May 11, 1998  
Dear State Health Official:  
The Balanced Budget Act of 1997 established the Children's Health 
Insurance Program (CHIP) under Title XXI of the Social Security Act (the 
Act). This new Title enables States to expand health insurance coverage for 
uninsured children through separate State health insurance program (S-
CHIP), through Medicaid, or a combination of the two. Title XXI requires 
States to submit plans for approval by the Secretary of the Department of 
Health and Human Services in order to receive funds for providing health 
care coverage. The Department of Health and Human Services has issued 
several letters to provide policy and State plan guidance on the 
implementation of Title XXI.  
This letter is intended to provide detailed guidance regarding coverage of 
immunization under Title XXI and the Vaccines for Children (VFC) 
program. Ensuring that all children receive appropriate immunizations is a 
priority for the President, the First Lady and Secretary Shalala. The unique 
nature of funding for vaccines create special challenges and options for 
covering vaccines for CHIP-covered children, as described below.  
States must ensure coverage for childhood vaccinations under CHIP. 
Section 2102(a)(7) of the Children's Health Insurance Program requires 
States to "assure the quality and appropriateness of care, particularly with 
respect to ... immunizations" provided under the State child health plan. 
The standard for appropriate care with respect to childhood 
immunizations, used in the Medicaid and the VFC programs, is the 
schedule of immunizations recommended by the Federal Advisory 
Committee on Immunization Practices (ACIP). All State CHIP plans must 
provide coverage for all ACIP-recommended vaccines to enrollees. The 
Department expects that children will be immunized with vaccines 
purchased using funds provided through their Title XXI plans.  
The VFC program was established in 1993 to serve children defined as  "federally vaccine eligible" under section 1928(b)(2), which includes both 
"uninsured" and "Medicaid eligible" children. American Indian, Alaskan 
Native children and children whose insurance does not cover 
immunizations are also eligible for VFC. States will continue to receive 
federal funding for reduced-price vaccines under this program.  
Children who are newly eligible for Medicaid under Title XXI are federally 
vaccine eligible, as are all other children eligible for Medicaid. However, 
because of Title XIX restrictions on eligibility for VFC, States that have 
designed a separate State health insurance program under CHIP (S-CHIP) 
may not treat children enrolled in such a program as federally vaccine 
eligible.  
Children enrolled in a separate State insurance program are neither 
Medicaid eligible nor uninsured as required under Title XIX and, therefore, 
they are not federally vaccine eligible. However, to ensure that States 
choosing to expand through S-CHIP have the same opportunity for 
reduced-price vaccines as States expanding through Medicaid, State have 
two options for funding.  
First, States may define these children as "State vaccine eligible" under 
Section 1928(b)(3) and purchase vaccine at the federal contract price for 
these children without these expenditures being subject to the 10 percent cap 
on expenditures for other child health assistance, health services initiative, 
outreach, and administration. To do this, States must retain responsibility for 
the provision of benefits to Title XXI children and sub-contract portions of 
the benefit package to insurers, except the purchase of vaccine. States must 
distribute vaccine purchased through the federal contract to their Title XXI 
providers so that they may administer the vaccine to children. Because the 
State is paying for the vaccine, contracts with insurers must not include 
payment for vaccine costs, although any fees or costs associated with the 
actual vaccination of children may be included in the sub-contract.  
Second, States may choose to contract with insurers for the provision of 
vaccine as they do for other services. States electing this approach will 
have to pay private sector market prices for vaccine. Under both options, 
State expenditures are matched at the CHIP enhanced matching rate.   States are encouraged to work through their State Health Departments 
and their State Immunization Programs to determine the most effective 
manner in which to purchase vaccines for S-CHIP children. Also, as part 
of the State's program evaluation strategy, States are strongly encouraged 
to track the percentage of children in Title XXI who are receiving age-
appropriate vaccinations and how those vaccinations are being delivered.  
I hope this guidance will be helpful. If you have any questions 
regarding coverage of immunization under Title XXI, please contact 
your HCFA regional office staff.  
Sincerely yours,  
Sally K. Richardson Director Center for Medicaid and State Operations  
cc: State Immunization Program Managers