[Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
[Notices]
[Pages 26545-26550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12429]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[MB-103-NC]
RIN 0938-AH90


Medicaid Program; Allocation of Enhanced Federal Matching Funds 
for Increased Administrative Costs Resulting From Welfare Reform

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

ACTION: Notice with comment period.

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SUMMARY: This notice with comment period announces the methodology used 
to determine the allocation, among the States and certain Territories, 
of a $500 million fund to assist them with the additional expenses 
attributable to eligibility determinations incurred as a result of the 
provisions of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996, which decouples Medicaid eligibility from 
receipt of cash assistance for families and children. Also, it 
announces the actual allocation amount for each State and Territory. 
The special fund is available for matching a State's or Territory's 
allowable administrative expenditures incurred only during Federal 
fiscal years 1997 through 2000, and only during the first 12 calendar 
quarters in which the State's Temporary Assistance to Needy Families 
program, which replaced the Aid to Families with Dependent Children 
program, is in effect after August 21, l996.

DATES: Effective Date: This notice is effective on May 14, 1997.
    Comment Period: Written comments will be considered if we receive 
them at the appropriate address, as provided below, no later than 5 
p.m. on June 13, 1997.

ADDRESSES: Mail comments (one original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: MB-103-NC, P.O. Box 7517, 
Baltimore, MD 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 20221, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. When you comment, please 
refer to file code MB-103-NC. 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).
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or MasterCard 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8. As an alternative, you can view and 
photocopy the Federal Register document at most libraries designated as 
Federal Depository Libraries and at many other public and academic 
libraries throughout the country that receive the Federal Register.

FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.

SUPPLEMENTARY INFORMATION:

I. Background

    Under title XIX of the Social Security Act (the Act), Federal funds 
are available at specified Federal matching rates for expenditures for 
medical assistance and administrative expenditures under the States' 
approved Medicaid plans. State Medicaid agencies are required to submit 
quarterly reports of expenditures (on Form HCFA-64) in order to claim 
Federal financial participation (FFP), that is, Federal matching funds 
for these expenditures.

II. Recent Legislation

    The Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (PRWORA) amended title IV-A of the Act to repeal the Aid to 
Families with Dependent Children (AFDC) program. The AFDC program 
provided an entitlement to cash assistance for eligible families with 
dependent children and was funded by an openended, jointly funded 
Federal-State program. PRWORA replaced AFDC with a program of block 
grants for States for Temporary Assistance for Needy Families (TANF). 
The repeal of AFDC becomes effective not later than July 1,

[[Page 26546]]

1997, or for most purposes on the date that the Secretary receives a 
State's TANF plan. Under TANF, States have broad flexibility to provide 
assistance for the purpose of ending the dependence of needy parents on 
government benefits by promoting job preparation, work, and marriage; 
preventing out-of-wedlock pregnancies; and encouraging the formation 
and maintenance of two-parent families. Prior to the passage of PRWORA, 
Medicaid eligibility for families with children receiving AFDC was 
automatic.
    With the implementation of each State's TANF program, there is no 
longer an automatic link between eligibility for cash assistance under 
the AFDC program and eligibility under the Medicaid program. Section 
114(a) of PRWORA amended title XIX of the Act to add a new section 1931 
that, in general, requires State agencies to provide Medicaid 
eligibility to low income families, if they had been eligible under the 
AFDC plan in effect on July 16, 1996. With the advent of the TANF 
program, State Medicaid agencies are expected to incur additional 
administrative costs related to the need to determine Medicaid 
eligibility for individuals in accordance with section 1931 of the Act. 
These expenditures include the costs of outreach to potential eligible 
individuals who will no longer receive automatic Medicaid eligibility 
through the cash assistance linkage. It is essential that State 
Medicaid agencies ensure and protect continued Medicaid eligibility for 
current Medicaid recipients who would have been eligible under the July 
16, 1996 AFDC rules or who are otherwise eligible under section 1931 of 
the Act, and that the State agencies successfully implement new 
procedures for identifying potential new Medicaid recipients and 
determining their eligibility.
    To assist State agencies with additional administrative costs 
involved in this transition, section 114(a) of PRWORA created a new 
section 1931(h) of the Act, which establishes a $500 million fund that 
is available as Federal matching funds for the State Medicaid agencies' 
administrative costs of Medicaid eligibility determinations incurred as 
a result of the delinking of Medicaid eligibility from eligibility for 
cash assistance under title IV-A of the Act. The additional Federal 
funds will be provided to State agencies through an enhanced Federal 
matching rate for the applicable administrative expenditures. A State 
agency is eligible to claim the enhanced Federal matching funds for 
allowable expenditures incurred during the first 12 calendar quarters 
(3 years) in which the State's TANF program is in effect. Furthermore, 
the enhanced Federal matching funds are only available for allowable 
expenditures for the period beginning with Federal fiscal year 1997 
(that is October 1, 1996) and ending with Federal fiscal year 2000 
(that is September 30, 2000). The law requires the Secretary to 
increase the usual Federal matching percentage of 50 percent for 
States' claims for administrative expenditures from this fund and to 
ensure the equitable distribution of the increased matching funds.
    Under section 1931(h) of the Act, the $500 million fund is 
available only for the administrative costs of Medicaid eligibility 
determinations attributable to the application of the requirements of 
section 1931 of the Act, that is, the rules of the States' former AFDC 
programs. The fund is not available for the costs of determining 
Medicaid eligibility for individuals with respect to other provisions 
of PRWORA, such as those related to alien and immigration status or the 
Supplemental Security Income (SSI) program, unless those individuals 
are screened for Medicaid eligibility through provisions of section 
1931 of the Act. HCFA estimates that $500 million provide adequate 
funds to offset additional administrative costs that States will incur 
attributable to the requirements of section 1931 of the Act.

III. Provisions of the Notice

    This notice with comment period announces the enhanced Federal 
matching rates, the allocation formula and the factors included in that 
formula, the dollar amounts allocated to each State, and the activities 
for which FFP will be available at enhanced matching rates, which are 
established under section 1931(h) of the Act. Specifically, sections 
1931 (h)(1), (h)(2), and (h)(3) of the Act, respectively, authorize the 
Secretary to: specify the enhanced Federal matching rates; determine 
the allowable expenditures; and ensure the equitable distribution of 
the funds among States by establishing the allocation formula and 
factors included in the formula, and the dollar amounts allocated to 
each State.
    We are allocating two amounts to each State agency from the $500 
million fund: A minimum (base) allocation, which is generally the same 
for all States; and an additional allocated amount (secondary 
allocation), which differs by State and is determined by a formula 
using factors discussed in detail in section VI. of this notice. State 
agencies may claim Federal funding for allowable activities against the 
base allocation at a 90-percent matching rate. State agencies may claim 
Federal funding against the secondary allocation at one of two Federal 
matching rates: A 90-percent enhanced matching rate for specified 
activities considered critical to protecting beneficiaries (for example 
outreach and beneficiary education); and a 75-percent enhanced rate for 
other allowable activities. In claiming Federal matching for 
expenditures for these activities, States must identify them separately 
on the form HCFA-64. States may draw down funds for their allocation as 
they incur allowable expenditures.

IV. Activities Subject to Enhanced Funding

    Under section 1931(h) of the Act, the $500 million fund may only be 
used for administrative expenditures shown by State agencies to be 
attributable to the administrative costs of Medicaid eligibility 
determinations required as a result of the TANF legislation and the 
delinking of Medicaid eligibility from AFDC status. The following 
activities are those for which Federal funding is already available and 
for which additional funding is available at one of the enhanced 
Federal matching rates, 90 percent or 75 percent. States can claim 90-
percent matching for any of the allowable activities listed below, up 
to the basic allocation for the State. For the States' secondary 
allocation, items indicated by an asterisk may be claimed at a 90-
percent matching rate and items not noted with an asterisk can be 
claimed at the 75-percent matching rate.
    We established the higher 90-percent enhanced Federal matching rate 
associated with the base allocation in recognition that there are 
pressing startup and other common costs among States related to the 
transition from AFDC to the TANF program. The higher Federal matching 
rate for the base allocation serves to expedite funds to States for 
such costs.
    We established the two enhanced Federal matching rates associated 
with the secondary allocation to recognize two priorities of activities 
related to this provision. The first priority, with the higher 90-
percent Federal matching rate, is associated with beneficiary oriented 
activities such as outreach, public service announcements, and 
education. The higher enhanced rate encourages such activities and 
recognizes the importance of ensuring that individuals do not lose 
their eligibility inappropriately, are correctly determined (or 
redetermined) eligible, and understand program requirements during the 
critical period of transition to TANF. Each of these higher rate (90 
percent) activities is indicated below by

[[Page 26547]]

an asterisk. The lower 75-percent enhanced Federal matching rate 
addresses the other activities performed during the transition period.

Allowable Activities

     Educational activities (relating to current or potential 
beneficiaries).*
     Public service announcements (PSAs).*
     Outstationing of eligibility workers (more workers or new 
locations, for example, churches, day care centers, WIC offices, health 
care providers).*
     Training related to the section 1931 provisions--*
     Eligibility workers.
     Providers.
     Outstationed eligibility workers and others.
     Community.
     Outreach activities (for example, general or targeted 
mailing campaigns, contracts to assist beneficiaries with the 
redetermination process).*
     Developing and disseminating new publications (targeted to 
at-risk populations).*
     Local community activities (for example, meetings with 
community leaders and speeches to community groups).*
     Hiring new Medicaid eligibility workers (related to 
section 1931 determinations).
     Designing new eligibility forms, for example, a single 
application for TANF and Medicaid whether eligibility is linked or not.
     Identification of ``at-risk'' TANF recipients (in this 
context, at-risk refers to vulnerability to losing Medicaid eligibility 
as a result of the TANF provisions).
     State and local government organizational changes related 
to the section 1931 provisions.
     Intergovernmental activities.
     Eligibility systems related changes.
     Other activities identified by States and approved by the 
Secretary as applicable to the enhanced matching fund provisions.
    In order for State agencies to claim Federal funds at the 
appropriate enhanced rates associated with the two allocated amounts 
for allowable activities, they will need to identify and report the 
administrative expenditures for such activities to HCFA on specified 
lines on the States' quarterly medical assistance expenditure report 
(Form HCFA-64), in accordance with HCFA guidance and instructions 
related to the form HCFA-64.

V. Special Issues

    We conducted a series of consultations with advocacy, provider, and 
intergovernmental groups to gather suggestions and recommendations on 
how to equitably distribute the enhanced matching funds. These groups 
included the National Governors' Association, the American Public 
Welfare Association, and the National Conference of State Legislatures. 
The criteria and requirements included in this notice reflect 
consideration of their suggestions and recommendations.

A. Federal Matching Rate To Be Increased

    Under section 1931(h)(2) of the Act, the Federal matching rate, 
which will be used for State claims related to the $500 million fund, 
applies only to those administrative expenditures of a State agency's 
Medicaid program described in section 1903(a)(7) of the Act 
(administrative expenditures that are Federally matched at a 50-percent 
rate). These administrative expenditures include the costs associated 
with eligibility determination activities.
    Because of the specific reference to section 1903(a)(7) of the Act, 
section 1931(a) of the Act precludes the $500 million fund from being 
available for matching expenditures referenced in other sections of 
section 1903(a) of the Act. For example, section 1903(a)(3) of the Act 
refers to administrative activities related to electronic claims 
processing systems and the associated Federal matching rates of 90 and 
75 percent. Section 1903(a)(4) refers to the costs of systems for 
verifying immigration status and the associated Federal matching rate 
of 100 percent. The $500 million fund is not available for these 
categories of administrative expenditures or others referenced in 
sections 1903 (a)(1) through (a)(6) of the Act.
    We note that, under existing Medicaid regulations published in 
1989, the administrative costs associated with automated eligibility 
systems are not considered part of the mechanized claims process and 
information retrieval systems, and therefore are not eligible for the 
75-percent or 90-percent Federal matching rate referred to in section 
1903(a)(3) of the Act. Therefore, these costs are matched at the 50 
percent rate under section 1903(a)(7) of the Act, and may be claimed 
against the State's allocation from the $500 million fund at the higher 
matching rate if they meet the other requirements.

B. Retroactive Claims

    Under sections 1931 (h)(3) and (h)(4) of the Act, the $500 million 
dollar fund is only available for claims for administrative costs 
incurred during Federal fiscal years 1997 through 2000 (that is, 
October 1, 1996 through September 30, 2000), and with respect to any 
specific State, only during the first 12 calendar quarters that the 
TANF program is in effect in that State beginning no earlier than 
October 1, 1996. As long as claims of that State are for expenditures 
incurred during this period and meet timely filing and other relevant 
requirements, they would not be precluded from being submitted and 
allowed retroactively.

C. Equitable Distribution of Funds Among All States

    Section 1931(h)(3) of the Act requires the Secretary to ``ensure 
the equitable distribution'' of the $500 million dollar fund among the 
States. We interpret this to mean that all States should receive an 
equitable share of the fund unless the State does not incur any cost 
associated with the implementation of section 1931 of the Act. Through 
the consultive process, discussed earlier in this section, States and 
other groups have expressed the position that every State agency should 
be able to receive at least some portion of the fund. We agree that the 
requirement for an equitable distribution must result in each State 
receiving a portion of the fund against which qualifying expenditures 
would be claimed. For purposes of the Medicaid program, the definition 
of ``State'' includes the District of Columbia and the five Territories 
of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and 
the Virgin Islands. However, we have not provided an allocation for the 
Northern Mariana Islands or American Samoa because they do not have an 
AFDC program and did not have an AFDC program at the time of the 
enactment of PRWORA. Therefore, only three Territories, Guam, Puerto 
Rico and the Virgin Islands, will incur administrative expenditures as 
a result of the transition from AFDC to TANF.
    The three Territories affected by section 1931 of the Act are still 
subject to the existing cap on Federal Medicaid expenditures for the 
Territories at section 1108(c) of the Act. This cap will not increase 
with the availability of a portion of the $500 million fund. However, 
these Territories could still receive benefits under the $500 million 
fund provisions because, with an enhanced Federal matching rate, less 
total territorial matching funds would be required for a given level of 
administrative costs unless the Territory exceeded its cap. Since these 
Territories, like the other States, will likely incur additional 
Medicaid expenditures due to the transition to TANF, a portion of the 
$500 million

[[Page 26548]]

enhanced Federal matching fund should be available to them.

D. Reduction of States' Allocations as Claims Are Made

    Section 1931(h) of the Act provides for enhanced Federal matching 
for States' claims against the additional $500 million fund. The 
enhanced rates and additional Federal funds are in addition to those 
that would otherwise be Federally matched at the usual 50-percent rate. 
States' claims for allowable administrative activities will reduce 
their base and secondary allocations only by the amounts that are in 
excess of the usual 50-percent FFP and not by the entire Federal 
matching amount. Specifically, States' allocations will be reduced by 
the amount of the claim multiplied by the difference between the 
enhanced Federal matching rate percentage and 50 percent.
    To illustrate how State claims against the allocations would work, 
we provide the following example: The State claim for allowable 
outreach expenditures is $500,000. This claim would usually be 
Federally matched at 50 percent, and the usual FFP amount for this 
claim would be $250,000 (50 percent of $500,000). Assuming the State is 
claiming these expenditures against the $2 million base allocation, the 
enhanced Federal matching rate would be 90 percent. Thus, the enhanced 
FFP amount would be $450,000 (90 percent of 500,000). However, the base 
allocation would not be reduced by the entire $450,000. Rather, for 
this claim the base allocation would be reduced by $200,000, which is 
40 percent of $500,000. Forty percent represents the excess of the 
enhanced Federal matching rate amount (90 percent) above the usual 
Federal matching rate amount (50 percent). If the amount of the State's 
base allocation was at $2 million prior to this claim, there would be 
$1.8 million remaining after the claim ($2 million-$200,000).

VI. Factors for Determining State Allotments

    We have established several factors that will be considered in 
determining the allotment for each State from the $500 million fund. We 
have divided the fund into two parts, an allocation of minimum State 
amounts and an allocation of the remainder of the fund. These two parts 
are discussed below.

A. Base Allocation Amount

    The first part of the distribution will consist of a minimum 
allocation amount of $2 million set aside for each State, the District 
of Columbia and Puerto Rico. Guam and the Virgin Islands will receive a 
lesser amount proportionate to the level of their administrative 
expenditures. This base allocation recognizes that States will incur 
certain costs that will not vary by the size of their Medicaid 
programs. The total of the base allocations for all States and 
Territories is $104,352,470.

B. Secondary Allocation Amount

    The amount of the $500 million fund remaining after distribution of 
the base allocations to each State will be allocated among the States 
according to a formula designed to ensure equity. As indicated in the 
previous section, the total base allocations for all States and 
Territories is $104,352,470. Therefore the total amount to be 
distributed to the States and Territories as secondary allocations is 
$395,647,530. This secondary allocation will be allocated based on the 
following four factors and weights.

------------------------------------------------------------------------
                                                                 Weight 
                            Factor                             (percent)
------------------------------------------------------------------------
State AFDC-Related Caseload..................................        60 
State Medicaid Administrative Expenditures...................        20 
SSI Childhood Disability Case Reevaluations..................        10 
SSI Immigrant Caseload.......................................        10 
------------------------------------------------------------------------

    With respect to Factor 1, State AFDC-related caseload, each State 
was credited with the higher of their caseloads for FY 1995 and FY 
1994, or the arithmetic average of their caseloads for FY 1992, FY 
1993, and FY 1994. This served as the basis for allocating 
$237,388,518, which represents 60 percent of the States' total 
secondary allocations.
    With respect to Factor 2, State Medicaid administrative 
Expenditures, each State was credited with the higher of certain of its 
administrative expenditures related to these provisions for FY 1995, FY 
1994, or the arithmetic average of its expenditures for FYs 1992, 1993, 
and 1994. Specifically, we are using a State's Medicaid administrative 
expenditures reported on its expenditure report (Form HCFA-64) in 
categories related to operation of systems, third party liability and 
assignment of rights activities, systems for verification of 
immigration status, outstationed eligibility workers, and other 
administrative costs Federally matched at 50 percent. This served as a 
basis for allocating $79,129,506, which represents 20 percent of the 
States' total secondary allocations.
    With respect to Factors 3 and 4, SSI childhood disability case 
reevaluations (in States requiring reevaluation under PWRORA) and SSI 
immigrant caseload, respectively, each State was credited with 
appropriate caseloads, as provided by the Social Security 
Administration for FY 1996. The caseload estimates are proxy estimates 
intended to show the relative administrative burden that each State 
agency faces under welfare reform. This served as the basis for 
allocating $39,564,753, which represents 10 percent of the State's 
total secondary allocations for each of Factors 3 and 4.
    The allocations for each State agency are as follows:

                                     State Allocations for Enhanced Matching                                    
----------------------------------------------------------------------------------------------------------------
                                                                       Base          Secondary         Total    
                              STATE                                 allocation      allocation      allocation  
----------------------------------------------------------------------------------------------------------------
Alabama.........................................................      $2,000,000      $4,504,897      $6,504,897
Alaska..........................................................       2,000,000       1,039,335       3,039,335
Arizona.........................................................       2,000,000       5,961,603       7,961,603
Arkansas........................................................       2,000,000       3,095,513       5,095,513
California......................................................       2,000,000      81,719,458      83,719,458
Colorado........................................................       2,000,000       3,166,316       5,166,316
Connecticut.....................................................       2,000,000       3,756,737       5,756,737
Delaware........................................................       2,000,000         801,757       2,801,757
Dis. Columbia...................................................       2,000,000       1,259,072       3,259,072
Florida.........................................................       2,000,000       20,262,23      22,262,239
Georgia.........................................................       2,000,000       9,591,549      11,591,549
Hawaii..........................................................       2,000,000       1,435,742       3,435,742

[[Page 26549]]

                                                                                                                
Idaho...........................................................       2,000,000       1,288,535       3,288,535
Illinois........................................................       2,000,000      17,363,894      19,363,894
Indiana.........................................................       2,000,000       5,545,162       7,545,162
Iowa............................................................       2,000,000       2,782,362       4,782,362
Kansas..........................................................       2,000,000       2,496,386       4,496,386
Kentucky........................................................       2,000,000       5,269,014       7,269,014
Louisiana.......................................................       2,000,000       7,029,185       9,029,185
Maine...........................................................       2,000,000       1,569,238       3,569,238
Maryland........................................................       2,000,000       5,595,943       7,595,943
Massachusetts...................................................       2,000,000       7,463,490       9,463,490
Michigan........................................................       2,000,000      13,975,445      15,975,445
Minnesota.......................................................       2,000,000       5,708,769       7,708,769
Missouri........................................................       2,000,000       6,561,956       8,561,965
Mississippi.....................................................       2,000,000       4,617,604       6,617,604
Montana.........................................................       2,000,000         764,134       2,764,134
Nebraska........................................................       2,000,000       1,308,247       3,308,247
Nevada..........................................................       2,000,000       1,258,808       3,258,808
New Hampshire...................................................       2,000,000         875,952       2,875,952
New Jersey......................................................       2,000,000       9,012,253      11,012,253
New Mexico......................................................       2,000,000       2,860,333       4,860,333
New York........................................................       2,000,000      35,034,556      37,034,556
North Carolina..................................................       2,000,000       9,550,703      11,550,703
North Dakota....................................................       2,000,000         537,922       2,537,922
Ohio............................................................       2,000,000      14,909,161      16,909,161
Oklahoma........................................................       2,000,000       3,938,082       5,938,082
Oregon..........................................................       2,000,000       3,740,656       5,740,656
Pennsylvania....................................................       2,000,000      15,553,339      17,553,339
Rhode Island....................................................       2,000,000       1,459,771       3,459,771
South Carolina..................................................       2,000,000       4,221,783       6,221,783
South Dakota....................................................       2,000,000         642,597       2,642,597
Tennessee.......................................................       2,000,000       7,250,889       9,250,889
Texas...........................................................       2,000,000      25,523,806      27,523,806
Utah............................................................       2,000,000       2,006,172       4,006,172
Vermont.........................................................       2,000,000         891,672       2,891,672
Virginia........................................................       2,000,000       6,531,522       8,531,522
Washington......................................................       2,000,000       8,443,170      10,443,170
West Virginia...................................................       2,000,000       3,420,593       5,420,593
Wisconsin.......................................................       2,000,000       5,023,766       7,023,766
Wyoming.........................................................       2,000,000         475,344       2,475,344
Guam............................................................         176,235          94,204         270,439
Puerto Rico.....................................................       2,000,000       6,325,084       8,325,084
Virgin Islands..................................................         176,235         131,810         308,045
                                                                 -----------------------------------------------
    Total.......................................................     104,352,470     395,647,530     500,000,000
----------------------------------------------------------------------------------------------------------------

VII. Alternative Approaches

    We considered an alternative approach to set aside a portion of the 
variable amount of each State agency's allocation (for example, 20 
percent) and earmark the funds for specified activities. States and 
intergovernmental groups did not support this approach because it 
restricted their flexibility to respond to their different 
circumstances across States. We also considered tying receipt of some 
or all of each State's allocation to successful performance in 
transitioning their determination of eligibility processes in response 
to their eligibility for cash assistance and TANF. States and 
intergovernmental groups also did not support this approach because it 
would restrict State flexibility. Furthermore, HCFA and the States and 
intergovernmental groups were not able to arrive at an appropriate 
measure which accurately correlated successful performance with receipt 
of allocation funds.

VIII. Waiver of Proposed Notice and Delay in Effective Date

    While the Administrative Procedure Act generally requires a 30-day 
delayed effective date for all rules and also requires an opportunity 
for public comment prior to the effective date of a rule, it also 
provides that we may waive those procedures if we find good cause that 
notice and comment are impracticable, unnecessary, or contrary to the 
public interest. Similarly, title 5 U.S.C. 801 provides for a 60 day 
delayed effective date for a major rule until the later of the receipt 
by Congress of a report on the rule or publication of the rule in the 
Federal Register. This delay provides Congress with an opportunity to 
review a major rule prior to its implementation. However, title 5 
U.S.C. 808 also provides that the rule may take effect without regard 
to the delay period if the agency finds good cause that notice and 
public procedure on the rule are impracticable, unnecessary, or 
contrary to the public interest.
    We are making the terms of this notice effective without 
publication of a proposed notice because we believe it would be 
impractical and contrary to public interest to delay its effective date 
in order to consider public comments. States have been implementing 
their TANF programs since the enactment of PRWORA and more States 
continue to do so each day. We believe that it is imperative that these 
States be able to receive the enhanced Federal matching funds as soon 
as possible so that they

[[Page 26550]]

are able to make an effective transition to the post-AFDC environment 
at the time they incur the additional administrative expenses resulting 
from the decoupling of Medicaid eligibility from receipt of cash 
assistance under title IV-A of the Act. Further delays in furnishing 
States with this funding could result in delays in making the 
determination that individuals are entitled to necessary medical 
services, with the attendant severe consequences for individuals who 
need them. It is also similarly important and in the public interest 
that States are able to conduct outreach efforts to prevent eligible 
needy individuals losing contact with the Medicaid program which they 
would otherwise have established because of its previous connection to 
cash assistance. Moreover, in developing the terms of this notice we 
have actively worked with intergovernmental and other interested groups 
to obtain their counsel. Accordingly, we find that good cause exists to 
waive prior notice and comment, the 30 day delay, and the 60 day delay 
for advance Congressional review.

IX. Impact Statement

    Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612), we prepare a regulatory flexibility analysis unless we 
certify that a notice such as this will not have a significant economic 
impact on a substantial number of small entities. For purposes of the 
RFA, individuals and States are not included in the definition of a 
small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a notice such as this 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 that is located outside of 
a Metropolitan Statistical Area and has fewer than 50 beds.
    The fund distribution announced by this notice is required by the 
Personal Responsibility and Work Opportunity Reconciliation Act of 
1996. In addition, the amount of money involved, $500 million divided 
among 50 States, the District of Columbia, and 3 Territories over a 
period of 3 years will not have a significant effect on any State or 
Territory, or the Medicare program.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined, and we 
certify, that this notice will not have a significant economic impact 
on a substantial number of small entities or a significant impact on 
the operations of a substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget. Costs 
attributable to State activities covered by this notice will be paid 
for by Federal funds according to the matching rates outlined in the 
allocation formula analysis described earlier. Further, States will 
incur some additional costs based on the State share associated with 
these matching rates.

X. Information Collection Requirements

    This document does not impose new information collection 
requirements that are subject to review by the Office of Management and 
Budget under the provisions of the Paperwork Reduction Act of 1995. 
States will be required to claim FFP for administrative expenditures 
attributable to the eligibility determination activities resulting from 
enactment of PRWORA. The only information that is required will be 
reported on existing Form HCFA-64. This form has been approved by the 
Office of Management and Budget under approval number 0938-0067, which 
expires on March 30, 1998.

    Authority: Secs. 1102 and 1931(h) of the Social Security Act (42 
U.S.C. 1302 and 1396uu).

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

    Dated: March 24, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: April 11, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-12429 Filed 5-13-97; 8:45 am]
BILLING CODE 4120-01-P