[Federal Register Volume 70, Number 121 (Friday, June 24, 2005)]
[Notices]
[Pages 36615-36620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12521]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2219-N]
RIN 0938-ZA17


State Children's Health Insurance Program; Final Allotments to 
States, the District of Columbia, and U.S. Territories and 
Commonwealths for Fiscal Year 2006

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

ACTION: Notice.

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SUMMARY: Title XXI of the Social Security Act (the Act) authorizes 
payment of Federal matching funds to States, the District of Columbia, 
and U.S. Territories and Commonwealths to initiate and expand health 
insurance coverage to uninsured, low-income children under the State 
Children's Health Insurance Program (SCHIP). This notice sets forth the 
final allotments of Federal funding available to each State, the 
District of Columbia, and each U.S. Territory and Commonwealth for 
fiscal year 2006.

DATES: Effective Date: This notice is effective on July 25, 2005. Final 
allotments are available for expenditures after October 1, 2005.

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

SUPPLEMENTARY INFORMATION:

I. Purpose of This Notice

    This notice sets forth the allotments available to each State, the 
District of Columbia, and each U.S. Territory and Commonwealth for 
fiscal year (FY) 2006 under title XXI of the Social Security Act (the 
Act). Final allotments for a fiscal year are available to match 
expenditures under an approved State child health plan for 3 fiscal 
years, including the year for which the final allotment was provided. 
The FY 2006 allotments will be available to States for FY 2006, and 
unexpended amounts may be carried over to FY 2007 and FY 2008. Federal 
funds appropriated for title XXI are limited, and the law specifies a 
formula to divide the total annual appropriation into individual 
allotments available for each State, the District of Columbia, and each 
U.S. Territory and Commonwealth with an approved child health plan.
    Section 2104(b)(1) and (c)(3) of the Act requires States, the 
District of Columbia, and U.S. Territories and Commonwealths to have an 
approved child health plan for the fiscal year in order for the 
Secretary to provide an allotment for that fiscal year. All States, the 
District of Columbia, and U.S. Territories and Commonwealths have 
approved plans for FY 2006. Therefore, the FY 2006 allotments contained 
in this notice pertain to all States, the District of Columbia, and 
U.S. Territories and Commonwealths.

II. Methodology for Determining Final Allotments for States, the 
District of Columbia, and U.S. Territories and Commonwealths

    Section 2104(a) of the Act provides that, for purposes of providing 
allotments to the States, the District of Columbia, and U.S. 
Territories and Commonwealths, the following amounts are appropriated: 
$4,295,000,000 for FY 1998; $4,275,000,000 for each FY 1999 through FY 
2001; $3,150,000,000 for each FY 2002 through FY 2004; $4,050,000,000 
for each FY 2005 through FY 2006; and $5,000,000,000 for FY 2007.
    This notice specifies, in the Table under section III, the final FY 
2006 allotments available to individual States, the District of 
Columbia, and U.S. Territories and Commonwealths for either child 
health assistance expenditures under approved State child health plans 
or for claiming an enhanced Federal medical assistance percentage rate 
for certain SCHIP-related Medicaid expenditures. As discussed below, 
the FY 2006 final allotments have been calculated to reflect the 
methodology for determining an allotment amount for each State, the 
District of Columbia, and each U.S. Territory and Commonwealth as 
prescribed by section 2104(b) and (c) of the Act.

[[Page 36616]]

Allotments to the U.S. Territories and Commonwealths

    Under section 2104(c) of the Act, 0.25 percent of the total amount 
appropriated each year is available for allotment to the U.S. 
Territories and Commonwealths of Puerto Rico, Guam, the Virgin Islands, 
American Samoa, and the Northern Mariana Islands. For FY 2006, this 
amount is $10,125,000 (0.25 percent of the FY 2006 appropriation of 
$4,050,000,000).
    Section 2104(c)(4)(B) of the Act provides for additional amounts 
for allotment to the U.S. Territories and Commonwealths: $32,000,000 
for FY 1999; $34,200,000 for each FY 2000 through FY 2001; $25,200,000 
for each FY 2002 through FY 2004; $32,400,000 for each FY 2005 through 
FY 2006; and $40,000,000 for FY 2007. Since, for FY 2006, title XXI of 
the Act provides an additional $32,400,000 for allotment to the U.S. 
Territories and Commonwealths, the total amount available for allotment 
to the U.S. Territories and Commonwealths in FY 2006 is $42,525,000; 
that is, $32,400,000 plus $10,125,000. This amount then is allotted to 
the U.S. Territories and Commonwealths according to the following 
percentages, as specified in section 2104(c)(2) of the Act: Puerto 
Rico, 91.6 percent; Guam, 3.5 percent; the Virgin Islands, 2.6 percent; 
American Samoa, 1.2 percent; and the Northern Mariana Islands, 1.1 
percent.

Allotments to the 50 States and the District of Columbia

Total Allotment Available
    The total amount available nationally for allotment for the 50 
States and the District of Columbia for FY 2006 is determined in 
accordance with the following formula:

AT = S2104(a) - T2104(c),

where
AT = Total amount available for allotment to the 50 States 
and the District of Columbia for the fiscal year.
S2104(a) = Total appropriation for the fiscal year indicated 
in section 2104(a) of the Act. For FY 2006, this is $4,050,000,000.
T2104(c) = Total amount available for allotment for the U.S. 
Territories and Commonwealths; determined under section 2104(c) of the 
Act as 0.25 percent of the total appropriation for the 50 States and 
the District of Columbia. For FY 2006, this is: .0025 x $4,050,000,000 
= $10,125,000.

    Therefore, for FY 2006, the total amount available for allotment to 
the 50 States and the District of Columbia is $4,039,875,000. This was 
determined as follows:

    AT ($4,039,875,000) = S2104(a) 
($4,050,000,000) - T2104(c) ($10,125,000)
    For purposes of the following discussion, the term ``State,'' as 
defined in section 2104(b)(4)(D)(ii) of the Act, ``means one of the 50 
States or the District of Columbia.''
Allotments to Each State
    Under section 2104(b)(4) of the Act, each State is allotted a 
``proportion'' of the total amount available for allotment to the 
States. The term ``proportion'' is defined in section 2104(b)(4)(D)(i) 
of the Act and refers to a State's share of the total amount available 
for allotment for any given fiscal year. The sum of the proportions for 
all States must exactly equal one. Under the statutory definition, a 
State's proportion for a fiscal year is equal to the State's allotment 
for the fiscal year divided by the total amount available for allotment 
for the fiscal year. In general, a State's allotment for a fiscal year 
is calculated by multiplying the State's proportion for the fiscal year 
by the total amount available for allotment for that fiscal year in 
accordance with the following formula:
SAi = Pi x AT, where
SAi = Allotment for a State for a fiscal year.
Pi = Proportion for a State for a fiscal year.
AT = Total amount available for allotment to the States for 
the fiscal year. For FY 2006, this is $4,039,875,000.

    In accordance with the statutory formula for determining 
allotments, the State proportions are determined under two steps, which 
are described below in further detail.
    Under the first step, the preadjusted proportions for each State 
are determined. Each State's proportion is calculated by multiplying 
the State's Number of Children, as described below, and the State Cost 
Factor, as described below, to determine a ``product'' for each State. 
The products for all States are then summed. Finally, the product for a 
State is divided by the sum of the products for all States, thereby 
yielding the State's preadjusted proportion. Under the second step, the 
preadjusted proportions are subject to the application of proportion 
floors, ceilings, and a reconciliation process as appropriate, as 
described below.
Preadjusted Proportions
    1. Number of Children. For FY 2006, as specified by section 
2104(b)(2)(A)(iii) of the Act, the number of children for a State is 
calculated as the sum of 50 percent of the number of low-income, 
uninsured children in the State and 50 percent of the number of low-
income children in the State. Under section 2104(b)(2)(B) of the Act, 
the determination of the number of children applied in calculating the 
SCHIP allotment for a particular fiscal year is based on the arithmetic 
average of the number of such children, as reported and defined in the 
three most recent March supplements to the Current Population Survey 
(CPS) of the Bureau of the Census officially available before the 
beginning of the calendar year in which the fiscal year begins. As part 
of a continuing formal process between the Centers for Medicare & 
Medicaid Services (CMS) and the Bureau of the Census, each fiscal year 
we obtain the number of children data officially from the Bureau of the 
Census, based on the standard methodology used to determine official 
poverty status and uninsured status in the annual CPS on these topics. 
Since FY 2006 begins on October 1, 2005 (that is, in calendar year 
2005), in determining the FY 2006 SCHIP allotments, we are using the 
most recent official data from the Bureau of the Census available 
before January 1 of calendar year 2005 (that is, through the end of 
December 31, 2004). Through December 31, 2004, the most recent official 
data available from the Bureau of the Census on the numbers of children 
were data from the three March CPSs conducted in March 2002, 2003, and 
2004 (representing data for years 2001, 2002, and 2003).
    2. State Cost Factor. The State cost factor is based on annual 
average wages in the health services industry in the State. Under 
section 2104(b)(3)(A) of the Act, the State cost factor for a State is 
equal to the sum of: 0.15 and 0.85 multiplied by the ratio of the 
annual average wages in the health industry per employee for the State 
to the annual average wages per employee in the health industry for the 
States.
    Under section 2104(b)(3)(B) of the Act, the State cost factor for 
each State for a fiscal year is calculated based on the average of the 
annual wages for employees in the health industry for each State using 
data for each of the most recent 3 years as reported by the Bureau of 
Labor Statistics (BLS) in the Department of Labor and available before 
the beginning of the calendar year in which the fiscal year begins. 
Since FY 2006 begins on October 1, 2005 (that is, in calendar year 
2005), in determining the FY 2006 SCHIP allotments, we are using the 
most recent 3 years of reported BLS data before

[[Page 36617]]

January 1, 2005 (that is, through the end of December 31, 2004). 
Accordingly, we used the State cost factor data available from BLS for 
2001, 2002, and 2003 in calculating the FY 2006 final allotments. As 
part of a continuing formal process between CMS and the BLS, each 
fiscal year CMS obtains these wage data officially from the BLS.
    Section 2104(b)(3)(B) of the Act refers to wage data as reported by 
BLS under the ``Standard Industrial Classification'' (SIC) system, and 
refers specifically to SIC code 8000. However, in calendar year 2002, 
BLS phased-out the SIC wage and employment reporting system and 
replaced it with the ``North American Industry Classification System'' 
(NAICS). Because of the changes from the SIC system to NAICS, wage data 
for 2001 and 2002 are not available under the SIC reporting system. 
Further, these SIC data were not even collected in FY 2003. Therefore, 
the BLS wage data used in calculating the 3-year annual average wages 
for FY 2006 SCHIP allotments necessarily reflect NAICS data, rather 
than SIC data.
    Under the SIC system, BLS provided CMS with wage data for each 
State under the SIC code 8000. However, the wage data codes under the 
SIC system do not map exactly to the wage data codes under the NAICS. 
As a result, BLS provided us with wage data using three NAICS wage data 
codes that represent approximately 98 percent of the wage data that 
would have been provided under the related SIC code 8000. Specifically, 
in lieu of SIC code 8000 data, BLS provided CMS data that are based on 
the following three NAICS codes: NAICS Code 621 (Ambulatory health care 
services), Code 622 (Hospitals), and Code 623 (Nursing and residential 
care facilities).
    Because of Privacy Act requirements and other confidentiality 
requirements, the BLS suppresses certain State-specific data used in 
calculating related national average wages. Therefore, we used the 
State-specific average wages per health services industry employee data 
provided to us by BLS to determine the national average wages per 
employee for the 50 States and the District of Columbia, as required by 
section 2104(b)(3)(A)(ii)(II) of the Act for determining the State Cost 
Factor.
Determination of Preadjusted Proportions
    The following is an explanation of how we applied the two State-
related factors specified in the Act at section 2104(b)(3) to determine 
the States' ``preadjusted'' proportions for FY 2006. The term 
``preadjusted,'' as used here, refers to the States'' proportions 
before the application of the floors and ceiling and adjustments, as 
specified in the Act at section 2104(b)(4). The determination of each 
State's preadjusted proportion for FY 2006 is in accordance with the 
following formula:

PPi = (Ci x SCFi/(Ci x 
SCFi), where
PPi = Preadjusted proportion for a State for a fiscal year.
Ci = Number of children in a State (section 2104(b)(1)(A)(i) 
of the Act) for a fiscal year. As described above, for fiscal year 
2006, the number of children is equal to the sum of 50 percent of the 
number of low-income uninsured children in the State for the fiscal 
year and 50 percent of the number of low-income children in the State 
for the fiscal year. (See section 2104(b)(2)(A)(iii) of the Act.)
SCFi = State Cost Factor for a State (section 
2104(b)(1)(A)(ii) of the Act). For a fiscal year, this is equal to: 
0.15 + 0.85 x (Wi/WN)
Wi = The annual average wages per employee for a State for 
such year, as described above (section 2104(b)(3)(A)(ii)(I) of the 
Act).
WN = The annual average wages per employee for all States, 
as described above (section 2104(b)(3)(A)(ii)(II) of the Act).
[Sigma] (Ci x SCFi) = The sum of the products of 
(Ci x SCFi) for each State (section 2104(b)(1)(B) 
of the Act).

    The resulting proportions would then be subject to the application 
of the floors and ceilings specified at section 2104(b)(4) of the Act, 
as described below, and reconciled, as necessary, to eliminate any 
deficit or surplus of the allotments because the sum of the proportions 
was either greater than or less than one, as explained in detail below.
Application of Floors and Ceilings
    Under the second step, the preadjusted proportions are subject to 
the application of proportion floors, ceilings, and a reconciliation 
process, as appropriate. Section 2104(b)(4)(A) of the Act specifies 
three proportion floors, or minimum proportions, that apply in 
determining States' allotments. The first proportion floor is equal to 
$2,000,000 divided by the total of the amount available for the fiscal 
year. This proportion ensures that a State's minimum allotment would be 
$2,000,000. For FY 2006, no State's preadjusted proportion is below 
this floor. The second proportion floor is equal to 90 percent of the 
allotment proportion for the State for the previous fiscal year; that 
is, a State's proportion for a fiscal year must not be lower than 10 
percent below the previous fiscal year's proportion. The third 
proportion floor is equal to 70 percent of the allotment proportion for 
the State for FY 1999; that is, the proportion for a fiscal year must 
not be lower than 30 percent below the FY 1999 proportion.
    Each State's allotment proportion for a fiscal year is also limited 
by a maximum ceiling amount, equal to 145 percent of the State's 
proportion for FY 1999; that is, a State's proportion for a fiscal year 
must be no higher than 45 percent above the State's proportion for FY 
1999. The floors and ceilings are intended to minimize the fluctuation 
of State allotments from year to year and over the life of the program 
as compared to FY 1999.
    As determined under the first step for determining the States' 
preadjusted proportions, which is applied before the application of any 
floors or ceilings, the sum of the proportions for all the States will 
be equal to exactly one. However, the application of the floors and 
ceilings under the second step may change the proportions for certain 
States; that is, some States' proportions may need to be raised to the 
floors, while other States' proportions may need to be lowered to the 
maximum ceiling. If this occurs, the sum of the proportions for all 
States may not exactly equal one. In that case, section 2104(b)(4)(B) 
of the Act requires the proportions to be adjusted, under a method that 
is determined by whether the sum of the proportions is greater or less 
than one.
    The sum of the proportions would be greater than one if the 
application of the floors and ceilings resulted in raising the 
proportions of some States (due to the application of the floors) to a 
greater degree than the proportions of other States were lowered (due 
to the application of the ceiling). If, after application of the floors 
and ceiling, the sum of the proportions is greater than one, section 
2104(b)(4)(B)(i) of the Act requires the Secretary to determine a 
maximum percentage increase limit, which, when applied to the State 
proportions, would result in the sum of the proportions being exactly 
one.
    If, after the application of the floors and ceiling, the sum of the 
proportions is less than one, section 2104(b)(4)(B)(ii) of the Act 
requires the States' proportions to be increased in a ``pro rata'' 
manner so that the sum of the proportions equals one. Finally, it is 
also possible, although unlikely, that the sum of the proportions 
(after the application of the floors and ceiling) will be exactly one; 
in that case, the proportions would require no further adjustment.

[[Page 36618]]

    Section 2104(e) of the Act requires that the amounts allotted to a 
State for a fiscal year be available to the State for a total of 3 
years; the fiscal year for which the amounts are allotted, and the 2 
following fiscal years.

III. Table of State Children's Health Insurance Program Final 
Allotments for FY 2006

Key to Table

Column/Description
    Column A = State. Name of State, District of Columbia, U.S. 
Commonwealth or Territory.
    Column B = Number of Children. The number of children for each 
State (provided in thousands) was determined and provided by the Bureau 
of the Census based on the arithmetic average of the number of low-
income children and low-income uninsured children, and is based on the 
three most recent March supplements to the CPS of the Bureau of the 
Census officially available before the beginning of the calendar year 
in which the fiscal year begins. The FY 2006 allotments were based on 
the 2002, 2003, and 2004 March supplements to the CPS. These data 
represent the number of people in each State under 19 years of age 
whose family incomes are at or below 200 percent of the poverty 
threshold appropriate for that family, and who are reported to be 
without health insurance coverage. The number of children for each 
State was developed by the Bureau of the Census based on the standard 
methodology used to determine official poverty status and uninsured 
status in its annual March CPS on these topics.
    For FY 2006, the number of children is equal to the sum of 50 
percent of the number of low-income uninsured children in the State and 
50 percent of the number of low-income children in the State.
    Column C = State Cost Factor. The State cost factor for a State is 
equal to the sum of: 0.15, and 0.85 multiplied by the ratio of the 
annual average wages in the health industry per employee for the State 
to the annual wages per employee in the health industry for the 50 
States and the District of Columbia. The State cost factor for each 
State was calculated based on such wage data for each State as reported 
and determined as final by the BLS in the Department of Labor for each 
of the most recent 3 years and available before the beginning of the 
calendar year in which the fiscal year begins. The FY 2006 allotments 
were based on final BLS wage data for 2001, 2002, and 2003.
    Column D = Product. The Product for each State was calculated by 
multiplying the Number of Children in Column B by the State Cost Factor 
in Column C. The sum of the Products for all 50 States and the District 
of Columbia is below the Products for each State in Column D. The 
Product for each State and the sum of the Products for all States 
provides the basis for allotment to States and the District of 
Columbia.
    Column E = Proportion of Total. This is the calculated percentage 
share for each State of the total allotment available to the 50 States 
and the District of Columbia. The Percent Share of Total is calculated 
as the ratio of the Product for each State in Column D to the sum of 
the Products for all 50 States and the District of Columbia below the 
Products for each State in Column D. For the U.S. Territories and 
Commonwealths, the Proportion of Total in Column E reflects the 
percentages set forth in section 2104(c) of the Act.
    Column F = Adjusted Proportion of Total. This is the calculated 
percentage share for each State and the District of Columbia of the 
total allotment available after the application of the floors and 
ceilings and after any further reconciliation needed to ensure that the 
sum of the State proportions is equal to one. The three floors 
specified in the statute are: (1) The percentage calculated by dividing 
$2,000,000 by the total of the amount available for all allotments for 
the fiscal year; (2) an annual floor of 90 percent of (that is, 10 
percent below) the preceding fiscal year's allotment proportion; and 
(3) a cumulative floor of 70 percent of (that is, 30 percent below) the 
FY 1999 allotment proportion. There is also a cumulative ceiling of 145 
percent of (that is, 45 percent above) the FY 1999 allotment 
proportion.
    There is no adjustment made to the allotments of the U.S. 
Territories and Commonwealths as they are not subject to the 
application of the floors and ceiling. As a result, Column F in the 
table, the Adjusted Proportion of Total, is empty for the U.S. 
Territories and Commonwealths.
    Column G = Allotment. This is the SCHIP allotment for each State, 
Commonwealth, or Territory or the District of Columbia for the fiscal 
year. For each of the 50 States and the District of Columbia, this is 
determined as the Adjusted Proportion of Total in Column F for the 
State multiplied by the total amount available for allotment for the 50 
States and the District of Columbia for the fiscal year.
    For each of the U.S. Territory and Commonwealths, the allotment is 
determined as the Proportion of Total in Column E multiplied by the 
total amount available for allotment to the U.S. Territories and 
Commonwealths.
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[[Page 36619]]

[GRAPHIC] [TIFF OMITTED] TN24JN05.089

IV. Regulatory Impact Statement

    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.
    We have examined the impact of this notice as required by Executive 
Order 12866. Executive Order 12866 directs agencies to assess all costs 
and benefits of available regulatory alternatives and, when rules are 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic environments, public health and safety, 
other advantages, distributive impacts, and equity). We believe that 
this notice is consistent with the regulatory philosophy and principles 
identified in the Executive Order.

[[Page 36620]]

    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 
million to $29 million in any one year. Individuals and States are not 
included in the definition of a small entity; therefore, this 
requirement does not apply.
    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.
    The Unfunded Mandates Reform Act of 1995 requires that agencies 
prepare an assessment of anticipated costs and benefits before 
publishing any notice that may result in an annual expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $110 million or more (adjusted each year for 
inflation) in any one year. Since 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 because it 
merely notifies States of their SCHIP allotment for FY 2006. Therefore, 
we are not required to perform an assessment of the costs and benefits 
of this notice.
    Low-income children will benefit from payments under SCHIP 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 U.S. Territories and Commonwealths of the 
extent to which they are permitted to expend funds under their child 
health plans using their FY 2006 allotments.
    Under Executive Order 13132, we are required to adhere to certain 
criteria regarding Federalism. We have reviewed this notice and 
determined that it does not significantly affect States' rights, roles, 
and responsibilities because it does not set forth any new policies.
    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 notice will 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 
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. 93.767, State 
Children's Health Insurance Program)

    Dated: April 29, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 11, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-12521 Filed 6-23-05; 8:45 am]
BILLING CODE 4120-01-P