[Federal Register Volume 71, Number 140 (Friday, July 21, 2006)]
[Notices]
[Pages 41448-41450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11577]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Alaska State 
Plan Amendment 05-06

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

ACTION: Notice of hearing.

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SUMMARY: This notice announces an administrative hearing to be held on 
August 29, 2006, at the Blanchard Plaza Building, 2201 Sixth Avenue, 
11th Floor Conference Room, Seattle, WA 98121, to reconsider CMS' 
decision to disapprove Alaska State plan amendment 05-06.
    Closing Date: Requests to participate in the hearing as a party 
must be received by the presiding officer by August 7, 2006.

FOR FURTHER INFORMATION CONTACT: Kathleen Scully-Hayes, Presiding 
Officer, CMS, Lord Baltimore Drive, Mail Stop LB-23-20, Baltimore, 
Maryland 21244. Telephone: (410) 786-2055.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider CMS' decision to disapprove Alaska State plan 
amendment (SPA) 05-06, which was submitted on August 1, 2005. This SPA 
was disapproved on April 21, 2006. Under SPA 05-06, Alaska proposed to 
add certain school-based behavioral health services under the 
rehabilitation services benefit.
    This amendment was disapproved because it did not comport with the 
requirements of section 1902(a) of the Social Security Act (the Act) 
and implementing regulations. Specifically, the following issues will 
be considered on reconsideration: (1) Whether the State demonstrated 
that the proposed services would be within the scope of ``medical 
assistance'' under the State plan pursuant to section 1902(a)(10) of 
the Act, as defined at section 1905(a) of the Act; (2) whether the 
State has assured that there is non-Federal funding as required under 
section 1902(a)(2) to support expenditures that would be claimed under 
the State plan as the basis for Federal matching funding in light of 
financial arrangements that do not appear to result in net 
expenditures; (3) whether the proposed payment rates meet the 
requirements of section 1902(a)(30)(A) of the Act to be consistent with 
efficiency, economy, and quality of care, in light of financial 
arrangements under which the providers do not retain

[[Page 41449]]

Medicaid payments; and (4) whether the State plan complied with the 
requirements of section 1902(a) generally, and implementing Federal 
regulations at 42 CFR 430.10, to include all information necessary to 
serve as the basis for Federal financial participation. We describe 
each of these issues in detail below.
    Section 1902(a)(10) of the Act requires that the State plan provide 
for making medical assistance available to eligible beneficiaries. The 
State did not establish that the proposed ``school-based rehabilitative 
services'' are within the scope of ``medical assistance,'' which is 
defined in section 1905(a) of the Act. While we understand the State 
has placed the proposed services under the rehabilitative services 
benefit in the State plan, the State has provided no clear definition 
of the proposed services so that CMS can determine whether they are, 
indeed, within the scope of the rehabilitation benefit. After repeated 
requests for further information, the State did not provide any 
description of what elements the ``behavioral health services 
(including medication services)'' encompass, and how they are different 
(or the same) as services in the currently approved State plan. It is 
not clear whether this is an expansion of coverage or a different 
payment methodology for school providers. Absent such information, SPA 
05-06 did not comply with the requirements of section 1902(a)(10) of 
the Act to provide for medical assistance as defined in section 1905(a) 
of the Act.
    Section 1902(a)(2) of the Act provides that the State plan must 
assure adequate funding for the non-Federal share of expenditures from 
State or local sources for the amount, duration, scope, or quality of 
care and services available under the plan. Section 1902(a)(30)(A) of 
the Act requires that State plans provide for payment for care and 
services available under the plan that is ``consistent with economy, 
efficiency, and quality of care.'' In order to assess compliance with 
these provisions, State officials were asked to provide information 
related to Alaska's funding mechanisms for payments, and the net State 
and local expenditures that are incurred. Nor did Alaska respond to 
requests for descriptions of any transfers of funds between providers 
and State or local governments, and information as to whether the 
providers keep 100 percent of the total computable funds given as 
Medicaid payments.
    According to a flow chart provided by the State, the Medicaid 
agency pays the schools 100 percent of the claimed amount. A quarterly 
bill for the State match is then submitted to school providers who 
transfer to the Medicaid agency the State share of the services 
provided. This transfer of funds is made after the schools have been 
reimbursed for the services they provide, and is effectively a refund 
by the schools for part of their Medicaid payments. As a result of this 
refund, the net expenditure by the State Medicaid agency is wholly 
federally funded. In light of this refund arrangement, we cannot 
conclude that the proposed payment rate reflects the net expenditure by 
the State for Medicaid services provided by schools, and that the net 
non-Federal share meets the requirements of section 1902(a)(2) of the 
Act. Moreover, the refund is an indication that the full payment amount 
is not required to ensure Medicaid beneficiaries' access to the 
providers' services. The result is that proposed payments under this 
section of the plan would not be in compliance with the requirement 
under section 1902(a)(30)(A) of the Act that payment rates must be 
consistent with economy, efficiency, and quality of care.
    Finally, the proposed SPA does not comply with the general 
provisions of section 1902(a), including section 1902(a)(4) of the Act, 
as implemented in part by Federal regulations at 42 CFR 430.10. This 
regulation requires that States include in their State plans all 
information necessary for CMS to determine whether the plan can be 
approved to serve as a basis for Federal financial participation. There 
is absent information that would more precisely identify the covered 
services. Therefore, the proposed SPA does not comply with this 
requirement.
    For the reasons cited above, and after consultation with the 
Secretary, as required by Federal regulations at 42 CFR 430.15(c)(2), 
Alaska SPA 05-06 was disapproved.
    Section 1116 of the Act, and Federal regulations at 42 CFR part 
430, establish Department procedures that provide an administrative 
hearing for reconsideration of a disapproval of a State plan or plan 
amendment. CMS is required to publish a copy of the notice to a State 
Medicaid agency that informs the agency of the time and place of the 
hearing, and the issues to be considered. If we subsequently notify the 
agency of additional issues that will be considered at the hearing, we 
will also publish that notice.
    Any individual or group that wants to participate in the hearing as 
a party must petition the presiding officer within 15 days after 
publication of this notice, in accordance with the requirements 
contained in Federal regulations at 42 CFR 430.76(b)(2). Any interested 
person or organization that wants to participate as amicus curiae must 
petition the presiding officer before the hearing begins in accordance 
with the requirements contained in Federal regulations at 42 CFR 
430.76(c). If the hearing is later rescheduled, the presiding officer 
will notify all participants.
    The notice to Alaska announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Mr. Jerry Fuller, Medicaid Director, State of Alaska, Department of 
Health and Social Services, Office of the Commissioner, P.O. Box 
110601, Juneau, AK 99811-0601.

    Dear Mr. Fuller: I am responding to your request for 
reconsideration of the decision to disapprove the Alaska State plan 
amendment (SPA) 05-06, which was submitted on August 1, 2005, and 
disapproved on April 21, 2006. Under SPA 05-06, Alaska was proposing 
to add certain school-based behavioral health services under the 
rehabilitation services benefit. This amendment was disapproved 
because it did not comport with the requirements of section 1902(a) 
of the Social Security Act (the Act) and implementing regulations, 
as discussed in more detail below.
    Specifically, the following issues will be considered on 
reconsideration: (1) Whether the State demonstrated that the 
proposed services would be within the scope of ``medical 
assistance'' under the State plan pursuant to section 1902(a)(10) of 
the Act, as defined at section 1905(a) of the Act; (2) whether the 
State has assured that there is non-Federal funding as required 
under section 1902(a)(2) of the Act to support expenditures that 
would be claimed under the State plan as the basis for Federal 
matching funding in light of financial arrangements that do not 
appear to result in net expenditures; (3) whether the proposed 
payment rates meet the requirements of section 1902(a)(30)(A) of the 
Act to be consistent with efficiency, economy, and quality of care, 
in light of financial arrangements under which the providers do not 
retain Medicaid payments; and (4) whether the State plan complied 
with the requirements of section 1902(a) of the Act generally, and 
implementing Federal regulations at 42 CFR 430.10, to include all 
information necessary to serve as the basis for Federal financial 
participation. We describe each of these issues in detail below.
    Section 1902(a)(10) of the Act requires that the State plan 
provide for making medical assistance available to eligible 
beneficiaries. The State did not establish that the proposed 
``school-based rehabilitative services'' are within the scope of 
``medical assistance,'' which is defined in section 1905(a) of the 
Act. While we understand the State has placed the proposed services 
under the rehabilitative services benefit in the State plan, the 
State has provided no clear definition of the proposed services so 
that the Centers for Medicare & Medicaid Services (CMS) can 
determine whether they are, indeed, within the scope of the 
rehabilitation benefit. After repeated requests for further 
information, the State provided no

[[Page 41450]]

description of what elements the ``behavioral health services 
(including medication services)'' encompass, and how they are 
different (or the same) as services in the currently approved State 
plan. It is not clear whether this is an expansion of coverage or a 
different payment methodology for school providers. Absent such 
information, SPA 05-06 did not comply with the requirements of 
section 1902(a)(10) of the Act to provide for medical assistance as 
defined in section 1905(a) of the Act.
    Section 1902(a)(2) of the Act provides that the State plan must 
assure adequate funding for the non-Federal share of expenditures 
from State or local sources for the amount, duration, scope, or 
quality of care and services available under the plan. Section 
1902(a)(30)(A) of the Act requires that State plans provide for 
payment for care and services available under the plan that is 
``consistent with economy, efficiency, and quality of care.'' In 
order to assess compliance with these provisions, State officials 
were asked to provide information related to Alaska's funding 
mechanisms for payments, and the net State and local expenditures 
that are incurred. Nor did Alaska respond to requests for any 
transfers of funds between providers and State or local governments, 
and information as to whether the providers keep 100 percent of the 
total computable funds given as Medicaid payments.
    According to a flow chart provided by the State, the Medicaid 
agency pays the schools 100 percent of the claimed amount. A 
quarterly bill for the State match is then submitted to school 
providers who transfer to the Medicaid agency the State share of the 
services provided. This transfer of funds is made after the schools 
have been reimbursed for the services they provide, and is 
effectively a refund by the schools for part of their Medicaid 
payments. As a result of this refund, the net expenditure by the 
State Medicaid agency is wholly federally funded. In light of this 
refund arrangement, we cannot conclude that the proposed payment 
rate reflects the net expenditure by the State for Medicaid services 
provided by schools, and that the net non-Federal share meets the 
requirements of section 1902(a)(2) of the Act. Moreover, the refund 
is an indication that the full payment amount is not required to 
ensure Medicaid beneficiaries' access to the providers' services. 
The result is that proposed payments under this section of the plan 
would not be in compliance with the requirement under section 
1902(a)(30)(A) of the Act that payment rates must be consistent with 
economy, efficiency, and quality of care.
    Finally, the proposed SPA does not comply with the general 
provisions of section 1902(a), including section 1902(a)(4) of the 
Act, as implemented in part by Federal regulations at 42 CFR section 
430.10. This regulation requires that States include in their State 
plans all information necessary for CMS to determine whether the 
plan can be approved to serve as a basis for Federal financial 
participation. As discussed above, Alaska did not provide 
information that would more precisely identify the covered services 
or the non-Federal funding source. Therefore the proposed SPA does 
not comply with this requirement.
    For the reasons cited above, and after consultation with the 
Secretary, as required by Federal regulations at 42 CFR 
430.15(c)(2), Alaska SPA 05-06 was disapproved.
    I am scheduling a hearing on your request for reconsideration to 
be held on August 29, 2006, at the Blanchard Plaza Building, 2201 
Sixth Avenue, 11th Floor Conference Room, Seattle, WA 98121, to 
reconsider the decision to disapprove SPA 05-06. If this date is not 
acceptable, we would be glad to set another date that is mutually 
agreeable to the parties. The hearing will be governed by the 
procedures prescribed by Federal regulations at 42 CFR part 430.
    I am designating Ms. Kathleen Scully-Hayes as the presiding 
officer. If these arrangements present any problems, please contact 
the presiding officer at (410) 786-2055. In order to facilitate any 
communication which may be necessary between the parties to the 
hearing, please notify the presiding officer to indicate 
acceptability of the hearing date that has been scheduled, and 
provide names of the individuals who will represent the State at the 
hearing.

    Sincerely,
Mark B. McClellan, M.D., PhD.

Section 1116 of the Social Security Act (42 U.S.C. 1316; 42 CFR 430.18)

(Catalog of Federal Domestic Assistance Program No. 13.714, Medicaid 
Assistance Program)

    Dated: July 14, 2006.
Mark B. McClellan,
Administrator.
 [FR Doc. E6-11577 Filed 7-20-06; 8:45 am]
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