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Notice

Medicaid Program; Final FY 2017 and Preliminary FY 2019 Disproportionate Share Hospital Allotments, and Final FY 2017 and Preliminary FY 2019 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 fiscal year (FY) 2017 and the preliminary federal share DSH allotments for FY 2019. This notice also announces the final FY 2017 and the preliminary FY 2019 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:

This notice is effective March 13, 2019. The final allotments and limitations set forth in this notice are applicable for the fiscal years specified.

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FOR FURTHER INFORMATION CONTACT:

Stuart Goldstein, (410) 786-0694 and Richard Cuno, (410) 786-1111.

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SUPPLEMENTARY INFORMATION:

I. Background

A. Fiscal Year DSH Allotments

A state's federal fiscal year (FY) disproportionate share hospital (DSH) allotment represents the aggregate limit on the federal share amount of the state's DSH payments to DSH hospitals in the state for the FY. The amount of such allotment is determined in accordance with the provisions of section 1923(f)(3) of the Social Security Act (the Act), with some state-specific exceptions as specified in section 1923(f) of the Act. Under such provisions, in general a state's FY DSH allotment is calculated by increasing the amount of its DSH allotment for the preceding FY by the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U) for the previous FY.

The Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, the Affordable Care Act), amended Medicaid DSH provisions, adding section 1923(f)(7) of the Act. Section 1923(f)(7) would have required reductions to states' FY DSH allotments from FY 2014 through FY 2020, the calculation of which was described in the Disproportionate Share Hospital Payment Reduction final rule published in the September 18, 2013 Federal Register (78 FR 57293). Subsequent legislation, most recently by the Bipartisan Budget Act of 2018 (Pub. L. 115-123, enacted February 9, 2018), delayed the start of these reductions until FY 2020. A proposed rule delineating a revised methodology for the calculation of DSH allotment reductions previously scheduled to begin in FY 2018 was published in the July 28, 2017 Federal Register (82 FR 35155).

Because there are no reductions to DSH allotments for FY 2017 and FY 2019 under section 1923(f)(7) of the Act, as amended, this notice contains only the state-specific final FY 2017 DSH allotments and preliminary FY 2019 DSH allotments, as calculated under the statute without application of the reductions that would have been imposed under the Affordable Care Act provisions beginning with FY 2014. This notice also provides information on the calculation of such FY DSH allotments, the calculation of the states' institutions for mental diseases (IMDs) DSH limits, and the amounts of states' final FY 2017 IMD DSH limits and preliminary FY 2019 IMD DSH limits.

B. Determination of Fiscal Year DSH Allotments

Generally, in accordance with the methodology specified under section 1923(f)(3) of the Act, a state's FY DSH allotment is calculated by increasing the amount of its DSH allotment for the preceding FY by the percentage change Start Printed Page 3170in the CPI-U for the previous FY. Also in accordance with section 1923(f)(3) of the Act, a state's DSH allotment for a FY 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).

Furthermore, under section 1923(h) of the Act, federal financial participation (FFP) for DSH payments to IMDs and other mental health facilities is limited to state-specific aggregate amounts. Under this provision, the 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 specified in section 1923(h) of the Act.

In general, we determine states' DSH allotments for a FY and the IMD DSH limits for the same FY using the most recent available estimates of or actual medical assistance expenditures, including DSH expenditures in their Medicaid programs and the most recent available change in the CPI-U used for the FY in accordance with the methodology prescribed in the statute. The indicated estimated or actual expenditures are obtained from states for each relevant FY from the most recent available quarterly Medicaid budget reports (Form CMS-37) or quarterly Medicaid expenditure reports (Form CMS-64), respectively, submitted by the states. For example, as part of the initial determination of a state's FY DSH allotment (referred to as the preliminary DSH allotments) that is determined before the beginning of the FY for which the DSH allotments and IMD DSH limits are being determined, we use estimated expenditures for the FY obtained from the August submission of the CMS-37 submitted by states prior to the beginning of the FY; such estimated expenditures are subject to update and revision during the FY before such actual expenditure data become available. We also use the most recent available estimated CPI-U percentage change that is available before the beginning of the FY for determining the states' preliminary FY DSH allotments; such estimated CPI-U percentage change is subject to update and revision during the FY before the actual CPI-U percentage change becomes available. In determining the final DSH allotments and IMD DSH limits for a FY we use the actual expenditures for the FY and actual CPI-U percentage change for the previous FY.

II. Provisions of the Notice

A. Calculation of the Final FY 2017 Federal Share State DSH Allotments, and the Preliminary FY 2019 Federal Share State DSH Allotments

1. Final FY 2017 Federal Share State DSH Allotments

Addendum 1 to this notice provides the states' final FY 2017 DSH allotments determined in accordance with section 1923(f)(3) of the Act. As described in the background section, in general, the DSH allotment for a FY is calculated by increasing the FY DSH allotment for the preceding FY by the CPI-U increase for the previous fiscal year. For purposes of calculating the states' final FY 2017 DSH allotments, the preceding final fiscal year DSH allotments (for FY 2016) were published in the July 6, 2018 Federal Register (83 FR 31536). For purposes of calculating the states' final FY 2017 DSH allotments we are using the actual Medicaid expenditures for FY 2017. Finally, for purposes of calculating the states' final FY 2017 DSH allotments, the applicable historical percentage change in the CPI-U for the previous FY (FY 2016) was 0.9 percent; we note that this is the same as the estimated 0.9 percentage change in the CPI-U for FY 2016 that was available and used in the calculation of the preliminary FY 2017 DSH allotments which were published in the November 3, 2017 Federal Register (82 FR 51259).

2. Calculation of the Preliminary FY 2019 Federal Share State DSH Allotments

Addendum 2 to this notice provides the preliminary FY 2019 DSH allotments determined in accordance with section 1923(f)(3) of the Act. The preliminary FY 2019 DSH allotments contained in this notice were determined based on the most recent available estimates from states of their FY 2019 total computable Medicaid expenditures. Also, the preliminary FY 2019 allotments contained in this notice were determined by increasing the preliminary FY 2018 DSH allotments. The estimated percentage increase in the CPI-U for FY 2018 was 2.4 percent (CMS originally published the preliminary FY 2018 DSH allotments in the July 6, 2018 Federal Register (83 FR 31536)).

We will publish states' final FY 2019 DSH allotments in a future notice based on the states' four quarterly Medicaid expenditure reports (Form CMS-64) for FY 2019 available following the end of FY 2019 utilizing the actual change in the CPI-U for FY 2018.

B. Calculation of the Final FY 2017 and Preliminary FY 2019 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 DSH payments to IMDs or other mental health facilities that exceed the IMD DSH limits. In this notice, we are publishing the final FY 2017 and the preliminary FY 2019 IMD DSH limits determined in accordance with the provisions discussed above.

Addendums 3 and 4 to this notice detail each state's final FY 2017 and preliminary FY 2019 IMD DSH limit, respectively, determined in accordance with section 1923(h) of the Act.

III. Collection of Information Requirements

As it relates to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), this notice does not impose any new or revised collection of information requirements or burden. While discussed in section I.B. and in Addendums 3 and 4 of this notice, the requirements and burden associated with Form CMS-37 and Form CMS-64 are unaffected by this notice. Both forms are approved by the Office of Management and Budget (OMB) under control number 0938-1265. Since this notice will not impose any new or revised requirements/burden, we are not making any changes under that control number.

IV. Regulatory Impact Analysis

We have examined the impact of this notice 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 Act, section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4; enacted on March 22, 1995) (UMRA `95), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation and Controlling Regulatory Costs (January 30, 2017).

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select Start Printed Page 3171regulatory 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 reaches the $100 million economic threshold and thus is considered a major rule under the Congressional Review Act.

The final FY 2017 DSH allotments being published in this notice are equal to the preliminary FY 2017 DSH allotments published in the November 3, 2017 Federal Register (82 FR 51259). This is due to the actual percentage change in the CPI-U for FY 2016 used in the calculation of the final FY 2017 allotments (0.9 percent) being equal to the estimated percentage change in the CPI-U for FY 2016 used in the calculation of the preliminary FY 2017 allotments (0.9 percent). The final FY 2017 IMD DSH limits being published in this notice are also equal to the preliminary FY 2017 IMD DSH limits published in the November 3, 2017 Federal Register (82 FR 51259). Since the final FY 2017 DSH allotments were equal to the preliminary FY 2017 DSH allotments, the associated FY 2017 IMD DSH limits also remained the same.

The preliminary FY 2019 DSH allotments being published in this notice have been increased by approximately $295 million more than the preliminary FY 2018 DSH allotments published in the July 6, 2018 Federal Register (83 FR 31536). The increase in the DSH allotments is due to the application of the statutory formula for calculating DSH allotments under which the prior fiscal year allotments are increased by the percentage increase in the CPI-U for the prior fiscal year. The preliminary FY 2019 IMD DSH limits being published in this notice are approximately $24 million more than the preliminary FY 2018 IMD DSH limits published in the July 6, 2018 Federal Register (83 FR 31536). The increases in the IMD DSH limits are because the DSH allotment for a FY is a factor in the determination of the IMD DSH limit for the FY. Since the preliminary FY 2019 DSH allotments are greater than the preliminary FY 2018 DSH allotments, the associated preliminary FY 2019 IMD DSH limits for some states also increased.

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 less than $7.5 million to $38.5 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, any impact on providers is due to the effect of the various controlling statutes; providers are not impacted as a result of the independent regulatory action in publishing this notice. The purpose of the notice is to announce the latest DSH allotments and IMD DSH limits, 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 specifies the methodology for determining the amounts of states' DSH allotments and IMD DSH limits; and as described previously, the application of the methodology specified in statute results in the decreases or increases in states' DSH allotments and IMD DSH limits for the applicable FYs. 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. For this reason, 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. In 2018, that threshold is approximately $150 million. This notice will have no consequential effect on spending by 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 or otherwise have Federalism implications, the requirements of E.O. 13132 are not applicable.

Executive Order 13771, titled “Reducing Regulation and Controlling Regulatory Costs,” was issued on January 30, 2017. It has been determined that this notice is a transfer rule and is not a regulatory action for the purposes of Executive Order 13771.

A. 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 and limits as specified in statute. This notice does not put forward any further discretionary administrative policies for determining such allotments and limits, or otherwise.

B. Accounting Statement

As required by OMB Circular A-4 (available at http://www.whitehouse.gov/​omb/​circulars/​a004/​a-4.pdf), in Table 1, we have prepared an accounting statement showing the classification of the estimated expenditures associated with the provisions of this notice. Table 1 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 2018 to FY 2019.

Table 1—Accounting Statement: Classification of Estimated Expenditures, From the FY 2018 to FY 2019

[in Millions]

CategoryTransfers
Annualized Monetized Transfers$295.
From Whom To Whom?Federal Government to States.
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C. Congressional Review Act

This proposed regulation is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress and the Comptroller General for review.

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

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Dated: January 9, 2019.

Seema Verma,

Administrator, Centers for Medicare & Medicaid Services.

Dated: January 18, 2019.

Alex M. Azar II,

Secretary, Department of Health and Human Services.

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Key to ADDENDUM 1—Final DSH Allotments for FY 2017

[The Final FY 2017 DSH Allotments for the NON-Low DSH States are presented in the top section of this addendum, and the Final FY 2017 DSH Allotments for the Low-DSH States are presented in the bottom section of this addendum.]

ColumnDescription
Column AState.
Column BFY 2017 FMAPs.
This column contains the States' FY 2017 Federal Medical Assistance Percentages.
Column CPrior FY (2016) DSH Allotments.
This column contains the States' prior FY 2016 DSH Allotments.
Column DPrior FY (2016) DSH Allotments (Col C) × (100 percent + Percentage Increase in CPIU): 100.9 percent.
This column contains the amount in Column C increased by 1 plus the percentage increase in the CPI-U for the prior FY (100.9 percent).
Column EFY 2017 TC MAP Exp. Including DSH.
This column contains the amount of the States' FY 2017 total computable (TC) medical assistance expenditures including DSH expenditures.
Column FFY 2017 TC DSH Expenditures.
This column contains the amount of the States' FY 2017 total computable DSH expenditures.
Column GFY 2017 TC MAP Exp. Net of DSH.
This column contains the amount of the States' FY 2017 total computable medical assistance expenditures net of DSH expenditures, calculated as the amount in Column E minus the amount in Column F.
Column H12 percent 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 IGreater of FY 2016 Allotment or 12 percent Limit.
This column contains the greater of the State's prior FY (FY 2016) DSH allotment or the amount of the 12 percent Limit, determined as the greater of the amount in Column C or Column H.
Column JFY 2017 DSH Allotment.
This column contains the States' final FY 2017 DSH allotments, determined as the lesser of the amount in Column I or Column D.
For states with “na” in Columns I or D, refer to the footnotes in the addendum.
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Key to ADDENDUM 2—Preliminary DSH Allotments for FY 2019

[The Preliminary FY 2019 DSH Allotments for the NON-Low DSH States are presented in the top section of this addendum, and the Preliminary FY 2019 DSH Allotments for the Low-DSH States are presented in the bottom section of this addendum.]

ColumnDescription
Column AState.
Column BFY 2019 FMAPs.
This column contains the States' FY 2019 Federal Medical Assistance Percentages.
Column CPrior FY (2018) DSH Allotments.
This column contains the States' prior preliminary FY 2018 DSH Allotments.
Column DPrior FY (2018) DSH Allotments (Col C) × (100 percent + Percentage Increase in CPIU): 102.4 percent.
This column contains the amount in Column C increased by 1 plus the estimated percentage increase in the CPI-U for the prior FY (102.4 percent).
Column EFY 2019 TC MAP Exp. Including DSH.
This column contains the amount of the States' projected FY 2019 total computable (TC) medical assistance expenditures including DSH expenditures.
Column FFY 2019 TC DSH Expenditures.
This column contains the amount of the States' projected FY 2019 total computable DSH expenditures.
Column GFY 2019 TC MAP Exp. Net of DSH.
This column contains the amount of the States' projected FY 2019 total computable medical assistance expenditures net of DSH expenditures, calculated as the amount in Column E minus the amount in Column F.
Column H12 percent 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 IGreater of FY 2018 Allotment or 12 percent Limit.
This column contains the greater of the State's preliminary prior FY (FY 2018) DSH allotment or the amount of the 12 percent Limit, determined as the greater of the amount in Column C or Column H.
Column JFY 2019 DSH Allotment.
This column contains the States' preliminary FY 2018 DSH allotments, determined as the lesser of the amount in Column I or Column D.
For states with “na” in Columns I or D, refer to the footnotes in the addendum.
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Key to ADDENDUM 3—Final IMD DSH Limits for FY 2017

[The final FY 2017 IMD DSH Limits for the Non-Low DSH States are presented in the top section of this addendum and the preliminary FY 2017 IMD DSH Limits for the Low-DSH States are presented in the bottom section of the addendum.]

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 as of January 1, 1997.
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 Hospital & 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 2017 Federal Share DSH Allotment.
This column contains the states' FY 2017 DSH allotments from Addendum 1, Column J.
Column GFY 2017 FMAP.
Column HFY 2017 DSH Allotments in Total Computable, Col. F/G.
This column contains states' FY 2017 total computable DSH allotment (determined as Column F/Column G).
Column IApplicable Percentage Applied to FY 2017 Allotments in TC, Col E × Col H.
This column contains the applicable percentage of FY 2017 total computable DSH allotment (calculated as the percentage in Column E multiplied by the amount in Column H).
Column JFY 2017 TC IMD DSH Limit. Lesser of Col. I or C.
This column contains the total computable FY 2017 TC IMD DSH Limit equal to the lesser of the amount in Column I or Column C.
Column KFY 2017 IMD DSH Limit in Federal Share, Col. G × J.
This column contains the FY 2017 Federal Share IMD DSH limit determined by converting the total computable FY 2017 IMD DSH Limit from Column J into a federal share amount by multiplying it by the FY 2016 FMAP in Column G.
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Key to ADDENDUM 4—Preliminary IMD DSH Limits for FY 2019

[The preliminary FY 2019 IMD DSH Limits for the Non-Low DSH States are presented in the top section of this addendum and the preliminary FY 2019 IMD DSH Limits for the Low-DSH States are presented in the bottom section of the addendum.]

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 as of January 1, 1997.
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 Hospital & 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 2019 Federal Share DSH Allotment.
This column contains the states' preliminary FY 2019 DSH allotments from Addendum 1, Column J.
Column GFY 2019 FMAP.
Column HFY 2019 DSH Allotments in Total Computable, Col. F/G.
This column contains states' FY 2019 total computable DSH allotment (determined as Column F/Column G).
Column IApplicable Percentage Applied to FY 2019 Allotments in TC, Col E × Col H.
This column contains the applicable percentage of FY 2019 total computable DSH allotment (calculated as the percentage in Column E multiplied by the amount in Column H).
Column JFY 2019 TC IMD DSH Limit. Lesser of Col. I or C.
This column contains the total computable FY 2019 TC IMD DSH Limit equal to the lesser of the amount in Column I or Column C.
Column KFY 2019 IMD DSH Limit in Federal Share, Col. G × J.
This column contains the FY 2018 Federal Share IMD DSH limit determined by converting the total computable FY 2019 IMD DSH Limit from Column J into a federal share amount by multiplying it by the FY 2018 FMAP in Column G.
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[FR Doc. 2019-01928 Filed 2-8-19; 8:45 am]

BILLING CODE 4120-01-P