[Federal Register Volume 70, Number 12 (Wednesday, January 19, 2005)]
[Notices]
[Pages 3036-3044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1139]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2230-NC]


State Children's Health Insurance Program (SCHIP); Redistribution 
of Unexpended SCHIP Funds From the Appropriation for Fiscal Year 2002

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

ACTION: Notice with comment period.

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SUMMARY: This notice with comment period describes the procedure for 
redistribution of States' unexpended Federal fiscal year (FY) 2002 
SCHIP allotments remaining at the end of FY 2004 to those States that 
fully expended such allotments. These redistributed allotments will be 
available through the end of FY 2005 (September 30, 2005).

DATES: Comment Date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on February 18, 2005.
    Effective Date: January 19, 2005.

ADDRESSES: In commenting, please refer to file code CMS-2230-NC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments (attachments should be in 
Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft 
Word).
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-2230-NC, P.O. Box 8010, Baltimore, MD 
21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members.
    Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, 
SW., Washington, DC 20201; or 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 a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this notice with comment period to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-2230-NC and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. CMS posts all electronic 
comments received before the close of the comment period on its public 
Web site as soon as possible after they have been received. Hard copy 
comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
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 an appointment to view public comments, phone 1-800-
743-3951.
    This Federal Register document is 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.gpoaccess.gov/fr/index.html.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``Background'' at the beginning of your comments.]

A. Extension of Availability and Redistribution of SCHIP Fiscal Year 
1998 Through 2001 Allotments

    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 terms 
``State'' and ``States'' refer to any or all 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(e) of the Act, the SCHIP allotments for a 
Federal fiscal year are available to match expenditures under an 
approved State child health plan for an initial 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 are reallotted and continue to be available during a 
subsequent period of availability, specified in SCHIP statute. With the 
exception described below for the allotments made in FYs 1998 through 
2001, allotments that are unexpended at the end of the initial 3-year 
period of availability would be redistributed from the States that did 
not fully spend such 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 
requirements for a subsequent extended period of availability with 
respect to the amounts of States' FY 1998 and FY 1999 allotments that 
were unspent during the initial 3-year period of availability. Under 
the BIPA amendments, the subsequent period of availability (after the 
initial 3-year period of availability) for States' unspent FY 1998 and 
1999 allotments was extended to the end of FY 2002.
    Section 1 of the Extension of Availability of SCHIP Allotments Act, 
Pub. L. 108-74, enacted on August 15, 2003, amended title XXI of the 
Act to establish further requirements for the subsequent period of 
availability associated with the unexpended amounts of States' FYs 
1998, 1999, 2000, and 2001 allotments during the initial 3-year period 
of availability, or

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subsequent period of availability, relating to those fiscal years. 
Specifically, Pub. L. 108-74 amended section 2104(g) of the Act to 
extend the subsequent period of availability associated with the 
allotments and redistribution of allotments for FYs 1998 through 2000 
through the end of fiscal year 2004. Pub. L. 108-74 also extended the 
subsequent period of availability for the redistributed and extended FY 
2001 allotments through the end of fiscal year 2005.
    As amended by Pub. L. 108-74, section 2104(g) of the Act prescribes 
a methodology and process that includes the retention of certain 
amounts of unspent FY 2000 and FY 2001 allotments that would remain 
available to the States that did not fully expend their FY 2000 or FY 
2001 allotments (retained allotments), and the redistribution of 
unspent FY 2000 or FY 2001 allotments that would not be retained but 
which would be redistributed to those other States that fully spent 
their FY 2000 or FY 2001 allotments (redistributed allotments).

B. Availability and Redistribution of SCHIP Fiscal Year 2002 Allotments

    As discussed previously, section 2104(e) of the Act states that 
amounts allotted to a State shall remain available for expenditures by 
the State through the end of the second succeeding fiscal year, except 
that amounts reallotted to a State are available for expenditure by the 
State through the end of the fiscal year in which they are reallotted. 
Section 2104(f) of the Act requires the Secretary to ``determine an 
appropriate procedure for redistribution of allotments'' from States 
that have not expended the allotment for the fiscal year to States that 
have fully expended their allotments. As discussed previously, section 
2104(g) of the Act, as added by BIPA and amended by Pub. L. 108-74, 
sets forth the process for reallotting unexpended amounts of SCHIP 
allotments for FY 1998 through FY 2001 (as well as for the extension of 
the period of time to expend allotments). Section 2104(g) of the Act 
did not address the treatment of States' unexpended SCHIP allotments 
for FY 2002 and the following fiscal years. Under sections 2104(e) and 
(f) of the Act, we are required to establish a procedure that provides 
for the treatment of States' unused SCHIP allotments for FY 2002 and 
following fiscal years. In particular, applying section 2104(f) of the 
Act, following the initial 3-year period of availability referenced in 
section 2104(e) of the Act, the Secretary must determine an 
``appropriate procedure for redistribution'' of the amounts of States' 
FY 2002 SCHIP allotments from States that did not expend such 
allotments during the 3-year period of availability for such fiscal 
year (that is, FY 2002 through FY 2004) to States that fully expended 
their FY 2002 allotments during such 3-year period of availability.

C. Expenditures, Authority for Qualifying States To Use Available SCHIP 
Allotments for Medicaid Expenditures, and Ordering of Elections

    Under section 2105(a)(1)(A) through (D) and (a)(2) of the Act and 
before enactment of Pub. L. 108-74, only Federal payments for the 
following Medicaid and SCHIP expenditures were applied against States' 
available SCHIP allotments in the following order: (1) Medical 
assistance provided under title XIX (Medicaid) at the SCHIP enhanced 
Federal medical assistance percentage (FMAP) matching rate with respect 
to the States' Medicaid SCHIP expansion population; (2) medical 
assistance provided on behalf of a child during presumptive eligibility 
under section 1920A of the Act (these funds are matched at the regular 
Medicaid FMAP rate); (3) child health assistance to targeted low income 
children that meets minimum benefit requirements under SCHIP; and (4) 
certain expenditures in the SCHIP that are subject to the 10-Percent 
Limit on non-primary expenditures (including other child health 
assistance for targeted low-income children, health services 
initiatives, outreach, and administrative costs).
    However, section 1(b) of Pub. L. 108-74, as amended by Pub. L. 108-
127, added new section 2105(g) to the Act under which certain 
``Qualifying States'' that met prescribed criteria may elect to use up 
to 20 percent of any of the States' available SCHIP allotments for FY 
1998, 1999, 2000, or 2001 as additional Federal financial participation 
for expenditures under their Medicaid program, instead of expenditures 
under the State's SCHIP. As described in the Federal Register published 
on July 23, 2004 (69 FR 44013), if a Qualified State submits both 20 
percent allowance expenditures and other ``regular'' SCHIP expenditures 
at the same time in a quarter, the 20 percent allowance expenditures 
will be applied first against the available fiscal year reallotments. 
However, the 20 percent allowance expenditures may be applied only 
against the specified available fiscal year allotment funds upon which 
the 20 percent allowances were based.

II. Provisions of This Notice

    [If you choose to comment on issues in this section, please include 
the caption ``Provisions of This Notice'' at the beginning of your 
comments.]
    The purpose of this notice with comment period is to set forth our 
procedure for redistributing FY 2002 unexpended allotments. This notice 
applies solely to the redistribution of FY 2002 unexpended allotments. 
We anticipate publishing regular notices on redistribution procedures 
for FY 2003 and subsequent years, unless Congress otherwise amends the 
Act to set forth procedures for redistributing unexpended allotments.

A. Status of Extended Availability and Redistribution of SCHIP Fiscal 
Year 1998 Through 2001 Allotments and Qualifying State Provisions

    The implementation by CMS of the provisions of Pub. L. 108-74, 
including the provisions for extension of unexpended FY 1998 and FY 
1999 redistributed and/or retained allotments, the methodologies for 
retention and/or redistribution of SCHIP allotments for FY 2000 and FY 
2001, and the qualifying States provisions, was described in the 
Federal Register published on July 23, 2004 (69 FR 44013). The SCHIP 
statute has not been amended to address further availability of the 
SCHIP allotments for FY 1998 through FY 2000. Therefore, the unexpended 
amounts of such allotments became unavailable to States following the 
end of FY 2004. Neither has the SCHIP statute been amended with respect 
to the extended availability and redistribution of the FY 2001 
allotments. Under the existing SCHIP statute, the FY 2001 reallotments 
are available to States only until the end of FY 2005. Finally, the 
SCHIP statute has not been amended with respect to the Qualifying State 
provisions under section 2105(g) of the Act. The FY 1998 through 2000 
allotment funds became unavailable to States at the end of FY 2004. 
Since the 20 percent allowances related to those years are contingent 
on the actual availability of the allotments for those years, the FY 
1998 through FY 2000 20 percent allowances are not available to the 
Qualified States, effective with FY 2005. Therefore, only the amounts 
of the 20 percent allowances related to the FY 2001 allotment funds, 
which are available in FY 2005, will remain available through the end 
of FY 2005.

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B. Redistribution of the FY 2002 SCHIP Allotments

1. Current Law
    Under section 2104(e) of the Act, the amount of a State's allotment 
for a fiscal year is available to the State for matching allowable 
State expenditures for an initial 3-year period of availability: the 
fiscal year for which the funds are allotted, and the two following 
fiscal years. For the FY 2002 SCHIP allotments, the initial 3-year 
period of availability is FY 2002 through FY 2004 (October 1, 2002 
through September 30, 2004). With respect to the FY 2002 SCHIP 
allotments, the initial 3-year period of availability (FY 2002 through 
FY 2004) ended with the end of FY 2004 on September 30, 2004; at that 
time, the unexpended FY 2002 allotments became unavailable to those 
States that did not fully expend such allotments. That is, for such 
States there is no provision under the current SCHIP statute for the 
retention of any portion of the unexpended amounts of the SCHIP FY 2002 
allotments (or the allotments for the following fiscal years).
    Under section 2104(f) of the Act, the Secretary must determine an 
appropriate procedure to redistribute the entire amount of States' 
unexpended SCHIP allotments following the end of the related initial 3-
year period of availability only to those States that fully expended 
such allotments by the end of the initial 3-year period of availability 
(referred to in this notice as the redistribution States). In 
determining the appropriate procedure for reallocating the unused FY 
2002 allotments, our primary consideration was to address, to the 
greatest extent possible, any projected State shortfalls for each of 
the redistribution States that would occur in FY 2005, the fiscal year 
in which the FY 2002 redistribution would occur. We determined the 
shortfalls by considering for each redistribution State: (1) The 
projected SCHIP-related expenditures in FY 2005, as reflected in the 
State's November 15, 2004 quarterly budget submission (Forms CMS-37 
and/or CMS-21B), and (2) the total SCHIP allotments available in FY 
2005 for the State, exclusive of any FY 2002 redistribution. For a 
redistribution State whose FY 2005 projected SCHIP-related expenditures 
are greater than its total SCHIP allotments available in FY 2005, the 
difference between the amounts under (1) and (2) for a State represents 
that State's ``shortfall,'' for FY 2005.
    In the FY 2002 redistribution described in this notice, only after 
accounting for the shortfall amounts of the redistribution States will 
we further redistribute any remaining unexpended FY 2002 allotments to 
the redistribution States. For purposes of consistency with previous 
fiscal year redistribution methodologies, we based the redistribution 
of the remaining unexpended FY 2002 allotments (after accounting for 
the total shortfalls for each redistribution State) on the same 
redistribution methodology as set forth in the BIPA legislation 
regarding section 2104(g)(1) of the Act. Specifically, we allocated the 
remaining amounts of the unexpended FY 2002 allotments based on the 
difference between each of the redistribution States' total SCHIP-
related expenditures for the 3-year period of availability related to 
FY 2002 (that is, FY 2002 through FY 2004) and the State's FY 2002 
allotment. The allocation basis is the percentage determined by 
dividing this difference for each redistribution State (including those 
redistribution States with a shortfall) by the total of such 
differences for all redistribution States.
2. Ordering of Expenditures
    In applying State's expenditures against their available SCHIP 
allotments, we follow the order of expenditures as provided under 
section 2105(a)(1)(A) through (D) and (a)(2) of the Act as follows:
    (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) Expenditures listed in section 2105(a)(1)(D)(i) through (iv) of 
the Act, respectively: Other child health assistance for targeted low-
income children; health services initiatives under the plan for 
improving the health of children (including targeted low-income 
children and other low-income children); expenditures for outreach 
activities; and administration expenditures.
    As discussed previously, Pub. L. 108-74, as amended by Pub. L. 108-
127, also added new section 2105(g) to the Act, under which a 
``Qualifying State'' meeting specified criteria could, at its option, 
elect to use up to 20 percent of any of the State's available SCHIP 
allotments for FY 1998, 1999, 2000, or 2001 for payments under the 
State's Medicaid program, instead of expenditures under the State's 
SCHIP. As described in the Federal Register published on July 23, 2004 
(69 FR 44013), if a Qualified State submits both 20 percent allowance 
expenditures and other ``regular'' SCHIP expenditures at the same time 
in a quarter (based on the allotment priority order they both must 
apply against any available fiscal year allotments), the 20 percent 
allowance expenditures will be applied first against any remaining 20 
percent allowance allotments amounts.
    In general, in accordance with the ordering of allotments and 
expenditures provisions, the expenditures of States eligible for the FY 
2002 redistribution will be applied against the FY 2002 redistribution 
amounts.
3. Ordering Election for FY 2002 Redistributed Amounts
    We believe that the States eligible for the FY 2002 redistribution 
should be afforded the flexibility to decide whether the FY 2002 
redistributed funds would be used before or after other available 
allotment funds to allow them to optimize the use of such funds. 
Therefore, we offered States that will receive FY 2002 redistributed 
amounts the option of choosing the order of when the funds would be 
expended during FY 2005 among the other available allotments during FY 
2005. In the previous redistributions for the unexpended FY 1998, FY 
1999, and FY 2000 allotments, the redistribution States had the same 
ordering of allotment choice for the redistributed allotment.
    An FY 2002 redistribution State (a State that has fully expended 
its FY 2002 allotment) may have a maximum of five possible choices for 
the order of the application of FY 2002 redistribution funds in FY 
2005, depending on what other fiscal year allotments are available to 
the State in FY 2005: (1) before FY 2001 retained allotments; (2) after 
FY 2001 retained allotments and before FY 2003 allotments; (3) after FY 
2003 and before FY 2004 allotments; (4) after FY 2004 allotments and 
before FY 2005 allotments; and (5) after FY 2005 allotments.
    Note, with respect to the unexpended FY 2001 allotments at the end 
of FY 2003, the FY 2001 ``redistribution States'' also had the option 
of selecting the ordering of the FY 2001 redistributed allotments which 
were provided to such States in FY 2004. Now, with respect to the FY 
2002 redistributed allotments, the FY 2002 redistribution States that 
also had FY

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2001 redistributed amounts have the option of ordering the FY 2002 
redistributed allotments in reference to their FY 2001 redistributed 
allotments ordering selections.
    As specified in section 2104(e) of the Act, the FY 2002 
redistributed amounts for a fiscal year will be available for allowable 
SCHIP expenditures reported by the redistribution States through the 
end of the fiscal year in which such amounts are redistributed. 
Therefore, for FY 2002, the redistributed amounts will be available 
through September 30, 2005 (the end of FY 2005).
    As part of the redistribution process, prior to making FY 2002 
redistribution funds actually available, we contact all of the States 
eligible for the FY 2002 redistribution in order to explain the 
provisions of this notice and to obtain their ordering elections for 
the FY 2002 redistributed amounts. In this regard, all of the 
redistribution States must provide their decision to us regarding their 
elections for the ordering of the FY 2002 redistributed allotments. 
This is the same process we have used in prior years for obtaining 
prior fiscal year redistribution States' ordering elections. Consistent 
with the past fiscal year redistribution processes, under the FY 2002 
redistribution methodology, once a State chooses the order of the FY 
2002 redistribution amounts, it cannot change that order at a later 
date. We then include the States' FY 2002 redistributed amounts and 
their ordering elections on Form CMS-21C (Allocation of Title XIX and 
Title XXI Expenditures to the SCHIP Fiscal Year Allotment). Form CMS-
21C is used for tracking States' expenditures against their available 
SCHIP allotments. The FY 2002 redistributed 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, 2004 
through September 30, 2005 against the FY 2002 redistributed amounts 
available through September 30, 2005 and the other SCHIP allotments 
available in FY 2005.
4. Determination of FY 2002 Redistribution Amounts
    In Table 2 of this notice, we set forth the amount of States' 
unexpended FY 2002 allotments as reflected by the States' expenditure 
submissions through November 30, 2004. These amounts are used in 
determining the States' FY 2002 redistribution amounts. We established 
the amount of States' unexpended FY 2002 allotments at the end of the 
initial 3-year period of availability based on the SCHIP-related 
expenditures, as reported and certified by States to us on the 
quarterly expenditure reports (Form CMS-64 and/or Form CMS-21) by 
November 30, 2004. These expenditures are applied and tracked against 
the States' FY 2002 allotments (as published in the Federal Register on 
October 26, 2001 (66 FR 54246), and on November 13, 2001 (correction 
notice (66 FR 56902)), and other available allotments, on Form CMS-21C, 
Allocation of the Title XIX and Title XXI Expenditures to SCHIP Fiscal 
Year Allotment.
    By November 30, 2004, all States reported and certified their FY 
2004 fourth quarter expenditures (representing the last quarter of the 
3-year period of availability for FY 2002). Expenditures reflected in 
Table 2 below were taken from our Medicaid Budget and Expenditure 
System/State Children's Health Program Budget and Expenditure System 
(MBES/CBES) ``masterfile'', which represents the State's official 
certified SCHIP and Medicaid expenditure reporting system records 
related to FY 2002 allotments. Based on States' expenditure reports 
submitted and certified through November 30, 2004, the total amounts of 
States' FY 2002 SCHIP allotments that were unexpended at the end of the 
3-year period ending September 30, 2004, is $642,617,724.
5. Application of the Maintenance of Effort Provision
    The unexpended FY 2002 allotments reflect the application of the 
``maintenance of effort'' (MOE) provisions specified in the SCHIP 
statute at section 2105(d)(2) of the Act. Under section 2105(d)(2) of 
the Act, the amount of certain States' allotments in a fiscal year, 
beginning with fiscal year 1999, is reduced if the State does not meet 
specified spending levels on children's health insurance. There were no 
MOE reductions necessary with respect to the FY 2002 allotments.
6. Redistribution for the Commonwealths and Territories for FY 2002 
Allocations
    Section 2104(g)(1)(A)(ii) of the Act specifies the methodology for 
determining the FY 1998 through FY 2001 redistributed allotments for 
the Commonwealths and Territories that fully expended their SCHIP 
allotments related to those fiscal years. We applied the same 
methodology for purposes of determining an appropriate procedure under 
section 2104(f) of the Act, to redistribute the unexpended FY 2002 
allotments remaining at the end of FY 2004. Under this procedure, the 
total FY 2002 allotment amount available for redistribution to the 
Commonwealths and Territories is determined by multiplying the total 
amount of the unexpended FY 2002 allotments available for 
redistribution nationally by 1.05 percent. For the FY 2002 
redistribution calculation, this amount is $6,747,486 (1.05 percent of 
$642,617,724). Only those Commonwealths and Territories that have fully 
expended their FY 2002 allotments will receive an allocation of this 
amount, equal to a specified percentage of the 1.05 percent amount; 
with respect to the FY 2002 allotments, all 5 Commonwealths and 
Territories fully expended such allotments by the end of FY 2004. This 
specified percentage is the amount determined by dividing the 
respective SCHIP FY 2002 allotment for each Commonwealth or Territory 
(that has fully expended its FY 2002 allotment) by the total of all the 
FY 2002 allotments for those Commonwealths and Territories that fully 
expended their FY 2002 allotments.
7. Redistribution for the States and the District of Columbia for FY 
2002 Allocations
    Section 2104(f) of the Act requires the Secretary to determine an 
appropriate procedure for calculating the redistribution amounts for 
each of those States and the District of Columbia that have fully 
expended their allotments. This notice sets forth the procedure for the 
FY 2002 redistribution. The attached tables and table descriptions 
provide detailed information on how the reallotment amounts are 
calculated. Generally, the FY 2002 redistribution amounts for the 50 
States and the District of Columbia were determined as follows:
    First, the total amount available for redistribution nationally was 
established by determining the total amount of unexpended FY 2002 
allotments remaining at the end of FY 2004, as reported by the States 
through November 30, 2004.
    Second, the total amount available for redistribution to the States 
and the District of Columbia (not including the Commonwealths and 
Territories) was determined by subtracting the total of the FY 2002 
redistribution amounts for the Commonwealths and Territories from the 
total available nationally for redistribution.
    Third, the allocation of this total amount available for 
redistribution to the States and District of Columbia is determined by 
determining the ``shortfall'' amounts (if any) for these redistribution 
States that would occur in FY 2005, the fiscal year in which the

[[Page 3040]]

unexpended FY 2002 allotments are actually redistributed. The FY 2005 
shortfall amount, described previously, was determined as the excess 
(if any) of the FY 2002 redistribution States' projected FY 2005 
expenditures (taken from the States' November 2004 budget quarterly 
budget report submissions) over such States' total SCHIP allotments 
available in FY 2005 (not including any potential FY 2002 
redistribution amounts). In this regard, the total available allotments 
in FY 2005 include the following: any remaining FY 2001 reallotments 
carried over from FY 2004, any remaining 2003 allotments carried over 
from FY 2004, any remaining 2004 allotments carried over from FY 2004, 
and the FY 2005 allotments (available beginning with FY 2005).
    Fourth, the amount of any unexpended FY 2002 allotments remaining 
after determining and accounting for the shortfall amounts was 
multiplied by a percentage specific to each FY 2002 redistribution 
State. This percentage is determined for each FY 2002 redistribution 
State by dividing the difference between such State's total reported 
applicable expenditures for the FY 2002 3-year period of availability 
and the State's FY 2002 allotment related to that period of 
availability, by the total of these differences for all redistribution 
States.
8. Tables for Calculating the SCHIP FY 2002 Redistributed Allotments
    Following, is a description of Table 1 and Table 2, which presents 
the calculation of each redistribution State's FY 2002 SCHIP 
redistribution amount.
    A total of $3,115,200,000 was allotted nationally for FY 2002, 
representing $3,082,125,000 in allotments to the 50 States and the 
District of Columbia, and $33,075,000 in allotments to the 
Commonwealths and Territories. Based on the quarterly expenditure 
reports, submitted and certified by November 30, 2003, 28 States fully 
expended their FY 2002 allotments, 23 States and the District of 
Columbia did not fully expend their FY 2002 allotments, and all 5 of 
the Commonwealths and Territories fully expended their FY 2002 
allotments. For the States and the District of Columbia that did not 
fully expend their FY 2002 allotments, their total FY 2002 allotments 
were $1,413,648,379 and the total expenditures applied against their FY 
2002 allotments were $771,030,655. Therefore, the total amount of 
unexpended FY 2002 allotments at the end of FY 2004 equaled 
$642,617,724 ($1,413,648,379 minus $771,030,655). In addition, as 
discussed above, no MOE reductions were necessary with respect to the 
FY 2002 allotments. Therefore, the total amount of the FY 2002 
allotments unexpended at the end of FY 2004 equaled $642,617,724 
($642,617,724 plus $0 related to the MOE provision).
    In accordance with the redistribution calculation for FY 2002 
described above, $6,747,486 is redistributed to the five Commonwealths 
and Territories, and $635,870,238 redistributed to the 28 
redistribution States. The total $642,617,724 in FY 2002 redistributed 
allotment amounts will remain available to these States through the end 
of FY 2005.

Key to Table 1--FY 2005 Shortfall Calculation

    Table 1 Presents the FY 2005 shortfall calculation for the 50 
States and the District of Columbia.
Column/Description
    Column A = State. Name of State, District of Columbia, the 
Commonwealth or Territory. This is the only column in Table 1 that 
includes Commonwealths and Territories; the shortfall calculation in 
Table 1 is not applicable to the jurisdictions.
    Column B = FY 2001 Retained/Redistributed Allotments Carried Over 
From FY 2004. This column contains the amounts of States' FY 2001 
redistributed or retained allotments carried over from FY 2004 and 
available in FY 2005.
    Column C = FY 2003 Allotments Carried Over From FY 2004. This 
column contains the amounts of States' FY 2003 allotments carried over 
from FY 2004 and available in FY 2005.
    Column D = FY 2004 Allotments Carried Over From FY 2004. This 
column contains the amounts of States' FY 2004 allotments carried over 
from FY 2004 and available in FY 2005.
    Column E = FY 2005 Allotments Initially Available Beginning FY 
2005. This column contains the FY 2005 SCHIP allotments, which are 
initially available in FY 2005, and were published in the Federal 
Register on August 27, 2004 (69 FR 52700).
    Column F = Total Available Allotments In FY 2005 Not Including FY 
2002 Redistribution. This column contains the States' total allotment 
amounts (not including any FY 2002 redistribution amounts) available in 
FY 2005. This amount is the sum of Columns B through E.
    Column G = Projected Expenditures FY 2005. This column contains the 
amounts of States' projected FY 2005 SCHIP and SCHIP-related 
expenditures as contained in the States' November 15, 2004 quarterly 
budget submission.
    Column H = Projected FY 2005 Shortfall Not Including FY 2002 
Redistribution. This column contains the States' projected FY 2005 
shortfall amounts, calculated as Column G minus Column F.

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Key to Table 2--Calculation of the SCHIP Redistribution of the 
Unexpended Allotments for Fiscal Year: 2002

    Table 2 Contains the calculation of States' FY 2002 redistribution.
Column/Description
    Column A = State. Name of State, District of Columbia, the 
Commonwealth or Territory.
    Column B = FY 2002 Allotment. This column contains the FY 2002 
SCHIP allotments for all States, which were published in the Federal 
Register on October 26, 2001 (66 FR 54246) and in the correction notice 
on November 13, 2001 (66 FR 56902).
    Column C = Expenditures Applied Against FY 2002 Allotment. This 
column contains the cumulative expenditures applied against the FY 2002 
allotments, as reported and certified by all States through November 
30, 2004.
    Column D = Unexpended FY 2002 Allotments Or ``Redistribution.'' 
This column contains the amounts of unexpended FY 2002 SCHIP allotments 
for States that did not fully expend the allotments during the 3-year 
period of availability for FY 2002 (FYs 2002 through 2004), and is 
equal to the difference between the amounts in Column B and Column C. 
For States that did fully expend their FY 2002 allotments during the 
period of availability, the entry in this column is ``REDISTRIBUTION.'' 
The MOE amount is added to the total of the amounts of the States' 
unexpended FY 2002 allotments in this column at the bottom of Column D. 
However, since the MOE is $0, $642,617,724 represents the total amount 
available for the FY 2002 redistribution ($642,617,724, the total 
unexpended FY 2002 allotments, plus $0, the MOE provision amount).
    Column E = Projected FY 2005 Shortfall. This column contains the 
projected ``shortfall'' amounts for the redistribution States, taken 
from Column H, Table 1. If there is no projected shortfall for the 
redistribution State, the entry in this column is ``NO Shortfall.'' If 
the State is not a redistribution State, the entry in this column is 
``na.'' For the Commonwealths and Territories, the entry in Column E is 
``NA.''
    Column F = For Redistribution States Only FY 2002--FY 2004 
Expenditures. For the redistribution States only (States that have 
fully expended their FY 2002 allotments), this column contains the 
total amounts of such States' reported SCHIP/SCHIP-related expenditures 
for the years FY 2002 through FY 2004, representing the FY 2002 3-year 
period of availability. For those States, Commonwealths, and 
Territories that did not fully expend their FY 2002 allotments during 
the period of availability, the entry in Column F is ``NA.''
    Column G = Redistribution States Only FY 02-04 Expenditures Minus 
FY 02 Allotment. This column contains the amounts of redistribution 
States' reported SCHIP/SCHIP-related expenditures for each of the years 
FY 2002 through FY 2004 minus the FY 2002 allotment, calculated as the 
entry in Column F minus the entry in Column B.
    Column H = For Redistribution States Percent Of Total 
Redistribution. This column contains each redistribution State's 
redistribution percentage of the total amount available for 
redistribution, calculated as the entry in Column G divided by the 
total (for redistribution States only, and exclusive of the 
Commonwealths and Territories) of Column G.
    Column I = FY 2002 Redistributed Allotment Amounts. This column 
contains the amounts of States' unexpended FY 2002 SCHIP allotments 
that are being redistributed to the redistribution States in addition 
to any shortfall amounts being provided to such States, calculated as 
the percentage in Column H multiplied by the total additional amount 
available for redistribution. For the 28 States that have fully 
expended their FY 2002 allotments, the additional FY 2002 
redistribution amounts totals $398,883,304. For the Commonwealths and 
Territories that have fully expended their FY 2002 allotments, the 
amounts in Column I represent their respective proportionate shares 
(allocated based on their FY 2002 allotments) of the total amount 
available for redistribution to the Commonwealths and Territories, 
$6,747,486 (representing 1.05 percent of the total amount for 
redistribution of $642,617,724). For those States and the District of 
Columbia, that did not fully expend their FY 2002 allotments during the 
3-year period of availability, the entry in Column I is ``NA.''
    Column J = FY 2005 Shortfall Amount. This column contains the 
shortfall amounts for the redistribution States; the amounts in this 
column are the same as the entries in Column E. The total shortfall 
amount is $236,986,934.
    Column K = Total FY 2002 Redistribution Including FY 2005 
Shortfall. For the redistribution States, this column reflects the 
total FY 2002 redistribution including the FY 2005 shortfall amount, 
calculated as the sum of Column I and Column J. For the States and the 
District of Columbia, the total FY 2002 redistribution amount in FY 
2005 is $635,870,238. For the Commonwealths and Territories, the total 
FY 2002 redistribution amount in FY 2005 is $6,747,486. The total FY 
2002 redistribution amount available nationally is $642,617,724.

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III. Regulatory Impact Statement

    [If you choose to comment on issues in this section, please include 
the caption ``Regulatory Impact Statement'' at the beginning of your 
comments.]
    We have examined the impact 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 one year). We have determined that this 
notice is not a major rule. The States' FY 2002 SCHIP allotments, 
totaling $3,115,200,000 were originally published in a notice in the 
Federal Register and allotted to States in FY 2002. This notice with 
comment period does not revise the amount of the 2002 allotment 
originally made available to the States, but rather, sets forth the 
procedure for redistributing those FY 2002 allotments, which were 
unexpended at the end of FY 2004 (the end of the 3-year period of 
availability referenced in section 2104(e) of the Act), and announces 
the amount of the FY 2002 allotments to be redistributed to the 
redistribution States and the availability of such unexpended FY 2002 
allotment amounts to the end of 2005. Because participation in the 
SCHIP program on the part of States is voluntary, any payments and 
expenditures States make or incur on behalf of the program that are not 
reimbursed by the Federal Government are made voluntarily. This notice 
will not create an unfunded mandate on States, tribal, or local 
governments. Therefore, we are not required to perform an assessment of 
the costs and benefits of this notice.
    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 have determined that it 
does not significantly affect States' rights, roles, and 
responsibilities.
    Low-income children will benefit from payments under this program 
through increased opportunities for health insurance coverage. We 
believe this notice 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 2002 allotment's redistribution 
amounts.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

IV. Waiver of Notice of Proposed Rulemaking and Delayed Effective Date

    [If you choose to comment on issues in this section, please include 
the caption ``Waiver of Notice of Proposed Rulemaking and Delayed 
Effective Date'' at the beginning of your comments.]
    We ordinarily publish a proposed notice in the Federal Register to 
provide a period of public comment before the provisions of a notice, 
such as this, are effective in accordance with section 553(b) of the 
Administrative Procedure Act (APA) (5 U.S.C. 553(b)). We also 
ordinarily provide a 30-day delay in the effective date of the 
provisions of a notice in accordance with section 553(d) of the APA (5 
U.S.C 553(d)). However, we can waive both the notice of proposed 
rulemaking and the 30-day delay in effective date if the Secretary 
finds, for good cause, that it is impracticable, unnecessary, or 
contrary to the public interest, and incorporates a statement of the 
finding and the reasons in the notice.
    We find there is good cause to waive notice of proposed rulemaking 
and the delay in the effective date of this issuance of the FY 2002 
redistributed allotments because such notice of proposed rulemaking and 
the delay in the effective date would be contrary to the public 
interest.
    We determined the amounts of the FY 2002 redistributed allotments 
as expeditiously as possible in order to make them available to the 
States as soon as possible. To that end, all States had until November 
30, 2004 to submit their required fourth quarter FY 2004 expenditure 
reports. In determining the FY 2002 redistributed amounts, we used 
State projected expenditures as contained in the most recent (November, 
2004) States' quarterly budget report submissions. The redistributed FY 
2002 allotments make available Federal funds to the recipient 
redistribution States, which is especially important for those 
redistribution States that may need such funds.
    Furthermore, under section 2104(e) of the Act, redistributed 
allotments are only available through the end of the fiscal year in 
which they are redistributed; in the case of the FY 2002 redistributed 
allotments, that would be until the end of FY 2005 (September 30, 
2005). We believe it is important that we issue these redistributed 
allotments as soon as possible. Therefore, in the interest of ensuring 
that the FY 2002 redistributed allotments are made available without 
delay to those States that need such funds, we are waiving notice of 
proposed rulemaking and the 30-day delay in effective date, and are 
publishing this issuance of the Federal Register as a notice with 
comment period.
    Accordingly, we provisionally will make the FY 2002 redistributed 
funds available to any State that has spent all of its available SCHIP 
allotments effective immediately upon publication of this notice with 
comment period. These FY 2002 redistributed funds are subject to final 
adjustment based on comments received in response to this notice with 
comment period. Any such adjustments resulting from review and analysis 
of comments will be published in the Federal Register within 60 days of 
the close of the comment period. (Section 1102 of the Social Security 
Act (42 U.S.C. 1302).)

(Catalog of Federal Domestic Assistance Program No. 93.767, State 
Children's Health Insurance Program)

    Dated: January 5, 2005.
Mark McClellan,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: January 14, 2005.
Tommy G. Thompson,
Secretary.
[FR Doc. 05-1139 Filed 1-18-05; 8:45 am]
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