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 # 10-005 
CHIPRA # 16 
 
March 2, 2010 
 
RE:  Applicability of Federal Matching 
Rates in CHIP and Medicaid 
 
Dear State Health Official: 
 
This letter is one of a series that provides guidance on the implementation of the Childrens 
Health Insurance Program Reauthorization Act of 2009 (CHIPRA), Public Law 111-3.  The 
purpose of this letter is to provide guidance on sections 114 and 115 of CHIPRA, which are 
related to the Federal Medical Assistance Percentage (FMAP) rate that a State may claim for 
Childrens Health Insurance Program (CHIP) expenditures.  Section 114 specifies that the regular 
FMAP rate under title XIX will apply for expenditures for children in families with incomes in 
excess of 300 percent of the federal poverty level (FPL).  Section 115 gives States the option to 
claim expenditures for Medicaid expansion program populations under section 1905(u) of the 
Social Security Act (the Act), either at the enhanced FMAP rate using title XXI funds or at the 
regular FMAP rate using title XIX funds.  The effective date for sections 114 and 115 was April 
1, 2009.   
 
Section 114:  Regular FMAP Rate for Child Populations Above 300 Percent FPL 
CHIPRA section 114 changed the applicable federal matching rate for expenditures for child 
health assistance or health benefits coverage for a targeted low-income child whose effective 
family income would exceed 300 percent of the FPL if not for the application of a general 
exclusion of a block of income that is not determined by type of expense or type of income.  
Instead of using the enhanced FMAP rate that would otherwise apply for CHIP expenditures, the 
regular Medicaid FMAP rate as determined under section 1905(b) of the Act would apply.  
(Please note that, currently, the regular Medicaid matching rate is the increased FMAP as 
provided for in the American Recovery and Reinvestment Act (ARRA).) 
 
Section 114 provides an exception for States that had existing authority to cover children above 
300 percent of the FPL as of the date of enactment of CHIPRA (February 4, 2009).  Existing 
authority could consist of an approved CHIP or Medicaid State plan amendment (SPA), an 
approved CHIP or Medicaid section 1115 demonstration, or an existing State law requiring the 
State to submit such a SPA.  States qualifying for an exception may receive the enhanced FMAP 
rate to provide coverage to children with family incomes above 300 percent of the FPL.    Page 2  State Health Official 
 
(Please note that any SPA submitted in response to a State law enacted on or before February 4, 
2009 should include a copy of the corresponding legislation.)   
 
The changed federal matching rate would not apply to the extent that a State disregards income 
based on specific types of expenses or types of income.  For example, a State that sets eligibility 
at 300 percent of the FPL that takes into account expenses for child care, or that disregards 
student income, would not be affected, even if some children might have gross family income 
above 300 percent of the FPL.  When a State applies a disregard of a block of income, however, 
the State will need to determine the appropriate FMAP for claimed expenditures.  For example, a 
State with a net income eligibility level of 100 percent of the FPL that disregarded all income 
between 100 and 350 percent of the FPL would not receive the enhanced FMAP for the children 
whose family incomes would have been above 300 percent of the FPL absent the block of income 
disregard.  These children may still be covered in CHIP, but the State would only receive federal 
matching funds at the regular FMAP rate. 
 
The change in the applicable federal matching rate applies for both separate CHIP programs and 
for Medicaid expansion programs.  However, for Medicaid expansion expenditures for children 
with effective family income levels above 300 percent of the FPL, the State will receive Medicaid 
matching funds at the regular FMAP.  Section 2105(a) of the Act authorizes payments for 
Medicaid expansions only at the enhanced FMAP level, and since the enhanced FMAP level will 
not be available, these payments will not reduce the States CHIP allotment.  Payments for 
separate CHIP programs at the regular FMAP level, however, will reduce the States CHIP 
allotment.  
 
Section 115:  Match Rate Option for CHIP Expenditures  
Prior to the enactment of CHIPRA, States were required to claim the enhanced FMAP from their 
title XXI CHIP allotments for expenditures for uninsured children enrolled in the Medicaid 
program who met the definition of optional targeted low-income children (i.e., uninsured 
children who would not have been eligible under the Medicaid State plan as of March 31, 1997) 
to the extent that there was available CHIP allotment funding.  States could not choose to rely on 
Medicaid funds for these children unless all available title XXI funds had been exhausted.   
 
Section 115 of CHIPRA allows States the option either to claim the enhanced FMAP under title 
XXI or to claim the regular FMAP under title XIX for such children, even if title XXI funds have 
not been exhausted.  Only those claims submitted at the enhanced FMAP rate will be paid by the 
Secretary from the States CHIP allotment.  The provision helps States that may be concerned 
that their CHIP allotment may not be sufficient to pay for all CHIP-eligible children and 
pregnant women by giving States the option to preserve title XXI funding for populations only 
eligible under a separate CHIP program.  
 
Since the match rate option allows States to choose Medicaid funds, it is only available for 
children enrolled in Medicaid expansion programs.  As always, States have the option to modify 
their CHIP programs from a separate child health program to a Medicaid expansion program at 
any time.  States would need to submit both a CHIP SPA and a Medicaid SPA to indicate their 
desire to make a program change.  Page 3  State Health Official 
 
In order to provide States the maximum flexibility in utilizing the FMAP option under this 
provision, but remaining consistent with the current quarterly grant accounting system, CMS will 
accept changes in the Medicaid expansion program FMAP designation on a quarterly basis.  If a 
State wishes to change the FMAP rate for its Medicaid expansion program expenditures, States 
will need to notify CMS through the budget projections made on the Medicaid Budget and 
Expenditure System/CHIP Budget and Expenditure System at least 45 days prior to the start of a 
certifying quarter.  For example, a State wishing to claim regular FMAP for its Medicaid 
expansion program population beginning July 1, 2010, would need to notify CMS of this change 
by May 15, 2010.   (For the quarter beginning April 1, 2010, States should notify CMS of any 
change no later than March 15, 2010.) CMS requests that the notification be entered both on 
Form CMS-37.12 and Form CMS-21B Narrative.  This notification will ensure that CMS has 
adequate time for processing any necessary system changes so that States may submit claims for 
the Medicaid expansion program expenditures affected by the FMAP change.   
If you have questions regarding this guidance please send an e-mail to 
CMSOCHIPRAQuestions@cms.hhs.gov or contact Ms. Victoria Wachino, Director, Family and 
Childrens Health Programs Group, who may be reached at (410) 786-5647. 
 
            Sincerely, 
 
                 /s/ 
 
            Cindy Mann 
            Director 
 
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 4  State Health Official 
 
Christine Evans, M.P.H. 
Director, 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