[Federal Register: January 25, 2007 (Volume 72, Number 16)]
[Notices]
[Page 3391-3395]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja07-33]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
Proposed Implementation of Section 6053(b) of the Deficit
Reduction Act for Fiscal Year 2008 FMAP
AGENCY: Office of the Secretary, HHS.
ACTION: Notice with comment period.
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SUMMARY: This notice with comment period describes the procedure for
implementing Section 6053(b) of the Deficit Reduction Act of 2005,
Public Law 109-171 for fiscal year 2008. Section 6053(b) of the Deficit
Reduction Act provides for a modification of the Federal Medical
Assistance Percentages for any state which has a significant number of
evacuees from Hurricane Katrina.
DATES: Comment Date: To be assured consideration, comment must be
received at the address provided below, no later than 5 p.m. on
February 26, 2007.
ADDRESSES: Because of staff and resource limitations, we can only
accept comments by regular mail. You may mail written comments (one
original and one copy) to the following address only: Department of
Health and Human Services, Room 447D, Attention: FMAP Proposed Rule,
200 Independence Ave., SW., Washington, DC 20201.
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule with comment period to assist us in fully
considering issues and developing policies. Please provide a reference
to the section on which you choose to comment.
SUPPLEMENTARY INFORMATION:
A. Background: Federal Medical Assistance Percentages
Federal Medical Assistance Percentages are used to determine the
amount of Federal matching for state expenditures for assistance
payments for certain social services such as Temporary Assistance for
Needy Families (TANF) Contingency Funds, matching funds for the Child
Care and Development Fund, Title IV-E Foster Care Maintenance payments,
Adoption Assistance payments, and state medical and medical insurance
expenditures for Medicaid and the State Children's Health Insurance
Program (SCHIP).
Sections 1905(b) and 1101(a)(8)(B) of the Social Security Act
require the Secretary of Health and Human Services to publish the
Federal Medical Assistance Percentages each year. The Secretary is to
calculate the percentages, using formulas in sections 1905(b) and
1101(a)(8)(B), from the Department of Commerce's statistics of average
income per person in each state and for the Nation as a whole. The
percentages are within the upper and lower limits given in section
1905(b) of the Act. The percentages to be applied to the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and
the Northern Mariana Islands are specified in statute, and thus are not
based on the statutory formula that determines the percentages for the
50 states. The ``Federal Medical Assistance Percentages'' are for
Medicaid.
Section 1905(b) of the Social Security Act specifies the formula
for calculating Federal Medical Assistance Percentages as follows:
``Federal medical assistance percentage'' for any state shall be
100 per centum less the state percentage; and the state percentage
shall be that percentage which bears the same ratio to 45 per centum as
the square of the per capita income of such state bears to the square
of the per capita income of the continental United States (including
Alaska) and Hawaii; except that (1) the Federal medical assistance
percentage shall in no case be less than 50 per centum or more than 83
per centum, (2) the Federal medical assistance percentage for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and
American Samoa shall be 50 per centum.
Section 4725 of the Balanced Budget Act of 1997 amended section
1905(b) to provide that the Federal Medical Assistance Percentage for
the District of Columbia for purposes of Title XIX and for the purposes
of calculating the Enhanced Federal Medical Assistance Percentage under
Title XXI shall be 70 percent. For the District of Columbia, we note
under the table of Federal Medical Assistance Percentages the rate that
applies in certain other programs calculated using the formula
otherwise applicable, and the rate that applies in certain other
programs pursuant to section 1118 of the Social Security Act. Section
2105(b) of the Social Security Act specifies the formula for
calculating the Enhanced Federal Medical Assistance Percentages as
follows:
The ``enhanced FMAP,'' for a state for a fiscal year, is equal to
the Federal medical assistance percentage (as defined in the first
sentence of section 1905(b)) for the state increased by a number of
percentage points equal to 30 percent of the number of percentage
points by which (1) such Federal medical assistance percentage for the
state, is less than (2) 100 percent; but in no case shall the enhanced
FMAP for a state exceed 85 percent.
The ``Enhanced Federal Medical Assistance Percentages'' are for use
in the State Children's Health Insurance Program under Title XXI, and
in the Medicaid program for certain children for expenditures for
medical assistance described in sections 1905(u)(2) and 1905(u)(3) of
the Social Security Act.
On November 30, 2006, at 71 FR 69209, we published the FMAP and
Enhanced FMAP rates for each state for October 1, 2007 through
September 30, 2008 (fiscal year 2008). This notice describes the
procedure we would use to modify the fiscal year 2008 FMAP rates to
comply with the requirements of section 6053(b) of the DRA, which we
discuss more fully below.
B. Section 6053(b) of the Deficit Reduction Act
Section 6053(b) of the Deficit Reduction Act (DRA) of 2005 requires
that calculations used in computing the FMAPs disregard evacuees and
any income attributable to them who were evacuated to and live in a
state, other than their state of residence, as of October 1, 2005 as a
result of Hurricane Katrina. The DRA defines ``evacuee'' as ``an
affected individual who has been displaced to another state'' (Sec
6201(b)(3)). This provision applies to any state that the Secretary of
HHS
[[Page 3392]]
determines has a significant number of Katrina evacuees.
The modification of the Federal Medical Assistance Percentages and
the Enhanced Federal Medical Assistance Percentages under the Deficit
Reduction Act affect only medical expenditure payments under Title XIX
and expenditure payments for the State Children's Health Insurance
Program under Title XXI. The Department believes that the percentages
in this rule do not apply to payments under Title IV of the Social
Security Act. In addition, the Title XIX statute provides separately
for Federal matching of administrative costs, which is not affected by
the subject Deficit Reduction Act provision.
Section 6053(b) applies to calculations for FMAPs for any year
after 2006. The underlying data that serve as the basis for the FMAP
calculations are produced by the Department of Commerce's Bureau of
Economic Analysis (BEA). Section 1101(a)(8)(B) requires FMAP
calculations to be determined using data from the Department of
Commerce. Therefore, the standard practice in the calculation of the
FMAPs is to utilize the most up-to-date BEA state per capita income
data. The Fiscal Year 2008 FMAPs, which were published on November 30,
2006 use the state per capita income estimates for 2003-2005. The first
year that the relevant data--state per capita personal income
estimates--would show any impact related to Hurricane Katrina is 2005,
since Hurricane Katrina occurred in August 2005. Therefore, this rule
proposes to implement Section 6053 (b) of the DRA starting with the
Fiscal Year 2008 FMAPs, since the 2008 FMAP calculation will be the
first year that include 2005 data.
We believe the likely Congressional intent of this provision was to
assist any state that took in a large number of Katrina evacuees. The
statute instructs HHS to remove Katrina evacuees and their income from
the FMAP calculation for any such state. This adjustment would protect
such a state from an adverse fluctuation in its FMAP based on Katrina
evacuees. This adjustment would also, however, remove any positive
fluctuation in the FMAP based on Katrina evacuees. It is not clear that
this latter impact was intended by Congress.
We believe that, because Katrina evacuees are likely to have lower
income than the general population of the states to which they are
evacuated, accurate data would probably result in no adverse
fluctuation in FMAP for any state using the standard calculation
methodology. Instead, there would probably be a positive fluctuation
under the standard calculation that would be eliminated by the
statutory adjustment. In other words, the statutory adjustment could
result in that state having a higher per capita income (and lower FMAP)
than if the adjustment was not made.
In many instances, evacuees either had lower incomes before or lost
their employment and means of support after Katrina. Evacuees' per
capita income, therefore, would be less than the per capita income of
the general population of the state(s) to which they were evacuated.
Eliminating persons of lower per capita income from any affected state
would raise overall state per capita income, thus lowering its
respective Federal FMAP percentage.
Moreover, the standard methodology used by BEA to calculate per
capita income does not permit the attribution of all income sources to
Katrina evacuees. That is, BEA does not possess the data necessary to
count all sources of Katrina evacuees' income (see detailed discussion
below), and as a result, we believe our approach offers the best
possible calculation given the limited data available.
We propose in this rule a methodology for the adjustment that would
take advantage of the way in which state population is usually
calculated to comply with our understanding of Congressional intent in
the first year, and raise the FMAP slightly for any affected state. But
we are concerned that this methodology would have the expected effect
of lowering the FMAP in future years compared to the calculation
methodology.
We are also concerned that it will be more difficult to accurately
disregard evacuee population and income in future years. It will also
become increasingly difficult to isolate Katrina evacuees' income to
adjust per capita state income calculations as BEA only captures
aggregate state income, not evacuees' income.
C. Calculation of the Federal Medical Assistance Percentage
The Federal Medical Assistance Percentage (FMAP) is based on the
percentage of low-income persons residing in a given state. By statute,
it is no lower than 50% and no higher than 83%. The key variable in
calculating the FMAP is the estimate of state per capita personal
income. The state per capita income estimates are then plugged into the
statutory FMAP formula. There are two components to the state per
capita personal income estimates. The denominator is the Annual
Population Estimate; the numerator is State Personal Income.
1. Modification to Population Estimate
The first adjustment that must take place under Section 6053(b) of
the DRA is to the state population estimate. The state population
estimate must be adjusted by removing all Katrina evacuees in each
state that were evacuated across state lines.
Because the state population estimates used in the 2005 Per Capita
Personal Income estimates are from July 1, 2005, which is prior to
Hurricane Katrina, these Katrina evacuees do not appear in the data
that is the basis for the state population estimates for any state
covered by this provision. Thus, while Section 6053(b) of the DRA
requires it, no adjustment to this data is required to disregard
Katrina evacuees.
To ensure compliance with the statutory requirement to disregard
Katrina evacuees, however, we explored the possibility of adjusting the
population estimates to reflect the influx of evacuees, and then
disregarding the actual number of Katrina evacuees. For this purpose,
we used BEA estimates of the number of Katrina evacuees relocated to
the various states based on FEMA data. We then used BEA's estimates of
Katrina evacuees relocated to each state to adjust upward the
population of those states to account for the influx of evacuees. We
then considered whether the influx of evacuees may have displaced other
individuals from the population of the affected state(s), but we found
no evidence to support an adjustment based on this possibility.
Following the requirements of Section 6053(b), we then would subtract
these evacuees from their respective states to arrive at a state
population prior to the effects of Hurricane Katrina. The resulting
calculations arrive at the July 1, 2005 population figures reported by
the Bureau of the Census for the time period just prior to Hurricane
Katrina. This analysis confirmed that no adjustment is required to the
population estimate used in the calculation of the state per capita
personal income for 2005 to disregard Katrina evacuees.
2. Modification to State Personal Income Estimate
The second adjustment that must take place under Section 6053(b) of
the DRA is to state personal income. State personal income must be
adjusted by removing all income that is attributed to Katrina evacuees,
and HHS has consulted with BEA at length on how to do so.
According to standard BEA methodology, state personal income
consists of the sum of wages and
[[Page 3393]]
salaries, supplements to wages and salaries, proprietor's income,
rental income, personal dividends, personal interest income, and
transfer receipts less contributions for government social insurance.
State personal income is the income that is received by, or on behalf
of, all the persons living in a state. In addition, source data for
wages and salaries, supplements to wages and salaries, and
contributions for government social insurance (which are compiled on a
place of work basis) are adjusted for persons who work in one state and
live in another.
BEA published these data in ``State Personal Income for the Fourth
Quarter of 2005 and Per Capita Income for 2005,'' which appeared in the
April 2006 Survey of Current Business, and subsequently revised in the
October 2006 Survey of Current Business. In Table D of the April 2006
article, BEA gives the adjustments it made to account for some of the
economic effects of Hurricanes Katrina, Rita, and Wilma that are not
reflected in the source data used to estimate state personal income for
2005. We will use these data as the basis for making the adjustments to
the FMAPs required by the Deficit Reduction Act.
Implementing Section 6053(b) is complex because the data related to
personal income are not detailed enough to fully conform to all of the
provision's requirements. For example, BEA cannot isolate the fraction
of a state's total wages and salaries that were paid to Katrina
evacuees who moved there from another state. Therefore, HHS cannot
remove income paid to Katrina evacuees for wages and salaries.
Further, HHS can only estimate some of the ``interstate income''
attributable to Katrina evacuees. For purposes of this rule, interstate
income is personal income that was paid to Katrina evacuees in a
different state than the state they were living in before Hurricane
Katrina. Included in our estimate of interstate income are governmental
transfer receipts that were paid to evacuees who may have moved across
state lines. Governmental transfer receipts consist of all transfer
payments, such as TANF or Medicaid, as well as transfers from business,
such as net insurance settlements. Transfers such as Medicare or
Medicaid are government payments made directly or through
intermediaries to vendors for the care provided to individuals.
Below we discuss three types of transfer receipt adjustments
included in Table D: FEMA disaster assistance, interstate population
dispersal, and net insurance settlements.
a. FEMA Disaster Assistance
FEMA disaster assistance is one type of transfer payment included
in personal income. For FEMA disaster assistance, payments are recorded
at the location where the recipients are residing at the time of
payment. Therefore, if the evacuees receiving FEMA disaster assistance
were evacuated to another state, the FEMA disaster assistance payment
would be counted as income in the state that they were evacuated to.
However, we can not know what proportion of the FEMA disaster
assistance payments were made to interstate evacuees and what
proportion were made to permanent residents of the states in question.
For Texas, it is likely that the majority of the FEMA disaster
assistance payments were made to interstate evacuees. For Alabama, the
FEMA disaster assistance payments were likely made to both Alabama
residents as well as interstate evacuees.
Although we cannot determine the extent to which the FEMA disaster
assistance payments represent income to interstate evacuees as opposed
to permanent residents, we propose to include the entire FEMA disaster
assistance adjustment in the estimate of interstate income. We make
this decision because we believe it is best to include as much
countable income of the evacuees as possible in order to comply with
the intent of the statute, especially given that we can not count all
sources of income for the evacuees.
b. Interstate Population Dispersal
The interstate population dispersal adjustment is BEA's estimate of
governmental transfer receipts that were paid to Hurricane Katrina
evacuees while they were living in the states to which they had been
evacuated. The transfer receipts included in the interstate population
dispersal adjustment include payments such as Medicaid or TANF, as
listed above. We propose to include the interstate population dispersal
adjustment in our estimate of interstate income.
According to Table D, some states gained income due to this
adjustment and some states lost income. A positive interstate
population dispersal adjustment, such as the adjustment for Alabama,
means that the state was estimated to receive an increase in transfer
income because evacuees moved into that state from another state, and
received transfer payments in their new state. A negative interstate
population dispersal adjustment, such as the adjustment for Louisiana,
means that the state was estimated to receive a decrease in transfer
income because evacuees moved out of that state to another state, and
received transfer payments in their new state.
BEA estimates these interstate population dispersal adjustments
based on the evacuee population that moved across state lines after the
hurricane, and the average transfer payment per evacuee. The evacuee
population is based on the FEMA Current Location Report.
c. Net Insurance Settlements
Net insurance settlements are income derived from insurance
payments made based on claims for lost or damaged property. For net
insurance settlements, BEA records the payments as income in the state
where the homes were destroyed.
Therefore, even if an evacuee received an insurance payment in a
different state from where their property was damaged, it would be
recorded as income in the state where the damage occurred. If an
individual was evacuated from Louisiana to Texas because his or her
home was destroyed in the hurricane, and he or she received an
insurance payment while living in Texas, BEA would record this payment
as income in the State of Louisiana, not the State of Texas.
Therefore, we propose not to include the net insurance settlements
adjustment in our estimate of interstate income, because the income has
already been re-allocated to the state where the evacuees lived before
Hurricane Katrina.
The methodology described above details the FMAP adjustments that
were made to accommodate the requirements of Section 6053(b) with the
available data. The calculations this year result in a positive impact
on any affected state, i.e., increasing FMAPs. As noted above, it is
unclear what effect Section 6053 (b) will have on future years should
this provision carry forward beyond fiscal year 2008. It is possible
that any affected state will receive lower FMAP rates when updated data
become available.
D. Affected States
According to Section 6053(b), the Secretary of HHS must apply this
provision to any state that the Secretary determines has a significant
number of Katrina evacuees. However, the statute provides HHS no
guidance on how to determine what number of evacuees constitutes a
``significant number.'' As a result, HHS attempted to provide an
objective means to determine a ``significant number'' of evacuees.
HHS has chosen to determine significance by calculating the numbers
of evacuees beyond two standard
[[Page 3394]]
deviations from the mean of all states' number of evacuees. Measures of
significance generally involve how observations vary in their distance
from the average of all observations in their particular group. In this
case, the observations are the number of evacuees relocated to each of
the respective states. A measure used frequently to determine
significance is the standard deviation from the mean or average. We
propose to use as the measure of a significantly affected state those
that incurred an influx of evacuees greater than twice the standard
deviation from the mean of all states.
Using the BEA estimates for the number of evacuees relocated to
each state (except as noted below for Louisiana) we calculated an
average influx of evacuees for all states of 7,159. The distribution of
evacuees into all states around this average produces a standard
deviation of 22,375. Therefore, we propose to apply the provisions of
Section 6053(b) to any state with an influx of evacuees greater than
51,909 (the mean plus two standard deviations). This methodology
specifies only Texas, with 154,018 evacuees, having such a significant
influx of evacuees.
Therefore, we propose to apply Section 6053(b) to Texas. Because
the DRA defines ``evacuee'' as ``an affected individual who has been
displaced to another state'' (section 6201 (b)(3)), we propose that
Louisiana not be considered an affected state. Although there were
intra-state evacuations within Louisiana, the provision is intended to
apply only to any state that took in a significant number of evacuees
from another state.
BEA has made available on its Web site a version of Table D that
includes adjustments for all states. The Web site address is: http://www.bea.gov/bea/regional/articles.cfm?section=articles
and the section
is: State Personal Income: Fourth Quarter of 2005 and Per Capita
Personal Income for 2005, Additional Tables.
E. Projected Effect of the Provision
Using the personal income estimates released by BEA, we have
calculated FMAPs for 2008 and the revised FMAPs applying the
methodology outlined above. The table below presents the 2008 FMAPs and
the revised 2008 FMAPs with the proposed adjustment, and the 2008
EFMAPs and the revised 2008 EFMAPs.
------------------------------------------------------------------------
2008 with
Texas Calculated proposed
2008 adjustment
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FMAP........................................ 60.53 60.56
EFMAP....................................... 72.37 72.39
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As seen in the tables above, applying the proposed adjustment
increases the FMAP and EFMAP for Texas.
F. Time Frame for the Adjustment
The language of Section 6053(b) does not provide for a sunset of
the FMAP adjustments. Therefore, the implication is that such
adjustments would be made in perpetuity. Yet it seems unreasonable to
assume that individuals who continue to reside in a state other than
those directly impacted by Katrina would still be considered evacuees
forever, even after they have established residency and obtained
employment in their new state.
As previously mentioned, it is possible that this provision will
have a negative impact on a qualifying state's FMAP in future years.
The magnitude of this negative impact is not known at this time.
Additionally, it is technically difficult to perform the
calculations for this provision because of numerous data limitations.
Even under the calculation for FY 08, BEA was unable to completely
account for all sources of income for evacuees. It is likely that BEA
will continue to encounter these difficulties and produce limited
income estimates in the future. Furthermore, BEA may also encounter
difficulties in tracking evacuees, as it is uncertain whether such data
will be available.
For the above reasons, we are proposing to define evacuees narrowly
to ensure that an adjustment is made only to the extent warranted to
address the sudden influx directly resulting from Hurricane Katrina,
and not permanent changes in population level for host states. While we
believe the most straightforward definition of an evacuee would be to
consider individuals to be evacuees fro a time-limited period following
displacement to another state, we have listed three approaches to
define evacuees, and are soliciting public comment on the issue.
(1) The first alternative would establish a bright line test as to
how long an individual would be considered an evacuee. Under this
alternative, individuals would be considered to be Hurricane Katrina
evacuees for up to 18 months following displacement to another state.
This represents a substantial time frame during which the individual
would likely have established residency in another state and become a
functioning part of that state's economy.
(2) A second alternative approach is that individuals would be
considered to be Hurricane Katrina evacuees while receiving FEMA
Hurricane Katrina assistance. FEMA assistance is an available data
source to identify the individuals. Receipt of FEMA assistance is an
indication that individuals are not fully integrated into the economy
of a new state, and expect to return to homes that were destroyed by
Hurricane Katrina.
(3) The third alternative approach would be to consider individuals
to be Hurricane Katrina evacuees while reliable data remains available
and sufficient to identify evacuees and their income in order to carry
out the provisions of the DRA. The statute does not authorize this
Department to construct or develop its own data sources. Thus, we do
not believe that Congress intended to require this adjustment to be
made after reliable data is no longer available to support the
adjustment.
We invite comments on the adoption for the definition of evacuee
discussed above, or an alternate approach, to ensure that the effect of
section 6053(b) of the DRA is limited to addressing sudden population
influxes directly resulting from Hurricane Katrina.
G. Regulatory Impact Statement
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) 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). The
Regulatory Flexibility Act (RFA) requires agencies to analyze options
for regulatory relief of small businesses. For purposes of the RFA,
small entities include small businesses, nonprofit organizations, and
government agencies. Section 202 of the Unfunded Mandates Reform Act of
1995 (Pub. L. 104-4) also requires that agencies assess anticipated
costs and benefits before issuing any rule whose mandates require
spending in any one year of $100 million in 1995 dollars, updated
annually for inflation. That threshold level is currently approximately
$120 million. Executive Order 13132 establishes certain requirements
that an agency must meet when it promulgates a final rule that imposes
substantial direct requirement costs on state and local governments,
[[Page 3395]]
preempts state law, or otherwise has Federalism implications.
This rule announces the provisions of section 6053(b) of the
Deficit Reduction Act of 2005. We do not estimate this regulation will
have any significant effect on the economy. Nevertheless, we estimate
the impact of the provision, once implemented, to be minimal. Our
analysis suggests that the modification to the FMAPs will only affect
Texas. The effect will likely be a minimal decrease in State Medicaid
and SCHIP spending and a corresponding minimal increase in federal
Medicaid and SCHIP spending.
In addition, the provisions only directly affect states. Therefore,
there is no need to perform a regulatory flexibility analysis in
accordance with section 603 of the Regulatory Flexibility Act.
H. Summary
We propose to adjust the fiscal year 2008 FMAP rate only for the
State of Texas, by reducing the income estimates used in the FMAP
calculation through the application of adjustments to reflect
interstate population dispersal income and FEMA disaster assistance
income for evacuees. Because this is the only income that can be
attributed to Katrina evacuees based on BEA data, this income will be
subtracted from the 2005 state personal income as published by BEA in
October 2006 to obtain a new state personal income for Texas. This
state personal income will be divided by the state population as of
July 2005 to get a revised per capita personal income for each state.
This revised 2005 per capita personal income will replace the 2005 per
capita personal income in calculating the 2008 FMAPs.
Effective Dates: The percentages listed will be effective for each
of the four (4) quarter-year periods in the period beginning October 1,
2007 and ending September 30, 2008.
FOR FURTHER INFORMATION CONTACT: Thomas Musco or Robert Stewart, Office
of Health Policy, Office of the Assistant Secretary for Planning and
Evaluation, Room 447D--Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201, (202) 690-6870.
(Catalog of Federal Domestic Assistance Program Nos. 93.778: Medical
Assistance Program; 93.767: State Children's Health Insurance
Program)
Dated: January 19, 2007.
Michael O. Leavitt,
Secretary of Health and Human Services.
[FR Doc. E7-1174 Filed 1-24-07; 8:45 am]
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