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 
 
                    SMDL # 10-004 
 
March 5, 2010 
 
              Re: Revised Clawback Calculations 
 
Dear State Medicaid Director: 
 
I am writing to confirm the policy that was announced by Secretary Sebelius on February 18, 
2010, to apply the increased Federal medical assistance percentage (FMAP) provided for in the 
American Recovery and Reinvestment Act of 2009 (ARRA) when calculating States liability 
under section 1935(c) of the Social Security Act (the Act) for the phased down State 
Contribution (State Contribution), also referred to as the clawback, for prescription drug costs 
for full-benefit dual eligible individuals enrolled in Medicare Part D.  This letter and these 
enclosures provide further information about this policy, an explanation of how the new 
calculations will be applied and how each State will be notified of its individual adjusted per 
capita State Contribution rate.   
 
  Recalculation of State Contribution.  This letter informs you of how we plan to proceed 
with recalculating the State Contribution payment to account for the FMAP Increase 
provided for by section 5001 of the ARRA.  This recalculation significantly reduces each 
States monthly State Contribution amount and will be in effect for the ARRA recession 
adjustment period, which under current law is October 1, 2008 through December 31, 
2010, and is intended to provide assistance to States during this time of economic 
hardship. 
 
  Notification of Estimated Phased-Down Per-Capita Rates.  This letter provides the initial  
notification to States of their updated per-capita State Contribution amounts beginning 
with the October through December 2008 quarter and through the January through March 
2010 quarter, as described below. Additional notifications will follow on a quarterly 
basis, as discussed below.  
 
RECALCULATION OF STATE CONTRIBUTION 
 
Each State is billed monthly for the State Contribution.  In general, the State Contribution is 
based upon a per-capita amount that is then multiplied by the monthly enrollment of Part D full-
benefit dual eligible individuals in the State.  The per-capita amount is determined using a 
formula that includes the State-specific FMAP that is generally applicable for determining the 
Federal share of medical assistance expenditures under the Medicaid program.  Therefore, a  Page 2  State Medicaid Director   
higher FMAP for a State would mean a lower non-Federal share percentage for a State, and 
would effectively reduce the State Contribution amount.  
 
In order to provide fiscal relief for States, section 5001 of ARRA provided for significant 
increases in the States FMAPs that would otherwise be determined under section 1905(b) of the 
Act, for a 9-quarter period beginning October 1, 2008 and ending December 31, 2010.  Under 
ARRA, the increases in States FMAPs can potentially vary by quarter, related to the levels of 
unemployment in each State.  The increases in States FMAPs under ARRA were effective 
retroactively, back to the beginning of Federal fiscal year (FY) 2009, that is, October 1, 2008.   
 
To date, the States have been billed for their monthly State Contributions under the process that 
existed prior to the enactment of ARRA, with the amount billed to each State calculated using 
the previously applicable single FY 2009 FMAP or FY 2010 FMAP.  We are temporarily 
modifying this billing process to ensure that States receive the benefit of the ARRA increased 
FMAP in calculating the State Contribution.  This new calculation process will be applied to 
adjust bills back to October 1, 2008, when the ARRA increased FMAP rates became applicable.  
The difference between these reduced payments and what CMS would have billed the States will 
be tracked by CMS as a separate item when reporting on ARRA programs. 
 
Below are some key points explaining how the recalculation, payment, and notification process 
will work: 
 
  FMAP.  Because of the unemployment rate factor, the ARRA increased FMAPs can vary 
by quarter (potentially resulting in up to four different FMAPs for a fiscal year).  Due to 
the timing related to the availability of final unemployment rate data with respect to a 
quarter; such increased FMAPs may not be finalized until after the beginning of the 
applicable quarter (States FMAPs are officially published in the Federal Register by the 
Assistant Secretary for Planning and Evaluation in the Department of Health and Human 
Services).  Therefore, on a prospective basis, monthly billing for the State Contribution 
will be based on preliminary FMAPs, and may be subject to later adjustments.   
 
We believe these revisions are appropriate given the intersection of section 5001 of 
ARRA with section 1935(c) of the Social Security Act.  Although section 1935(c)(2)(B) 
requires the Centers for Medicare & Medicaid Services (CMS) to notify a State of its per-
capita State Contribution amount by October 15 of the prior year, the formula now 
includes an FMAP component that may vary based upon unemployment and eligibility 
for such increased FMAP in accordance with section 5001 of ARRA.  Given this 
variation, we believe it is appropriate to account for this later-enacted statutory provision 
by providing either upward or downward adjustments that reflect final unemployment 
rate data as well as the other conditions of section 5001 of ARRA.    
 
  Retroactive application.  Adjustments will be made to the monthly billings issued prior to 
the period in which we are implementing this temporary new procedure.  The adjustments 
will reflect the application of the ARRA increased FMAPs effective back to October 1, 
2008.  The retroactive adjustment will be reflected as a credit to be applied as an offset 
for any prospective monthly State Contributions.    Page 3  State Medicaid Director   
 
  Billing. The State Contribution monthly bill for February 2010 to be issued at the 
beginning of March will reflect the adjusted per-capita State Contribution amounts using 
the increased ARRA FMAPs.  This bill will include both an itemization of all monthly 
State Contributions reflecting the retroactive per capita rate adjustments effective October 
2008 through January 2010 and the prospective (that is, beginning February 2010) State 
Contributions reflecting the per capita rate adjustment relating to the ARRA increased 
FMAP.  Subsequent monthly State Contribution bills will reflect the ARRA FMAP 
applicable for the month. 
 
Any credit balances resulting from the adjustment to the per capita amounts retroactive to 
October 2008 will be applied prospectively beginning with the State Contribution for 
February 2010.  In that regard, the State may choose not to pay the State Contribution bill 
for February and the following months until such time as the credit balance is exhausted 
(the monthly bills will track payments and credit offsets).  However, a State may decide 
to pay its State Contribution bills (including the February bill) which would in effect 
delay the application of any credit through the remaining months of the State fiscal year; 
this could result in the application of the credit to payments otherwise due in the next 
State fiscal year.  CMS expects that States may maintain a credit balance for several 
months based on this adjustment.  Once the credit balance is exhausted, the monthly State 
Contribution bill will only reflect the per capita amount applicable for the month. 
 
  January payment. The monthly State Contribution bill for January 2010, issued at the 
beginning of February 2010 and due to be paid at the beginning of March, was based on 
the regular (non-ARRA) FMAP.  Because of the significant credit that will result from 
the adjustment described in this letter, States that have not already paid the State 
Contribution bill for January may choose not to pay the bill, without a penalty.  The 
payment choice will ultimately be reflected in the credit amount reported in the monthly 
billing for March 2010, which will be issued in early April.  
 
NOTIFICATION OF ESTIMATED STATE CONTRIBUTION AMOUNTS 
 
Through the end of the period for which the ARRA increased FMAP is applicable, estimated 
phased-down per-capita rates will be sent to each State before the beginning of each quarter.  
Those States whose rates do change because of a change in their unemployment levels will be 
provided their new rate.  Therefore, the estimated FMAP and per-capita payment rate for the 
upcoming quarter, as well as the actual State Contribution amounts for the current quarter, are 
enclosed with this letter.  This information will be the basis for the monthly phased-down State 
Contribution payments.  These monthly payments are defined by the MMA to be the product of a 
per-capita State Contribution amount multiplied by the monthly State enrollment of full-benefit 
dual eligibles in Part D plans.  That payment will continue to be computed on a monthly basis.  
As noted above, CMS expects that States will maintain a credit balance for several months based 
on this adjustment.  
 
  Page 4  State Medicaid Director   
For prior periods, CMS will issue an adjustment to bills previously sent to States based on the 
enclosed chart with all States quarterly phased-down State Contribution per-capita rates from 
October 2008 through March 2010.  Also enclosed are the increased FMAPs as determined 
under ARRA that were used in adjusting the State Contribution bills. 
 
We appreciate States partnership in administering these critical programs and we look forward 
to our continuing work together.  If you have questions regarding these revised calculations, 
please contact Mr. Richard Strauss, Senior Financial Advisor, Center for Medicaid and State 
Operations, who may be reached at (410) 786-2019, or via email at 
Richard.strauss@cms.hhs.gov. 
  
 
            Sincerely, 
 
            /s/ 
 
            Cindy Mann 
            Director 
 
 
Enclosures: 
Table 1  Quarterly Phase Down State Contribution Per-Capita Rates 
Table 2 -- ARRA Increased Federal Medical Assistance Percentage (FMAP): October     
       December 2002 through January  March 2010 
           
cc:  
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
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   Page 5  State Medicaid Director   
Christine Evans, M.P.H. 
Chief, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy 
  TABLE 1. QUARTERLY PHASEDOWN STATE CONTRIBUTION PER-CAPITA RATES
WITH ARRA INCREASED FMAP 
OCTOBER - DECEMBER 2008 THROUGH JANUARY-MARCH 2010 QUARTERS
OCT - DEC  JAN - MAR  APR - JUN  JUL - SEPT  OCT - DEC  JAN-MAR 2010 
STATE
2008 RATE  2009 RATE 2009 RATE 2009 RATE 2009 RATE RATE*
Alabama 44.41 47.59 45.81 45.81 45.77 47.02
Alaska 113.89 122.05 114.84 114.84 114.84 113.90
Arizona 35.37 37.90 36.50 36.50 36.50 37.49
Arkansas 36.32 38.92 36.46 36.46 36.46 36.07
California 71.56 76.68 76.68 76.68 76.68 78.77
Colorado 98.95 106.03 98.81 98.81 98.81 101.49
Connecticut 117.57 125.99 125.99 121.56 121.56 124.86
Delaware 94.23 100.98 97.43 97.43 96.95 99.58
District of Columbia 39.40 42.22 39.18 39.18 39.18 40.24
Florida 83.38 89.35 89.35 89.35 89.35 91.78
Georgia 56.72 60.78 58.53 58.53 57.30 58.86
Hawaii 58.17 62.34 60.09 60.09 60.09 61.73
Idaho 57.47 61.58 59.27 59.27 59.27 60.89
Illinois 95.37 102.19 98.57 98.57 98.57 101.25
Indiana 66.61 71.38 68.77 68.77 64.82 66.59
Iowa 79.44 85.12 85.12 79.96 74.94 76.98
Kansas 84.87 90.94 85.47 82.50 81.77 84.00
Kentucky 53.05 56.85 52.73 52.73 50.86 52.24
Louisiana 47.24 50.62 50.62 48.75 46.90 48.17
Maine 58.06 62.22 57.83 57.83 56.68 58.22
Maryland 103.99 111.43 107.62 103.84 103.84 106.66
Massachusetts 81.51 87.35 84.36 81.39 81.39 83.61
Michigan 54.41 58.30 56.20 56.20 51.23 52.63
Minnesota 96.94 103.88 100.22 100.22 100.22 102.95
Mississippi 30.37 32.55 31.32 31.32 30.08 30.90
Missouri 85.67 91.81 85.33 85.33 81.62 83.84
Montana 57.33 61.43 59.23 59.23 57.03 58.58
Nebraska 86.44 92.63 87.09 87.09 84.47 86.76
Nevada 82.42 88.32 88.32 88.32 88.32 90.72
New Hampshire 122.84 131.63 123.88 119.64 115.43 118.57
New Jersey 124.38 133.28 124.20 124.20 124.20 127.57
New Mexico 37.24 39.91 37.42 36.05 34.21 35.14
New York 91.71 98.27 94.91 91.57 91.57 94.06
North Carolina 65.48 70.17 67.62 67.62 66.38 68.18
North Dakota 63.58 68.13 68.13 68.13 68.13 69.99
Ohio 89.27 95.66 88.94 88.94 85.31 87.63
Oklahoma 45.90 49.18 49.18 47.44 47.44 46.91
Oregon 70.02 75.03 72.31 72.31 71.63 73.58
Pennsylvnia 96.16 103.05 99.51 95.96 95.24 97.83
Rhode Island 86.63 92.84 92.84 92.84 92.76 95.28
South Carolina 36.52 39.14 37.66 37.66 37.26 38.27
South Dakota 76.88 82.38 77.40 77.40 76.98 79.07
Tennessee 73.77 79.05 76.15 76.15 72.78 74.76
Texas 58.83 63.05 63.05 60.85 58.65 60.24
Utah 62.32 66.78 60.30 60.30 57.89 59.47
Vermont 74.39 79.72 74.17 74.17 74.17 76.18
Virginia 104.73 112.23 104.58 104.58 104.58 107.42
Washington 95.68 102.53 95.52 95.52 95.52 98.12
West Virginia 43.72 46.85 43.85 40.62 40.62 41.72
Wisconsin 85.92 92.07 83.54 80.54 78.56 80.70
Wyoming 116.31 124.64 124.64 117.30 109.30 112.27
*Estimate, subject to change based on updated unemployment information TABLE 2. ARRA INCREASED FEDERAL MEDICAL ASSISTANCE PERCENTAGE (FMAP)
OCTOBER - DECEMBER 2008 THROUGH JANUARY - MARCH 2010
OCT - DEC    JAN - MAR      APR - JUNE  JUL - SEPT  OCT - DEC 
JAN - MAR Q2 
STATE Q1 2008  Q2 2009  Q3 2009  Q4 2009  Q1 2010 
2010 FMAP *
FMAP FMAP FMAP FMAP FMAP
Alabama 76.64 76.64 77.51 77.51 77.53 77.53
Alaska 58.68 58.68 61.12 61.12 61.12 62.46
Arizona 75.01 75.01 75.93 75.93 75.93 75.93
Arkansas 79.14 79.14 80.46 80.46 80.46 81.18
California 61.59 61.59 61.59 61.59 61.59 61.59
Colorado 58.78 58.78 61.59 61.59 61.59 61.59
Connecticut 60.19 60.19 60.19 61.59 61.59 61.59
Delaware 60.19 60.19 61.59 61.59 61.78 61.78
District of Columbia 77.68 77.68 79.29 79.29 79.29 79.29
Florida 67.64 67.64 67.64 67.64 67.64 67.64
Georgia 73.44 73.44 74.42 74.42 74.96 74.96
Hawaii 66.13 66.13 67.35 67.35 67.35 67.35
Idaho 78.37 78.37 79.18 79.18 79.18 79.18
Illinois 60.48 60.48 61.88 61.88 61.88 61.88
Indiana 73.23 73.23 74.21 74.21 75.69 75.69
Iowa 68.82 68.82 68.82 70.71 72.55 72.55
Kansas 66.28 66.28 68.31 69.41 69.68 69.68
Kentucky 77.80 77.80 79.41 79.41 80.14 80.14
Louisiana 80.01 80.01 80.01 80.75 81.48 81.48
Maine 72.40 72.40 74.35 74.35 74.86 74.86
Maryland 58.78 58.78 60.19 61.59 61.59 61.59
Massachusetts 58.78 58.78 60.19 61.59 61.59 61.59
Michigan 69.58 69.58 70.68 70.68 73.27 73.27
Minnesota 60.19 60.19 61.59 61.59 61.59 61.59
Mississippi 83.62 83.62 84.24 84.24 84.86 84.86
Missouri 71.24 71.24 73.27 73.27 74.43 74.43
Montana 76.29 76.29 77.14 77.14 77.99 77.99
Nebraska 65.74 65.74 67.79 67.79 68.76 68.76
Nevada 63.93 63.93 63.93 63.93 63.93 63.93
New Hampshire 56.20 56.20 58.78 60.19 61.59 61.59
New Jersey 58.78 58.78 61.59 61.59 61.59 61.59
New Mexico 77.24 77.24 78.66 79.44 80.49 80.49
New York 58.78 58.78 60.19 61.59 61.59 61.59
North Carolina 73.55 73.55 74.51 74.51 74.98 74.98
North Dakota 69.95 69.95 69.95 69.95 69.95 69.95
Ohio 70.25 70.25 72.34 72.34 73.47 73.47
Oklahoma 74.94 74.94 74.94 75.83 75.83 76.73
Oregon 71.58 71.58 72.61 72.61 72.87 72.87
Pennsylvnia 63.05 63.05 64.32 65.59 65.85 65.85
Rhode Island 63.89 63.89 63.89 63.89 63.92 63.92
South Carolina 78.55 78.55 79.36 79.36 79.58 79.58
South Dakota 68.75 68.75 70.64 70.64 70.8 70.80
Tennessee 73.25 73.25 74.23 74.23 75.37 75.37
Texas 68.76 68.76 68.76 69.85 70.94 70.94
Utah 77.83 77.83 79.98 79.98 80.78 80.78
Vermont 67.71 67.71 69.96 69.96 69.96 69.96
Virginia 58.78 58.78 61.59 61.59 61.59 61.59
Washington 60.22 60.22 62.94 62.94 62.94 62.94
West Virginia 80.45 80.45 81.7 83.05 83.05 83.05
Wisconsin 65.58 65.58 68.77 69.89 70.63 70.63
Wyoming 56.20 56.20 56.2 58.78 61.59 61.59
*Estimate, subject to change based on updated unemployment information; official FMAPs are published in the 
Federal Register by the Assistant Secretary for Planning and Evaluation, Department of Health and Human 
Services