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 
 
                    SHO #02-004 
 
                November 12, 2002 
 
Dear State Health Official: 
 
States now have the option of ensuring that needed prenatal care is available under SCHIP to 
benefit unborn children and uninsured low-income women.  The purpose of this letter is to 
provide general information concerning this provision and guidance for amending your state plan 
to reflect the provision of prenatal care to unborn children under the State Childrens Health 
Insurance Program (SCHIP) if your state wishes to take advantage of this option.   
 
In the interest of providing necessary prenatal care and other health services to children, we 
promulgated a final rule on October 2 that revised the definition of child at 42 CFR 457.10 to 
clarify that child means an individual from conception up to age 19.  This rule provides states 
with the option to consider an unborn child to be a targeted low-income child and therefore 
eligible for coverage under SCHIP, if other applicable state eligibility requirements are met.  
This permits states to provide vital health care services to promote healthy pregnancies and 
healthy children regardless of the mothers eligibility status.  Moreover, under the new regulation 
states are able to provide eligibility to unborn children of low-income immigrants, which results 
in access to important prenatal care for these women.  The final rule may be found at: 
http://www.access.gpo.gov/su_docs/fedreg/a021002c.html. 
 
We emphasize that this final rule is not intended to modify current health insurance financial 
practices or alter the relationship between the pregnant mother and/or her unborn child and the 
physician.  Therefore, states that usually pay for pregnancy and delivery services through a 
bundled payment or global fee method consistent with general industry practices may continue to 
do so.  Services that are often paid for using these methods include prenatal care, labor and 
delivery (including pain management), and postpartum care.   
 
Federal financial participation (FFP) is available for claims for pregnancy and delivery services 
including prenatal care, labor and delivery (including pain management).  Global fees commonly 
used in reimbursing for obstetrical care cover all prenatal visits, delivery, and at least one 
postnatal visit.  As a global fee benefits the program by guarding against problems associated 
with unbundling and upcoding, and the number of new eligibles under the rule are estimated to 
represent less than 5 percent of total pregnancies covered by Medicaid and SCHIP, states will not 
be required to distinguish cases that are eligible under this regulation from others by changing 
their current global fee payment methodology.  In addition, FFP is available for capitation rates 
that reflect the use of bundled payments or global fees by managed care entities.  Page 2  State Health Official 
 
States that currently do not pay in this manner should explore the extent to which general 
practices will allow bundling of these services.  FFP will not be available for post hospitalization 
postpartum care that is not included in the bundled or capitated payment. 
 
In order to adopt this option and be eligible for funds under title XXI, states must submit a state 
plan amendment, which must be approved by the Secretary.  States adopting this option will be 
able to amend their state plan by submitting the enclosed addendum to the state plan and budget 
form.  The addendum sections correspond to the relevant sections in your current State Child 
Health Plan Template.   
 
States that have implemented SCHIP through a Medicaid expansion and wish to extend coverage 
to unborn children may submit the same plan amendment as described above.  The state may 
continue to cover children from birth through age 18 under its Medicaid expansion program. 
 
To incorporate this provision into your state plan, the state, through the appropriate state official, 
should submit these pages electronically to both the Centers for Medicare & Medicaid Services 
(CMS) Central and Regional Offices.  Once approved, these pages will be added to your current 
State Child Health Plan.  Each state should also review its current approved state plan and amend 
additional sections simultaneously, if necessary (e.g., if a new benefit package is being adopted 
or if cost sharing is being modified just for this eligibility group, or if the state has not previously 
implemented a separate child health program).   
 
We encourage states to consider this important new opportunity to provide prenatal care and 
other health services to unborn children and their mothers. 
 
Questions or assistance may be provided by your Central or Regional Office Project Officer. 
 
            Sincerely, 
 
            /s/ 
             
            Dennis G. Smith 
            Director 
 
Enclosure 
 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
   for Medicaid and State Operations 
 
 
Page 3  State Health Official 
  Lee Partridge 
Director, Health Policy Unit 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Brent Ewig 
Senior Director, Access Policy 
Association of State and Territorial Health Officials 
 
Jennifer King 
Director, Health and Human Services Task Force  
American Legislative Exchange Council 
 
Trudi Matthews 
Senior Health Policy Analyst 
Council of State Governments 
 
Jim Frogue 
Acting Director, Health and Human Services Task Force  
American Legislative Exchange Council   
 
SCHIP Budget Plan Template  
   
  Federal Fiscal Year 
Costs 
Enhanced FMAP rate   
Benefit Costs   
Insurance payments   
   Managed care   
        per member/per month rate @ # of eligibles   
   Fee for Service   
Total Benefit Costs   
(Offsetting beneficiary cost sharing payments)   
Net Benefit Costs   
   
Administration Costs   
Personnel   
General administration   
Contractors/Brokers (e.g., enrollment contractors)   
Claims Processing   
Outreach/marketing costs   
Other   
Total Administration Costs   
10% Administrative Cost Ceiling   
   
Federal Share (multiplied by enh-FMAP rate)   
State Share   
TOTAL PROGRAM COSTS   
   
Note:  The Federal Fiscal Year (FFY) runs from  
October 1st through September 30th.
  Draft Preprint- Addition of SCHIP Coverage for Prenatal Care and Associated Health 
Care Services to the State Child Health Plan 
. 
 
 
State/Territory:___________________________________________________________ 
(Name of State/Territory) 
 
 
Section 4.  Eligibility Standards and Methodology.   (Section 2102(b))  
 
4.1.2.1  Age:  ________________________ through birth  
 
4.1.3.1  Income:  
0 % of the FPL (and not eligible for Medicaid) through 
________% of the FPL  
 
 
    Effective Date:      ____________(date costs begin to be incurred) 
    Implementation Date:   ____________(dates services begin to be provided) 
 
 
Section 9.  Strategic Objectives and Performance Goals and Plan Administration 
(Section 2107) 
 
  
9.10.  Please provide a 1-year projected budget for all targeted low-income children 
covered under the state plan using the attached financial form.  Additionally, 
please provide the following: 
 
Total 1- year cost of adding prenatal coverage:  
(cid:137) 
  ___________________ 
 
Estimate of unborn children covered in year 1:
(cid:137) 
  ___________________