[Federal Register Volume 69, Number 185 (Friday, September 24, 2004)]
[Rules and Regulations]
[Pages 57224-57225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21207]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 406

[CMS-4018-F]
RIN 0938-AK94


Medicare Program; Continuation of Medicare Entitlement When 
Disability Benefit Entitlement Ends Because of Substantial Gainful 
Activity

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

ACTION: Final rule.

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SUMMARY: This final rule will conform the existing Medicare eligibility 
regulations to reflect a change made by the Ticket to Work and Work 
Incentives Improvement Act (TWWIIA) of 1999. That statutory change that 
was implemented effective October 1, 2000, provides working disabled 
individuals with continued Medicare entitlement for an additional 54 
months beyond the previous limit of 24 months, for a total of 78 months 
of Medicare coverage following the 15th month of the reentitlement 
period.

EFFECTIVE DATE: These regulations are effective on November 23, 2004.

FOR FURTHER INFORMATION CONTACT: Denise Cox, (410) 786-3195.

I. Background

    Before October 1, 2000, section 226(b) of the Social Security Act 
(the Act) provided that disabled beneficiaries who continued to engage 
in substantial gainful activity after completing a trial work period 
would receive Medicare coverage for 24 months following the 15th month 
of the reentitlement period.
    Effective October 1, 2000, section 202 of the Ticket to Work and 
Work Incentives Improvement Act (TWWIIA) of 1999 (Pub. L. 106-170) 
amended section 226(b) of the Act to extend the period of Medicare 
coverage to 78 months after the 15th month of the reentitlement period. 
Because section 202 was implemented effective October 1, 2000, Medicare 
coverage has already been extended to 78 months for all disabled 
individuals who continue to engage in substantial gainful activity 
after completing a trial work period. This regulation is intended to 
codify these statutory provisions.

II. Provisions of the Proposed Regulations

    On July 25, 2003, we published a proposed rule in the Federal 
Register (68 FR 43998) to revise Sec.  406.12(e)(2)(i) to be consistent 
with the amended section 226(b) of the Act, which was implemented 
effective October 1, 2000. We proposed to change the 24 months of 
extended Medicare coverage to 78 months of Medicare coverage following 
the 15th month of the reentitlement period.

III. Analysis of and Responses to Public Comments and Provisions of the 
Final Rule

    In response to the July 25, 2003 proposed rule, we received no 
public comments. We are incorporating the provisions of the proposed 
rule as final.

IV. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements.

V. Regulatory Impact

A. Overall Impact

    We have examined the impact of this final 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), section 1102(b) of the Social Security Act, the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. 
This final rule will essentially conform our regulations to the plain 
language of the statute.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) 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 as 
required by 5 U.S.C. 804). We estimate a cost of $112 million to the 
Medicare trust fund in calendar year 2005. This cost estimate includes 
Medicare payments for disabled beneficiaries who are currently working 
and entitled to Medicare coverage, as well as payments for individuals 
who will become entitled to disability benefits in the future and 
subsequently return to work with extended Medicare coverage. As noted 
above, the plain language of the statute gives us no discretion in 
interpreting this provision, and these costs flow directly from the 
statute, with or without implementing this final rule. Since this is a 
major rule, we are providing the following analysis under the 
Anticipated Effects in section V.B.
    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 $6 to $29 
million in any 1 year. For purposes of the RFA, beneficiaries are not 
considered to be small entities. Individuals and States are not 
included in the definition of a small entity. This final rule codifies 
provisions of the TWWIIA that were implemented on October 1, 2000. 
Eligible working disabled individuals are already receiving this 
extended benefit. Based on the legislation, they can continue to 
receive Medicare benefits for an additional 4\1/2\ years. Thus, the 
only impact on those small entities or rural hospitals currently 
serving these individuals is that they will continue to receive payment 
from Medicare for services furnished to individuals. This final rule 
will not impose any additional administrative or regulatory burdens on 
small entities. Therefore, we have determined and we certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities.
    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 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. As described above, this 
final rule extends Medicare coverage to eligible disabled working 
individuals who are already receiving coverage. Thus, those rural 
hospitals that currently serve these individuals will continue to 
receive payment from Medicare for these services. This final rule will 
not impose any additional administrative or regulatory burden on small 
rural hospitals. Therefore, we have determined and we certify that this 
final rule will not significantly affect the operations of a 
substantial number of small rural hospitals.
    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

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any 1 year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $110 million. State, local, or tribal 
governments will not be affected since this final rule simply extends 
the Medicare entitlement for working disabled beneficiaries for an 
additional 54 months beyond the previous limit of 24 months.
    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 final rule, which was implemented effective October 
1, 2000, will not have a substantial effect on State or local 
governments because the extension of Medicare entitlement is for 
individuals already receiving the coverage.

B. Anticipated Effects

1. Effects on Beneficiaries
    Before October 1, 2000, disabled beneficiaries who returned to work 
received 24 additional months of Medicare coverage following the 15th 
month of their reentitlement period. Effective October 1, 2000, these 
beneficiaries received 78 months of Medicare coverage following the 
15th month of the reentitlement period.
    The extension of Medicare coverage allows these beneficiaries to 
return to work without fear of being unable to qualify for health 
insurance because of pre-existing medical conditions and being faced 
with the prospect of either no health insurance or health insurance at 
a high premium, or significant medical expenses. In addition, the law 
ensures that individuals already entitled to Medicare can continue to 
receive health care services from the same providers without incurring 
a break in coverage. This extended coverage also gives individuals with 
disabilities the ability to continue working and therefore lead 
productive lives. Together with the other provisions of the TWWIIA (for 
example, rehabilitation and job training), the extension of Medicare 
coverage will improve the overall quality of life for these 
beneficiaries.
    Without this extension of coverage, the beneficiaries would have 
been forced to find other health insurance coverage (presumably at a 
higher cost, or with his or her disability excluded from coverage) or 
forego coverage entirely, and thus incur significant medical expenses. 
Either result would likely have lowered the beneficiary's overall 
quality of life and discourage him or her from returning to work. 
Instead, the Congress chose to extend Medicare coverage and has 
requested that the General Account Office study the overall impact of 
this extension so that it may decide in the future whether to extend 
the coverage indefinitely for this population.
2. Effects on the Medicare Programs
    Anticipated expenditures to the Medicare program have been 
projected over a 5-year period and are shown in the following chart:

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                   Year                         2004          2005          2006          2007          2008
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Cost* ($ in millions).....................            98           112           127           141           156
Disabled individuals affected**...........        35,000        39,000        42,000        45,000        48,000
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*Rounded to nearest million.
**Rounded to nearest thousand.

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Sections in 42 CFR Part 406

    Health facilities, Medicare.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 406--HOSPITAL INSURANCE ELIGIBILITY AND ENTITLEMENT

Subpart B--Hospital Insurance Without Monthly Premiums

    1. The authority citation for part 406 continues to read as 
follows:

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


    2. In Sec.  406.12, revise the introductory text to paragraph 
(e)(2) and revise paragraph (e)(2)(i) to read as follows:


Sec.  406.12  Individual under age 65 who is entitled to social 
security or railroad retirement disability benefits.

* * * * *
    (e) * * *
    (2) Duration of continued Medicare entitlement. If an individual's 
entitlement to disability benefits or status as a qualified disabled 
railroad retirement beneficiary ends because he or she engaged in, or 
demonstrated the ability to engage in, substantial gainful activity 
after the 36 months following the end of the trial work period, 
Medicare entitlement continues until the earlier of the following:
    (i) The last day of the 78th month following the first month of 
substantial gainful activity occurring after the 15th month of the 
individual's reentitlement period or, if later, the end of the month 
following the month the individual's disability benefit entitlement 
ends.
* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
    Dated: January 12, 2004.
Dennis G. Smith,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: February 18, 2004.
Tommy G. Thompson,
Secretary.

    Note: This document was received at the Office of the Federal 
Register on Thursday, September 16, 2004.

[FR Doc. 04-21207 Filed 9-23-04; 8:45 am]
BILLING CODE 4120-01-P