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Notice

Medicaid Program; Final FY 2009 and Preliminary FY 2011 Disproportionate Share Hospital Allotments, and Final FY 2009 and Preliminary FY 2011 Institutions for Mental Diseases Disproportionate Share Hospital Limits

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AGENCY:

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

ACTION:

Notice.

SUMMARY:

This notice announces the final Federal share disproportionate share hospital (DSH) allotments for Federal FY (FY) 2009 and the preliminary Federal share DSH allotments for FY 2011. This notice also announces the final FY 2009 and the preliminary FY 2011 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' FY DSH allotments.

DATES:

Effective Date: This notice is effective March 4, 2011. The final allotments and limitations set forth in this notice are effective for the fiscal years specified.

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FOR FURTHER INFORMATION CONTACT:

Richard Strauss, (410) 786-2019.

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SUPPLEMENTARY INFORMATION:

I. Background

A. Disproportionate Share Hospital Allotments for Federal FY 2003

Under section 1923(f)(3) of the Social Security Act (the Act), States' Federal fiscal year (FY) 2003 disproportionate share hospital (DSH) allotments were calculated by increasing the amounts of the FY 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 FY cannot result in the DSH allotment exceeding the greater of the State's DSH allotment for the previous FY 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 which allowed for a special DSH calculation rule for FY 2001 and FY 2002. However, as indicated previously, the calculation of States' FY 2003 allotments was not based on the actual FY 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 FY 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 FY 2003 allotments were determined by increasing States' actual FY 2002 DSH allotments, rather than their FY 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 FY 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' FY 2004 DSH allotments were determined by increasing their FY 2003 allotments by 16 percent, and the FY DSH allotment amounts so determined were not subject to the 12 percent limit.

C. DSH Allotments for Non-Low DSH States for FY 2005, and FYs 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 FY 2005 and subsequent FYs continue at the same level as the States' DSH allotments for FY 2004 until a “fiscal year specified” occurs. The fiscal year specified is the first FY 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 FYs after 2003 by increasing the State's DSH allotment for the previous FY by the percentage change in the CPI-U for the prior FY, 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 FY in which the parallel DSH allotment calculated under this special parallel process 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 FY DSH allotment will be calculated by increasing the State's previous actual FY DSH allotment (which would be equal to the FY 2004 DSH allotment) by the percentage change in the CPI-U for the previous FY, subject to the 12 percent limit. The following example illustrates how the FY DSH allotment would be calculated for FYs after FY 2004.

Example—In this example, we are determining the parallel FY 2009 DSH allotment. A State's actual FY 2003 DSH allotment is $100 million. Under the MMA, this State's actual FY 2004 DSH allotment would be $116 million ($100 million increased by 16 percent). The State's DSH allotment for FY 2005 and subsequent FYs would continue at the $116 million FY 2004 DSH allotment for FYs following FY 2004 until the fiscal year specified occurs. Under the separate parallel process, we determine Start Printed Page 149whether 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 continue to determine the State's parallel DSH allotment for each FY by increasing the State's parallel DSH allotment for the previous FY (as also determined under the special parallel process) by the percentage change in the CPI-U for the previous FY, 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 FY 2008 DSH allotment was determined to be $115 million and the percentage change in the CPI-U for FY 2008 (the previous FY) relevant for the calculation of the FY 2009 DSH allotment was 4.4 percent. That is, the percentage change for the CPI-U for FY 2008, the year before FY 2009, was 4.4 percent. Therefore, the State's special parallel process FY 2009 DSH allotment amount would be calculated by increasing the special parallel process FY 2008 DSH allotment amount of $115 million by 4.4 percent; this results in a parallel process DSH allotment process amount for FY 2009 of $120.06 million. Since $120.06 million is greater than $116 million (the actual FY 2004 DSH allotment calculated under the MMA), we would determine that FY 2009 is the fiscal year specified (the first year that the FY 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 FY 2009 allotment by increasing the State's actual FY 2008 DSH allotment ($116 million) by the percentage change in the CPI-U for FY 2008 (4.4 percent). Therefore, the State's FY 2009 DSH allotment would be $121.104 million ($116 million increased by 4.4 percent); for purposes of the calculation in this example, the application of the 12 percent limit has no effect. Furthermore, for FY 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 FY's DSH allotment by the percentage change in the CPI-U for the previous FY, 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 FY 2004. This provision is described in section I.D.

D. DSH Allotments for Low-DSH States for FY 2004 and FYs Thereafter

Section 1001(b)(1) of the MMA amended section 1923(f)(5) of the Act regarding the calculation of the FY DSH allotments for “Low-DSH” States for FY 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 FY 2004 if its total DSH payments under its State plan for FY 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 FY 2000 expenditures under its State plan for medical assistance. For States that meet the Low-DSH criteria, their FY 2004 DSH allotments are calculated by increasing their FY 2003 DSH allotments by 16 percent. Therefore, for FY 2004, Low-DSH States' FY 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 FY 2004.

Furthermore, for States meeting the MMA's Low-DSH definition, the DSH allotments for FYs 2005 through 2008 will continue to be determined by increasing the previous FY's DSH allotment by 16 percent. The Low-DSH States' DSH allotments for FYs 2004 through 2008 are not subject to the 12 percent limit. The Low-DSH States' DSH allotments for FYs 2009 and subsequent FYs are calculated by increasing those States' DSH allotments for the prior FY by the percentage change in the CPI-U for that prior fiscal year. For FYs 2009 and thereafter, the DSH allotments so determined would be subject to the 12 percent limit.

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

Under section 1923(h) of 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 FY 1995 total computable (State and Federal share) IMD and other mental health facility DSH expenditures applicable to the State's FY 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 FY 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 DSH as of January 1, 1997. We then calculate an “applicable percentage.” The applicable percentage for FY 1998 through FY 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 FY 1995 DSH allotment by the total computable amount of all DSH expenditures (mental health facility plus inpatient hospital) applicable to the FY 1995 DSH allotment. For FY 2001 and thereafter, the applicable percentage is defined as the lesser of the applicable percentage as calculated above (for FYs 1998 through 2001) or 50 percent for FY 2001; 40 percent for FY 2002; and 33 percent for each subsequent fiscal year.

The applicable percentage is then applied to each State's total computable FY DSH allotment for the current fiscal year. The State's total computable FY DSH allotment is calculated by dividing the State's Federal share DSH allotment for the FY by the State's Federal medical assistance percentage (FMAP) for that fiscal year.

In the final step of the calculation of the IMD DSH Limit, the State's total computable IMD DSH limit for the FY is set at the lesser of the product of a State's current FY total computable DSH allotment and the applicable percentage for that FY, or the State's FY 1995 total computable IMD and other mental health facility DSH expenditures applicable to the State's FY 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.

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 FY 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 FY for which the DSH allotments and IMD DSH limits are being determined. Also, as part of the basic determination of preliminary DSH allotments for a FY, we use the available CPI-U percentage increase that is available before the beginning of the FY for which the allotment is being determined to determine the preliminary FY DSH allotment. For example, in determining the preliminary FY 2011 DSH allotment, we would apply the CPI-U percentage increase for FY 2010 that was available just before the beginning of FY 2011 on October 1, 2010.

The DSH allotments and IMD DSH limits determined using these estimates and CPI-U percentage increases Start Printed Page 150available before the beginning of the FY 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), and the final historic CPI-U percentage increases for the prior FY, which occurs after the end of the FY, are the “final” DSH Allotments and IMD DSH limits determined.

The notice published in the Federal Register on December 19, 2008 (73 FR 77704), included the announcement of the preliminary FY 2009 DSH allotments (based on estimates), and the preliminary FY 2009 IMD DSH limits (since they were based on the preliminary DSH allotments for FY 2009). A correction notice published in the Federal Register on January 26, 2009 (74 FR 4439) provided a correction to the chart of preliminary FY 2009 DSH allotments published in the December 19, 2008 Federal Register. Finally, the notice published in the Federal Register on April 23, 2010 (75 FR 21314), included the announcement of the revised preliminary FY 2009 DSH allotments to reflect increases in the amount of the States' DSH allotments for FY 2009 and FY 2010 pursuant to the enactment on February 17, 2009 of the American Recovery and Reinvestment Act of 2009 (section 5002 of Pub. L. 111-5) and revisions to the CPI-U percentage increase for FY 2008, and the revised preliminary FY 2009 IMD DSH limits (since they were based on the revised preliminary DSH allotments for FY 2009).

This notice announces the final FY 2009 DSH allotments and the final FY 2009 IMD DSH limits (since these are now based on the actual expenditures for that fiscal year), the preliminary FY 2011 DSH allotments (based on expenditure estimates), and the preliminary IMD DSH limits for FY 2011 (since they are based on the preliminary DSH allotments for FY 2011). This notice does not include the final FY 2010 DSH allotments or the final FY 2010 IMD DSH limits, since the associated actual expenditures for FY 2010 are not available at this time.

G. DSH Allotment Provisions for Certain States

1. 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), section 202 of Public Law 110-275 (enacted on July 15, 2008), section 616 of Public Law 111-3 (enacted on February 4, 2009), and most recently as amended by Section 1054 of Public Law 111-152 (enacted on March 30, 2010) provides for the determination of a DSH allotment for the State of Tennessee for each of FYs 2007 through FY 2011, for 2 periods encompassing FY 2012, and for FY 2013. In accordance with this provision, Tennessee's DSH allotment for each of FYs 2007 through 2011 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 each of FYs 2007 through 2011 is $305,451,928. Furthermore, Tennessee's DSH allotment for the period October 1, 2011 through December 31, 2011 (the first quarter of FY 2012) 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 of the FYs 2007 through 2011, and for the first quarter of FY 2012 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 2011, and $22,908,895 (30 percent of $76,362,982) for the period October 1, 2011 through December 31, 2011 (the first quarter of FY 2012. The statute also provides for additional allotments for Tennessee for the period January 1, 2011 through September 30, 2012 (quarters 2 through 4 of FY 2012) and for all of FY 2013; future Federal Register notices will describe the determination of the amounts of DSH allotments for Tennessee for FY 2012 and FY 2013.

2. 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, section 202 of Public Law 110-275, section 616 of Public Law 111-3 (enacted on February 4, 2009) most recently as amended by Section 10201(e)(1) of Public Law 111-148 (enacted on March 23, 2010) provides for a DSH allotment for the State of Hawaii for each of FYs 2007 through 2011, for 2 periods encompassing FY 2012, and certain other provisions providing for a DSH allotment for FY 2013. In accordance with the statute, Hawaii's DSH allotment each year for FY 2007 through FY 2011 is $10 million. Furthermore, for the period October 1, 2011 through December 31, 2011 (the first quarter of FY 2012) Hawaii's DSH allotment is $2.5 million, and for the period January 1, 2012 through September 30, 2012 Hawaii's DSH allotment is $7.5 million. Future Federal Register notices will describe the determination of the amounts of DSH allotments for Hawaii for FY 2012 and FY 2013.

H. DSH Allotments for FY 2009 and FY 2010 Under the Recovery Act

Section 5002 of the Recovery Act added a new section 1923(f)(3)(E) of the Act; this new section provides for a temporary increase in States' DSH allotments only for FY 2009 and FY 2010.

1. Revised Preliminary DSH Allotments for FY 2009

States' preliminary FY 2009 DSH allotments were previously published in the Federal Register on January 26, 2009. However, section 5002 of the Recovery Act enacted after the publication of the preliminary FY 2009 DSH allotments provided for an increase in States' DSH allotments from what were previously determined and published in the Federal Register on January 26, 2009. The Recovery Act provided fiscal relief to States during the recent national economic downturn. In that regard, section 1923(f)(3)(E)(i)(I) of the Act, as created by section 5002 of the Recovery Act, requires that, in general, States' DSH allotments for FY 2009 be equal to 102.5 percent of the FY 2009 allotments that would otherwise have been determined; this provision does not apply to certain States as discussed in section G. above.

As described in section F. above, we typically publish States' preliminary DSH allotments based on expenditure estimates and CPI-U percentage increases available before the FY for which the preliminary DSH allotment is being determined. The preliminary DSH allotments are subsequently finalized after the FY is over and when the applicable inputs for determining the DSH allotments (that is, the applicable expenditures and the CPI-U percentage increase for the previous FY) are final.

Due to the Recovery Act temporary increase for FY 2009, in this notice we revised the preliminary FY 2009 DSH allotments previously published to reflect updated States' expenditures, and more significantly, to reflect an updated and increased CPI-U percentage increase. As described above, States' DSH allotments are determined by increasing the previous FY allotment by the applicable CPI-U Start Printed Page 151percentage increase. In particular, when we previously calculated the preliminary FY 2009 allotments, the applicable CPI-U percentage increase for FY 20 08 (used for determining the FY 20 09 DSH allotment), which was available before the beginning of FY 2009, was 4.0 percent. However, subsequent to our initial determination of the preliminary FY 2009 DSH allotments, the historical applicable CPI-U percentage increase for FY 2008 became available; that actual CPI-U increase for FY 2008 is 4.4 percent. In order to ensure that the full increase in DSH allotments for FY 2009 is available to States during FY 2009, we revised the preliminary FY 2009 DSH allotments prior to the end of FY 2009 to reflect both the updated increase in the applicable CPI-U percentage increase for FY 2008 and the 2.5 percent increase in States' FY 2009 DSH allotments as required under the Recovery Act.

The final FY 2009 allotments contained in this Federal Register notice reflect the final CPI-U percentage increase for FY 2008 and the actual expenditures in Medicaid for FY 2009.

2. Preliminary DSH Allotments for FY 2011

Sections 1923(f)(3)(E) of the Act, as amended by Section 5002 of the Recovery Act, in general (with the exceptions for certain States described above) provided for a 2.5 percent increase in States' FY 2009 DSH allotments and for States' FY 2010 DSH allotments to be determined as the higher of:

  • 102.5 percent of the DSH allotment for FY 2009, as determined under the Recovery Act provision, or
  • The FY 2010 DSH allotment as would otherwise be calculated without the application of the Recovery Act provision.

The final FY 2009 DSH allotments contained in this Federal Register notice and the preliminary FY 2010 DSH allotment for States (as published in the Federal Register on April 23, 2010, 75 FR 21314) were determined in accordance with the law, as amended by the Recovery Act.

As indicated, the Recovery Act DSH allotment provisions apply only for FY 2009 and FY 2010; that is, States' DSH allotments for FY 2011 are determined as DSH allotments were determined prior to the enactment of the Recovery Act.

3. Effect of the Recovery Act DSH Provision on Calculation of the States' IMD DSH Limits for FY 2009 and FY 2010, and Determination of Such Limits for FY 2011

Section E above described the determination of States' IMD DSH limits for FYs beginning FY 1998 and after, as determined under section 1923(h) of the Act. Section 5002 of the Recovery Act did not amend section 1923(h) of the Act. Accordingly, States' preliminary IMD DSH limits for FY 2009 and FY 2010, the FYs for which the Recovery Act provisions are applicable, were determined as under the existing provisions. As described in section E above, States' DSH allotments are an element of the determination of the IMD DSH limit. Therefore, the DSH allotments for FY 2009 and FY 2010, as determined under the Recovery Act provisions, were used in calculating States' Final FY 2009 (as contained in this Federal Register notice) and States' preliminary FY 2010 (as previously published in the Federal Register on April 23, 2010, 75 FR 21314) IMD DSH limits. This is the same application of States' DSH allotments for purposes of determining States' IMD DSH limits as was applied under section 1923(h) of the Act, regardless of the Recovery Act provision.

II. Provisions of the Notice

A. Calculation of the Final FY 2009 Federal Share State DSH Allotments, and the Preliminary FY 2011 Federal Share State DSH Allotments

1. Final FY 2009 Federal Share State DSH Allotments

Chart 1 of the Addendum to this notice provides the States' final FY 2009 DSH allotments as discussed above in section I.H.1 of this notice. As discussed in that section of this notice, the revised preliminary FY 2009 DSH allotments were previously published in the Federal Register on April 23, 2010. As described above and in previous Federal Register notices in determining non-Low DSH States' DSH allotments for FYs after FY 2004 under section 1923(f)(3)(C) of the Act for DSH allotments, we determined States' DSH allotments under a “parallel” process. Under the parallel process, for each FY 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 FY 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 before 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 CPI-U increase for the prior FY 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). The fiscal year specified for a State is the FY when the FY 2004 allotment is no longer greater than the parallel process DSH allotment.

We are reiterating the parallel process provision because we determined that FY 2009 was the fiscal year specified for all non-Low DSH States (except Louisiana). Therefore, as indicated in section 1923(f)(3)(C)(ii) of the Act, the Final FY 2009 DSH allotment for all non-Low DSH States (except Louisiana) is equal to the prior FY 2008 DSH allotment increased by the CPI-U increase for FY 2008 (4.4 percent). Chart 1 contains the final FY 2009 DSH allotments. For the non-Low DSH States for which the FY 2009 is the fiscal year specified, the FY 2010 and subsequent FY DSH allotments are calculated by increasing the prior FY DSH allotment by the CPI-U 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 FYs, the DSH allotment for Low-DSH States is calculated by increasing the prior FY DSH allotment by the percentage change in the CPI-U for the prior fiscal year.

The preliminary FY 2009 allotments were initially determined using the States' August 2008 expenditure estimates submitted by the States on the Form CMS-37, and the percentage increase in the CPI-U for the previous FY that was available before the beginning of FY 2009. As discussed in section I.H.1 above, based on the updated CPI-U percentage increase for FY 2008 (from 4.0 percent to 4.4 percent), and the enactment of section 5002 of the Recovery Act (which provides that States' FY 2009 DSH allotments are equal to 102.5 percent of these allotments as would otherwise be determined for the FY), we revised the preliminary FY 2009 DSH allotments, which were published in the Federal Register on April 23, 2010. States' final FY 2009 DSH allotments as contained in Start Printed Page 152this Federal Register were determined based on States' four quarterly Medicaid expenditure reports (Form CMS-64) for FY 2009 received following the end of FY 2009 and the final applicable percentage increase to CPI-U for the previous FY 2008.

2. Calculation of the Preliminary FY 2011 Federal Share State DSH Allotments

Chart 2 of the Addendum to this notice provides the preliminary FY 2011 DSH allotments determined in accordance with the section 1923(f)(3) of the Act, as described in section I.H.2. As described in that section of this notice, the Recovery Act provisions which increased States' DSH allotments for FY 2009 and FY 2010 are not applicable for determining States' FY 2011 DSH allotments. States' final FY 2011 DSH allotments will be published in the Federal Register following receipt of the States' four quarterly Medicaid expenditure reports (Form CMS-64) for FY 2010 following the end of FY 2011.

B. Calculation of the Final FY 2009 and Preliminary FY 2011 IMD DSH Limits

As discussed in section I.E. and I.H.3 above of this notice, 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 IMD limits. In this notice, we are publishing the final FY 2009 IMD DSH Limit and the preliminary FY 2011 IMD DSH Limit determined in accordance with the provisions discussed above, and for FY 2009, reflecting the DSH allotments for the FY determined under the provisions of section 1923(f)(3)(E) of the Act, as amended by section 5002 of the Recovery Act.

Charts 3 and 4 of the Addendum to this notice detail each State's final IMD DSH Limit for FY 2009 and the preliminary IMD DSH Limit for FY 2011, respectively, determined 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 on Regulatory Planning and Review (September 1993), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).

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 $100 million economic threshold and thus is considered a major rule under the Congressional Review Act.

There are no changes between the revised preliminary and final FY 2009 DSH allotments and FY 2009 IMD DSH limits.

The preliminary FY 2011 DSH allotments being published in this notice are about $365 million less than the preliminary FY 2010 DSH allotments published in the Federal Register on April 23, 2010 (75 FR 21314). These decreases are a direct result of the application of the provisions of section 1923(f)(3) of the Act in the calculation of States' DSH allotments, and in particular the provisions of section 1923(f)(3)(E) of the Act as amended by the Recovery Act (which provided for a temporary increase in States' DSH allotments for FY 2009 and FY 2010 during the specified recession period) do not apply with respect to the FY 2011 and following FY DSH allotments.

The preliminary FY 2011 IMD DSH Limits being published in this notice are about $23 million less than the preliminary FY 2010 IMD DSH Limits published in Federal Register on April 23, 2010 (75 FR 21314). This is because the DSH allotment for a FY is a factor in the determination of the IMD DSH limit for the FY, and since the preliminary FY 2011 DSH allotments were decreased as compared to the preliminary FY 2010 DSH allotments, the associated FY 2011 IMD DSH limits for some States were also decreased.

The RFA requires agencies to analyze options for regulatory relief of small businesses, if a rule has a significant impact on a substantial number of small entities. 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 $7.0 million to $34.5 million in any one year. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because the Secretary has determined 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 the Secretary has determined that this notice will not have a significant impact on the operations of a substantial number of small rural hospitals.

The Medicaid statute (including as most recently amended by the Recovery Act) specifies the methodology for determining the amounts of States' DSH allotments and IMD DSH limits; and as described previously, results in increases in States' DSH allotments and IMD DSH limits for the FYs referred to. The statute applicable to these allotments and limits does not apply to the determination of the amounts of DSH payments made to specific DSH hospitals; rather, these allotments and limits represent an overall limit on the total of such DSH payments. In this regard, 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 Start Printed Page 153in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2010, that threshold is approximately $135 million. This notice will have no consequential effect on State, local, or Tribal governments, in the aggregate, 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.

Alternatives Considered

The methodologies for determining the States' fiscal year DSH allotments and IMD DSH Limits, as reflected in this notice, were established in accordance with the methodologies and formula for determining States' allotments as specified in statute. This notice does not put forward any further discretionary administrative policies for determining such allotments.

Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf), 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 change (decrease) in the Federal share of States' Medicaid DSH payments resulting from the application of the provisions of the Medicaid statute relating to the calculation of States' FY DSH allotments and the increase in the FY DSH allotments from FY 2010 to FY 2011.

Table—Accounting Statement: Classification of Estimated Expenditures, From FY 2010 to FY 2011

[In millions]

CategoryTransfers
Annualized Monetized Transfers−$365.
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 (preceded by associated keys) that are referred to in the preamble of this notice.

Key to Chart 1. Final DSH Allotments for FY 2009.

Key to Chart 1—Final DSH Allotments for Fiscal Year: 2009

[The Final FY 2009 DSH Allotments for the NON-Low DSH States are presented in the top section of this chart, and the Final FY 2009 DSH Allotments for the Low-DSH States are presented in the bottom section of this chart.]

ColumnDescription
Column AState.
Column B1923(f)(3)(D) Test Met. This column indicates whether the “FY Specified” has occurred with respect to Non-Low DSH States, determined in accordance with section 1923(f)(3)(D) of the Act. “YES” indicates the FY Specified has occurred; “NOT MET” indicates that the FY Specified has not occurred; and “na” indicates that this provision is not applicable. This provision is not applicable for Low-DSH States indicated in the bottom portion of chart 2.
Columns C-LFor all States, the entries in Columns C through K present the determination of the final FY 2009 DSH allotments as would be calculated without the application of section 1923(f)(3)(E) of the Act as amended by section 5002 of ARRA. For all States, the entries in Column M present the calculation of the final FY 2009 DSH Allotments, determined in accordance with the provisions of section 5002 of ARRA.
For Non-Low DSH States indicated in the top portion of Chart 2, entries in Columns C through K are only for States meeting the “FY Specified” test (“YES” in Column B). For States not meeting the test indicated in Column B, these Columns indicate “NA”, and for States for which such test is not applicable, these Columns indicate “na”. For Low DSH States, entries are in the bottom portion of Chart 2.
Column CFY 2009 FMAPS. This column contains the States' FY 2009 Federal Medical Assistance Percentages.
Column DFY 2008 DSH Allotment For States Meeting Test. This column contains the States' prior FY 2008 DSH Allotments.
Column EFY 2008 Allotments X (1 + Percentage Increase in CPI-U): 1.044. This column contains the amount in Column D increased by 1 plus the percentage increase in the CPI-U for the prior FY (4.4 percent).
Column FFY 2009 TC MAP Exp. Incl. DSH. This column contains the amount of the States' actual FY 2009 total computable medical assistance expenditures including DSH expenditures.
Column GFY 2009 TC MAP Exp. Net of DSH. This column contains the amount of the States' actual FY 2009 total computable DSH expenditures.
Column HFY 2009 TC MAP Exp. Net of DSH. This column contains the amount of the States' actual 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 I12% 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 JGreater of FY 2008 Allotment or 12% Limit. This column contains the greater of the State's prior FY (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 KFY 2009 DSH Allotment PRE-ARRA. This column contains the States' FY 2009 DSH allotments as would be determined prior to ARRA, determined as the minimum of the amount in Column J or Column E. For Non-Low DSH States that have not met the “FY 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.
Column LFY 2009 DSH Allotment Under ARRA. This column contains the State's FY 2009 DSH allotment as determined in accordance with section 5002 of ARRA, and calculated as the amount in Column K multiplied by 1.025.
Column MFinal FY 2009 DSH Allotment Under ARRA. (Max of Col K or L.) This column contains the State's final FY 2009 DSH allotment as determined in accordance with section 1923(f)(3)(E) of the Act as amended by section 5002 of ARRA, and determined as the maximum of the amount in Column K or L.
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Key to Chart 2. Preliminary DSH Allotments for FY 2011.

Key to Chart 2—Preliminary DSH Allotments for Fiscal Year: 2011

[The Preliminary FY 2011 DSH Allotments for the NON-Low DSH States are presented in the top section of this chart, and the Preliminary FY 2011 DSH Allotments for the Low-DSH States are presented in the bottom section of this chart.]

ColumnDescription
Column AState.
Column B1923(f)(3)(D) Test Met. This column indicates whether the “FY Specified” has occurred with respect to Non-Low DSH States, determined in accordance with section 1923(f)(3)(D) of the Act. “YES” indicates the FY Specified has occurred; “NOT MET” indicates that the FY Specified has not occurred; and “na” indicates that this provision is not applicable. This provision is not applicable for Low-DSH States indicated in the bottom portion of chart 3.
Columns C-KFor all States, the entries in Columns B through K present the determination of the preliminary FY 2011 DSH allotments as would be calculated without the application of section 5002 of ARRA since such provisions were only applicable for FY 2009 and FY 2010.
For Non-Low DSH States indicated in the top portion of Chart 2, entries in Columns C through J are only for States meeting the “FY Specified” test (“YES” in Column B). For States not meeting the test indicated in Column B, these Columns indicate “NA”, and for States for which such test is not applicable, these Columns indicate “na”. For Low DSH States, entries are in the bottom portion of Chart 2.
Column CFY 2011 FMAPS. This column contains the States' FY 2011 Federal Medical Assistance Percentages.
Column DFY 2010 DSH Allotment For States Meeting Test. This column contains the States' prior FY 2010 DSH Allotments as would be determined without the application of section 5002 of ARRA.
Column EFY 2010 Allotments X (1 + Percentage Increase in CPI-U): 1.018. This column contains the amount in Column D increased by 1 plus the percentage increase in the CPI-U for the prior FY (1.8 percent).
Column FFY 2011 TC MAP Exp. Incl. DSH. This column contains the amount of the States' projected FY 2011 total computable medical assistance expenditures including DSH expenditures.
Column GFY 2011 TC DSH Expenditures. This column contains the amount of the States' projected FY 2011 total computable DSH expenditures.
Column HFY 2011 TC MAP Exp. Net of DSH. This column contains the amount of the States' projected FY 2011 total computable medical assistance expenditures net of DSH expenditures, calculated as the amount in Column F minus the amount in Column G.
Column I12% 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 JGreater of FY 2010 Allotment or 12% Limit. This column contains the greater of the State's prior FY (FY 2010) DSH allotment or the amount of the 12% Limit, determined as the maximum of the amount in Column D or Column I.
Column KFY 2011 DSH Allotment. This column contains the States' FY 2011 DSH allotments as would be determined without the application of the provisions of section 5002 of ARRA, determined as the minimum of the amount in Column J or Column E. For Non-Low DSH States that have not met the “FY 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 IMD DSH Limit for FY 2009.

Key to Chart 3—Final IMD DSH Limit for FY: 2009

[Key to the Chart of the Final FY 2009 IMD Limitations.—The Final FY 2009 IMD DSH Limits for the regular States are presented in the top section of this chart and the final FY IMD DSH Limits for the Low-DSH States are presented in the bottom section of the chart.]

ColumnDescription
Column AState.
Column BInpatient Hospital Services FY 95 DSH Total Computable. This column contains the States' total computable FY 1995 inpatient hospital DSH expenditures as reported on the Form CMS-64.
Column CIMD and Mental Health Services FY 95 DSH Total Computable. This column contains the total computable FY 1995 mental health facility DSH expenditures as reported on the Form CMS-64 as of January 1, 1997.
Column DTotal 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 FY 1995 as reported on the Form CMS-64 as of January 1, 1997 (representing the sum of Column B and Column C).
Column EApplicable Percentage Col C/D. This column contains the “applicable percentage” representing the total computable FY 1995 mental health facility DSH expenditures divided by total computable all inpatient hospital and mental health facility DSH expenditures for FY 1995 (the amount in Column C divided by the amount in Column D). Per section 1923(h)(2)(A)(ii)(III) of the Act, for FYs after FY 2002, the applicable percentage can be no greater than 33 percent.
Column FFY 2009 Allotment in FS Under ARRA. This column contains the States' final FY 2009 DSH allotments as determined under ARRA.
Column GFY 2009 FMAP. This column contains the States' FY 2009 FMAPs.
Column HFY 2009 DSH Allotments in TC. Col. F/G. This column contains the FY 2009 total computable DSH Allotment (determined as the amount in Column F divided by the amount in Column G).
Column ICol E * Col H in TC. This column contains the applicable percent of FY 2008 total computable DSH allotment (calculated as the amount in Column E multiplied by the amount in Column H).
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Column JFY 2009 TC IMD DSH Limit. Lesser of Col. C or I. This column contains the FY 2009 TC IMD DSH Limit equal to the lesser of the amount in Column C or Column I.
Column KFY 2009 IMD DSH Limit in FS U/ARRA. Col. G × J. This column contains the FY 2009 Federal share IMD DSH limit determined by converting the total computable FY 2009 IMD DSH Limit from Column J into a Federal share amount by multiplying it by the FY 2009 FMAP in Column G.

Key to Chart 4. Preliminary IMD DSH Limit for FY 2011.

Key to Chart 4—Preliminary IMD DSH Limit for FY: 2011

[Key to the Chart of the FY 2011 IMD Limitations—The preliminary FY 2011 IMD DSH Limits for the Non-Low DSH States are presented in the top section of this chart and the preliminary FY 2011 IMD DSH Limits for the Low-DSH States are presented in the bottom section of the chart.]

ColumnDescription
Column AState.
Column BInpatient Hospital Services FY 95 DSH Total Computable. This column contains the States' total computable FY 1995 inpatient hospital DSH expenditures as reported on the Form CMS-64.
Column CIMD and Mental Health Services FY 95 DSH Total Computable. This column contains the total computable FY 1995 mental health facility DSH expenditures as reported on the Form CMS-64 as of January 1, 1997.
Column DTotal 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 FY 1995 as reported on the Form CMS-64 as of January 1, 1997 (representing the sum of Column B and Column C).
Column EApplicable Percent Col. C/D. This column contains the “applicable percentage” representing the total Computable FY 1995 mental health facility DSH expenditures divided by total computable all inpatient hospital and mental health facility DSH expenditures for FY 1995 (the amount in Column C divided by the amount in Column D) Per section 1923(h)(2)(A)(ii)(III) Of the Act, for FYs after FY 2002, the applicable Percentage can be no greater than 33 percent.
Column FFY 2011 Federal Share DSH Allotment. This column contains the States' preliminary FY 2011 DSH allotments.
Column GFY 2011 FMAP. This column contains the States' FY 2010 FMAPs.
Column HFY 2011 DSH Allotments in Total Computable Col. F/G. This column contains States' FY 2011 total computable DSH allotment (determined as Column F/Column G).
Column ICol E * Col H in TC. This column contains the applicable percent of FY 2010 total computable DSH allotment (calculated as the percentage in Column E multiplied by the amount in Column H).
Column JFY 2011 TC IMD DSH Limit. Lesser of Col. C or I. This column contains the FY 2011 TC IMD DSH Limit equal to the lesser of the amount in Column C or Column I.
Column KFY 2011 IMD DSH Limit in Federal Share, Col. G x J. This column contains the FY 2011 Federal share IMD DSH limit determined by converting the total computable FY 2011 IMD DSH Limit from Column J into a Federal share amount by multiplying it by the FY 2011 FMAP in Column G.
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(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program)

Start Signature

Dated: October 20, 2010.

Donald M. Berwick,

Administrator, Centers for Medicare & Medicaid Services.

Dated: November 17, 2010.

Kathleen Sebelius,

Secretary.

End Signature End Supplemental Information

BILLING CODE 4120-01-P

[FR Doc. 2010-32979 Filed 12-30-10; 8:45 am]

BILLING CODE 4120-01-C