[Federal Register Volume 62, Number 8 (Monday, January 13, 1997)]
[Rules and Regulations]
[Pages 1682-1685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-673]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 435

[MB-105-FC]


Medicaid Program; Redeterminations of Medicaid Eligibility Due to 
Welfare Reform

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

ACTION: Final rule with comment period.

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SUMMARY: The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 and the Contract with America Advancement 
Act of 1996 created changes in Federal law affecting the eligibility of 
large numbers of Medicaid recipients. These changes include revisions 
to the definition of disability for children and to the eligibility 
requirements of non-U.S. citizens and individuals receiving disability 
cash assistance based on a finding of alcoholism and drug addiction.
    This final rule with comment period protects Federal financial 
participation

[[Page 1683]]

(FFP) in State Medicaid expenditures for States with unusual volumes of 
eligibility redeterminations caused by these recent changes in the law. 
We are making changes to the regulations to provide for additional time 
for States to process these redeterminations and provide services 
pending the redeterminations.

DATES: Effective date. These regulations are effective on January 13, 
1997.
    Comments. Written comments will be considered if we receive them at 
the appropriate address, as provided below, no later than 5:00 p.m. on 
March 14, 1997.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: MB-105-FC, P.O. Box 7517, 
Baltimore, Maryland 21207-0517.
    If you prefer, you may deliver your written comments (one 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 C5-09-26, Central Building, 7500 Security Boulevard, Baltimore, 
Maryland 21244-1850

Office of Information and Regulatory Affairs.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code MB-105-FC. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a 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: Bob Tomlinson, (410) 786-4463.

SUPPLEMENTARY INFORMATION:

I. Background

    Two recent laws have brought about major changes in the cash 
assistance programs under title IV-A (Aid to Families with Dependent 
Children (AFDC)) and title XVI (Supplemental Security Income (SSI)) of 
the Social Security Act, with substantial implications for Medicaid 
eligibility. These two laws are: the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Public Law 104-193), enacted on 
August 22, 1996, and the Contract with America Advancement Act of 1996 
(Public Law 104-121), enacted on March 29, 1996. These laws have 
affected the eligibility of individuals receiving cash payments by 
replacing the Aid to Families with Dependent Children (AFDC) program 
with a block grant to States for Temporary Assistance for Needy 
Families (TANF) and eliminated the automatic linkage between cash 
assistance to families and children and Medicaid. It replaced the 
automatic link with special Medicaid eligibility rules primarily based 
on whether the individuals would have received AFDC benefits under the 
program in effect on July 16, 1996. These laws also affected the 
eligibility of children who are receiving disability benefits under 
SSI, individuals receiving SSI disability benefits based on a finding 
of alcoholism and drug addiction, and non-U.S. citizens.
    In most States, individuals who are eligible for AFDC or SSI are 
(or were) also automatically eligible for Medicaid. These legislative 
changes will result in a large number of individuals losing cash 
assistance eligibility and therefore Medicaid. Under existing 
regulations at 42 CFR 435.916 and 435.1003, States are required to 
perform a redetermination of Medicaid eligibility in any case in which 
an individual loses eligibility based on receipt of cash assistance and 
that termination affects the individual's eligibility for Medicaid.
    The legislative changes have created a substantial new workload for 
States in the administration of their programs. We estimate that States 
will have to perform redeterminations on approximately 1.6 million 
individuals, most of which must occur by July 1, 1997. Considering this 
volume of redeterminations, we believe that our existing regulations do 
not allow sufficient time for States to comply with the requirements 
without risking loss of FFP in their administrative expenditures. Our 
existing regulations at Sec. 435.916 require that States must 
``redetermine the eligibility of Medicaid recipients, with respect to 
circumstances that may change, at least every 12 months * * * .'' The 
regulations also require the State to promptly redetermine eligibility 
when the State agency receives information about changes in a 
recipient's circumstances that may affect the recipient's eligibility; 
and, at the appropriate time, when the agency has information about 
anticipated changed in a recipient's circumstances, such as the loss of 
SSI payments because the individual has been found ineligible for SSI. 
This requirement also applies when changes in Federal or State law 
occur affecting the Medicaid eligibility of individuals or groups. 
Regulations at Sec. 435.1003 provide that, with respect to individuals 
who had been eligible for SSI, FFP is available until the end of the 
month if the SSI termination notice is received from SSA by the 10th of 
the month; and until the end of the following month if the SSA notice 
is received after the 10th of the month. Both regulations require that 
States determine or redetermine eligibility promptly.
    States are required to redetermine the Medicaid eligibility of any 
recipient who loses eligibility based on receipt of cash assistance. 
The redetermination must examine whether or not the individual would be 
Medicaid eligible on any other available basis under the State's 
approved plan. For example, a person who loses SSI may still be 
eligible for Medicaid as medically needy, optional categorically needy, 
or even based on receipt of cash assistance under title IV-A. This 
policy derives in part from the court decisions in Stenson v. Blum, 476 
F.Supp., 1331 (S.D.N.Y. 1979) aff'd without opinion, 628 F.2d 1345 (2d 
Cir. 1980) and Massachusetts Association of Older Americans v. Sharp 
(700 F.2d 749 (1st Cir. 1983). In these cases, the courts ruled that 
before a State may terminate an individual's Medicaid eligibility, it 
must redetermine the individual's Medicaid eligibility on any other 
available basis under the State's approved plan.
    Section 435.1003 allows States a limited period of time to perform 
redeterminations of individuals who have been determined ineligible for 
SSI in order to be eligible for FFP. The time allowed varies between 20 
and 45 days based on the date of receipt of information from SSA about 
the individual's SSI eligibility.
    States have expressed concerns regarding the time required to 
perform these redeterminations, and thus the implications for potential 
loss of FFP, given the current regulatory constraints and the 
complexity of Medicaid eligibility determination and redetermination 
processes. In situations such as those created by these recent laws, in 
which States have large redetermination workloads and short timeframes 
for adjusting the eligibility of affected beneficiaries, they believe 
that more time is needed. States and HCFA are concerned that retaining 
the existing time constraints would not allow sufficient time to 
process such a volume adequately, and would result in sharply increased 
appeals workloads, and the concomitant delays and expense attendant on 
such appeals. In some cases, it possibly may result in the

[[Page 1684]]

inappropriate loss of Medicaid eligibility and potential harm to the 
health of recipients. We believe that this approach may also shift the 
burden of finding a basis for eligibility to the recipient, who may be 
the least knowledgeable in this area.

II. Provisions of the Final Rule With Comment Period

    Under current rules, when changes in Federal law cause a 
significant change in eligibility for Medicaid and a consequent 
increase in the eligibility determination/redetermination workload, two 
equally undesirable results may occur. In an effort to comply with the 
regulations, States may make inadequate or cursory redeterminations 
that, in some cases, may result in inappropriate termination of 
Medicaid eligibility. The affected recipients may be denied medical 
care or become impoverished attempting to pay for care they do receive. 
In the alternative, the State may take longer than permitted to make 
the redetermination and thus risk denial of FFP. In either case, the 
State risks loss of FFP or incurs increased administrative costs coping 
with appeals or increased application workloads, while the individual 
is unnecessarily deprived of the means to pay for needed medical care 
with attendant adverse consequences.
    To promote the proper and efficient administration of the Medicaid 
program, we believe that when there is a change in Federal law that 
significantly affects Medicaid eligibility, the Secretary should be 
able to grant States additional time to redetermine eligibility without 
risk of loss of FFP and to assure that redeterminations are not 
performed hastily. We believe the Secretary is best able to determine 
when additional time and FFP should be granted, because the granting of 
additional time is intended to be used only when Federal law makes 
significant changes in Medicaid eligibility requiring voluminous 
redeterminations of eligibility.
    Therefore, we have determined that when changes in Federal law 
cause sharp increases in State eligibility redetermination workloads, 
the Secretary should have the flexibility to authorize additional time 
during which FFP would be available. Such flexibility assures that FFP 
will be available to meet the redetermination workload while assuring 
that the time and FFP available are directly proportional to the 
expected volume of redeterminations arising from the particular 
legislation.
    A grant of additional time would be made only in exceptional 
circumstances, such as the passage of recent Public Laws 104-193 and 
104-121. This legislation requires a significant volume of 
redeterminations, estimated at upwards of 1.6 million, most of which 
must be performed within the next 9 months. It is for this reason that 
we are providing in this notice that States may take up to 120 days to 
process all redeterminations of Medicaid eligibility governed by 42 CFR 
Sec. 435.1003 through the end of calendar year 1997 unless the 
Secretary further extends the waiver.
    The issue of whether more time should be routinely available to 
States for completing redeterminations will likely be dealt with in a 
separate regulation at a future date. We are not addressing that issue 
in this regulation because we do not believe it is an appropriate 
subject for an emergency regulation.
    We considered providing a fixed but longer period of time than that 
currently provided in Sec. 435.1003. However, such a fixed period would 
not address the type of extraordinary circumstance, such as welfare 
reform, which necessitates the changes we are making in this final rule 
with comment period.
    An alternative approach to providing more time, consistent with the 
theme that a uniform time for redeterminations be used, would be to 
provide 60 days to redetermine Medicaid eligibility for anyone losing 
SSI or cash assistance under title IV-A, or in cases where there is a 
change in circumstances of the recipient. This alternative would 
include an escape clause similar to one already in existence in 
Sec. 435.911, which permits States to take longer to make eligibility 
determinations than the generally specified time period, when 
extraordinary circumstances prevent adherence to the time standards. 
Such an escape clause would permit States to take longer when a change 
in Federal law necessitates large numbers of redeterminations without 
risking loss of FFP. We did not adopt this option because of concerns 
that such an open-ended redetermination period would require 
substantially more monitoring by the Federal Government and 
recordkeeping by States to ensure that when a State uses the escape 
clause, the use is justified and the period of time for which it is 
used is reasonable.
    We are adding a new paragraph (c) to Sec. 435.1003 to provide that 
when a change in Federal law affects the eligibility of large numbers 
of Medicaid recipients, the Secretary may waive the otherwise 
applicable FFP requirements and redetermination time limits. This is 
done to make FFP available for a reasonable period of time, designated 
by the Secretary, while States redetermine the eligibility of Medicaid 
recipients. These recipients may otherwise lose Medicaid eligibility, 
possibly due to loss of SSI eligibility, because of a change in Federal 
law. In such situations, the States are given a reasonable period of 
time, designated by the Secretary, to do the redetermination.

III. Waiver of Proposed Rule and 30-Day Delay in the Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register for a substantive rule to provide a period for public 
comment. However, we may waive that procedure if we find good cause 
that notice and comment are impractical, unnecessary, or contrary to 
the public interest. In addition we also normally provide a delay of 30 
days in the effective date. However, if adherence to this procedure 
would be impractical, unnecessary, or contrary to public interest, we 
may waive the delay in the effective date.
    We are adopting this regulation as a final with comment period 
without publication of a notice of proposed rule making because of the 
urgent need to provide the States with FFP in their Medicaid 
expenditures for additional time for completing the massive number of 
redeterminations caused by the recent statutory changes. This need is 
critical because States must begin redetermining eligibility for large 
numbers of individuals who may lose Medicaid or SSI beginning January 
1, 1997. Publication of a proposed rule with a 60-day comment period 
prior to publication of a final rule would cost valuable time in 
processing the mandated redeterminations, and would leave large numbers 
of beneficiaries without Medicaid or SSI beginning January 1, 1997. 
Thus, we believe that it is contrary to the public interest to delay 
implementation of the statutory provisions until the process of 
publishing both proposed and final rules can be completed. Therefore, 
we find good cause to waive proposed rulemaking and to issue these 
regulations as final.
    Also, because States must begin such redeterminations as of January 
1, 1997, we are not making the effective date of the regulation the 
usual 30 days after publication. Instead, we will make the regulation 
effective on the date of publication. For the reasons discussed above, 
we find good cause to waive the usual 30-day delay so that the 
provisions may take effect upon publication of this final rule with 
comment period.
    Although we are publishing this as a final rule, we are providing a 
60-day period for public comment. Because of the large number of items 
of

[[Page 1685]]

correspondence we normally receive concerning regulations, we are not 
able to acknowledge or respond to the comments individually. However, 
if we decide that changes are necessary as a result of our 
consideration of timely comments, we will issue a final rule and 
respond to the comments in the preamble of that rule.

IV. Regulatory Impact Statement

    For final rules with comment period, we generally prepare a 
regulatory flexibility analysis that is consistent with the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601 through 612), unless we certify 
that a final rule will not have a significant economic impact on a 
substantial number of small entities. For purposes of a RFA, 
individuals and States are not considered to be small entities.
    In addition, section 1102(b) of the Social Security Act requires us 
to prepare a regulatory impact analysis for any final 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. With the exception of hospitals located in 
certain rural counties adjacent to urban areas, 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 estimate that the costs of performing the redeterminations 
arising from recent Federal laws will be substantial. We expect that 
nearly 1,600,000 individuals will have their eligibility redetermined. 
Of this number, most are SSI-eligible individuals, and of these, 
500,000 involve redetermination of disability. We estimate that the 
cost to the Medicaid program, emanating from Public Laws 104-193 and 
104-121, of allowing a longer period of time to make eligibility 
redeterminations on those individuals who may lose benefits to be 
approximately $50 million (Federal share) in FY 1998. This is estimated 
on the basis of the redeterminations occurring within one year of 
implementation of this rule and requiring an approximate extra 75 days 
to complete.
    Because these final regulations affect only States and individuals, 
which are not defined as small entities, we have determined, and we 
certify, that this rule will not have a significant economic impact 
under the threshold criteria of the RFA. Further, we certify, for the 
same reasons, that this final rule does not have a significant impact 
on the operations of a substantial number of small rural hospitals. 
Therefore, we have not prepared a regulatory flexibility analysis or an 
analysis of the effects of this rule on small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

V. Collection of Information Requirements

    This rule does not impose any new information collection or 
recordkeeping requirements that are subject to review by the Office of 
Management and Budget under the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501 et seq.) The existing collection requirements under 
Sec. 435.1003 are currently approved under OMB approval number 0938-
0247 through May 31, 1997.
    Redetermination of eligibility is currently required for all 
individuals whose eligibility is affected either by change in law or 
change in individual circumstances. The passage of Public Laws 104-193 
and 104-121 requires that SSA redetermine the SSI eligibility of large 
numbers of recipients. Once SSA issues redetermination notices to the 
affected individuals, States must redetermine Medicaid eligibility of 
these individuals. Regulations at Sec. 435.1003 require that such 
redeterminations be performed promptly. These new rules will not change 
the redetermination requirement and the associated paperwork needed to 
perform a redetermination. However, because of the change in Federal 
law, there will be a substantial increase in the volume of 
redeterminations States will have to make. These regulations are 
designed to relieve the States of the pressures and costs of these 
redeterminations by providing both more time and FFP to conduct the 
redeterminations and to provide FFP in Medicaid expenditures while the 
redeterminations are pending.
    We estimate that each redetermination will involve approximately 18 
hours.

List of Subjects in 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 435 is amended as follows:

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

    1. The authority citation for part 435 continues to read as 
follows:

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

    2. In Sec. 435.1003, the title is revised, and a new paragraph (c) 
is added to read as follows:


Sec. 435.1003  FFP for redeterminations.

* * * * *
    (c) When a change in Federal law affects the eligibility of 
substantial numbers of Medicaid recipients, the Secretary may waive the 
otherwise applicable FFP requirements and redetermination time limits 
of this section, in order to provide a reasonable time to complete such 
redeterminations. The Secretary will designate an additional amount of 
time beyond that allowed under paragraphs (a) and (b) of this section, 
within which FFP will be available, to perform large numbers of 
redeterminations arising from a change in Federal law.

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

    Dated: December 10, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: December 20, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 97-673 Filed 1-10-97; 8:45 am]
BILLING CODE 4120-01-P