[Federal Register Volume 67, Number 81 (Friday, April 26, 2002)]
[Notices]
[Pages 20794-20800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10260]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[CMS-2137-N]


State Children's Health Insurance Program (SCHIP); Redistribution 
and Continued Availability of Unexpended SCHIP Funds From the 
Appropriation for FY 1999

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the application of the statutory 
provisions concerning the redistribution and availability of unexpended 
funds appropriated for fiscal year (FY) 1999 for the State Children's 
Health Insurance Program under title XXI of the Social Security Act. It 
sets forth the amounts available for each of the 50 States, the 
District of Columbia, and the Commonwealths and Territories from the FY 
1999 appropriation for a second period of availability under the 
statutory formula. It specifies amounts of allotments that may remain 
available (``retained allotments'') to the States to which those 
amounts were originally allotted during the initial period, and the 
amounts of allotments that are redistributed from the States to which 
they were allotted during the initial period to be available to other 
States (``redistributed allotments'').

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

SUPPLEMENTARY INFORMATION:

I. Background

    Title XXI of the Social Security Act (the Act) sets forth the State 
Children's Health Insurance Program (SCHIP) to enable States, the 
District of Columbia, and specified Commonwealths and Territories to 
initiate and expand health insurance coverage to uninsured, low-income 
children. In this notice, unless otherwise indicated, the use of the 
terms ``State'' and ``States,'' refers to any or all

[[Page 20795]]

of the 50 States, the District of Columbia, and the Commonwealths and 
Territories. States may implement SCHIP through a separate child health 
program under title XXI of the Act, an expanded program under title XIX 
of the Act, or a combination of both. Under section 2104 of the Act, 
the SCHIP allotments for a fiscal year (FY) are available to match 
expenditures under an approved State child health plan for a 3-fiscal 
year ``period of availability,'' including the fiscal year for which 
the allotment was provided. After the initial period of availability, 
the amount of unspent allotments is subject to a second period of 
availability. With the exception described below for the allotments 
made in FYs 1998 and 1999, allotments unspent in the initial period of 
availability are to be redistributed from States that did not fully 
spend these allotments to States that fully spent their allotments for 
that fiscal year.
    The Medicare, Medicaid and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA), enacted as part of Pub. L. 106-554 on 
December 21, 2000, amended title XXI of the Act, in part by 
establishing new requirements for the second period of availability of 
amounts of FYs 1998 and 1999 allotments unspent during the initial 
period of availability. These requirements limit the redistribution of 
unspent allotments to States that fully spent their FY 1998 or 1999 
allotments (redistributed amounts). These requirements also provide 
that amounts of unspent allotments not redistributed as a result of 
these limits would remain available to States that did not fully expend 
their FY 1998 or 1999 allotments (retained allotments). These 
requirements prescribe a methodology and process for determining the FY 
1998 and FY 1999 redistributed and retained allotment amounts.

II. Provisions of This Notice

    This notice announces the application of the statutory provisions 
concerning the redistribution and availability of unexpended funds 
appropriated for the FY 1999 SCHIP program. Section 2104 of the Act 
provides an allotment for each fiscal year for Federal matching 
payments for an initial 3-year period for the States. Section 801 of 
BIPA added section 2104(g) to the Act to provide for a methodology to 
redistribute or continue availability of all unexpended amounts for FYs 
1998 and 1999 at the end of the initial 3-year period.
    Section 2104 of the Act requires the Secretary to calculate 
allotments for each State with an approved State child health plan 
based on available appropriated funds for each fiscal year. All States 
had approved plans in order to have access to their final FY 1999 SCHIP 
allotments, which were published on May 24, 2000 in the Federal 
Register (65 FR 33634). The final rule setting forth the methodologies 
and procedures to determine the allotment of Federal funds for each 
fiscal year and the grant award and payment process was also published 
on May 24, 2000 in the Federal Register (65 FR 33616).
    BIPA amended the SCHIP statute to add a new section 2104(g) to the 
Act, which requires the Secretary to redistribute limited amounts of 
the unexpended allotments for FYs 1998 and 1999 to States that fully 
expended their allotments for those years, and extended the 
availability of remaining unexpended allotments for those years, in 
accordance with a specified formula. This notice sets forth the results 
of the statutory formula to the unexpended allotments for FY 1999, and 
describes the methodology for the redistribution and continued 
availability of unexpended SCHIP allotments. The FY 1998 redistributed 
and retained allotment amounts were published in the Federal Register 
on June 21, 2001 (66 FR 33257).

III. Application of the Provisions of Section 2104(g) of the Act to 
the Unexpended FY 1999 SCHIP Allotments To Determine the 
Redistribution and Continued Availability of Allotments for Each 
State

    Section 2104(e) of the Act requires that the amount of a State's 
allotment for a fiscal year be available to the State for matching 
allowable State expenditures for a 3-year initial period of 
availability; the fiscal year for which the funds are allotted, and the 
two following fiscal years. For FY 1999, the 3-year initial period of 
availability is October 1, 1998 through September 30, 2001. With the 
exception of the methodology specified in BIPA for treating unspent FY 
1998 and 1999 allotments, section 2104(f) of the Act requires 
redistribution of the entire amount of unspent allotments after the 
initial period of availability has expired. Section 2104(e) of the Act 
provides that redistributed funds are available for matching State 
expenditures through the end of the fiscal year in which they are 
reallotted. Any redistributed funds for the fiscal year that remained 
unexpended at the end of the fiscal year in which they were reallotted 
would have reverted to the Federal Treasury.
    BIPA did not repeal or delete sections 2104(e) and (f) of the Act. 
However, BIPA added a new section 2104(g) of the Act that established a 
formula for redistributing and continuing the availability of 
unexpended allotments for FYs 1998 and 1999 and references the 
provisions of sections 2104(e) and (f) of the Act. This formula 
replaces the redistribution that otherwise would have been required 
under section 2104(f) of the Act.
    Section 2104(g) of the Act requires the Secretary to redistribute 
and continue availability of the unexpended FYs 1998 and 1999 
allotments under section 2104(f) of the Act. Section 2104(g) also 
provides that both FYs 1998 and 1999 redistribution amounts and FYs 
1998 and 1999 retained amounts, under sections 2104(g)(1)(B)(ii) and 
2104(g)(2)(A)(i) of the Act, respectively, shall remain available to 
the States through the end of FY 2002; that is, through September 30, 
2002.
    The availability of retained allotment funds is determined in 
accordance with requirements related to the ordering of expenditures. 
Section 2105(a)(2) of the Act, as amended by BIPA, requires that 
expenditures be applied against a State's available fiscal year SCHIP 
allotment amounts in the following order:
    (1) Title XIX SCHIP related expenditures for which payment is made 
at the enhanced Federal medical assistance percentage (FMAP) (section 
2105(a)(1)(A) of the Act);
    (2) Title XIX expenditures for medical assistance provided during a 
presumptive eligibility period under section 1920A of the Act (section 
2105(a)(1)(B) of the Act);
    (3) Child health assistance for targeted low-income children in the 
form of providing health benefits coverage that meets the requirements 
of section 2103 (section 2105(a)(1)(C) of the Act);
    (4)(a) Other child health assistance for targeted low-income 
children and health services initiatives under the plan for improving 
the health of children (including targeted low-income children and 
other low-income children) (section 2105(a)(1)(D)(i and ii) of the 
Act);
    (4)(b) Outreach expenditures (section 2105(a)(1)(D)(iii) of the 
Act); and
    (4)(c) Administration expenditures (section 2105(a)(1)(D)(iv) of 
the Act).
    In general, States' expenditures will be applied against the FY 
1999 redistribution and retained amounts in accordance with existing 
SCHIP regulations on allotments (42 CFR parts 447 and 457). These 
regulations, however, do not directly address the treatment of 
redistributed allotments because they do not make clear whether these 
expenditures will be applied to these allotments based on the fiscal 
year

[[Page 20796]]

of the initial allotment, the fiscal year of the redistribution, or the 
fiscal year of the allotment whose expiration date matches the 
redistribution. This notice permits States the option to decide the 
order of application of expenditures against the redistribution amounts 
and other available fiscal year allotment amounts. Under this option, a 
redistribution State may have a maximum of four possible choices for 
the order of the application of FY 1999 redistribution funds in FY 
2002, depending on what other fiscal year allotments are available in 
FY 2002: (1) Before FY 2000 allotments; (2) after FY 2000 and before FY 
2001 allotments; (3) after FY 2001 and before FY 2002 allotments; and 
(4) after FY 2002 allotments. Furthermore, if a FY 1999 redistribution 
State also has FY 1998 redistribution funds available in FY 2002, it 
can choose whether the FY 1999 redistribution funds will be used before 
or after the FY 1998 redistribution amounts.
    We believe that States should be afforded the flexibility to decide 
whether redistributed funds would be used before or after other 
available allotment funds to allow them to optimize the use of the 
funds. Therefore, in implementing the BIPA legislation, we offered 
States that will receive FY 1999 redistributed funds the option of 
choosing the order of when the funds would be expended during FY 2002 
among the other available allotments during FY 2002. All of the 
redistribution States have responded to us with their decision 
regarding this option. Under this option, once a State chooses the 
order of the FY 1999 redistribution amounts, it cannot change that 
order at a later date.
    Both the redistribution amounts and the retained amounts for FY 
1999 will be available for allowable SCHIP expenditures reported for 
the period of October 1, 2001 through September 30, 2002. This will 
ensure that the redistribution and retained allotment amounts will be 
available for SCHIP expenditures for the entire period, October 1, 2001 
through September 30, 2002, even though this notice is being published 
after October 1, 2001.
    We have made provisions on the Form CMS-21C in the Medicaid and 
State Children's Health Insurance Program Budget and Expenditure System 
(MBES/CBES), Allocation of Title XIX and Title XXI Expenditures to the 
SCHIP Fiscal Year Allotment, which is used for tracking States' 
expenditures against their allotments, to include the States' FY 1999 
redistributed and retained amounts. The redistributed and retained 
allotment amounts will be automatically entered on this form and the 
Medicaid and SCHIP expenditure system will automatically apply 
expenditures reported on the quarterly expenditure reports for the 
period of October 1, 2001 through September 30, 2002 to the FY 1999 
redistributed and retained amounts available through September 30, 
2002. Except as provided above regarding the option for States to 
choose the ordering of fiscal year redistribution amounts, expenditures 
reported by States during this period will be applied against retained, 
redistributed or other available allotments in chronological order from 
earlier to more recent, in accordance with the SCHIP regulations 
published on May 24, 2000 in the Federal Register (65 FR 33616). Thus, 
for example, States' expenditures would be applied first against any 
remaining FY 1998 retained allotments, then against available FY 1999 
retained allotments, and then against any other available fiscal year 
allotments in chronological order; however, if applicable, the 
available redistribution amounts would be ordered in accordance with 
those redistribution States' choices under the option for ordering such 
redistribution amounts.

IV. Determination of Redistribution or Continued Availability of 
Unexpended FY 1999 Allotments

    In Table 1 of this notice, we set forth the amount of unexpended 
allotments as of November 30, 2001, as specified in section 2104(g) of 
the Act. We also set forth the retained amounts that, under the 
statutory formula, are subject to continued availability by States that 
did not fully expend their FY 1999 allotments, and the amounts that are 
redistributed for availability to States that fully expended their FY 
1999 allotments. The formula for determining the redistributed and 
retained amounts of the FY 1999 SCHIP allotments is described below.

Establishing the Amount of Unexpended FY 1999 Allotments

    The amount of States' unexpended allotments are established based 
on the SCHIP related expenditures, as reported and certified by States 
to CMS on the quarterly expenditure reports. To determine the amounts 
of unexpended FY 1999 allotments remaining at the end of the initial 
period of availability, or to identify States that have fully expended 
their FY 1999 allotments, section 2104(g)(3) of the Act provides that 
the Secretary use expenditures reported as of November 30, 2001 on the 
Form CMS-64 or CMS-21, as approved by the Secretary. These expenditures 
are applied and tracked against the States' FY 1999 allotments (as 
published on May 24, 2000 in the Federal Register (65 FR 33634)), and 
other available allotments, on the Form CMS-21C, Allocation of the XIX 
and Title XXI Expenditures to SCHIP Fiscal Year Allotment.
    By November 30, 2001, all States did report and certify their FY 
2001 fourth quarter expenditure reports (representing the last quarter 
of the 3-year period of availability for FY 1999). Expenditures 
reflected in Table 1 below were taken from our MBES/CBES 
``masterfile,'' which represent the State's official certified SCHIP 
and Medicaid expenditure reporting system records.
    Based on States' expenditure reports submitted and certified 
through November 30, 2001, the total amount of unexpended FY 1999 SCHIP 
allotments is $2,818,627,105. This amount includes the amounts of 
reduction to the States' FY 1999 allotments based on the application of 
the ``maintenance of effort'' (MOE) provisions specified in the SCHIP 
statute at section 2105(d)(2) of the Act.

Application of the Maintenance of Effort Provision

    Under section 2105(d)(2) of the Act, the amount of the fiscal year 
allotments for certain States, beginning with FY 1999, are reduced if 
the States' expenditures do not meet the specified MOE requirements. 
The application of the MOE provisions resulted in one State's FY 1999 
allotment being reduced by $2,216,553; in effect, the amount of the MOE 
reduction to its FY 1999 SCHIP allotment was not available to that 
State for expenditure. However, this MOE reduction amount is available 
and is included in the total amount available nationally for 
redistribution and continued availability of the FY 1999 allotments.
    Initially, the total amount of FY 1999 unexpended allotments was 
effectively reduced because it did not include the reduction amount 
related to the MOE provision. However, the MOE reduction amount is 
available for purposes of the redistribution. Therefore, the MOE 
reduction amount is applied to decrease the amount of the total 
unexpended FY 1999 allotments needed for redistribution to the States 
that have fully spent their FY 1999 allotments. By applying the MOE 
reduction amount to the amount needed for redistribution, the amount of 
unexpended FY 1999 allotments that can be retained by States that did 
not fully expend their allotments is larger.

[[Page 20797]]

Redistribution for the States and the District of Columbia

    Section 2104(g)(1)(i)(I) of the Act specifies the FY 1999 
redistribution for the 50 States and the District of Columbia that have 
fully expended their FY 1999 allotments. Specifically, under this 
section, the redistribution amounts are equal to these States' 
``excess'' expenditures during the FY 1999 period of availability; this 
amount is the difference between the States' total reported applicable 
expenditures for the period FYs 1999 through 2001, and the States' FY 
1999 SCHIP allotments.

Redistribution for the Commonwealths and Territories

    Section 2104(g)(1)(ii) of the Act specifies the FY 1999 
redistribution for the Commonwealths and Territories that have fully 
expended their FY 1999 allotments. Under this provision, first the 
total Commonwealths and Territories redistribution amount is calculated 
by multiplying the total amount of the allotments available for 
redistribution and continued availability, including the MOE provision 
reduction amounts, by 1.05 percent; for the FY 1999 redistribution 
calculation, this amount is $29,595,585 (1.05 percent of 
$2,818,627,105). Second, only those Commonwealths and Territories that 
have fully expended their FY 1999 allotments will receive an amount 
equal to a specified percentage of the 1.05 percent amount. That 
percentage is determined by dividing the FY 1999 SCHIP allotment for 
each Commonwealth or Territory that has fully expended its FY 1999 
allotment, by the total of all the FY 1999 allotments for those 
Commonwealths and Territories that fully expended their FY 1999 
allotments.

Continued Availability of Unexpended FY 1999 Allotments

    Section 2104(g)(2)(B) of the Act specifies the formula for 
determining the amount of the unexpended FY 1999 allotments that will 
be retained by States. First the total amount of the unexpended FY 1999 
allotments (not including the MOE provision amounts) for all States is 
determined. Next, the total amount needed for redistribution, as 
described above, is determined. The total amount needed for 
redistribution is reduced by the MOE provision reduction amounts; the 
result (representing the amount of the redistribution that will be 
covered by the unexpended FY 1999 allotment amounts) is then subtracted 
from the total amount of unexpended FY 1999 allotments. This remainder 
represents the total FY 1999 retained allotment amounts. Next, a 
percentage is calculated by dividing the total FY 1999 retained 
allotment amounts by the total amount of the unexpended FY 1999 
allotments (not including the MOE reduction amounts). Finally, each 
State's specific retained amount is calculated by multiplying this 
percentage by the amount of the State's unexpended FY 1999 SCHIP 
allotment.

V. Table of SCHIP FY 1999 Redistribution and Continued Availability 
of Unexpended FY 1999 Allotments

    A description of the formula used to determine the amount of the 
unexpended FY 1999 SCHIP allotments for redistribution or continued 
availability is described below. Following the description in Table 1, 
which presents each State's FY 1999 SCHIP allotment redistribution or 
retained amount.
    A total of $4,247,000,000 was allotted nationally for FY 1999, 
representing $4,204,312,500 in allotments to the 50 States and the 
District of Columbia, and $42,687,500 in allotments to the 
Commonwealths and Territories. Based on the quarterly expenditure 
reports, which States submitted and certified by November 30, 2001, 13 
States fully expended their FY 1999 allotments, 38 States including the 
District of Columbia did not fully expend their FY 1999 allotments, and 
all of the Commonwealths and Territories fully expended their FY 1999 
allotments. For the States, including the District of Columbia, that 
did not fully expend their FY 1999 allotments, their total FY 1999 
allotments (not including the MOE provision reduction amounts) were 
$3,371,650,523, and the total expenditures applied against their FY 
1999 allotments were $555,239,971. Therefore, the total amount of 
unexpended FY 1999 allotments available for redistribution (not 
including the MOE amounts) is $2,816,410,552 ($3,371,650,523 minus 
$555,239,971). In addition, the FY 1999 MOE provision reduction amount 
of $2,216,553 is available for redistribution. Therefore the total 
amount of the FY 1999 allotments available for redistribution is 
$2,818,627,105 ($2,816,410,552, the total unexpended FY 1999 
allotments, plus $2,216,553, the MOE amount).
    In accordance with the redistribution calculation for FY 1999 
described above, $1,608,256,691 is needed for redistribution for 13 
States, and $29,595,585 is needed for redistribution to the 5 
Commonwealths and Territories. Therefore, a total of $1,637,852,276 is 
needed for redistribution. The States' total unexpended FY 1999 
allotments (not including the MOE provision amounts) totaled 
$2,816,410,552. The MOE provision amount of $2,216,553 is applied 
against the needed redistribution amounts. Therefore, $1,635,635,723 
($1,637,852,276, the total needed redistribution amount, minus 
$2,216,553, the MOE amount) is the remaining redistribution that will 
be covered by the unexpended FY 1999 allotment amounts. As a result, 
$1,180,774,829 ($2,816,410,552, the total unexpended FY 1999 allotments 
(not including the MOE amounts) minus $1,635,635,723, the remaining 
redistribution) is the total FY 1999 retained allotment amounts for the 
States, including the District of Columbia. Both the $1,637,852,276 
redistribution amount and the $1,180,774,829 retained amounts will 
remain available through the end of FY 2002.

Key to Table 1--CALCULATION OF THE SCHIP FY 1999 REDISTRIBUTION AND 
CONTINUED AVAILABILITY OF THE UNEXPENDED FY 1999 ALLOTMENTS

Column/Description
Column A = STATE. Name of State, District of Columbia, the Commonwealth 
or Territory.

Column B = FY 1999 ALLOTMENT. This column contains the FY 1999 SCHIP 
allotments for all States, which were published on May 24, 2000 in the 
Federal Register (65 FR 33634).
Column C = EXPENDITURES APPLIED AGAINST FY 1999 ALLOTMENT. This column 
contains the cumulative expenditures applied against the FY 1999 
allotments, as reported and certified by all States through November 
30, 2001.
Column D = UNEXPENDED FY 1999 ALLOTMENTS OR ``REDISTRIBUTION.'' This 
column contains the amounts of unexpended FY 1999 SCHIP allotments for 
States that did not fully expend the allotments during the 3-year 
period of availability for FY 1999 (FYs 1999 through 2001), and is 
equal to the difference between the amounts in Column B and Column C. 
For States that did fully expend their FY 1999 allotments during the 
period of availability, the entry in this column is ``REDISTRIBUTION.'' 
The amounts in each of the State lines in this column do not include 
the MOE provision amount of $2,216,553; the MOE amount is added to the 
total of the amounts of

[[Page 20798]]

the States' unexpended FY 1999 allotments in this column at the bottom 
of Column D. The total amount of $2,818,627,105 ($2,816,410,552, the 
total unexpended FY 1999 allotments, plus $2,216,553, the MOE provision 
amounts) represents the total amount available for redistribution and 
continued availability for FY 1999.
Column E = FOR REDISTRIBUTION STATES ONLY FY 1999-2001 EXPENDITURES. 
For those States that have fully expended their FY 1999 allotments, 
this column contains the amounts of the States' reported SCHIP related 
expenditures for each of the years FY 1999 through FY 2001, 
representing the FY 1999 3-year period of availability. For those 
States, Commonwealths and Territories that did not fully expend their 
FY 1999 allotments during the period of availability, the entry in 
Column E is ``NA.''
Column F = FY 1999 REDISTRIBUTED AMOUNTS. This column contains the 
amounts of States' unexpended FY 1999 SCHIP allotments that are being 
redistributed to those States that have fully expended their FY 1999 
allotments. For the States that have fully expended their FY 1999 SCHIP 
allotments, the amount in Column F is the difference between Column E, 
the States' FY 1999-FY 2001 expenditures, and Column B, the States' FY 
1999 allotments. For the 13 States that have fully expended their FY 
1999 allotments, the FY 1999 redistribution amounts total 
$1,608,256,691. For the Commonwealths and Territories that have fully 
expended their FY 1999 allotments, the amounts in Column F represents 
their respective proportionate shares of $29,595,585 based on their FY 
1999 allotments (1.05 percent of the total amount for redistribution 
and continued availability of $2,818,627,105). For those States, 
Commonwealths and Territories that did not fully expend their FY 1999 
allotments during the period of availability, the entry in Column F is 
``NA.''
Column G = FY 1999 RETAINED ALLOTMENT AMOUNTS. For the States that did 
not fully expend their FY 1999 allotments, this column contains the 
amounts of the States' FY 1999 unexpended allotments after the 
application of the proportionate reduction to account for the total 
redistribution amounts needed for the States that did fully expend 
their FY 1999 allotments. As indicated at the top of Column G, the 
proportionate reduction is approximately 41.92 percent. This percentage 
is multiplied by the unexpended amounts of the States' FY 1999 
allotments in Column D; the result is the amount of the States' 
unexpended FY 1999 allotments that the States will retain. As indicated 
at the bottom of Column G, the total FY 1999 retained allotment amount 
is $1,180,774,829.
Column H = UNEXPENDED FY 1999 ALLOTMENT AMOUNTS USED IN REDISTRIBUTION. 
For the States that did not fully expend their FY 1999 allotments, this 
column contains the amounts of the States' FY 1999 unexpended 
allotments (not including the MOE provision amount) that were used in 
the redistribution in Column F; these amounts are no longer available 
to these States. The amount in Column H is equal to the difference 
between Columns D, the Unexpended FY 1999 Allotments, and G, the FY 
1999 Retained Allotment Amounts. For States that did fully expend their 
FY 1999 allotments, the entry in Column H is ``NA.''
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VI. Impact Statement

A. Overall Impact

    We 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 annually). We have determined that this rule is 
not a major rule for the reasons discussed below.
    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 to $25 million 
or less annually. For purposes of the RFA, all hospices are considered 
to be small entities. Individuals and States are not included in the 
definition of a small entity. The notice of redistribution and 
continued availability of SCHIP funds is the result of a statutory 
formula that does not involve any agency discretion or policy. While 
this notice also sets forth CMS policy under which the States decide on 
the ordering of these funds and other available SCHIP funds in the 
application of States' SCHIP expenditures against such funds, we do not 
believe this policy will have a significant economic impact. We note 
that the same option was available to States for the FY 1998 
redistribution and therefore this policy represents no change from 
that. We do not expect that the availability of this option will affect 
the operation of States' SCHIP programs or the amount or type of 
expenditures in such programs. Therefore, we do not believe further 
regulatory analysis is necessary.
    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 100 beds. We do not believe further 
regulatory analysis is necessary because this notice will not have a 
significant economic impact on small rural hospitals or a substantial 
number of small entities.
    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 expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This rule does not require any change in State 
expenditures; rather it notifies States of additional Federal funding 
that is available to pay for a share of State expenditures. This notice 
will not impose an unfunded mandate on States, tribal, or local 
governments. Therefore, we are not required to perform an assessment of 
the costs and benefits of these regulations.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this notice and determined that it does 
not significantly affect States' rights, roles, and responsibilities.
    This notice informs the States of additional amounts of Federal 
funds that are available for part of State expenditures in accordance 
with the statute. This notice does not affect State rights or change 
the States' costs. It will have an overall positive impact by informing 
States, the District of Columbia, and Commonwealths and Territories of 
the extent to which they are permitted to expend funds under their 
child health plans using the FY 1999 allotment redistribution and 
retained amounts.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

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

(Catalog of Federal Domestic Assistance Program No. 00.000, State 
Children's Health Insurance Program)

    Dated: February 10, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 9, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-10260 Filed 4-25-02; 8:45 am]
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