[Federal Register Volume 65, Number 106 (Thursday, June 1, 2000)]
[Rules and Regulations]
[Pages 34983-34986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13601]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 403

[HCFA-4005-IFC]
RIN 0938-AJ67


Medicare Program; State Health Insurance Assistance Program 
(SHIP)

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule explains the terms and conditions that 
apply to grants to States for counseling and assistance to Medicare 
beneficiaries, and makes several minor technical clarifications about 
program compliance. We also specify our policies regarding the 
treatment of funds associated with the management of this program, 
including user fee assessments not in effect when prior regulations 
were issued. This interim final rule is issued in accordance with 
section 4360 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 
'90) and section 1857(e)(2) of the Social Security Act (the Act).

DATES: Effective date: These regulations are effective on July 3, 2000.
    Comment date: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5:00 p.m. on July 
31, 2000.

ADDRESSES: Mail an original and 3 copies of written comments to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-4005-IFC, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-16-03, 7500 Security Boulevard, Baltimore, Maryland 21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-4005-IFC. 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 443-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: Eric Lang, (410) 786-3199.

I. Background

A. OBRA '90

    Section 4360 of the Omnibus Budget Reconciliation Act of 1990 (OBRA 
'90), Public Law 101-508, requires us to make grants to States, 
Commonwealths, and Territories for health insurance advisory service 
programs for Medicare beneficiaries. (Hereinafter, unless otherwise 
indicated, the term ``State'' or

[[Page 34984]]

``States'' includes the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American 
Samoa.) Grants are available to provide information, counseling, and 
assistance relating to Medicare, Medicaid, Medicare supplemental 
policies, long-term care insurance, and other health insurance benefit 
information. This funding program is known as the State Health 
Insurance Assistance Program (SHIP), formerly called the Health 
Insurance Information Counseling and Assistance (ICA) Grants Program. 
The name of this program was changed to SHIP in FY 1998 when it became 
apparent that the most recent name of the program, Beneficiary Services 
and Information Grants Program (BSI), severely lacked public 
recognition.
    On August 26, 1992, we published a final rule with comment period 
(57 FR 38616) that established the funding level for health insurance 
grants during Federal fiscal year (FY) 1992-1993. The provisions 
incorporated into our regulations at 42 CFR part 403, subpart E, 
defined program eligibility criteria, minimum funding levels, 
limitations and reporting requirements. On October 7, 1994, we 
published a final rule with comment period (59 FR 51125) that included 
amendments to the 1992 rule and established a regulatory basis for 
continued funding beyond FY 1993. As set forth in that rule, grant 
awards are based on a 12-month period, with an option to renew at the 
close of the fiscal year.
    Section 403.502 of our regulations, Availability of grants, 
specifies that HCFA awards funds to States subject to Congressional 
appropriations of funds and, if applicable, subject to the satisfactory 
progress in the State's project during the preceding grant period. The 
criteria by which progress is evaluated and the performance standards 
for determining whether satisfactory progress has been made is 
specified in the notice of grant award sent to each State. HCFA advises 
each State as to when to make application and provides information as 
to the timing of the grant award and the duration of the grant award. 
HCFA also provides an estimate of the amount of funds that may be 
available to the State.
    Section 403.504, Number and size of grants, establishes that each 
eligible State submitting an acceptable application receives a grant 
for new programs and enhancement of existing programs.
    Section 403.504(b)(1) provides that each State, with the exception 
of American Samoa, the Virgin Islands and Guam, is eligible to receive 
a ``fixed'' award of $75,000. American Samoa, the Virgin Islands and 
Guam are each eligible to receive a fixed grant award of $25,000. The 
fixed grant constitutes the minimum level of funding required by 
section 4360(a) of OBRA '90. In addition, Sec. 403.504(b)(2) provides 
that each State is also eligible to receive a ``variable'' award, that 
is calculated according to the formula set forth therein.
    Previously, HCFA depended upon specific Congressional 
appropriations to fund SHIP. In 1995, the Congressional appropriations 
were discontinued and funding for the program since that time has been 
made from the HCFA program management budget. Additional funds are 
available from the Medicare+Choice (M+C) user fee assessment, as 
discussed below.
    SHIP grants are now in the seventh and final period of the initial 
solicitation that was issued in FY 1992. DHHS grant administration 
requirements, set forth in HHS Chapter 1-85, Grants Administration 
Manual, section 1-85-40A, Incremental Funding-Project Periods and 
Frequency of Competition, specify that no project may be supported 
longer than 7 years without recompetition. When we apply for a 
continuation of funding for the SHIP next year, we will also send out 
new solicitation and grant application packages to the States.

B. BBA of 1997

    Amendments to the Act have led to the creation of additional 
funding for SHIP. On August 5, 1997, the Act was amended by the 
Balanced Budget Act (the BBA) of 1997, which established a new Part C 
of the Medicare program, sections 1851 through 1859, known as the 
``Medicare+Choice Program'' (M+C).
    Section 1851(d)(1) of the Act, ``Providing information to promote 
informed choice,'' requires us to provide for activities to broadly 
disseminate information to Medicare beneficiaries (and prospective 
Medicare beneficiaries) on available M+C coverage options in order to 
promote an active, informed selection among these options. Section 
1857(e)(2)(A) of the Act, ``Cost-sharing in enrollment-related costs,'' 
authorizes us to charge and collect an administration or user fee from 
M+C organizations for the purpose of administering this information 
dissemination program. Any amounts collected in accordance with section 
1857(e)(2) are specifically authorized to be appropriate only for the 
purpose of carrying out section 1851 (relating to enrollment and 
dissemination of information) and section 4360 of OBRA '90 (SHIP).

II. Provisions of the Interim Final Rule

    We are amending our regulations to provide for a 2-tiered approach 
for making grants under SHIP. Section 403.504(a) is revised to provide 
that for aggregate annual expenditures of up to $10 million, grants 
will be made according to the current procedures set forth in 
Sec. 403.504. That is, each eligible State will receive a fixed as well 
as variable amount as set forth in paragraphs (b) and (c) of that 
section. We plan to continue to fund this first tier of grants from our 
program management budget and through any Congressional appropriations 
made for the purpose of implementing this program.
    With respect to the second tier, any grants that exceed a total of 
$10 million annually will be made at our discretion according to 
criteria that will be communicated to States through the grant 
solicitation process (See revised Sec. 403.504(a)). We have decided to 
notify States of the criteria for awarding the grants rather than 
publish specific criteria in our regulations in order to give us the 
flexibility required by the dynamic nature of the health care industry.
    The statutory foundation for the current SHIP directed the focus of 
this program primarily on informing beneficiaries about their rights 
and options in regard to supplemental insurance. Since that time, 
changes in the climate of the health care industry, including, for 
example, Medicare reform, the implementation of the M+C program, and 
ongoing consolidation within the managed care industry, have introduced 
a host of issues that have profoundly changed access to services, and 
greatly increased the need for accurate and unbiased information to 
support informed choice and decision-making among beneficiaries.
    Significant issues have emerged that affect and confuse 
beneficiaries. For example, health care options available today require 
coverage and payment choices by beneficiaries. Rapidly emerging issues, 
such as managed care plan withdrawals, create an urgent need for quick 
response to the concerns of affected beneficiaries and their care 
givers. Greater choice for beneficiaries requires SHIPs to modify, and 
in many instances, expand, their programs, both in the size and scope 
of services they provide.
    Our policies must have the flexibility to accommodate changes 
facing the Medicare program and its beneficiaries. Therefore, we will 
use our discretion to allocate the additional funds in ways that will 
best serve beneficiaries through

[[Page 34985]]

SHIP. This will allow us to adapt to the particular needs of 
beneficiaries at a given time.
    We are revising Sec. 403.502, Availability of grants, to reflect 
the change in the source of grant awards. This change clarifies that we 
award grants to States subject to fund availability, and if applicable, 
subject to the satisfactory progress in the State's project during the 
preceding grant period.
    We are revising Sec. 403.504, Number and size of grants, at 
paragraph (a) to specify that, for available grant funds, up to and 
including $10,000,000, grants will be apportioned to States according 
to the grant award process currently in place. We are also revising 
paragraph (b) to highlight the availability of funds as a condition of 
award.
    We are revising Sec. 403.508, Limitations, at paragraph (a) to 
emphasize the fact that States receiving grants under this subpart must 
use the grant money in accordance with the terms and conditions 
specified in the notice of grant award.

III. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all relevant comments we receive by the date and time specified in the 
DATES section of this preamble, and, when we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and provide a period for public comment before the 
provisions of a rule are made final. Publication of a notice of 
proposed rulemaking may be waived if we find there is good cause that 
prior notice and comment are impractical, unnecessary, or contrary to 
public interest. Because the changes effected in this rule are not 
substantive, but, rather are procedural and technical in nature, and 
serve primarily to explain our policies, we have determined that notice 
and comment is not required. In addition, under 42 U.S.C. 1395hh (a)-
(b), notice and comment is not required where a statute specifically 
permits a regulation to be issued in interim final form. Section 
4207(j) of Public Law No. 101-508, the same legislation (OBRA '90) 
containing section 4360, which established the grants that are the 
subject of this regulation, specifically authorizes the Secretary to 
implement section 4360 by interim final rule. Nevertheless, we are 
providing a 60-day period for public comment on this rule. We will 
consider relevant comments that are received timely, and will respond 
to those comments and make changes in a subsequent document as 
appropriate and necessary.

V. Collection of Information Requirements

    This interim final rule does not impose any information collection 
and recordkeeping requirements that are subject to review by the Office 
of Management and Budget under the Paperwork Reduction Act of 1995.

VI. Regulatory Impact Statement

    We have examined the impacts of this interim final rule as required 
by Executive Order (E.O.) 12866, the Unfunded Mandates Reform Act of 
1995 (Public Law 104-4), the Regulatory Flexibility Act (RFA) (5 U.S.C. 
sections 601-612) (Public Law 96-354), and section 1102(b) of the 
Social Security Act.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for significant regulatory action that 
may have economically significant effects ($100 million or more 
annually). For purpose of E.O. 12866, this interim final rule is not 
expected to have an impact that meets the economically significant 
threshold.
    The Unfunded Mandates Reform Act of 1995 (UMRA) applies to general 
notices of proposed rulemaking and final rules for which a general 
notice of proposed rulemaking was published. Thus, this interim final 
rule is not subject to the requirements of the UMRA. Despite its 
inapplicability, this rule is not a ``significant regulatory action'' 
within the meaning of the UMRA. Section 202 of the Unfunded Mandates 
Reform Act of 1995 requires agencies to prepare an assessment of 
anticipated costs and benefits before publishing any rule that may 
result in an expenditure in any year by State, local, or tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more. We have determined that this interim final rule will 
not result in such an expenditure.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, certain non-profit organizations and small 
governmental jurisdictions. We generally prepare a regulatory 
flexibility analysis that is consistent with the RFA unless we certify 
that an interim final rule will not have a significant impact on a 
substantial number of small entities. The impact of this rule will fall 
primarily on States and individuals. For purposes of the RFA, we do not 
consider States or individuals to be small entities. We have not 
prepared an analysis for the RFA because we have determined, and 
certify, that this interim final rule has no significant economic 
impact on small entities.
    Section 1102(b) of the Social Security Act (the Act) requires us to 
prepare a regulatory impact analysis (RIA) if a rule or regulation may 
have a significant impact on the operations of a substantial number of 
small rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a Metropolitan Statistical Area and has fewer than 50 beds.
    We have not prepared an analysis for section 1102(b) of the Act 
because we have determined that this interim final rule has no 
significant economic impact on a substantial number of small rural 
hospitals.
    In accordance with the provisions of Executive Order 12866, this 
interim final rule with comment period was not reviewed by the Office 
of Management and Budget.

List of Subjects in 42 CFR Part 403

    Health insurance, Hospitals, Intergovernmental relations, Medicare, 
Reporting and Recordkeeping requirements.

    42 CFR part 403 is amended as follows:

PART 403--SPECIAL PROGRAMS AND PROJECTS

    1. The authority citation for part 403 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

    2. Section 403.502 is revised to read as follows:


Sec. 403.502  Availability of grants.

    HCFA awards grants to States subject to availability of funds, and 
if applicable, subject to the satisfactory progress in the State's 
project during the preceding grant period. The criteria by which 
progress is evaluated and the performance standards for determining

[[Page 34986]]

whether satisfactory progress has been made are specified in the terms 
and conditions included in the notice of grant award sent to each 
State. HCFA advises each State as to when to make application, what to 
include in the application, and provides information as to the timing 
of the grant award and the duration of the grant award. HCFA also 
provides an estimate of the amount of funds that may be available to 
the State.

    3. In Sec. 403.504, paragraph (a) and the introductory text of 
paragraph (b), are revised to read as follows:


Sec. 403.504  Number and size of grants.

    (a) General. For available grant funds, up to and including 
$10,000,000, grants will be made to States according to the terms and 
formula in paragraphs (b) and (c) of this section. For any available 
grant funds in excess of $10,000,000, distribution of grants will be at 
the discretion of HCFA, and will be made according to criteria that 
HCFA will communicate to the States via grant solicitation. HCFA will 
provide information to each State as to what must be included in the 
application for grant funds. HCFA awards the following type of grants:
    (1) New program grants.
    (2) Existing program enhancement grants.
    (b) Grant Award. Subject to the availability of funds, each 
eligible State that submits an acceptable application receives a grant 
that includes a fixed amount (minimum funding level) and a variable 
amount.
* * * * *

    4. Section 403.508(a) is revised to read as follows:


Sec. 403.508  Limitations.

    (a) Use of grants. Except as specified in paragraph (b) of this 
section, and in the terms and conditions in the notice of grant award, 
a State that receives a grant under this subpart may use the grant for 
any reasonable expenses for planning, developing, implementing, and/or 
operating the program for which the grant is made as described in the 
solicitation for application for the grant.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare--
Hospital Insurance; and Program No. 93.774, Medicare--Supplementary 
Medical Insurance Program)


    Dated: December 3, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Approved: March 27, 2000.
Donna E. Shalala,
Secretary.
[FR Doc. 00-13601 Filed 5-31-00; 8:45 am]
BILLING CODE 4120-01-P