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EXECUTIVE ORDER 12866 SUBMISSION
Important
Please read the instructions on the reverse side before completing this form.
For additional forms or assistance in completing this form, contact the OIRA Docket Library,
[202] 395-6880, or your OIRA Desk Officer.
Send three copies of this form and supporting material to:
Office of Information and Regulatory Affairs
Office of Management and Budget
REQUIVED JAN 30 1998
Attention: Docket Library, Room 3201
725 17th Street N.W.
Washington, DC 20503
IPA DOCKET LIBRAR:
1. Agency/Subagency originating request
2. Regulation Identifier Number (RIN)
DHHS, HCFA, MB
0938-AH79
0938-B016
3. Title
Revision to the Definition of an Unemployed Parent - MB-106-FC
4. Stage of Development
5. Legal Deadline for this
Prerule
a)
Proposed Rule
Ye As promised
Interim Final Rule
b)
Final Rule with comment period
Date Please let me
X
know as soon
Final Rule - No material change
c)
Stat as have comments valicial Lama
you can you
Notice
Other
6. Economically Significant
Yes
No
Description of Other
7. Agency Contact (person who can best answer questions regarding the content of this submission)
Judith Rhoades Jula Paradis
Phone 410) 786-4462
Certification for Executive Order 12866 Submissions
The authorized regulatory contact and the program official certify that the agency has complied with the requirements of
E.O. 12866 and any applicable policy directives.
Date
for
Director, Signature of Program MB Witham Official
5/19/97
Signature of Authorized Regulatory Contact
Date
Ken Choe OS/ES
K-Co
1/30/98
1:94
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
45 CFR Part 233
[HCFA-2106-FC]
RIN 0938-AH79
Medicaid Program; Revision to the Definition of
an Unemployed Parent
AGENCY: Administration for Children and Families (ACF), and
Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment period.
SUMMARY: The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) made changes in Federal
law that affect the eligibility of Medicaid and Federal
foster care recipients. Significantly, it eliminated the
Aid to Families with Dependent Children (AFDC) program and
replaced it with block grants for Temporary Assistance for
Needy Families (TANF). While under the previous law receipt
of AFDC qualified families for Medicaid, the new statute
does not tie receipt of TANF to Medicaid. Instead, subject
to some exceptions, Medicaid eligibility for families and
children now depends upon whether a family would have
qualified for AFDC under the rules in effect on July 16,
1996. Federal foster care eligibility depends on whether
the child would have qualified for AFDC under the rules in
effect on July 16, 1996.
HCFA-2106FC
2
We are amending the AFDC regulations pertaining to
eligibility in cases where a parent is unemployed. This
final rule with comment period makes a change to facilitate
among the TANF, Medicaid and foster care programs
coordination in cases where a State has expanded coverage
under its TANF plan beyond the definition of unemployed
parent contained in existing AFDC regulations.
This final rule with comment period revises the
definition of unemployment of a principal wage earner for
purposes of coverage of dependent children of unemployed
parents. It also allows States to eliminate inequitable
policies that are a disincentive to family unity.
DATES: Effective Date: These regulations are effective on
[the date of publication in the Federal Register].
Comments: Written comments will be considered if we receive
them at the appropriate address, as provided below, no later
than 5:00 p.m. on [60 days after date of publication of
these final rules with comment period in the Federal
Register].
ADDRESSES: Mail written comments (one original and three
copies) to the following address:
Health Care Financing Administration,
Department of Health and Human Services,
Attention: HCFA-2106-FC,
P.O. Box 7517,
Baltimore, MD 21207-0517.
HCFA-2106FC
3
If you prefer, you may deliver your written
comments (one original and three copies) to one of the
following addresses:
Room 309-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW,
Washington, D.C., or
Room C5-09-27, Central Building,
7500 Security Boulevard,
Baltimore, Maryland.
Because of staffing and resource limitations, we cannot
accept comments by facsimile (FAX) transmission. In
commenting, please refer to file code HCFA-2106-FC.
Comments received timely will be available for public
inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in
Room 309-G of the Department's offices at 200 Independence
Avenue, SW, Washington, DC, on Monday through Friday of each
week from 8:30 a.m. to 5 p.m. (Phone: (202) 690-7890).
If you wish to submit written comments on the
information collection requirements contained in this final
rule with comment period, you may submit written comments to
the following:
Laura Oliven, HCFA Desk Officer,
Office of Information and Regulatory Affairs,
Room 3001, New Executive Office Building,
Washington, D.C. 20503; and
HCFA-2106FC
4
Health Care Financing Administration,
Office of Information Services,
Information Technology Investment Management Group,
Division of HCFA Enterprise Standards,
Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
FOR FURTHER INFORMATION CONTACT:
Judith Rhoades, (410) 786-4462 (Medicaid)
Daniel Lewis, (202) 205-8618 (title IV-E foster care)
SUPPLEMENTARY INFORMATION:
I. Background
The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, Public Law 104-193 (commonly
referred to as welfare reform), enacted on August 22, 1996,
replaced the Federal/State program of Aid to Families With
Dependent Children (AFDC) with a new program of block grants
to States for Temporary Assistance for Needy Families
(TANF). This change has substantial implications for
Medicaid and title IV-E foster care eligibility Prior to
the enactment of Public Law 104-193, under section
1902 (a) (10) (A) (i) (I) of the Social Security Act (the Act),
individuals who received AFDC cash assistance or were deemed
to have received AFDC were automatically eligible for
Medicaid. Section 114 of Public Law 104-193 amended the Act
by redesignating section 1931 as section 1932 and inserting
a new section 1931 which establishes a new Medicaid
HCFA-2106FC
5
eligibility group for low-income families that is related to
eligibility requirements of the AFDC program in effect on
July 16, 1996. Section 108(d) of Public Law 104-193 amended
title IV-E of the Act to provide for Federal foster care
eligibility of children who would have been eligible for
AFDC under the June 1, 1995 requirements. Section 5513(b)
of the Balanced Budget Act of 1997 (Public Law 105-33)
amended sections 472 and 473 of the Act to replace the
reference to the June 1, 1995 AFDC requirements date
(regarding title IV-E foster care eligibility), with a
reference to July 16, 1996 AFDC requirements. This
technical change makes the July 16, 1996 date consistent
with the Medicaid AFDC eligibility provisions. In other
words, the financial eligibility standards and deprivation
requirements of the States' pre-welfare reform AFDC programs
will be used to determine Medicaid and title IV-E foster
care eligibility. One requirement in both programs is that
a child in a family must be deprived of parental support or
care by reason of the death, absence, incapacity, or
unemployment of a parent (the pre-welfare reform AFDC
deprivation provision).
Under the AFDC program, States were required (until
October 1998) to provide cash assistance to families in
which the principal wage earner was unemployed.
Unemployment of the principal wage earner constituted a type
of dependency relationship under the AFDC program. Section
HCFA-2106FC
6
407 (a) of the Act authorized the Secretary to prescribe
standards for determining unemployment for purposes of this
requirement. It did not specifically define unemployment.
In accordance with this provision, the Secretary established
an hour standard for determining unemployment, with an
exception fcr certain intermittent work, under current
regulations at 45 CFR 233.101 (a) (1). Specifically,
§ 233.101 (a) (1) provides that the definition of unemployed
must include any such parent who is employed less than 100
hours a month; or exceeds that standard for a particular
month, if the work is intermittent and the excess is of a
temporary nature as evidenced by the fact that the parent
was under the 100-hour standard for the prior 2 months and
is expected to be under the standard during the next month.
These pre-welfare reform regulations apply for purposes of
determining whether a family would have qualified for AFDC
under the statute in effect on July 16, 1996, which is part
of the test for Medicaid eligibility.
Under TANF, States will no longer be mandated to
provide cash assistance to intact families on the basis of
unemployment but may choose to do so. If a State chooses to
ensure Medicaid eligibility for cash assistance recipients
under TANF, it must align the eligibility requirements of
the new Medicaid eligibility group with its requirements
under TANF. In consultation with States, we have learned
that many States believe the definition of unemployment
HCFA-2106FC
7
established under § 233.101 (a) (1) for the AFDC program is
inequitable and excessively restrictive. They do not intend
to continue using the definition under their TANF programs.
Some States believe that this definition is anti-family and
disadvantages intact families. Under the AFDC program,
employment in excess of 100 hours per month was immaterial
for single-parent families. Some States believe if they
were to import the 100-hour rule into their TANF programs,
families in which a principal wage earner is employed over
100 hours per month, but whose income is below the cash
assistance standard, may actually break up in order to be
eligible for cash assistance.
States have indicated they would like to align
eligibility of TANF, foster care, and Medicaid programs for
programmatic reasons (such as facilitating Medicaid
eligibility) and administrative simplicity. However, the
existing definition of unemployment in § 233.101 (a) (1) will
stand in the way of this alignment if a State chooses to
apply a more liberal definition of employment under its TANF
program.
We agree with States that the existing definition of
unemployment is too restrictive. It imposes an impediment
to administrative simplification particularly for those
States that believe that the policy is inequitable and
discourages family unity. For these reasons, we are
revising the definition of unemployment to allow States the
HCFA-2106FC
8
opportunity to adopt more flexible definitions of
unemployment. This revision will allow States to align
their TANF, foster care, and Medicaid programs and thereby
allow administrative simplification. It will also allow
States to eliminate policies they believe to be inequitable
and a disincentive to family unity. We expect that some
States will choose to consider the principal wage earner to
be unemployed if the family income is below the applicable
cash assistance standard. Under welfare reform
demonstration projects, 30 States have statewide title IV-A
waivers that allow them to treat single-parent and two-
parent recipient families the same. In these States,
eligibility for cash assistance is not terminated solely on
the basis of hours worked. It is expected that these States
will use section 1931(d) authority to continue this policy
under their TANF programs for purposes of Medicaid
eligibility. However, it is expected that additional States
may wish to adopt a similar policy under their TANF programs
for purposes of Medicaid eligibility. (Six States have
related title IV-A waivers in limited areas of the State.
The section 1931(d) authority cannot be used to continue
these waivers on a statewide basis under TANF.)
Section 1931(b) of the Act, as added by Public Law 104-
193, provides that an individual must be treated as
receiving aid or assistance under a State plan approved
under title IV only if the individual meets the income and
HCFA-2106FC
9
resources standards and methodologies and the eligibility
requirements of the State's title IV-A plan under
section 406 (a) through (c) and section 407 (a) of the Act as
in effect as of July 16, 1996. Section 407 (a) defined
"dependent child" to include a needy child "who has been
deprived of parental support or care by reason of the
unemployment (as determined in accordance with standards
prescribed by the Secretary) of the parent who is the
principal wage earner." The regulations promulgated under
the section 407 (a) authority generally imposed a 100-hour
test to determine unemployment of the principal wage earner
(45 CFR 233.101(a)(1)) Nevertheless, we believe that the
reference in section 1931 (b) to the requirements of
section 407 (a) as in effect on July 16, 1996 does not freeze
those regulations in place. Rather, it refers to the
statutory. test for unemployment, which is itself subject to
regulation by the Secretary. In view of the new flexibility
contained in the TANF statute and the desirability of
coordinating Medicaid and foster care rules with expanded
TANF criteria, we believe that section 1102 of the Act
affords the Secretary with the authority to provide States
with the discretion to liberalize their definitions of
unemployment for purposes of Medicaid eligibility.
Therefore, we are revising the regulations at 45 CFR
233. (a) (1) to permit States to include families with
HCFA-2106FC
10
unemployed parents who would not have met the 100-hour rule
contained in the existing regulation.
II. Provisions of the Final Rule with Comment Period
We are revising § 233.101 (a) (1) to specify that a
State's definition of unemployed, for purposes of Medicaid
and title IV-E eligibility, must have a reasonable standard
and, at a minimum, include any such parent who is employed
less than 100 hours a month, or meets the exception for
certain intermittent work specified in existing regulations.
Under the revised definition, States will not be
allowed to define unemployment in any way that is more
restrictive than the existing definition. This is because
the intent of the welfare reform legislation was to protect
Medicaid eligibility for any individuals who would have been
eligible under the AFDC rules previously in effect.
Furthermore, the revised regulation does not require States
to adopt a broader definition of unemployment, since there
in no indication that the Congress intended to mandate
expanded eligibility beyond the statutory baseline.
In addition, States will be required to develop a
reasonable standard as part of the definition of
unemployment. That standard may be based on hours of work
and/or dollar amounts and may include family size and/or
time elements.
HCFA-2106FC
11
III. Regulatory Impact Statement
HCFA has examined the impact of this final rule with
comment period as required by Executive Order 12866 and the
Regulatory Flexibility Act (RFA) (Public Law 96-354)
Executive Order 12866 directs agencies to assess all costs
and benefits of available regulatory alternatives and, when
regulations are necessary, to select regulatory approaches
that maximize net benefits (including potential economic
environments, public health and safety, other advantages,
distributive impacts, and equity). We believe that this
final rule with comment period is consistent with the
regulatory philosophy and principles identified in the
Executive Order. The RFA requires agencies to analyze
options for regulatory relief for small businesses. For
purposes of a RFA, individuals and States are not considered
to be small entities.
In addition, section 1102(b) of the Act requires us to
prepare a regulatory impact analysis for any final rule that
may have a significant impact on the operations of a
substantial number of small rural hospitals. Such an
analysis must conform to the provisions of section 604 of
the RFA. With the exception of hospitals located in certain
rural counties adjacent to urban areas, for purposes of
section 1102(b) of the Act, we define a small rural hospital
as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 50 beds.
HCFA-2106FC
12
This final rule with comment period makes a change
necessary to facilitate the coordination of Medicaid with
TANF in cases where a State has expanded coverage under its
TANF plan beyond the definition of unemployed parent that
was contained in existing AFDC regulations. The rule
revises the definition of unemployment of a principal wage
earner for purpose of unifying families.
We estimate that this rule meets the threshold under
Executive Order 12866 of an effect on the economy of $100
million or more and thus requires a regulatory impact
analysis as a major rule. Therefore, we have developed the
following analysis in combination with the remainder of this
preamble.
Although this rule is considered a major rule, we
believe that the legislative intent of the Congress in
passing the PRWORA was to encourage needy families to
withdraw from welfare dependency over time, and at the same
time provide them with temporary assistance. Therefore, we
believe it is necessary to revise the definition of an
unemployed parent to achieve these goals.
The table below shows estimates of Federal and State
shares of Medicaid program costs that may be incurred as a
result of this regulation. These estimates are based on an
initial simulation study conducted in 1996 by the Urban
Institute to determine the impact of repealing the 100-hour
rule in those States that did not have IV-A waivers at that
HCFA-2106FC
13
time. This simulation produced an estimated increase of
1.275 million individuals who would meet AFDC eligibility
requirements as a result of repeal of the 100-hour rule. Of
these 1.275 million individuals, the Urban Institute
estimated that .546 million -- mostly adults -- would gain
Medicaid eligibility specifically because of the change; the
balance would have been eligible for Medicaid already, under
other Medicaid eligibility provisions. Of all the adults
gaining AFDC eligibility as a result of the change, the
Urban Institute estimated that 83 percent would also gain
Medicaid eligibility as a result (that is, would not
otherwise have been eligible for Medicaid).
Our estimate starts from the Urban Institute numbers of
potential new Medicaid eligibles, and updates them using a
corrected list of States that currently have statewide or
substate IV-A waivers. (These States are: Alabama*,
Arizona, California, Connecticut, Florida*, Georgia, Hawaii,
Iowa, Indiana, Kansas, Massachusetts, Maryland, Michigan,
Minnesota, Mississippi, Montana, Missouri, North Carolina,
North Dakota*, Nebraska, New Mexico, Ohio, Oklahoma*,
Oregon, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas, Utah, Vermont, Washington, and Wisconsin.
[Asterisks indicate States with partial waivers. ]) We
assumed no Medicaid effect in those States in which the 100-
hour rule is already waived, and we assumed further that
HCFA-2106FC
14
these waivers would remain in effect throughout the estimate
period.
Then, for the remaining States, we projected population
growth and Medicaid per capita costs over the 5-year
estimate period. We also assumed that only adults would be
affected by any broadening of the definition of
unemployment, since children would most likely be covered
already through other eligibility mechanisms. This
methodology produced an estimate of Medicaid costs for
implementation of this expansion of coverage.
Because this regulation provides States with an option,
it is difficult to predict State behavior. On the one hand,
it could be assumed that if a State had wanted to use an
unemployment standard different from the 100-hour rule, it
would have done so already, through the waiver mechanism; by
that logic, the additional cost of this regulation would be
minimal. On the other hand, the new TANF program, with its
new eligibility requirements and its disconnection from
Medicaid eligibility, provides new incentives that may not
have been present before, and, conceivably all States may
wish to immediately avail themselves of the option to change
the 100-hour rule. This latter scenario would produce
maximum costs. Given these uncertainties, we made a
midpoint estimate of the cost impact of this regulatory
change. That is, we assumed that expenditures in States
that do not currently have waivers would increase so that
HCFA-2106FC
15
the cost of this change would be half the estimated maximum
possible amount. Accordingly, we expect this final rule to
result in the following costs:
FY 1998
FY 1999
FY 2000
FY 2001
FY 2002
Federal
$115
$110
$115
$120
$125
State
$85
$80
$85
$90
$95
($ in millions, rounded to the nearest $5 million)
A separate but similar analysis was conducted for the
title IV-E foster care and adoption assistance programs.
Because more than 90 percent of children who are eligible
for foster care and adoption assistance would qualify for
these programs according to other rules unaffected by this
revision, we determined that this revision would have no
cost impact on foster care or adoption assistance.
These final regulations affect only States and
individuals, which are not defined as small entities. We
have determined and certify that this final rule with
comment period will not have a significant economic impact
on small entities under the threshold criteria of the RFA.
However, we have provided an analysis of the impact on
States and individuals under E.O. 12866. Further, we
certify that this final rule with comment period does not
have a significant impact on the operations of a substantial
number of small rural hospitals.
The only alternative to implementing this provision is
not to publish this regulation. However, not publishing
HCFA-2106FC
16
this provision would impose additional barriers to family
unity and administrative simplification of State Medicaid
programs.
In accordance with the provisions of Executive Order
12866, this regulation was reviewed by the Office of
Management and Budget.
This final rule has been classified as a major rule
subject to Congressional review. The effective date is
[INSERT DATE of publication]. If, however, at the
conclusion of the congressional review process the effective
date has been changed, HCFA will publish a document in the
Federal Register to establish the actual effective date or
to issue a notice of termination of the final rule action.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, agencies are
required to provide 60-day notice in the Federal Register
and solicit public comment before a collection of
information requirement is submitted to the Office of
Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection
should be approved, section 3506 (c) (2) (A) of the Paperwork
Reduction Act of 1995 requires that we solicit comment on
the following issues:
Whether the information collection is necessary and
useful to carry out the proper functions of the agency;
HCFA-2106FC
17
The accuracy of the agency's estimate of the
information collection burden;
The quality, utility, and clarity of the information
to be collected; and
Recommendations to minimize the information
collection burden on the affected public, including
automated collection techniques.
Section 233.101 of this final rule with comment period
contains requirements that are subject to review by the
Office of Management and Budget under the Paperwork
Reduction Act of 1995. The rule requires States to amend
their State plans to specify a reasonable standard for
measuring unemployment. Public reporting burden for this
collection of information is estimated to be 1 hour per
State. A notice will be published in the Federal Register
when approval is obtained. Organizations and individuals
desiring to submit comments on the information collection
and recordkeeping requirements should direct them to the OMB
official and HCFA/OFHR whose names appear in the "ADDRESSES"
section of this preamble.
V. Waiver of Proposed Rule and 30-Day Delay in the
Effective Date
We ordinarily publish a notice of proposed rulemaking
in the Federal Register for a substantive rule to provide a
period of public comment. However, we may waive that
procedure if we find good cause that notice and comment are
HCFA-2106FC
18
impractical, unnecessary, or contrary to the public
interest. In addition we also normally provide a delay of
30 days in the effective date. However, if adherence to
this procedure would be impractical, unnecessary, or
contrary to public interest, we may waive the delay in the
effective date.
We are adopting this regulation as a final rule with
comment period without publication of a notice of proposed
rulemaking because we believe it would be impractical and
contrary to public interest to delay allowing States
flexibility in implementing the welfare reform legislation.
The effective date for the TANF program depends on the date
the State submits a State TANF plan to the Secretary.
However, the limit on State funding under title IV-A is
effective on October 1, 1996. We believe that it is
imperative to allow States as much flexibility as possible,
and as soon as possible, to align the eligibility
requirements of the Medicaid program with the TANF program
to aid administrative simplification and eliminate any
disincentive to family unity on the part of recipients.
The sooner States have the flexibility to align these
programs, the more likely it is that additional individuals
will receive needed medical and remedial care. Also,
providing States with flexibility at the earliest possible
time will minimize unnecessary systems changes they would
otherwise incur in making the transition to the post-AFDC
HCFA-2106FC
19
environment. Therefore, we find good cause to waive
proposed rulemaking and issue these regulations as final.
For reasons discussed above, we also find good cause to
waive the usual 30-day delay in the effective date so that
the revisions to the definition may take effect upon
publication of this final rule with comment period.
Although we are publishing this as a final rule, we are
providing a 60-day period for public comment.
VI. Response to Comments
Because of the large number of items of correspondence
we normally receive on Federal Register documents published
for comment, we are not able to acknowledge or respond to
them individually. We will consider all comments we receive
by the date and time specified in the "DATES" section of
this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to
that document.
List of Subjects in 45 CFR Part 233
Aliens, Grant Programs-Social Programs, Public
Assistance Programs, Reporting and recordkeeping
requirements.