DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop C2-21-15 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
June 9, 2006                    SMDL#06-014 
 
Dear State Medicaid Director: 
 
On October 18, 2005 The Centers for Medicare & Medicaid Services (CMS) issued a State Medicaid 
Director (SMD) letter containing guidance for participation by Tribal organizations in arrangements 
that use certified public expenditures by a unit of government to fulfill the non- federal matching 
requirements for administrative activities under the Medicaid program.  The letter set forth criteria 
under which a Tribal organization may be considered as a unit of government that can certify 
expenditures as the non-Federal share of Medicaid administration claims.  The letter contained the 
following footnote: 
 
Federal funds may not be used to meet State matching requirements, except as authorized by 
Federal law.  Although Federal HHS funds awarded under ISDEAA [the Indian Self-Determination 
and Education Assistance Act, or Pub.L. 93-638] may be used to meet Tribal matching requirements, 
that authority does not include State matching requirements.  As a result, Tribal expenditures 
certified for this purpose must be funded through non-ISDEAA sources. 
 
Although the footnote correctly states the applicable principles of law, after further review, we have 
determined that the conclusion in the last sentence would not apply when the full financial benefit 
and responsibility has been assigned to the tribal organization.  The Indian Health Service (IHS) and 
CMS are issuing this joint SMD letter to clarify that footnote. 
 
When a State assigns to a tribal organization the full right to the federal matching share, without any 
diminution, along with the full responsibility for establishing the non-federal share through certified 
public expenditures, the State effectively drops out of the financial equation.  What remains is a 
funding arrangement under which federal matching funds are directly available to the tribal 
organization based on the tribal organizations expenditures.  This is effectively a tribal matching 
obligation, rather than a contribution to a larger State matching obligation. 
 
Based on this analysis that such an arrangement effectively results in a tribal matching obligation, the 
Indian Health Service (HIS) has determined that ISDEAA funds may be used for certified public 
expenditures under such an arrangement to obtain federal Medicaid matching funding.  The net 
required contribution by the Tribal organization cannot exceed the non-Federal share of such 
expenditures; thus the State must pass through to the Tribal organization the full amount of  Federal 
Medicaid matching funding received based on the certified expenditures. 
 
It is important to note that ISDEAA funds may only be used to fund activities permissible under the 
ISDEAA.  This includes activities authorized under the Snyder Act, 25 U.S.C. 13, and the Indian 
Health Care Improvement Act (IHCIA), 25 U.S.C. 1601 et seq.  Thus, any Medicaid administrative 
activities that are funded with ISDEAA funds must also be permissible activities under the Snyder 
Act or the IHCIA.   
Page 2- State Medicaid Director 
 
The October 18, 2005 State Medicaid Director letter also contained four criteria for recognition of 
Tribal organization expenditures as the non-Federal share of Medicaid administration claims.  The 
fourth criterion, stating that expenditures for allowable administrative activities which are certified by 
the Tribal organizations must be made with Tribal sources of revenue other than Medicaid revenues 
or ISDEAA funds is amended to delete the reference to ISDEAA funds, which may now be used as 
outlined in this letter.  Additionally, a fifth criterion is hereby added.  The fourth and fifth criteria 
now read as follows: 
 
4.  Expenditures for allowable Medicaid administrative activities which are certified by 
the Tribal organization are made with funds derived from Tribal sources of revenue 
other than Medicaid revenues. 
 
5.  Expenditures made with funds derived from ISDEAA agreements may be certified by 
the Tribal organization only to the extent that the State passes the entire amount of 
Federal Medicaid matching funding to the Tribal organization. 
 
Tribes, as well as Tribal organizations, which certify Medicaid administration expenditures made 
with funds derived from ISDEAA agreements, must receive the full amount of Federal Medicaid 
matching funding. 
 
If you have questions regarding this matter, please contact Ed Gendron at CMS on 410-786-1064 or 
Carl Harper at HIS on 301-443-3216. 
 
Sincerely, 
 
/s/            /s/ 
Dr. Charles Grim, D.D.S.,M.H.S.A.    Dennis G. Smith 
Director          Director 
Indian Health Service       Center for Medicaid and State Operations 
 
 
Cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
  For Medicaid and State Operations 
 
Martha Roberty 
Director, Health Policy Unit 
American Public Human Services Association 
 
 
 
 
   
Page 3- State Medicaid Director 
 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Jacalyn Bryan Carden 
Director of Policy and Programs 
Association of State and Territorial Health Officials 
 
Christie Raniszewski Herrera 
Director, Health and Human Services Task Force 
American Legislative Exchange Council 
 
Lynne Flynn 
Director for Health Policy 
Council of State Governments 
 
H. Sally Smith 
Chairperson 
National Indian Health Board 
 
Valerie Davidson 
Chairperson 
CMS Tribal Technical Advisory Group 
 
HIS Area Directors