DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
             
April 6, 2009                    SMD #09-002 
                      ARRA #1 
 
 
Dear State Medicaid Director: 
 
This letter is one of a series that provides guidance on the implementation of the American 
Recovery and Reinvestment Act of 2009 (ARRA), Public Law 111-5.  Section 5004 of the 
ARRA extends Transitional Medical Assistance (TMA) through December 31, 2010, and 
provides States with options to modify TMA eligibility requirements.  The amendments made by 
this section take effect on July 1, 2009.  This letter provides a brief overview of the TMA 
program prior to the passage of the ARRA and guidance on the changes made by the ARRA.  
Additionally, a State plan preprint is enclosed with this letter to assist you in submitting an 
amendment. 
 
Background 
  
Under section 1902(e)(1)(A) of the Social Security Act (the Act), States are permanently 
required to provide 4 months of TMA for families who lose Medicaid eligibility due to an 
increase in earned income or hours of employment.  In the Family Support Act of 1988 (FSA), 
Public Law 100-485, Congress expanded TMA under section 1925 of the Act, requiring States to 
provide coverage for at least 6, and up to 12, months for families who no longer qualify for 
Medicaid, and authorizing a wrap-around option for payment of employment-related health 
coverage costs.  At that time, Medicaid eligibility for these families was still tied to eligibility for 
cash assistance under title IV-A of the Act.  The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA), Public Law 104-193, in de-linking Medicaid from cash 
assistance, established a new mandatory Medicaid eligibility group of low-income families with 
children under section 1931 of the Act.  The requirements of section 1925 then became 
applicable to families covered under section 1931.  While the FSA expansion of TMA was 
effective only through fiscal year 1998, Congress passed a series of extensions, the most recent 
of which, prior to the ARRA, provided funding through June 30, 2009.  The ARRA amended 
sections 1902(e)(1)(B) and 1925(f) of the Act to extend and further expand TMA through 
December 31, 2010. 
 
Section 1925 of the Act requires States to provide Medicaid coverage for low-income families 
who no longer qualify under section 1931 of the Act due to increased earned income or working 
hours from the caretaker relatives employment, or due to the loss of a time-limited earned 
income disregard.  In order for Medicaid-eligibility to be extended through TMA, families must 
have been Medicaid eligible under section 1931 during at least 3 of the 6 months immediately  P  age 2  State Medicaid Director 
preceding the month in which the family became ineligible under section 1931.  This may 
include months of retroactive eligibility. 
 
Through TMA, families Medicaid eligibility is extended for an initial 6-month period.  In order 
for TMA eligibility to continue into a second 6-month extension period, the family must: 
  Have been covered under TMA during the entire 6-month initial period; and 
  Submit a report, by the twenty-first day in the fourth month of the initial period, on the 
familys gross monthly earnings and any costs for child care necessary for the caretaker 
relatives employment in each of the 3 preceding months. 
 
In order for a family to remain covered throughout the second 6-month extension period, the 
following requirements must be met: 
  The family must submit, by the twenty-first day in the first and fourth months of the second 
6-month period, two additional reports on the familys gross monthly earnings and any costs 
for child care necessary for the caretaker relatives employment in each of the 3 preceding 
months. 
  The familys TMA coverage is terminated at the end of the first or fourth month of the 
second 6-month period (with at least 10-days advance written notice) if: 
o  The family fails to submit the required report by the due date, without good cause; 
o  The caretaker relative had no earnings in one or more of the previous 3 months, 
unless the lack of earnings was caused by an involuntary loss of employment, illness, 
or other good cause established to the States satisfaction; or 
o  The familys average gross monthly earnings (less the costs of child care necessary 
for the caretaker relatives employment) during the previous 3 months exceed 185 
percent of the Federal poverty level (FPL) for the family size. 
  The familys TMA coverage is also terminated with a 10-day advance notice during the 
second 6-month extension period if the family: 
o  No longer includes a child living in the home; or 
o  Fails to pay any premium, except for good cause. 
 
New State Option of 12-Month Initial Period for TMA Eligibility 
 
The ARRA amends section 1925(a)(1) of the Act to provide States the option to extend families 
Medicaid eligibility under TMA for an initial period of 12 months, rather than an initial period of 
6 months followed by a second 6-month period.  If a State amends its Medicaid State plan to 
select the option for a single 12-month TMA period, the reporting, income, and technical 
eligibility requirements specified in section 1925(b) of the Act will not be applied, and an 
additional 6-month extension will not be received when the single 12-month TMA period ends. 
 
New State Option to Revise Requirement for Previous Receipt of Medicaid 
 
The ARRA also amends section 1925(a)(1) of the Act to give States the option to waive the 
TMA eligibility requirement that families must have been covered by Medicaid under section 
1931 during at least 3 of the 6 months immediately preceding the month in which the family 
became ineligible under section 1931.  A State may submit a Medicaid State plan amendment to  P  age 3  State Medicaid Director 
cover families under TMA if they were Medicaid eligible under section 1931, or had applied and 
been determined eligible for such coverage, for fewer than 3 of the 6 previous months. 
 
 
Collection and Reporting of Participation Information 
 
Finally, the ARRA establishes a new section 1925(g) of the Act, which requires all States to 
collect and submit to the Department of Health and Human Services (HHS) and to make publicly 
available, information on the average monthly enrollment and average monthly participation 
rates for adults and children covered under TMA.  States must also report the number and 
percentage of children who, after TMA eligibility ends, retain their Medicaid eligibility in 
another eligibility group or are enrolled in the Childrens Health Insurance Program (CHIP) 
under title XXI.  The HHS Secretary will specify the format, timing, and frequency for this 
reporting.  HHS must submit an annual Report to Congress concerning these enrollment and 
participation rates. 
 
Draft State Plan Template 
 
Attached is a draft Medicaid State plan template that States may use for a State plan amendment 
to elect the option for a single 12-month period of TMA eligibility and/or the option for deleting 
the requirement for section 1931 eligibility in 3 of the 6 preceding months. 
 
Contact Information 
 
If you have questions regarding this guidance, please contact Ms. Dianne E. Heffron, Acting 
Director, Family and Childrens Health Programs Group, who may be reached at  
(410) 786-5647. 
 
            Sincerely, 
 
                /s/ 
 
            Jackie Garner 
            Acting Director 
            Center for Medicaid and State Operations 
 
 
Enclosure: 
Draft State plan template 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health  P  age 4  State Medicaid Director 
 
Ann C. Kohler 
NASMD Executive Director 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christie Raniszewski Herrera 
Director, Health and Human Services Task Force 
American Legislative Exchange Council 
 
Barbara W. Levine 
Chief, Government Relations & Legal Affairs 
Association of State and Territorial Health Officials