[Federal Register Volume 65, Number 211 (Tuesday, October 31, 2000)]
[Proposed Rules]
[Pages 64919-64924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27923]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 435

[HCFA-2086-P]
RIN 0938-AK22


Medicaid Program; Change in Application of Federal Financial 
Participation Limits

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would change the current requirement that 
limits on Federal Financial Participation (FFP) must be applied before 
States use less restrictive income methodologies than those used by 
related cash assistance programs in determining eligibility for 
Medicaid.
    This regulatory change is necessary because the current regulatory 
interpretation of how the FFP limits apply to income methodologies 
under section 1902 (r)(2) of the Social Security Act (the Act) 
unnecessarily restricts States' ability to take advantage of the 
authority to use less restrictive income methodologies under that 
section of the statute. While the enactment of section 1902(r)(2) of 
the Act could be read in the limited manner embodied in current 
regulations the statute does not require such a reading, and subsequent 
State experience with implementing section 1902(r)(2) calls into 
question the current regulation's approach.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on November 30, 2000.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-2086-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    To ensure that mailed comments are received in time for us to 
consider them, please allow for possible delays in delivering them.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:


[[Page 64920]]


Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-8010.

    Comments mailed to the above addresses may be delayed and received 
too late for us to consider them.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-2086-P.
    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 office at 
200 Independence Avenue, SW., Washington, DC, on Monday through Friday 
of each week from 8:30 to 5 p.m. (phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Roy Trudel, (410) 786-3417.

SUPPLEMENTARY INFORMATION: Generally, in determining financial 
eligibility of individuals for the Medicaid program, State agencies 
must apply the financial methodologies and requirements of the cash 
assistance program that is most closely categorically related to the 
individual's status. Our regulations at 42 CFR 435.601 set forth the 
requirements for State agencies applying less restrictive income and 
resource methodologies when determining Medicaid eligibility under the 
authority of section 1902(r)(2) of the Social Security Act (the Act). 
Current regulations at 42 CFR 435.1007 provide that when States use 
less restrictive income and resource methodologies under section 
1902(r)(2), the limits on Federal Financial Participation (FFP) in 
section 1903(f) of the Act apply before application of any less 
restrictive income methodologies. We are proposing to amend that 
regulation to change this requirement so that FFP limits would apply 
after application of any less restrictive income methodologies under 
section 1902(r)(2) of the Act.
    The adoption of this policy would give States additional 
flexibility in setting Medicaid eligibility requirements. Also, we 
believe adoption of this policy reflects the intent of Congress to move 
the Medicaid program away from cash assistance program rules, as 
evidenced by enactment of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996, which severed the link between 
the AFDC program and Medicaid.

I. Background

    Section 2373(c) of the Deficit Reduction Act of 1984 (DRA) 
established a moratorium period beginning on October 1, 1981, during 
which the Secretary was prohibited from taking any compliance, 
disallowance, penalty, or other regulatory action against a State 
because a State's Medicaid plan included a standard or methodology for 
determining financial eligibility for the medically needy that the 
Secretary determined was less restrictive than the standard or 
methodology required under the related cash assistance program.
    The provisions of the DRA moratorium were clarified by section 9 of 
the Medicare and Medicaid Patient Program Protection Act of 1987. 
Section 9 amended section 2373(c) of DRA to specify that the moratorium 
applied to the Secretary's compliance, disallowance, penalty, or other 
regulatory actions against a State because the State plan is determined 
to be in violation of provisions of the Act for coverage, as optional 
categorically needy, of certain aged, blind, and disabled individuals 
who were in institutions or receiving home and community-based 
services, as well as methodologies for determining financial 
eligibility of the medically needy.
    The moratorium applied to an amendment or other changes in Medicaid 
State plans, or operation or program manuals, regardless of whether the 
Secretary had approved, disapproved, acted upon, or not acted upon the 
amendment or other change, or operation or program manual.
    Authority to adopt less restrictive financial methodologies as part 
of a State's Medicaid plan was added to the law in 1988. Section 303(e) 
of the Medicare Catastrophic Coverage Act of 1988, enacted on July 1, 
1988 (and amended by section 608(d)(16)(C) of the Family Support Act of 
1988), amended the Act to permit States to use less restrictive 
financial methodologies in determining eligibility not only for the 
medically needy eligibility group at section 1902(a)(10)(C) of the Act, 
but also for specified categorically needy groups of individuals. These 
categorically needy groups include qualified pregnant women and 
children (section 1902(a)(10)(A)(i)(III) of the Act), poverty level 
pregnant women and infants (section 1902(a)(10)(A)(i)(IV) of the Act), 
qualified Medicare beneficiaries (section 1905(p) of the Act), all of 
the optional categorically needy groups specified in section 
1902(a)(10)(A)(ii) of the Act, and individuals in States that have 
elected, under section 1902(f) of the Act, to apply more restrictive 
eligibility criteria than are used by the Supplemental Security Income 
(SSI) program. This provision of the Medicare Catastrophic Coverage Act 
was effective for medical assistance furnished on or after October 1, 
1982. This authority was codified in a new section 1902(r)(2) of the 
Act.
    The application of FFP limits prior to use of section 1902(r)(2) 
more liberal income methodologies was based on the Senate Report 
accompanying the 1987 amendment to the DRA moratorium (Senate Report 
No. 109, 100th Congress, 1st session at 24-25) which stated that:

    The moratorium does not eliminate the limits on income and 
resources of eligible individuals and families under section 1903(f) 
(including the requirements that the applicable medically needy 
income level not exceed the amount determined in accordance with 
standards prescribed by the Secretary to be equivalent to 133\1/3\ 
percent of the most generous AFDC eligibility standard, and that the 
income of individuals receiving a State supplementary payment in a 
medical institution or receiving home and community-based services 
under a special income standard not exceed 300% of the SSI 
standard). The moratorium also does not permit States Medicaid 
benefits to those who are not ``categorically related'' individuals 
(that is, individuals who would not be eligible for Medicaid, 
regardless of the amount of their income and resources).

    Since, as the legislative history indicates, section 1902(r)(2) is 
essentially the codification of the DRA moratorium, we continued to 
apply the FFP limits at section 1903(f) of the Act when developing the 
implementing regulations for section 1902(r)(2).
    However, subsequent experience has shown that the policy we adopted 
restricted the flexibility Congress intended States to have when it 
enacted section 1902(r)(2) in ways we did not foresee when we published 
the current regulations. The real effect of the policy we adopted was 
to make it almost impossible for States to actually use less 
restrictive income methodologies for many eligibility groups, including 
the medically needy, because use of such methodologies would violate 
the FFP limits. States have noted that the application of the FFP 
limits prior to use of less restrictive income methodologies 
unnecessarily limits their flexibility to expand Medicaid eligibility 
and simplify program administration by modifying cash assistance 
financial methodologies that do not work well in the Medicaid context.
    Further, the passage of Pub. L. 104-193, the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, leads 
us to believe that the current

[[Page 64921]]

application of the FFP income limits under section 1902(r)(2) no longer 
reflects Congressional intent. In enacting this legislation, Congress 
clearly expressed its intent that States should have the flexibility to 
depart from cash assistance program-based income criteria to define 
Medicaid eligibility. Given that Congress chose to sever the link 
between cash assistance and Medicaid under this legislation, we believe 
it is valid to conclude that Congress did not actually intend that FFP 
limits, which are based on cash assistance standards, apply prior to 
use of less restrictive financial methodologies under section 
1902(r)(2) of the Act for those eligibility groups to which section 
1902(r)(2) applies.
    Also, section 1903(f) was enacted prior to section 1902(r)(2). Had 
Congress intended that the FFP limits apply prior to use of less 
restrictive income methodologies, it could have amended section 1903(f) 
to so state. The fact that section 1903(f) was not so amended indicates 
that Congress intended that the FFP limits apply after, not before, use 
of less restrictive income methodologies.
    Thus, this change will give States needed additional flexibility in 
setting Medicaid eligibility requirements. Even though section 
1902(r)(2) was derived from the DRA moratorium, its own legislative 
history did not contain any similar discussion of its interaction with 
the 1903(f) FFP limits. As such, we do not believe it is necessary to 
consider the legislative history of DRA to be determinative of 
Congressional understanding of the operation of section 1902(r)(2).

II. Provisions of the Proposed Regulations

    As explained above, we are proposing to amend Sec. 435.1007 to 
change the requirement that FFP limits apply prior to use of any less 
restrictive income methodologies under section 1902(r)(2) of the Act.

Section 435.1007  Categorically Needy, Medically Needy, and Qualified 
Medicare Beneficiaries

    In 435.1007(b), we intend to delete the phrase ``does not exceed'' 
and replace it with the word ``exceeds''. This is purely an editorial 
change to correct an error in wording in the current regulation.
    In Sec. 435.1007, we are proposing to amend paragraph (e) by 
removing the phrase ``are applied and before the less restrictive 
income deductions under Sec. 435.601(c)'' and replacing it with the 
following language: ``and any income disregards in the State plan 
authorized under section 1902(r)(2)'.
    We are proposing to further amend Sec. 435.1007 by adding a new 
paragraph (f) to read: ``A State may use the less restrictive income 
methodologies included under its State plan as authorized under 
Sec. 435.601 in determining whether a family's income exceeds the 
limitation described in paragraph (b) of this section.''

III. Collection of Information Requirements

    Under the Paper Work Reduction Act (PRA) of 1995, we are required 
to provide 60-day notice in the Federal Register and solicit public 
comment if Office of Management and Budget review and approval is 
needed because a proposed regulation imposes a collection of 
information requirement.
    However, this proposed regulation does not impose any new 
collection of information requirements. Whether to take advantage of 
the flexibility the proposed rule makes available is strictly at the 
option of each State. If a State chooses to use any less restrictive 
income methodologies under the proposed rule, it would do so by using 
the existing process for amending its State Medicaid plan. The proposed 
rule imposes no new or different processes or information requirements 
on States.

IV. 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 comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the major comments in the preamble to that 
document.

V. Regulatory Impact Statement

A. Overall Impact

    We and the Office of Management and Budget have examined the 
impacts of this rule as required by Executive Order 12866 (September 
1993, Regulatory Planning and Review) and the Regulatory Flexibility 
Act (RFA) (September 19, 1980, Pub. L. 96-354). Executive Order 12866 
directs agencies to assess all costs and benefits of available 
regulatory alternatives and, if 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 major rules with economically significant effects ($100 
million or more in any one year). This rule is considered to be a major 
rule with economically significant effects.
    The Medicaid and Medicare cost of the proposed rule is projected to 
be $960 million over five years. This estimate is based on available 
cost data on medically needy income standards and medically needy 
spending levels. Such data could be obtained for only two States (Utah 
and California). Using that available data, we projected the potential 
cost of the proposed rule by assuming that within two years of 
enactment about one fourth of States (i.e., States representing at 
least 25% of total Medicaid program costs) would implement changes 
similar to those proposed by Utah and California. The result was an 
estimated potential cost of $860 million over five years in Medicaid 
costs and about $100 million in Medicare costs as explained below.
    Arriving at the Medicaid and Medicare costs was difficult due to 
the fact that implementation of the option under this rule is entirely 
at the discretion of the State. Further, States that choose to exercise 
the option have great latitude in establishing the extent to which, and 
the eligibility groups for which, the option would be applied under 
their State Medicaid plan. As a result of limited data being available, 
we invite comments on this section.
Benefits of the Proposed Rule Change
    We believe the proposed change will benefit both States and 
individuals in a number of ways. For example, under normal eligibility 
rules, States are required to count many kinds of income. Some of these 
types of income are administratively burdensome to deal with, and often 
do not materially affect the outcome of the eligibility determination. 
Some examples are the value of food or shelter provided to an applicant 
(called in-kind support and maintenance), income belonging to a parent 
of a child, or a spouse who is not applying for benefits (called deemed 
income), and low amounts of income such as interest earned on savings 
accounts. The proposed rule would allow States to use income disregards 
to simplify the process of determining eligibility by not counting 
types of income that primarily impose an administrative burden.
Medically Needy Income Limits
    Under a medically needy program, States can choose to cover under 
Medicaid individuals with income that is too high to otherwise be 
eligible, but

[[Page 64922]]

who, by subtracting incurred medical expenses from their income, could 
reduce their income to the State's medically needy income standard. 
This process is known as spending down excess income, or ``spenddown''.
    However, in many States the medically needy income standard is very 
low; in at least 22 States, the medically needy income standard is 
actually lower than the income standard for SSI benefits ($512 a month 
for an individual in 2000). In four States, the medically needy income 
standard is less than $200 a month. This creates a situation where 
individuals whose income is just slightly over the limit that would 
allow them to receive Medicaid as SSI recipients must spend down a 
certain amount of ``excess'' income to reach the medically needy income 
level.
    For example, a person with $512 a month in income can be eligible 
for SSI and get free Medicaid in most States. A person with just $1 
more cannot be eligible for SSI, and thus cannot receive Medicaid based 
on receiving SSI benefits. Depending on a particular State's medically 
needy income level, such an individual may have to spend over $300 on 
medical care each month just to reach a medically needy income limit 
that is that far below the SSI level.
    Under the Medicaid statute, States cannot just increase their 
medically needy income levels to deal with this problem. However, under 
the proposed rule, a State could use section 1902(r)(2) to disregard 
additional amounts of income under its medically needy program, 
effectively reducing or even eliminating the large spenddown liability 
described in the example above.
Helping People Move From Institutions to the Community
    The medically needy spenddown problem described above can also have 
adverse effects for people in medical institutions who would like to 
receive care in community settings. In many States, people with 
relatively high levels of income (up to $1,536 a month in 2000) can 
still be eligible for Medicaid provided they are in a medical 
institution. This is because many States cover an eligibility group 
that is specifically targeted at people in institutions, and which 
provides for that high income standard.
    As long as a person is in the institution, he or she remains 
eligible for Medicaid. However, if the person wants to move to the 
community, he or she will lose eligibility under the institutional 
group. The only alternative in many cases is to become eligible in the 
community as medically needy. However, as explained previously, the 
medically needy income standard is very low in many States. A person 
who was eligible under the institutional group may find that he or she 
must spend most of his or her income on medical care in the community 
before the medically needy income standard can be met. The person may 
not be able to incur enough in the way of medical expenses while in the 
community to meet the medically needy income standard, which in turn 
would mean the person effectively would be without any coverage for 
medical care. Even if the person could incur enough medical expenses, 
though, the medical expenses would consume so much income that the 
person would have little left to use for the basic necessities of life 
such as food, clothing, shelter, transportation, etc.
    The practical effect of this is that many people in institutions 
who would like to move to the community, and who would normally be able 
to manage in a community setting, remain in the institution because 
they literally cannot afford to leave. The proposed change in the 
regulations would give States opportunities to correct spenddown 
problems so that more people could leave institutional settings and 
live in the community.
Encouraging Work Effort
    While legislation enacted in the last few years has given States 
new options for providing Medicaid to individuals with disabilities who 
want to work, States may want to encourage work effort among 
individuals eligible under other groups such as the medically needy, or 
among individuals who may not readily fit into one of the new work 
incentives groups. One way to encourage work effort is to allow people 
to keep more of the income they earn without forcing them to either 
spend more for medical care under a medically needy spenddown, or risk 
losing Medicaid altogether.
    Under section 1902(r)(2) a State could do that by increasing the 
amount of earned income that is not counted in determining a person's 
eligibility. However, the current application of the FFP limits to the 
use of less restrictive income disregards effectively precludes States 
from offering that kind of encouragement for many eligibility groups. 
The proposed change in the regulations would remove that restriction, 
giving States another way to encourage work effort.
Medicaid Eligibility Expansion
    In addition to the specific examples described above, section 
1902(r)(2) gives States the option of expanding their Medicaid 
eligibility rolls by disregarding additional types and amounts of 
income and resources, thereby allowing people who could not otherwise 
meet the program's eligibility requirements to become eligible. 
However, the current application of the FFP limits to the use of less 
restrictive income disregards greatly reduces the options States have 
to implement that kind of program expansion. The proposed regulation 
change would give States the full flexibility provided by section 
1902(r)(2) to expand their base of eligible individuals if they choose 
to do so.
Effect on Small Businesses and Small Rural Hospitals
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $5 
million or less annually. Individuals and States are not included in 
the definition of a small entity.
    We certify that small entities would not be affected by the 
proposed rule because the rule only affects States, which by definition 
are not small entities. The proposed rule would affect only States 
because any decisions concerning whether to take advantage of the 
options the rule makes available would be made at the State government 
level and then implemented by each State. However, because of limited 
data available, we invite comments in this area.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule 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 603 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.
    This proposed rule would have no direct impact on small rural 
hospitals. The proposed rule affects only States because only States 
can implement the option the proposed rule makes available. As such 
small rural hospitals are in no way involved in the process of deciding 
whether to take advantage of the flexibility the proposed rule offers. 
Small rural hospitals would be impacted only to the extent that a 
State's use of less restrictive income methodologies could result in 
some

[[Page 64923]]

increase in the number of individuals eligible for Medicaid. This in 
turn could result in a slight increase in utilization of rural hospital 
services should an individual eligible under the less restrictive 
methodology need such services. Again, because of limited data 
available, we invite comments in this area.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an annual expenditure by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $100 million. The proposed rule would have no impact on the 
private sector. The rule would impose no requirements on State, local 
or tribal governments. Rather, it would offer State governments 
additional flexibility in operating their Medicaid programs, but would 
not require that they make any changes in their programs.
Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that would impose substantial direct requirement costs on 
State and local governments, preempts State law, or otherwise has 
Federalism implications. The proposed rule would impose no requirement 
costs on governments, nor does it preempt State law or otherwise have 
Federalism implications.
    HCFA has had discussions of this issue with a number of State 
governments since approximately 1990. Those discussions have taken 
place both with individual States and with groups of States, including 
HCFA's Medicaid Eligibility Technical Advisory Group and the National 
Association of State Medicaid Directors Executive Council. Based on the 
many discussions we have had, we believe States will be overwhelmingly 
in favor of the proposed change.

B. Anticipated Effects

    1. Effects on State Governments
    The proposed rule will give States greater flexibility in designing 
and operating their Medicaid programs.
    2. Effects on Providers
    No providers would be affected by this rule.
    3. Effects on the Medicare and Medicaid programs
    This rule would increase Medicare costs by about $100 million over 
five years. Since the rule may increase the number of individuals 
eligible for Medicaid who receive inpatient hospital services, it would 
affect the calculation of hospitals' disproportionate share hospital 
(DSH) calculations under the Medicare program. We estimate that 
Medicare DSH payments would increase by $100 million over five years 
due to changes in this rule.
    Under Medicaid, it is projected that the Federal cost of this rule 
could be as much as $860 million over 5 years. However, because actual 
implementation of the provisions of the rule is strictly at the option 
of each State, actual Federal program costs would depend on whether, 
and to what degree, States choose to take advantage of the flexibility 
provided by the proposed rule.

C. Alternatives Considered

    There are few alternatives to the proposed rule to consider. One 
alternative is to maintain the requirement that the FFP limits apply 
prior to use of less restrictive income methodologies under 
Sec. 435.601, but allow additional disregards at a somewhat higher 
level than is possible under the current regulations. However, this 
would not provide States the level of flexibility to operate their 
Medicaid programs that is provided under the proposed rule, and thus 
would be of only limited value. We rejected this alternative because it 
would not give States what they need to effectively operate their 
Medicaid programs.
    We also considered pursuing a legislative option that would have 
changed the Medicaid statute itself to clarify that the FFP limits at 
section 1903(f) of the Act should apply after, rather than before, the 
use of any less restrictive income methodologies under section 
1902(r)(2) of the Act. However, as explained previously the current 
policy concerning application of the FFP limits to less restrictive 
income methodologies does not reflect a clear statutory requirement, 
but rather is an administrative interpretation of the statute. Since 
the statute as written will support the proposed change in policy, we 
believe the issue should be addressed via a change in the regulations 
rather than a change in the statute. Also, we believe the proposed rule 
is the most efficient and expedient way of accomplishing the desired 
change.

D. Conclusion

    We expect this rule to benefit State Medicaid programs and Medicaid 
beneficiaries by giving States additional flexibility in designing and 
operating their programs. In turn, this would allow States to make 
individuals eligible for Medicaid who otherwise could not be eligible 
under the current regulations.
    Because this rule is considered major rule that is economically 
significant, we have prepared a regulatory impact statement. We believe 
that this rule will have an estimated cost of $960 million dollars over 
five years based on best available data. In addition, we certify, that 
this rule would 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 
regulation was reviewed by the Office of Management and Budget.

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.
    For the reasons set forth in the preamble, 42 CFR part 435 would be 
amended as set forth below:

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

    2. Section 435.1007 is amended by revising paragraphs (b) and (e) 
and adding paragraph (f) to read as follows:


435.1007  Categorically needy, medically needy, and qualified Medicare 
beneficiaries.

* * * * *
    (b) Except as provided in paragraphs (c) and (d) of this section, 
FFP is not available in State expenditures for individuals (including 
the medically needy) whose annual income after deductions specified in 
Secs. 435.831(a) and (c) exceeds the following amounts, rounded to the 
next higher multiple of $100.
* * * * *
    (e) FFP is not available in expenditures for services provided to 
categorically needy and medically needy recipients subject to the FFP 
limits if their annual income, after the cash assistance income 
deductions and any income disregards in the State plan authorized under 
section 1902(r)(2) of the Act are applied, exceeds the 133\1/3\ percent 
limitation described under paragraphs (b), (c), and (d) of this 
section.

[[Page 64924]]

    (f) A State may use the less restrictive income methodologies 
included under its State plan as authorized under Sec. 435.601 in 
determining whether a family's income exceeds the limitation described 
in paragraph (b) of this section.

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

    Dated: July 25, 2000.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Approved: September 23, 2000.
Donna E. Shalala,
Secretary.
[FR Doc. 00-27923 Filed 10-27-00; 8:45 am]
BILLING CODE 4120-01-P