SMDL #01-030  
October 23, 2001  
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) 2001 by 
November 30, 2001. As described below, this is necessary to ensure that the 
maximum amount of SCHIP funds are available for your state under the 
redistribution process for unexpended FY 1999 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 1999 SCHIP 
allotments ended at the end of FY 2001, that is, on September 30, 2001. However, 
section 801 of the Medicare, Medicaid and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) amended the SCHIP statute at section 2104(g) of the 
Act to establish a formula for redistributing and continuing the availability of states' 
unexpended allotments applicable only for the FY 1998 and FY 1999 allotments. 
Note, this letter is only with respect to the redistribution of states' unexpended FY 
1999 allotments; the redistribution of states' unexpended FY 1998 allotments has 
already been completed.  
Under the FY 1999 redistribution process, the Centers for Medicare & Medicaid 
Services (CMS), formerly the Health Care Financing Administration, must determine 
the amounts of states' unexpended FY 1999 SCHIP allotments using the amounts of 
applicable states' expenditures through the end of FY 2001, as reported by states no 
later than November 30, 2001. This date is specified in section 2104(g)(3) of the 
Act, as amended by BIPA. Based on these expenditures, states that have fully 
expended their FY 1999 allotments will receive a redistribution from the pool of the 
total unexpended FY 1999 allotments. The remaining states (states that did not 
expend their FY 1999 allotments) will retain a proportionate amount of their 
unexpended FY 1999 allotments, in accordance with a statutorily prescribed formula.  
As described above, in order for CMS to fully consider all states' applicable 
expenditures in determining states' redistribution and retained FY 1999 allotment 
amounts, it is critical that your state submit and certify its FY 2001 fourth quarter 
Medicaid and SCHIP expenditure report(s) no later than November 30, 2001, over 
the Medicaid and State Children's Health Insurance Program Budget and Expenditure 
System (MBES/CBES). Failure by a state to do so, in accordance with the statutorily 
prescribed formula, will likely result in a lower amount of redistributed or retained FY 
1999 allotment funds for such state because the amount of that state's FY 1999 
redistributed or retained allotment amounts would be based only on the (lower) 
amounts reported through that date.   After November 30, the MBES/CBES, with respect to expenditure forms only, will not 
be accessible to any state for a brief period of time as CMS begins its process for the 
FY 1999 redistribution. We will notify all users by e-mail once the MBES/CBES is 
accessible for expenditure reporting. When the MBES/CBES reopens, the state may 
not make any changes to its fourth quarter FY 2001 or prior expenditure reports that 
affect SCHIP expenditures (this includes Medicaid SCHIP). However, the fourth 
quarter FY 2001 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, Center for Medicaid and State Operations  
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  
Matt Salo  
Director of Health Legislation  
National Governors' Association  
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
Trudi Matthews  
Council of State Governments  
Jennifer King  
American Legislative Exchange Council