[Federal Register Volume 66, Number 8 (Thursday, January 11, 2001)]
[Rules and Regulations]
[Pages 2195-2206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-661]



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  Federal Register / Vol. 66, No. 8 / Thursday, January 11, 2001 / 
Rules and Regulations  

[[Page 2195]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 215, 225, 226, and 245

RIN 0584-AC95


Special Milk Program for Children, Summer Food Service Program, 
Child and Adult Care Food Program and Determining Eligibility for Free 
and Reduced Price Meals and Free Milk in Schools: Disclosure of 
Children's Eligibility Information to State Medicaid and the State 
Children's Health Insurance Program

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This interim rule amends the regulations for the Special Milk 
Program for Children, Summer Food Service Program, Child and Adult Care 
Food Program, and Determining Eligibility for Free and Reduced Price 
Meals and Milk in Schools. The rule establishes requirements for the 
disclosure of children's free and reduced price meal or free milk 
eligibility information to State Medicaid (Medicaid) and the State 
Children's Health Insurance Program (SCHIP) by State and local agencies 
responsible for free and reduced price meal or free milk eligibility 
determinations. These regulations affect State agencies and program 
operators that administer the Child Nutrition Programs (National School 
Lunch Program, Special Milk Program for Children, School Breakfast 
Program, Child and Adult Care Food Program, and the Summer Food Service 
Program) and who elect to disclose children's free and reduced price 
meal or free milk eligibility information to Medicaid and SCHIP. The 
provisions also affect households determined eligible for free and 
reduced price meals or free milk. The rule reflects the waiver of 
confidentiality provisions of the Agricultural Risk Protection Act of 
2000 and is intended to facilitate enrollment of eligible children in 
Medicaid and SCHIP.

DATES: Effective Date: October 1, 2000. Comment Date: To be assured of 
consideration, comments must be postmarked on or before April 11, 2001.

ADDRESSES: Address all comments concerning this interim rule to Robert 
M. Eadie, Chief, Policy and Program Development Branch, Child Nutrition 
Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Alexandria, VA 22302. You also may submit comments electronically at 
[email protected]. All written submissions received will be 
available for public inspection in Room 1007 at the address listed 
above, during regular business hours (8:30 a.m. to 5:00 p.m.) Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: Barbara Semper or Mary Jane Whitney at 
the above address or by telephone at 703-305-2590. A regulatory cost-
benefit analysis was completed for this rule. Single copies may be 
requested from the FNS officials identified above.

SUPPLEMENTARY INFORMATION:

Background

What Is the Purpose of This Rule?

    This interim rule implements a provision of the Agricultural Risk 
Protection Act of 2000, Public Law (P.L.) 106-224, enacted June 20, 
2000. P.L. 106-224 amended section 9(b)(2)(C) of the Richard B. Russell 
National School Lunch Act (NSLA) (42 U.S.C. 1758(b)(2)(C)) to add 
Medicaid under title XIX of the Social Security Act (42 U.S.C. 1396 et 
seq.) and SCHIP under title XXI of that Act (42 U.S.C. 1397aa et seq.) 
to the programs that are authorized limited access to children's free 
and reduced price meal or free milk eligibility information provided:
    (1) The State agency and school food authority elect to disclose 
children's free and reduced price meal or free milk eligibility 
information to these health insurance programs;
    (2) There is a written agreement between the school and the health 
insurance program agency that requires the health insurance program 
agency to use the information to seek to enroll children in Medicaid 
and SCHIP; and
    (3) Parents/guardians are notified and given an opportunity to 
elect not to have their children's eligibility information disclosed to 
Medicaid or SCHIP.

Does the NSLA Allow Disclosure of Children's Eligibility Information to 
Other Programs?

    On July 25, 2000, the Food and Nutrition Service (FNS) published a 
proposed rule on the disclosure of children's (and adult participants' 
in the Child and Adult Care Food Program) free and reduced price meal 
or free milk eligibility information (65 FR 45725) to implement 
provisions of Pub. L. 103-448, the Healthy Meals for Healthy Americans 
Act of 1994. Pub. L. 103-448 amended the NSLA to allow limited 
disclosure of children's eligibility information to certain programs 
and individuals. The comment period for the proposed rule closes on 
November 22, 2000. In accordance with the statute, the proposed rule 
would authorize disclosure, without parental/guardian consent, to 
persons directly connected with the administration or enforcement of:
    (1) The NSLA or the Child Nutrition Act of 1966 (CNA) (42 U.S.C. 
Sec. 1771 et seq.) or a regulation issued under either of those Acts;
    (2) A Federal education program;
    (3) A State health or education program (other than Medicaid) 
administered by the State or local education agency;
    (4) A Federal, State or local means-tested nutrition program with 
eligibility standards comparable to the National School Lunch Program 
(NSLP);
    (5) The Comptroller General of the United States for audit and 
examination; and
    (6) Certain law enforcement officials for investigating alleged 
program violations.
    Pub. L. 103-448 specifically excluded disclosure of children's 
eligibility information, without consent, to a program under title XIX 
of the Social Security Act, i.e., Medicaid (42 U.S.C. 1396 et. seq.). 
Pub. L. 103-448 did not address disclosure of children's eligibility 
information to SCHIP, which was established in later Federal 
legislation. The Agricultural Risk Protection Act of 2000, Pub. L. 106-
224, subsequently amended the NSLA to provide disclosure of children's 
eligibility information to Medicaid and

[[Page 2196]]

SCHIP. This interim rule promulgates the regulations for Pub. L. 106-
224.
    FNS previously issued guidance that allows disclosure of 
eligibility information consistent with P.L. 103-448. Under that 
guidance, disclosure to Medicaid and SCHIP is allowed with parental/
guardian consent. Please refer to the proposed rule published on July 
25, 2000 at 65 FR 45725 for a discussion of the disclosure provisions 
under P.L. 103-448.

Why Is This Rule Being Issued as an Interim Rule and Not a Proposed 
Rule?

    Section 242(c) of Pub. L. 106-224 makes the provisions of that law 
addressed in this rulemaking effective October 1, 2000 and section 263 
requires that FNS promulgate regulations to implement the provisions as 
soon as practicable after the date of enactment without regard to the 
Administrative Procedure Act's notice and comment provisions at 5 
U.S.C. Sec. 553; the Statement of Policy of the Secretary of 
Agriculture effective July 24, 1971 (36 FR 13804) relating to notices 
of proposed rulemaking and public participation in rulemaking; and the 
Paperwork Reduction Act at 44 U.S.C. chapter 35. In addition, section 
172 of Pub. L. 106-224 requires us to promulgate rules to carry out the 
Act and its amendments not later than 120 days after the date of 
enactment. For these reasons, we are not taking public comment prior to 
promulgation of this interim rule.
    To benefit from the experiences of program operators and because 
the disclosure of eligibility information is a sensitive issue, FNS 
decided to issue this rule as an interim, rather than a final rule, in 
order to facilitate public comment. FNS intends to issue a final rule 
combining the proposed disclosure provisions implementing Pub. L. 103-
448 and these interim disclosure provisions implementing Pub. L. 106-
224 after consideration of the comments received on these rules.

What Programs Are Being Affected?

    As with the amendment to the NSLA made by Pub. L. 103-448, the new 
provisions pertaining to disclosure of children's eligibility 
information to Medicaid and SCHIP appear in the part of the NSLA that 
applies to the free and reduced price meal application process for the 
NSLP. However, based on FNS practices and policies dealing with past 
issues and the need for consistency among the Child Nutrition Programs, 
these regulations on the disclosure of free and reduced price meal or 
free milk eligibility information by determining agencies to Medicaid 
and SCHIP apply to all the Child Nutrition Programs--the NSLP, School 
Breakfast Program (SBP), Special Milk Program for Children (SMP), Child 
and Adult Care Food Program (CACFP), and camps and enrolled sites in 
the Summer Food Service Program (SFSP). Therefore, this rule amends the 
regulations for each of these programs. The various sections amended 
are listed following the discussion of each issue addressed by this 
rule. The minor wording differences necessary to accommodate the 
terminology for the specific programs are not addressed in the 
preamble. School food authorities, SMP child-care institutions, CACFP 
institutions, and SFSP sponsors are determining agencies and are 
collectively referred to as ``program operators'' in the preamble. 
Additionally, this approach is consistent with the July 25, 2000, 
proposed rule.

What Definitions Will Be Added to the Regulations?

    Disclosure. Any time information is revealed or used for a purpose 
other than for the purpose for which the information was obtained, it 
is a disclosure. This is true even when the same agency that obtained 
the information is the one wishing to use it for another purpose. The 
term ``disclosure,'' refers to access, release, or transfer of personal 
data about participants by means of print, tape, microfilm, microfiche, 
electronic communication or any other means. In this rule, the data 
would be individual children's free and reduced price eligibility 
status or other information obtained through the free and reduced price 
meal or free milk application or through direct certification.
    Medicaid and SCHIP. Medicaid and SCHIP refers to the Federal and 
State funded health insurance programs under titles XIX and XXI of the 
Social Security Act, which provide free and low cost health insurance 
to needy children.
    This interim rule will include the above definitions in the 
alphabetical listings at 7 CFR 215.2, 225.2, 226.2, and 245.2.

Is Disclosure of Individual Children's Eligibility Information to 
Medicaid or SCHIP Required?

    Section 9(b)(2)(C)(ii)(IV) of the NSLA, as amended by Pub. L. 106-
224, specifies that individual children's eligibility information may 
be disclosed to Medicaid and SCHIP only if the State agency and program 
operators ``elect'' to do so. Both the State agency and program 
operator must agree to the disclosure. Since the disclosure provision 
applies to all the Child Nutrition Programs, in most cases, this would 
be the State agency and the school food authority or school, SFSP 
sponsor, or CACFP institution. This provision is included in 
Secs. 215.13a(g)(1), 225.15(g)(1), 226.23(i)(1), 245.6(f)(1) of this 
interim rule. Additionally, as discussed later in this preamble, 
parents/guardians must be given the opportunity to elect not to have 
their information disclosed.

What Information May Be Disclosed for Use by Medicaid and SCHIP?

    When both the State agency and program operators elect to disclose 
eligibility information for use by Medicaid/SCHIP and parents/guardians 
have not declined the disclosure, program operators may disclose 
children's eligibility information. In accordance with section 
9(b)(2)(C)(iii)(IV) of the NSLA, program operators may disclose 
children's names, eligibility status (whether they are eligible for 
free or reduced price meals or free milk), and any other eligibility 
information obtained from the application for free and reduced price 
meals or free milk or through direct certification to persons directly 
connected with the administration of Medicaid or SCHIP. (Please note 
that for the Child and Adult Care Food Program and the Summer Food 
Service Program, children's eligibility information may only be 
disclosed to the extent that there are free and reduced price meal 
applications for these children.) This provision is included in 
Secs. 215.13a(g)(2), 225.15(g)(2), 226.23(i)(2), and 245.6(f)(2).

Who Is a Person ``directly connected'' With the Administration of 
Medicaid or SCHIP?

    The NSLA permits disclosure and use of program eligibility 
information specifically to ``a person directly connected with the 
administration'' of Medicaid or SCHIP for the purpose of identifying 
and seeking to enroll children in Medicaid or SCHIP. Persons directly 
connected with the administration of State Medicaid and SCHIP for 
purposes of disclosure of free and reduced price meal and free milk 
eligibility information are State employees and persons authorized 
under Federal and State Medicaid and SCHIP requirements to carry out 
initial processing of Medicaid or SCHIP applications or to make 
eligibility determinations for Medicaid or SCHIP. Initial processing of 
Medicaid or SCHIP applications includes assisting individuals to fill 
out the application, explaining requirements and similar

[[Page 2197]]

activities. In addition to being authorized under Federal and State 
Medicaid requirements, persons directly connected with Medicaid or 
SCHIP administration must be designated by the Medicaid or SCHIP agency 
to receive Medicaid or SCHIP eligibility information. This may include 
employees of county health departments, county departments of human or 
social services, family service agencies or income maintenance 
agencies. This also may include persons under contract to the State 
health program to make eligibility determinations and enroll children 
in the State health insurance program. These entities and persons must 
have a formal relationship with the Medicaid or SCHIP agency to be 
directly connected with Medicaid or SCHIP administration.
    The statute allows disclosure of children's eligibility information 
to identify children who may be eligible for one of these health 
insurance programs and to seek to enroll eligible children in the 
applicable program. The statute does not authorize disclosure to 
persons connected with Medicaid or SCHIP enforcement activities. Thus, 
Federal, State and local reviewers responsible for reviewing or 
auditing compliance with State Medicaid or SCHIP regulations may not 
have access to children's free and reduced price meal or free milk 
eligibility information under this rule.
    In general, organizations and individuals assisting in Medicaid and 
SCHIP outreach activities are not authorized access to children's free 
and reduced price eligibility information. The intent is to limit 
disclosure of program eligibility information to those who have a 
``need to know'' program eligibility information for identifying and 
seeking to enroll eligible children in Medicaid and SCHIP. Since States 
have flexibility in implementing Medicaid and SCHIP, FNS recommends 
that State agencies and determining agencies contact the Medicaid/SCHIP 
coordinator in their State to determine the persons or entities 
authorized and designated by Medicaid or SCHIP to receive eligibility 
information. A description of ``a person directly connected'' with 
State Medicaid or SCHIP administration is included in 
Secs. 215.13a(g)(3), 225.15(g)(3), 226.23(i)(3), and 245.6(f)(3) of 
this rule.

What If Student Records and Other Systems Are Computerized?

    FNS is concerned about maintaining the confidentiality of 
children's eligibility information that is maintained in a computerized 
data base. Procedures must be in place to ensure that only authorized 
individuals have access to children's eligibility information.
    Many schools are now computerized, and individual student 
information is often part of a Statewide electronic database under the 
responsibility of the State's Department of Education. The information 
may also be part of a local school district database. Typically, these 
databases contain ``directory information,'' such as student's name, 
address, phone number, and ``education records,'' such as achievement 
test scores, grades, special education plans, and evaluations. The 
Department of Education has regulations restricting access to 
``education records,'' including those on computerized systems. These 
regulations are found at 34 CFR Part 99.
    Program operators should take note that ``education records'' do 
not include Child Nutrition Program eligibility information. Therefore, 
the Department of Education regulations do not extend to program 
eligibility information for the Child Nutrition Programs. Nor is 
compliance with the Department of Education confidentiality regulations 
sufficient to meet the confidentiality protections in the NSLA. 
Therefore, program operators, who may also be database managers, must 
ensure that to the extent that Child Nutrition Program eligibility 
information is kept together with other school records, controls are 
established and maintained to ensure that the program eligibility 
information is available only to authorized persons and used only for 
authorized purposes.
    FNS is not proposing any specific methods to ensure compliance with 
the NSLA confidentiality provisions in these situations. However, FNS 
remains concerned about the extent of access to the databases, and ways 
to protect program eligibility information from disclosure and use 
beyond what is authorized by Congress. Since FNS experience in this 
area is limited, commenters are encouraged to provide their experiences 
with student databases in which access restrictions vary according to 
the sensitivity of the different data items in the database. An example 
would be a school district database where access to students' academic 
records is more restricted than is access to students' class schedules, 
addresses, and other common information. Comments on this subject will 
aid FNS in determining whether special controls are necessary in 
situations in which program eligibility information reside in the same 
database where other student information is maintained. While this rule 
would not forbid such arrangement, FNS wishes to emphasize that to 
comply with this rule, database managers, who may also be program 
operators, must restrict access to program eligibility information to 
only those individuals and uses authorized by statute and regulation.

Are There Restrictions on How Children's Free and Reduced Price 
Eligibility Information May Be Used by State Medicaid and SCHIP?

    Section 9(b)(2)(C)(iii)(IV) of the NSLA specifies that Medicaid and 
SCHIP agencies and health insurance program operators receiving 
children's free and reduced price meal or free milk eligibility 
information may only use that information to identify children that may 
be eligible for State Medicaid or SCHIP and to seek to enroll them in 
those programs. State agencies and program operators must include this 
restriction in the agreement with Medicaid or SCHIP officials discussed 
later in this preamble. This provision is added to 
Sec. Sec. 215.13a(g)(4), 225.15(g)(4), 226.23(i)(4), and 245.6(f)(4).
    The statute and this regulation specify that children's eligibility 
information, when disclosed to Medicaid or SCHIP, must be used to 
identify and ``seek to enroll'' children in one of these health 
insurance programs. In actuality, it is unlikely that children will be 
automatically enrolled in Medicaid or SCHIP based on information from 
the free or reduced price application or obtained through direct 
certification, because Medicaid and SCHIP need additional information 
to enroll children. Rather, children's free and reduced price meal or 
free milk eligibility information will be used to facilitate Medicaid 
and SCHIP enrollment. There is concern that households may believe that 
by allowing their information to be disclosed to Medicaid and SCHIP, 
their children will be automatically enrolled in one of these health 
insurance programs without the household taking further action. 
Medicaid and SCHIP officials and program operators should work together 
to ensure that once households are identified as potentially eligible 
for Medicaid or SCHIP, households are aware that they must complete the 
Medicaid or SCHIP application process.

Must Households Be Notified of Potential Disclosures to Medicaid and 
SCHIP?

    In accordance with section 9(b)(2)(C)(vi)(II)(aa) and (bb) of the 
NSLA, for any disclosures to State Medicaid and/or SCHIP, parents/
guardians must be notified of the potential disclosure and given the 
opportunity to elect not to have their

[[Page 2198]]

information disclosed. The notification must inform the parents/
guardians that: (1) They are not required to consent to the disclosure; 
(2) the information, if disclosed, will be used to facilitate the 
identification and enrollment of eligible children in a health 
insurance program; and (3) their decision will not affect their 
children's eligibility for free and reduced price meals or free milk. 
The notification may be included in the letter/notice to parents/
guardians that accompanies the free and reduced price meal or free milk 
application, on the application itself or in a separate but concurrent 
notice provided to parents/guardians. The notice must be given prior to 
the disclosure and parents/guardians must be given a reasonable time 
limit to respond. (A discussion about notifying households of potential 
disclosures of eligibility information for children who are determined 
eligible for free meals through direct certification is included 
below.) Only the parent or guardian who is a member of the household or 
family for purposes of the free and reduced price meal or free milk 
application, i.e., the parent/guardian included on the application, 
must be notified and given the option to decline the disclosure of 
eligibility information. In most cases of divorce or separation, this 
means the custodial parent or guardian. However, if custody is shared, 
the parents or guardians must decide who has primary custody for 
purposes of making application for the program. The parent or guardian 
having such custody would be the only person who must be notified and 
given the option to elect to decline the disclosure. In other words, by 
not declining to have their information disclosed to Medicaid/SCHIP, 
the parent/guardian is consenting to have their eligibility information 
shared. FNS is concerned about the personal financial data at stake. 
This information is unlike other student records that directly concern 
the education of the child, and in which both parents have a direct 
interest. The program eligibility information in these circumstances is 
associated with one parent or guardian, and FNS believes that only that 
parent or guardian should be given the option of electing whether or 
not to disclose their eligibility information. FNS recognizes that this 
is a difficult issue and is particularly interested in comments on this 
point.
    Regardless of the document used to notify parents/guardians and to 
secure the consent/declination, officials must provide the household 
with adequate information for them to determine whether or not to allow 
the disclosure of their eligibility information. This rule would amend 
Secs. 215.13a(g)(5), 225.15(g)(5), 226.23(i)(5), and 245.6(f)(5) to set 
the minimum standards for the notice of potential disclosure.

How Are Households Who Are Determined Eligible for Free Meals Through 
Direct Certification Notified About the Potential Disclosure of 
Eligibility Information?

    Section 9(b)(2)(C)(iii) of the NSLA authorizes the disclosure of 
participants' free and reduced price information obtained from a free 
and reduced price meal application or obtained through direct 
certification. As specified in Sec. 245.6(b), direct certification is 
the process by which program operators determine program eligibility by 
directly communicating with the appropriate State or local agency to 
obtain documentation that an individual is a member of a food stamp 
household (or member of a household receiving benefits under the Food 
Distribution Program on Indian Reservations (FDPIR) in lieu of food 
stamps) or a member of a family receiving assistance under certain 
State programs for the Temporary Assistance for Needy Families (TANF). 
In the case of direct certification, the agency administering the Food 
Stamp Program, FDPIR or TANF, as appropriate, may add a notification/
declination statement to the notice of eligibility for free meals or 
milk under the Child Nutrition Programs that is provided to the 
household as documentation of eligibility for free meals. The household 
would be asked to contact the program operator if they did not want 
their information disclosed to Medicaid or SCHIP. Another option is for 
the program operator to include the notification/declination statement 
on the notice of eligibility for free meals that the program operator 
provides to the households when the direct certification is 
accomplished by computer match. Regardless of the method chosen to 
notify households of the potential disclosure and to obtain their 
consent/declination, officials must provide households with adequate 
information to determine whether to disclose their information and 
adequate time for the household to respond.

May Social Security Numbers Be Disclosed?

    The Privacy Act of 1974 (5 U.S.C. 552a note) requires that notice 
be given of the intended uses of social security numbers. Thus, if a 
State agency or program operator intends to disclose social security 
numbers, either through the disclosure provisions authorized in the 
NSLA or with specific parental consent, then section 7(b) of the 
Privacy Act of 1974 (5 U.S.C. 552a note) requires that notice of the 
planned uses of the social security number be given.
    The easiest method is to include the planned uses of social 
security numbers in the Privacy Act notice currently required by 
Secs. 225.15(f)(4)(iv), 226.23(e)(1)(ii)(F), and 245.6(a)(1), because a 
Privacy Act notice is already on the free and reduced price meal 
application. The only uses of social security numbers currently listed 
in the regulations and the prototype application are for the 
determination and verification of eligibility for program meals. Any 
State agency or program operator that plans to disclose all eligibility 
information, including the social security number, to Medicaid or SCHIP 
administrators or plans to use the number for purposes not specified in 
their Privacy Act notice must amend the Privacy Act notice to reflect 
this. State agencies and program operators are responsible for ensuring 
the adequacy of their Privacy Act notice, and FNS encourages them to 
consult with their legal counsel. The requirement regarding Privacy Act 
compliance is specified in Secs. 215.13a(g)(6), 225.15(g)(6), 
226.23(i)(6), and 245.6(f)(6) of this interim rule.
    Currently, the regulations for the SMP do not include a Privacy Act 
notice. The addition of a Privacy Act notice to the SMP was proposed in 
the July 25, 2000 rule (65 FR 45725). To ensure Privacy Act compliance 
in that program, this rule adds a Privacy Act notice requirement for 
the SMP in child-care institutions. The Privacy Act notice requirement 
for the SMP in child-care institutions is added at Sec. 215.13a(f).
    This rule amends and simplifies current Privacy Act notice required 
in Secs. 226.23(e) and 245.6(a). The revision to the Privacy Act notice 
on the free and reduced price application replaces the three sentences 
giving detailed descriptions of the potential use of the social 
security number for verification with a more general, simpler statement 
that the social security number will be used in the administration and 
enforcement of the program. This revision is intended to respond to 
concerns about the lengthy Privacy Act notice previously required by 
program regulations. This revision shortens the notice and reduces the 
amount of space it takes up on the application. An additional Privacy 
Act notice is required to be given before verification (for those 
programs subject to verification). That notice would continue to 
provide the more detailed description on the potential uses of social 
security numbers in verification. The sections

[[Page 2199]]

revised are Secs. 225.15(f)(4)(iv), 226.23(e)(1)(ii)(F), and 
245.6(a)(1). This revision was proposed in the July 25, 2000 rule (65 
FR 45725).

Must There Be an Agreement With State Medicaid and/or SCHIP?

    Section 9(b)(2)(C)(vi)(I) of the NSLA specifies that the 
determining agency must have a written agreement with the State or 
local agency or agencies administering Medicaid and/or SCHIP prior to 
disclosing children's free and reduced price meal or free milk 
eligibility information. At a minimum, the agreement must: (1) Identify 
the health insurance program or health agency receiving children's 
eligibility information; (2) describe the information that will be 
disclosed; (3) require the insurance program or health agency to use 
the eligibility information obtained; (4) specify that the information 
must only be used to identify children eligible for and to seek to 
enroll children in Medicaid or SCHIP; (5) describe how the information 
will be protected from unauthorized uses and disclosures; (6) describe 
the penalties for unauthorized disclosure; and (7) be signed by both 
the determining agency and the Medicaid/SCHIP program or agency 
receiving children's eligibility information. This provision is 
included in Secs. 215.13a(g)(7), 225.15(g)(7), 226.23(i)(7), and 
245.6(f)(7).

What Are the Penalties for Improper Disclosure?

    The NSLA establishes a fine of not more than $1000 or imprisonment 
of not more than 1 year, or both, for publishing, divulging, 
disclosing, or making known in any manner or extent not authorized by 
Federal law, any eligibility information. This includes the disclosure 
of eligibility information by one entity authorized under the statute 
to receive the information to any other entity, even if that entity 
would otherwise be authorized to receive the information directly from 
the determining agency, i.e., third party disclosures are prohibited. 
These penalties are described in Secs. 215.13a(g)(8), 225.15(g)(8), 
226.23(i)(8), and 245.6(f)(8) of this interim rule.

What Are the State Agency's Responsibilities?

    A State agency that elects to disclose children's free and reduced 
price meal or free milk information, with the agreement of the 
determining agency, must ensure that the determining agency: (1) Has a 
written agreement with the State or local agency or agencies 
administering health insurance programs for children under title XIX 
and XXI of the Social Security Act (42 U.S.C. 1396 et seq. and 1397aa 
et seq.) that requires the health agencies to use children's free and 
reduced price meal or free milk eligibility information to seek to 
enroll children in those health insurance programs; and (2) notifies 
each household of the information that will be disclosed, that the 
information disclosed will be used only to seek to enroll children in 
Medicaid or the State Children's Health Insurance Program and provides 
each parent/guardian with an opportunity to elect not to have the 
information disclosed. Sections 215.13a(g)(9), 225.15(g)(9), 
226.23(i)(9), and 245.6(f)(9) specify the State agency's 
responsibilities regarding disclosures.

Summary

    FNS is amending the Child Nutrition Program regulations to permit 
the disclosure of program eligibility information to Medicaid and SCHIP 
consistent with the recent amendments to the NSLA made by P.L. 106-224. 
FNS' goal is to facilitate the enrollment of eligible children in those 
health insurance programs, without sacrificing the confidentiality of 
children's eligibility information.

Public Participation

    Section 242(c) of Pub. L. 106-224 (7 U.S.C. 1421 note) makes the 
provisions of this rule effective on October 1, 2000. Further, section 
263 of Pub. L. 106-224 directs the Department to implement these 
provisions without regard to the Administrative Procedure Act's notice 
and public comment provisions at 5 U.S.C. Sec. 553. The Department is 
thus promulgating the provisions of this interim rule without prior 
notice or public comment. As a result, as of October 1, program 
administrators will be given the opportunity to disclose participant's 
program eligibility information to Medicaid and SCHIP to facilitate 
enrollment in those programs. The Department, however, is providing 
interested parties an opportunity to comment on the interim regulatory 
provisions during the public comment period and will consider comments 
submitted when finalizing this rule.

Executive Order 12866

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

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes a requirement for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
FNS generally prepares a written statement, including a cost-benefit 
analysis. This is done for proposed and final rules that have ``Federal 
mandates'' which may result in expenditures of $100 million or more in 
any one year by State, local, or tribal governments, in the aggregate, 
or by the private sector. When this statement is needed for a rule, 
section 205 of the UMRA generally requires the FNS to identify and 
consider a reasonable number of regulatory alternatives. It must then 
adopt the least costly, most cost-effective or least burdensome 
alternative that achieves the objectives of the rule.
    This interim rule contains no Federal mandates of $100 million or 
more in any one year (under regulatory provisions of Title II of the 
UMRA) for State, local, and tribal governments or the private sector. 
Thus, this interim rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Regulatory Flexibility Act

    This interim rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act (5 U.S.C. 601-612). Shirley R. 
Watkins, Under Secretary for Food, Nutrition and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. By permitting access to certain 
eligibility information, this rule could reduce duplicative paperwork 
by certain agencies which serve low-income children and adults. The 
rule could streamline operations of those programs. The provisions of 
this rule also may enhance access to these programs by needy children. 
The Department of Agriculture does not anticipate any adverse fiscal 
impact resulting from implementation of this rulemaking. Although there 
may be some burdens associated with this rule, the burdens would not be 
significant and would be outweighed by the benefits of sharing of 
information.

Executive Order 12372

    The Special Milk Program, the Summer Food Service Program, and the 
Child and Adult Care Food Program are listed in the Catalog of Federal 
Domestic Assistance under Nos. 10.556, 10.559, and 10.558 respectively. 
These programs are subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials (7 CFR Part

[[Page 2200]]

3015, Subpart V, and final rule related notice at 48 FR 29115, June 24, 
1983).

Executive Order 12988

    This interim rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would impede its full 
implementation. This rule is not intended to have retroactive effect 
unless that is specified in the Effective Date section of the preamble 
of the final rule. Before any judicial challenge to the provisions of 
this rule or the application of its provisions, all administrative 
procedures that apply must be followed. The only administrative appeal 
procedures relevant to this proposed rule are the hearings that FNS 
must provide for decisions relating to eligibility for free and reduced 
price meals and free milk (Sec. 245.7 for the NSLP, SBP, and SMP in 
schools; Sec. 226.23(e)(5) for the CACFP).

Paperwork Reduction Act

    In accordance with the authority provided under section 263 of Pub. 
L. 106-224, this rulemaking is made without regard to the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35).
    This rule contains burdens that were included in the burden 
estimate in the proposed rule, Disclosure of Children's Eligibility 
Information, published on July 25, 2000, at 65 FR 45725. That rule 
proposed to allow the disclosure of children's eligibility information 
to various education, nutrition, and health programs authorized under 
Pub. L. 103-448. Additionally, under the proposed rule, officials may 
disclose children's eligibility to other programs, such as Medicaid and 
SCHIP, with parental consent.
    Since many of the provisions in the proposed rule, mentioned above, 
and this interim rule are similar, such as taking agreements with 
persons or agencies receiving children's eligibility information and 
notifying households of potential disclosures, the Department plans to 
issue one final rule that responds to commenter concerns on the 
proposed rule and this interim rule. The Department will make any 
adjustments to the burden estimate in that final rule.

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have ``federalism implications,'' agencies are 
directed to provide a statement for inclusion in the preamble to the 
regulation describing the agency's considerations in terms of the three 
categories called for under section (6)(a)(B) of Executive Order 13132:

Prior Consultation With State Officials

    Prior to drafting this interim rule, we received input from State 
and local agencies at various times. Since the Child Nutrition Programs 
(CNP) are State administered, federally funded programs, our regional 
offices have informal and formal discussions with State and local 
officials on an ongoing basis regarding program implementation and 
performance. This arrangement allows State and local agencies to 
provide feedback that forms the basis for any discretionary decisions 
in this and other CNP rules. The provisions in this rule are primarily 
non-discretionary. Pub. L. 106-224 mandates that we promptly promulgate 
regulations without regard to the notice and comment provisions of 5 
U.S.C. 553. However, because the disclosure of children's eligibility 
information is a sensitive issue, we are issuing this rule as an 
interim rule with a request for public comment.

Nature of Concerns and the Need To Issue This Rule

    State and local agencies are generally concerned about protecting 
the confidentiality of children's eligibility information. They are 
also concerned about the paperwork and financial burdens placed on food 
service to provide eligibility information to Medicaid and SCHIP 
officials.
    The issuance of a regulation is required by Pub. L. 106-224. Prior 
to Pub. L. 106-224, program officials were permitted to disclose 
children's eligibility information to certain programs and individuals 
without parental consent. Medicaid and SCHIP were not included. 
Therefore, program officials had to obtain the consent of parents/
guardians if they elected to disclose children's eligibility 
information with Medicaid and SCHIP. A proposed rule to allow the 
disclosure of eligibility information to these other programs was 
published on July 25, 2000 (64 FR 45725). In accordance with Pub. L. 
106-224, this interim rule will allow the disclosure of children's 
eligibility information unless parents/guardian elect not to have their 
information disclosed to Medicaid and SCHIP. Certain other provisions, 
as specified in the statute, must also be met prior to disclosing 
information to Medicaid and SCHIP.

Extent to Which We Meet These Concerns

    We believe that we adequately address the issue of State and local 
flexibility. We clarify that the disclosure of children's eligibility 
information to Medicaid is a State and local decision. They are not 
required to disclose children's eligibility information. However, we 
encourage State and local agencies to work with Medicaid and SCHIP 
officials to make the exchange of eligibility information as 
streamlined as possible. Additionally, FNS has issued prototype 
materials, such as a prototype agreement between program operators and 
an agency receiving eligibility information and a prototype 
notification to parents/guardians that their eligibility information 
may be disclosed unless the program operator is notified that they do 
not want their information disclosed. Additionally, the Department of 
Health and Human Services, the department that administers Medicaid and 
SCHIP, is preparing an administrative guidance on reimbursement for 
costs associated with Medicaid and SCHIP outreach and enrollment. 
Finally, we will consider all comments received on this rule when we 
draft the final rule.

List of Subjects

7 CFR Part 215

    Food assistance programs, Grant programs-education, Grant programs-
health, Infants and children, Milk, Reporting and recordkeeping 
requirements.

7 CFR Part 225

    Food assistance programs, Grant programs-health, Infants and 
children, Labeling, Reporting and recordkeeping requirements.

7 CFR Part 226

    Accounting, Aged, Day care, Food assistance programs, Grant 
programs, Grant programs-health, Indians, Individuals with 
disabilities, Infants and children, Intergovernmental relations, Loan 
programs, Reporting and recordkeeping requirements, Surplus 
agricultural commodities.

7 CFR Part 245

    Civil rights, Food assistance programs, Grant programs-education, 
Grant programs-health, Infants and children, Milk, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.
    Accordingly, 7 CFR Parts 215, 225, 226, and 245 are amended as 
follows:

[[Page 2201]]

PART 215--SPECIAL MILK PROGRAM FOR CHILDREN

    1. Revise the authority citation for Part 215 to read as follows:

    Authority:  42 U.S.C. 1772 and 1779.


    2. In Sec. 215.2:
    a. Add a new paragraph (i-l) Disclosure;
    b. Add a new paragraph (k-l) Medicaid; and
    c. Redesignate paragraph (aa) Summer Food Service Program as 
paragraph (bb) Summer Food Service Program and add a new paragraph (aa) 
State Children's Health Insurance Program in its place.
    The additions read as follows:


Sec. 215.2  Definitions.

* * * * *
    (i-1) Disclosure means individual children's program eligibility 
information obtained through the free milk eligibility process that is 
revealed or used for a purpose other than for the purpose for which the 
information was obtained. The term refers to access, release, or 
transfer of personal data about children by means of print, tape, 
microfilm, microfiche, electronic communication or any other means.
* * * * *
    (k-1) Medicaid means the State medical assistance program under 
title XIX of the Social Security Act (42 U.S.C. 1396 et seq.).
* * * * *
    (aa) State Children's Health Insurance Program (SCHIP) means the 
State medical assistance program under title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.).
* * * * *

    3. In Sec. 215.13a, add new paragraphs (f) and (g) to read as 
follows:


Sec. 215.13a  Determining eligibility for free milk in child-care 
institutions.

* * * * *
    (f) Is a Privacy Act notice required on the free milk application? 
Each free milk application must include substantially the following 
statement: ``Unless you include your child's case number for the Food 
Stamp Program, the Food Distribution Program on Indian Reservations (or 
other identifier for the Food Distribution Program on Indian 
Reservations) or the Temporary Assistance for Needy Families Program, 
you must include the social security number of the adult household 
member signing the application or indicate that the household member 
does not have a social security number. This is required by section 9 
of the National School Lunch Act. The social security number is not 
mandatory, but the application cannot be approved if a social security 
number is not given or an indication is not made that the signer does 
not have a social security number. The social security number will be 
used in the administration and enforcement of the program.''
    (g) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP) 
Program eligibility information about children eligible for free milk 
may be disclosed to Medicaid and SCHIP as described in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow child 
care institutions to disclose children's free milk eligibility 
information to Medicaid and SCHIP. Child care institutions may then 
elect to do so. Children's program eligibility information may only be 
disclosed to Medicaid or SCHIP when both the State agency and the child 
care institution so elect, the parent/guardian does not decline to have 
their eligibility information disclosed as described in paragraph 
(g)(5), and the requirements in this paragraph (g) are met.
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or child care institution, as appropriate, may 
disclose children's names, eligibility status (whether they are 
eligible for free milk), and any other eligibility information obtained 
through the free milk application or obtained through direct 
certification to persons directly connected with the administration of 
Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration 
of Medicaid and SCHIP for purposes of disclosure of children's free 
milk eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free milk eligibility information? Medicaid and SCHIP 
agencies and health insurance program operators receiving children's 
free milk eligibility information may only use the information to seek 
to enroll children in Medicaid or SCHIP. The Medicaid and SCHIP 
enrollment process may include targeting and identifying children from 
low-income households who are potentially eligible for Medicaid or 
SCHIP for the purpose of seeking to enroll them in Medicaid or SCHIP.
    (5) Must we notify households of potential disclosure to Medicaid 
or SCHIP? The State agency or child care institution, as appropriate, 
must notify parents/guardians that their children's free milk 
eligibility information will be disclosed to Medicaid and/or SCHIP 
unless the parent/guardian elects not to have their information 
disclosed. Additionally, the State agency or sponsor, as appropriate, 
must give parents/guardians an opportunity to elect not to have their 
information disclosed to Medicaid or SCHIP. Only the parent or guardian 
who is a member of the household or family for purposes of the free and 
reduced price meal or free milk application may decline the disclosure 
of eligibility information. The notification must inform parents/
guardians that they are not required to consent to the disclosure, that 
the information, if disclosed, will be used to identify children 
eligible for and to seek to enroll children in a health insurance 
program, and that their decision will not affect their children's 
eligibility for free milk. The notification may be included in the 
letter/notice to parents/guardians that accompanies the free milk 
application, on the application itself or in a separate notice provided 
to parents/guardians. The notice must give parents/guardians adequate 
time to respond. For children determined eligible through direct 
certification, the notice of potential disclosure may be included in 
the document informing parents/guardians of their children's 
eligibility for free milk through direct certification.
    (6) May social security numbers be disclosed? The State agency or 
child care institution, as appropriate, may disclose social security 
numbers to any programs or persons authorized to receive all program 
eligibility information under this paragraph (g), provided parents/
guardians have not declined to have their information disclosed. 
However State agencies and child care institutions that plan to 
disclose social security numbers must give notice of the planned use of 
the social security numbers. This notice must be in accordance with 
section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note). The 
application must include substantially the following language for 
disclosures of social security numbers to Medicaid or SCHIP: ``The 
social security number may also be disclosed to Medicaid and the State 
Children's Health Insurance Program for the purpose of identifying and 
seeking to enroll eligible children in one of these health insurance 
programs.'' This

[[Page 2202]]

language is in addition to the notice required in paragraph (f) of this 
section. State agencies and child care institutions are responsible for 
drafting the appropriate notice for disclosures of social security 
numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or child care institution, as 
appropriate, must have a written agreement with the State or local 
agency or agencies administering Medicaid or SCHIP prior to disclosing 
children's free milk eligibility information. At a minimum, the 
agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or child care institution, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (g) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of 
children's free milk eligibility information to Medicaid or SCHIP, as 
provided in this paragraph (g), must ensure that any child care 
institution acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free milk eligibility information to seek to enroll children in those 
health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.

PART 225--SUMMER FOOD SERVICE PROGRAM

    1. The authority citation for Part 225 continues to read as 
follows:

    Authority:  Secs. 9, 13, and 14, National School Lunch Act, as 
amended (42 U.S.C. 1758, 1761, and 1762a).


    2. In Sec. 225.2, add new paragraphs Disclosure; Medicaid; and 
State Children's Health Insurance Program (SCHIP) in alphabetical order 
to read as follows:


Sec. 225.2  Definitions.

* * * * *
    Disclosure means individual children's program eligibility 
information obtained through the free and reduced price meal 
eligibility process that is revealed or used for a purpose other than 
for the purpose for which the information was obtained. The term refers 
to access, release, or transfer of personal data about children by 
means of print, tape, microfilm, microfiche, electronic communication 
or any other means.
* * * * *
    Medicaid means the State medical assistance program under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.).
* * * * *
    State Children's Health Insurance Program (SCHIP) means the State 
medical assistance program under title XXI of the Social Security Act 
(42 U.S.C. 1397aa et seq.).
* * * * *

    3. In Sec. 225.15:
    a. Revise paragraph (f)(4)(iv), and
    b. Redesignate paragraphs (g) and (h) as paragraphs (h) and (i) and 
add a new paragraph (g).
    The revision and addition reads as follows:


Sec. 225.15  Management responsibilities of sponsors.

* * * * *
    (f) * * *
    (4) * * *
    (iv) The following statement that provides notice to the household 
member whose social security number is disclosed: ``Unless you include 
your child's case number for the Food Stamp Program, the Food 
Distribution Program on Indian Reservations (or other identifier for 
the Food Distribution Program on Indian Reservations) or the Temporary 
Assistance for Needy Families Program, you must include the social 
security number of the adult household member signing the application 
or indicate that the household member does not have a social security 
number. This is required by section 9 of the National School Lunch Act. 
The social security number is not mandatory, but the application cannot 
be approved if a social security number is not given or an indication 
is not made that the signer does not have a social security number. The 
social security number will be used in the administration and 
enforcement of the program.''
* * * * *
    (g) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP). 
Program eligibility information about children eligible for free and 
reduced price meals may be disclosed to Medicaid and SCHIP as described 
in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow sponsors 
to disclose children's free and reduced price meal eligibility 
information to Medicaid and SCHIP. Sponsors may then elect to do so. 
Children's program eligibility information may only be disclosed to 
Medicaid or SCHIP when both the State agency and the sponsor so elect, 
the parent/guardian does not decline to have their eligibility 
information disclosed as described in paragraph (g)(5), and the 
requirements in this paragraph (g) are met. y
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or sponsor, as appropriate, may disclose children's 
names, eligibility status (whether they are eligible for free or 
reduced price meals), and any other eligibility information obtained 
through the free and reduced price meal application or obtained through 
direct certification to persons directly connected with the 
administration of Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration 
of Medicaid and SCHIP for purposes of disclosure of children's free and

[[Page 2203]]

reduced price meal eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free and reduced price meal eligibility information? 
Medicaid and SCHIP agencies and health insurance program operators 
receiving children's free and reduced price meal eligibility 
information may only use the information to enroll children in Medicaid 
or SCHIP. The Medicaid and SCHIP enrollment process may include 
targeting and identifying children from low-income households who are 
potentially eligible for Medicaid or SCHIP for the purpose of seeking 
to enroll them in Medicaid or SCHIP.
    (5) What are the requirements for notifying households of potential 
disclosure to Medicaid or SCHIP? The State agency or sponsor, as 
appropriate, must notify parents/guardians that their children's free 
or reduced price meal eligibility information will be disclosed to 
Medicaid and/or SCHIP unless the parent/guardian elects not to have 
their information disclosed. Additionally, the State agency or sponsor, 
as appropriate, must give parents/guardians an opportunity to elect not 
to have their information disclosed to Medicaid or SCHIP. Only the 
parent or guardian who is a member of the household or family for 
purposes of the free and reduced price meal or free milk application 
may decline the disclosure of eligibility information. The notification 
must inform parents/guardians that they are not required to consent to 
the disclosure, that the information, if disclosed, will be used to 
identify children eligible for and seek to enroll children in a health 
insurance program, and that their decision will not affect their 
children's eligibility for free or reduced price meals. The 
notification may be included in the letter/notice to parents/guardians 
that accompanies the free and reduced price application, on the 
application itself or in a separate notice provided to parents/
guardians. The notice must give parents/guardians adequate time to 
respond. For children determined eligible through direct certification, 
the notice of potential disclosure may be included in the document 
informing parents/guardians of their children's eligibility for free 
meals through direct certification.
    (6) May social security numbers be disclosed? The State agency or 
sponsor, as appropriate, may disclose social security numbers to any 
programs or persons authorized to receive all program eligibility 
information under this paragraph (g), provided parents/guardians have 
not declined to have their information disclosed. However, State 
agencies and sponsors that plan to disclose social security numbers 
must give notice of the planned use of the social security number. This 
notice must be in accordance with section 7(b) of the Privacy Act of 
1974 (5 U.S.C. 552a note). The application must include substantially 
the following language for disclosures of social security numbers to 
Medicaid or SCHIP: ``The social security number may also be disclosed 
to Medicaid and the State Children's Health Insurance Program for the 
purpose of identifying and seeking to enroll eligible children in one 
of these health insurance programs.'' This language is in addition to 
the notice required in paragraph (f)(4)(iv) of this section. State 
agencies and sponsors are responsible for drafting the appropriate 
notice for disclosures of social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or sponsor, as appropriate, must have a 
written agreement with the State or local agency or agencies 
administering Medicaid or SCHIP prior to disclosing children's free and 
reduced price eligibility information. At a minimum, the agreement 
must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or sponsor, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (g) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of 
children's free and reduced price meal eligibility information to 
Medicaid or SCHIP, as provided in this paragraph (g), must ensure that 
any sponsor acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free and reduced price meal eligibility information to seek to enroll 
children in those health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.
* * * * *

PART 226--CHILD AND ADULT CARE FOOD PROGRAM

    1. The authority citation for Part 226 continues to read as 
follows:

    Authority: Secs. 9, 11, 14, 16 and 17, National School Lunch 
Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 1765, and 1766).

    2. In Sec. 226.2, add new paragraphs Disclosure; Medicaid; and 
State Children's Health Insurance Program (SCHIP) in alphabetical order 
to read as follows:


Sec. 226.2  Definitions.

* * * * *
    Disclosure means individual children's program eligibility 
information obtained through the free and reduced price meal 
eligibility process that is revealed or used for a purpose other than 
for the purpose for which the information was obtained. The term refers 
to access, release, or transfer of personal data about children by 
means of print, tape, microfilm, microfiche, electronic communication 
or any other means.
* * * * *
    Medicaid means Title XIX of the Social Security Act.
* * * * *
    State Children's Health Insurance Program (SCHIP) means the State 
medical assistance program under title XXI of the Social Security Act ( 
42 U.S.C. 1397aa et seq.).
* * * * *

    3. In Sec. 226.23, revise paragraph (e)(1)(ii)(F) and add a new 
paragraph (i) to read as follows:


Sec. 226.23  Free and reduced-price meals.

* * * * *
    (e)(1) * * *

[[Page 2204]]

    (ii) * * *
    (F) A statement that includes substantially the following 
information: ``Unless you include your child's case number for the Food 
Stamp Program, the Food Distribution Program on Indian Reservations (or 
other identifier for the Food Distribution Program on Indian 
Reservations) or the Temporary Assistance for Needy Families Program, 
you must include the social security number of the adult household 
member signing the application or indicate that the household member 
does not have a social security number. This is required by section 9 
of the National School Lunch Act. The social security number is not 
mandatory, but the application cannot be approved if a social security 
number is not given or an indication is not made that the signer does 
not have a social security number. The social security number will be 
used in the administration and enforcement of the program.'' State 
agencies and institutions must ensure that the notice complies with 
section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note); and
* * * * *
    (i) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP) 
Program eligibility information about children eligible for free and 
reduced price meals may be disclosed to Medicaid and SCHIP as described 
in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow 
institutions to disclose children's free and reduced price meal 
eligibility information to Medicaid and SCHIP. Institutions may then 
elect to do so. Children's program eligibility information may only be 
disclosed to Medicaid or SCHIP when both the State agency and the 
institution so elect, the parent/guardian does not decline to have 
their eligibility information disclosed as described in paragraph 
(i)(5), and the requirements in this paragraph (i) are met.
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or institution, as appropriate, may disclose 
children's names, eligibility status (whether they are eligible for 
free or reduced price meals), and any other eligibility information 
obtained through the free and reduced price meal application to persons 
directly connected with the administration of Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration 
of Medicaid and SCHIP for purposes of disclosure of children's free and 
reduced price meal eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free and reduced price meal eligibility information? 
Medicaid and SCHIP agencies and health insurance program operators 
receiving children's free and reduced price meal eligibility 
information may only use the information to seek to enroll children in 
Medicaid or SCHIP. The Medicaid and SCHIP enrollment process may 
include targeting and identifying children from low-income households 
who are potentially eligible for Medicaid or SCHIP for the purpose of 
seeking to enroll them in Medicaid or SCHIP.
    (5) What are the requirements for notifying households of potential 
disclosure to Medicaid or SCHIP? The State agency or institution, as 
appropriate, must notify parents/guardians that children's free or 
reduced price meal eligibility information will be disclosed to 
Medicaid and/or SCHIP unless the parent/guardian elects not to have 
their information disclosed. Additionally, the State agency or 
institution, as appropriate, must give parents/guardians an opportunity 
to elect not to have their information disclosed to Medicaid or SCHIP. 
Only the parent or guardian who is a member of the household or family 
for purposes of the free and reduced price meal or free milk 
application may decline the disclosure of eligibility information. The 
notification must inform parents/guardians that they are not required 
to consent to the disclosure, that the information, if disclosed, will 
be used to identify children eligible for and to seek to enroll 
children in a health insurance program, and that their decision will 
not affect their children's eligibility for free or reduced price 
meals. The notification may be included in the letter/notice to 
parents/guardians that accompanies the free and reduced price 
application, on the application itself or in a separate notice provided 
to parents/guardians. The notice must give parents/guardians adequate 
time to respond. For children determined eligible through direct 
certification, the notice of potential disclosure may be included in 
the document informing parents/guardians of their children's 
eligibility for free meals through direct certification.
    (6) May social security numbers be disclosed? The State agency or 
institution, as appropriate, may disclose social security numbers to 
any programs or persons authorized to receive all program eligibility 
information under this paragraph (i), provided parents/guardians have 
not declined to have their information disclosed. However, State 
agencies and institutions that plan to disclose social security numbers 
must give notice of the planned use of the social security numbers. 
This notice must be in accordance with section 7(b) of the Privacy Act 
of 1974 (5 U.S.C. 552a note). The application must include 
substantially the following language for disclosures of social security 
numbers to Medicaid or SCHIP: ``The social security number may also be 
disclosed to Medicaid and the State Children's Health Insurance Program 
for the purpose of identifying and seeking to enroll eligible children 
in one of these health insurance programs.'' This language is in 
addition to the notice required in paragraph (e)(1)(i)(F) of this 
section. State agencies and institutions are responsible for drafting 
the appropriate notice for disclosures of social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or institution, as appropriate, must have 
a written agreement with the State or local agency or agencies 
administering Medicaid or SCHIP prior to disclosing children's free and 
reduced price eligibility information. At a minimum, the agreement 
must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or institution, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent

[[Page 2205]]

not authorized by statute or this section, any information obtained 
under this paragraph (i) will be fined not more than $1,000 or 
imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of 
children's free and reduced price meal eligibility information to 
Medicaid or SCHIP, as provided in this paragraph (i), must ensure that 
any institution acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free and reduced price meal eligibility information to seek to enroll 
children in those health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.

PART 245--DETERMINING ELIGIBILITY FOR FREE AND REDUCED PRICE MEALS 
AND FREE MILK IN SCHOOLS

    1. The authority citation for Part 245 is revised to read as 
follows:

    Authority: 42 U.S.C. 1752, 1758, 1759a, 1772, 1773, and 1779.


    2. In Sec. 245.2:
    a. Redesignate paragraph (a-3) as paragraph (a-4) and add new 
paragraph (a-3) in its place;
    b. Redesignate paragraph (f-1) as paragraph (f-2) and add a new 
paragraph (f-1) in its place; and
    c. Redesignate paragraphs (k) and (l) as paragraphs (l) and (m) and 
add a new paragraph (k).
    The additions read as follows:


Sec. 245.2  Definitions.

* * * * *
    (a-3) Disclosure means individual children's program eligibility 
information obtained through the free and reduced price meal or free 
milk eligibility process that is revealed or used for a purpose other 
than for the purpose for which the information was obtained. The term 
refers to access, release, or transfer of personal data about children 
by means of print, tape, microfilm, microfiche, electronic 
communication or any other means.
* * * * *
    (f-1) Medicaid means the State medical assistance program under 
title XIX of the Social Security Act (42 U.S.C. 1396 et seq.).
* * * * *
    (k) State Children's Health Insurance Program (SCHIP) means the 
State medical assistance program under title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.).
* * * * *

    3. In Sec. 245.6, revise paragraph (a)(1) and add a new paragraph 
(f) to read as follows:


Sec. 245.6  Certification of children for free and reduced price meals 
and free milk.

    (a) * * *
    (1) ``Unless you include your child's case number for the Food 
Stamp Program, the Food Distribution Program on Indian Reservations (or 
other identifier for the Food Distribution Program on Indian 
Reservations) or the Temporary Assistance for Needy Families Program, 
you must include the social security number of the adult household 
member signing the application or indicate that the household member 
does not have a social security number. This is required by section 9 
of the National School Lunch Act. The social security number is not 
mandatory, but the application cannot be approved if a social security 
number is not given or an indication is not made that the signer does 
not have a social security number. The social security number will be 
used in the administration and enforcement of the program.'' State 
agencies and school food authorities must ensure that the notice 
complies with section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a 
note); and
* * * * *
    (f) Disclosure of program eligibility information to State Medicaid 
(Medicaid) and the State Children's Health Insurance Program (SCHIP) 
Program eligibility information about children eligible for free and 
reduced price meals may be disclosed to Medicaid and SCHIP as described 
in this section.
    (1) Who decides whether to disclose program eligibility information 
to Medicaid and/or SCHIP? The State agency may elect to allow school 
food authorities to disclose children's free and reduced price meal 
eligibility information to Medicaid and SCHIP. School food authorities 
may then elect to do so. Children's program eligibility information may 
only be disclosed to Medicaid or SCHIP when both the State agency and 
the school food authority so elect, the parent/guardian does not 
decline to have their eligibility information disclosed as described in 
paragraph (f)(5), and the requirements in this paragraph (f) are met.
    (2) What information may we disclose for use by Medicaid and SCHIP? 
The State agency or school food authority, as appropriate, may disclose 
children's names, eligibility status (whether they are eligible for 
free or reduced price meals or free milk), and any other eligibility 
information obtained through the free and reduced price meal/milk 
application or obtained through direct certification to persons 
directly connected with the administration of Medicaid or SCHIP.
    (3) Who are persons ``directly connected'' with the administration 
of Medicaid and SCHIP? State employees and persons authorized under 
Federal and State Medicaid and SCHIP requirements to carry out initial 
processing of Medicaid or SCHIP applications or to make eligibility 
determinations are persons directly connected with the administration 
of Medicaid and SCHIP for purposes of disclosure of children's free and 
reduced price meal and free milk eligibility information.
    (4) What are the restrictions on how Medicaid and SCHIP use 
children's free and reduced price meal and free milk eligibility 
information? Medicaid and SCHIP agencies and health insurance program 
operators receiving children's free and reduced price meal and free 
milk eligibility information may only use the information to seek to 
enroll children in Medicaid or SCHIP. The Medicaid and SCHIP enrollment 
process may include targeting and identifying children from low-income 
households who are potentially eligible for Medicaid or SCHIP for the 
purpose of seeking to enroll them in Medicaid or SCHIP.
    (5) Must we notify households of potential disclosure to Medicaid 
or SCHIP? The State agency or school food authority, as appropriate, 
must notify parents/guardians that their children's free or reduced 
price meal or free milk eligibility information will be disclosed to 
Medicaid and/or SCHIP unless the parent/guardian elects not to have 
their information disclosed. Additionally, the State agency or school 
food authority, as appropriate, must give parents/guardians an 
opportunity to elect not to have their information disclosed to 
Medicaid or SCHIP. Only the parent or guardian who is a member of the 
household or family for purposes of the free and reduced price meal or 
free milk

[[Page 2206]]

application may decline the disclosure of eligibility information. The 
notification must inform parents/guardians that they are not required 
to consent to the disclosure, that the information, if disclosed, will 
be used to identify children eligible for and seek to enroll children 
in a health insurance program, and that their decision will not affect 
their children's eligibility for free or reduced price meals or free 
milk. The notification may be included in the letter/notice to parents/
guardians that accompanies the free and reduced price meal or free milk 
application, on the application itself or in a separate notice provided 
to parents/guardians. The notice must give parents/guardians adequate 
time to respond. For children determined eligible through direct 
certification, the notice of potential disclosure may be included in 
the document informing parents/guardians of their children's 
eligibility for free meals or free milk through direct certification.
    (6) May social security numbers be disclosed? The State agency or 
school food authority, as appropriate, may disclose social security 
numbers to any programs or persons authorized to receive all program 
eligibility information under this paragraph (f), provided parents/
guardians have not declined to have their information disclosed. 
However, State agencies and school food authorities that plan to 
disclose social security numbers must give notice of the planned use of 
the social security numbers. This notice must be in accordance with 
section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note). The 
application must include substantially the following language for 
disclosures of social security numbers to Medicaid or SCHIP: ``The 
social security number may also be disclosed to Medicaid and the State 
Children's Health Insurance Program for the purpose of identifying and 
seeking to enroll eligible children in one of these health insurance 
programs.'' This language is in addition to the notice required in 
paragraph (a)(1) of this section. State agencies and school food 
authorities are responsible for drafting the appropriate notice for 
disclosures of social security numbers.
    (7) Are agreements required before disclosing program eligibility 
information? The State agency or school food authority, as appropriate, 
must have a written agreement with the State or local agency or 
agencies administering Medicaid or SCHIP prior to disclosing children's 
free and reduced price eligibility information. At a minimum, the 
agreement must:
    (i) Identify the health insurance program or health agency 
receiving children's eligibility information;
    (ii) Describe the information that will be disclosed;
    (iii) Require that the Medicaid or SCHIP agency use the information 
obtained and specify that the information must only be used to seek to 
enroll children in Medicaid or SCHIP;
    (iv) Describe how the information will be protected from 
unauthorized uses and disclosures;
    (v) Describe the penalties for unauthorized disclosure; and
    (vi) Be signed by both the Medicaid or SCHIP program or agency and 
the State agency or school food authority, as appropriate.
    (8) What are the penalties for unauthorized disclosure or misuse of 
information? In accordance with section 9(b)(2)(C)(v) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(C)(v)), any 
individual who publishes, divulges, discloses or makes known in any 
manner, or to any extent not authorized by statute or this section, any 
information obtained under this paragraph (f) will be fined not more 
than $1,000 or imprisoned for up to 1 year, or both.
    (9) What are the State agency's responsibilities regarding 
disclosures? State agencies that elect to allow disclosure of 
children's free and reduced price meal eligibility information to 
Medicaid or SCHIP, as provided in this paragraph (f), must ensure that 
any school food authority acting in accordance with that option:
    (i) Has a written agreement with the State or local agency or 
agencies administering health insurance programs for children under 
titles XIX and XXI of the Social Security Act (42 U.S.C. 1396 et seq. 
and 1397aa et seq.) that requires the health agencies to use children's 
free and reduced price meal eligibility information to seek to enroll 
children in those health insurance programs; and
    (ii) Notifies each household of the information that will be 
disclosed, that the information disclosed will be used only to seek to 
enroll children in Medicaid or SCHIP and provides each parent/guardian 
with an opportunity to elect not to have the information disclosed.

    Dated: January 5, 2001.
Shirley R. Watkins,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 01-661 Filed 1-8-01; 10:50 am]
BILLING CODE 3410-30-P