E8-30267. Medicaid Program; Fiscal Year Disproportionate Share Hospital Allotments and Disproportionate Share Hospital Institutions for Mental Disease Limits

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS

ACTION:

Notice.

SUMMARY:

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

DATES:

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

FOR FURTHER INFORMATION CONTACT:

Richard Strauss, [phone].

SUPPLEMENTARY INFORMATION:

I. Background

A. Disproportionate Share Hospital Allotments for Federal Fiscal Year 2003

Under section 1923(f)(3) of the Social Security Act (the Act), States' Federal fiscal year (FFY) 2003 disproportionate share hospital (DSH) allotments were calculated by increasing the amounts of the FFY 2002 allotments for each State (as specified in the chart, entitled “DSH Allotment (in millions of dollars),” contained in section 1923(f)(2) of the Act) by the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U) for the prior fiscal year. The allotment, determined in this way, is subject to the limitation that an increase to a State's DSH allotment for a fiscal year cannot result in the DSH allotment exceeding the greater of the State's DSH allotment for the previous fiscal year or 12 percent of the State's total medical assistance expenditures for the allotment year (this is referred to as the 12 percent limit).

Most States' actual FY 2002 allotments were determined in accordance with the provisions of section 1923(f)(4) of the Act. However, as indicated previously, the calculation of States' FFY 2003 allotments was not based on the actual FFY 2002 DSH allotments; rather, section 1923(f)(3) of the Act requires that the States' FY 2003 allotments be determined using the amount of the States' FY 2002 allotments specified in the chart in section 1923(f)(2) of the Act. The exception to this is the calculation of the FFY 2003 DSH allotments for certain “Low-DSH States” (defined in section 1923(f)(5) of the Act). Under the Low-DSH State provision, there is a special calculation methodology for the Low-DSH States only. Under this methodology, the FFY 2003 allotments were determined by using (that is, increasing) States' actual FFY 2002 DSH allotments (not their FFY 2002 allotments specified in the chart in section 1923(f)(2) of the Act) by the percentage change in the CPI-U for the previous fiscal year.

B. DSH Allotments for FFY 2004

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

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

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

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

However, as amended by section 1001(b)(4) of the MMA, section 1923(f)(5)(B) of the Act also contains criteria for determining whether a State is a Low-DSH State, beginning with FFY 2004. This provision is described in section I.D.

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

Section 1001(b)(1) of the MMA amended section 1923(f)(5) of the Act regarding the calculation of the fiscal year DSH allotments for “Low-DSH” States for FFY 2004 and subsequent fiscal years. Specifically, under section 1923(f)(5)(B) of the Act, as amended by section 1001(b)(4) of the MMA, a State is considered a Low-DSH State for FFY 2004 if its total DSH payments under its State plan for FFY 2000 (including Federal and State shares) as reported to CMS as of August 31, 2003, are greater than 0 percent and less than 3 percent of the State's total FFY 2000 expenditures under its State plan for medical assistance. For States that meet the new Low-DSH criteria, their FFY 2004 DSH allotments are calculated by increasing their FFY 2003 DSH allotments by 16 percent. Therefore, for FFY 2004, Low-DSH States' fiscal year DSH allotments are calculated in the same way as the DSH allotments for regular States, which under section 1923(f)(3) of the Act, get the special temporary increase for FFY 2004.

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

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

Under section 1923(h) to the Act, Federal financial participation (FFP) is not available for DSH payments to institutions for mental diseases (IMDs) and other mental health facilities that are in excess of State-specific aggregate limits. Under this provision, this aggregate limit for DSH payments to IMDs and other mental health facilities is the lesser of a State's FFY 1995 total computable (State and Federal share) IMD and other mental health facility DSH expenditures applicable to the State's FFY 1995 DSH allotment (as reported on the Form CMS-64 as of January 1, 1997), or the amount equal to the product of the State's current year total computable DSH allotment and the applicable percentage.

Each State's IMD limit on DSH payments to IMDs and other mental health facilities was calculated by first determining the State's total computable DSH expenditures attributable to the FFY 1995 DSH allotment for mental health facilities and inpatient hospitals. This calculation was based on the total computable DSH expenditures reported by the State on the Form CMS-64 as mental health DSH and inpatient hospital as of January 1, 1997. We then calculate an “applicable percentage.” The applicable percentage for FFY 1998 through FFY 2000 (1995 IMD DSH percentage) is calculated by dividing the total computable amount of IMD and mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment by the total computable amount of all DSH expenditures (mental health facility plus inpatient hospital) applicable to the FFY 1995 DSH allotment. For FFY 2001 and thereafter, the applicable percentage is defined as the lesser of the applicable percentage as calculated above (for FFYs 1998 through 2001) or 50 percent for FFY 2001; 40 percent for FFY 2002; and 33 percent for each subsequent FFY.

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

In the final step of the calculation of the IMD DSH Limit, the State's total computable IMD DSH limit for the FFY is set at the lesser of the product of a State's current fiscal year total computable DSH allotment and the applicable percentage for that fiscal year, or the State's FFY 1995 total computable IMD and other mental health facility DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64.

The MMA legislation did not amend the Medicaid statute with respect to the calculation of the IMD DSH limit.

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

In general, we initially determine States' DSH allotments and IMD DSH limits for a fiscal year using estimates of medical assistance expenditures, including DSH expenditures in their Medicaid programs. These estimates are provided by States each year on the August quarterly Medicaid budget reports (Form CMS-37) before the Federal fiscal year for which the DSH allotments and IMD DSH limits are being determined. The DSH allotments and IMD DSH limits determined using these estimates are referred to as “preliminary.” Only after we receive States’ reports of the actual related medical assistance expenditures through the quarterly expenditure report (Form CMS-64), which occurs after the end of the fiscal year, are the “final” DSH Allotments and IMD DSH limits determined.

As indicated in section I.F. of this notice, the notice published in the Federal Register on October 3, 2006, included the announcement of the preliminary FFY 2007 DSH allotments (based on estimates), and the preliminary FFYs 2007 IMD DSH limits (since they were based on the preliminary DSH allotments for FFYs 2007). The notice published in the Federal Register on December 28, 2007 announced the final FFY 2006 DSH allotments and the final FFY 2006 IMD DSH limits (since they were based on the actual expenditures related to those years), and the preliminary FFY 2008 allotments (based on estimates), and the preliminary FFYs 2008 IMD DSH limits (since they were based on the preliminary DSH allotments for FFYs 2008).

This notice announces the final FFY 2007 DSH allotments and the final FFY 2007 IMD DSH limits (since these are now based on the actual expenditures for those fiscal years), the preliminary FFY 2009 DSH allotments (based on estimates), and the preliminary IMD DSH limits for FFY 2009 (since they are based on the preliminary DSH allotments for FFY 2009). This notice does not include the final FFY 2008 DSH allotments or the final FFY 2008 IMD DSH limits, since the associated actual expenditures for FFY 2008 are not available at this time.

G. DSH Allotment Provisions for Certain States

1. DSH Allotments for the District of Columbia

The provisions of section 6054 of the Deficit Reduction Act (DRA) of 2005 Public Law 109-171, enacted February 8, 2006) affected the determination of the DSH allotment for the District of Columbia. Under section 6054 of the DRA, for purposes of determining only the FFY 2006 and subsequent fiscal year DSH allotments for the District of Columbia, the table in section 1923(f)(2) of the Act is amended by increasing the FFY DSH allotment amounts indicated in that table for the District of Columbia for FFYs 2000, 2001, and 2002 to $49 million for each of those fiscal years. Before the DRA amendment, the amount in the chart in section 1923(f)(2) of the Act for the District of Columbia for each of those fiscal years was $32 million. This DRA provision increases the fiscal year DSH allotment for the District of Columbia effective with the FFY 2006 DSH allotment. This change is because the DSH allotments for FFY 2003 were based on the amounts of States' DSH allotments for FFY 2002 as contained in the chart in section 1923(f)(2) of the Act. Since (for purposes of ultimately determining the FFY 2006 allotment) the DRA provision increased the FFY 2002 allotment for the District of Columbia, as indicated above, the FFY 2003 allotment was increased. Furthermore, for this purpose, the FFY 2004 allotment for the District of Columbia would then have been determined by increasing the FFY 2003 allotment (as so determined) by 16 percent. For fiscal years subsequent to FFY 2006, the DSH allotments are determined as described above. The final FFY 2007 DSH allotment and the preliminary FFY 2009 DSH allotment for the District of Columbia contained in this notice reflect the provision of section 6054 of the DRA.

As described below, in accordance with section 6054 of the DRA, the final FFY 2007 DSH allotment for the District of Columbia is $57,692,600. As amended by section 6054 of the DRA, the FFY 2002 DSH allotment amount for the District of Columbia contained in the chart in section 1923(f)(2) of the Act was increased to $49,000,000. In accordance with section 1923(f)(3)(A) of the Act, the FFY 2003 DSH allotment is determined by increasing the $49,000,000 DSH Allotment for FFY 2002 (as referenced in section 1923(f)(2) of the Act) by the percentage change in the CPI-U for 2002 (in this case, 1.5 percent) to $49,735,000. In accordance with section 1923(f)(3)(C)(i) of the Act, the FFY 2004 DSH allotment for DC would be determined by increasing the $49,735,000 FFY 2003 DSH allotment amount by 16 percent to $57,692,600. In accordance with the provisions of section 1923(f)(3)(C)(ii) of the Act, as applicable for other Non-Low DSH States under the “parallel” process described above, the District of Columbia's DSH allotments for FFYs 2005 and following fiscal years would remain at $57,692,600 until the fiscal year specified occurs. In accordance with section 6054 of the DRA, the District of Columbia's DSH allotment was actually increased as described above, effective beginning with FFY 2006 to the $57,692,600 amount. The final FY 2007 DSH allotment for DC is also $57,692,600.

2. DSH Allotments for the State of Tennessee.

Section 1923(f)(6)(A) of the Act, as amended by section 404 of Public Law 109-432 (enacted on December 20, 2006), section 204 of Public Law 110-173 (enacted on December 29, 2007), and section 202 of Public Law 110-275 (enacted on July 15, 2008) provides for the determination of a DSH allotment for the State of Tennessee for FY 2007, FY 2008, FY 2009, and for a period in FY 2010. In accordance with this provision, Tennessee's DSH allotment for each of these fiscal years is the greater of $280 million and the FY 2007 Federal medical assistance percentage of the DSH payment adjustments reflected in the State's TennCare Demonstration Project for the demonstration year ending in 2006. In accordance with this provision, the State's Federal share DSH allotment for FY 2007, FY 2008, and FY 2009 was determined to be $305,451,928. Furthermore, Tennessee's DSH allotment for the period October 1, 2009, through December 31, 2009, is one-fourth of this amount; that is, $76,362,982. Section 1923(f)(6)(A)(ii) of the Act further limits the amount of Federal funds that are available for DSH payments that Tennessee may make in each fiscal year to 30 percent of the DSH allotment. In this regard, the limit on the DSH payments that the State of Tennessee may make is effectively $91,635,578 (30 percent of $305,451,928) for each FY 2007 through FY 2009, and $22,908,895 (30 percent of $76,362,982) for the period October 1, 2009, through December 31, 2009.

3. DSH Allotments for the State of Hawaii

Section 1923(f)(6)(B) of the Act, as amended by section 404 of Public Law 109-432, section 204 of Public Law 110-173, and section 202 of Public Law 110-275 provides for a DSH allotment for the State of Hawaii for FY 2007, FY 2008, FY 2009, and for a period in FY 2010. In accordance with this provision, Hawaii's DSH allotment for FY 2007, FY 2008, and FY 2009 is $10 million. Furthermore, Hawaii's DSH allotment for the period October, 1, 2009, through December 31, 2009, is $2.5 million.

II. Provisions of the Notice

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

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

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

Chart 2 of the Addendum to this notice provides the States' “preliminary” FFY 2009 DSH allotments. These preliminary allotments were determined using the States' August 2008 expenditure estimates submitted by the States on the Form CMS-37, and the currently available percentage change in the consumer price index for all urban consumers (all items; U.S. city average), for the previous fiscal year (that is, for FY 2008). The final FFY 2009 DSH allotments for each State will be published following receipt of the States' four quarterly Medicaid expenditure reports (Form CMS-64) for FFY 2009.

As discussed previously, in determining non-Low DSH States' DSH allotments for fiscal years after FY 2004 under section 1923(f)(3)(C) of the Act for DSH allotments, we have been determining States' DSH allotments under a “parallel” process. Under the parallel process, for each fiscal year for each State we have been determining whether the “Fiscal Year Specified” (as defined in section 1923(f)(3)(D) of the Act) has occurred. Under section 1923(f)(3)(D) of the Act, the Fiscal Year Specified is determined separately for each State and “is the first fiscal year for which the Secretary estimates that the DSH allotment for that State will equal (or no longer exceed) the DSH allotment for that State under the law as in effect before the date of enactment” of MMA. The process in effect prior to the enactment in MMA is the process described in section 1923(f)(3)(A) of the Act; under this process each States' DSH allotment since FY 2003 is increased by the CPIU increase for the prior fiscal year and the result is then compared to the State's FY 2004 DSH allotment, as determined under section 1923(f)(3)(C)(i) of the Act (under which the States' FY 2003 DSH allotments were increased by 16 percent). In other words, the Fiscal Year Specified for a State is the fiscal year when the FY 2004 allotment is no longer greater than the parallel process DSH allotment.

We are reiterating the parallel process provision because for all non-Low DSH States (except one), we have determined that FY 2009 is the “Fiscal Year Specified”. Therefore, as indicated in section 1923(f)(3)(C)(ii) of the Act, the FY 2009 DSH allotment for all non-Low DSH States (except one)is equal to the prior FY 2008 DSH allotment increased by the CPIU increase for FY 2008 (4.0 percent). Chart 2 reflects this. For the non-Low DSH States for which the FY 2009 is the Fiscal Year Specified, the FY 2010 and subsequent fiscal year DSH allotments will be calculated by increasing the prior fiscal year DSH allotment by the CPIU increase for the prior fiscal year.

For Low-DSH States, the FY 2009 DSH allotment is calculated using the same methodology as for the non-Low DSH States for which the Fiscal year specified has occurred. That is, for FY 2009 and following fiscal years, the DSH allotment for Low-DSH States is calculated by increasing the prior fiscal year DSH allotment by the CPIU increase for the prior fiscal year.

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

Section 1923(h) of the Act specifies the methodology to be used to establish the limits on the amount of DSH payments that a State can make to IMDs and other mental health facilities. FFP is not available for IMD or DSH payments that exceed the lesser of the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported to us on the Form CMS-64 as of January 1, 1997; or the amount equal to the product of the State's current FFY total computable DSH allotment and the applicable percentage. We are publishing the final FFY 2007 IMD DSH limit, and the preliminary FFY 2009 IMD DSH limit, along with an explanation of the calculation of these limits.

For FFY 2003 and following fiscal years, the applicable percentage is the lesser of 33 percent or the 1995 DSH IMD percentage of the amount computed for FFY 2000. This percentage was applied to the State's fiscal year total computable DSH allotment. This result was then compared to the State's FFY 1995 total computable mental health DSH expenditures applicable to the State's FFY 1995 DSH allotment as reported on the Form CMS-64 as of January 1, 1997. The lesser of these two amounts was the State's limitation on total computable IMD/DSH expenditures for FFY 2003 and following fiscal years.

Charts 3 and 4 of the Addendum to this notice detail each State's final IMD/DSH limitation for FFY 2007 and the preliminary IMD/DSH limitation for FFY 2009, respectively, in accordance with section 1923(h) of the Act.

III. Collection of Information Requirements

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

IV. Regulatory Impact Statement

We have examined the impact of this rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). This notice does reach the economic threshold and thus is considered a major rule. We note that the total preliminary FY 2009 DSH allotments announced in this notice are about $385 million greater than the total preliminary FY 2008 DSH allotments, which were announced in the Federal Register published on December 28, 2008 (72 FR 73831). As described previously, this change in allotment is a result of the application of the explicit provisions of the Medicaid statute, which requires that for the “fiscal year specified” the fiscal year DSH allotments for non-Low DSH states be calculated by increasing the previous fiscal year's DSH allotment by the increase in the CPI-U for the prior fiscal year. Except for one State, for all non-Low DSH States FY 2009 is the fiscal year specified, and therefore, the FY 2009 DSH allotment for these states must be calculated by increasing the FY 2008 DSH allotments by the CPI-U for FY 2008 (in this case 4 percent). Additionally, in accordance with the Medicaid statute, the calculation of all Low-DSH states' FY 2009 allotments reflects this CPI-U increase. After application of these statutory provisions, the resulting total FY 2009 DSH allotments are about $385 million more than the total FY 2008 DSH allotments; this notice announces those amounts.

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6.5 million to $31.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this notice will not have significant economic impact on a substantial number of small entities. Specifically, the effects of the various controlling statutes on providers are not impacted by a result of any independent regulatory impact and not this notice. The purpose of the notice is to announce the latest distributions as required by the statute.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Core-Based Statistical Area for Medicaid payment regulations and has fewer than 100 beds. We are not preparing analysis for section 1102(b) of the Act because we have determined and the Secretary certifies that this notice will not have a significant impact on the operations of a substantial number of small rural hospitals.

In addition, the MMA set statutorily defined limits on the amount of Federal share DSH expenditures available for FFY 2004 and subsequent fiscal years. Specifically, section 1001 of the MMA increased the DSH allotment for States beginning with fiscal year 2004. While overall the statute mandated some increases in DSH payments, we do not believe that this notice will have a significant economic impact on a substantial number of small entities.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $130 million. This notice will have no consequential effect on State, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. Since this notice does not impose any costs on State or local governments, the requirements of E.O. 13132 are not applicable.

Accounting Statement

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

Table—Accounting Statement: Classification of Estimated Expenditures, From the FY 2008 to FY 2009

[In millions]

Category	Transfers
Annualized Monetized Transfers	$385
From Whom To Whom?	Federal Government to States

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

Addendum

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

Key to Chart 1—Final DSH Allotments for FY 2007

[Key to the chart of the final FFY 2007 DSH allotments. The final FFY 2007 DSH allotments for the regular states are presented in the top section of this chart and the final FFY 2007 DSH allotments for the Low-DSH states are presented in the bottom section of the chart.]

Column	Description
For Non-Low-DSH States:
Column A	State.
Column B	Final FY 2004 DSH Allotments—This column contains the final Federal share FFY 2004 DSH Allotments.
Column C	FY 2007 DSH Allotment—This column contains the final Federal share FFY 2007 DSH Allotments.
Column D	MMA Low-DSH Status—This column indicates the MMA Low-DSH Status of each State.
For Low-DSH States:
Column A	State.
Column B	Prior FY DSH Allotments—This column contains the final FFY 2006 DSH Allotments.
Column C	FY 2007 DSH Allotments—This column contains the final Federal share FFY 2007 DSH Allotments = Column B multiplied by 1.16.
Column D	MMA Low-DSH Status—This column indicates the MMA Low-DSH Status of each State.

Key to Chart 2—Preliminary DSH Allotment for Fiscal Year 2009

[Key to the chart of the preliminary FY 2009 DSH allotments. The preliminary FY 2009 DSH allotments for the Non-Low DSH states are presented in the top section of this chart, and preliminary FY 2009 DSH allotments for the Low-DSH states are presented in the bottom section of this chart.]

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

Key to Chart 3—Final FFY 2007 IMD DSH Limits

[Key to the Chart of the FFY 2007 IMD Limitations. The final FFY 2007 IMD DSH Limits for the regular States are presented in the top section of this chart and the final FFY IMD DSH Limits for the Low-DSH States are presented in the bottom section of the chart.]

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

Key to Chart 4—Preliminary FFY 2009 IMD DSH Limits

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

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

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program)

Dated: September 25, 2008.

Kerry Weems,

Acting Administrator, Centers for Medicare & Medicaid Services.

Dated: October 14, 2008.

Michael O. Leavitt,

Secretary.

Editorial Note: This document was received in the Office of the Federal Register on Tuesday, December 16, 2008.