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 #02-017 
November 8, 2002 
Dear State Medicaid and State Children's Health Insurance Program Directors: 
We are writing you to alert you of the critical need for your state to submit and certify its 
applicable Medicaid and State Children's Health Insurance Program (SCHIP) fourth quarter 
expenditure reports for federal fiscal year (FY) 2002 by November 30, 2002.  As described 
below, this is necessary to ensure that the full and correct amount of SCHIP funds are available 
for your state through the end of FY 2002, and to enable us to implement the redistribution 
process for the unexpended FY 2000 SCHIP allotments. 
Under the SCHIP statute (title XXI of the Social Security Act (the Act)), states are provided 
federal funds through the mechanism of federal fiscal year specific and state specific allotments, 
for the purpose of enabling them to provide health insurance for uninsured low-income children. 
Generally, each state's fiscal year specific SCHIP allotment is available for expenditure by the 
state only for a 3-year "period of availability," the fiscal year in which the allotments were 
allotted and the two succeeding fiscal years, after which any unexpended amounts of such 
allotment are redistributed.  The 3-year period of availability for states' FY 2000 SCHIP 
allotments ended at the end of FY 2002, that is, on September 30, 2002. 
Also, under the current SCHIP statute, states unexpended FY 1998 and FY 1999 redistributed 
and retained allotment amounts are only available to states through the end of FY 2002. 
Sometime after the end of FY 2002 pursuant to receipt of the FY 2002 fourth quarter expenditure 
reports, we will need to close the states payment accounts related to the unexpended FY 1998 
and 1999 SCHIP funds. Since, under current statute these funds are no longer available for 
matching states expenditures for periods after the end of FY 2002, it is very important that states 
report the full and correct amount of expenditures through the fourth quarter of FY 2002. 
Furthermore, Congress is currently considering legislation affecting SCHIP funds for FYs 1998, 
1999, and 2000, potentially to extend their availability beyond FY 2002.  Whether or not 
Congress acts to extend these funds, it is important for states to report the full amount of their 
SCHIP expenditures through the fourth quarter of FY 2002. 
Under current statute, for the FY 2000 funds redistribution process the Centers for Medicare & 
Medicaid Services (CMS) must determine the amounts of states' unexpended FY 2000 SCHIP 
allotments remaining at the end of FY 2002 after application of the relevant states' expenditures 
through the end of FY 2002, as reported by states no later than November 30, 2002.  Based on 
this determination, states that have fully expended their FY 2000 allotments by the end of FY 
2002 will be eligible to receive a redistribution from the pool of the total unexpended FY 2000 
allotments. We have established this FY 2002 fourth quarter expenditure report cutoff date for  Page 2 - State Medicaid and State Children's Health Insurance Program Directors 
states to submit their expenditures in order to implement a redistribution process as early as 
possible in FY 2003. This is because under the existing SCHIP statute states receiving 
redistribution funds have only until the end of the fiscal year of the redistribution to expend such 
funds. 
As described above, in order for CMS to fully consider all states' applicable expenditures in 
determining states' FY 2000 redistributed allotment amounts, it is critical that your state submit 
and certify its FY 2002 fourth quarter Medicaid and SCHIP expenditure report(s) no later than 
November 30, 2002, through the Medicaid and State Children's Health Insurance Program 
Budget and Expenditure System (MBES/CBES). Failure by a state to report these expenditures, 
could result in no or a lower amount of redistributed FY 2000 allotment funds for such state 
because the amount of that state's FY 2000 redistributed allotment amounts would be based only 
on the (lower) amounts reported through that date. 
For a brief period of time after November 30, 2002, as CMS begins the FY 2000 redistribution 
process, the MBES/CBES will not be accessible to any state with respect to expenditure forms 
only.  We will notify all users by e-mail once the MBES/CBES is again accessible for 
expenditure reporting. When the MBES/CBES reopens, the state may not make any changes to 
its fourth quarter FY 2002 or prior expenditure reports that affect SCHIP expenditures (this 
includes Medicaid SCHIP). However, the fourth quarter FY 2002 expenditure reports will be 
accessible for a state to add or modify only its non-SCHIP Medicaid expenditures. 
The CMS regional office responsible for your state will be working with you to ensure timely 
submission of these expenditure reports.  If you have any questions regarding this issue, please 
contact your CMS regional office. 
Sincerely, 
/s/ 
Dennis G. Smith 
Director 
cc: 
CMS Regional Administrators 

CMS Associate Regional Administrators 

for Medicaid and State Operations 

Brett Ewig 

Senior Director, Access Policy 

Association of State and Territorial Health Officials 

Lee Partridge 

Director, Health Policy Unit 

American Public Human Services Association 
 Page 3 - State Medicaid and State Children's Health Insurance Program Directors 

Matt Salo 

Director of Health Legislation 

National Governors Association 

Joy Wilson 

Director, Health Committee 

National Conference of State Legislatures 

Trudi Matthews 

Senior Health Policy Analyst 

Council of State Governments 

Jim Frogue 

Acting Director, Health and Human Services Task Force 

American Legislative Exchange Council