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 #03-005 
June 13, 2003 
Dear State Medicaid Directors: 
On May 28, 2003, President Bush signed into law (P.L. 108-27) the Jobs and Growth Tax Relief 

Reconciliation Act of 2003 (TRRA). Subsection 401(a) of TRRA provides temporarily, with 

respect to certain expenditures by eligible states, increases in the Federal medical assistance 

percentage (FMAP), that is, the Federal matching rate for states medical assistance expenditures 

under their Medicaid program. Under this provision, the increased FMAP is available only for a 

period of five calendar quarters, the last two quarters of Federal fiscal year (FY) 2003 and the 

first three quarters of Federal FY 2004. Subsection 401(a) of TRRA also increases the limitation 

on payments to the commonwealths and territories (the territories) as determined under section 

1108 of the Social Security Act (the Act). 

This letter contains some initial guidance on section 401(a) of TRRA. Attached to this letter are 

tables setting forth the additional Federal funding authorized for the commonwealths and 

territories, the potential increases in the FMAP for each state and territory for the third and fourth 

quarters of FY 2003, and increases in FY 2003 third quarter advance grant awards to reflect 

these changes. 

Determination of the Increased FMAP

Under TRRA, there are two steps for determining the increased FMAP for each state for the last 

two quarters of FY 2003.  First, each states FY 2003 FMAP, as would otherwise be calculated, 

must be at least equal to the states FMAP for FY 2002, and second, the FMAP determined 

under this first step is increased by 2.95 percentage points. Under section 401(a)(8)(B) of 

TRRA, the term State has the same meaning given for such term for purposes of  title XIX of 

the Act, the Medicaid statute. Under section 1101(a) of the Act, the territories are considered as 

states for purposes of title XIX of the Act.  Therefore, the territories will receive the same FMAP 

increase as the 50 states and District of Columbia will receive under this new law. 

Payments for Which Increased FMAP Are Not Available

Subsection 401(a)(5) of TRRA provides that the increased FMAP does not apply with respect to 

the following: 

  Medicaid disproportionate share hospital payments  Page 2  State Medicaid Directors 
	 Payments under title IV and title XXI of the Act (the Federal matching percentage under 
these programs is a function of the Medicaid FMAP rate). This provision indicates that 
the Medicaid FMAP applied for the purposes of these programs will be the Medicaid 
FMAP otherwise determined without application of the provisions of TRRA. 
	 Payments under Medicaid that are based on the enhanced FMAP described in section 
2105(b) of the Act.  The Federal matching rate for certain Medicaid expenditures is tied 
to the enhanced FMAP referenced in section 2105(b) of the Act. In turn, the enhanced 
FMAP is calculated based on the Medicaid FMAP. This provision of TRRA indicates 
that the enhanced FMAP under section 2105(b) of the Act will be based on the Medicaid 
FMAP otherwise determined without application of the provisions of TRRA. 
There are certain expenditures in the Medicaid program for which the Federal matching rate is 

not the usual FMAP; these include Indian Health Service facility expenditures (100 percent), 

family planning services (90 percent), cervical and breast cancer services (enhanced FMAP). 

The Federal matching rate for these medical assistance expenditures will continue to be as 

indicated. Finally, the increased FMAP is only applicable with respect to certain medical 

assistance expenditures; it is not applicable for states administrative costs. 

Determination of Increased Limitation for the Territories

Section 401(a)(4) of TRRA provides that the limitation for the territories under section 1108 of 

the Act, shall be increased by 5.90 percent for the last two quarters of FY 2003 and the first three 

quarters of FY 2004. CMS is implementing this provision by prorating the territorial cap, as 

otherwise determined for the fiscal year under section 1108 of the Act, among the four quarters 

of the fiscal year. For FY 2003, these third and fourth quarter prorated amounts will be 

increased by 5.9 percent. In effect, operationally, for FY 2003 the dollar increase in the section 

cap multiplied by 5.9 percent.  For FY 2004 the dollar increase in the section 1108 cap will be 

equal to three-fourths of the section 1108 cap multiplied by 5.9 percent. The revised caps for the 

territories are attached. 

State Eligibility for Increased FMAP

Under section 401(a)(6) of TRRA, a state is eligible for an increase in its FMAP for any of the 

affected quarters of FY 2003 and 2004 only if eligibility under its Medicaid state plan (including 

any waivers under title XIX or section 1115 of the Act) in effect for such quarter is no more 

restrictive than the eligibility under such plan or waiver as in effect on September 2, 2003. 

In making this determination on what is effective on September 2, 2003, CMS will consider only 
the approved state plan and waivers on September 2, 2003, and subsequently approved state plan 
amendments and waivers submitted on or prior to September 2, 2003. This is because we do not 
read the statutory reference to this exact date to include revisions subsequently proposed by the 
state.  Page 3  State Medicaid Directors 
Determination of Increased Funds for the Third Quarter of FY 2003 
Because of the increased FMAP provided under TRRA, we have recalculated advance grant 
awards for most states applicable to the third quarter of FY 2003.  In general, under the Federal 
funding process for the Medicaid program, at the beginning of each calendar quarter and based 
on states estimates and any adjustments made by CMS, states are provided advance grant 
awards.  These are issued for purposes of making Federal matching funds available to states 
during a current quarter for allowable Medicaid expenditures incurred by the state during the 
quarter.  The amount of Federal funds needed by a state during a quarter is directly related to the 
FMAP applicable to the expenditures incurred by the state during the quarter. Since the 
increased FMAP under TRRA is potentially available with the beginning of the third quarter of 
FY 2003 (that is, April 1, 2003), the amounts of the initial grant awards that were initially issued 
at the beginning of April 2003 were potentially insufficient. 
Based on states estimates and CMS adjustments for the third quarter, any subsequent 

adjustments, and the original FY 2003 third quarter grant awards, we have recalculated an 

incremental amount of Federal funds that may be needed by states in the third quarter of FY 

2003 because of the availability of the increased FMAP. We calculated this amount by first 

determining the total amount of expenditures that the state estimated for the quarter 

incorporating any adjustments made by CMS.  We then deducted the amounts the states had 

included in such estimates for DSH payments and expenditures that would be claimed at the 

enhanced FMAP under section 2105(b) of the Act. We calculated the Federal matching funds 

needed for these net expenditures using the previous FMAP, and then with the increased FMAP. 

The difference between these two amounts represent the incremental amount of Federal funds 

needed in the third quarter to accommodate the increased FMAP. These amounts are indicated 

in the attachment to this letter. 

We note that there are six annual grant award (AGA) states referenced in the attached chart for 

which no incremental amounts are shown for the third quarter. The AGA states are not issued an 

advance grant award for each calendar quarter as is done for most states; rather, at the beginning 

of the fiscal year CMS issues AGA states grant awards reflecting the states Federal funding 

needs for the entire fiscal year. Since the AGA states have been issued grant awards in amounts 

that reflect the entire FY 2003, we have determined that no incremental grant awards are needed 

at this time for the third quarter for FY 2003. 

Regardless of the supplemental grant awards we are issuing for the third quarter related to the 

FMAP increase, should any state need additional funds before the end of the quarter, they may 

request them. CMS will evaluate such requests and issue any appropriate additional 

supplemental grant awards. Finally, CMS will be evaluating states needs for the fourth quarter 

of FY 2003. 

Non-Federal Share (NFS) Funding Requirements.

Under section 401(a)(7) of TRRA, states may not require that the percentage of a states' NFS of 

expenditures contributed by political subdivisions within a state to be greater than the percentage 

required under the states plan on April 1, 2003. Under existing Medicaid provisions at section 

1902(a)(2) of the Act, and 42 CFR 433.53 of the regulations, a state plan must require that the 
 Page 4  State Medicaid Directors 

NFS be comprised of at least 40 percent of state (as distinguished from local) funds. In order to 

implement section 401(a)(7) of TRRA, CMS will need to identify each state that has a 

requirement for political subdivisions within the state to contribute toward the non-Federal share 

of expenditures, and with respect to such states to determine the applicable percentage as of 

April 1, 2003. On a subsequent basis, with respect to the five quarter period for which the 

increased FMAP is available, the state must maintain this NFS funding percentage. We note that 

since this is a state plan requirement, if this condition is not met, the state would be considered to 

be out of compliance resulting in the applicable compliance process and any appropriate 

sanctions. 

Definition of Incurred Expenditures

The increased FMAP is available for expenditures incurred by states in the applicable quarters. 

TRRA does not change the definition of incurred expenditures under the Medicaid program.  In 

particular, under title XIX medical assistance expenditures are considered to be incurred based 

on when the state makes a payment to a provider of services; it is not determined by the date of 

service. Therefore, the date of payment will determine the quarter for which the expenditure will 

be considered to be incurred. The increased FMAP applicable to each affected quarter will be 

available for matching such expenditures. 

Prior Period Adjustments

Expenditures incurred during a particular quarter, which are not reported by states as a current 

quarter expenditure, must be reported on the Medicaid quarterly expenditure report, Form CMS-

64, as a prior period adjustment. For such prior period adjustment expenditures, the available 

applicable FMAP will relate to the quarter it was initially incurred. If an expenditure was 

incurred in one of the five quarters referenced in the legislation, the (increased) FMAP 

associated with that quarter would be the applicable FMAP for such expenditure. 

Expenditure Reporting

CMS is working to modify the Medicaid budget and expenditure reporting system so states will 

be able to identify and claim expenditures at the appropriate FMAP rate. We expect the 

reporting system to be updated in time for states to submit their third quarter expenditure reports. 

CMS will issue instructions to states on this in the near future. 

If you have any questions regarding this issue, please contact Richard Strauss on 410-786-2019. 
Sincerely, 
/s/ 
Dennis G. Smith 
Director 
Enclosures  Page 5  State Medicaid Directors 
cc: 
CMS Regional Administrators 
CMS Associate Regional Administrators 

for Medicaid and State Operations 

Kathryn Kotula 

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 

Trudi Matthews 

Senior Health Policy Analyst 

Council of State Governments 

Jim Frogue 

Director, Health and Human Services Task Force 

American Legislative Exchange Council 
 ATTACHMENT 
INCREASE IN FY 2003 AND FY 2004 FEDERAL MEDICAID CEILING LIMIT 
AS A RESULT OF THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF FY 2003 ($ IN 000s) 
FY 2003 
TERRITORIAL SECTION 1108 CAP INCREASE ($ in 000s)  5.9% :Section 1108 CAP Increase 
Previous FY 03  Previous FY 03  Previous 1108  Previous 1108  New FY 03 1108  Total New 1108  Total 2 Quarter 
Territory  1108 CAP  1108 CAP Per Qtr  CAP For 1st  CAP For 3rd  CAP For 3rd &  CAP For FY 03  Impact FY 03 
& 2nd Qtrs of FY 03  & 4th Qtrs FY 03  4th Qtrs FY 03 
(Col B)/4  Col C x 2  Col C X 2  Col E X 1.059  Col D + Col F  Col G - Col B 
A  B  C  D  E  F  G  H 
Puerto Rico  201,400  50,350  100,700  100,700  106,641  207,341  5,941 
Amer. Samoa  3,620  905  1,810  1,810  1,917  3,727  107 
Guam  6,140  1,535  3,070  3,070  3,251  6,321  181 
N. Mariana Islands  2,190  548  1,095  1,095  1,160  2,255  65 
Virgin Islands  6,350  1,588  3,175  3,175  3,362  6,537  187 
Total  219,700  54,925  109,850  109,850  116,331  226,181  6,481 
FY 2004 
TERRITORIAL SECTION 1108 CAP INCREASE ($ in 000s) 
Previous FY 04  Previous FY 04  Previous 1108  Previous 1108  New FY 04 1108  Total New 1108  Total 3 Quarter 
Territory  1108 CAP  1108 CAP Per Qtr  CAP For  CAP For 1st - CAP For 1st - CAP For FY 04  Impact FY 04 
4th Qtr of FY 04  3rd Qtrs FY 04  3rd Qtrs 
(Col B)/4  = Col C  Col C X 3  Col E X 1.059  Col D + Col F  Col G - Col B 
A  B  C  D  E  F  G  H 
Puerto Rico  210,100  52,525  52,525  157,575  166,872  219,397  9,297 
Amer. Samoa  3,780  945  945  2,835  3,002  3,947  167 
Guam  6,400  1,600  1,600  4,800  5,083  6,683  283 
N. Mariana Islands  2,280  570  570  1,710  1,811  2,381  101 
Virgin Islands  6,620  1,655  1,655  4,965  5,258  6,913  293 
Total  229,180  57,295  57,295  171,885  182,026  239,321  10,141  ATTACHMENT 
IMPACT OF SECTION 401(a) OF P.L. 108-27 FOR THIRD QUARTER FY 2003 
TEMPORARY INCREASE OF THE MEDICAID FMAP 
State  PREVIOUS  NEW FMAP FOR  3rd QUARTER 
FY 2003  3RD AND 4TH  FY 2003 
FMAP  QUARTERS  SUPPLEMENTAL 
FY 2003  GRANT AWARD 
A  B  C  D 
Alabama  70.60%  73.55%  20,862,000 
Alaska  58.27%  61.22%  5,095,000 
Arizona  67.25%  70.20%  33,930,000 
Arkansas  74.28%  77.23%  17,322,000 
California  50.00%  54.35%  409,080,000 
Colorado  50.00%  52.95%  17,796,000 
Connecticut  50.00%  52.95%  23,308,000 
Delaware  50.00%  52.95%  5,400,000 
Dist Columbia  70.00%  72.95%  9,127,000 
Florida  58.83%  61.78%  87,464,000 
Georgia  59.60%  62.55%  47,934,000 
Hawaii  58.77%  61.72%  5,805,000 
Idaho  70.96%  73.97%  6,219,000 
Illinois  50.00%  52.95%  80,189,000 
Indiana  61.97%  64.99%  - AGA* 
Iowa  63.50%  66.45%  15,164,000 
Kansas  60.15%  63.15%  12,313,000 
Kentucky  69.89%  72.89%  26,917,000 
Louisiana  71.28%  74.23%  - AGA* 
Maine  66.22%  69.53%  12,425,000 
Maryland  50.00%  52.95%  28,965,000 
Massachusetts  50.00%  52.95%  54,705,000 
Michigan  55.42%  59.31%  62,727,000 
Minnesota  50.00%  52.95%  37,567,000 
Mississippi  76.62%  79.57%  21,925,000 
Missouri  61.23%  64.18%  35,999,000 
Montana  72.96%  75.91%  4,830,000 
Nebraska  59.52%  62.50%  - AGA* 
Nevada  52.39%  55.34%  6,617,000 
New Hampshire  50.00%  52.95%  7,269,000 
New Jersey  50.00%  52.95%  47,117,000 
New Mexico  74.56%  77.51%  14,034,000 
New York  50.00%  52.95%  264,344,000 
North Carolina  62.56%  65.51%  50,294,000 
North Dakota  68.36%  72.82%  4,872,000 
Ohio  58.83%  61.78%  69,644,000 
Oklahoma  70.56%  73.51%  18,864,000 
Oregon  60.16%  63.11%  19,939,000 
Pennsylvania  54.69%  57.64%  92,676,000 
Rhode Island  55.40%  58.35%  8,933,000 
South Carolina  69.81%  72.76%  27,384,000 
South Dakota  65.29%  68.88%  4,791,000 
Tennessee  64.59%  67.54%  43,084,000 
Texas  59.99%  63.12%  108,744,000 
Utah  71.24%  74.19%  7,762,000 
Vermont  62.41%  66.01%  6,036,000 
Virginia  50.53%  54.40%  - AGA* 
Washington  50.00%  53.32%  - AGA* 
West Virginia  75.04%  78.22%  14,057,000 
Wisconsin  58.43%  61.52%  - AGA* 
Wyoming  61.32%  64.92%  2,834,000 
TOTAL STATES  1,902,363,000 
COMMONWEALTHS AND TERRITORIES/1 
Puerto Rico  50.00%  52.95%  5,941,000 
Amer. Samoa  50.00%  52.95%  107,000 
Guam  50.00%  52.95%  181,000 
N. Mariana Islands  50.00%  52.95%  65,000 
Virgin Islands  50.00%  52.95%  187,000 
TOTAL  6,481,000 
NATIONAL TOTAL  1,908,844,000 
*AGA = Annual Grant Award States. AGAs can use previously received 
full-year funding to cover any third quarter impact. 
1/ The amounts in Column D for the Commonwealths and Territories represent 
the total increase to the cap under section 1108 of the Act for both the 3rd 
and 4th quarters of of FY 2003.  INCREASED FEDERAL MEDICAL ASSISTANCE PERCENTAGE LEGISLATION 
Questions & Answers 
 
On May 28, 2003, President Bush signed into law (P.L. 108-27) the Jobs and Growth Tax Relief 
Reconciliation Act of 2003 (TRRA).  Subsection 401(a) of TRRA provides temporarily, with 
respect to certain expenditures by eligible states, increases in the Federal medical assistance 
percentage (FMAP), that is, the Federal matching rate for states medical assistance expenditures 
under their Medicaid programs.  Under this provision, the increased FMAP is available only for 
a period of five calendar quarters, the last two quarters of Federal fiscal year (FFY) 2003 and the 
first three quarters of FY 2004.  Subsection 401(a) of TRRA also increases the limitation on 
payments to the commonwealths and territories (the territories) as determined under section 1108 
of the Social Security Act (the Act). 
 
On June 13, 2003, the Centers for Medicare & Medicaid Services (CMS), Center for Medicaid 
and State Operations issued State Medicaid Director Letter (SMDL) #03-005 containing initial 
guidance on section 401(a) of TRRA.  The following Qs & As provides additional guidance on 
the TRRA increased FMAP provision:  
 
I.  ELIGIBILITY FOR INCREASED FMAP 
 
Q1.  What is the requirement for states to be eligible for the increased FMAP? 
 
A.  Under section 401(a)(6) of TRRA, a state is eligible for an increase in its FMAP for any 
of the affected quarters of FY 2003 and 2004 only if eligibility under its Medicaid state 
plan (including any waivers under title XIX or section 1115 of the Act) in effect for such 
quarter is no more restrictive than the eligibility under such plan or waiver as in effect on 
September 2, 2003.  In making this determination on what is effective on September 2, 
2003, CMS will consider only the approved state plan and waivers on September 2, 2003, 
and subsequently approved state plan amendments and waivers submitted on or prior to 
September 2, 2003.  This is because we do not read the statutory reference to this exact 
date to include revisions subsequently proposed by the state. 
 
Q2.  If a state restricts eligibility under its program after September 2, 2003, causing the 
increased FMAP to be unavailable, may the state take action to reinstate eligibility 
for the increased FMAP? 
 
A.  Yes.  Section 401(a)(6)(B) of TRRA specifically provides for states, which have 
restricted eligibility under its program, causing the state to be ineligible for the increased 
FMAP for the quarters in which the restriction is in effect, to reinstate the less restrictive 
provisions.  Under this section of TRRA, the state will be eligible for the increased 
FMAP in the first quarter in which it reinstates the less restrictive eligibility. 
  Page 2 - Qs and As on Increased FMAP Provision 
Q3.  In general, what is the meaning of the term "eligibility," for purposes of 
determining  eligibility in effect under states' Medicaid programs on September 2, 
2003, or during one of the calendar quarters for which the increased FMAP is 
available? 
A.  In general, in this context, the term eligibility includes the income and resource 
methodologies and standards that are used in determining individuals' eligibility for the 
Medicaid program.  It also includes the eligibility groups, such as the categorically needy 
(both mandatory and optional) and medically needy groups.   
 
Q4.  Are there general principles that are applicable in determining whether the 
"eligibility" in a state's program is more or less restrictive? 
 
A.  In general, an eligibility condition the application of which would have the result of 
making an individual ineligible, or less likely to be eligible, would be considered to be 
more restrictive.  An eligibility condition which would have the result of making an 
individual more likely to be eligible would be considered to be less restrictive. 
 
Examples of an eligibility condition which is "more restrictive": 
  A decrease in a state's income and/or resource standard 
  A decrease in the amount of an income and/or resource disregard 
  A definition of income or resources which includes greater amounts or more types of 
income and/or resource within the definition of income/resource 
  Dropping or reducing an eligibility group, for example, dropping an optional 
categorically needy, or medically needy group 
  Lowering the age limit under which an individual is considered eligible for medical 
assistance in a state's Medicaid program. For example, section 1905(a)(i) of the Act, 
defines certain individuals "under the age of 21, or, at the option of the state, under 
the age of 20, 19, or 18 as the state may choose."  In this regard, a lower age limit is 
more restrictive than a higher one.   
 
Q5.  Are there particular policy areas which are not considered to be an "eligibility" 
condition for purposes of determining whether the increased FMAP is available? 
 
A.  The following areas are NOT considered a condition of eligibility for purposes of 
whether the increased FMAP is available: 
 
  Cost sharing.  The imposition of such cost sharing charges which in this context 
includes premiums, or the increase in such charges is not an eligibility condition for 
purposes of the availability of the increased FMAP.   The non-payment of such 
charges (such as refusal to pay the cost sharing) and the resulting ineligibility of an 
individual for such reasons is not considered a condition of eligibility for this 
purpose. 
  Definition of covered "medical assistance" under the State plan    Policies which 
determine the types, or amount, duration, and scope of medical assistance in a state's 
Medicaid program are NOT considered a condition of eligibility.  Page 3 - Qs and As on Increased FMAP Provision 
  Medical necessity.  The criteria for determining medical necessity for a service, 
including a change in the level of care requirement, as is imposed under certain 
waivers to qualify for services under the waiver. 
  Administrative Requirements.  State requirements for individuals to provide 
documentation such as for verification of income and resources or non-compliance 
with verification requirements are not considered an eligibility condition for purposes 
of availability of the increased FMAP.  For example, a state may require individuals 
to complete a form in which they indicate sources of income, resources, or third party 
liability information.  A requirement to submit such information and/or non-
compliance with such requirements resulting in ineligibility, are not considered an 
eligibility condition for this purpose. 
 
Q6.  The availability of certain home and community based services (HCBS) under a 
states' HCBS waiver program may be contingent on the need for "activities of daily 
living" (ADL); are ADLs considered a condition of eligibility? 
 
A.  No, we do not consider ADL requirements under a HCBS waiver as an eligibility 
condition for purposes of the availability of the increased FMAP. 
 
Q7.  How should the redetermination process and the minimum enrollment period in a 
managed care setting be considered for purposes of the availability of the increased 
FMAP? 
 
A.  As follows, we distinguish aspects of the administration of the program from 
programmatic eligibility requirements for purposes of the availability of the increased 
FMAP: 
 
(cid:131) Redetermination Process.  We do not consider the administrative process under which 
a state periodically reexamines an individual's Medicaid eligibility, referred to as the 
redetermination process, to be a condition of eligibility for purposes of the 
availability of the increased FMAP.  Furthermore, the frequency at which a state may 
perform such periodic redeterminations is not an eligibility condition; therefore 
changes in this process such as an increase in the frequency of a redetermination does 
not change an individual's eligibility.  For example, a state may change the frequency 
of periodic redeterminations from 12 months to six months; this change would not be 
determinative as to whether the increased FMAP is available.  The frequency of the 
redetermination process must be distinguished from the eligibility requirements 
contained in the state's approved state plan or waiver which are applied in the 
redetermination process (whether every 12 months, 6 months, or with some other 
frequency). 
 
(cid:131) Minimum Enrollment Period in Managed Care.  In the managed care setting, states 
may elect a minimum enrollment period for managed care enrollees during which 
individuals are deemed to continue to be eligible.  This minimum enrollment period is 
distinguished from the actual eligibility requirements, as contained in the state's 
approved state plan or waiver; therefore, we do not consider the minimum enrollment  Page 4 - Qs and As on Increased FMAP Provision 
period in managed care and the deemed eligibility status of an individual during such 
period to be an eligibility condition for purposes of the availability of the increased 
FMAP. 
 
Q8.  Are eligibility requirements under a states title XXI-related Medicaid expansion 
program (referred to as M-SCHIP) considered eligibility conditions for purposes of 
the availability of the increased FMAP? 
 
A.  Yes.  For purposes of the availability of the increased FMAP, the M-SCHIP option is 
considered part of the Medicaid program.  That is, the M-SCHIP option provides for 
making certain low-income children eligible under the authority of section 1905(u)(2) 
and (u)(3) of the Act. That is, the M-SCHIP program is considered part of the Medicaid 
statute.  Therefore, an eligibility conditions that are part of the M-SCHIP program are 
considered to be part of the Medicaid program, and if eligibility in a states M-SCHIP 
program for quarters in which the increase FMAP is available is more restrictive than the 
eligibility under such plan on September 2, 2003, then the increased FMAP would not be 
available.   
 
Q9.  Does a reduction in eligibility have to be fully implemented on or before 
September 2, 2003 in order for a state to qualify for the increased FMAP, or is it 
merely enough for CMS to have received the request by that date? 
 
A.  As indicated in the June 13, 2003 state Medicaid director letter, in determining the 
eligibility under a states program in effect on September 2, 2003, CMS will consider the 
approved state plans and waivers that are effective on September 2, 2003.  Furthermore, 
in this regard, CMS will also consider subsequently approved state plan amendments and 
waivers, but only if they have been submitted by the state and received by CMS on or 
prior to September 2, 2003.  Finally, the ultimately approved effective date for the plan or 
waiver must include September 2, 2003.  That is, although a reduction in eligibility as 
requested through a plan amendment or waiver does not actually have to be in effect on 
September 2, 2003, the related plan amendment or waiver request must be submitted by 
the state and received by CMS by September 2, 2003, and the CMS approval date must 
include September 2, 2003.  This is because, although the plan or waiver request may be 
submitted and received by CMS by September 2, the ultimate effective date approved by 
CMS may be after September 2, 2003. 
 
Q10.  What is the issue with respect to the availability of the increased FMAP for the 
April-June 2003 quarter? 
 
A.  Under section 401(a)(6) of TRRA, the increased FMAP is not available for expenditures 
incurred in a quarter in which the eligibility under the states program effective during the 
quarter is more restrictive than the eligibility in effect on September 2, 2003.  However, 
this creates a situation in which a state that expands eligibility under its program after the 
April-June 2003 quarter and which would be in effect on September 2, 2003, would 
preclude the availability of the increased FMAP for the April  June 2003 quarter.  This 
is because in comparison, the eligibility in effect under the plan in for April  June 2003  Page 5 - Qs and As on Increased FMAP Provision 
quarter would be relatively more restrictive than the expanded eligibility in effect on 
September 2, 2003.  We are aware of this result and are working to achieve a technical 
correction to the statute to address this issue. 
 
Note: as indicated in the response to the previous question, the date of submittal and 
receipt of an eligibility change affects the availability of the increased FMAP.  In that 
regard, if a state submitted and CMS received a request for a less restrictive eligibility 
condition (and which would be effective on September 2) after September 2, 2003, such a 
change would not be considered to be in effect on September 2, 2003, for purposes of the 
availability of the increased FMAP.  In this example, because the proposal was submitted 
after September 2, 2003, the fact that the states program in effect during the April 
through June 2003 quarter is more restrictive than the program under the states proposal 
would not be considered in determining the availability of the increased FMAP.    
 
Q11.  In the special terms and conditions governing states' approved waivers, states may 
make changes to certain eligibility categories without securing additional approval 
from CMS; however, under the special terms and conditions, the state needs to 
notify CMS 60 days prior to such action.  In such a case, could the state provide the 
60-day notice to CMS of a reduction in eligibility after September 2, 2003, and still 
be eligible for the increased FMAP?  
 
A.  No.  Although the special terms and conditions of the CMS waiver approval does not 
require the state to obtain further approval by CMS for a change in eligibility, it does 
require the state to notify CMS of changes in eligibility.  In determining whether the 
(change in) eligibility is in effect on September 2, 2003, for purposes of the availability 
of the increased FMAP, CMS must be notified by September 2, 2003.  In particular, a 
reduction (more restrictive change) in eligibility would need to be in effect on  
September 2, 2003, so as to have the comparison of eligibility to be no more restrictive 
than what is in effect on September 2, 2003.  Again, the notification of such a change 
must be submitted by the state and received by CMS by September 2, 2003. 
 
Q12.  Is the increased FMAP available by quarter, or on an "all or nothing" basis?  For 
example, if the state were to reduce eligibility beginning January 1, 2004, would the 
increased FMAP still be available for periods prior to January 2004? 
  
A.  The availability of the increased FMAP is on a quarterly basis.  Thus, in the example 
indicated in the question, assuming that eligibility under the states program for the 
quarters prior to January 2004 was no more restrictive than the eligibility under the 
program on September 2, 2003, the increased FMAP would still be available for the 
period prior to January 2004.  Of course, in the example, beginning January 2004, 
eligibility under the states program is more restrictive than eligibility on  
September 2, 2003, and therefore beginning with January 2004, the increased FMAP 
would no longer be available.  Finally, under section 401(a)(6)(B) of TRRA, a state 
which has restricted eligibility under its program after September 2, 2003 (causing the 
state to no longer qualify for the increased FMAP beginning with the quarter in which the 
restriction is in effect), may reinstate the less restrictive provision(s).  Under this section  Page 6 - Qs and As on Increased FMAP Provision 
of TRRA, the state will be eligible again for the increased FMAP in the first quarter in 
which it reinstates the less restrictive eligibility provision in its program. 
 
Q13.  Under certain waivers, such as those approved under section 1915(c) of the Act 
(relating to home and community based services  HCBS), states can limit the 
number of individuals that can be eligible under such waivers.  Are changes in this 
limit considered an eligibility condition for purposes of the availability of the 
increased FMAP? 
 
A.  Yes, changes which affect the number of individuals that can be eligible for a waiver, are 
considered eligibility conditions with respect to the availability of the increased FMAP.  
For example,  if a state decreased the limit on the numbers of individuals that can be 
eligible under such a waiver, eligibility under the program would be considered more 
restrictive as compared to the program before the change. 
 
Q14.  A state changes the number of waivers under which it provides HCBS waiver 
services under its section 1915(c) waiver.  Is this an eligibility condition which would 
affect the availability of the increased FMAP? 
 
A.  By itself, changing the number of waivers under which a state covers the waiver 
population would not be considered an eligibility change, so long as eligibility for 
individuals under the waivers is the same.   For example, a state currently covers the 
HCBS waiver population under one broad waiver.  However, the state intends to revise 
its program so as to cover the HCBS waiver population under 4 waivers, under which 
different HCBS waiver services and levels of services are provided under each of the 4 
new waivers, based on the characteristics of the population.  Nevertheless, the eligibility 
criteria for the individuals remains the same, and any limits on the total numbers of 
people covered under either the one waiver previously, or the under the 4 waivers under 
the proposal, does not change.  In that case, the states proposal would not be considered 
as revising the eligibility under the plan. 
 
 
II.  DETERMINATION OF INCREASED FMAP 
 
Q1.  How is the increased FMAP determined? 
 
A.  Under section 401(a) of TRRA, there are two steps for determining the increased FMAP 
for each state for the last two quarters of FY 2003, and the first three quarters of  
FY 2004.  First, the increased FMAP for the last two quarters of FY 2003 (as would 
otherwise be calculated), must be at least equal to the states FMAP for FY 2002, and 
second, the FMAP determined under this first step is increased by 2.95 percentage points.  
Similarly, the increased FMAP for the first three quarters of FY 2004 must be at least 
equal to the states FMAP for FY 2003 (as would otherwise be calculated), and second, 
the FMAP determined under this first step is increased by 2.95 percentage points. 
  Page 7 - Qs and As on Increased FMAP Provision 
Q2.  How will CMS determine the amount and provide additional funding to the states 
related to the increased FMAP? 
 
A.  For the third quarter of FY 2003, CMS calculated the states' additional Federal funding 
needs related to the increased FMAP based on the states' February 2003 quarterly budget 
estimates submitted to CMS; these amounts were issued to states as a supplemental grant 
award in mid June 2003.  Similarly, for the fourth quarter of FY 2003, CMS calculated 
the states' additional Federal funding related to the increased FMAP based on the states' 
May 2003 quarterly budget estimates submitted to CMS; these increased amounts were 
included in the fourth quarter grant awards issued to states at the beginning of July 2003. 
 
Q3.  Section 401(a) of TRRA refers to $10,000,000,000 For A Temporary Increase Of 
The Medicaid FMAP.  Are states limited to a total of $10 billion in additional funds 
related to the increased FMAP provisions? 
 
A.  No.  The reference to $10 billion is only in the title of section 401(a) of TRRA.  In the 
language of the actual provisions of this legislation there is no limit on the amounts of 
additional Federal matching funds states may claim for the expenditures incurred in the 
five quarters for which the increased FMAP is applicable. 
 
Q4.  Is there special treatment for annual grant award (AGA) states with respect the 
increased FMAP provisions and in the determination of increased funding? 
 
A.  There are six annual grant award (AGA) states (IN, LA, NE, VA, WA, and WI) for 
which no incremental amounts are shown for the third quarter.  The AGA states are not 
issued an advance grant award for each calendar quarter as is done for most states; rather, 
at the beginning of the fiscal year CMS issues AGA states grant awards reflecting the 
states Federal funding needs for the entire fiscal year.  Since the AGA states were issued 
grant awards at the beginning of FY 2003 in amounts that reflect such states funding 
needs for the entire FY 2003, we determined that no incremental grant awards were 
needed this time for the third quarter of FY 2003.  However, as is the case for AGA states 
at the end of the every fiscal year, at the same time as we look at all states fourth quarter 
funding needs, we also review the AGA states funding needs based on the May 2003 
quarterly budget submission.  In that regard, and with respect to the increased FMAP 
provisions, we determined if the AGA states needed additional funds for FY 2003, and 
issued additional funds as necessary. 
 
Q5.  Will CMS provide additional funds if the supplemental grant awards for the third 
quarter, or the advance grant awards are not sufficient for the states funding needs? 
 
A.  Regardless of the supplemental grant awards we are issuing for the third quarter related to 
the FMAP increase, or the amount of the advance grant awards for the fourth quarter, 
should any state need additional funds before the end of a quarter, they may request them 
through a supplemental request.  CMS will evaluate such requests and issue any 
appropriate additional supplemental grant awards.  
  Page 8 - Qs and As on Increased FMAP Provision 
III.  EXPENDITURES 
 
Q1.  In general, for which expenditures is the increased FMAP available? 
 
A.  In general, the increased FMAP is available for allowable medical assistance 
expenditures.  However, refer to the next Q&A for expenditures that the increased FMAP 
is not available.  
 
Q2.  In general, for which expenditures is the increased FMAP not available? 
 
A.  Subsection 401(a)(5) of TRRA provides that the increased FMAP does not apply with 
respect to the following: 
 
  Medicaid disproportionate share hospital payments 
  Payments under title IV and title XXI of the Act (the Federal matching percentage under 
these programs is a function of the Medicaid FMAP rate).  This provision indicates that 
the Medicaid FMAP applied for the purposes of these programs will be the Medicaid 
FMAP otherwise determined without application of the provisions of TRRA. 
  Payments under Medicaid that are based on the enhanced FMAP described in  
section 2105(b) of the Act.  The Federal matching rate for certain Medicaid expenditures 
is tied to the enhanced FMAP referenced in section 2105(b) of the Act.  In turn, the 
enhanced FMAP is calculated based on the Medicaid FMAP.  This provision of TRRA 
indicates that the enhanced FMAP under section 2105(b) of the Act will be based on the 
Medicaid FMAP otherwise determined without application of the provisions of TRRA. 
 
Q3.  Does the new increased FMAP apply to administrative costs? 
 
A.  No.  The (increased) FMAP represents the matching rate at which a state's expenditures 
for medical assistance are matched by the Federal Government; it is not available for 
matching states administrative costs.  
 
Q4.  What is the operating definition of incurred expenditures for purposes of 
determining whether the increased FMAP is available? 
 
A.  The increased FMAP is available for expenditures incurred by states in the applicable 
quarters.  The TRRA did not change the definition of incurred expenditures under the 
Medicaid program.  In particular, under title XIX, medical assistance expenditures are 
considered to be incurred based on when the state makes a payment to a provider of 
services; it is not determined by the date of service.  The quarter in which the state makes 
a payment is the quarter in which the expenditure will be considered to be incurred, and 
the FMAP applicable to that incurred quarter is that which must be applied.  In this 
context, the increased FMAP will be available for expenditures incurred during one of the 
five quarters for which the increased FMAP is available. 
  Page 9 - Qs and As on Increased FMAP Provision 
Q5.  Is the increased FMAP available for all claims reported on quarterly expenditure 
reports (i.e. Form CMS-64) submitted on and after April 1, 2003, or is it available 
with respect to claims paid by the states on and after April 1, 2003?   
 
A.  The definition of expenditures for which the increased FMAP is available is not based on 
the quarterly expenditure report in which the expenditure is reported.  As indicated in the 
all state letter, dated June 13, 2003, the definition of expenditures for which the increased 
FMAP is available is contingent on when such expenditures are incurred by the state; and 
in this regard, "incurred" means the period in which the state makes such payment to a 
medical provider.    
 
Q6.  For which calendar quarters is the increased FMAP available? 
 
A.  Under section 401(a)(1)-(3) of TRRA, the increased FMAP is available for the last two 
quarters of Federal FY 2003 (April 1, 2003 through September 30, 2003), and the first 
three quarters of FY 2004 (October 1, 2003 through June 30, 2004).  
 
Q7.  How should drug rebate collections be treated with respect to availability of the 
increased FMAP for a state? 
 
A.  For purposes of determining the appropriate and applicable FMAP rate, drug rebate 
collections are considered incurred in the quarter in which the state actually receives the 
rebate from the drug manufacturer.  Therefore, the FMAP associated with that quarter 
would be the applicable FMAP rate.  For example, if a state received a drug rebate from 
the manufacturer in the second quarter of FY 2003, the regular FMAP applicable for  
FY 2003 would be used.  However, if the state received the drug rebate from the 
manufacturer in the 3rd quarter of FY 2003, the increased FMAP associated with the 
3rd quarter of FY 2003 should be used. 
 
With respect to reporting the drug rebate receipts, the state should report such collections 
as a current quarter collection or a prior period collection based on the quarter it received 
the rebate and the quarter of the expenditure report submission.  This would apply, for 
example, when a state received a drug rebate in the second quarter of FY 2003, and the 
state is reporting such receipt on the 3rd quarter expenditure report.  In this example, the 
FMAP associated with the 2nd quarter of FY 2003 is the applicable FMAP; that is, it is 
the regular FMAP, not the increased FMAP that should be associated with the claim. 
Since the state is reporting this 2nd quarter drug rebate receipt on the 3rd quarter 
expenditure report, the amount of the drug rebate should be reported as a prior period 
adjustment, indicating the 2nd quarter as the prior quarter.  This is because the expenditure 
was incurred by the state in the second quarter, and the state delayed reporting it until the 
3rd quarter submission; that is, any expenditures from quarters prior to the 3rd quarter 
should be reported as a prior period claim.  
  Page 10 - Qs and As on Increased FMAP Provision 
IV.  COMMONWEALTHS AND TERRITORIES 
 
Q1.  Is the increased FMAP available for expenditures incurred by the Commonwealths 
and Territories? 
 
A.  Yes.  Under section 401(a)(8)(B) of TRRA, the term state has the same meaning given 
for such term for purposes of title XIX of the Act, the Medicaid statute.  Under  
section 1101(a) of the Act, the commonwealths and territories are considered to be states 
for purposes of title XIX of the Act.  Therefore, the commonwealths and territories will 
receive the same FMAP increase as the 50 states and District of Columbia will receive 
under this new law.  Since the usual FMAP for the commonwealths and territories is  
50 percent, the increased FMAP for them would be 52.95 percent. 
 
Q2.  Under TRRA, the limit on Federal funding for the jurisdictions under section 1108 
of the Act has been increased; how is the amount of the increase determined? 
 
A.  Section 401(a)(4) of TRRA provides that the limitation for the territories section under 
1108 of the Act, shall be increased by 5.90 percent for the last two quarters of FY 2003 
and the first three quarters of FY 2004.  CMS is implementing this provision by prorating 
the territorial cap, as otherwise determined for the fiscal year under section 1108 of the 
Act, among the four quarters of the fiscal year.  For FY 2003, these third and fourth 
quarter prorated amounts will be increased by 5.9 percent.  In effect, operationally, for 
FY 2003 the dollar increase in the section cap will be equal to two-fourths of the 
section 1108 cap multiplied by 5.9 percent.  For FY 2004, the dollar increase in the 
section 1108 cap will be equal to three-fourths of the section 1108 cap multiplied by 5.9 
percent.  The revised section 1108 caps were provided to the commonwealths and 
territories as an attachment to the June 13, 2003, State Medicaid Directors letter. 
 
Q3.  How does the increase in the section 1108 cap apply for expenditures incurred by 
the Territories? 
 
A.  The entire FY 2003 increase in the section 1108 cap is available for expenditures incurred 
by the commonwealths and territories beginning with the third quarter of FY 2003.  The 
entire FY 2004 increase in the section 1108 cap is available for expenditures incurred by 
commonwealths and territories beginning with the first quarter of FY 2004.  The 
increased FMAPs applicable to FY 2003 and FY 2004 is available to the commonwealths 
and territories for the third and fourth quarter of FY 2003, and the first, second and third 
quarter of FY 2004, respectively. 
 
 
V.  REPORTING OF EXPENDITURES 
 
Q1.  How will states report expenditures for which the increased FMAP is available? 
 
A.  The first quarter for which the increased FMAP is available is the third quarter of  Page 11 - Qs and As on Increased FMAP Provision 
FY 2003; states are required to submit the quarterly expenditure report (Form CMS-64) 
for this quarter beginning July 30, 2003.  CMS is currently in the process of working with 
its contractors to revise the quarterly expenditure report to automatically reflect the 
availability of the increased FMAP for the expenditures to which it is applicable.    
 
Q2.  Is the increased FMAP available for prior period claims? 
 
A.  Yes.  The increased FMAP is available for expenditures incurred by states in the five 
calendar quarters to which it is applicable.  Current quarter expenditures would be 
claimed on the quarterly expenditure reports for the applicable quarters; however, states 
do typically make claims for expenditures incurred in prior quarters.  So long as the prior 
period claims are for one of the five quarters for which the increased FMAP is available, 
states may make claims at the increased FMAP for prior period claims, subject to any 
applicable requirements, such as the two-year timely filing provisions.  
 
Q3.  How should states report prior period claims for which the increased FMAP is 
available? 
 
A.  States typically make prior period claims on the prior period claim forms of the Form 
CMS-64.  However, in the past, states only needed to identify the fiscal year for which 
the prior period claims was associated.  We recognize that the increased FMAP is 
associated with specific quarter.  In that regard, CMS is revising the quarterly 
expenditure report to allow for states to appropriately identify the quarters for which the 
prior period claims would be associated with the increased FMAPs. 
 
 
VI.  NON-FEDERAL SHARE FUNDING REQUIREMENTS 
 
Q1.  What is the non-Federal share (NFS) funding requirement under the TRRA 
provisions? 
 
A.  Under section 401(a)(7) of TRRA, states may not require that the percentage of a states 
NFS of expenditures contributed by political subdivisions within a state to be greater than 
the percentage required under the states plan on April 1, 2003.  Under existing Medicaid 
provisions at section 1902(a)(2) of the Act, and 42 CFR 433.53 of the regulations, a state 
plan must require that the NFS of total Medicaid spending statewide be comprised of at 
least 40 percent of state (as distinguished from local) funds.  In order to implement 
section 401(a)(7) of TRRA, CMS will need to identify each state that has a requirement 
for political subdivisions within the state to contribute toward the non-Federal share of 
expenditures, and with respect to such states to determine the applicable percentage as of 
April 1, 2003.  On a subsequent basis, with respect to the five-quarter period for which 
the increased FMAP is available, the state must maintain this NFS funding percentage.  
We note that since this is a state plan requirement, if this condition is not met, the state 
would be considered to be out of compliance resulting in the applicable compliance 
process and any appropriate sanctions. 
  Page 12 - Qs and As on Increased FMAP Provision 
Q2.  Is a state in compliance with the requirements of section 401(a)(7) of TRRA if, with 
respect to an expenditure of the same total amount, it requires a political 
subdivision within the state to contribute the same dollar amount to meet the states 
NFS of the expenditure as was required prior to the application of the increased 
FMAP?  This would result in an effective increase in the percentage of the required 
political subdivisions contribution to the federally required NFS of the expenditure 
compared to the percentage that would have been contributed if the increased 
FMAP was not available? 
 
A.  Under section 401(a)(7) of TRRA, states cannot require political subdivisions within the 
state to pay a greater percentage of the NFS of expenditures than the political 
subdivisions would have been required to pay prior to application of the increased 
FMAP.  If a state requires a political subdivision within the state to contribute the same 
dollar amount, after the application of the increased FMAP the state would be effectively 
requiring political subdivisions within the state to pay a greater percentage of the NFS of 
expenditures.  Therefore, the state would not be in compliance with the requirements of 
section 401(a)(7) of TRRA.  The following example illustrates this: 
 
Example.   Prior to the FMAP increase under section 401(a)(7) of TRRA, a state's FMAP 
is 60 percent; after the FMAP increase, the state's FMAP is 62.95 percent.  With respect 
to a $10,000 total computable expenditure, prior to the FMAP increase the Federal share 
(FS) amount would be $6,000, and the NFS amount would be $4,000.  Furthermore, prior 
to the application of the FMAP increase under TRRA, the state required the local 
political subdivision to pay 100 percent of the federally required NFS of expenditures.  
Therefore, in this example, prior to the application of the FMAP increase, the local 
subdivision paid $4,000 (40 percent) of the $10,000 expenditure.  After the application of 
the FMAP increase, with respect to the $10,000 expenditure, the state intends to require 
the local subdivision to continue to contribute $4,000 of this expenditure. 
 
With the application of the 62.95 percent increased FMAP, the FS of the $10,000 total 
expenditure would be $6,295 and the federally required NFS of this expenditure would be 
$3,705.  However, after the application of the increased FMAP, the state requires the 
local subdivision to continue to contribute the same $4,000 amount as it previously 
required with respect to the total $10,000 expenditure.  The effect of this is that the 
percentage of the federally required NFS amount of the expenditure that the local 
political subdivision would be contributing would be effectively increased.  That is, prior 
to the application the percentage of the federally required NFS that the local political 
subdivision contributed is 100 percent, calculated as $4,000 (the contribution) divided by 
the required NFS of $4,000 (40 percent of $10,000).   After the FMAP increase, based on 
the $4,000 the state is requiring the local subdivision to contribute on the $10,000 
expenditure, the percentage local subdivision is contributing is 107.96 percent of the 
required NFS, calculated as $4,000 (the state continued required contribution) divided by 
$3,705 (37.05 percent of $10,000, representing the federally required NFS amount).  
Since the percentage of the NFS amount required under Federal Medicaid statute that the 
local subdivision is being required to contribute has increased from 100 percent  Page 13 - Qs and As on Increased FMAP Provision 
($4,000/$4,000) to 107.96 percent ($4,000/$3,705), the state would not be in compliance 
with section 401(a)(7) of TRRA. 
 
 
Q3.  Does the provision under section 401(a)(7) of TRRA apply with respect to the NFS 
of expenditures associated with the Medicaid expansion eligibility groups? 
 
A.  Yes.  The Medicaid expansion population, as referenced in section 1905(u) of the Act, is  
under title XIX, the Medicaid statute.  Therefore, expenditures related to this group are 
considered expenditures under the State Medicaid plan for purposes of the provision in 
section 401(a)(7) of TRRA. 
 
Q4.  What expenditures must be considered in determining whether a state is in 
compliance with the provisions of section 401(a)(7) of TRRA? 
 
A.  Section 401(a)(7) of TRRA refers to the non-Federal share expenditures under the state 
Medicaid plan required under section 1902(a)(2) of the Social Security Act and 
including any title XIX and Section 1115 waivers.  Section 1902(a)(2) of the Act, in turn 
refers to the non-Federal share of the expenditures under the plan with respect to which 
payment under section 1903 are authorized by this title.  Finally, section 1903 of the Act 
refers to all Medicaid expenditures that a state may incur in its program, including both 
medical assistance and administrative expenditures for which a state may claim Federal 
matching payments.  
 
Q5.  Under section 1902(a)(2) of the Act and Medicaid regulations at 42 CFR 433. 53(b), 
state (as distinguished from local) funds must be used to pay at least 40 percent of 
the NFS of total expenditures under the Medicaid plan; that is, the local 
subdivisions cannot contribute more than 60 percent of the NFS of expenditures.   If 
the state currently requires local political subdivisions to contribute less than the 60 
percent maximum amount permitted under the statute and regulations, can the 
state require the local subdivisions to increase their percentage contribution up to 
60 percent and still be in compliance with the NFS requirement under section 
401(a)(7) of TRRA? 
 
A.  No.  As required by section 401(a)(7) of TRRA, states cannot increase the percentage of 
the NFS that local subdivisions are required to pay to a percentage that is greater than that 
required under the plan on April 1, 2003.  Therefore, although increasing the NFS 
contribution for local subdivisions to 60 percent may be permissible under the NFS 
requirements under section 1902(a)(2) of the Act, if the local subdivisions percentage of 
NFS requirement is greater than the percentage required under the state plan on 
April 1, 2003, the state would not be in compliance with the TRRA requirements.  
  
  Page 14 - Qs and As on Increased FMAP Provision 
VII.  TREASURY DEPARTMENT PROVISIONS 
 
Q1.  Under section 401(b) of TRRA, $10 billion was allocated to states under a new 
title VI of the Social Security Act to assist in government services; can states use 
these Federal funds for purposes of providing the non-Federal share of Medicaid 
and/or SCHIP expenditures? 
 
A.  No.  Medicaid regulations at 42 CFR 433.51(c), and SCHIP regulations at 
42 CFR 457.628(a), indicate that unless the Federal funds (in this case, the states' 
allocations under section 401(b) of TRRA) are specifically authorized by Federal law to 
be used to match other Federal funds, that is, Federal matching funds under the Medicaid 
program and/or the SCHIP, they (the funds under section 401(b) of TRRA) cannot be 
used as the non-Federal share in the Medicaid program and/or the SCHIP.  The CMS 
position is that these TRRA funds are not specifically authorized to be used to match 
Medicaid and/or SCHIP funds.  
 
Q2.  The $10 billion fund under the new title VI of the Social Security Act is being 
administered by the Treasury Department; what has the Treasury Department 
released with respect to this provision?  
 
A.  On June 4, 2003, Treasury Secretary Snow released a letter to the Governors announcing 
the availability of funds under the new title VI of the Social Security Act - Temporary 
State Fiscal Relief.  The following Treasury Department websites describe this provision: 
 
Treasury Department, June 4, 2003, Press Release: 
http://www.treas.gov/press/releases/js453.htm 
 
Treasury Department, June 4, 2003, letter from Treasury Department Secretary Snow to 
Governors: 
http://www.treas.gov/press/releases/reports/stateletter.pdf 
 
Table indicating each state's allocation of the $10 billion under Title VI of the Social 
Security Act: 
http://www.treas.gov/press/releases/reports/paymenttable.pdf 
 
  Certification Form to be submitted by states to Treasury Department: 
http://www.treas.gov/press/releases/reports/certificationformmsword.doc