[Federal Register Volume 73, Number 245 (Friday, December 19, 2008)]
[Notices]
[Pages 77704-77714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30267]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2274-N]
RIN 0938-AP09


Medicaid Program; Fiscal Year Disproportionate Share Hospital 
Allotments and Disproportionate Share Hospital Institutions for Mental 
Disease Limits

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

ACTION: Notice.

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SUMMARY: This notice announces the final Federal share disproportionate 
share hospital (DSH) allotments for Federal fiscal year (FFY) 2007 and 
the preliminary Federal share DSH allotments for FFY 2009. This notice 
also announces the final FFY 2007 and the preliminary FFY 2009 
limitations on aggregate DSH payments that States may make to 
institutions for mental disease and other mental health facilities. In 
addition, this notice includes background information describing the 
methodology for determining the amounts of States' FFY DSH allotments.

DATES: Effective Date: This notice is effective on 60 days after the 
date of publication in the Federal Register. The final allotments and 
limitations set forth in this notice are effective for the fiscal years 
specified.

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

SUPPLEMENTARY INFORMATION:

I. Background

A. Disproportionate Share Hospital Allotments for Federal Fiscal Year 
2003

    Under section 1923(f)(3) of the Social Security Act (the Act), 
States' Federal fiscal year (FFY) 2003 disproportionate share hospital 
(DSH) allotments were calculated by increasing the amounts of the FFY 
2002 allotments for each State (as specified in the chart, entitled 
``DSH Allotment (in millions of dollars),'' contained in section 
1923(f)(2) of the Act) by the percentage change in the Consumer Price 
Index for all Urban Consumers (CPI-U) for the prior fiscal year. The 
allotment, determined in this way, is subject to the limitation that an 
increase to a State's DSH allotment for a fiscal year cannot result in 
the DSH allotment exceeding the greater of the State's DSH allotment 
for the previous fiscal year or 12 percent of the State's total medical 
assistance expenditures for the allotment year (this is referred to as 
the 12 percent limit).
    Most States' actual FY 2002 allotments were determined in 
accordance with the provisions of section 1923(f)(4) of the Act. 
However, as indicated previously, the calculation of States' FFY 2003 
allotments was not based on the actual FFY 2002 DSH allotments; rather, 
section 1923(f)(3) of the Act requires that the States' FY 2003 
allotments be determined using the amount of the States' FY 2002 
allotments specified in the chart in section 1923(f)(2) of the Act. The 
exception to this is the calculation of the FFY 2003 DSH allotments for 
certain ``Low-DSH States'' (defined in section 1923(f)(5) of the Act). 
Under the Low-DSH State provision, there is a special calculation 
methodology for the Low-DSH States only. Under this methodology, the 
FFY 2003 allotments were determined by using (that is, increasing) 
States' actual FFY 2002 DSH allotments (not their FFY 2002 allotments 
specified in the chart in section 1923(f)(2) of the Act) by the 
percentage change in the CPI-U for the previous fiscal year.

B. DSH Allotments for FFY 2004

    Section 1001(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173, enacted on December 
8, 2003) amended section 1923(f)(3) of the Act to provide for a 
``Special, Temporary Increase in Allotments on a One-Time, Non-
Cumulative Basis.'' Under this provision, States' FFY 2004 DSH 
allotments were determined by increasing their FFY 2003 allotments by 
16 percent, and the fiscal year DSH allotment amounts so determined 
were not subject to the 12 percent limit.

C. DSH Allotments for Non-Low DSH States for FFY 2005, and Fiscal Years 
Thereafter

    Under the methodology contained in section 1923(f)(3)(C) of the 
Act, as amended by section 1001(a)(2) of the MMA, the non-Low-DSH 
States' DSH allotments for FFY 2005 and subsequent fiscal years 
continue at the same level as the States' DSH allotments for FFY 2004 
until a ``fiscal year specified'' occurs. The ``fiscal year specified'' 
is the first fiscal year for which the Secretary estimates that a 
State's DSH allotment equals (or no longer exceeds) the DSH allotment 
as would have been determined under the statute in effect before the 
enactment of the MMA. We determine whether the fiscal year specified 
has occurred under a special parallel process. Specifically, under this 
parallel process, a ``parallel'' DSH allotment is determined for FFYs 
after 2003 by increasing the State's DSH allotment for the previous 
fiscal year by the percentage change in the CPI-U for the prior fiscal 
year, subject to the 12 percent limit. This is the methodology as would 
otherwise have been applied under section 1923(f)(3)(A) of the Act 
notwithstanding the application of the provisions of MMA. The ``fiscal 
year specified,'' is the fiscal year in which the parallel DSH 
allotment calculated under this special parallel process finally equals 
or exceeds the FY 2004 DSH allotment, as determined under the MMA 
provisions. Once the fiscal year specified occurs for a State, that 
State's fiscal year DSH allotment will be calculated by increasing the 
State's previous actual fiscal year DSH allotment (which would be equal 
to the FY 2004 DSH allotment) by the percentage change in the CPI-U for 
the previous fiscal year, subject to the 12 percent limit. The 
following example illustrates how the fiscal year DSH allotment would 
be calculated for fiscal years after FFY 2004.
    Example--In this example, we are determining the parallel FFY 2009 
DSH

[[Page 77705]]

allotment. A State's actual FFY 2003 DSH allotment is $100 million. 
Under the MMA, this State's actual FFY 2004 DSH allotment would be $116 
million ($100 million increased by 16 percent). The State's DSH 
allotment for FFY 2005 and subsequent fiscal years would continue at 
the $116 million FFY 2004 DSH allotment for fiscal years following FFY 
2004 until the ``fiscal year specified'' occurs. Under the separate 
parallel process, we determine whether the fiscal year specified has 
occurred by calculating the State's DSH allotments in accordance with 
the statute in effect before the enactment of the MMA. Under this 
special process, we would continue to determine the State's parallel 
DSH allotment for each fiscal year by increasing the State's parallel 
DSH allotment for the previous fiscal year (as also determined under 
the special parallel process) by the percentage change in the CPI-U for 
the previous fiscal year, and subject to the 12 percent limit. Assume 
for purposes of this example that, in accordance with this special 
parallel process, the State's parallel FFY 2008 DSH allotment was 
determined to be $115 million and the percentage change in the CPI-U 
for FFY 2008 (the previous fiscal year) relevant for the calculation of 
the FFY 2009 DSH allotment was 4.0 percent. That is, the percentage 
change for the CPI-U for FFY 2008, the year before FFY 2009, was 4.0 
percent. Therefore, the State's special parallel process FFY 2009 DSH 
allotment amount would be calculated by increasing the special parallel 
process FFY 2008 DSH allotment amount of $115 million by 4.0 percent; 
this results in a parallel process DSH allotment process amount for FFY 
2009 of $119.6 million. Since $119.6 million is greater than $116 
million (the actual FFY 2004 DSH allotment calculated under the MMA), 
we would determine that FFY 2009 is the ``fiscal year specified'' (the 
first year that the FFY 2004 allotment equals or no longer exceeds the 
parallel process allotment). Since FY 2009 is the fiscal year 
specified, we would then determine the State's FFY 2009 allotment by 
increasing the State's actual FFY 2008 DSH allotment ($116 million) by 
the percentage change in the CPI-U for FFY 2008 (4.0 percent). 
Therefore, the State's FFY 2009 DSH allotment would be $120.6 million 
($116 million increased by 4.0 percent); for purposes of this example, 
the application of the 12 percent limit has no effect. Furthermore, for 
FFY 2009 and thereafter, the State's DSH allotment would be calculated 
under the provisions of section 1923(f)(3)(A) of the Act by increasing 
the State's previous fiscal year's DSH allotment by the percentage 
change in the CPI-U for the previous fiscal year, subject to the 12 
percent limit.
    However, as amended by section 1001(b)(4) of the MMA, section 
1923(f)(5)(B) of the Act also contains criteria for determining whether 
a State is a Low-DSH State, beginning with FFY 2004. This provision is 
described in section I.D.

D. DSH Allotments for Low-DSH States for FFY 2004 and Fiscal Years 
Thereafter

    Section 1001(b)(1) of the MMA amended section 1923(f)(5) of the Act 
regarding the calculation of the fiscal year DSH allotments for ``Low-
DSH'' States for FFY 2004 and subsequent fiscal years. Specifically, 
under section 1923(f)(5)(B) of the Act, as amended by section 
1001(b)(4) of the MMA, a State is considered a Low-DSH State for FFY 
2004 if its total DSH payments under its State plan for FFY 2000 
(including Federal and State shares) as reported to CMS as of August 
31, 2003, are greater than 0 percent and less than 3 percent of the 
State's total FFY 2000 expenditures under its State plan for medical 
assistance. For States that meet the new Low-DSH criteria, their FFY 
2004 DSH allotments are calculated by increasing their FFY 2003 DSH 
allotments by 16 percent. Therefore, for FFY 2004, Low-DSH States' 
fiscal year DSH allotments are calculated in the same way as the DSH 
allotments for regular States, which under section 1923(f)(3) of the 
Act, get the special temporary increase for FFY 2004.
    Furthermore, for States meeting the MMA's Low-DSH definition, the 
DSH allotments for FFYs 2005 through 2008 will continue to be 
determined by increasing the previous fiscal year's DSH allotment by 16 
percent. The Low-DSH States' DSH allotments for FFYs 2004 through 2008 
are not subject to the 12 percent limit. The Low-DSH States' DSH 
allotments for FFYs 2009 and subsequent fiscal years are calculated by 
increasing those States' DSH allotments for the prior fiscal year by 
the percentage change in the CPI-U for that prior fiscal year. For FFYs 
2009 and thereafter, the DSH allotments so determined would be subject 
to the 12 percent limit.

E. Institutions for Mental Diseases DSH Limits for FFYs 1998 and 
Thereafter

    Under section 1923(h) to the Act, Federal financial participation 
(FFP) is not available for DSH payments to institutions for mental 
diseases (IMDs) and other mental health facilities that are in excess 
of State-specific aggregate limits. Under this provision, this 
aggregate limit for DSH payments to IMDs and other mental health 
facilities is the lesser of a State's FFY 1995 total computable (State 
and Federal share) IMD and other mental health facility DSH 
expenditures applicable to the State's FFY 1995 DSH allotment (as 
reported on the Form CMS-64 as of January 1, 1997), or the amount equal 
to the product of the State's current year total computable DSH 
allotment and the applicable percentage.
    Each State's IMD limit on DSH payments to IMDs and other mental 
health facilities was calculated by first determining the State's total 
computable DSH expenditures attributable to the FFY 1995 DSH allotment 
for mental health facilities and inpatient hospitals. This calculation 
was based on the total computable DSH expenditures reported by the 
State on the Form CMS-64 as mental health DSH and inpatient hospital as 
of January 1, 1997. We then calculate an ``applicable percentage.'' The 
applicable percentage for FFY 1998 through FFY 2000 (1995 IMD DSH 
percentage) is calculated by dividing the total computable amount of 
IMD and mental health DSH expenditures applicable to the State's FFY 
1995 DSH allotment by the total computable amount of all DSH 
expenditures (mental health facility plus inpatient hospital) 
applicable to the FFY 1995 DSH allotment. For FFY 2001 and thereafter, 
the applicable percentage is defined as the lesser of the applicable 
percentage as calculated above (for FFYs 1998 through 2001) or 50 
percent for FFY 2001; 40 percent for FFY 2002; and 33 percent for each 
subsequent FFY.
    The applicable percentage is then applied to each State's total 
computable FFY DSH allotment for the current FFY. The State's total 
computable FFY DSH allotment is calculated by dividing the State's 
Federal share DSH allotment for the FFY by the State's Federal medical 
assistance percentage (FMAP) for that FFY.
    In the final step of the calculation of the IMD DSH Limit, the 
State's total computable IMD DSH limit for the FFY is set at the lesser 
of the product of a State's current fiscal year total computable DSH 
allotment and the applicable percentage for that fiscal year, or the 
State's FFY 1995 total computable IMD and other mental health facility 
DSH expenditures applicable to the State's FFY 1995 DSH allotment as 
reported on the Form CMS-64.
    The MMA legislation did not amend the Medicaid statute with respect 
to the calculation of the IMD DSH limit.

[[Page 77706]]

F. Publication in the Federal Register of Preliminary and Final Notice 
for DSH Allotments and IMD DSH Limits

    In general, we initially determine States' DSH allotments and IMD 
DSH limits for a fiscal year using estimates of medical assistance 
expenditures, including DSH expenditures in their Medicaid programs. 
These estimates are provided by States each year on the August 
quarterly Medicaid budget reports (Form CMS-37) before the Federal 
fiscal year for which the DSH allotments and IMD DSH limits are being 
determined. The DSH allotments and IMD DSH limits determined using 
these estimates are referred to as ``preliminary.'' Only after we 
receive States' reports of the actual related medical assistance 
expenditures through the quarterly expenditure report (Form CMS-64), 
which occurs after the end of the fiscal year, are the ``final'' DSH 
Allotments and IMD DSH limits determined.
    As indicated in section I.F. of this notice, the notice published 
in the Federal Register on October 3, 2006, included the announcement 
of the preliminary FFY 2007 DSH allotments (based on estimates), and 
the preliminary FFYs 2007 IMD DSH limits (since they were based on the 
preliminary DSH allotments for FFYs 2007). The notice published in the 
Federal Register on December 28, 2007 announced the final FFY 2006 DSH 
allotments and the final FFY 2006 IMD DSH limits (since they were based 
on the actual expenditures related to those years), and the preliminary 
FFY 2008 allotments (based on estimates), and the preliminary FFYs 2008 
IMD DSH limits (since they were based on the preliminary DSH allotments 
for FFYs 2008).
    This notice announces the final FFY 2007 DSH allotments and the 
final FFY 2007 IMD DSH limits (since these are now based on the actual 
expenditures for those fiscal years), the preliminary FFY 2009 DSH 
allotments (based on estimates), and the preliminary IMD DSH limits for 
FFY 2009 (since they are based on the preliminary DSH allotments for 
FFY 2009). This notice does not include the final FFY 2008 DSH 
allotments or the final FFY 2008 IMD DSH limits, since the associated 
actual expenditures for FFY 2008 are not available at this time.

G. DSH Allotment Provisions for Certain States

1. DSH Allotments for the District of Columbia
    The provisions of section 6054 of the Deficit Reduction Act (DRA) 
of 2005 Public Law 109-171, enacted February 8, 2006) affected the 
determination of the DSH allotment for the District of Columbia. Under 
section 6054 of the DRA, for purposes of determining only the FFY 2006 
and subsequent fiscal year DSH allotments for the District of Columbia, 
the table in section 1923(f)(2) of the Act is amended by increasing the 
FFY DSH allotment amounts indicated in that table for the District of 
Columbia for FFYs 2000, 2001, and 2002 to $49 million for each of those 
fiscal years. Before the DRA amendment, the amount in the chart in 
section 1923(f)(2) of the Act for the District of Columbia for each of 
those fiscal years was $32 million. This DRA provision increases the 
fiscal year DSH allotment for the District of Columbia effective with 
the FFY 2006 DSH allotment. This change is because the DSH allotments 
for FFY 2003 were based on the amounts of States' DSH allotments for 
FFY 2002 as contained in the chart in section 1923(f)(2) of the Act. 
Since (for purposes of ultimately determining the FFY 2006 allotment) 
the DRA provision increased the FFY 2002 allotment for the District of 
Columbia, as indicated above, the FFY 2003 allotment was increased. 
Furthermore, for this purpose, the FFY 2004 allotment for the District 
of Columbia would then have been determined by increasing the FFY 2003 
allotment (as so determined) by 16 percent. For fiscal years subsequent 
to FFY 2006, the DSH allotments are determined as described above. The 
final FFY 2007 DSH allotment and the preliminary FFY 2009 DSH allotment 
for the District of Columbia contained in this notice reflect the 
provision of section 6054 of the DRA.
    As described below, in accordance with section 6054 of the DRA, the 
final FFY 2007 DSH allotment for the District of Columbia is 
$57,692,600. As amended by section 6054 of the DRA, the FFY 2002 DSH 
allotment amount for the District of Columbia contained in the chart in 
section 1923(f)(2) of the Act was increased to $49,000,000. In 
accordance with section 1923(f)(3)(A) of the Act, the FFY 2003 DSH 
allotment is determined by increasing the $49,000,000 DSH Allotment for 
FFY 2002 (as referenced in section 1923(f)(2) of the Act) by the 
percentage change in the CPI-U for 2002 (in this case, 1.5 percent) to 
$49,735,000. In accordance with section 1923(f)(3)(C)(i) of the Act, 
the FFY 2004 DSH allotment for DC would be determined by increasing the 
$49,735,000 FFY 2003 DSH allotment amount by 16 percent to $57,692,600. 
In accordance with the provisions of section 1923(f)(3)(C)(ii) of the 
Act, as applicable for other Non-Low DSH States under the ``parallel'' 
process described above, the District of Columbia's DSH allotments for 
FFYs 2005 and following fiscal years would remain at $57,692,600 until 
the fiscal year specified occurs. In accordance with section 6054 of 
the DRA, the District of Columbia's DSH allotment was actually 
increased as described above, effective beginning with FFY 2006 to the 
$57,692,600 amount. The final FY 2007 DSH allotment for DC is also 
$57,692,600.
2. DSH Allotments for the State of Tennessee.
    Section 1923(f)(6)(A) of the Act, as amended by section 404 of 
Public Law 109-432 (enacted on December 20, 2006), section 204 of 
Public Law 110-173 (enacted on December 29, 2007), and section 202 of 
Public Law 110-275 (enacted on July 15, 2008) provides for the 
determination of a DSH allotment for the State of Tennessee for FY 
2007, FY 2008, FY 2009, and for a period in FY 2010. In accordance with 
this provision, Tennessee's DSH allotment for each of these fiscal 
years is the greater of $280 million and the FY 2007 Federal medical 
assistance percentage of the DSH payment adjustments reflected in the 
State's TennCare Demonstration Project for the demonstration year 
ending in 2006. In accordance with this provision, the State's Federal 
share DSH allotment for FY 2007, FY 2008, and FY 2009 was determined to 
be $305,451,928. Furthermore, Tennessee's DSH allotment for the period 
October 1, 2009, through December 31, 2009, is one-fourth of this 
amount; that is, $76,362,982. Section 1923(f)(6)(A)(ii) of the Act 
further limits the amount of Federal funds that are available for DSH 
payments that Tennessee may make in each fiscal year to 30 percent of 
the DSH allotment. In this regard, the limit on the DSH payments that 
the State of Tennessee may make is effectively $91,635,578 (30 percent 
of $305,451,928) for each FY 2007 through FY 2009, and $22,908,895 (30 
percent of $76,362,982) for the period October 1, 2009, through 
December 31, 2009.
3. DSH Allotments for the State of Hawaii
    Section 1923(f)(6)(B) of the Act, as amended by section 404 of 
Public Law 109-432, section 204 of Public Law 110-173, and section 202 
of Public Law 110-275 provides for a DSH allotment for the State of 
Hawaii for FY 2007, FY 2008, FY 2009, and for a period in FY 2010. In 
accordance with this provision, Hawaii's DSH allotment for FY 2007, FY 
2008, and FY 2009 is $10 million.

[[Page 77707]]

Furthermore, Hawaii's DSH allotment for the period October, 1, 2009, 
through December 31, 2009, is $2.5 million.

II. Provisions of the Notice

A. Calculation of the Final FFY 2007 Federal Share State DSH Allotments 
and the Preliminary FFY 2009 Federal Share State DSH Allotments

    Chart 1 of the Addendum to this notice provides the States' 
``final'' FFY 2007 DSH allotments. The final FFY 2007 DSH allotments 
for each State were computed in accordance with the provisions of the 
Medicaid statute as amended by the MMA. As required by the provisions 
of the MMA, the final FFY 2004 DSH allotments for the ``Low-DSH'' 
States and all the other States were calculated by increasing the FFY 
2003 DSH allotments by 16 percent. In the notice published on March 26, 
2004 notice published in the Federal Register (69 FR 15850), we 
explained the definition and determination of the ``Low-DSH'' States 
under the MMA provisions. However, for following fiscal years, the DSH 
allotments are determined under a process which incorporates a parallel 
process described in section I.C. of this notice. Under that parallel 
process, States final FFY 2007 DSH allotments were determined using the 
States' expenditure reports (Form CMS-64) for FFY 2007.

B. Calculation of the Preliminary FFY 2009 Federal Share State DSH 
Allotments

    Chart 2 of the Addendum to this notice provides the States' 
``preliminary'' FFY 2009 DSH allotments. These preliminary allotments 
were determined using the States' August 2008 expenditure estimates 
submitted by the States on the Form CMS-37, and the currently available 
percentage change in the consumer price index for all urban consumers 
(all items; U.S. city average), for the previous fiscal year (that is, 
for FY 2008). The final FFY 2009 DSH allotments for each State will be 
published following receipt of the States' four quarterly Medicaid 
expenditure reports (Form CMS-64) for FFY 2009.
    As discussed previously, in determining non-Low DSH States' DSH 
allotments for fiscal years after FY 2004 under section 1923(f)(3)(C) 
of the Act for DSH allotments, we have been determining States' DSH 
allotments under a ``parallel'' process. Under the parallel process, 
for each fiscal year for each State we have been determining whether 
the ``Fiscal Year Specified'' (as defined in section 1923(f)(3)(D) of 
the Act) has occurred. Under section 1923(f)(3)(D) of the Act, the 
Fiscal Year Specified is determined separately for each State and ``is 
the first fiscal year for which the Secretary estimates that the DSH 
allotment for that State will equal (or no longer exceed) the DSH 
allotment for that State under the law as in effect before the date of 
enactment'' of MMA. The process in effect prior to the enactment in MMA 
is the process described in section 1923(f)(3)(A) of the Act; under 
this process each States' DSH allotment since FY 2003 is increased by 
the CPIU increase for the prior fiscal year and the result is then 
compared to the State's FY 2004 DSH allotment, as determined under 
section 1923(f)(3)(C)(i) of the Act (under which the States' FY 2003 
DSH allotments were increased by 16 percent). In other words, the 
Fiscal Year Specified for a State is the fiscal year when the FY 2004 
allotment is no longer greater than the parallel process DSH allotment.
    We are reiterating the parallel process provision because for all 
non-Low DSH States (except one), we have determined that FY 2009 is the 
``Fiscal Year Specified''. Therefore, as indicated in section 
1923(f)(3)(C)(ii) of the Act, the FY 2009 DSH allotment for all non-Low 
DSH States (except one)is equal to the prior FY 2008 DSH allotment 
increased by the CPIU increase for FY 2008 (4.0 percent). Chart 2 
reflects this. For the non-Low DSH States for which the FY 2009 is the 
Fiscal Year Specified, the FY 2010 and subsequent fiscal year DSH 
allotments will be calculated by increasing the prior fiscal year DSH 
allotment by the CPIU increase for the prior fiscal year.
    For Low-DSH States, the FY 2009 DSH allotment is calculated using 
the same methodology as for the non-Low DSH States for which the Fiscal 
year specified has occurred. That is, for FY 2009 and following fiscal 
years, the DSH allotment for Low-DSH States is calculated by increasing 
the prior fiscal year DSH allotment by the CPIU increase for the prior 
fiscal year.

C. Calculation of the FFYs 2007 and FFY 2009 IMD DSH Limits

    Section 1923(h) of the Act specifies the methodology to be used to 
establish the limits on the amount of DSH payments that a State can 
make to IMDs and other mental health facilities. FFP is not available 
for IMD or DSH payments that exceed the lesser of the State's FFY 1995 
total computable mental health DSH expenditures applicable to the 
State's FFY 1995 DSH allotment as reported to us on the Form CMS-64 as 
of January 1, 1997; or the amount equal to the product of the State's 
current FFY total computable DSH allotment and the applicable 
percentage. We are publishing the final FFY 2007 IMD DSH limit, and the 
preliminary FFY 2009 IMD DSH limit, along with an explanation of the 
calculation of these limits.
    For FFY 2003 and following fiscal years, the applicable percentage 
is the lesser of 33 percent or the 1995 DSH IMD percentage of the 
amount computed for FFY 2000. This percentage was applied to the 
State's fiscal year total computable DSH allotment. This result was 
then compared to the State's FFY 1995 total computable mental health 
DSH expenditures applicable to the State's FFY 1995 DSH allotment as 
reported on the Form CMS-64 as of January 1, 1997. The lesser of these 
two amounts was the State's limitation on total computable IMD/DSH 
expenditures for FFY 2003 and following fiscal years.
    Charts 3 and 4 of the Addendum to this notice detail each State's 
final IMD/DSH limitation for FFY 2007 and the preliminary IMD/DSH 
limitation for FFY 2009, respectively, in accordance with section 
1923(h) of the Act.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

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 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 1 year). This notice 
does reach the economic threshold and thus is considered a major rule. 
We note that the total preliminary FY 2009 DSH

[[Page 77708]]

allotments announced in this notice are about $385 million greater than 
the total preliminary FY 2008 DSH allotments, which were announced in 
the Federal Register published on December 28, 2008 (72 FR 73831). As 
described previously, this change in allotment is a result of the 
application of the explicit provisions of the Medicaid statute, which 
requires that for the ``fiscal year specified'' the fiscal year DSH 
allotments for non-Low DSH states be calculated by increasing the 
previous fiscal year's DSH allotment by the increase in the CPI-U for 
the prior fiscal year. Except for one State, for all non-Low DSH States 
FY 2009 is the fiscal year specified, and therefore, the FY 2009 DSH 
allotment for these states must be calculated by increasing the FY 2008 
DSH allotments by the CPI-U for FY 2008 (in this case 4 percent). 
Additionally, in accordance with the Medicaid statute, the calculation 
of all Low-DSH states' FY 2009 allotments reflects this CPI-U increase. 
After application of these statutory provisions, the resulting total FY 
2009 DSH allotments are about $385 million more than the total FY 2008 
DSH allotments; this notice announces those amounts.
    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 
$6.5 million to $31.5 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, and the Secretary 
certifies, that this notice will not have significant economic impact 
on a substantial number of small entities. Specifically, the effects of 
the various controlling statutes on providers are not impacted by a 
result of any independent regulatory impact and not this notice. The 
purpose of the notice is to announce the latest distributions as 
required by the statute.
    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 for Medicaid payment regulations and has fewer than 
100 beds. We are not preparing analysis for section 1102(b) of the Act 
because we have determined and the Secretary certifies that this notice 
will not have a significant impact on the operations of a substantial 
number of small rural hospitals.
    In addition, the MMA set statutorily defined limits on the amount 
of Federal share DSH expenditures available for FFY 2004 and subsequent 
fiscal years. Specifically, section 1001 of the MMA increased the DSH 
allotment for States beginning with fiscal year 2004. While overall the 
statute mandated some increases in DSH payments, we do not believe that 
this notice will have a significant economic impact on a substantial 
number of small entities.
    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 $130 million. This notice will have no 
consequential effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this notice does not impose any costs on State or 
local governments, the requirements of E.O. 13132 are not applicable.

Accounting Statement

    As required by OMB Circular A-4 (available at), in the table below, 
we have prepared an accounting statement showing the classification of 
the estimated expenditures associated with the provisions of this 
notice. This table provides our best estimate of the increase in the 
Federal share of States' Medicaid DSH payments resulting from of the 
application of the provisions of the Medicaid statute relating to the 
calculation of States' fiscal year DSH allotments and the increase in 
such fiscal year DSH allotments from FY 2008 to FY 2009.

 Table--Accounting Statement: Classification of Estimated Expenditures,
                       From the FY 2008 to FY 2009
                              [In millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $385
From Whom To Whom?                          Federal Government to States
------------------------------------------------------------------------

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

Addendum

    This addendum contains the charts 1 through 4 (proceeded by 
associated keys) that are referred to in the preamble of this notice.

            Key to Chart 1--Final DSH Allotments for FY 2007
  [Key to the chart of the final FFY 2007 DSH allotments. The final FFY
   2007 DSH allotments for the regular states are presented in the top
section of this chart and the final FFY 2007 DSH allotments for the Low-
      DSH states are presented in the bottom section of the chart.]
------------------------------------------------------------------------
                 Column                            Description
------------------------------------------------------------------------
For Non-Low-DSH States:
    Column A...........................  State.
    Column B...........................  Final FY 2004 DSH Allotments--
                                          This column contains the final
                                          Federal share FFY 2004 DSH
                                          Allotments.
    Column C...........................  FY 2007 DSH Allotment--This
                                          column contains the final
                                          Federal share FFY 2007 DSH
                                          Allotments.
    Column D...........................  MMA Low-DSH Status--This column
                                          indicates the MMA Low-DSH
                                          Status of each State.
For Low-DSH States:
    Column A...........................  State.
    Column B...........................  Prior FY DSH Allotments--This
                                          column contains the final FFY
                                          2006 DSH Allotments.

[[Page 77709]]

 
    Column C...........................  FY 2007 DSH Allotments--This
                                          column contains the final
                                          Federal share FFY 2007 DSH
                                          Allotments = Column B
                                          multiplied by 1.16.
    Column D...........................  MMA Low-DSH Status--This column
                                          indicates the MMA Low-DSH
                                          Status of each State.
------------------------------------------------------------------------


     Key to Chart 2--Preliminary DSH Allotment for Fiscal Year 2009
    [Key to the chart of the preliminary FY 2009 DSH allotments. The
    preliminary FY 2009 DSH allotments for the Non-Low DSH states are
 presented in the top section of this chart, and preliminary FY 2009 DSH
allotments for the Low-DSH states are presented in the bottom section of
                              this chart.]
------------------------------------------------------------------------
                 Column                            Description
------------------------------------------------------------------------
Column A...............................  State.
Column B...............................  1923(f)(3)(D) Test Met.
                                         This column indicates whether
                                          the ``Fiscal Year Specified''
                                          has occurred, determined in
                                          accordance with section
                                          1923(f)(3)(D) of the Act.
                                          ``YES'' indicates the Fiscal
                                          Year Specified has occurred;
                                          ``NOT MET'' indicates that the
                                          Fiscal Year Specified has not
                                          occurred; and ``NA'' indicates
                                          that this provision is not
                                          applicable.
Columns C-K............................  For Non-Low DSH States entries
                                          in Columns C through K are
                                          only for States meeting the
                                          ``Fiscal Year Specified'' test
                                          (``YES'' in Column B).
Column C...............................  FY 2009 FMAPS.
                                         This column contains the
                                          States' FY 2009 Federal
                                          Medical Assistance
                                          Percentages.
Column D...............................  FY 2008 DSH Allotment For
                                          States Meeting Test.
                                         This column contains the
                                          States' FY 2008 DSH
                                          Allotments.
Column E...............................  FY 2008 Allotments x CPIU
                                          Increase: 1.04.
                                         This column contains the amount
                                          in Column D increased by the
                                          increase in the CPIU for the
                                          prior fiscal year (4.0
                                          percent).
Column F...............................  FY 2009 TC MAP Exp. Incl. DSH.
                                         This column contains the amount
                                          of the States' projected FY
                                          2009 total computable medical
                                          assistance expenditures
                                          including DSH expenditures.
Column G...............................  FY 2009 TC DSH Expenditures.
                                         This column contains the amount
                                          of the States' projected FY
                                          2009 total computable DSH
                                          expenditures.
Column H...............................  FY 2009 TC MAP Exp. Net of DSH.
                                         This column contains the amount
                                          of the States' projected FY
                                          2009 total computable medical
                                          assistance expenditures net of
                                          DSH expenditures, calculated
                                          as the amount in Column F
                                          minus the amount in Column G.
Column I...............................  12% AMOUNT.
                                         This column contains the amount
                                          of the ``12 percent limit'' in
                                          Federal share, determined in
                                          accordance with the provisions
                                          of section 1923(f)(3) of the
                                          Act.
Column J...............................  Greater of FY 2008 Allotment or
                                          12% Limit.
                                         This column contains the
                                          greater of the State's prior
                                          fiscal year (FY 2008) DSH
                                          allotment or the amount of the
                                          12% Limit, determined as the
                                          maximum of the amount in
                                          Column D or Column I.
Column K...............................  FY 2009 DSH Allotment.
                                         This column contains the
                                          States' FY 2009 DSH
                                          allotments, determined as the
                                          minimum of the amount in
                                          Column J or Column E. For Non-
                                          Low DSH States that have not
                                          met the ``Fiscal Year Year
                                          Specified'' test (entry in
                                          Column B is ``NOT MET''), the
                                          amount in Column K is equal to
                                          the State's FY 2004 DSH
                                          allotment. For States for
                                          which the entry in Column B is
                                          ``NA'', the amount in Column K
                                          is determined in accordance
                                          with the provisions of section
                                          1923(f)(6) of the Act.
------------------------------------------------------------------------


              Key to Chart 3--Final FFY 2007 IMD DSH Limits
  [Key to the Chart of the FFY 2007 IMD Limitations. The final FFY 2007
 IMD DSH Limits for the regular States are presented in the top section
  of this chart and the final FFY IMD DSH Limits for the Low-DSH States
           are presented in the bottom section of the chart.]
------------------------------------------------------------------------
                 Column                            Description
------------------------------------------------------------------------
Column A...............................  State.
Column B...............................  Inpatient Hospital Services FY
                                          95 DSH Total Computable. This
                                          column contains the States'
                                          total computable FFY 1995
                                          inpatient hospital DSH
                                          expenditures as reported on
                                          the Form CMS-64.

[[Page 77710]]

 
Column C...............................  IMD and Mental Health Services
                                          FY 95 DSH Total Computable.
                                          This column contains the total
                                          computable FFY 1995 mental
                                          health facility DSH
                                          expenditures as reported on
                                          the Form CMS-64 as of January
                                          1, 1997.
Column D...............................  Total Inpatient & IMD & Mental
                                          Health FY 95 DSH Total
                                          Computable, Col B + C. This
                                          column contains the total
                                          computation of all inpatient
                                          hospital DSH expenditures and
                                          mental health facility DSH
                                          expenditures for FFY 1995 as
                                          reported on the Form CMS-64 as
                                          of January 1, 1997
                                          (representing the sum of
                                          Column B and Column C).
Column E...............................  Applicable Percentage Col C/D.
                                          This column contains the
                                          ``applicable percentage''
                                          representing the total
                                          computable FFY 1995 mental
                                          health facility DSH
                                          expenditures divided by total
                                          computable all inpatient
                                          hospital and mental health
                                          facility DSH expenditures for
                                          FFY 1995 (the amount in Column
                                          C divided by the amount in
                                          Column D). Per section
                                          1923(h)(2)(A)(ii)(II) of the
                                          Act, for FFYs after FY 2002,
                                          the applicable percentage can
                                          be no greater than 33 percent.
Column F...............................  FY 2007 Federal Share DSH
                                          Allotment. This column
                                          contains the States' final FFY
                                          2007 DSH allotments.
Column G...............................  FFY 2007 FMAP.
Column H...............................  FY 2007 DSH Allotments in TC.
                                          Col. F/G. This column contains
                                          the FFY 2007 total computable
                                          DSH Allotment (determined as
                                          Column F/Column G).
Column I...............................  Col E x Col H in TC. This
                                          column contains the applicable
                                          percent of FFY 2007 total
                                          computable DSH allotment
                                          (calculated as Column E x
                                          Column H).
Column J...............................  FY 2007 IMD DSH Limit Total
                                          Computable. Lesser of Col. C
                                          or I. The column contains the
                                          lesser of Column I or C.
Column K...............................  FY 2007 IMD DSH Limit Federal
                                          Share, Col. G x J. This column
                                          contains the total computable
                                          IMD DSH Limit from Col. J and
                                          converts that amount into a
                                          Federal share (calculated as
                                          Col. G x Col. J).
Column L...............................  LOW DSH Status. This column
                                          contains Low DSH status for
                                          each State.
------------------------------------------------------------------------


           Key to Chart 4--Preliminary FFY 2009 IMD DSH Limits
 [Key to the Chart of the FFY 2009 IMD Limitations. The preliminary FFY
   2009 IMD DSH Limits for the regular States are presented in the top
  section of this chart and the preliminary FFY 2009 IMD DSH Limits for
  the Low-DSH States are presented in the bottom section of the chart.]
------------------------------------------------------------------------
                 Column                            Description
------------------------------------------------------------------------
Column A...............................  State.
Column B...............................  Inpatient Hospital Services FY
                                          95 DSH Total Computable. This
                                          column contains the States'
                                          total computable FFY 1995
                                          inpatient hospital DSH
                                          expenditures as reported on
                                          the Form CMS-64.
Column C...............................  IMD and Mental Health Services
                                          FY 95 DSH Total Computable.
                                          This column contains the total
                                          computable FFY 1995 mental
                                          health facility DSH
                                          expenditures as reported on
                                          the Form CMS-64 as of January
                                          1, 1997.
Column D...............................  Total Inpatient & IMD & Mental
                                          Health FY 95 DSH Total
                                          Computable, Col. B + C. This
                                          column contains the total
                                          computation of all inpatient
                                          hospital DSH expenditures and
                                          mental health facility DSH
                                          expenditures for FFY 1995 as
                                          reported on the Form CMS-64 as
                                          of January 1, 1997
                                          (representing the sum of
                                          Column B and Column C).
Column E...............................  Applicable Percentage Col. C/D.
                                          This column contains the
                                          ``applicable percentage''
                                          representing the total
                                          Computable FFY 1995 mental
                                          health facility DSH
                                          expenditures divided by total
                                          computable all inpatient
                                          hospital and mental health
                                          facility DSH expenditures for
                                          FFY 1995 (the amount in Column
                                          C divided by the amount in
                                          Column D). Per section
                                          1923(h)(2)(A)(ii)(II) of the
                                          Act, for FFYs after FY 2002,
                                          the applicable percentage can
                                          be no greater than 33 percent.
Column F...............................  FY 2009 Federal Share DSH
                                          Allotment. This column
                                          contains the States'
                                          preliminary FFY 2009 DSH
                                          allotments.
Column G...............................  FFY 2009 FMAP.
Column H...............................  FY 2009 DSH Allotment Total
                                          Computable Col. F/G. This
                                          column contains FFY 2009 total
                                          computable DSH allotment
                                          (determined as Column F/Column
                                          G).
Column I...............................  Col E x Col H in TC. This
                                          column contains the applicable
                                          percent of FFY 2009 total
                                          computable DSH allotment
                                          (calculated as Column E x
                                          Column H).
Column J...............................  FY 2009 IMD DSH Limit Total
                                          Computable. Lesser of Col. C
                                          or I. The column contains the
                                          lesser of Column I or C.
Column K...............................  FY 2009 IMD DSH Limit Federal
                                          Share, Col. G x J. This column
                                          contains the total computable
                                          IMD DSH Limit from Col. J and
                                          converts that amount into a
                                          Federal share (calculated as
                                          Col. G x Col. J).
Column L...............................  Low DSH Status. This column
                                          contains Low DSH status for
                                          each State.
------------------------------------------------------------------------


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BILLING CODE 4120-01-C
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: September 25, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Dated: October 14, 2008.
Michael O. Leavitt,
Secretary.

     Editorial Note: This document was received in the Office of the 
Federal Register on Tuesday, December 16, 2008.
 [FR Doc. E8-30267 Filed 12-18-08; 8:45 am]
BILLING CODE 4120-01-P