DEPARTMENT OF HEALTH & HUMAN SERVICES 
Health Care Financing Administration  
 Center for Medicaid and State Operations 
7500 Security Boulevard 
Baltimore, MD 21244-1850 
 
May 14, 1997 
 
Dear State Medicaid Director: 
 
This letter and attachments provides guidance on how State Medicaid Agencies must report, and the Health Care 
Financing Administration (HCFA) will track, certain Medicaid administrative expenditures and budget projections 
relating to the provision of the Welfare Reform legislation (Public Law 104-193, enacted August 22, 1996), the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), which established a special $500 million 
fund available to States for enhanced Federal matching for such expenditures. 
In consultation with State intergovernmental groups, HCFA allocated two amounts from the $500 million fund to each 
State Agency, to be used for allowable expenditures. The first allocation is a minimum amount and is generally the same 
for all States ($2 million). States may make claims for any allowable expenditures against this allocation at the enhanced 
Federal matching rate of 90 percent. The second amount differs among States and was based on State specific factors such 
as caseload and Medicaid administrative expenditures. States may make claims for allowable expenditures against this 
allocation at two rates, 90 or 75 percent, relating to the category of expenditure. 
The allocated funds are available to each State for certain administrative expenditures attributable to the costs of Medicaid 
eligibility determinations related to this Welfare Reform provision and incurred during the first three years the State's 
Temporary Assistance for Needy Families (TANF) program is in effect, but no earlier than October 1, 1996 and no later 
than September 30, 2000. 
There are 3 attachments to this letter. The first attachment contains more detailed guidance describing this provision and 
the reporting requirements that States must follow in order to claim for allowable expenditures at the enhanced Federal 
matching rates. The second attachment is a chart showing the States allocations from the $500 million enhanced Federal 
matching Fund. The third attachment is the Federal Register notice (MB-103-NC' implementing this provision. 
 
If you have any questions or require further information, please contact your HCFA Regional Office. 
 
Sincerely, 
/s/ 
Judith D. Moore 
Acting Director, Medicaid Bureau 
 
Attachments 
cc: 
All HCFA Regional Offices 
Ms. Lee Partridge, Director Health Policy Unit, American Public Welfare Association 
Ms. Jennifer Baxendell, Senior Policy Analyst, Human Resources Group, National Governors' Association 
Ms. Joy Wilson, Director, Health Committee, National Conference of State Legislatures 
Lloyd Bishop, Office of Legislative and Governmental Affairs,   ATTACHMENT 1 
STATE REPORTING OF EXPENDITURES AND BUDGET PROJECTIONS RELATING TO $500 MILLION 
ENHANCED FEDERAL MATCHING FUND 
 
Background - Repeal of the AFDC Program. Title I of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) replaced the open-end funded Aid to Families with Dependent Children (AFDC) 
cash assistance program with the block grant funded Temporary Assistance for Needy Families (TANF) program. 
Previously, receipt by a family of cash assistance under the AFDC program conferred automatic Medicaid eligibility. 
Under section 1931 of the Social Security Act (the Act), as amended by section 114(a) of PRWORA, in general State 
agencies must provide Medicaid eligibility to those low-income families meeting the eligibility requirements for AFDC 
under the States' AFDC State plans in effect as of July 16, 1996. 
 
$500 Million Fund Established. To assist State Medicaid agencies with the additional Medicaid administrative 
expenditures that they will incur as a result of determining AFDC-related Medicaid eligibility, section 193 1(h) of the Act, 
established a $500 million enhanced Federal matching fund and directed the Secretary of the Department of Health and 
Human Services to ensure the equitable distribution of the fund among the States and territories. 
 
Two Allocations Of The Fund For Each State. In consultation with State 
intergovernmental groups, the Health Care Financing Administration (HCFA) allocated two amounts to each State agency 
from the $500 million fund: a minimum (Base) Allocation which is generally the same for all States ($2,000,000); and an 
additional amount (Secondary Allocation), which differs among States and was allocated in accordance with a formula 
based on State specific factors such as caseload and Medicaid administrative expenditures. State agencies may claim 
Federal funding for allowable activities against the Base Allocation at a 90-percent enhanced Federal matching rate. States 
may claim Federal funding for allowable activities against the Secondary Allocation at two rates: a 90-percent enhanced 
Federal matching rate for specified activities considered critical to protecting recipients; and a 75-percent enhanced 
Federal matching rate for other allowable activities. 
 
Period for Which Enhanced Funds Are Available. A State agency may claim enhanced Federal matching funds for 
allowable expenditures incurred during the first 12 calendar quarters (3 years) in which the State's TANF program is in 
effect. Furthermore, the enhanced Federal matching funds are only available for allowable expenditures for the period 
beginning with Federal fiscal year 1997 (that is October 1, 1996) and ending with Federal fiscal year 2000 (that is, 
September 30, 2000). 
 
One Enhanced Federal Matching Rate for the Base Allocation. We established the higher 90-percent enhanced 
Federal matching rate associated with the Base Allocation to recognize the pressing startup and other common costs 
among States related to the transition from AFDC to the TANF program. The higher Federal matching rate for the Base 
Allocation will help expedite funds to States for such costs. 
 
Two Enhanced Federal Matching Rates for the Secondary Allocation. We established the two enhanced Federal 
matching rates associated with the Secondary Allocation to recognize two priorities of activities related to this provision. 
Items of the highest priority are indicated in the Allowable Activities section below by an asterisk (*) and are claimed at 
the higher 90-percent Federal matching rate. These items are associated with beneficiary oriented activities such as 
outreach, public service announcements, and education. The higher 90 percent enhanced rate encourages such activities 
and recognizes the importance of ensuring that individuals do not lose their eligibility inappropriately, are correctly 
determined (or redetermined) eligible, and understand program requirements during the critical period of transition to 
TANF. The lower 75- percent enhanced Federal matching rate addresses the other activities performed during the 
transition period. 
 
Allowable Activities. Expenditures for activities allowable for enhanced Federal matching funds under this provision 
include only those that would otherwise be Federally matched as Medicaid administrative expenditures at a 50 percent 
rate under section 1903(a)(7) of the Act. These are expenditures attributable to the increased administrative costs of 
Medicaid eligibility determinations and directly related activities incurred because of the transition from AFDC to TANF, 
and resulting from the enactment of section 1931 of the Act. For example, expenditures related to new Medicaid 
eligibility workers (including outstationed eligibility workers) hired by a State to implement the provisions of section 
1931 of the Act would be allowable at the enhanced Federal matching rates. In addition, PRWORA activities performed 
by current eligibility workers would be allowable at the enhanced Federal matching rates. On the other hand, expenditures  related to activities of outstationed eligibility workers who determine Medicaid eligibility for Supplemental Security 
Income (SSI) related individuals, such as the aged and disabled, or other non-PRWORA activities would not be allowable 
at the enhanced Federal matching rates. 
 
With respect to the Base Allocation all of the allowable activities on the following list would be claimable at the 90 
percent enhanced Federal matching. With respect to the Secondary Allocation, those allowable activities indicated with an 
asterisk (*) would be claimable at the 90 percent enhanced Federal matching rate. The other allowable activities with no 
asterisk would be claimable against the Secondary Allocation at the 75 percent enhanced Federal matching rate. 
 
(cid:131)  Educational activities (relating to current or potential beneficiaries). * 
(cid:131)   Public service announcements (PSAs). * 
(cid:131)   Outstationing of eligibility workers (more workers or new locations, for example, churches, day care centers, WIC 
offices, health care providers). * 
(cid:131)  Training related to the section 1931 provisions-- * 
1.  Eligibility workers 
2.  Providers 
3.  Outstationed eligibility workers and other individuals 
4.  Community 
(cid:131)   Outreach activities (for example, general or targeted mailing campaigns, contracts to assist beneficiaries with the 
redetermination process). * 
(cid:131)   Developing and disseminating new publications (targeted to at-risk populations). * 
(cid:131)   Local community activities (for example, meetings with community leaders and speeches to community groups).  
(cid:131)   Hiring new Medicaid eligibility workers (related to section 1931 determinations). 
(cid:131)  Designing new eligibility forms, for example, a single application for TANF and Medicaid whether eligibility is 
linked or not. 
(cid:131)   Identification of "at-risk" TANF recipients (in this context, at-risk refers to vulnerability to losing Medicaid 
eligibility as a result of the TANF provisions). 
(cid:131)   State and local government organizational changes related to the section 1931 provisions. 
(cid:131)   Intergovernmental activities. 
(cid:131)   Eligibility systems related changes. 
(cid:131)   Other activities identified by States and approved by the Secretary as applicable to the enhanced matching fund 
provisions. 
In order for State agencies to claim Federal funds for these allowable activities at the appropriate enhanced Federal 
matching rates associated with the two allocations, and for HCFA to properly track State expenditures against the 
allocations, States will need to report the expenditures on the Form HCFA-64 (Quarterly Medicaid Statement of 
Expenditures for the Medical Assistance program) and Form HCFA-37 (Medicaid Program Budget Report), as described 
in the sections below. 
 
REPORTING EXPENDITURES FOR STATE AND LOCAL ADMINISTRATION -FORM HCFA-64.lO AND 
64.lOP 
 
Waiver Schedules of the Forms HCFA-64.lO/ lop). In order for State agencies to claim Federal funds for allowable 
administrative activities at the correct enhanced Federal matching rates associated with the Base and Secondary 
Allocations, and for HCFA to track State expenditures against the two allocations, States must create two separate waiver 
schedules for the Form HCFA-64. 10, one for each of the two allocations. Note, line 14 of the Form HCFA-64.10 has 
previously allowed Federal share entries to be reported only in column (d) at the 50 percent rate. In order to allow the 
reporting of expenditures at the enhanced Federal matching rates of 90 and 75 percent, the Medicaid Budget and 
Expenditure System (MBES) has been modified to allow entries to be reported on the Form HCFA-64.10 in columns (b) 
at 90 percent, and (c) at 75 percent. 
  Base Allocation. In order to report and claim expenditures against the Base Allocation at the associated 90 percent 
Federal matching rate, the State must create a waiver schedule of the Form HCFA-64. 10, indicating "TANF" in the 
"TYPE OF WAIVER" block and "BASE ALLOC" in the "WAIVER NUMBER" block. All allowable expenditures for 
which States are claiming against the Base allocation must be reported on line 14 (OTHER FINANCIAL 
PARTICIPATION) of this waiver schedule of the Form HCFA-64. 10. The total computable amounts must be reported in 
column (a) and the (90 percent) Federal share amounts must be reported in columns (b) and (f). 
 
Secondary Allocation. In order to report and claim expenditures against the Secondary Allocation at the associated 90 
and 75 percent Federal matching rates, the State must create a waiver schedule of the Form HCFA-64. 10, indicating 
"TANF" in the "TYPE OF WAIVER" block and "SECONDARY ALLOC" in the "WAIVER NUMBER" block. All 
allowable expenditures for which States are claiming against the Secondary allocation must be reported on line 14 
(OTHER FINANCIAL PARTICIPATION) of this waiver schedule of the Form HCFA- 64.10. The sum of all the total 
computable amounts for both the 75 percent and the 90 percent activities must be reported in column (a). The 90 percent 
Federal share amounts must be reported in column (b) and the 75 percent Federal share amounts must be reported in 
column (c). The sum of the Federal share amounts reported in columns (b) and (c) must be reported in column (f). 
 
Base Form of the Form HCFA-64.lO. Line 14 of the base form of the Form HCFA-64.10 must include the combined 
totals in each of the columns from all the "TANF" waiver forms, as well as the usual current administrative expenditures 
reported by the States on this form. Note, any entries on the base form of the Form HCFA-64.10 in columns (b) at 90 
percent and (c) at 75 percent must reflect only the TANF expenditures related to the Base and Secondary Allocations. 
 
The following example illustrates how to complete the Form HCFA-64. 10/lOp. 
 
Example. For th.e third quarter of FY 1999 the State has the following current quarter total computable "Other Financial 
Participation" administrative expenditures: 
(cid:131)  $100,000,000 in regular Medicaid administrative expenditures 
(cid:131)   $6,500,000 in total administrative expenditures for allowable TANF related activities: 
1.  $1,000,000 in expenditures for TANF activities to be applied towards the Base Allocation at 90 
percent. 
2.  $3,000,000 in expenditures for TANF activities to be applied towards the Secondary Allocation at 90 
percent. 
3.  $2,500,000 in expenditures for TANF activities to be applied towards the Secondary Allocation at 75 
percent. 
(cid:131)  $50,000 in prior period expenses. In addition to the above current quarter expenditures, in the third quarter of FY 
1999 the State has $50,000 of total computable allowable TANF related expenditures related to a prior period, FY 
1998, to be reported against the Secondary Allocation at 75 percent. 
 
In order to report the above regular and TANF related administrative expenditures, the State will need to do the following: 
 
(cid:131)   For the Base Allocation current quarter expenditures, create a Form HCFA64.10 waiver schedule for the third 
quarter of FY 1999, indicating on line 14 
$1,000,000 in Column (a) and $1,000,000 in column (b). The system will calculate the federal share of $900,000 
(90 percent of $1,000,000) for column (b) and report $900,000 in column (f). Indicate "TANF" as the Type of 
Waiver and "BASE ALLOC" as the Waiver Number. Indicate June 30, 1999 in the Quarter Ended block. 
(cid:131)  For the Secondary Allocation current quarter expenditures, create a Form HCFA-64.10 waiver schedule for the 
third quarter of FY 1999, indicating on line 14 $5,500,000 ($3,000,000 plus $2,500,000) in column (a), $ 
3,000,000 in column (b), and $2,500,000 in column (c). The system will compute $2,700,000 in column (b) (90 
percent of $3,000,000), $1,875,000 in column (c) (75 percent of $2,500,000) , and $4,575,000 in column (f) 
($2,700,000 plus $1875,000). Indicate "TANF" as the Type of Waiver and "SECONDARY ALLOC" as the 
Waiver Number. Indicate June 30, 1999 in the Quarter Ended block. 
(cid:131)  Base Form HCFA-64.10. For line 14 of the third quarter FY 1999 current quarter expenditures base Form HCFA-
64. 10, indicate $106,500,000 total computable in column (a), $4,0000,000 in column (b), $2,500,000 in column 
(c), and $100,000,000 in column(d). The system will compute $3,600,000 (Federal share at 90 percent) in column 
(b), $1,875,000 (Federal share at 75 percent) in column (c), $50,000,000 (Federal share at 50 percent) in column 
(d), and $55,475,000 total Federal share in column f). Indicate June 30, 1999 in the Quarter Ended block.  (cid:131)   For the FY 1998 prior period expenditures applicable to the Secondary Allocation, create a Form HCFA-64. lOp 
waiver schedule for FY 1998, indicating on line 14 $50,000 in columns (a) and (c). The system will compute 
$37,300 (75 percent of $50,000) in columns (c) and (f). Indicate "TANF" as the Type of Waiver and 
"SECONDARY ALLOC" as the Waiver Number. Indicate June 30, 1999 in the Quarter Ended block. Indicate 
1998 in the Fiscal Year block. 
(cid:131)  Summary Form HCFA-64. Finally, the total computable amounts of $106,500,000, and the associated Federal 
shares of $55,475,000, for the current third quarter of FY 1999 (which were reported on the base Form HCFA-
64.10), will be included on line 6 in columns (c) and (d) of the summary Form HCFA-64. 
 
The total computable amount of $50,000, and the associated Federal shares of $37,300 for the prior period FY 1998, will 
be included on line 7 in columns (c) and (d) of the summary Form HCFA-64. 
 
TRACKING ALLOWABLE EXPENDITURES AGAINST THE STATE ALLOCATIONS 
 
Section 1931(h) of the Act provides for enhanced Federal matching for States' claims against the Base and Secondary 
Allocations. These enhanced Federal matching rates are in addition to Federal funds that would ordinarily be available for 
such expenditures at the 50 percent matching rate available under section 1903(a)(7) of the Act. Therefore States' claims 
for allowable administrative activities will reduce their Base and Secondary Allocations only by the amounts that are in 
excess of the usual 50 percent Federal matching rate, and not by the entire Federal matching amount. Specifically, States' 
allocations will be reduced by the amount of the claim multiplied by the difference between the enhanced Federal 
matching rate percentage and the (usual) 50 percent rate. 
 
Using the example above, the State's allocations would be reduced by the following: 
 
(cid:131)  The Base Allocation would be reduced by $400,000 (900,000 - $500,000) with respect to the total computable 
expenditure of $1,000,000, which received 90 percent Federal matching. 
(cid:131)  The Secondary Allocation would be reduced by $1,200,000 ($2,700,000 -$1,500,000) with respect to the total 
computable expenditure of $3,000,000, which received 90 percent Federal matching. 
(cid:131)   The Secondary Allocation would be reduced by $625,000 ($1,875,000 -$ 1,250,000) with respect to the total 
computable expenditure of $2,500,000, which received 75 percent Federal matching. 
(cid:131)  The Secondary Allocation would be reduced by $12,500 ($37,500 - $25,000) with respect to the prior period total 
computable expenditure of $50,000, which received 75 percent Federal matching. 
The above amounts will be tracked against the States' respective Base and Secondary Allocations by the grants analysts in 
the HCFA's Medicaid Bureau and reflected in the quarterly grant awards for each State. 
 
POSSIBLE REALLOCATION OF FUNDS: TRACKING ALLOWABLE EXPENDITURES AFTER THE 
ALLOCATIONS ARE MET 
 
Once a State has claimed up to its Base and Secondary allocations (that is, the State's allocations have been reduced to $0) 
Federal funds will only be available for allowable expenditures at the usual 50 percent matching rate. However, it is 
possible that certain States may never reach their allocations; that is, they may not incur sufficient expenditures during the 
applicable period to use up their entire allocations. If there are such unused funds, HCFA would reallocate the unused 
Federal funds to those other States that may have incurred allowable expenditures in excess of their allocations during the 
applicable period, if the excess allowable expenditures have been reported appropriately. 
 
In order for HCFA to reallocate any potential unused amounts from the $500 million fund to those States that may be able 
to use them, and for such States to claim the reallocated fund at the enhanced Federal matching rates, the States will need 
to continue to report and HCFA will need to continue to track the amounts of allowable expenditures incurred by such 
States during the applicable period under these provisions. This would need to be done even after the States have reached 
their allocations in order for HCFA at the time of reallocation to identify and match the expenditures at the appropriate 
enhanced Federal matching rate. Therefore, States that want to be eligible for any potential reallocation will need to 
continue to report allowable expenditures, even after they have reached their allocations. 
  However, after a State has claimed up to its allocations, but prior to the availability of any reallocation, HCFA would have 
to defer or disallow claims for allowable expenditures at the enhanced Federal matching rates, if the State were to 
continue to report and claim the expenditures at the 90/75 percent enhanced Federal matching rate on line 14 columns (b) 
and (c) of the waiver schedule of Form HCFA64.10/lOp. That is, prior to the availability of any reallocated amounts, 
Federal funds would not yet be available for States' claims which are in excess of their State allocations at other than the 
50 percent rate and amounts of claims in excess of 50 percent would have to be deferred or disallowed. 
 
In order to avoid the need for deferral or disallowance actions yet still provide information that would be used by HCFA 
to pay claims against potential reallocated funds, States should continue to report the allowable expenditures in excess of 
its allocations, but only at the 50 percent rate, on line 14 in column (d) of the Secondary Allocation waiver schedule of 
Form HCFA-64. 10/lOp. Since these amounts will only be reported in the 50 percent column (d) on line 14, the State will 
also need to distinguish between amounts of the allowable expenditure that would be claimed at 90 or 75 percent. In order 
to properly distinguish these expenditures, States should use the narrative sheet of the Form HCFA-64 to indicate and 
separately identify the amounts of the expenditures that would have been claimed at 90 percent and at 75 percent. 
 
Example. A State has claimed up to its Base Allocation and Secondary Allocation by the end of FY 1998 (September 30, 
1998). In the first quarter of FY 1999 the State has allowable TANF related expenditures which otherwise could have 
been claimed at the enhanced Federal Matching rates of 90 percent and 75 percent in the total computable amounts of $1 
million and $2 million, respectively. On line 14 of the Secondary Allocation waiver schedule of the Form HCFA-64. 10, 
the State should report $3 million ($1 million plus $2 million) in the total computable column (a) and $1.5 million (50 
percent of $3 million) in the 50 percent Federal matching rate column (d). On the narrative sheet of the HCFA-64, the 
State should indicate to the effect: "The $3 million total computable TANF related expenditures reported on line 14 in 
column (a) of the Secondary Allocation waiver schedule of the Form 64.10, represents $1 million in allowable 
expenditures for activities that could otherwise have been claimed at an enhanced Federal matching rate of 90 percent, and 
$2 million at 75 percent, except that the State has already claimed up to its TANF allocation." 
 
MEDICAID PROGRAM BUDGET REPORT FORM HCFA-37.1O 
 
States must include and report all allowable TANF expenditures on line 14, Other Financial Services, of the Form HCFA-
37.l0. Include and enter the total computable portion in column A and the Federal share in column B. This line will no 
longer automatically calculate the Federal share in column B. After entering the total computable amount you must 
calculate the Federal share in order to receive reimbursement since line 14 will now reflect the multiple Federal matching 
rates. In order for HCFA to relate the amounts indicated on line 14 to the TANF provisions, the State must indicate in the 
narrative section of the Form HCFA-37.12 the amount of TANF expenditures they are requesting for both the Base and 
Secondary allocation. The example below illustrates the completion of the Form HCFA-37. 
 
Example. For FY 1999 the State projects the following (dollars are in thousands): 
 
(cid:131)  $100,000 in total computable regular line 14 Other Financial Participation administrative expenditures, to be 
Federally matched at 50 percent. The projected Federal share of this amount would be $50,000. 
(cid:131)   $1,000 in total computable expenditures to be applied against the base allocation at the 90 percent Federal 
matching rate. The projected Federal share of this amount would be $900. 
(cid:131)   $3,000 in total computable expenditures to be applied against the secondary allocation at the 90 percent Federal 
matching rate. The projected Federal Share of this amount would be $2,700. 
(cid:131)   $2,550 in total computable expenditures to be applied against the secondary allocation at the 75 percent Federal 
matching rate. The projected Federal share of this amount would be $1,913. 
In accordance with this information the State must complete the Form HCFA-37 as follows: 
(cid:131)   On the Form HCFA-37. 10, the State must report the following for budget year FY 1999: 
1.  $106,550 ($100,000 + $1,000 + $3,000 + $2,550) on line 14 column 
A. 
2.  $55,513 ($50,000 + $900 + $2,700 + $1,913) on line 14 in column B. 
 
(cid:131)  In the narrative section of the Form HCFA-37.12 the State must indicate language to the effect for FY 1999: 
(cid:131)  "Explanation of Line 14 of the Form HCFA-37.10. The $106,550 Other Financial Participation total 
computable expenditure amounts includes $100,000 in regular expenditures Federally matchable at  50 percent, and "Section 1931 related TANF expenditures" as follows: $1,000 applicable towards the 
Base Allocation and Federally matchable at 90 percent, $3,000 applicable to the Secondary 
Allocation and Federally matchable at 90 percent, and $2,550 applicable to the Secondary Allocation 
and Federally matchable at 75 percent. The $55,513 Other Financial Participation Federal Share 
expenditure amounts reflects the above total computable expenditures at the respective Federal 
Matching rates: $50,000, $900, $2,700, and $1913."  ATTACHMENT 2 
 
State  Base Allocation  Secondary Allocation  Total Allocation 
Alabama  $2,000,000  $4,504,897  $6,504,897.00 
Alaska  $2,000,000  $1,039,335  $3,039,335.00 
Arizona  $2,000,000  $5,961,603  $7,961,603.00 
Arkansas  $2,000,000  $3,095,513  $5,095,513.00 
California  $2,000,000  $81,719,458  $83,719,458.00 
Colorado  $2,000,000  $3,166,316  $5,166,316.00 
Connecticut  $2,000,000  $3,756,737  $5,756,737.00 
Delaware  $2,000,000  $801,757  $2,801,757.00 
$3,259,072.00 
Dist. Of Col.  $2,000,000  $1,259,072 
$22,262,239.00 
Florida  $2,000,000  $20,262,239 
$11,591,549.00 
Georgia  $2,000,000  $9,591,549 
$3,435,742.00 
Hawaii  $2,000,000  $1,435,742 
$3,288,535.00 
Idaho  $2,000,000  $1,288,535 
$19,363,894.00 
Illinois  $2,000,000  $17,363,894 
$7,545,162.00 
Indiana  $2,000,000  $5,545,162 
$4,782,362.00 
Iowa  $2,000,000  $2,782,362 
$4,496,386.00 
Kansas  $2,000,000  $2,496,386 
$7,269,014.00 
Kentucky  $2,000,000  $5,269,014 
$9,029,185.00 
Louisiana  $2,000,000  $7,029,185 
$3,569,238.00 
Maine  $2,000,000  $1,569,238 
$7,595,943.00 
Maryland  $2,000,000  $5,595,943 
$9,463,490.00 
Massachusetts  $2,000,000  $7,463,490 
$15,975,445.00 
Michigan  $2,000,000  $13,975,445 
$7,708,769.00 
Minnesota  $2,000,000  $5,708,769 
$6,617,604.00 
Mississippi  $2,000,000  $4,617,604 
$8,561,956.00 
Missouri  $2,000,000  $6,561,956 
$2,764,134.00 
Montana  $2,000,000  $764,134 
$3,308,247.00 
Nebraska  $2,000,000  $1,308,247 
$3,258,808.00 
Nevada  $2,000,000  $1,258,808 
$2,875,952.00 
New Hampshire  $2,000,000  $875,952  State  Base Allocation  Secondary Allocation  Total Allocation 
$11,012,253.00 
New Jersey  $2,000,000  $9,012,253 
$4,860,333.00 
New Mexico  $2,000,000  $2,860,333 
$37,034,556.00 
New York  $2,000,000  $35,034,556 
$11,550,703.00 
North Carolina  $2,000,000  $9,550,703 
$2,537,922.00 
North Dakota  $2,000,000  $537,922 
$16,909,161.00 
Ohio  $2,000,000  $14,909,161 
$5,938,082.00 
Oklahoma  $2,000,000  $3,938,082 
$5,740,656.00 
Oregon  $2,000,000  $3,740,656 
$17,553,339.00 
Pennsylvania  $2,000,000  $15,553,339 
$3,459,771.00 
Rhode Island  $2,000,000  $1,459,771 
$6,221,783.00 
South Carolina  $2,000,000  $4,221,783 
$2,642,597.00 
South Dakota  $2,000,000  $642,597 
$9,250,889.00 
Tennessee  $2,000,000  $7,250,889 
$27,523,806.00 
Texas  $2,000,000  $25,523,806 
$4,006,172.00 
Utah  $2,000,000  $2,006,172 
$2,891,672.00 
Vermont  $2,000,000  $891,672 
$8,531,522.00 
Virginia  $2,000,000  $6,531,522 
$10,443,170.00 
Washington  $2,000,000  $8,443,170 
$5,420,593.00 
West Virginia  $2,000,000  $3,420,593 
$7,023,766.00 
Wisconsin  $2,000,000  $5,023,766 
$2,475,344.00 
Wyoming  $2,000,000  $475,344 
$270,439.00 
Guam  $176,235  $94,204 
$8,325,084.00 
Puerto Rico  $2,000,000  $6,325,084 
$308,045.00 
Virgin Islands  $176,235  $131,810 
Total  $104,352,470.00  $395,647,530.00  $500,000,000.00 
 
  ATTACHMENT 3 
 
(Note: The information below appeared in the Federal Register, Volume 62, Number 93 on May 14, 1997. We 
believe the information to be identical to the original. However, due to possible conversion differences, only the 
Federal Register version should be considered official.) 
 
[Federal Register: May 14, 1997 (Volume 62, Number 93)] [Notices] 
[Page 26545-26550] 
From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID :frl4my97- 106] 
 
DEPARTMENT OF HEALTH AND HUMAN SERVICES 
 
Health Care Financing Administration 
[MB- 103-NC] 
RIN 0938-AH9O 
 
Medicaid Program; Allocation of Enhanced Federal Matching Funds for Increased Administrative Costs Resulting From 
Welfare Reform 
 
AGENCY: Health Care Financing Administration (HCFA), HHS. 
 
ACTION: Notice with comment period. 
 
SUMMARY: This notice with comment period announces the methodology used to determine the allocation, among the 
States and certain Territories, of a $500 million fund to assist them with the additional expenses attributable to eligibility 
determinations incurred as a result of the provisions of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996, which decouples Medicaid eligibility from receipt of cash assistance for families and children. Also, it 
announces the actual allocation amount for each State and Territory. The special fund is available for matching a State's or 
Territory's allowable administrative expenditures incurred only during Federal fiscal years 1997 through 2000, and only 
during the first 12 calendar quarters in which the State's Temporary Assistance to Needy Families program, which 
replaced the Aid to Families with Dependent Children program, is in effect after August 21, 1996. 
 
DATES: Effective Date: This notice is effective on May 14, 1997. 
Comment Period: Written comments will be considered if we receive them at the appropriate address, as provided below, 
no later than 5 p.m. on June 13, 1997. 
 
ADDRESSES: Mail comments (one original and three copies) to the following address: Health Care Financing 
Administration, Department of Health and Human Services, Attention: MB-103-NC, P.O. Box 7517, Baltimore, MD 
21207-0517. 
 
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, DC 20221, or 
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 2 1244-1850. 
 
Because of staffing and resource limitations, we cannot accept comments by facsimile (FAX) transmission. When you 
comment, please refer to file code MB-103-NC. 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). 
 
Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, 
Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date of the issue requested and 
enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or MasterCard number 
and expiration date. Credit card orders can also be placed by calling the order desk at (202) 512-1800 or by faxing to 
(202) 512- 2250. The cost for each copy is $8. As an alternative, you can view and photocopy the Federal Register 
document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries  throughout the country that receive the Federal Register. 
 
FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019. 
 
SUPPLEMENTARY INFORMATION: 
I.  Background 
 
Under title XIX of the Social Security Act (the Act), Federal funds are available at specified Federal matching rates for 
expenditures for medical assistance and administrative expenditures under the States' approved Medicaid plans. State 
Medicaid agencies are required to submit quarterly reports of expenditures (on Form HCFA-64) in order to claim Federal 
financial participation (FFP), that is, Federal matching funds for these expenditures. 
 
II. Recent Legislation 
 
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) amended title IV-A of the 
Act to repeal the Aid to Families with Dependent Children (AFDC) program. The AFDC program provided an entitlement 
to cash assistance for eligible families with dependent children and was funded by an openended, jointly funded Federal-
State program. PRWORA replaced AFDC with a program of block grants for States for Temporary Assistance for Needy 
Families (TANF). The repeal of AFDC becomes effective not later than July 1, 1997, or for most purposes on the date that 
the Secretary receives a State's TANF plan. Under TANF, States have broad flexibility to provide assistance for the 
purpose of ending the dependence of needy parents on government benefits by promoting job preparation, work, and 
marriage; preventing out-of-wedlock pregnancies; and encouraging the formation and maintenance of two-parent families. 
Prior to the passage of PRWORA, Medicaid eligibility for families with children receiving AFDC was automatic. 
 
With the implementation of each State's TANF program, there is no longer an automatic link between eligibility for cash 
assistance under the AFDC program and eligibility under the Medicaid program. Section 114(a) of PRWORA amended 
title XIX of the Act to add a new section 1931 that, in general, requires State agencies to provide Medicaid eligibility to 
low income families, if they had been eligible under the AFDC plan in effect on July 16, 1996. With the advent of the 
TANF program, State Medicaid agencies are expected to incur additional administrative costs related to the need to 
determine Medicaid eligibility for individuals in accordance with section 1931 of the Act. These expenditures include the 
costs of outreach to potential eligible individuals who will no longer receive automatic Medicaid eligibility through the 
cash assistance linkage. It is essential that State Medicaid agencies ensure and protect continued Medicaid eligibility for 
current Medicaid recipients who would have been eligible under the July 16, 1996 AFDC rules or who are otherwise 
eligible under section 1931 of the Act, and that the State agencies successfully implement new procedures for identifying 
potential new Medicaid recipients and determining their eligibility. 
 
To assist State agencies with additional administrative costs involved in this transition, section 114(a) of PRWORA 
created a new section 1931(h) of the Act, which establishes a $500 million fund that is available as Federal matching 
funds for the State Medicaid agencies' administrative costs of Medicaid eligibility determinations incurred as a result of 
the delinking of Medicaid eligibility from eligibility for cash assistance under title IV-A of the Act. The additional Federal 
funds will be provided to State agencies through an enhanced Federal matching rate for the applicable administrative 
expenditures. A State agency is eligible to claim the enhanced Federal matching funds for allowable expenditures incurred 
during the first 12 calendar quarters (3 years) in which the State's TANF program is in effect. Furthermore, the enhanced 
Federal matching funds are only available for allowable expenditures for the period beginning with Federal fiscal year 
1997 (that is October 1, 1996) and ending with Federal fiscal year 2000 (that is September 30, 2000). The law requires the 
Secretary to increase the usual Federal matching percentage of 50 percent for States' claims for administrative 
expenditures from this fund and to ensure the equitable distribution of the increased matching funds. 
 
Under section 1931(h) of the Act, the $500 million fund is available only for the administrative costs of Medicaid 
eligibility determinations attributable to the application of the requirements of section 1931 of the Act, that is, the rules of 
the States' former AFDC programs. The fund is not available for the costs of determining Medicaid eligibility for 
individuals with respect to other provisions of PRWORA, such as those related to alien and immigration status or the 
Supplemental Security Income (SSI) program, unless those individuals are screened for Medicaid eligibility through 
provisions of section 1931 of the Act. HCFA estimates that $500 million provide adequate funds to offset additional 
administrative costs that States will incur attributable to the requirements of section 1931 of the Act.  III. Provisions of the Notice 
 
This notice with comment period announces the enhanced Federal matching rates, the allocation formula and the factors 
included in that formula, the dollar amounts allocated to each State, and the activities for which FFP will be available at 
enhanced matching rates, which are established under section 1931(h) of the Act. Specifically, sections 1931 (h)(1), 
(h)(2), and (h)(3) of the Act, respectively, authorize the Secretary to: specify the enhanced Federal matching rates; 
determine the allowable expenditures; and ensure the equitable distribution of the funds among States by establishing the 
allocation formula and factors included in the formula, and the dollar amounts allocated to each State. 
 
We are allocating two amounts to each State agency from the $500 million fund: A minimum (base) allocation, which is 
generally the same for all States; and an additional allocated amount (secondary allocation), which differs by State and is 
determined by a formula using factors discussed in detail in section VI. of this notice. State agencies may claim Federal 
funding for allowable activities against the base allocation at a 90-percent matching rate. State agencies may claim 
Federal funding against the secondary allocation at one of two Federal matching rates: A 90-percent enhanced matching 
rate for specified activities considered critical to protecting beneficiaries (for example outreach and beneficiary 
education); and a 75-percent enhanced rate for other allowable activities. In claiming Federal matching for expenditures 
for these activities, States must identify them separately on the form HCFA-64. States may draw down funds for their 
allocation as they incur allowable expenditures. 
 
IV. Activities Subject to Enhanced Funding 
 
Under section 193 1(h) of the Act, the $500 million fund may only be used for administrative expenditures shown by State 
agencies to be attributable to the administrative costs of Medicaid eligibility determinations required as a result of the 
TANF legislation and the delinking of Medicaid eligibility from AFDC status. The following activities are those for 
which Federal funding is already available and for which additional funding is available at one of the enhanced Federal 
matching rates, 90 percent or 75 percent. States can claim 90- percent matching for any of the allowable activities listed 
below, up to the basic allocation for the State. For the States' secondary allocation, items indicated by an asterisk may be 
claimed at a 90-percent matching rate and items not noted with an asterisk can be claimed at the 75-percent matching rate. 
 
We established the higher 90-percent enhanced Federal matching rate associated with the base allocation in recognition 
that there are pressing startup and other common costs among States related to the transition from AFDC to the TANF 
program. The higher Federal matching rate for the base allocation serves to expedite funds to States for such costs. 
 
We established the two enhanced Federal matching rates associated with the secondary allocation to recognize two 
priorities of activities related to this provision. The first priority, with the higher 90- percent Federal matching rate, is 
associated with beneficiary oriented activities such as outreach, public service announcements, and education. The higher 
enhanced rate encourages such activities and recognizes the importance of ensuring that individuals do not lose their 
eligibility inappropriately, are correctly determined (or redetermined) eligible, and understand program requirements 
during the critical period of transition to TANF. Each of these higher rate (90 percent) activities is indicated below by an 
asterisk. The lower 75-percent enhanced Federal matching rate addresses the other activities performed during the 
transition period. 
 
Allowable Activities 
 
(cid:131)  Educational activities (relating to current or potential beneficiaries).* Public service announcements (PSAs).* 
(cid:131)   Outstationing of eligibility workers (more workers or new locations, for example, churches, day care centers, WIC 
offices, health care providers).* 
(cid:131)   Training related to the section 1931 provisions~~* 
(cid:131)   Eligibility workers. 
(cid:131)   Providers. 
(cid:131)  Outstationed eligibility workers and others. 
(cid:131)  Comm unity. 
(cid:131)   Outreach activities (for example, general or targeted mailing campaigns, contracts to assist beneficiaries with the 
redetermination process).* 
(cid:131)   Developing and disseminating new publications (targeted to at-risk populations). *  (cid:131)   Local community activities (for example, meetings with community leaders and speeches to community groups).* 
(cid:131)   Hiring new Medicaid eligibility workers (related to section 1931 determinations). 
(cid:131)   Designing new eligibility forms, for example, a single application for TANF and Medicaid whether eligibility is 
linked or not. 
(cid:131)   Identification of ' 'at-risk" TANF recipients (in this context, at-risk refers to vulnerability to losing Medicaid 
eligibility as a result of the TANF provisions). 
(cid:131)   State and local government organizational changes related to the section 1931 provisions. 
(cid:131)   Intergovernmental activities. 
(cid:131)   Eligibility systems related changes. 
(cid:131)   Other activities identified by States and approved by the Secretary as applicable to the enhanced matching fund 
provisions. 
 
In order for State agencies to claim Federal funds at the appropriate enhanced rates associated with the two allocated 
amounts for allowable activities, they will need to identify and report the administrative expenditures for such activities to 
HCFA on specified lines on the States' quarterly medical assistance expenditure report (Form HCFA-64), in accordance 
with HCFA guidance and instructions related to the form HCFA-64. 
 
V. Special Issues 
 
We conducted a series of consultations with advocacy, provider, and intergovernmental groups to gather suggestions and 
recommendations on how to equitably distribute the enhanced matching funds. These groups included the National 
Governors' Association, the American Public Welfare Association, and the National Conference of State Legislatures. The 
criteria and requirements included in this notice reflect consideration of their suggestions and recommendations. 
 
A. Federal Matching Rate To Be Increased 
 
Under section 1931(h)(2) of the Act, the Federal matching rate, which will be used for State claims related to the $500 
million fund, applies only to those administrative expenditures of a State agency's Medicaid program described in 
section 1903(a)(7) of the Act (administrative expenditures that are Federally matched at a 50-percent rate). These 
administrative expenditures include the costs associated with eligibility determination activities. 
 
Because of the specific reference to section 1903(a)(7) of the Act, section 193 1(a) of the Act precludes the $500 
million fund from being available for matching expenditures referenced in other sections of section 1903(a) of the Act. 
For example, section 1903(a)(3) of the Act refers to administrative activities related to electronic claims processing 
systems and the associated Federal matching rates of 90 and 75 percent. Section 1903(a)(4) refers to the costs of 
systems for verifying immigration status and the associated Federal matching rate of 100 percent. The $500 million 
fund is not available for these categories of administrative expenditures or others referenced in sections 1903 (a)(1) 
through (a)(6) of the Act. 
 
We note that, under existing Medicaid regulations published in 1989, the administrative costs associated with 
automated eligibility systems are not considered part of the mechanized claims process and information retrieval 
systems, and therefore are not eligible for the 75-percent or 90-percent Federal matching rate referred to in section 
1903(a)(3) of the Act. Therefore, these costs are matched at the 50 percent rate under section 1903(a)(7) of the Act, and 
may be claimed against the State's allocation from the $500 million fund at the higher matching rate if they meet the 
other requirements. 
 
B. Retroactive Claims 
 
Under sections 1931 (h)(3) and (h)(4) of the Act, the $500 million dollar fund is only available for claims for 
administrative costs incurred during Federal fiscal years 1997 through 2000 (that is, October 1, 1996 through September 
30, 2000), and with respect to any specific State, only during the first 12 calendar quarters that the TANF program is in 
effect in that State beginning no earlier than October 1, 1996. As long as claims of that State are for expenditures 
incurred during this period and meet timely filing and other relevant requirements, they would not be precluded from 
being submitted and allowed retroactively. 
  C. Equitable Distribution of Funds Among All States 
 
Section 1931(h)(3) of the Act requires the Secretary to ' 'ensure the equitable distribution" of the $500 million dollar 
fund among the States. We interpret this to mean that all States should receive an equitable share of the fund unless the 
State does not incur any cost associated with the implementation of section 1931 of the Act. Through the consultive 
process, discussed earlier in this section, States and other groups have expressed the position that every State agency 
should be able to receive at least some portion of the fund. We agree that the requirement for an equitable distribution 
must result in each State receiving a portion of the fund against which qualifying expenditures would be claimed. For 
purposes of the Medicaid program, the definition of ' State" includes the District of Columbia and the five Territories of 
American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. However, we have not 
provided an allocation for the Northern Mariana Islands or American Samoa because they do not have an AFDC 
program and did not have an AFDC program at the time of the enactment of PRWORA. Therefore, only three 
Territories, Guam, Puerto Rico and the Virgin Islands, will incur administrative expenditures as a result of the transition 
from AFDC to TANF. 
 
The three Territories affected by section 1931 of the Act are still subject to the existing cap on Federal Medicaid 
expenditures for the Territories at section 1108(c) of the Act. This cap will not increase with the availability of a portion 
of the $500 million fund. However, these Territories could still receive benefits under the $500 million fund provisions 
because, with an enhanced Federal matching rate, less total territorial matching funds would be required for a given 
level of administrative costs unless the Territory exceeded its cap. Since these Territories, like the other States, will 
likely incur additional Medicaid expenditures due to the transition to TANF, a portion of the $500 million enhanced 
Federal matching fund should be available to them. 
 
D. Reduction of States' Allocations as Claims Are Made 
 
Section 1931(h) of the Act provides for enhanced Federal matching for States' claims against the additional $500 
million fund. The enhanced rates and additional Federal funds are in addition to those that would otherwise be Federally 
matched at the usual 50-percent rate. States' claims for allowable administrative activities will reduce their base and 
secondary allocations only by the amounts that are in excess of the usual 50-percent FFP and not by the entire Federal 
matching amount. Specifically, States' allocations will be reduced by the amount of the claim multiplied by the 
difference between the enhanced Federal matching rate percentage and 50 percent. 
 
To illustrate how State claims against the allocations would work, we provide the following example: The State claim 
for allowable outreach expenditures is $500,000. This claim would usually be Federally matched at 50 percent, and the 
usual FFP amount for this claim would be $250,000 (50 percent of $500,000). Assuming the State is claiming these 
expenditures against the $2 million base allocation, the enhanced Federal matching rate would be 90 percent. Thus, the 
enhanced FFP amount would be $450,000 (90 percent of 500,000). However, the base allocation would not be reduced 
by the entire $450,000. Rather, for this claim the base allocation would be reduced by $200,000, which is 40 percent of 
$500,000. Forty percent represents the excess of the enhanced Federal matching rate amount (90 percent) above the 
usual Federal matching rate amount (50 percent). If the amount of the State's base allocation was at $2 million prior to 
this claim, there would be $1.8 million remaining after the claim ($2 million-$200,000). 
 
VI. Factors for Determining State Allotments 
 
We have established several factors that will be considered in determining the allotment for each State from the $500 
million fund. We have divided the fund into two parts, an allocation of minimum State amounts and an allocation of the 
remainder of the fund. These two parts are discussed below. 
 
A. Base Allocation Amount 
 
The first part of the distribution will consist of a minimum allocation amount of $2 million set aside for each State, the 
District of Columbia and Puerto Rico. Guam and the Virgin Islands will receive a lesser amount proportionate to the 
level of their administrative expenditures. This base allocation recognizes that States will incur certain costs that will 
not vary by the size of their Medicaid programs. The total of the base allocations for all States and Territories is 
$104,352,470. 
  B. Secondary Allocation Amount 
 
The amount of the $500 million fund remaining after distribution of the base allocations to each State will be allocated 
among the States according to a formula designed to ensure equity. As indicated in the previous section, the total base 
allocations for all States and Territories is $104,352,470. Therefore the total amount to be distributed to the States and 
Territories as secondary allocations is $395,647,530. This secondary allocation will be allocated based on the 
following four factors and weights. 
 
 
Factor  Weight (percent) 
State AFDC-Related Caseload  60 
State Medicaid Administrative Expenditures  20 
SSI Childhood Disability Case Revaluations  10 
SSI Immigrant Caseload  10 
 
With respect to Factor 1, State AFDC-related caseload, each State was credited with the higher of their caseloads for FY 
1995 and FY 1994, or the arithmetic average of their caseloads for FY 1992, FY 1993, and FY 1994. This served as the 
basis for allocating $237,388,518, which represents 60 percent of the States' total secondary allocations. 
 
With respect to Factor 2, State Medicaid administrative Expenditures, each State was credited with the higher of certain of 
its administrative expenditures related to these provisions for FY 1995, FY 1994, or the arithmetic average of its 
expenditures for FYs 1992, 1993, and 1994. Specifically, we are using a State's Medicaid administrative expenditures 
reported on its expenditure report (Form HCFA-64) in categories related to operation of systems, third party liability and 
assignment of rights activities, systems for verification of immigration status, outstationed eligibility workers, and other 
administrative costs Federally matched at 50 percent. This served as a basis for allocating $79,129,506, which represents 
20 percent of the States' total secondary allocations. 
 
With respect to Factors 3 and 4, SSI childhood disability case reevaluations (in States requiring reevaluation under 
PWRORA) and SSI immigrant caseload, respectively, each State was credited with appropriate caseloads, as provided by 
the Social Security Administration for FY 1996. The caseload estimates are proxy estimates intended to show the relative 
administrative burden that each State agency faces under welfare reform. This served as the basis for allocating 
$39,564,753, which represents 10 percent of the State's total secondary allocations for each of Factors 3 and 4. 
 
The allocations for each State agency are as follows: 
 
State Allocations f or Enhanced Matching 
 
State  Base Allocation  Secondary Allocation  Total Allocation 
Alabama  $2,000,000  $4,504,897  $6,504,897.00 
Alaska  $2,000,000  $1,039,335  $3,039,335.00 
Arizona  $2,000,000  $5,961,603  $7,961,603.00 
Arkansas  $2,000,000  $3,095,513  $5,095,513.00 
California  $2,000,000  $81,719,458  $83,719,458.00 
Colorado  $2,000,000  $3,166,316  $5,166,316.00 
Connecticut  $2,000,000  $3,756,737  $5,756,737.00 
Delaware  $2,000,000  $801,757  $2,801,757.00  State  Base Allocation  Secondary Allocation  Total Allocation 
$3,259,072.00 
Dist. Of Col.  $2,000,000  $1,259,072 
$22,262,239.00 
Florida  $2,000,000  $20,262,239 
$11,591,549.00 
Georgia  $2,000,000  $9,591,549 
$3,435,742.00 
Hawaii  $2,000,000  $1,435,742 
$3,288,535.00 
Idaho  $2,000,000  $1,288,535 
$19,363,894.00 
Illinois  $2,000,000  $17,363,894 
$7,545,162.00 
Indiana  $2,000,000  $5,545,162 
$4,782,362.00 
Iowa  $2,000,000  $2,782,362 
$4,496,386.00 
Kansas  $2,000,000  $2,496,386 
$7,269,014.00 
Kentucky  $2,000,000  $5,269,014 
$9,029,185.00 
Louisiana  $2,000,000  $7,029,185 
$3,569,238.00 
Maine  $2,000,000  $1,569,238 
$7,595,943.00 
Maryland  $2,000,000  $5,595,943 
$9,463,490.00 
Massachusetts  $2,000,000  $7,463,490 
$15,975,445.00 
Michigan  $2,000,000  $13,975,445 
$7,708,769.00 
Minnesota  $2,000,000  $5,708,769 
$6,617,604.00 
Mississippi  $2,000,000  $4,617,604 
$8,561,956.00 
Missouri  $2,000,000  $6,561,956 
$2,764,134.00 
Montana  $2,000,000  $764,134 
$3,308,247.00 
Nebraska  $2,000,000  $1,308,247 
$3,258,808.00 
Nevada  $2,000,000  $1,258,808 
$2,875,952.00 
New Hampshire  $2,000,000  $875,952 
$11,012,253.00 
New Jersey  $2,000,000  $9,012,253 
$4,860,333.00 
New Mexico  $2,000,000  $2,860,333 
$37,034,556.00 
New York  $2,000,000  $35,034,556 
$11,550,703.00 
North Carolina  $2,000,000  $9,550,703 
$2,537,922.00 
North Dakota  $2,000,000  $537,922 
$16,909,161.00 
Ohio  $2,000,000  $14,909,161 
$5,938,082.00 
Oklahoma  $2,000,000  $3,938,082 
$5,740,656.00 
Oregon  $2,000,000  $3,740,656 
$17,553,339.00 
Pennsylvania  $2,000,000  $15,553,339  State  Base Allocation  Secondary Allocation  Total Allocation 
$3,459,771.00 
Rhode Island  $2,000,000  $1,459,771 
$6,221,783.00 
South Carolina  $2,000,000  $4,221,783 
$2,642,597.00 
South Dakota  $2,000,000  $642,597 
$9,250,889.00 
Tennessee  $2,000,000  $7,250,889 
$27,523,806.00 
Texas  $2,000,000  $25,523,806 
$4,006,172.00 
Utah  $2,000,000  $2,006,172 
$2,891,672.00 
Vermont  $2,000,000  $891,672 
$8,531,522.00 
Virginia  $2,000,000  $6,531,522 
$10,443,170.00 
Washington  $2,000,000  $8,443,170 
$5,420,593.00 
West Virginia  $2,000,000  $3,420,593 
$7,023,766.00 
Wisconsin  $2,000,000  $5,023,766 
$2,475,344.00 
Wyoming  $2,000,000  $475,344 
$270,439.00 
Guam  $176,235  $94,204 
$8,325,084.00 
Puerto Rico  $2,000,000  $6,325,084 
$308,045.00 
Virgin Islands  $176,235  $131,810 
Total  $104,352,470.00  $395,647,530.00  $500,000,000.00 
 
VII. Alternative Approaches 
 
We considered an alternative approach to set aside a portion of the variable amount of each State agency's allocation (for 
example, 20 percent) and earmark the funds for specified activities. States and intergovernmental groups did not support 
this approach because it restricted their flexibility to respond to their different circumstances across States. We also 
considered tying receipt of some or all of each State's allocation to successful performance in transitioning their 
determination of eligibility processes in response to their eligibility for cash assistance and TANF. States and 
intergovernmental groups also did not support this approach because it would restrict State flexibility. Furthermore, 
HCFA and the States and intergovernmental groups were not able to arrive at an appropriate measure which accurately 
correlated successful performance with receipt of allocation funds. 
 
VIII. Waiver of Proposed Notice and Delay in Effective Date 
 
While the Administrative Procedure Act generally requires a 30-day delayed effective date for all rules and also requires 
an opportunity for public comment prior to the effective date of a rule, it also provides that we may waive those 
procedures if we find good cause that notice and comment are impracticable, unnecessary, or contrary to the public 
interest. Similarly, title 5 U.S.C. 801 provides for a 60 day delayed effective date for a major rule until the later of the 
receipt by Congress of a report on the rule or publication of the rule in the Federal Register. This delay provides Congress 
with an opportunity to review a major rule prior to its implementation. However, title 5 U.S.C. 808 also provides that the 
rule may take effect without regard to the delay period if the agency finds good cause that notice and public procedure on 
the rule are impracticable, unnecessary, or contrary to the public interest. 
 
We are making the terms of this notice effective without publication of a proposed notice because we believe it would be 
impractical and contrary to public interest to delay its effective date in order to consider public comments. States have 
been implementing their TANF programs since the enactment of PRWORA and more States continue to do so each day.  We believe that it is imperative that these States be able to receive the enhanced Federal matching funds as soon as 
possible so that they are able to make an effective transition to the post-AFDC environment at the time they incur the 
additional administrative expenses resulting from the decoupling of Medicaid eligibility from receipt of cash assistance 
under title IV-A of the Act. Further delays in furnishing States with this funding could result in delays in making the 
determination that individuals are entitled to necessary medical services, with the attendant severe consequences for 
individuals who need them. It is also similarly important and in the public interest that States are able to conduct outreach 
efforts to prevent eligible needy individuals losing contact with the Medicaid program which they would otherwise have 
established because of its previous connection to cash assistance. Moreover, in developing the terms of this notice we 
have actively worked with intergovernmental and other interested groups to obtain their counsel. Accordingly, we find 
that good cause exists to waive prior notice and comment, the 30 day delay, and the 60 day delay for advance 
Congressional review. 
 
IX. Impact Statement 
 
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612), we prepare a regulatory flexibility 
analysis unless we certify that a notice such as this will not have a significant economic impact on a substantial number of 
small entities. For purposes of the RFA, individuals and States are not included in the definition of a small entity. 
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a notice such as this 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. 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. 
 
The fund distribution announced by this notice is required by the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996. In addition, the amount of money involved, $500 million divided among 50 States, the 
District of Columbia, and 3 Territories over a period of 3 years will not have a significant effect on any State or Territory, 
or the Medicare program. 
 
For these reasons, we are not preparing analyses for either the RFA or section 1102(b) of the Act because we have 
determined, and we certify, that this notice will not have a significant economic impact on a substantial number of small 
entities or a significant impact on the operations of a substantial number of small rural hospitals. In accordance with the 
provisions of Executive Order 12866, this notice was reviewed by the Office of Management and Budget. Costs 
attributable to State activities covered by this notice will be paid for by Federal funds according to the matching rates 
outlined in the allocation formula analysis described earlier. Further, States will incur some additional costs based on the 
State share associated with these matching rates. 
 
X. Information Collection Requirements 
 
This document does not impose new information collection requirements that are subject to review by the Office of 
Management and Budget under the provisions of the Paperwork Reduction Act of 1995. States will be required to claim 
FFP for administrative expenditures attributable to the eligibility determination activities resulting from enactment of 
PRWORA. The only information that is required will be reported on existing Form HCFA-64. This form has been 
approved by the Office of Management and Budget under approval number 0938-0067, which expires on March 30, 1998. 
 
Authority: Secs. 1102 and 1931(h) of the Social Security Act (42 U.S.C. 1302 and 1396uu). 
 
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical Assistance Program) 
 
Dated: March 24, 1997. Bruce C. Vladeck, Administrator, Health Care Financing Administration. 
 
Dated: April 11, 1997. Donna E. Shalala, Secretary. 
[FR Doc. 97-12429 Filed 5-13-97; 8:45 am] BILLING CODE 4120-01-p