.15; (2) for State agencies--administrative procedures issued 
pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for rules related to 
non-quality control (QC) liabilities) or Part 284 (for rules related to 
QC liabilities); (3) for Program retailers and wholesalers--
administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7 
CFR 278.8.

Background

    On October 3, 1994, the Department published an interim rule at 59 
FR 50153 (interim regulation) amending the food stamp regulations to 
simplify the means by which households with elderly and disabled 
members claim deductions from income for verified, prospective, non-
reimbursed medical expenses. Comments were solicited on the provisions 
of the interim rule through December 2, 1994. This final action 
addresses the commenters' concerns. Readers are referred to the interim 
rule for a more complete understanding of this final action.
    The Department received 5 comments on the interim rule. Two of the 
commenters supported the interim rule, believing that it benefitted 
households and State agencies alike by eliminating unnecessary 
reporting requirements. Four of the five commenters raised issues which 
are addressed below.

Budgeting of Medical Expenses

    A commenter noted that, although the interim regulations require 
State agencies to allow households to estimate, prospectively, 
recurring medical expenses, they do not explicitly prohibit 
retrospective budgeting of those expenses. Such retrospective budgeting 
is prohibited by section 5(e) of the Food Stamp Act of 1977, as 
amended, 7 USC 2014(e) (Act). Since only households in which all 
members are elderly or disabled with no earned income are amongst those 
groups of households exempt from retrospective budgeting, the interim 
rule's failure to explicitly prohibit the retrospective budgeting of 
medical expenses leaves open the possibility that some households' 
medical expenses would be budgeted in that manner.
    The Department agrees with the commenter that the interim 
regulations failed to explicitly prohibit the retrospective budgeting 
of medical expenses. Therefore, the Department is amending current 
regulations at 7 CFR 273.21(f)(2)(iv) to require that State agencies 
prospectively budget recurring medical expenses.
Verification of Medical Expenses

    The same commenter requested clarification of the procedures for 
State agency action on a household's voluntary report of a change in 
medical expenses. Although reporting of changes in medical expenses 
during the [[Page 17629]] certification period was not required by the 
interim rule, the household was given the option of voluntarily 
reporting any changes in medical expenses it incurred between 
certifications. If the household voluntarily reported a change in its 
medical expenses, the interim rule required the State agency to act on 
the change in accordance with current regulations at 7 CFR 273.12(c).
    The commenter felt that the reference was unclear and that further 
clarification was necessary. The commenter was particularly concerned 
about instances in which a household voluntarily reports a change in 
medical expenses that would cause a decrease in the household's 
allotment. Under current regulations at 7 CFR 273.12(c), the State 
agency may act on a reported change that would decrease the household's 
allotment or make the household ineligible without verification, though 
verification which is required by 7 CFR 273.2(f) has to be obtained 
prior to the household's recertification. The commenter felt that it 
should be clear in the regulatory language at 7 CFR 273.2, that if the 
household voluntarily reports a change in its recurring medical 
expenses that would decrease its allotment, the State agency should act 
on the change without requiring the household to verify it.
    The Department agrees with the commenter that, with respect to 
State agency action on a household's voluntary report of changes in 
medical expenses, additional clarification of the requirements is 
desirable. Therefore, the Department is amending 7 CFR 273.10(d)(4) and 
7 CFR 273.21(i) and (j)(iii)(C) to describe the procedures for acting 
on a household's voluntary report of changes in its medical expenses. 
The State agency is required to verify reported changes that would 
increase a household's allotment. The State agency has the option of 
either requiring verification prior to acting on the changes, or 
requiring the verification prior to the second normal monthly allotment 
after the change is reported. In the case of a reported change that 
would decrease the household's allotment, or make the household 
ineligible, the State agency shall act on the change without 
verification, though verification which is required by 7 CFR 273.2(f) 
has to be obtained prior to the household's recertification.

Restored Benefits

    A commenter stated that the interim rule should have provided for 
restoration of benefits back to October 1, 1991; the effective date of 
section 1717 of the Mickey Leland Memorial Domestic Hunger Relief Act 
of 1990 (1990 Leland Act), Title XVII, Public Law 101-624. The 
commenter argued that, because the Department failed to issue 
regulations in connection with section 1717 of the 1990 Leland Act, 
elderly and disabled households were wrongfully denied allotments based 
on recurring medical expenses during the period beginning October 1, 
1991 (the effective date of section 1717 of the 1990 Leland Act) to 
October 1, 1994 (the effective date of the October 3, 1994 interim 
rule). The commenter believed that the interim regulations should 
permit these households to receive restored benefits back to October 1, 
1991.
    Another commenter, however, questioned the need for the restoration 
of benefits under the interim rule. The commenter noted that under 
previous regulations, eligible households were receiving allowable 
medical expense deductions and that the interim rule merely simplified 
the process through which households can claim that deduction. Since 
eligible households were already receiving a deduction, the commenter 
asked in what case would a household be entitled to restored benefits.
    The Department agrees with the second commenter that restored 
benefits are not necessary in connection with the interim rule. The 
provisions of the interim rule did not change eligibility requirements 
for the medical deduction, but only simplified reporting procedures for 
claiming the deduction. Households that claimed the deduction under the 
previous rules should have received a benefit similar to that received 
under current rules.
    It could be argued that some eligible households may have refrained 
from claiming the medical deduction under the old rules because they 
felt that the former reporting requirements were too exacting, and that 
if the simplification provisions of the October 3, 1994 interim 
regulation had been published by the effective date of the 1990 Leland 
Act, those households would have claimed the medical deduction. 
However, restored benefits would not be appropriate for such households 
since the Department's former reporting requirements were consistent 
with the statute and within the Department's discretion. Therefore, 
such households could not argue they were wrongfully denied benefits.
    At the time the 1990 Leland Act was enacted, the Department 
believed that its then existing regulations adequately addressed the 
intent of section 1717. This claim was made in a proposed rule 
(Miscellaneous Provisions of the Mickey Leland Memorial Domestic Hunger 
Relief Act, June 28, 1991, 56 FR 29594), and no comment was received to 
the contrary. After learning that some States may have been confused 
and were misapplying the reporting requirements, the Department first 
issued regional memoranda and then exercised its discretion to revise 
and simplify its rules in a way designed to ease the reporting burden 
on both households and State agencies.
    The Department maintains that its old rules satisfied the 
requirements of section 1717 of the 1991 Leland Act. Under the rules 
that existed at that time, a household's medical expense deduction for 
the certification period was still based on the household's 
prospectively estimated recurring medical expenses and there was no 
change in the procedures that occur at the time of certification or 
recertification. Households were, however, required to report 
unanticipated changes of $25 or more which occurred during the 
certification period.
    The major simplification provision of the interim rule was the 
elimination of the household's requirement to report unanticipated 
changes of $25 or more in its medical expenses that it experienced 
during the certification period. The Department believes that this 
simplification was not required by section 1717 of the 1990 Leland Act 
but was within the discretion of the Department to further simplify 
medical deduction reporting procedures for households and beleaguered 
State agencies alike.
    The Department disagrees with the commenter that households 
eligible for the medical deduction should be issued restored benefits. 
First, the provisions of the interim rule merely simplified 
discretionary reporting requirements and did not alter eligibility 
requirements. Households eligible for the medical deduction would have 
received essentially the same benefit under the old rules as they did 
under the interim regulations. Second, though some households may have 
refrained from claiming the medical expense deduction because of the 
reporting requirements connected with the deduction, the Department 
contends that since the regulations in effect prior to the interim rule 
were reasonably within the Department's discretion when implementing 
the medical expense provisions of the 1990 Leland Act, no household was 
wrongly denied benefits.
    Consistent with the above, the Department is not amending the 
interim regulations to provide for the restoration [[Page 17630]] of 
benefits back to October 1, 1991 for households eligible for the 
medical expense deduction. The Department, however, is amending the 
interim regulations at 7 CFR 272.1(g)(138) to eliminate the requirement 
that restored benefits be issued back to October 1, 1994, the effective 
date of the interim rule, for households converted to the interim 
rule's procedures after the effective date. As noted by the second 
commenter, households eligible for the medical expense deduction were 
receiving correct deductions under prior regulations, and thus restored 
benefits are not necessary. If the household properly reported and 
verified its allowable medical expenses, it should have received the 
correct amount of benefits.
    On a related issue, a commenter wrote that State agencies should be 
required to notify eligible households immediately of the provisions of 
the interim rule. The interim rule required State agencies to implement 
the changes in medical deduction policy on October 1, 1994, and all 
households that newly apply for Program benefits on or after October 1, 
1994 would be subject to the interim rule procedures. For households 
participating prior to October 1, 1994, the interim rule required that 
they be subject to the new provisions at their request, at the time of 
recertification, or when their case is next reviewed, whichever occurs 
first. The State agency is required to provide restored benefits to 
such households back to the required implementation date or the date of 
application, whichever is later.
    The commenter felt that since households are unlikely to know about 
the changes in medical deduction policy required by the October 3, 1994 
interim rule and, therefore, are unlikely to request benefit conversion 
to the new policy, State agencies should be required to notify 
households of the provisions of the interim rule immediately and not 
wait until the household's next recertification or case review. The 
commenter noted that households with elderly or disabled persons are 
likely to have longer certification periods, perhaps up to 24 months. 
Therefore, waiting until a household's next recertification could delay 
implementation of the interim rule's provisions for several years. The 
commenter also contended that restored benefits are insufficient 
because they force vulnerable, hungry households to go without benefits 
during the certification period when they most need the assistance.
    The provisions of the interim rule simplify the means by which 
households with elderly and disabled members can claim the medical 
deduction. Those provisions benefit both eligible households and State 
agencies by reducing the reporting burden associated with the 
deduction. The Department agrees with the commenter, therefore, that it 
is in the best interest of both households and State agencies for 
eligible households to be made aware of the interim rule's procedures 
as soon as possible. Therefore, the Department is revising the 
implementation regulations of the interim rule at 7 CFR 272.1(g)(138) 
to require that State agencies notify all households eligible for the 
medical expense deduction of the change in medical deduction reporting 
procedures and of their right to be converted to those new procedures 
immediately. The method of notification is being left up to the State 
agencies.
    Another commenter requested clarification of a State agency's 
obligation to establish claims or provide supplemental benefits to 
households as a result of the changes in medical deduction policy. As 
noted above, a household's medical deduction is based on expenses 
reported at certification and changes in those expenses that can be 
reasonably anticipated. The household does not have to report any 
changes in its medical expenses during the certification period. The 
State agency would learn of any difference between the deduction and 
actual costs at the household's next recertification, when the 
household would be required to report and verify all of its current 
medical expenses. However, the State agency would not be allowed to 
apply this information to the previous (i.e., ending) certification 
period.
    Because of the change in policy regarding the reporting of medical 
expenses during the certification period, the State agency shall not 
issue supplements to or establish claims against households that choose 
not to report and/or verify changes in medical expenses when they occur 
during the certification period. The Department is amending the interim 
regulations at 7 CFR 273.10(d)(4) to clarify this requirement.

Implementation

    Under the interim rule, the provisions addressed in this final rule 
were effective October 1, 1994. The Department received one comment 
criticizing the short implementation time of the interim rule. The 
commenter wrote that State agencies are put in an awkward position 
whenever regulatory changes are made effective prior to the date of 
release of a regulation. This anomaly, the commenter noted, usually 
results because of the statutory implementation date of a provision. 
The provisions of the October 3, 1994 interim rule, however, were 
discretionary, and the commenter felt that the Department could have 
afforded State agencies a reasonable period of time for implementation.
    The Department understands the difficulties State agencies 
encounter when the effective date of a rule precedes its publication 
date. However, the Department felt that, due to apparent misapplication 
of the reporting requirements by some State agencies, the provisions of 
the interim rule were important enough to warrant a retroactive 
implementation date. In addition, in the Spring of 1994, the Department 
informed State agencies through its regional offices of the likelihood 
of a change in regulations regarding the medical expense deduction, 
thus giving State agencies the opportunity to do advanced planning in 
regard to implementing the rule. No change in the interim rule's 
effective date is being made in this final rule.
    The provisions of this final action which adopt as final without 
change provisions of the interim rule were effective as of October 1, 
1994. The provisions of this final action which require alteration of 
State procedures are to be effective May 8, 1995 and must be 
implemented no later than September 5, 1995.
    Any variance resulting from the implementation of the provisions of 
this final rule shall be excluded from quality control error analysis 
for 120 days from the required implementation date in accordance with 7 
CFR 275.12(d)(2)(vii).

List of Subjects

7 CFR Part 272

    Alaska, Civil rights, Food stamps, Grant programs-social programs, 
Reporting and recordkeeping requirements.

7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Food stamps, 
Fraud, Grant programs--social programs, Penalties, Records, Reporting 
and recordkeeping requirements, Social security.

    Accordingly, the interim rule amending 7 CFR 272 and 273 which was 
published at 59 FR 50153 on October 3, 1994, is adopted as a final rule 
with the following changes:
    1. The authority citation for 7 CFR parts 272 and 273 continues to 
read as follows:

    Authority: 7 U.S.C. 2011-2032. [[Page 17631]] 

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

    2. In Sec. 272.1, paragraph (g)(138) is revised to read as follows:


Sec. 272.1  General terms and conditions.

* * * * *
    (g) Implementation * * *
    (138) Amendment No. 359 The provision of Amendment No. 359 
regarding the medical expense deduction is effective and must be 
implemented no later than October 1, 1994. Any variances resulting from 
implementation of the provisions of this amendment shall be excluded 
from error analysis for 120 days from this required implementation date 
in accordance with 275.12(d)(2)(vii) of this chapter. The provision 
must be implemented for all households that newly apply for Program 
benefits on or after the required implementation date. State agencies 
must notify households eligible for the deduction of the change in 
medical deduction reporting requirements and the right of the household 
to be converted to those new procedures immediately. The current 
caseload shall be converted to these provisions at the household's 
request, at the time of recertification, or when the case is next 
reviewed, whichever occurs first.
* * * * *
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    3. In Sec. 273.10, the eighth sentence of paragraph (d)(4) is 
removed, and three new sentences are added to the end of paragraph to 
read as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions. * * *
    (4) Anticipating expenses. * * * If the household voluntarily 
reports a change in its medical expenses, the State agency shall verify 
the change in accordance with Sec. 273.2(f)(8)(ii) if the change would 
increase the household's allotment. The State agency has the option of 
either requiring verification prior to acting on the change, or 
requiring the verification prior to the second normal monthly allotment 
after the change is reported. In the case of a reported change that 
would decrease the household's allotment, or make the household 
ineligible, the State agency shall act on the change without requiring 
verification, though verification which is required by Sec. 273.2(f)(8) 
shall be obtained prior to the household's recertification.
* * * * *
    4. In Sec. 273.21:
    a. Paragraph (f)(2)(iv) is amended by adding the words ``, except 
medical expenses,'' after the words ``prorated over two or more 
months'' in the first sentence, and by adding a new sentence after the 
first sentence.
    b. The third sentence of paragraph (i) is revised and a fourth 
sentence is added.
    c. Paragraph (j)(3)(iii)(C) is revised.
    The revisions and addition read as follows:


Sec. 273.21  Monthly Reporting and Retrospective Budgeting (MRRB).

* * * * *
    (f) Calculating allotments for households following the beginning 
months. * * *
    (2) Income and deductions. * * *
    (iv) * * * Medical expenses shall be budgeted prospectively. * * *
* * * * *
    (i) Verification. * * * If the household voluntarily reports a 
change in its medical expenses, the State agency shall verify the 
change in accordance with Sec. 273.2(f)(8)(ii) before acting on it if 
the change would increase the household's allotment. In the case of a 
reported change that would decrease the household's allotment, or make 
the household ineligible, the State agency shall act on the change 
without requiring verification, though verification which is required 
by Sec. 273.2(f)(8)(i) shall be obtained prior to the household's 
recertification.
    (j) State agency action on reports. * * *
    (3) Incomplete filing. * * *
    (iii) * * *
    (C) If a household fails to verify a change in reported medical 
expenses in accordance with Sec. 273.2(f)(8), and that change would 
increase the household's allotment, the State agency shall not make the 
change. The State agency shall act on reported changes without 
requiring verification if the changes would decrease the household's 
allotment, or make the household ineligible.
* * * * *
    Dated: March 30, 1995.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 95-8492 Filed 4-6-95; 8:45 am]
BILLING CODE 3410-30-U