[Federal Register Volume 68, Number 143 (Friday, July 25, 2003)]
[Proposed Rules]
[Pages 43995-43998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18859]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405 and 411

[CMS-6014-P]
RIN 0938-AL14


Medicare Program; Interest Calculation

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would change the way we calculate interest, 
on Medicare overpayments and underpayments to providers, suppliers, 
health maintenance organizations, competitive medical plans, and health 
care prepayment plans to be more reflective of current business 
practices. This change would reduce the amount of interest assessed on 
overpayments and underpayments and simplify the way the interest is 
calculated.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on September 23, 2003.

ADDRESSES: In commenting, please refer to file code CMS-6014-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
two copies) to the following addresses ONLY: Centers for Medicare and 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-6014-P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and two copies) to one of the following 
addresses:

Hubert H. Humphrey Building, Room 445-G, 200 Independence Avenue, SW., 
Washington, DC 21201, or
Centers for Medicare & Medicaid Services, Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

(Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain proof of filing by stamping in 
and retaining an extra copy of the comments being filed.)

[[Page 43996]]

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Nancy Braymer, (410) 786-4323.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: Comments 
received timely will be available for public inspection as they are 
received, generally beginning approximately 3 weeks after the 
publication of a document, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m. To schedule and appointment to view public comments, telephone 
(410) 786-7197.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money payable to the 
Superintendent of Documents, or enclose your Visa or Master Card number 
and expiration date. Credit card orders can also be placed by calling 
the order desk at (202) 512-1800 (or toll-free at 1-888-293-6498) or by 
faxing to (202) 512-2250. The cost for each copy is $9. As an 
alternative, you can view and photocopy the Federal Register document 
at most libraries designated as Federal Depository Libraries and at 
many other public and academic libraries throughout the country that 
receive the Federal Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html.

I. Background

A. Interest Calculation

    Sections 1815(d) and 1833(j) of the Social Security Act (the Act) 
require that whenever a payment to a provider, supplier, or other 
entity is more than (overpayment) or less than (underpayment) the 
amount that was due to the provider, supplier, or other entity, we 
assess interest on the amount of the overpayment that the provider, 
supplier, or other entity owes to us or the underpayment that we owe to 
the provider, supplier, or other entity. This interest becomes due if 
the overpayment amount owed to us or the underpayment amount owed by us 
is not paid within 30 days of the date of the final determination of 
the overpayment or underpayment. We determine the rate of interest in 
accordance with 42 CFR 405.378 by comparing the Private Consumer Rate 
with the Current Value of Funds Rate and assessing the interest at the 
higher of the two rates that is in effect on the date of the final 
determination of the amount of the overpayment or underpayment.
    Interest is calculated from the date of the final determination and 
is owed if the amount of the overpayment or underpayment is not paid 
within 30 days. Interest is calculated in 30-day periods. A period that 
is less than 30 days is considered to be a full 30-day period.
    In this proposed rule, we are proposing to change the method of 
calculating the amount of interest that is assessed on overpayments and 
underpayments to better align our practices to a commercial business 
model. We now assess interest prospectively (30 days into the future). 
Under private sector practices, interest is assessed on delinquent 
debts retrospectively.
    We are proposing that periods of less than 30 days would not be 
treated as a full 30-day period. Interest would be assessed only for 
full 30-day periods when payment is not made on time.
    The change in the method of calculation would apply only to 
overpayments and underpayments whose date of final determination 
occurred after the effective date of the final regulation implementing 
this proposed rule.

B. Technical Correction

    We are making a technical correction to correct a reference that 
was cited in a previous revision of the Code of Federal Regulations 
(CFR). In Sec.  411.24, the rate of interest to be assessed on the 
recovery of Medicare conditional payments is incorrectly referenced as 
appearing in Sec.  405.376(d), rather than Sec.  405.378(d), which is 
the correct reference.

II. Provisions of the Proposed Regulations

    The provisions of this proposed rule are as follows:
    [sbull] In Sec.  405.378, we would revise paragraph (b)(2) to 
delete the requirement that periods of less than 30 days be treated as 
a full 30-day period.
    [sbull] In Sec.  411.24, we would revise paragraph (m)(2)(iii) to 
correct the reference to Sec.  405.376(d) by changing the reference to 
Sec.  405.378(d).

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget (OMB) under the authority of the 
Paperwork Reduction Act of 1995 (PRA).

IV. Response to Comments

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

V. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866, (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year).
    This proposed rule is not a major rule. It simply changes the way 
we calculate interest on overpayments and underpayments. It does not 
change how overpayments or underpayments are determined, nor does it 
require providers, suppliers, or other entities to change the way they 
interact with us in determining overpayments and underpayments.
    During fiscal year (FY) 2001, we recovered $167 million in interest 
on delinquent overpayments. Had this proposed rule been in effect, 
interest recoveries would have been $153 million, a difference of $14 
million due to the change in the interest calculation. During FY 2002, 
we recovered $115.7 million in interest on delinquent

[[Page 43997]]

overpayments. Had this proposed rule been in effect, interest 
recoveries would have been $106.1 million, a difference of $9.6 
million. During FY 2001, we paid $2.6 million in interest on 
underpayments. Had this proposed rule been in effect, interest payments 
would have been $2.4 million, a difference of $0.2 million. During FY 
2002, we paid $5.2 million in interest on underpayments. Had this 
proposed rule been in effect, interest payments would have been $4.8 
million, a difference of $0.4 million.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, nonprofit organizations, and government agencies. 
Most hospitals, and most other providers, suppliers, health maintenance 
organizations, competitive medical plans, and health care prepayment 
plans are small entities, either by nonprofit status or by having 
revenues of $29 million or less in any 1 year. During FY 2001, we 
recovered $167 million in interest on delinquent overpayments; during 
FY 2002, we recovered $115.7 million. Had this proposed rule been in 
effect, interest recoveries would have been $153 million during FY 2001 
and $106.1 million during FY 2002, a difference of $14 million and $9.6 
million, respectively. This would amount to 0.1 percent of the $13.5 
billion in overpayments recovered during FY 2001 and less than 0.1 
percent of the $13.4 billion recovered during FY 2002. During FY 2001, 
we paid $2.6 million in interest on underpayments; during FY 2002, we 
paid $5.2 million. Had this proposed rule been in effect, we would have 
paid $2.4 million during FY 2001 and $4.8 million during FY 2002, a 
difference of $0.2 million and $0.4 million, respectively. This would 
amount to less than 0.1 percent of the $236 billion and $246.8 billion 
in benefit payments made during FY 2001 and FY 2002. For further 
details, see the Small Business Administration's regulation that set 
forth size standards for health care industries at 65 FR 69432.
    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.
    This proposed rule has no operations impact on any provider, 
supplier, or other entity including small rural hospitals. The proposed 
rule simply changes the way we calculate interest we assess on 
overpayments and underpayments. It does not change how overpayments or 
underpayments are determined nor require providers, suppliers, or other 
entities to change how they interact with us in determining 
overpayments or underpayments. Therefore, we have determined that this 
proposed rule would not have a significant effect on the operations of 
a substantial number of rural hospitals. Because the interest we 
collect in a year far exceeds the interest we pay, the majority of 
providers, suppliers, and other entities would benefit from changing 
the method of calculating interest.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. During FY 2001 and FY 2002, we 
recovered $167 million and $115.7 million, respectively, in interest on 
delinquent overpayments. Had this proposed rule been in effect, 
interest recoveries would have been $153 million during FY 2001, a 
difference of $14 million. For FY 2002, interest recoveries would have 
been $106.1 million, a difference of $9.6 million. During FY 2001, we 
paid $2.6 million in interest on underpayments. Had this proposed rule 
been in effect, we would have paid $2.4 million, a difference of $0.2 
million. During FY 2002, we paid $5.2 million in interest on 
underpayments. Had this proposed rule been in effect, interest payments 
would have been $4.8 million, a difference of $0.4 million.
    This proposed rule would have no impact on State, local, or tribal 
governments. It would reduce annual expenditures by providers, 
suppliers, or other entities in the private sector because it changes 
the way that we compute interest on any delinquent overpayments owed to 
us. Additionally, the change in interest calculation that we pay on 
underpayments owed to providers, suppliers, and other entities would 
not be an expenditure by a State, local, or tribal government.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates 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. This proposed rule would impose no direct requirement 
costs on State and local governments, would not preempt State law, or 
have any Federalism implications. By changing how we calculate 
interest, we are reducing the amount of interest assessed on 
overpayments owed to us and underpayments owed by us to providers, 
suppliers, and other entities.

B. Effects on the Medicare and Medicaid Programs

    This proposed rule would reduce the amount of interest assessed on 
Medicare overpayments and underpayments. During FY 2001, we recovered 
$167 million in interest on delinquent overpayments. Had this proposed 
rule been in effect, interest recoveries would have been $153 million, 
a difference of $14 million. During FY 2001, we paid $2.6 million in 
interest on underpayments. Had this proposed rule been in effect, we 
would have paid $2.4 million, a difference of $0.2 million. During FY 
2002, we recovered $115.7 million in interest on delinquent 
overpayments. Had this proposed rule been in effect, interest 
recoveries would have been $106.1 million, a difference of $9.6 
million. During FY 2002, we paid $5.2 million in interest on 
underpayments. Had this proposed rule been in effect, we would have 
paid $4.8 million, a difference of $0.4 million. There is no effect on 
the Medicaid program.

C. Alternatives Considered

    We considered a number of other methods to use in calculating the 
amount of interest owed. We assessed the relative merits of alternative 
calculation methods based on two primary criteria: Comparability to a 
commercial business model and secondly, relative ease and cost of 
administration. Applying the first criterion precludes continuing our 
current calculation method. Under the proposed rule, we would be able 
to use commercially obtained off-the-shelf software to calculate 
interest. As in the private sector, the debtor would still have a set 
payment period (30 days) to pay the amount owed without additional 
interest being assessed during the payment period. We considered 
calculating and assessing interest on a daily basis but determined this 
would be prohibitively expensive and administratively burdensome for 
Medicare contractors, providers and beneficiaries.

D. Conclusion

    This proposed rule is not a major rule. It would not change the way 
overpayments or underpayments are

[[Page 43998]]

determined. It would not have a significant impact on a substantial 
number of rural hospitals. Since a partial period would no longer be 
considered a full 30-day period, interest assessed on amounts owed to 
us would be reduced. Therefore, this proposed rule would reduce State, 
local, and tribal government expenditures. The proposed rule does not 
impose any direct requirement costs on State and local governments and 
does not preempt State law or have any Federalism implications.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined, and we 
certify, that this rule would not have a significant economic impact on 
a substantial number of small entities or a significant impact on the 
operations of a substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
proposed regulation was reviewed by the Office of Management and 
Budget.

List of Subjects Affected

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 411

    Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    1. The authority citation for part 405, subpart C, continues to 
read as follows:

    Authority: Secs. 1102, 1815, 1833, 1842, 1866, 1870, 1871, 1879, 
and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1351, 
1395u, 1395cc, 1395gg, 1395hh, 1395pp, and 1395ccc) and 31 U.S.C. 
3711.

Subpart C--Suspension of Payment, Recovery of Overpayments, and 
Repayment of Scholarships and Loans

    2. In Sec.  405.378, paragraph (b)(2) is revised to read as 
follows:


Sec.  405.378  Interest charges on overpayments and underpayments to 
providers, suppliers, and other entities.

* * * * *
    (b) * * *
    (1) * * *
    (2) Interest will accrue from the date of the final determination 
as defined in paragraph (c) of this section, and will either be charged 
on the overpayment balance or paid on the underpayment balance for each 
full 30-day period that payment is delayed.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

    3. The authority citation for part 411 continues to read as 
follows:

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

Subpart B--Insurance Coverage That Limits Medicare Payment; General 
Provisions

    4. In Sec.  411.24, paragraph (m)(2)(iii) is revised to read as 
follows:


Sec.  411.24  Recovery of conditional payments.

* * * * *
    (m) * * *
    (2) * * *
    (iii) The rate of interest is that provided at Sec.  405.378(d) of 
this chapter.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: September 10, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 10, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-18859 Filed 7-24-03; 8:45 am]
BILLING CODE 4120-01-P