[Federal Register Volume 72, Number 102 (Tuesday, May 29, 2007)]
[Notices]
[Pages 29502-29515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2607]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2241-N]
RIN 0938-AO28


State Children's Health Insurance Program (SCHIP); Redistribution 
of Unexpended SCHIP Funds From the Appropriations for Fiscal Year 2004 
and Fiscal Year 2005 To Eliminate SCHIP Fiscal Year 2007 Funding 
Shortfalls; and Provisions for Continued Authority for Qualifying 
States To Use a Portion of Certain SCHIP Funds for Medicaid 
Expenditures

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

ACTION: Notice

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SUMMARY: This notice describes, in accordance with the provisions of 
the National Institutes of Health Reform Act of 2006 (NIHRA), the 
methodology and process used for determining the amounts of unexpended 
Federal fiscal year (FY) 2004 SCHIP allotments remaining at the end of 
FY 2006, and the amounts of unexpended FY 2005 SCHIP allotments 
available mid-FY 2007, to be redistributed to certain States to 
eliminate these States' SCHIP funding shortfalls in FY 2007. In 
accordance with this methodology, this notice also contains the amounts 
of States' redistributed FY 2004 and FY 2005 allotments.
    This notice also describes the amendments to the SCHIP statute, in 
accordance with the NIHRA, relating to the provisions for ``qualifying 
States'' to elect to receive a portion of their available SCHIP 
allotments as increased Federal matching funds for certain expenditures 
in their Medicaid programs.

SUPPLEMENTARY INFORMATION:

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

I. Background

A. Availability and Redistribution of SCHIP Fiscal Year 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. The 50 States, the District of Columbia, and the 
Commonwealths and Territories 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.
    Section 2104(e) of the Act specifies that SCHIP allotments for a 
Federal fiscal year are available for payment to States' for their 
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. Section 2104(f) of the Act specifies 
that the amounts of States' allotments, which are not expended during 
the initial 3-year period of availability, are to be redistributed to 
those States that have fully spent these fiscal year allotments during 
this period of availability in accordance with an appropriate procedure 
determined by the Secretary. Furthermore, section 2104(e) of the Act 
specifies that the amounts of the redistributed allotments continue to 
be available for expenditure by the States receiving these 
redistributions to the end of the fiscal year in which these funds are 
redistributed.
    B. Enactment of the NIHRA and Special Rules for Addressing FY 2007 
SCHIP Funding Shortfalls
    In general, under section 2104(e) and (f) of the Act, any 
unexpended SCHIP allotments remaining following the end of the initial 
3-year period of availability would otherwise be redistributed in 
accordance with an appropriate procedure determined by the Secretary. 
However, section 201(a) of the recently enacted National Institutes of 
Health Reform Act of 2006 (Pub. L. 109-482) (NIHRA) amended the SCHIP 
statute to add a new section 2104(h) of the Act. This new subsection 
provides for special rules to address States' FY 2007 SCHIP funding 
shortfalls. Specifically, in order to address States' FY 2007 SCHIP 
funding shortfalls, section 2104(h) of the Act provides for the 
redistribution in FY 2007 of the unexpended FY 2004 allotments 
remaining at the end of FY 2006, and the redistribution of certain 
amounts of unexpended FY 2005 allotments which are available for 
redistribution in months after March 31, 2007. This notice describes 
the implementation of section 201(a) of the NIHRA and contains the 
amounts of the States' redistributed FY 2004 and FY 2005 allotments 
determined in accordance with these provisions.

[[Page 29503]]

C. Expenditures, Authority for Qualifying States To Use Available SCHIP 
Allotments for Medicaid Expenditures

    Under section 2105(a)(1)(A) through (D) and (a)(2) of the Act, and 
before enactment of Public Law 108-74 (Extension of Availability of 
SCHIP Allotment Act, enacted on August 15, 2003), only Federal payments 
for the following Medicaid and SCHIP expenditures were applied against 
States' available SCHIP allotments: (1) Medical assistance provided 
under title XIX (Medicaid) to targeted low-income children in a SCHIP-
related Medicaid expansion, for which the enhanced SCHIP Federal 
Medical assistance program( FMAP) rate is available; (2) medical 
assistance provided on behalf of a child during a period of 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) 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).
    Section 1(b) of Public Law 108-74, as amended by Public Law 108-127 
(Social Security Act, Technical corrections, enacted November 17, 
2003), added new section 2105(g) to the Act under which certain 
``qualifying States'' that met prescribed criteria could elect to use 
up to 20 percent of any of the States' available SCHIP allotments for 
FY 1998, 1999, 2000, or 2001 to increase the FMAP rate for regular 
Medicaid expenditures to the enhanced FMAP rate available under SCHIP. 
As described in the Federal Register published on July 23, 2004 (69 FR 
44013), if a qualified State submitted both 20 percent allowance 
expenditures and other ``regular'' SCHIP expenditures at the same time 
in a quarter, the 20 percent allowance expenditures would be applied 
first against the available fiscal year reallotments. However, the 20 
percent allowance expenditures could be applied only against the 
specified fiscal year allotment funds (upon which the 20 percent 
allowances were based) and which would remain available. Under section 
2104(g)(1)(B)(iii) of the Act, the amounts of States' FY 2001 
reallotments would only be available through the end of FY 2005; 
therefore, the FY 2001 20 percent allowances for the qualifying States 
are only available through the end of FY 2005.
    Section 6103 of the Deficit Reduction Act of 2005 (Pub.L. 109--171, 
enacted on February 8, 2006) amended section 2105(g) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2004 and FY 2005 SCHIP allotments to allow the 
use of the enhanced (FMAP) rate (as determined under section 2105(b) of 
the Act) for certain expenditures made under the Medicaid program.
    Section 201(b) of the NIHRA amended section 2105(g) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2006 and FY 2007 SCHIP allotments to allow the 
use of the enhanced Federal Medical assistance percentage (FMAP) rate 
(as determined under section 2105(b) of the Act) for certain 
expenditures made under the Medicaid program.

II. Provisions of This Notice

    The purpose of this notice is to set forth our procedure for 
redistributing unexpended FY 2004 and FY 2005 allotments in accordance 
with section 2104(h) of the Act as added by the NIHRA. In this regard, 
this notice applies solely to the redistribution of unexpended FY 2004 
and FY 2005 allotments and does not describe the procedure for the 
redistribution of any other unexpended fiscal year allotments. This 
notice also implements the continued authority for ``qualifying 
States'' to elect to receive a portion of certain of their available FY 
2006 and FY 2007 SCHIP allotments as increased Federal matching funds 
for certain expenditures in their Medicaid programs.

A. Methodology for Redistribution of the FY 2004 SCHIP Allotments for 
the Period Ending March 2007 To Eliminate FY 2007 SCHIP Funding 
Shortfalls

    Section 2104(f) of the Act provides for the Secretary to 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 
the allotments by the end of the initial 3-year period of availability. 
However, section 2104(h)(1) of the Act as added by section 201(a) of 
the NIHRA, specifies the application of special rules for the 
redistribution of the unexpended FY 2004 allotments in FY 2007 with 
respect to certain ``shortfall States.'' As described below, the 
procedure for redistribution of States' unexpended FY 2004 allotments 
remaining at the end of FY 2006 will be in accordance with the 
provisions of section 2104(h)(1) of the Act relating to the elimination 
of funding shortfalls in the SCHIP in FY 2007.
    Under section 2104(h)(7) of the Act as amended by the NIHRA, the 
special rules for the redistribution of the unexpended FY 2004 and FY 
2005 allotments in FY 2007 to address FY 2007 SCHIP funding shortfalls 
apply only to the 50 States and the District of Columbia; that is, this 
provision refers only to States which received an allotment under 
section 2104(b) of the Act, and under this section a State means only 
the 50 States and the District of Columbia, as appropriate. Therefore, 
section 2104(h)(1) of the Act does not apply to the Commonwealths and 
Territories, which received SCHIP allotments for FY 2007 under the 
authority of section 2104(c) of the Act. Accordingly, unless otherwise 
indicated in this notice in referring to the redistribution of the FY 
2004 allotments the term ``State'' means only the 50 States and the 
District of Columbia, as applicable.
    Under section 2104(h)(1)(B) of the Act, a shortfall State is a 
State with an approved child health plan under title XXI of the Act, 
for which the Secretary estimates, on a monthly basis using the most 
recent data available to the Secretary, that the State's projected FY 
2007 expenditures under this plan will exceed the sum of:
    i. The amount of the State's allotments for each of FY's 2005 and 
2006 that were not expended by the end of FY 2006;
    ii. The amount of the State's allotment for FY 2007.
    Furthermore, in determining whether a States' estimated FY 2007 
expenditures are in excess of the State's available allotment funds 
specified above, these expenditures are determined subject to the 
provisions of section 2104(h)(4) of the Act. In the context of the FY 
2004 redistributed allotments, section 2104(h)(4) of the Act indicates 
that these redistributed funds may only be used to make payments to 
States with respect to expenditures for (1) providing child health 
assistance or other health benefits coverage for populations eligible 
under the State child health plan (including under a waiver of this 
plan) on October 1, 2006; and (2) providing child health assistance or 
other health benefits coverage to an individual who is not a child or a 
pregnant woman at the regular FMAP only (not the enhanced FMAP). The 
redistributed FY 2004 allotments would be available for making payments 
to States for

[[Page 29504]]

expenditures for a child or a pregnant woman at the enhanced FMAP rate.
    In determining the amount of any unexpended FY 2004 allotments that 
might be redistributed to address a State's FY 2007 SCHIP funding 
shortfall, we first determined the amount, if any, of each State's FY 
2004 allotments that were not expended by the end of FY 2006 based on 
States' quarterly expenditure reports (Forms CMS-21 and CMS-64) as 
submitted and certified by States through November 30, 2006. We also 
determined the amounts of each States' unexpended FY 2005 and FY 2006 
allotments that were not expended by the end of FY 2006, also based on 
States' quarterly expenditure reports (Forms CMS-21 and CMS-64) as 
submitted and certified by States through November 30, 2006. The 
amounts of the States' allotments for FY 2007 are as published in the 
Federal Register on July 28, 2006 (71 FR 42854). We then determined the 
amounts of States' projected FY 2007 expenditures using the States' 
most recent estimates. In that regard, the most recent estimates of 
States' FY 2007 expenditures were obtained from the States' certified 
submissions of their February 2007 quarterly report forms CMS-21b and 
CMS-37. From these submissions we were able to determine States' 
projected expenditures for FY 2007 on a yearly and quarterly basis. For 
those States that cover adults in their SCHIP programs, we also 
obtained further breakouts of these expenditures between children, 
pregnant women, and adults (other than pregnant women, that is, parents 
and childless adults). Using this information, we determined the States 
that met the definition of Shortfall State in section 2104(h)(1)(B) of 
the Act.
    The next step was to determine on a monthly basis, beginning with 
October 2006, whether these shortfall States had sufficient allotment 
funds available to meet their estimated SCHIP expenditures. As 
indicated previously, this determination was made subject to the 
provisions of section 2104(h)(4)(B) of the Act, under which the FY 2004 
redistributed funds are only available for expenditures for populations 
eligible on October 1, 2006 and for an individual other than a child or 
pregnant woman at the regular FMAP rate. Under the standard operational 
procedures in the SCHIP program, States report their actual 
expenditures on a quarterly basis, and only after the end of the 
quarter. This process has been explicitly recognized in the SCHIP 
statute with respect to previous fiscal year reallotment determinations 
(for example, see section 2104(g)(3) of the Act, which references a 
November 30th date (that is, 2 months following the end of the 
associated fiscal year)). Accordingly, we have used 2 months as a 
reasonable time period for States to report their expenditures 
following the end of a fiscal year quarter. The most recent quarterly 
expenditure report submitted by States was for the fourth quarter of FY 
2006, and as indicated previously, we obtained the final States' 
submissions for this quarter/fiscal year by November 30, 2006. Using 
the 2 month period, the next expenditure report for the first quarter 
of FY 2007 (October 1, 2006 through December 31, 2006) would be 
expected as of the end of February 2007.
    With respect to States' estimated expenditures, a quarterly 
reporting process also applies. The most recent expenditure estimates 
for FY 2007 were submitted by States through their February 2007 
submissions of the Forms CMS-37 and CMS-21B. Typically, the reports of 
States' quarterly estimates are completed/certified by States before 
the beginning of the following quarter; for example, the States' 
submissions of their February 2007 quarterly estimate reports were 
completed/certified by the end of March 2007. The next scheduled 
quarterly estimate reports due from States would be the May 2007 
quarterly submission which would not be completed/certified by States 
until mid to late June 2007.
    Because of the timing and availability of the States' quarterly 
expenditure reports and the States' quarterly expenditure estimate 
reports, and in order to comply timely with the provisions of section 
2104(h)(1) of the Act (which requires that States' FY 2007 SCHIP 
funding shortfalls be addressed on a monthly basis), we propose to use 
the States' submissions of their February 2007 quarterly expenditure 
estimate reports to determine and estimate the amounts of the States' 
monthly SCHIP funding shortfalls through March 2007. That is, the 
February 2007 quarterly expenditure estimate reports submitted by 
States represent the most recent official/certified estimates that 
States have submitted and that were available through the end of March 
2007.
    In order to determine States' monthly SCHIP funding shortfalls, and 
in order to address the ``varying FMAP'' provision (in section 
2104(h)(4)(B) of the Act), we used the States' expenditure estimates 
for FY 2007 to determine an expenditure per diem amount for shortfall 
States; this was calculated by dividing the total projected 
expenditures for the first two quarters of FY 2007 by 182, the number 
of days in the period October 1, 2007 through March 31, 2007, the 
period ending with the date specified in section 2104(h)(2) of the Act 
as amended by NIHRA, and which is the end of the second quarter FY 
2007. Furthermore, in applying the States' estimates for determining 
the monthly SCHIP funding shortfalls, we assumed that the expenditures 
represented by these fiscal year estimates would be presented for 
payment to the State in each quarter without regard to the type of 
individual the expenditure is associated with. Finally, we determined 
two different expenditure per diem amounts. The first expenditure per 
diem amount was determined as if payment for the entire amount of a 
State's estimated expenditures for the first two quarters of FY 2007 
were available at the enhanced FMAP rate, without regard to the type of 
populations (children/pregnant women or non-pregnant adults) such 
expenditures represented. Therefore, the first expenditure per diem 
amount was determined by dividing the States' projected FY 2007 
expenditures through March 31, 2007 (representing the first two 
quarters of FY 2007), with no adjustment for the type of individual 
(child/pregnant woman or non-pregnant adult) for whom the expenditure 
was associated, by 182. This expenditure per diem amount is applied 
under the premise that payment for a State's expenditures prior to a 
SCHIP funding shortfall occurring (the point in time when all 
allotments have been exhausted) for the State would be made from the 
State's other allotments available in FY 2007 (specifically, the 
States' available FY 2005, 2006 and 2007 allotments, not including any 
FY 2004 redistribution). The varying FMAP provision is not applicable 
with respect to the other fiscal year allotment funds available to the 
State (the allotments other than the FY 2004 allotments).
    The second expenditure per diem amount is determined by adjusting 
the States' projected expenditures for the first two quarters of FY 
2007 to reflect the provision under section 2104(h)((4) of the Act, as 
amended by NIHRA, that payment for expenditures for an individual who 
is not a child or pregnant woman (that is, a non-pregnant adult) which 
is made from the FY 2004 redistribution amounts available to the 
shortfall States would be at the regular FMAP rate. This reflects the 
premise that once a State experiences a SCHIP funding shortfall 
situation during a month, that is, the point in time when all other 
available allotments (other than the potential FY 2004 redistribution 
amounts) have been exhausted, payment for the State's expenditures 
could only

[[Page 29505]]

be made from the FY 2004 redistributed amounts that might be made 
available to the State. Since application of the FY 2004 redistributed 
allotments are conditioned by the varying FMAP provision in section 
2104(h)(4)(B) of the Act, the second expenditure per diem amount was 
determined by dividing the estimated expenditures for the period ending 
March 31, 2007 by 182, after these expenditures were adjusted to 
reflect that adult expenditures are only matched at the regular FMAP 
rate (for States that have expenditures affected by this provision).
    For each shortfall state, we then divided its total allotments 
available in FY 2007 (not including any FY 2004 redistribution amounts) 
by the unadjusted expenditure per diem amount to determine the total 
number of days funded by the other allotments available to the State 
before it would experience a SCHIP funding shortfall. Again, in this 
regard, ``other allotments'' refers to the allotments available to the 
State not including any FY 2004 redistributed allotments. Using this 
approach, we determined the month and the day on which each shortfall 
state would no longer have any other SCHIP allotment funds available 
during the period ending March 31, 2007. Then, for days in the month 
after the shortfall occurred, the State would be in a shortfall 
situation and as available, amounts of unexpended FY 2004 allotment 
would be redistributed to these State(s) in amounts intended to 
eliminate this shortfall. Using this approach, on a month by month 
basis for the period ending March 31, 2007, we determined the FY 2004 
redistribution amounts for shortfall States for months in the first two 
quarters of FY 2007. This monthly amount is equal to the SCHIP funding 
shortfall amounts in the month, unless there were not sufficient FY 
2004 allotments remaining available to meet this monthly SCHIP funding 
shortfall. The SCHIP funding shortfall amount for a month is equal to 
the number of days in the month in which the State is estimated to 
experience a shortfall multiplied by the adjusted per diem rate. In a 
month when the amounts of the unexpended FY 2004 allotment available 
for redistribution is less than the total allotment funds needed by 
shortfall States, per section 2104(h)(1)(D) of the Act, these amounts 
available for redistribution in this month would need to be prorated, 
based on the shortfall expenditures in this month for the identified 
shortfall States.
    Using the approach described above, we identified the shortfall 
States in FY 2007, determined the amounts of these States' monthly 
shortfalls through the end of March 2007, and the amounts of the 
redistributed unexpended FY 2004 allotments determined to meet these 
shortfalls for the period ending March 2007. The monthly amounts of the 
redistributed FY 2004 allotments are included in this notice.

B. Methodology for Redistribution of the Remaining Unexpended FY 2004 
Allotments and Certain Amounts of Unexpended FY 2005 SCHIP Allotments 
to Eliminate FY 2007 SCHIP Funding Shortfalls in the Months After March 
31, 2007

    Under section 2104(f) of the Act, the Secretary is required to 
determine an appropriate procedure to redistribute the entire amount of 
States' unexpended SCHIP allotments following the end of the associated 
initial 3-year period of availability only to those States that fully 
expended the allotments by the end of the initial 3-year period of 
availability. However, section 2104(h)(2) of the Act as amended by the 
NIHRA, provides for an earlier redistribution of certain amounts of 
States' FY 2005 allotments. Specifically, this section requires the 
redistribution in FY 2007 of certain amounts of States' unexpended FY 
2005 allotments estimated to be available in months following March 31, 
2007, in order to address and reduce certain identified States' SCHIP 
funding shortfalls occurring in FY 2007.
    Under section 2104(h)(7) of the Act as amended by the NIHRA, the 
special rules for the redistribution of the unexpended FY 2004 and FY 
2005 allotments in FY 2007 to address FY 2007 SCHIP funding shortfalls 
apply only to the 50 States and the District of Columbia. That is, this 
provision refers only to States which received an allotment under 
section 2104(b) of the Act, and under this section a State means only 
the 50 States and the District of Columbia, as appropriate. Therefore, 
section 2104(h)(2) of the Act does not apply to the Commonwealths and 
Territories, which received SCHIP allotments for FY 2007 under the 
authority of section 2104(c) of the Act. Accordingly, unless otherwise 
indicated in this notice in referring to the redistribution of the FY 
2005 allotments the term ``State'' means only the 50 States and the 
District of Columbia, as applicable.
    Under section 2104(h)(2)(B) of the Act, a shortfall State is a 
State with an approved child health plan under title XXI of the Act, 
for which the Secretary estimates, subject to paragraph (4)(B) and on a 
monthly basis using the most recent data available to the Secretary as 
of March 31, 2007, that its projected FY 2007 expenditures under this 
plan will exceed the sum of:
    i. The amount of the State's allotments for each of FYs 2005 and 
2006 that were not expended by the end of FY 2006;
    ii. The amount, if any, of the State's FY 2004 redistribution, as 
determined above, in accordance with section 2104(h)(1) of the Act; and
    iii. The amount of the State's allotment for FY 2007.
    In determining whether a State's estimated FY 2007 expenditures are 
in excess of the State's allotment funds available in FY 2007, these 
expenditures are determined, in accordance with section 2104(h)(4) of 
the Act. Section 2104(h) (4) of the Act indicates that Federal payments 
to a State from the FY 2005 redistributed allotment amounts with 
respect to expenditures for providing child health assistance or other 
health benefits coverage is for populations eligible under the State 
child health plan (including under a waiver of this plan) on October 1, 
2006 and payment to an individual who is not a child or a pregnant 
woman, using the FY 2005 redistributed allotments may only be at the 
regular FMAP (not the enhanced FMAP). Federal payments from the FY 2005 
redistributed allotments for expenditures for a child or a pregnant 
woman using the redistributed FY 2005 allotments would be available at 
the enhanced FMAP.
    Section 2104(h)(2) of the Act provides for a redistribution of 
States' unexpended FY 2005 allotments in FY 2007. However, section 
2104(h)(3) of the Act limits the amounts and the States from which 
these unexpended FY 2005 allotments would be redistributed. 
Specifically, the States from which these unexpended FY 2005 allotment 
funds would be redistributed are identified as follows, based on the 
most recent data as of March 31, 2007:
    i. The States have not expended all of their FY 2005 allotments by 
March 31, 2007.
    ii. The total of these States' estimated available allotments (as 
of March 31, 2007) is at least equal to 200 percent of the States' 
total projected SCHIP expenditures for FY 2007.
    In the case of States identified as meeting the above conditions, 
the amount of the FY 2005 allotments that would be redistributed from 
them is limited to the lesser of:
    i. 50 percent of their unexpended FY 2005 allotments available as 
of March 31, 2007, or
    ii. $20 million.
    By March 31, 2007, all States submitted their first quarter FY 2007 
expenditure reports; however, at that

[[Page 29506]]

time the second quarter of FY 2007 had only just ended, and the 
associated expenditure reports have not yet have been submitted by 
States. However, the States' February 2007 quarterly submissions of 
estimated expenditure reports for FY 2007 were submitted by March 31, 
2007. In that regard, in accordance with section 2104(h)(2) of the Act, 
we used the States' submissions of their February 2007 quarterly 
expenditure estimate reports of their FY 2007 expenditures in order to 
determine the following:
     The amounts of SCHIP allotment funds (including the FY 
2005 allotments and any redistributed amounts of unexpended FY 2004 
allotments) that would be available as of March 31, 2007; and
     The amounts of States' estimated expenditures for FY 2007 
on an annual basis and for each quarter of the fiscal year.
    Using this information we were able to determine projected 
estimates of States' SCHIP funding shortfalls for months after March 
31, 2007, and the amount of the unexpended FY 2005 allotments available 
as of that date to be used to address these SCHIP funding shortfalls.
    In order to determine States' monthly SCHIP funding shortfalls 
after March 31, 2007, and in order to address the ``varying FMAP'' 
provision (referenced in section 2104(h)(4)(B) of the Act), we used the 
States' expenditure estimates for FY 2007 obtained from the February 
2007 quarterly expenditure estimate reports to determine expenditure 
per diem amounts for the FY 2007 shortfall States, identified as 
discussed in section A above. The per diem amounts for the period after 
March 31, 2007 were calculated by dividing the total projected 
expenditures for the period April 1, 2007 through September 30, 2007 
(as provided by States' February 2007 submission) by 183, the number of 
days in that period. Furthermore, in applying the States' estimates for 
determining the monthly SCHIP funding shortfalls after March 31, 2007, 
we assume that the expenditures represented by these estimates would be 
presented for payment to the State without regard to the type of 
individual (child/pregnant woman or non-pregnant adult) with which the 
expenditure is associated. Finally, we determined two different 
expenditure per diem amounts. The first per diem amount was determined 
as if payment for all of the State's estimated expenditures for the 
period April 1, 2007 through September 30, 2007 were available at the 
enhanced FMAP rate. Therefore, the first expenditure per diem amount is 
determined by dividing the States' projected FY 2007 expenditures for 
the period after March 31, 2007, with no adjustment made for the type 
of individual (child/pregnant woman or adult) for whom the expenditure 
was associated, by 183. This first expenditure per diem amount is 
applied under the premise that a State's expenditures prior to a 
shortfall occurring for the State (the point in time when all 
allotments have been exhausted) would be matched with the other (if 
any) fiscal year allotments available to the State in FY 2007 (that is, 
the States' available FY 2005, 2006 and 2007 allotments, and also 
including any FY 2004 redistribution amounts available to the State). 
The varying FMAP provision would not be applicable for these other 
allotment funds available to the State (not including the FY 2004 and 
FY 2005 redistributions).
    The second expenditure per diem amount is determined by adjusting 
the States' projected FY 2007 expenditures to reflect the condition 
that payment for expenditures for an individual who is not a child or 
pregnant woman would be made at the regular FMAP rate using any FY 2005 
redistribution amounts available to the shortfall State. This reflects 
the premise that once a State reaches a shortfall situation during a 
month (that is, all other available allotments, other than the FY 2005 
redistribution amounts have been exhausted), payment for the FY 2007 
shortfall State's expenditures would only be made from the FY 2005 
redistributed amounts that might be made available. Since application 
of the FY 2005 redistributed allotments is conditioned by the varying 
FMAP provision (refer to section 2104(h)(4)(B) of the Act), the second 
expenditure per diem amount is determined by dividing the estimated 
expenditures for FY 2007 for the period after March 31, 2007 (as 
adjusted to reflect the adult expenditures affected by the varying FMAP 
provision for States that have these expenditures) by 183.
    For each shortfall state, we divided its total available allotments 
(other than the potential FY 2005 redistributed amounts, if any) by the 
unadjusted expenditure per diem amount to determine the total number of 
funded days the State had before it was in a shortfall situation. This 
would determine the month and the day on which the shortfall State 
would no longer have any (other) allotment funds available. For days in 
the month beginning with the day the SCHIP funding shortfall occurs, 
the State is in shortfall and as available, amounts of the unexpended 
FY 2004 allotments (remaining after the redistributions for the months 
prior to April 2007) and the unexpended FY 2005 allotments (estimated 
to be unexpended at the end of March 2007 and available for 
redistribution on April 1, 2007) would be redistributed to these 
State(s). On a month by month basis, we determined the FY 2004 and FY 
2005 redistribution amounts to be provided to shortfall States for 
months after March 31, 2007.
    In particular, beginning with April 1, 2007, we determined the 
amount of the remaining unexpended FY 2004 allotments to be 
redistributed to each shortfall state with a shortfall projected for 
April by determining the April 2007 shortfall amount. The April 
shortfall amount for each shortfall State was determined by multiplying 
the State's number of shortfall days in April by the adjusted 
expenditure per diem amount. The remaining unexpended FY 2004 
allotments were then prorated by the April shortfall amounts for each 
State (since the amounts of the remaining unexpended FY 2004 allotments 
were not sufficient to meet the entire April shortfall). That is, per 
section 2104(h)(1)(D) of the Act, unexpended FY 2004 allotment amounts 
available for redistribution in a month must be prorated or reduced 
proportionally, based on the shortfall expenditures in the month. From 
the unexpended FY 2005 allotments determined to be available as of 
April 1, 2005 to meet the remaining April shortfall, we then 
redistributed to each shortfall state with a projected April shortfall 
an amount equal to the remaining April shortfall after the provision of 
the FY 2004 redistribution for April.
    Finally, we determined the redistribution of FY 2005 allotments for 
May 2007. This was determined by multiplying the number of shortfall 
days in May for each shortfall State by the adjusted per diem amount. 
Since the remaining unexpended FY 2005 allotments available for 
redistribution in May 2007 (after the April redistribution) were 
projected to be insufficient to meet the total projected May 2007 
shortfall, the final FY 2005 redistribution amounts for May were 
prorated, based on the total shortfall for the month. That is, per 
section 2104(h)(2)(D) of the Act, FY 2005 allotment amounts available 
for redistribution in a month must be prorated or reduced 
proportionally, based on the shortfall expenditures in the month.

C. Retrospective Adjustment

    Section 2104(h)(5) of the Act provides discretion for the Secretary 
to adjust the estimates and determinations of FY

[[Page 29507]]

2004 and FY 2005 redistributions following the end of FY 2007 under 
sections 2104(h)(1), (2) and (3) of the Act, on the basis of the actual 
expenditures reported by States no later than November 30, 2007. 
However, in no case may the amounts of the FY 2005 allotments 
redistributed from States exceed the amounts that were determined based 
on the most recent data available as of March 31, 2007. As described, 
above, these amounts were determined based on the States' submissions 
of the February 2007 quarterly estimate reports of their FY 2007 
expenditures, and using these estimates would not exceed the lesser of 
50 percent of the States' available FY 2005 allotments as would be 
available as of March 31, 2007 or $20 million. Furthermore, under 
section 2104(h)(5)(B) of the Act, only the actual unexpended FY 2005 
allotments remaining at the end of FY 2007 (as determined following the 
submission of States' fourth quarter FY 2007 expenditure reports 
submitted by November 30, 2007) may be available for any retrospective 
adjustments that may be made under this provision. Finally, under 
section 2104(h)(5)(C) of the Act, any retrospective adjustment may not 
provide for the reduction of any States' FY 2006 or FY 2007 allotments.

D. 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:
    (i) Title XIX SCHIP-related expenditures for which payment is made 
at the enhanced FMAP (section 2105(a)(1)(A) of the Act);
    (ii) 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);
    (iii) Child health assistance for targeted low-income children in 
the form of providing health benefits coverage that meets the 
requirements of section 2103 (per section 2105(a)(1)(C) of the Act);
    (iv) 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, Public Law 108-74, as amended by Public 
Law 108-127, also added a 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. Furthermore, as amended by section 6103 of the DRA, qualifying 
States may elect to use up to 20 percent of their available FY 2004 and 
FY 2005 allotments for this purpose. Finally, as amended by section 
201(b) of the NIHRA, qualifying States may elect to use up to 20 
percent of their available FY 2006 and FY 2007 allotments. As described 
in the Federal Register published on July 23, 2004 (69 FR 44026), 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. We will apply the same approach with 
respect to the FY 2006 and FY 2007 20 percent allowances determined in 
accordance with section 201(b) of the NIHRA.
    In general, in accordance with the ordering of allotments and 
expenditures provisions, the expenditures of States eligible for the FY 
2004 and FY 2005 redistribution amounts will be applied against the FY 
2004 and FY 2005 redistribution amounts.

E. No Ordering Election for FY 2004 and FY 2005 Redistributed Amounts

    In the past, for purposes of applying States' expenditures against 
the redistributed allotments, States receiving redistributed allotment 
amounts were given flexibility to decide the ordering of the 
redistributed allotments with respect to the States' other available 
allotments. This allowed the redistribution States to optimize the use 
of these redistributed funds. However, because of the statutory 
provisions made by the NIHRA related to the determination of shortfall 
States and the amount of the funding shortfalls on a monthly basis, and 
the requirement that these redistributed allotments be available only 
after the States' other SCHIP allotment funds have been exhausted, we 
believe that the FY 2004 and FY 2005 redistributed allotments must be 
ordered after the States' other available allotments are exhausted. 
Therefore, shortfall States must spend their available FY 2005, FY 2006 
and FY 2007 allotments first, before any redistributed FY 2004 and FY 
2005 allotment amounts. Furthermore, since the unexpended FY 2004 
allotments must be redistributed before any redistribution of the FY 
2005 allotments, the FY 2004 redistributed allotment amounts must be 
ordered prior to any FY 2005 redistributed allotment amounts.
    As specified in section 2104(h)(6) of the Act, as added by section 
201(a) of the NIHRA, the amounts of the unexpended FY 2004 and FY 2005 
allotments redistributed to a State in FY 2007 are only available for 
expenditure by the State through September 30, 2007; and any amounts of 
these redistributed allotments remaining at the end of FY 2007, shall 
not be subject to redistribution under section 2104(f) of the Act.
    As part of the redistribution process, prior to making the FY 2004 
and FY 2005 redistribution funds actually available, we contacted all 
of the States we estimated to be eligible for these fiscal year 
redistributions and all of the States contributing towards the FY 2005 
redistribution (as identified in section 2104(h)(3) of the Act) in 
order to explain the redistribution process and associated SCHIP 
allotment amounts as described in this notice. The amounts of such 
States' FY 2004 and FY 2005 redistributed allotment amounts and the 
reduction of the FY 2005 allotments, will be incorporated into the 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 amounts of 
the FY 2004 and the FY 2005 redistributed allotments and the reduction 
to the FY 2005 allotments will be entered on this form, and the 
Medicaid and SCHIP expenditure system will automatically apply 
expenditures reported on the quarterly expenditure reports for FY 2007 
against the FY 2004 and FY 2005 redistributed amounts and the revised 
FY 2005 allotments available in FY 2007, and the other SCHIP allotments 
available in FY 2007.

F. Special Rule for Coverage for Populations Eligible on October 1, 
2006

    Under section 2104(h)(4)(A) of the Act, as added by the NIHRA, a 
State may use amounts of FY 2004 allotments or FY 2005 allotments, 
redistributed under section 2104(h) of the Act, only for expenditures 
for providing child health assistance or other health benefits coverage 
for populations eligible for assistance or benefits under

[[Page 29508]]

its approved State child health assistance plan (including a waiver of 
this plan) as in effect on October 1, 2006. During FY 2007, if a State 
which received amounts of redistributed FY 2004 or FY 2005 allotments 
does not provide eligibility for any populations in addition to those 
eligible under its approved plan (including a waiver of this plan) as 
in effect on October 1, 2006, we will deem this requirement to be met 
and no special/separate reporting of expenditures related to the 
populations eligible in accordance with the State's plans (or waiver of 
this plan) as in effect on October 1, 2006 would be required . However, 
if a State receiving amounts of redistributed FY 2004 or FY 2005 
allotments does provide eligibility for any populations in addition to 
those eligible under its approved plan (including a waiver of this 
plan) as in effect on October 1, 2006, this State will need to 
separately report the FY 2007 expenditures it reports to CMS for these 
additional populations, in accordance with reporting requirements 
determined by CMS. Separately reporting these expenditures will ensure 
that none of the FY 2007 expenditures for these additional populations 
will be applied against the FY 2004 or FY 2005 redistributed 
allotments.

G. Continued Authority for Qualifying States To Use Certain Funds for 
Medicaid Expenditures

    Section 1(b) of Public Law 108-74, as amended by Public Law 108-
127, added new section 2105(g) to the Act under which certain 
``qualifying States'' that met prescribed criteria could elect to use 
up to 20 percent of the States' available SCHIP allotments for FY 1998, 
1999, 2000, or 2001 as additional Federal financial participation for 
expenditures under the State's Medicaid program, instead of 
expenditures under the State's SCHIP. The Federal Register published on 
July 23, 2004 (69 FR 44026) described the definition of qualifying 
State and indicated how the 20 percent allowances for these States 
would be calculated and applicable expenditures tracked against them. 
Section 6103 of the DRA amended section 2105(g)(1)(A) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2004 and FY 2005 SCHIP allotments. Finally, 
section 201(b) of the NIHRA amended section 2105(g)(1)(A) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2006 and FY 2007 SCHIP allotments. The 20 percent 
allowances for qualifying States associated with the FY 2006 and FY 
2007 allotments have been calculated in the same way as we determined 
and tracked the 20 percent allowances associated with the FY 1998 
through FY 2002 fiscal years. The availability of the 20 percent 
allowances for FY 2006 and FY 2007, and the application of expenditures 
against these allowances, will be in accordance with the same 
provisions as in the July 23, 2004 Federal Register.

H. Tables for FY 2004 Unexpended Allotments, Calculation of FY 2004 and 
FY 2005 Redistribution , and Determination of Available FY 2005 
Allotments for Redistribution

    In Table 1 of this notice we set forth the unexpended FY 2004 SCHIP 
allotments remaining at the end of FY 2006. We established the amount 
of States' unexpended FY 2004 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, 2006. These 
expenditures are applied and tracked against the States' FY 2004 
allotments (as published in the Federal Register on August 22, 2003 (68 
FR 50784)) 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, 2006, all States reported and certified their FY 
2006 fourth quarter expenditures (representing the last quarter of the 
3-year period of availability for FY 2004). Expenditures reflected in 
Table 1 below were taken from our Medicaid Budget and Expenditure 
System/State Children's Health Program Budget and Expenditure System 
(MBES/CBES) ``master file,'' which represents the State's official 
certified SCHIP and Medicaid expenditure reporting system records 
related to the determination of the amounts of the unexpended FY 2004 
allotments. Based on States' expenditure reports submitted and 
certified through November 30, 2006, the total amount of States' FY 
2004 SCHIP allotments that were unexpended at the end of the 3-year 
period ending September 30, 2006, is $146,879,932. These amounts were 
used to determine the States' FY 2004 redistributed allotment amounts 
set forth in Table 3 of this notice.
Tables for Calculating the SCHIP FY 2004 Redistributed Allotments
    The following describes Tables 1 through Table 3, which together 
presents the redistributed amounts of the unexpended FY 2004 and FY 
2005 SCHIP allotments for purposes of eliminating FY 2007 SCHIP funding 
shortfalls.
    A total of $3,175,200,000 was allotted nationally for FY 2004, 
representing $3,142,125,000 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, 2006, 44 States and 
the District of Columbia fully expended their FY 2004 allotments, 7 
States did not fully expend their FY 2004 allotments, and all 5 of the 
Commonwealths and Territories fully expended their FY 2004 allotments. 
For the 7 States that did not fully expend their FY 2004 allotments, 
the total unexpended FY 2004 allotments is $146,879,932; this amount is 
available for redistribution to States with shortfalls in FY 2007, in 
accordance with the provisions of the NIHRA in FY 2007. The calculation 
of the total unexpended FY 2004 allotments remaining at the end of FY 
2006 is detailed in Table 1 below.
    Based on the States' February 2007 projections of their FY 2007 
SCHIP expenditures, there are 11 States projected to have a SCHIP 
shortfall in FY 2007 totaling about $932 million. However, only 5 of 
these States are projected to have a shortfall for the period October 
1, 2006 through March 31, 2007 (Illinois, Maryland, Massachusetts, New 
Jersey, and Rhode Island); in particular, we projected that the 
shortfalls for these states begin in January 2007. In accordance with 
the provisions of section 2104(h)(1) of the Act, as amended by NIHRA, 
we estimated the shortfalls for the 5 States for the months of January 
through March 2007 total about $86.5 million. Since there is a total of 
about $146.9 million in unexpended FY 2004 allotments available for 
redistribution in FY 2007, the entire shortfall for months prior to 
April 2007 can be met, The redistribution of unexpended FY 2004 
allotments for the months of January through March 2007 shortfalls is 
included in Table 3 below.
    There were 13 States identified under section 2104(h)(3) of the 
Act, as amended by NIHRA, as having unexpended FY 2005 allotment 
amounts available as of March 31, 2007 and that also had total 
available allotments equal to at least 200 percent of their projected 
FY 2007 expenditures available as of March 31, 2007. We determined this 
using the States' February 2007 submissions of their FY 2007 projected 
expenditures. For these States, the lesser of $20 million, or fifty 
percent of their unexpended FY 2005 allotments, available as of March 
31,

[[Page 29509]]

2007, is available for redistributions for states with FY 2007 
shortfalls in months after March 2007. Based on this, we determined 
that a total of $137,832,296 in unexpended FY 2005 allotments from 
theses 13 states is available for redistribution to the shortfall 
States in FY 2007 for months after March 2007. Table 3 below provides 
details regarding this determination.
    Of the 11 States projected to have shortfalls in FY 2007, 6 of them 
are projected to have shortfalls in April and May 2007 (Georgia, 
Illinois, Maryland, Massachusetts, New Jersey, and Rhode Island). Based 
on the February 2007 estimates of States' projected FY 2007 
expenditures, the total shortfall for these 6 States for the month of 
April is estimated at about $96.9 million. About $60.3 million in 
unexpended FY 2004 allotments remained after the redistribution for the 
months prior to April 2007; therefore, this amount is available to meet 
the FY 2007 shortfall for the month of April. The remaining April 
shortfall after the FY 2004 redistribution is about $36.6 million 
($96.9 million minus $60.3 million). This remaining April shortfall is 
fully covered by the $137.8 million in unexpended FY 2005 allotments 
available for redistribution for months after March 2007. The remaining 
$101.2 million in unexpended FY 2005 allotments is available to be 
applied to projected May 2007 shortfall amounts. The projected May 2007 
shortfall for the 6 states projected to have shortfalls in May is about 
$116.6 million; therefore, the remaining $101.2 million in FY 2005 
allotments available for redistribution to address May 2007 shortfalls 
has been prorated among the 6 May shortfall States, based on the May 
shortfall projections. The amounts of the remaining redistributed FY 
2004 allotments and the redistribution of the FY 2005 allotments for 
the April and May 2007 shortfalls is included in Table 3 below.

Key to Table 1-Unexpended SCHIP Allotments for Fiscal Year 2004

    Table 1 presents the amounts of the unexpended FY 2004 allotments 
remaining at the end of FY 2006 and available for redistribution in FY 
2007 to address the FY 2007 SCHIP funding shortfalls for the 50 States 
and the District of Columbia.

Column/Description

    Column A = State. Name of State, District of Columbia, the 
Commonwealth or Territory.
    Column B = FY 2004 Allotments. This column contains the FY 2004 
SCHIP allotments for all States, which were published in the Federal 
Register on October 22, 2003 (68 FR 50784).
    Column C = Expenditures Applied Against FY 2004 Allotment. This 
column contains the cumulative expenditures applied against the FY 2004 
allotments, as reported and certified by all States through November 
30, 2006.
    Column D = Unexpended FY 2004 Allotments or ``None''. This column 
contains the amounts of unexpended FY 2004 SCHIP allotments for States 
that did not fully expend the allotments during the 3-year period of 
availability for FY 2004 (FYs 2004 through 2006), and is equal to the 
difference between the amounts in Column B and Column C. For States 
that did fully expend their FY 2004 allotments during the 3-year period 
of availability, the entry in this column is ``None.'' The total of the 
entries in Column D, $146,879,932, represents the total amount of 
unexpended FY 2004 allotments remaining at the end of FY 2006 and 
available for redistribution in FY 2007.

Key to Table 2--Determination of Amounts of Unexpended FY 2005 
Allotments Available Mid-FY2007 for Redistribution

    Table 2 reflects the amounts of unexpended FY 2005 allotments 
determined to be available as of March 31, 2007 based on the States' 
February 2007 submissions of their FY 2007 estimated expenditures, 
determined in accordance with the provisions of section 2104(h)(3) of 
the Act, as amended by the NIHRA and as described in this Federal 
Register notice. These amounts will be used to eliminate the States' FY 
2007 SCHIP funding shortfalls occurring in the period beginning April 
2007 through the redistribution process described in this Federal 
Register notice; the amounts of this FY 2005 redistribution is 
contained in Table 3 along with the redistributed amounts of the FY 
2004 allotments.

Column/Description

    Column A = STATE. Column A contains the name of the State or the 
District of Columbia.
    Column B = Total Allots. Remaining 3/31/2007. Column B contains the 
total allotments remaining available to each State in FY 2007 as of 
March 31, 2007. These amounts were determining by applying the 
projected expenditures for each State for the first two quarters of FY 
2007 (October 1, 2006 through March 31, 2007) against the State's 
available allotments in that period (including the State's unexpended 
FY 2005 allotments carried over from FY 2006, unexpended FY 2006 
allotments carried over from FY 2006, and FY 2007 allotments).
    Column C = FY 2005 Allots. Remaining 3/31/2007. Column C contains 
the total FY 2005 allotments remaining available to each State in FY 
2007 as of March 31, 2007. These amounts were determining by applying 
the projected expenditures for each State for the first two quarters of 
FY 2007 (October 1, 2006 through March 31, 2007) against the State's 
available allotments in that period (including the State's unexpended 
FY 2005 allotments carried over from FY 2006, unexpended FY 2006 
allotments carried over from FY 2006, and FY 2007 allotments).
    Column D = Total Yearly Projected FY 2007 Expenditures. Column D 
contains the total Federal share projected SCHIP expenditures for FY 
2007, as projected by the State and submitted to CMS in its February 
2007 submission.
    Column E = 200 Percent of FY 2007 Proj. Expends, 2 x D. Column E 
contains 200 percent of the amount of the State's projected Federal 
share SCHIP FY 2007 expenditures contained in Column D.
    Column F = 2104(h)(3)(B) Test, Tot. Mid-FY07 Est. Exp., B >= E. 
Column F contains the results of the test applied under section 
2104(h)(3)(B) of the Act. That test, is whether the total available 
SCHIP allotments projected to be available as of March 31, 2007 
(indicated in Column B) is at least equal to 200 percent of the State's 
projected FY 2007 SCHIP expenditures (indicated in Column E). If the 
amounts for the State meet this test, the entry in Column E will 
indicate ``YES''. If the amounts for the State do not meet this test, 
the entry in Column E will indicate ``Not Met''.
    Column G = Amount Contributed to FY 05 Redist., Min (.5xC, $20M). 
For the States that Column F indicates the test is met (Column F 
indicates ``YES''), Column G contains the portion of that State's FY 
2005 allotment that is available as of March 31, 2007 which will be 
adjusted applied to the FY 2007 SCHIP funding shortfalls. For the 
States meeting the test, the amount in Column G is determined as the 
lesser of $20 million, or 50 percent of the amount of the State's 
available FY 2005 allotment as of March 31, 2007 (indicated in Column 
C).

Key to Table 3--Amounts of Unexpended FY 2004 and FY 2005 Allotments 
Redistributed in FY 2007

    Table 3 contains the redistributed amounts of unexpended FY 2004 
allotments and FY 2005 allotments for addressing States' funding 
shortfalls in FY 2007, determined in accordance with section 2104(h) of 
the Act, as

[[Page 29510]]

amended by NIHRA. These amounts were determined using States' SCHIP 
expenditure projections for FY 2007 as provided by the States in their 
February 2007 CMS-37 and CMS-21B quarterly submissions.

Column/Description

    Column A = STATE. Column A contains the name of the State or the 
District of Columbia.
    Column B = FY 2007 Tot. Avail. Allots NOT Including Redist. 
Amounts. Column B contains the total allotments available to each State 
in FY 2007, not including any potential unexpended fiscal year 
allotments a State may receive in FY 2007 as a redistribution such as 
the FY 2004 or FY 2005 redistributed allotments. Specifically, this 
amount includes, if any, the sum of the amounts of each State's: 
Unexpended FY 2005 allotments carried over from FY 2006, unexpended FY 
2006 allotments carried over from FY 2006, and FY 2007 allotments.
    Column C = FY 2007 Projected Fed. Share Expenditures. Column C 
contains the Federal share amount of each State's projected FY 2007 
SCHIP expenditures, as contained in the February 2007 States' quarterly 
budget submissions of the CMS-37 and CMS-21B. These amounts reflect the 
availability of a Federal matching rate for the State's expenditures 
equal to the full SCHIP enhanced FMAP rate for all individuals.
    Column D = FY 2007 Projected Shortfall. Col C--B. Column D contains 
the amount, if any, of the State's shortfall for the entire FY 2007, 
calculated as the amount in Column C minus the amount in Column B. If 
the amount in Column B is greater than or equal to the amount in Column 
C, there would be no shortfall in FY 2007 and the entry in Column D is 
``No SF''.
    Columns E Through L, General. Columns E through L contain the 
amounts of the unexpended FY 2004 and FY 2005 allotments redistributed 
for States with projected shortfalls in FY 2007, and in particular, 
with projected shortfalls for the indicated months of January through 
May 2007, determined in accordance with the methodology for such 
redistributions described in this Federal Register. Redistributed 
allotment amounts in these columns reflect the amounts of the estimated 
shortfalls; specifically, these amounts were determined based on the 
number of projected shortfall days in the indicated month funded at the 
``adjusted per diem'' expenditure amount (reflecting that non-pregnant 
adults may only be funded from the redistributed FY 2004 or FY 2005 
allotments at the regular FMAP rate), and proportionally prorated, if 
appropriate. For States not projected to have shortfalls in FY 2007, 
the entry in these columns is ``na''. For States that are projected to 
have a shortfall in FY 2007 which occurs after May 2007, the entry in 
this column is also $0 since the FY 2004 and FY 2005 redistribution 
amounts are exhausted by May 2007. For States projected to have funding 
shortfalls through May 2007, but are not projected to experience a 
shortfall in the particular month, the entry in these columns would 
also be $0.
    Column E = FY 04 SF Redist. For JAN. 2007. Column E contains the 
amount of the unexpended FY 2004 allotments redistributed to address 
estimated SCHIP funding shortfalls for the State for January 2007.
    Column F = FY 04 SF Redist. For FEB. 2007. Column F contains the 
amount of the unexpended FY 2004 allotments redistributed to address 
estimated SCHIP funding shortfalls for the State for February 2007.
    Column G = FY 04 SF Redist. For Mar. 2007. Column G contains the 
amount of the unexpended FY 2004 allotments redistributed to address 
estimated SCHIP funding shortfalls for the State for March 2007.
    Column H = FY 04 SF Redist. For Apr. 2007. Column H contains the 
amount of the unexpended FY 2004 allotments redistributed to address 
estimated SCHIP funding shortfalls for the State for April 2007.
    Column I = Total FY 2004 Redist. E+F+G+H. Column I contains the 
total unexpended FY 2004 allotments redistributed to each State for 
January, February, March, and April 2007, respectively, calculated as 
the sum of the amounts in Column E, F, G, and H. With respect to States 
for which there is no redistribution of FY 2004 allotments for these 
months, the entry in Column I is $0.
    Column J = FY 05 SF Redist. For Apr. 2007. Column J contains the 
amount of the estimated FY 2005 allotments available as of March 31, 
2007 and redistributed to address estimated SCHIP funding shortfalls 
for the State for April 2007.
    Column K = FY 05 SF Redist. For May 2007. Column K contains the 
amount of the estimated FY 2005 allotments available as of March 31, 
2007 and redistributed to address estimated SCHIP funding shortfalls 
for the State for May 2007.
    Column L = Total FY 2005 Redist. J + K. Column L contains the total 
estimated FY 2005 allotments available as of March 31, 2007 and 
redistributed to each State for April and May 2007, respectively, 
calculated as the sum of the amounts in Column J and K. With respect to 
States for which there is no redistribution of FY 2005 allotments for 
these months, the entry in Column L is $0.

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

III. 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 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.
    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 with respect to the FY 2004 and FY 2005 redistribution 
amounts, totaling

[[Page 29514]]

about $146.9 million and $137.8 million, respectively, this notice is 
economically significant. However, because this notice only announces 
the redistribution of funds based on the formulae specified in statute 
and does not put forward any administrative policies, we have not 
performed an analysis beyond that which is presented in section II. (H) 
above. The 50 States and the District of Columbia's FY 2004 SCHIP 
allotments (totaling $3,142,125,000) and FY 2005 allotments (totaling 
$4,039,875,000), were originally published in a notice in the Federal 
Register (68 FR 50784 and 69 FR 52700, respectively) and allotted to 
States in FY 2004 and FY 2005, respectively. This notice does not 
revise the amounts of the FY 2004 and FY 2005 allotments originally 
made available to the States, but rather, sets forth the procedure for 
redistributing the amounts of those FY 2004 and FY 2005 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) or 
available mid FY 2007 (under the provision of section 2104(h) of the 
Act), and announces the amounts of the FY 2004 and FY 2005 allotments 
to be redistributed to the redistribution States, the methodology for 
determining the amounts of the FY 2005 allotments to be redistributed 
in FY 2007 and announces these amounts determined in accordance with 
this methodology, and indicates the availability of these redistributed 
allotment amounts to the end of 2007, in accordance with SCHIP statute, 
as amended by the NIHRA.
    Because State participation in the SCHIP program 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.
    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 small governmental 
jurisdictions. 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 1 year. Individuals and States are not 
included in the definition of a small entity. We are not preparing an 
analysis for the RFA because we have determined that this notice 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 Core-Based 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined that 
this notice will not have a significant impact on 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 whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. 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 2004 or FY 2005 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 Delay in Effective Date

    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 2004 
redistributed allotments and the methodology for determining the FY 
2005 redistributed allotment amounts to eliminate the FY 2007 funding 
shortfalls in SCHIP because a comment period and delay in effective 
date are unnecessary because: (1) States were already given informal 
notice of proposed amounts; and (2) redistribution was carried out in 
accordance with a statutory formula that permitted limited discretion.
    We determined the amounts of the FY 2004 redistributed allotments 
and the amounts of the FY 2005 redistributed allotments to eliminate 
the FY 2007 SCHIP funding shortfall 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, 2006 to submit their required 
fourth quarter FY 2006 expenditure reports. In determining both the FY 
2004 redistributed amounts and the FY 2005 redistributed amounts we 
used State FY 2007 projected expenditures as contained in the most 
recent (February 2007) States' quarterly budget report submissions. The 
redistributed FY 2004 and FY 2005 allotments make available Federal 
funds to the recipient redistribution States, which is especially 
important for those redistribution States that may need these funds.
    Furthermore, under section 2104(h)(6) of the Act, the FY 2004 and 
FY 2005 redistributed allotments to eliminate the FY 2007 shortfalls in 
SCHIP funding, are only available through September 30, 2007. We 
believe it is important that we issue these redistributed allotments 
and additional allotments as soon as possible. Delay in States 
receiving those funds could result in disruption of program operations. 
Therefore, in the interest of ensuring that the FY 2004 and FY 2005 
redistributed allotments to eliminate the FY 2007 shortfall in SCHIP 
funding are made available without delay to those States that need 
these 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.

[[Page 29515]]

    In accordance with the provisions of this notice, we have 
determined the amounts of the FY 2004 and FY 2005 redistributed 
allotment funds to eliminate the FY 2007 shortfalls in SCHIP funding 
available to shortfall States effective immediately upon publication of 
this notice. These FY 2004 and FY 2005 redistributed allotment funds 
are subject to final adjustment based on comments received in response 
to this notice.

    Authority: (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: February 16, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: February 26, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 07-2607 Filed 5-25-07; 8:45 am]
BILLING CODE 4120-01-P