[Federal Register Volume 69, Number 141 (Friday, July 23, 2004)]
[Notices]
[Pages 44013-44027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14580]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2187-N]


State Children's Health Insurance Program (SCHIP); Extended 
Availability of Unexpended SCHIP Funds From the Appropriation for 
Fiscal Years 1998 Through 2001; and Provision of Authority for 
Qualifying States To Use a Portion of SCHIP Funds for Medicaid 
Expenditures

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY:  This notice describes the extension of availability to the 
end of Federal fiscal year (FY) 2004 of the amounts of States' 
unexpended FY 1998 and FY 1999 allotment funds. Additionally, this 
notice sets forth the amounts of States' unexpended FY 2000 allotments 
that remained at the end of FY 2002 that will be available under a 
statutory formula for each of the 50 States, the District of Columbia, 
and the Commonwealths and Territories through the end of a subsequent 
period of availability ending September 30, 2004. This notice also sets 
forth the amounts of States' unexpended FY 2001 allotments that 
remained at the end of FY 2003 that will be available under a statutory 
formula for each of the 50 States, the District of Columbia, and the 
Commonwealths and Territories through the end of a subsequent period of 
availability ending September 30, 2005.
    Finally, this notice permits ``Qualifying States'' to elect to 
receive a portion of their available SCHIP allotments as increased 
Federal matching funding for certain expenditures in their Medicaid 
programs.

FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.

SUPPLEMENTARY INFORMATION:

I. Background

A. Extension of Availability and Redistribution of State Children's 
Health Insurance Program (SCHIP) Fiscal Year 1998 Through 2001 
Allotments

    Title XXI of the Social Security Act (the Act) sets forth the State 
Children's Health Insurance Program (SCHIP) to enable States, the 
District of Columbia, and specified Commonwealths and Territories to 
initiate and expand health insurance coverage to uninsured, low-income 
children. In this notice, unless otherwise indicated, the terms 
``State'' and ``States'' refer to any or all of the 50 States, the 
District of Columbia, and the Commonwealths and Territories. States may 
implement SCHIP through a separate child health program under title XXI 
of the Act, an expanded program under title XIX of the Act, or a 
combination of both. Under section 2104 of the Act, the SCHIP 
allotments for a Federal fiscal year (FY) are available to match 
expenditures under an approved State child health plan for an initial 
3-fiscal year ``period of availability,'' including the fiscal year for 
which the allotment was provided. After the initial period of 
availability, the amount of unspent allotments is subject to a 
subsequent period of availability. With the exception described below 
for the allotments made in FYs 1998 through 2001, allotments unspent in 
the initial 3-year period of availability would be redistributed from 
States that did not fully spend these allotments to States that fully 
spent their allotments for that fiscal year.
    The Medicare, Medicaid and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) enacted as part of Pub. L. 106-554 on 
December 21, 2000, amended title XXI of the Act, in part by 
establishing new requirements for a subsequent extended period of 
availability with respect to the amounts of States' FY 1998 and FY 1999 
allotments that were unspent during the initial 3-year period of 
availability. Under the BIPA amendments, the subsequent period of 
availability for States' unspent FY 1998 and 1999 allotments was 
extended to the end of FY 2002.
    Section 1 of Pub. L. 108-74, enacted on August 15, 2003, amended 
title XXI of the Act to establish new requirements for the subsequent 
period of availability associated with the unexpended amounts of 
States' FYs 1998, 1999, 2000, and 2001 allotments that were unspent 
during the initial 3-year period of availability relating to those 
fiscal years. Specifically, section 2104(g) of the Act extends the 
subsequent period of availability associated with the allotments and 
redistribution of allotments for FYs 1998 through 2000 through the end 
of fiscal year 2004, and through the end of fiscal year 2005 for the 
redistributed and extended FY 2001 allotments.
    The requirements of section 2104(g) of the Act prescribe a 
methodology and process which includes the retention of certain amounts 
of unspent FY 2000 and FY 2001 allotments that would remain available 
to the States that did not fully expend their FY 2000 or FY 2001

[[Page 44014]]

allotments (retained allotments), and the redistribution of unspent FY 
2000 or FY 2001 allotments that would not be retained but which would 
be redistributed to those other States that fully spent their FY 2000 
or FY 2001 allotments (redistributed allotments).

B. Authority for Qualifying States To Use Available SCHIP Allotments 
for Medicaid Expenditures

    Under section 2105(a)(1)(A) through (D) of the Act and before 
enactment of Pub. L. 108-74, only Federal payments for the following 
Medicaid and SCHIP expenditures were applied against States' available 
SCHIP allotments: (1) Medical assistance provided under title XIX 
(Medicaid) at the SCHIP enhanced Federal medical assistance percentage 
(FMAP) matching rate with respect to the States' Medicaid SCHIP 
expansion population; (2) medical assistance provided on behalf of a 
child during presumptive eligibility under section 1920A of the Act 
(these funds are matched at the regular Medicaid FMAP rate); (3) child 
health assistance to targeted low income children that meets minimum 
benefit requirements under SCHIP; and (4) certain expenditures in the 
SCHIP that are subject to the 10-Percent Limit on non-primary 
expenditures (including other child health assistance for targeted low-
income children, health services initiatives, outreach, and 
administrative costs).
    However, section 1(b) of Pub. L. 108-74, as amended by Pub. L. 108-
127 also adds a new section 2105(g) to the Act under which ``Qualifying 
States'' that meet prescribed criteria may elect to use up to 20 
percent of their available FYs 1998 through 2001 SCHIP allotments as 
additional Federal financial participation (FFP) in certain 
expenditures under their Medicaid programs.

II. Provisions of This Notice

A. Extension of Availability and Redistribution of SCHIP Fiscal Year 
1998 Through 2001 Allotments

1. Extension of Availability of FY 1998 Through 2001 SCHIP Allotments
    Section 2104 of the Act provides an allotment for each fiscal year 
for Federal matching payments for an initial 3-year period for the 
States. Section 2104(g) of the Act, as added by BIPA, provided for a 
methodology to redistribute or continue availability of all unexpended 
amounts for FYs 1998 and 1999 at the end of the initial 3-year period. 
Furthermore, under BIPA, the unexpended FY 1998 and 1999 reallotments 
were available to States until the end of FY 2002. However, section 
2104(g) of the Act, as amended by BIPA, provided for a methodology for 
the redistribution and retention of unexpended allotment amounts only 
for the FYs 1998 and 1999. Section 2104(g), as amended by BIPA, did not 
prescribe a methodology for the redistribution or retention of the 
amounts of the FY 2000 or FY 2001 allotments that were unexpended at 
the end of the initial 3-year period of availability. Furthermore, 
there was no provision for States that did not fully expend their FY 
2000 or FY 2001 allotment to retain any portion of their unexpended FY 
2000 or FY 2001 allotment amounts.
    Section 2104(g), as amended by Pub. L. 108-74, extended the 
subsequent period of availability for reallotted FY 1998 and FY 1999 
allotments through the end of fiscal year 2004. Furthermore, section 
2104(g) of the Act was amended to specify a methodology for the 
redistribution and retention of the amounts of unexpended FY 2000 and 
FY 2001 allotments. Section 2104 of the Act requires the Secretary to 
calculate allotments for each State with an approved State child health 
plan based on available appropriated funds for each fiscal year. All 
States had approved plans in order to have access to their final FY 
2000 and FY 2001 SCHIP allotments, which were published on May 24, 2000 
and January 22, 2001, respectively, in the Federal Register (65 FR 
33638) and in the Federal Register (66 FR 6630). The final rule setting 
forth the methodologies and procedures to determine the allotment of 
Federal funds for each fiscal year and the grant award and payment 
process was also published on May 24, 2000 in the Federal Register (65 
FR 33616).
    Sections 2104(e) and (f) of the Act require the Secretary to 
develop an appropriate procedure for the redistribution of States' 
unexpended SCHIP fiscal year allotments only for those States that have 
fully expended such allotments during the initial 3-year period of 
availability. With respect to these provisions, in March 2003, in order 
to provide States access to funding pending adoption of a final 
redistribution procedure, we redistributed a portion of the unexpended 
FY 2000 funds on an interim basis (subject to redistribution in 
accordance with the final redistribution procedure that would be 
adopted). The interim redistribution was limited to one-half of the 
unexpended FY 2000 allotments and was made only to those States 
(including the Commonwealths and Territories) that fully expended such 
allotments by the end of FY 2002.
    Pub. L. 108-74 amended section 2104(g) of the Act, in accordance 
with a specified formula, to provide for the retention of certain 
amounts of States' unexpended FY 2000 allotments and the redistribution 
of the remaining amounts of such unexpended FY 2000 allotments to 
States that fully expended their allotments in the initial 3-year 
period of availability. This notice sets forth the results of the 
statutory formula to the unexpended allotments for FY 2000 and FY 2001 
and describes the methodology for the redistribution and retention of 
unexpended SCHIP allotments.
    Section 2104(e) of the Act requires that the amount of a State's 
allotment for a fiscal year be available to the State for matching 
allowable State expenditures for a 3-year initial period of 
availability; the fiscal year for which the funds are allotted, and the 
two following fiscal years. For FY 2000, the 3-year initial period of 
availability was October 1, 1999 through September 30, 2002, and For FY 
2001, the 3-year initial period of availability was October 1, 2000 
through September 30, 2003. Section 2104(f) of the Act requires 
redistribution of the entire amount of unspent allotments after the 
initial period of availability has expired.
    Neither BIPA nor the recently enacted Pub. L. 108-74 repealed or 
deleted sections 2104(e) and (f) of the Act. Referencing sections 
2104(e) and (f) of the Act, BIPA added section 2104(g) of the Act which 
established a formula for redistributing and continuing the 
availability of unexpended allotments for FYs 1998 and 1999. Pub. L. 
108-74 further amended section 2104(g) of the Act to provide for the 
redistribution and retention of unexpended FY 2000 and FY 2001 
allotments under a prescribed methodology that differs from the 
methodology provided under the BIPA amendments for the FY 1998 and FY 
1999 unexpended allotments. The FY 2000 and FY 2001 allotment 
redistribution/retention formula provided for under section 2104(g) of 
the Act, as amended by Pub. L. 108-74, replaces the redistribution that 
otherwise would have been required under section 2104(f) of the Act. 
This FY 2000 and FY 2001 redistribution and retained allotment is 
described in the next section of this notice.
    Section 2104(g) of the Act, as amended by Pub. L. 108-74, requires 
the Secretary to redistribute and continue availability of States' 
unexpended FYs 1998, 1999, and 2000 allotments until the end of FY 
2004. Before enactment of Pub. L. 108-74, section 2104(g) of the Act 
provided that the redistributed and retained allotment amounts for FYs 
1998 and 1999 was

[[Page 44015]]

available only until the end of FY 2002. Similarly, under section 
2104(e) of the Act, the redistributed FY 2000 allotments would only be 
available until the end of FY 2003. Finally, under section 2104(g) of 
the Act, as amended by Pub. L. 108-74, the redistributed and retained 
allotment amounts for FY 2001 will continue to be available to States 
until the end of FY 2005.
2. Ordering of Expenditures
    The availability of retained allotment funds is determined in 
accordance with requirements related to the ordering of expenditures. 
Specifically, a State's expenditures are applied against the State's 
available fiscal year SCHIP allotment amounts in the following order:
    (1) Title XIX SCHIP-related expenditures for which payment is made 
at the enhanced Federal medical assistance percentage (FMAP) (section 
2105(a)(1)(A) of the Act);
    (2) Title XIX expenditures for medical assistance provided during a 
presumptive eligibility period under section 1920A of the Act (section 
2105(a)(1)(B) of the Act);
    (3) Child health assistance for targeted low-income children in the 
form of providing health benefits coverage that meets the requirements 
of section 2103 (section 2105(a)(1)(C) of the Act);
    (4) Other child health assistance for targeted low-income children 
and health services initiatives under the plan for improving the health 
of children (including targeted low-income children and other low-
income children) (sections 2105(a)(1)(D)(i)and (ii) of the Act);
    (5) Outreach expenditures (section 2105(a)(1)(D)(iii) of the Act); 
and
    (6) Administration expenditures (section 2105(a)(1)(D)(iv) of the 
Act).
    In general, States' expenditures will be applied against the FY 
2000 and FY 2001 redistribution amounts in accordance with existing 
SCHIP regulations on allotments (42 CFR part 457). This notice permits 
States the option to decide the order of application of expenditures 
against the redistribution amounts and other available fiscal year 
allotment amounts.
    Ordering Election for FY 2000 Redistributed Amounts. A 
redistribution State, that is, a State that has fully expended its 
allotment, may have a maximum of four possible choices for the order of 
the application of FY 2000 redistribution funds in FY 2003, depending 
on what other fiscal year allotments are available to the State in FY 
2003: (1) Before FY 2001 allotments; (2) after FY 2001 and before FY 
2002 allotments; (3) after FY 2002 and before FY 2003 allotments; and 
(4) after FY 2003 allotments. Furthermore, if a FY 1998 and/or FY 1999 
redistribution State also has FY 1998 and/or FY 1999 redistribution 
funds available in FY 2003, it can choose whether the FY 2000 
redistribution funds will be used before or after the FY 1998 and/or FY 
1999 redistribution funds.
    In addition, with the enactment of Pub. L. 108-74, the FY 1998 and 
FY 1999 redistributed amounts are extended to the end of FY 2004; 
therefore, the States have the option to choose their ordering election 
for the FY 1998 and FY 1999 redistribution allotment amounts.
    We believe that States should be afforded the flexibility to decide 
whether redistributed funds would be used before or after other 
available allotment funds to allow them to optimize the use of the 
funds. Therefore, during the interim and final redistribution, we 
offered States that will receive FY 2000 redistributed amounts the 
option of choosing the order of when the funds would be expended during 
FY 2003 among the other available allotments during FY 2003.
    Both the redistributed amounts and the retained amounts for FY 2000 
will be available for allowable SCHIP expenditures reported for the 
period of October 1, 2002 through September 30, 2004.
    Ordering Election for FY 2001 Redistributed Amounts. A 
redistribution State, that is, a State that has fully expended its 
allotment, may have a maximum of four possible choices for the order of 
the application of FY 2001 redistribution funds in FY 2004, depending 
on what other fiscal year allotments are available to the State in FY 
2004: (1) Before FY 2002 allotments; (2) after FY 2002 and before FY 
2003 allotments; (3) after FY 2003 and before FY 2004 allotments; and 
(4) after FY 2004 allotments. Furthermore, if a FY 1998, FY 1999, and/
or FY 2000 redistribution State also has FY 1998, FY 1999, and/or FY 
2000 redistribution funds available in FY 2004, it can choose whether 
the FY 2001 redistribution funds will be used before or after the FY 
1998, FY 1999, and/or FY 2000 redistribution funds, based on their 
ordering election for those funds.
    Both the redistributed amounts and the retained amounts for FY 2001 
will be available for allowable SCHIP expenditures reported for the 
period of October 1, 2003 through September 30, 2005.
    All of the redistribution States have responded to us with their 
decision regarding this option for their ordering elections for the FY 
2001 redistributed allotments. Under the final redistribution 
methodology, once a State chooses the order of the FY 1998, FY 1999, FY 
2000, and FY 2001 redistribution amounts, it cannot change that order 
at a later date. We have made provisions to include the States' FY 2000 
and FY 2001 redistributed amounts on Form CMS-21C (Allocation of Title 
XIX and Title XXI Expenditures to the SCHIP Fiscal Year Allotment). 
Form CMS-21C is used for tracking States' expenditures against their 
allotments, to include the States' FY 2000 and FY 2001 redistributed 
amounts. The redistributed allotment amounts will be automatically 
entered on this form, and the Medicaid and SCHIP expenditure system 
will automatically apply expenditures reported on the quarterly 
expenditure reports for the period of October 1, 2002 through September 
30, 2004 to the FY 2000 redistributed amounts available through 
September 30, 2004. Similarly, the system will automatically apply 
expenditures reported on the quarterly expenditure reports for the 
period of October 1, 2003 through September 30, 2005 to the FY 2001 
redistributed amounts available through September 30, 2005.
3. Determination of Redistribution Amounts or Continued Availability of 
Unexpended FY 2000 and FY 2001 Allotments
    In Table 1 and Table 2 of this notice, we set forth the amount of 
States' unexpended FY 2000/2001 allotments as of November 30, 2002, or 
November 30, 2003, respectively, as specified in section 2104(g) of the 
Act. We also set forth the retained amounts that, under statutory 
formula, are subject to continued availability by States that did not 
fully expend their FY 2000/2001 allotments, and the amounts that are 
redistributed for availability to States that fully expended their FY 
2000/2001 allotments. The formula for determining the redistributed and 
retained amounts of the FY 2000/2001 SCHIP allotments are described 
below.
    Establishing the Amount of Unexpended FY 2000/2001 Allotments. 
Under section 2104(g)(3) of the Act, the amount of States' unexpended 
FY 2000 allotments at the end of the initial 3-year period of 
availability is established based on the SCHIP-related expenditures, as 
reported and certified by States to us on the quarterly expenditure 
reports (Form CMS-64 or CMS-21) through November 30, 2002 (for the FY 
2000 allotments), or through November 30, 2003 (for the FY 2001 
allotments), as approved by the

[[Page 44016]]

Secretary. These expenditures are applied and tracked against the 
States' FY 2000 allotments (as published on May 24, 2000 in the Federal 
Register (65 FR 33638)), and the States' FY 2001 allotments (as 
published on January 22, 2001 in the Federal Register (66 FR 6630)), 
and other available allotments, on Form CMS-21C, Allocation of the 
Title XIX and Title XXI Expenditures to SCHIP Fiscal Year Allotment.
    By November 30, 2002, all States reported and certified their FY 
2002 fourth quarter expenditure reports (representing the last quarter 
of the 3-year period of availability for FY 2000). Similarly, by 
November 30, 2003, all States reported and certified their FY 2003 
fourth quarter expenditure reports (representing the last quarter of 
the 3-year period of availability for FY 2001). Expenditures reflected 
in Table 1 and Table 2 below were taken from our MBES/CBES 
``masterfile,'' which represents the State's official certified SCHIP 
and Medicaid expenditure reporting system records related to FY 2000 
and FY 2001 allotments, respectively.
    Based on States' expenditure reports submitted and certified 
through November 30, 2002, the total amounts of States' FY 2000 SCHIP 
allotments that were unexpended at the end of the 3-year period ending 
September 30, 2002, is $2,206,440,396. Based on States' expenditure 
reports submitted and certified through November 30, 2003, the total 
amounts of States' FY 2001 SCHIP allotments that were unexpended at the 
end of the 3-year period ending September 30, 2003, is $1,749,021,146.
    Application of the Maintenance of Effort Provision. The 
$2,206,440,396 in unexpended FY 2000 allotments includes the amounts of 
reduction to the States' FY 2000 allotments based on the application of 
the ``maintenance of effort'' (MOE) provisions specified in the SCHIP 
statute at section 2105(d)(2) of the Act. Under section 2105(d)(2) of 
the Act, the amount of a State allotment in a fiscal year, beginning 
with fiscal year 1999, is reduced if the State does not meet specified 
spending levels on children's health insurance. The application of this 
provision resulted in the reduction of one State's FY 2000 allotment by 
$7,893,711. Because this amount was originally allotted to the State 
but was not expended by the State, it is subject to redistribution. 
This amount is not subject to continued availability because it is not 
available to the State to which it was originally allotted. There were 
no MOE reductions necessary with respect to the FY 2001 allotments.
    Continued Availability of Unexpended FY 2000/2001 Allotments. 
Section 2104(g)(2)(A)(iii) of the Act specifies the formula for 
determining the amounts of the FY 2000 allotments that were unexpended 
at the end of FY 2002 and that will remain available for each retained 
allotment State. Specifically, the FY 2000 retained allotment amount is 
calculated for each affected State by multiplying the State's 
unexpended FY 2000 allotment amount remaining at the end of the 3-year 
period of availability (that is, at the end of FY 2002) by 50 percent; 
the result is the FY 2000 retained allotment amount for that State.
    Similarly, section 2104(g)(2)(A)(iv) of the Act specifies the same 
formula for determining the amounts of the FY 2001 allotments that were 
unexpended at the end of FY 2003 and that will remain available for 
each retained allotment State. Specifically, the FY 2001 retained 
allotment amount is calculated for each affected State by multiplying 
the State's unexpended FY 2001 allotment amount remaining at the end of 
the 3-year period of availability (that is, at the end of FY 2003) by 
50 percent; the result is the FY 2001 retained allotment amount for 
that State.
    Redistribution for the Commonwealths and Territories. Section 
2104(g)(1)(A)(ii) of the Act specifies the FY 2000 and FY 2001 
redistribution for the Commonwealths and Territories that have fully 
expended their FY 2000 and/or FY 2001 allotments. First, under this 
provision, the total Commonwealths and Territories redistribution 
amount is calculated by multiplying the total amount of the unexpended 
FY 2000 or FY 2001 allotments available for redistribution and 
continued availability by 1.05 percent. For the FY 2000 redistribution 
calculation, this amount is $23,167,624 (1.05 percent of 
$2,206,440,396). For the FY 2001 redistribution calculation, this 
amount is $18,364,722 (1.05 percent of $1,749,021,146). Second, only 
those Commonwealths and Territories that have fully expended their FY 
2000 and/or FY 2001 allotments will receive an allocation of this 
amount, equal to a specified percentage of the 1.05 percent amount. 
This percentage is determined by dividing the respective SCHIP fiscal 
year allotment (FY 2000 or FY 2001) for each Commonwealth or Territory 
that has fully expended its FY 2000 and/or FY 2001 allotment by the 
total of all the FY 2000 (and/or FY 2001) allotments for those 
Commonwealths and Territories that fully expended their FY 2000 and/or 
FY 2001 allotments.
    Redistribution for the States and the District of Columbia. As 
amended by Pub. L. 108-74, section 2104(g)(1)(A)(i)(III) of the Act 
specifies the formula for calculating the FY 2000 redistribution 
amounts for each of those States and the District of Columbia that have 
fully expended their FY 2000 allotments. Similarly, section 
2104(g)(1)(A)(i)(IV) of the Act specifies the formula for calculating 
the FY 2001 redistribution amounts for each of those States and the 
District of Columbia that have fully expended their FY 2001 allotments. 
First, the total amount available for redistribution is determined by 
subtracting the total of the redistribution amounts for the 
Commonwealths and Territories and the total amount needed for retention 
by the States, Commonwealths, and Territories from the total available 
for redistribution. Second, the allocation of this total amount 
available for redistribution is determined by multiplying this amount 
by a percentage specific to each State. The percentage is determined 
for each redistribution State by dividing the difference between the 
State's total reported applicable expenditures for the respective 3-
year period of availability, and the State's fiscal year allotment 
related to that period of availability, by the total of these 
differences for all States.
4. Table of SCHIP FY 2000 Redistribution or Extended Availability of 
Unexpended FY 2000 Allotments
    The formula used to determine the amount of the unexpended FY 2000 
SCHIP allotments for redistribution or continued availability is 
described in detail below. The following is a description of Table 1, 
which presents each State's FY 2000 SCHIP allotment redistribution or 
retained amount.
    A total of $4,249,200,000 was allotted nationally for FY 2000, 
representing $4,204,312,500 in allotments to the 50 States and the 
District of Columbia, and $44,887,500 in allotments to the 
Commonwealths and Territories. Based on the quarterly expenditure 
reports, submitted and certified by November 30, 2002, 14 States fully 
expended their FY 2000 allotments, 37 States and the District of 
Columbia did not fully expend their FY 2000 allotments, and all 5 of 
the Commonwealths and Territories fully expended their FY 2000 
allotments. For the States and the District of Columbia that did not 
fully expend their FY 2000 allotments, their total FY 2000 allotments 
were $3,362,230,713, and the total expenditures applied against their 
FY 2000 allotments were $1,163,684,028. Therefore, the total amount of

[[Page 44017]]

unexpended FY 2000 allotments at the end of FY 2002 equaled 
$2,198,546,685 ($3,362,230,713 minus $1,163,684,028). In addition, 
$7,893,711, related to the MOE provision described above, also remained 
unexpended at the end of FY 2002. Therefore, the total amount of the FY 
2000 allotments unexpended at the end of FY 2002 equaled $2,206,440,396 
($2,198,546,685 plus $7,893,711).
    In accordance with the redistribution calculation for FY 2000 
described above, $1,099,273,343 (50 percent of $2,198,546,685) is 
retained by the 37 States that did not fully expend their FY 2000 
allotments, $23,167,624 is redistributed to the five Commonwealths and 
Territories, and $1,083,999,429 is redistributed to the 14 
redistribution States. Both the $1,107,167,054 redistributed allotment 
amounts and the $1,099,273,343 retained allotment amounts will remain 
available through the end of FY 2004.

Key to Table 1--Calculation of The SCHIP FY 2000 Redistribution of the 
Unexpended FY 2000 Allotments

Column/Description

Column A = STATE. Name of State, District of Columbia, the 
Commonwealth or Territory.
Column B = FY 2000 ALLOTMENT. This column contains the FY 2000 SCHIP 
allotments for all States, which were published on May 24, 2000 in 
the Federal Register (65 FR 33638).
Column C = EXPENDITURES APPLIED AGAINST FY 2000 ALLOTMENT. This 
column contains the cumulative expenditures applied against the FY 
2000 allotments, as reported and certified by all States through 
November 30, 2002.
Column D = UNEXPENDED FY 2000 ALLOTMENTS OR ``REDISTRIBUTION.'' This 
column contains the amounts of unexpended FY 2000 SCHIP allotments 
for States that did not fully expend the allotments during the 3-
year period of availability for FY 2000 (FYs 2000 through 2002), and 
is equal to the difference between the amounts in Column B and 
Column C. For States that did fully expend their FY 2000 allotments 
during the period of availability, the entry in this column is 
``REDISTRIBUTION.'' The amounts in each of the State lines in this 
column do not include the MOE provision amount of $7,893,711; the 
MOE amount is added to the total of the amounts of the States' 
unexpended FY 2000 allotments in this column at the bottom of Column 
D. The total amount of $2,206,440,396 ($2,198,546,685, the total 
unexpended FY 2000 allotments, plus $7,893,711, the MOE provision 
amounts) represents the total amount available for redistribution 
and continued availability for FY 2000.
Column E = FOR REDISTRIBUTION STATES ONLY FY 2000 through 2002 
EXPENDITURES. For those States that have fully expended their FY 
2000 allotments, this column contains the total amounts of the 
States' reported SCHIP related expenditures for each of the years FY 
2000 through FY 2002, representing the FY 2000 3-year period of 
availability. For those States, Commonwealths, and Territories that 
did not fully expend their FY 2000 allotments during the period of 
availability, the entry in Column E is ``NA.''
Column F = REDISTRIBUTION STATES ONLY FYs 2000 Through 2002 
EXPENDITURES MINUS FY 2000 ALLOTMENT. This column contains the 
amounts of States' reported SCHIP-related expenditures for each of 
the years FY 2000 through FY 2002 (Column E), minus the FY 2000 
allotment (Column B).
Column G = FOR REDISTRIBUTION STATES PERCENT OF TOTAL 
REDISTRIBUTION. This column contains each State's redistribution 
percentage of the total amount available for redistribution, 
calculated as the entry in Column F divided by the total (for States 
only) in Column F.
Column H = FY 2000 REDISTRIBUTED ALLOTMENT AMOUNTS. This column 
contains the amounts of States' unexpended FY 2000 SCHIP allotments 
that are being redistributed to those States that have fully 
expended their FY 2000 allotments. For the States that have fully 
expended their FY 2000 SCHIP allotments, the amount in Column H is 
equal to the percentage in Column G multiplied by the total amount 
available for redistribution ($1,083,999,429). For the 14 States 
that have fully expended their FY 2000 allotments, the FY 2000 
redistribution amounts total $1,083,999,429. For the Commonwealths 
and Territories that have fully expended their FY 2000 allotments, 
the amounts in Column H represents their respective proportionate 
shares (based on their FY 2000 allotments) of $23,167,624 
(representing 1.05 percent of the total amount for redistribution 
and continued availability of $2,206,440,396). For those States, 
Commonwealths, and Territories that did not fully expend their FY 
2000 allotments during the period of availability, the entry in 
Column H is ``NA.''
Column I = FY 2000 RETAINED ALLOTMENT AMOUNTS. For the States that 
did not fully expend their FY 2000 allotments, this column contains 
the amounts of the States' FY 2000 unexpended allotments in Column D 
multiplied by 50 percent, the result is the amount of these States' 
unexpended FY 2000 allotments that the States will retain. As 
indicated at the bottom of Column I, the total FY 2000 retained 
allotment amounts are $1,099,273,343.
Column J = UNEXPENDED FY 2000 ALLOTMENT AMOUNTS USED IN 
REDISTRIBUTION. For the States that did not fully expend their FY 
2000 allotments, this column reflects the amounts of such States' FY 
2000 unexpended allotments (not including the MOE reduction amount) 
that were used in the redistribution in Column H; these amounts are 
no longer available to these States. The amount in Column J is equal 
to the difference between Column D, the unexpended FY 2000 
Allotments, and Column I, the FY 2000 Retained Allotment Amounts. 
For States that did fully expend their FY 2000 allotments, the entry 
in Column J is ``NA.''


[[Page 44018]]



                                                        Table 1.--Calculation of the SCHIP FY 2000 Redistribution and Continued Availability of the Unexpended FY 2000 Allotments
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                         Unexpended FY
                                                                Expenditures     Unexpended FY 2000  For redistribution   Redist States only  FY     For redist states      FY 2000 redistributed    FY 2000 retained    2000 allotment
                 State                    FY 2000 Allotment    applied against      allotments or      states only  FY   2000-2002  expenditures      percent of total     allotment amounts  (col  allotment amounts   amounts used in
                                                              FY 2000 allotment  ``redistribution''       2000-2002           minus  FY 2000      redistribution  (col F/    G x amount available   (col D x retained    redistribution
                                                                                                        expenditures       allotment  (col E-B)        sum of col F)         for redistribution)            %)             (col D-I)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A                                                         B                   C                   D                   E                        F                        G                        H                  I                  J
----------------------------------------
Alabama................................         $77,012,259         $28,818,937         $48,193,322                  NA                       NA                       NA                       NA        $24,096,661        $24,096,661
Alaska.................................          $7,730,025          $7,730,025      REDISTRIBUTION         $62,676,041              $54,946,016                  2.5327%              $27,454,002                 NA                 NA
Arizona................................        $130,213,077         $75,293,441         $54,919,636                  NA                       NA                       NA                       NA        $27,459,818        $27,459,818
Arkansas...............................         $53,754,360                  $0         $53,754,360                  NA                       NA                       NA                       NA        $26,877,180        $26,877,180
California.............................        $765,547,705         $23,061,375        $742,486,330                  NA                       NA                       NA                       NA       $371,243,165       $371,243,165
Colorado...............................         $46,890,416         $17,691,235         $29,199,181                  NA                       NA                       NA                       NA        $14,599,590        $14,599,591
Connecticut............................         $39,225,273          $4,426,705         $34,798,568                  NA                       NA                       NA                       NA        $17,399,284        $17,399,284
Delaware...............................          $9,036,260                  $0          $9,036,260                  NA                       NA                       NA                       NA         $4,518,130         $4,518,130
District of Columbia...................         $10,817,074          $1,068,733          $9,748,341                  NA                       NA                       NA                       NA         $4,874,171         $4,874,171
Florida................................        $242,044,718        $215,487,253         $26,557,465                  NA                       NA                       NA                       NA        $13,278,732        $13,278,733
Georgia................................        $132,381,325         $67,636,544         $64,744,781                  NA                       NA                       NA                       NA        $32,372,390        $32,372,391
Hawaii.................................         $10,036,935                  $0         $10,036,935                  NA                       NA                       NA                       NA         $5,018,468         $5,018,468
Idaho..................................         $17,817,572         $12,328,159          $5,489,413                  NA                       NA                       NA                       NA         $2,744,707         $2,744,707
Illinois...............................        $137,481,231                  $0        $137,481,231                  NA                       NA                       NA                       NA        $68,740,615        $68,740,616
Indiana................................         $63,161,480         $50,187,036         $12,974,444                  NA                       NA                       NA                       NA         $6,487,222         $6,487,222
Iowa...................................         $32,382,884         $23,937,736          $8,445,148                  NA                       NA                       NA                       NA         $4,222,574         $4,222,574
Kansas.................................         $30,320,974         $30,320,974      REDISTRIBUTION         $73,313,596              $42,992,622                  1.9817%              $21,481,440                 NA                 NA
Kentucky...............................         $56,025,995         $56,025,995      REDISTRIBUTION        $200,089,782             $144,063,787                  6.6404%              $71,982,061                 NA                 NA
Louisiana..............................         $91,130,730         $19,652,547         $71,478,183                  NA                       NA                       NA                       NA        $35,739,091        $35,739,092
Maine..................................         $13,978,005         $13,978,005      REDISTRIBUTION         $43,339,164              $29,361,159                  1.3534%              $14,670,423                 NA                 NA
Maryland...............................         $56,869,698         $56,869,698      REDISTRIBUTION        $304,236,730             $247,367,032                 11.4020%             $123,597,951                 NA                 NA
Massachusetts..........................         $48,063,710         $48,063,710      REDISTRIBUTION        $154,330,787             $106,267,077                  4.8982%              $53,096,780                 NA                 NA
Michigan...............................        $102,762,059          $6,288,727         $96,473,332                  NA                       NA                       NA                       NA        $48,236,666        $48,236,666
Minnesota..............................         $31,861,256         $31,861,256      REDISTRIBUTION         $65,415,500              $33,554,244                  1.5466%              $16,765,516                 NA                 NA
Mississippi............................         $58,036,226         $58,036,226      REDISTRIBUTION        $139,819,869              $81,783,643                  3.7697%              $40,863,532                 NA                 NA
Missouri...............................         $57,979,004          $1,278,214         $56,700,790                  NA                       NA                       NA                       NA        $28,350,395        $28,350,395
Montana................................         $13,173,122         $11,149,994          $2,023,128                  NA                       NA                       NA                       NA         $1,011,564         $1,011,564
Nebraska...............................         $16,576,269          $8,218,671          $8,357,598                  NA                       NA                       NA                       NA         $4,178,799         $4,178,799
Nevada.................................         $30,526,393          $9,119,551         $21,406,842                  NA                       NA                       NA                       NA        $10,703,421        $10,703,421
New Hampshire..........................         $10,263,860                  $0         $10,263,860                  NA                       NA                       NA                       NA         $5,131,930         $5,131,930
New Jersey.............................         $96,858,666         $96,858,666      REDISTRIBUTION        $428,241,575             $331,382,909                 15.2746%             $165,576,828                 NA                 NA
New Mexico.............................         $56,407,772                  $0         $56,407,772                  NA                       NA                       NA                       NA        $28,203,886        $28,203,886
New York...............................        $286,821,535        $286,821,535      REDISTRIBUTION      $1,116,326,169             $829,504,634                 38.2348%             $414,465,389                 NA                 NA
North Carolina.........................         $89,211,202         $77,768,983         $11,442,219                  NA                       NA                       NA                       NA         $5,721,110         $5,721,110
North Dakota...........................          $5,655,883          $1,900,044          $3,755,839                  NA                       NA                       NA                       NA         $1,877,920         $1,877,920
Ohio...................................        $129,857,897        $117,814,672         $12,043,225                  NA                       NA                       NA                       NA         $6,021,613         $6,021,613
Oklahoma...............................         $76,764,895                  $0         $76,764,895                  NA                       NA                       NA                       NA        $38,382,447        $38,382,448
Oregon.................................         $43,895,837          $1,026,305         $42,869,532                  NA                       NA                       NA                       NA        $21,434,766        $21,434,766
Pennsylvania*..........................        $121,062,524         $90,688,050         $30,374,474                  NA                       NA                       NA                       NA        $15,187,237        $15,187,237
Rhode Island...........................          $9,570,566          $9,570,566      REDISTRIBUTION         $63,200,408              $53,629,842                  2.4720%              $26,796,370                 NA                 NA
South Carolina.........................         $71,314,037         $71,314,037      REDISTRIBUTION        $136,657,369              $65,343,332                  3.0119%              $32,649,064                 NA                 NA
South Dakota...........................          $7,951,348          $6,233,781          $1,717,567                  NA                       NA                       NA                       NA           $858,784           $858,784
Tennessee..............................         $74,226,011                  $0         $74,226,011                  NA                       NA                       NA                       NA        $37,113,005        $37,113,006
Texas..................................        $502,812,459        $255,483,677        $247,328,782                  NA                       NA                       NA                       NA       $123,664,391       $123,664,391
Utah...................................         $27,199,406         $24,258,592          $2,940,814                  NA                       NA                       NA                       NA         $1,470,407         $1,470,407
Vermont................................          $3,966,889          $1,630,776          $2,336,113                  NA                       NA                       NA                       NA         $1,168,057         $1,168,057
Virginia...............................         $73,580,365         $11,234,290         $62,346,075                  NA                       NA                       NA                       NA        $31,173,037        $31,173,038
Washington.............................         $52,355,470                  $0         $52,355,470                  NA                       NA                       NA                       NA        $26,177,735        $26,177,735
West Virginia..........................         $21,145,730         $21,145,730      REDISTRIBUTION         $58,780,823              $37,635,093                  1.7347%              $18,804,528                 NA                 NA
Wisconsin..............................         $45,591,653         $45,591,653      REDISTRIBUTION        $157,259,996             $111,668,343                  5.1472%              $55,795,545                 NA                 NA
----------------------------------------
Wyoming................................          $7,068,749                  $0          $7,068,749                  NA                       NA                       NA                       NA         $3,534,375         $3,534,375
    Total States Only..................      $4,196,418,789      $1,997,872,104      $2,198,546,685      $3,003,687,809           $2,169,499,733                100.0000%           $1,083,999,429     $1,099,273,343     $1,099,273,343
----------------------------------------
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 44019]]


                                                        Table 1.--Calculation of the SCHIP FY 2000 Redistribution and Continued Availability of the Unexpended FY 2000 Allotments
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                         Unexpended FY
                                                                Expenditures     Unexpended FY 2000  For redistribution   Redist States only  FY     For redist states      FY 2000 redistributed    FY 2000 retained    2000 allotment
                 State                    FY 2000 Allotment    applied against      allotments or      states only  FY   2000-2002  expenditures      percent of total     allotment amounts  (col  allotment amounts   amounts used in
                                                              FY 2000 allotment  ``redistribution''       2000-2002           minus  FY 2000      redistribution  (col F/    G x amount available   (col D x retained    redistribution
                                                                                                        expenditures       allotment  (col E-B)        sum of col F)         for redistribution)            %)             (col D-I)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Commonwealths and Territories:
    Puerto Rico........................         $41,116,950         $41,116,950      REDISTRIBUTION                  NA                       NA                       NA              $21,221,544                 NA                 NA
    Guam...............................          $1,571,063          $1,571,063      REDISTRIBUTION                  NA                       NA                       NA                 $810,867                 NA                 NA
    Virgin Islands.....................          $1,167,075          $1,167,075      REDISTRIBUTION                  NA                       NA                       NA                 $602,358                 NA                 NA
    American Samoa.....................            $538,650            $538,650      REDISTRIBUTION                  NA                       NA                       NA                 $278,011                 NA                 NA
    N. Mariana Islands.................            $493,762            $493,762      REDISTRIBUTION                  NA                       NA                       NA                 $254,844                 NA                 NA
                                        ---------------------
        Total..........................         $44,887,500         $44,887,500                  $0                  NA                       NA  .......................              $23,167,624                 $0                 $0
----------------------------------------
                                                                                                                                                                             (Totals to ``1.05%''   .................  .................
                                                                                                                                                                                   Amount)
----------------------------------------
National Total.........................      $4,241,306,289      $2,042,759,604      $2,198,546,685                                                                                 $1,107,167,053     $1,099,273,343     $1,099,273,343
*FY 2000 MOE Amount....................          $7,893,711  ..................          $7,893,711                                                                             Total FY 2000         Total FY 2000
Total With MOE Amount..................      $4,249,200,000      $2,042,759,604      $2,206,440,396                                                                         Redistributed Amounts    Retained Amounts
                                        ---------------------
 
                                         Total Unexpended FY 2000 Allotments (not including MOE):
                                         $2,198,546,685
 
                                         FY 2000 MOE Amount: $7,893,711
 
                                         Total Unexpended FY 2000 Allotments (including MOE): \1\
                                         $2,206,440,396
 
                                         Total Needed for Retained Allotments: \2\ $1,099,273,343    Retained allotment
 
                                         Total Needed for Redistribution for Territories: \3\            percentage:
                                         $23,167,624
 
                                          Total: $1,122,440,967                                              50%
 
                                         Total Available for Redistribution to States: \4\
                                         $1,083,999,429
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes:
\1\ The total unexpended FY 2000 allotments are $2,206,440,396, calculated as $2,198,546,685 (the total unexpended FY 2000 allotments, not including the maintenance of effort (MOE) amount) plus $7,893,711 (the MOE amount).
\2\ $1,099,273,343 is the total needed for retained allotments, calculated as $2,198,546,685 (the total unexpended FY 2000 allotments, not including $7,893,711 (the MOE amount)), multiplied by 50 percent.
\3\ $23,167,624 is the total amount needed for redistribution to the commonwealths and territories, calculated as $2,206,440,396 (the total unexpended FY 2000 allotments, including the MOE amount) multiplied by 1.05 percent.
\4\ $1,083,999,429 is the total redistribution to the states, calculated as $2,206,440,396 (total unexpended FY 2000 allotments including the MOE amount) reduced by $1,099,273,343 (the total FY 2000 retained allotments) and
  $23,167,624 (total redistribution for the commonwealths and territories).


[[Page 44020]]

5. Table of SCHIP FY 2001 Redistribution or Extended Availability of 
Unexpended FY 2001 Allotments
    The formula used to determine the amount of the unexpended FY 2001 
SCHIP allotments for redistribution or continued availability is 
described in detail below. The following is a description of Table 2, 
which presents each State's FY 2001 SCHIP allotment redistribution or 
retained amount.
    A total of $4,249,200,000 was allotted nationally for FY 2001, 
representing $4,204,312,500 in allotments to the 50 States and the 
District of Columbia, and $44,887,500 in allotments to the 
Commonwealths and Territories. Based on the quarterly expenditure 
reports, submitted and certified by November 30, 2003, 19 States fully 
expended their FY 2001 allotments, 32 States and the District of 
Columbia did not fully expend their FY 2001 allotments, and all 5 of 
the Commonwealths and Territories fully expended their FY 2001 
allotments. For the States and the District of Columbia, that did not 
fully expend their FY 2001 allotments, their total FY 2001 allotments 
were $2,784,606,938, and the total expenditures applied against their 
FY 2001 allotments were $1,035,585,792. Therefore, the total amount of 
unexpended FY 2001 allotments at the end of FY 2003 equaled 
$1,749,021,146 ($2,784,606,938 minus $1,035,585,792).
    In accordance with the redistribution calculation for FY 2001 
described above, $874,510,573 (50 percent of $1,749,021,146) is 
retained by the 32 States that did not fully expend their FY 2001 
allotments, $18,364,722 is redistributed to the five Commonwealths and 
Territories, and $856,145,851 is redistributed to the 19 redistribution 
States. Both the $856,145,851 redistributed allotment amounts and the 
$874,510,573 retained allotment amounts will remain available through 
the end of FY 2005.

Key to Table 2--CALCULATION OF THE SCHIP FY 2001 REDISTRIBUTION OF THE 
UNEXPENDED FY 2001 ALLOTMENTS

Column/Description

Column A = STATE. Name of State, District of Columbia, the 
Commonwealth or Territory.
Column B = FY 2001 ALLOTMENT. This column contains the FY 2001 SCHIP 
allotments for all States, which were published on January 22, 2001 
in the Federal Register (66 FR 6630).
Column C = EXPENDITURES APPLIED AGAINST FY 2001 ALLOTMENT. This 
column contains the cumulative expenditures applied against the FY 
2001 allotments, as reported and certified by all States through 
November 30, 2003.
Column D = UNEXPENDED FY 2001 ALLOTMENTS OR ``REDISTRIBUTION.'' This 
column contains the amounts of unexpended FY 2001 SCHIP allotments 
for States that did not fully expend the allotments during the 3-
year period of availability for FY 2001 (FYs 2001 through 2003), and 
is equal to the difference between the amounts in Column B and 
Column C. For States that did fully expend their FY 2001 allotments 
during the period of availability, the entry in this column is 
``REDISTRIBUTION.'' The total amount of $1,749,021,146 represents 
the total amount available for redistribution and continued 
availability for FY 2001.
Column E = FOR REDISTRIBUTION STATES ONLY FY 2001 Through 2003 
EXPENDITURES. For those States that have fully expended their FY 
2001 allotments, this column contains the total amounts of the 
States' reported SCHIP related expenditures for each of the years FY 
2001 through FY 2003, representing the FY 2001 3-year period of 
availability. For those States, Commonwealths, and Territories that 
did not fully expend their FY 2001 allotments during the period of 
availability, the entry in Column E is ``NA.''
Column F = REDISTRIBUTION STATES ONLY FYs 2001 Through 2003 
EXPENDITURES MINUS FY 2001 ALLOTMENT. This column contains the 
amounts of States' reported SCHIP-related expenditures for each of 
the years FY 2001 through FY 2003 (Column E), minus the FY 2001 
allotment (Column B).
Column G = FOR REDISTRIBUTION STATES PERCENT OF TOTAL 
REDISTRIBUTION. This column contains each State's redistribution 
percentage of the total amount available for redistribution, 
calculated as the entry in Column F divided by the total (for States 
only) in Column F.
Column H = FY 2001 REDISTRIBUTED ALLOTMENT AMOUNTS. This column 
contains the amounts of States' unexpended FY 2001 SCHIP allotments 
that are being redistributed to those States that have fully 
expended their FY 2001 allotments. For the States that have fully 
expended their FY 2001 SCHIP allotments, the amount in Column H is 
equal to the percentage in Column G multiplied by the total amount 
available for redistribution ($856,145,851). Therefore, for the 19 
States that have fully expended their FY 2001 allotments, the FY 
2001 redistribution amounts total $856,145,851. For the 
Commonwealths and Territories that have fully expended their FY 2001 
allotments, the amounts in Column H represents their respective 
proportionate shares (based on their FY 2001 allotments) of 
$18,364,722 (representing 1.05 percent of the total amount for 
redistribution and continued availability of $1,749,021,146). For 
those States, Commonwealths, and Territories that did not fully 
expend their FY 2001 allotments during the period of availability, 
the entry in Column H is ``NA.''
Column I = FY 2001 RETAINED ALLOTMENT AMOUNTS. For the States that 
did not fully expend their FY 2001 allotments, this column contains 
the amounts of the States' FY 2001 unexpended allotments in Column D 
multiplied by 50 percent, the result is the amount of these States' 
unexpended FY 2001 allotments that the States will retain. As 
indicated at the bottom of Column I, the total FY 2001 retained 
allotment amounts are $874,510,573.
Column J = UNEXPENDED FY 2001 ALLOTMENT AMOUNTS USED IN 
REDISTRIBUTION. For the States that did not fully expend their FY 
2001 allotments, this column reflects the amounts of such States' FY 
2001 unexpended allotments (not including the MOE reduction amount) 
that were used in the redistribution in Column H; these amounts are 
no longer available to these States. The amount in Column J is equal 
to the difference between Column D, the unexpended FY 2001 
Allotments, and Column I, the FY 2001 Retained Allotment Amounts. 
For States that did fully expend their FY 2001 allotments, the entry 
in Column J is ``NA.''

[[Page 44021]]



                                                        Table 2.--Calculation of the SCHIP FY 2001 Redistribution and Continued Availability of the Unexpended FY 2001 Allotments
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                         Unexpended FY
                                                                Expenditures     Unexpended FY 2001  For redistribution   Redist States only  FY     For redist states      FY 2001 redistributed    FY 2001 retained    2001 allotment
                 State                    FY 2001 Allotment    applied against      allotments or      states only  FY   2001-2003  expenditures      percent of total     allotment amounts  (col  allotment amounts   amounts used in
                                                              FY 2001 allotment  ``redistribution''     2001-FY 2003          minus  FY 2001      redistribution  (col F/    G x amount available   (col D x retained    redistribution
                                                                                                        expenditures       allotment  (col E-B)        sum of col F)         for redistribution)            %)             (col D-I)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A                                                         B                   C                   D                   E                        F                        G                        H                  I                  J
----------------------------------------
Alabama................................         $69,311,033         $47,221,655         $22,089,378                  NA                       NA                       NA                       NA        $11,044,689        $11,044,689
Alaska.................................          $8,987,100          $8,987,100      REDISTRIBUTION         $68,549,034              $59,561,934                  1.5308%              $13,106,151                 NA                 NA
Arizona................................        $124,519,004        $124,519,004      REDISTRIBUTION        $361,415,726             $236,896,722                  6.0886%              $52,127,325                 NA                 NA
Arkansas...............................         $53,957,231                  $0         $53,957,231                  NA                       NA                       NA                       NA        $26,978,616        $26,978,616
California.............................        $704,930,926        $193,778,325        $511,152,601                  NA                       NA                       NA                       NA       $255,576,301       $255,576,301
Colorado...............................         $44,648,559         $25,998,147         $18,650,412                  NA                       NA                       NA                       NA         $9,325,205         $9,325,206
Connecticut............................         $39,398,021                  $0         $39,398,021                  NA                       NA                       NA                       NA        $19,699,011        $19,699,011
Delaware...............................         $10,505,758                  $0         $10,505,758                  NA                       NA                       NA                       NA         $5,252,879         $5,252,879
District of Columbia...................         $11,751,544          $1,142,796         $10,608,748                  NA                       NA                       NA                       NA         $5,304,374         $5,304,374
Florida................................        $220,217,905        $220,217,905      REDISTRIBUTION        $822,911,546             $602,693,641                 15.4901%             $132,618,160                 NA                 NA
Georgia................................        $135,053,332        $135,053,332      REDISTRIBUTION        $362,649,585             $227,596,253                  5.8496%              $50,080,828                 NA                 NA
Hawaii.................................         $11,669,166                  $0         $11,669,166                  NA                       NA                       NA                       NA         $5,834,583         $5,834,583
Idaho..................................         $20,715,109          $9,411,471         $11,303,638                  NA                       NA                       NA                       NA         $5,651,819         $5,651,819
Illinois...............................        $159,838,759                  $0        $159,838,759                  NA                       NA                       NA                       NA        $79,919,379        $79,919,380
Indiana................................         $60,023,791                  $0         $60,023,791                  NA                       NA                       NA                       NA        $30,011,896        $30,011,896
Iowa...................................         $32,940,215         $28,662,733          $4,277,482                  NA                       NA                       NA                       NA         $2,138,741         $2,138,741
Kansas.................................         $29,337,719         $29,337,719      REDISTRIBUTION         $97,424,891              $68,087,172                  1.7499%              $14,982,065                 NA                 NA
Kentucky...............................         $55,939,972         $55,939,972      REDISTRIBUTION        $209,288,363             $153,348,391                  3.9413%              $33,743,149                 NA                 NA
Louisiana..............................         $82,017,657         $42,625,805         $39,391,852                  NA                       NA                       NA                       NA        $19,695,925        $19,695,926
Maine..................................         $13,444,691         $13,444,691      REDISTRIBUTION         $53,010,358              $39,565,667                  1.0169%               $8,706,125                 NA                 NA
Maryland...............................         $51,422,315         $51,422,315      REDISTRIBUTION        $349,768,834             $298,346,519                  7.6680%              $65,648,887                 NA                 NA
Massachusetts..........................         $55,879,946         $55,879,946      REDISTRIBUTION        $181,800,684             $125,920,738                  3.2364%              $27,707,902                 NA                 NA
Michigan...............................        $119,473,472         $12,588,968        $106,884,504                  NA                       NA                       NA                       NA        $53,442,252        $53,442,252
Minnesota..............................         $37,042,610         $37,042,610      REDISTRIBUTION        $129,651,820              $92,609,210                  2.3802%              $20,377,955                 NA                 NA
Mississippi............................         $55,987,988         $55,987,988      REDISTRIBUTION        $207,438,300             $151,450,312                  3.8925%              $33,325,491                 NA                 NA
Missouri...............................         $65,460,374         $43,219,476         $22,240,898                  NA                       NA                       NA                       NA        $11,120,449        $11,120,449
Montana................................         $15,169,315         $11,031,111          $4,138,204                  NA                       NA                       NA                       NA         $2,069,102         $2,069,102
Nebraska...............................         $19,084,374         $19,084,374      REDISTRIBUTION         $46,196,710              $27,112,336                  0.6968%               $5,965,864                 NA                 NA
Nevada.................................         $31,344,200         $11,595,386         $19,748,814                  NA                       NA                       NA                       NA         $9,874,407         $9,874,407
New Hampshire..........................         $11,932,994                  $0         $11,932,994                  NA                       NA                       NA                       NA         $5,966,497         $5,966,497
New Jersey.............................         $98,823,044         $98,823,044      REDISTRIBUTION        $643,980,744             $545,157,700                 14.0114%             $119,957,813                 NA                 NA
New Mexico.............................         $50,766,995                  $0         $50,766,995                  NA                       NA                       NA                       NA        $25,383,498        $25,383,498
New York...............................        $322,025,819        $322,025,819      REDISTRIBUTION      $1,067,477,303             $745,451,484                 19.1592%             $164,030,940                 NA                 NA
North Carolina.........................        $103,718,942        $103,718,942      REDISTRIBUTION        $287,610,824             $183,891,882                  4.7263%              $40,464,013                 NA                 NA
North Dakota...........................          $6,575,656          $3,222,774          $3,352,882                  NA                       NA                       NA                       NA         $1,676,441         $1,676,441
Ohio...................................        $142,214,540        $132,497,208          $9,717,332                  NA                       NA                       NA                       NA         $4,858,666         $4,858,666
Oklahoma...............................         $69,088,406                  $0         $69,088,406                  NA                       NA                       NA                       NA        $34,544,202        $34,544,203
Oregon.................................         $50,134,100                  $0         $50,134,100                  NA                       NA                       NA                       NA        $25,067,050        $25,067,050
Pennsylvania*..........................        $138,968,854        $105,117,471         $33,851,383                  NA                       NA                       NA                       NA        $16,925,692        $16,925,692
Rhode Island...........................          $9,300,803          $9,300,803      REDISTRIBUTION         $91,503,795              $82,202,992                  2.1127%              $18,088,144                 NA                 NA
South Carolina.........................         $64,591,234         $44,893,470         $19,697,764                  NA                       NA                       NA                       NA         $9,848,882         $9,848,882
South Dakota...........................          $8,177,039          $8,177,039      REDISTRIBUTION         $23,025,033              $14,847,994                  0.3816%               $3,267,188                 NA                 NA
Tennessee..............................         $86,296,823                  $0         $86,296,823                  NA                       NA                       NA                       NA        $43,148,411        $43,148,412
Texas..................................        $452,531,213        $281,964,250        $170,566,963                  NA                       NA                       NA                       NA        $85,283,482        $85,283,482
Utah...................................         $30,184,401         $18,619,845         $11,564,556                  NA                       NA                       NA                       NA         $5,782,278         $5,782,278
Vermont................................          $4,611,995          $1,915,842          $2,696,153                  NA                       NA                       NA                       NA         $1,348,077         $1,348,077
Virginia...............................         $75,491,290         $20,079,059         $55,412,231                  NA                       NA                       NA                       NA        $27,706,115        $27,706,116
Washington.............................         $60,869,643                  $0         $60,869,643                  NA                       NA                       NA                       NA        $30,434,822        $30,434,822
West Virginia..........................         $21,144,989         $21,144,989      REDISTRIBUTION         $76,049,494              $54,904,505                  1.4111%              $12,081,320                 NA                 NA
Wisconsin..............................         $49,597,970         $49,597,970      REDISTRIBUTION        $230,774,551             $181,176,581                  4.6565%              $39,866,531                 NA                 NA
Wyoming................................          $7,193,664                  $0          $7,193,664                  NA                       NA                       NA                       NA         $3,596,832         $3,596,832
                                        ---------------------
    Total States Only..................      $4,204,312,500      $2,455,291,354      $1,749,021,146      $5,310,527,595           $3,890,822,033                100.0000%             $856,145,851       $874,510,573       $874,510,573
----------------------------------------
Commonwealths and Territories:
    Puerto Rico........................         $41,116,950         $41,116,950      REDISTRIBUTION                  NA                       NA                       NA              $16,822,085                 NA                 NA
    Guam...............................          $1,571,062          $1,571,062      REDISTRIBUTION                  NA                       NA                       NA                 $642,765                 NA                 NA
    Virgin Islands.....................          $1,167,075          $1,167,075      REDISTRIBUTION                  NA                       NA                       NA                 $477,483                 NA                 NA
    American Samoa.....................            $538,650            $538,650      REDISTRIBUTION                  NA                       NA                       NA                 $220,377                 NA                 NA
    N. Mariana Islands.................            $493,763            $493,763      REDISTRIBUTION                  NA                       NA                       NA                 $202,012                 NA                 NA
                                        ---------------------
        Total..........................         $44,887,500         $44,887,500                  $0                  NA                       NA  .......................              $18,364,722                 $0                 $0
----------------------------------------
                                                                                                                                                                             (Totals to ``1.05%''   .................  .................
                                                                                                                                                                                   Amount)
----------------------------------------

[[Page 44022]]

 
National Total.........................      $4,249,200,000      $2,500,178,854      $1,749,021,146                                                                                   $874,510,573       $874,510,573       $874,510,573
*FY 2001 MOE Amount....................                  $0  ..................                  $0                                                                             Total FY 2001         Total FY 2001
Total With MOE Amount..................      $4,249,200,000      $2,500,178,854      $1,749,021,146                                                                         Redistributed Amounts    Retained Amounts
                                        ---------------------
 
                                         Total Unexpended FY 2001 Allotments (not including MOE):
                                         $1,749,021,146
 
                                         FY 2001 MOE Amount: $0
 
                                         Total Unexpended FY 2001 Allotments (including MOE): \1\
                                         $1,749,021,146
 
                                         Total Needed for Retained Allotments: $874,510,573          Retained allotment
 
                                         Total Needed for Redistribution for Territories:                percentage:
                                         $18,364,722
 
                                          Total: $892,875,295                                                50%
 
                                         Total Available for Redistribution to States: $856,145,851
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes:
\1\ The total unexpended FY 2001 allotments are $1,749,021,146, calculated as $1,749,021,146 (the total unexpended FY 2000 allotments, not including the maintenance of effort (MOE) amount) plus $0,000 (the MOE amount).
\2\ $874,510,573 is the total needed for retained allotments, calculated as $1,749,021,146 (the total unexpended FY 2001 allotments, not including $0,000 (the MOE amount)), multiplied by 50 percent.
\3\ $18,364,722 is the total amount needed for redistribution to the commonwealths and territories, calculated as $1,749,021,146 (the total unexpended FY 2001 allotments, including the MOE amount) multiplied by 1.05 percent.
\4\ $856,145,851 is the total redistribution to the states, calculated as $1,749,021,146 (total unexpended FY 2001 allotments including the MOE amount) reduced by $874,510,573 (the total FY 2001 retained allotments) and $18,364,722
  (total redistribution).


[[Page 44023]]

B. Authority for Qualifying States To Elect To Receive Part of 
Available FY 1998 Through 2001 SCHIP Allotments for Certain Medicaid 
Expenditures

    Pub. L. 108-74, as amended by Pub. L. 108-127 added a new section 
2105(g) of the Act, under which a ``Qualifying State'' may elect to use 
not more than 20 percent of any of the State's available SCHIP 
allotments for FY 1998, 1999, 2000, or 2001 for payments under the 
State's Medicaid program, instead of expenditures under the State's 
SCHIP. Section 2105(g)(2) of the Act, as amended by Pub. L. 108-74 and 
Pub. L. 108-127, defines a ``Qualifying State'' as:

    ``a State that, on and after April 15, 1997, has an income 
eligibility standard that is at least 184 percent of the poverty 
line with respect to any 1 or more categories of children (other 
than infants) who are eligible for medical assistance under section 
1902(a)(10)(A) or, in the case of a State that has a statewide 
waiver in effect under section 1115 with respect to title XIX that 
was first implemented on August 1, 1994, or July 1, 1995, has an 
income eligibility standard under such waiver for children that is 
at least 185 percent of the poverty line, or, in the case of a State 
that has a statewide waiver in effect under section 1115 with 
respect to title XIX that was first implemented on January 1, 1994, 
has an income eligibility standard under such waiver for children 
who lack health insurance that is at least 185 percent of the 
poverty line, or, in the case of a State that had a statewide waiver 
in effect under section 1115 with respect to title XIX that was 
first implemented on October 1, 1993, had an income eligibility 
standard under such waiver for children that was at least 185 
percent of the poverty line and on and after July 1, 1998, has an 
income eligibility standard for children under section 
1902(a)(10)(A) or a statewide waiver in effect under section 1115 
with respect to title XIX that is at least 185 percent of the 
poverty line.''

    We have determined the States that meet the definition of 
``Qualifying State'' in accordance with these statutory criteria.
1. Calculation of the 20 Percent Allowance Amount
    Section 2105(g)(1)(A) of the Act provides that a Qualifying State 
may elect to use not more than 20 percent of any allotment under 
section 2104 for fiscal year 1998, 1999, 2000, or 2001 (insofar as it 
is available under sections 2104(e) and (g) of the Act). In this 
regard, sections 2104(e) and (g) of the Act refer to the periods of 
availability for allotments and redistributed/retained allotments, 
respectively. Furthermore, section 2105(g)(1)(B)(ii) of the Act refers 
to the 20 percent expenditures as ``expenditures made after the date of 
the enactment of this subsection and during the period in which funds 
are available to the qualifying State * * *.'' (Emphasis supplied).
    In this notice, we refer to the term ``20 percent of any 
allotment,'' as referenced in the statute, as the ``20 percent 
allowance.'' In accordance with section 2105(g) of the Act, a 20 
percent allowance for each Qualified State must be determined with 
respect to each of only four fiscal year allotments, FY 1998, 1999, 
2000, and 2001. Furthermore, Federal matching funds at the enhanced 
FMAP rate can only be available for the applicable Medicaid 
expenditures under the 20 percent allowances for the four fiscal years, 
only if the related specified fiscal year allotment amounts are 
``available,'' and only if there are any applicable Medicaid 
expenditures after the date of enactment of Pub. L. 108-74.
    The only applicable FY 1998 through 2001 allotment funds that are 
available to States in FY 2003 (the year in which Pub. L. 108-74 was 
enacted), for purposes of providing enhanced funding for the applicable 
20 percent allowance expenditures, are the unexpended fiscal year 
allotment amounts for FYs 1998 through 2001. These unexpended allotment 
include allotments, redistributions, and retained allotment amounts 
that would be carried forward into FY 2003 for use by a Qualified State 
in FY 2003, and which have not been expended by the State through the 
date of enactment of Pub. L. 108-74. By definition, the expended 
amounts of these fiscal year allotment funds, through the date of 
enactment of Pub. L. 108-74, are no longer available in FY 2003 for use 
under the 20 percent allowance provision. That is, only the unexpended 
(remaining) amounts of these fiscal year allotment funds can be 
considered to be ``available'' in FY 2003, FY 2004, and FY 2005.
    The amounts of the FY 1998 through 2001 allotments that will be 
available during each of the applicable fiscal years (FY 2003 through 
2005) are determined in accordance with the established rules for the 
application of all the Federal payments for the Qualifying State's 
expenditures against all of the State's available allotments. The 
amounts of the relevant 20 percent fiscal year allowances that a 
Qualifying State may use in FY 2003, and in the subsequent fiscal years 
(that is, FY 2004 and FY 2005), will be limited by the amounts of the 
related fiscal year allotments that are actually available.
    The amount of the 20 percent allowances is determined, with respect 
to each of the original fiscal year allotments for FYs 1998 through 
2001, under section 2105(g) of the Act. That is, we determined the 20 
percent allowances for the Qualifying States for each of these fiscal 
years by multiplying each of the original fiscal year allotments for 
these years by 20 percent. Therefore, the 20 percent fiscal year 
allowances are determined and tracked individually, based on the 
Qualifying State expenditures that are applied against each of the 
related fiscal year 20 percent allowances and related fiscal year 
allotment amounts, as available. Note, even if there is a remaining 20 
percent allowance for a particular fiscal year, the actual availability 
of the related fiscal year allotment amount is the ultimate determining 
factor as to whether any applicable Medicaid expenditures can be 
matched at the enhanced matching rate. That is, if the fiscal year 
allotment amount related to a particular fiscal year 20 percent 
allowance has been exhausted (is no longer available), the State would 
not be able to claim any expenditures against that fiscal year 20 
percent allowance.
    In FY 2003, representing the fiscal year in which the Qualifying 
State provision was enacted and the first fiscal year for which a 
Qualifying State may claim expenditures against its 20 percent 
allowances, the only fiscal year allotment amounts related to FYs 1998, 
1999, and 2000 that may still be available are the redistributed and/or 
retained allotment amounts for those fiscal years. Furthermore, under 
section 2104(g) of the Act as amended by Pub. L. 108-74, these amounts 
will only be available to States until the end of FY 2004.
    In FY 2003, the unexpended amounts of a Qualifying State's original 
fiscal year 2001 allotment may also be available for expenditure by the 
State. Initial State FY 2001 allotments are available only until the 
end of FY 2003 (the end of the 3-year period of availability for the FY 
2001 fiscal year allotment). In FY 2004, there will be a reallotment of 
any unexpended FY 2001 allotments similar to the reallotment in FY 2003 
of the States' unexpended FY 2000 allotments, which was described 
previously in this notice. The unexpended FY 2001 allotments reallotted 
in FY 2004 will only be available to States until the end of FY 2005.
    The discussion in the following sections describes the 
determinations of the fiscal year 20 percent allowances for the 
Qualifying States for each of the FYs 1998 through 2001 as would be 
available during the FYs 2003 through 2005, and how they would be 
tracked through FY 2005, the last year for which

[[Page 44024]]

any of the related fiscal year allotment amounts are available.
    Determination and Tracking of the Fiscal Year 20 Percent Allowances 
in FY 2003. In FY 2003, the 20 percent allowances for each Qualifying 
State would be calculated as 20 percent of each of the Qualifying 
State's original SCHIP allotments for FYs 1998, 1999, 2000, and 2001. 
Since Pub. L. 108-74 was enacted on August 15, 2003, only expenditures 
from August 16, 2003 on may be claimed against the related fiscal year 
allotment amounts that are available as of August 16. The actual 
availability of each Qualifying State's fiscal year allotment amounts 
for FYs 1998 through 2001 will be determined in accordance with the 
applicable requirements for the application of expenditures against the 
States' available allotments, which in FY 2003, include the extended 
availability of States' unexpended FY 1998 and 1999 allotment amounts 
and the redistribution and extended availability of States' unexpended 
FY 2000 allotments available beginning October 1, 2002. Therefore, as 
limited by the 20 percent allowances for each fiscal year, only to the 
extent that the fiscal year allotment amounts related to each of the 20 
percent allowances are available to the Qualifying States can such 
allotment amounts be used for matching the States' applicable 
expenditures.
    Example. A Qualifying State's original FY 1998 allotment was $50 
million; therefore, the FY 1998 20 percent allowance would be $10 
million (20 percent of $50 million). However, through the application 
of expenditures through the years of the SCHIP, at the end of FY 2002 
there was only $16 million remaining in the State's FY 1998 
``retained'' allotment. Under the provisions of Pub. L. 108-74, the 
availability of this amount was extended until the end of FY 2004; this 
is the amount considered as initially available at the beginning of FY 
2003. However, throughout FY 2003, the State's expenditures would be 
applied according to the established rules for that application; this 
would further limit the final availability of the FY 1998 retained 
allotment funds for enhanced payment in FY 2003. Although the 20 
percent allowance was determined to be $10 million, any ultimate 
payments to be applied and tracked against this amount would be limited 
by the actual availability of the FY 1998 retained allotment. In this 
example, if the actual application of the State's expenditures in FY 
2003 resulted in only $3 million of the FY 1998 retained allotment 
remaining in the fourth quarter of FY 2003, then that $3 million amount 
would be the most the Qualifying State could claim against the FY 1998 
20 percent allowance of $10 million.
    Continued Tracking of the Fiscal Year 20 Percent Allowances in FY 
2004. The amounts of each Qualifying State's fiscal year 20 percent 
allowances, and the related fiscal year allotment amounts remaining at 
the end of FY 2003, will be carried over to FY 2004. However, the 
availability of the FY 2001 allotment amounts will differ from the 
availability of the FY 1998 through 2000 allotment amounts. In 
particular, the Qualifying States' fiscal year 20 percent allowances in 
FY 2004 that are carried over from FY 2003 will be limited by the 
actual available related fiscal year allotment amounts that are carried 
over from FY 2003. In FY 2003, the available fiscal years 1998, 1999, 
and 2000 allotment amounts are the retained allotments and/or the 
redistributed allotments for those fiscal years that were carried over 
from or reallotted in FY 2003.
    In FY 2004, however, the FY 2001 reallotment process will occur. 
Similar to the FY 2000 reallotment process, as discussed earlier in 
this notice, the FY 2001 ``retained allotment States'' will carry-over 
from FY 2003 into FY 2004 only 50 percent of their unexpended FY 2001 
allotments remaining at the end of FY 2003. Furthermore, the FY 2001 
``redistribution States'' by definition have fully expended their FY 
2001 allotments by the end of FY 2003. Therefore, the FY 2001 
redistribution States will not carry-over any of their own FY 2001 
allotments; however, they will receive a redistribution of about 50 
percent of the FY 2001 retained allotment States' unexpended FY 2001 
allotments remaining at the end of FY 2003. In summary, the amounts of 
the available FY 2001 allotments in FY 2004 will be determined by the 
amounts of the FY 2001 retained or redistributed allotments a 
Qualifying State will receive in FY 2004.
    Example 1. At the end of FY 2003, Qualifying State A's remaining FY 
2001 20 percent allowance is $20 million, and the State's remaining 
unexpended FY 2001 allotment is $30 million. The State will carry over 
its FY 2001 20 percent allowance balance of $20 million into FY 2004. 
However, because Qualifying State A has not fully expended its FY 2001 
allotment, it will be a FY 2001 retained allotment State in FY 2004, 
and in that regard, would only retain $15 million of its unexpended FY 
2001 allotment (50 percent of $30 million) in FY 2004. Although the FY 
2001 20 percent allowance carried into FY 2004 is $20 million, the 
State would only have available $15 million of its FY 2001 allotment 
amount for matching any of the State's applicable 20 percent allowance 
expenditures in FY 2004.
    Example 2. At the end of FY 2003, Qualifying State B's remaining FY 
2001 20 percent allowance is $20 million, and the State has fully 
expended its FY 2001 allotment. The State will carry over its FY 2001 
20 percent allowance balance of $20 million into FY 2004. However, 
because the State has fully expended its FY 2001 allotment by the end 
of FY 2003, it will be a FY 2001 redistribution State in FY 2004. The 
State receives a FY 2001 redistribution of $25 million in FY 2004, and 
accordingly, it will be considered to have $25 million available in FY 
2004 related to the FY 2001 allotment. Furthermore, in FY 2004 the 
States' remaining FY 2001 20 percent allowance is $20 million; this 
would be the limit on the States' claims for the applicable 20 percent 
expenditures in FY 2004.
    Continued Tracking of the Fiscal Year 20 Percent Allowances in FY 
2005. The availability of fiscal year (re)allotted amounts for FYs 1998 
through 2000 was only extended until the end of FY 2004. Therefore, the 
only applicable fiscal year allotment amounts related to the 20 percent 
allowances that will be available in FY 2005 are the amounts of the 
unexpended FY 2001 retained or redistributed allotments that were 
carried over from FY 2004 into FY 2005. Furthermore, the only 20 
percent allowances that will be available in FY 2005 are the amounts of 
the related FY 2001 20 percent allowances that remain at the end of FY 
2004 and carried over into FY 2005. Therefore, in FY 2005, Qualifying 
States' claims for 20 percent allowance expenditures would be limited 
by such States' actual available FY 2001 redistributed or retained 
allotment amounts that remained at the end of FY 2004 and were carried 
over to FY 2005.
2. Amounts Applied Against the 20 Percent Allowance Amounts
    Additional Amount Applied Against 20 Percent Allowance Amount. 
Under section 2105(g)(1)(B)(i) of the Act, as amended by Pub. L. 108-
74, ``subject to the availability of funds * * * the Secretary shall 
pay the State an amount each quarter equal to the additional amount 
that would have been paid to the State under title XIX'' with respect 
to the 20 percent allowance expenditures, if the enhanced FMAP had been 
substituted for the FMAP. This provisions does not authorize the State 
to ``double-bill'' the SCHIP and/or the Medicaid program; rather, it 
allows the State with respect to an allowable

[[Page 44025]]

expenditure, to receive in total, a Federal share amount equal to the 
enhanced FMAP rate under title XXI instead of the (lower) FMAP rate 
that would otherwise have been applied under title XIX. However, only a 
portion of this total Federal share at the enhanced FMAP rate, equal to 
the difference between the enhanced FMAP rate under title XXI and the 
``regular'' FMAP rate under title XIX, will be applied against the 
Qualifying States' available 20 percent allowance SCHIP fiscal year 
allotments. As indicated in the next paragraph and following example, 
for purposes of this calculation, the regular FMAP rate is equal to the 
``increased FMAP.''
    Relationship to the ``Increased FMAP''. With the passage of the 
Jobs and Growth Tax Relief Reconciliation Act of 2003 (TRRA (Pub. L. 
108-27)) on May 28, 2003, there are five Federal fiscal year quarters 
for which States' Medicaid expenditures are matched at an increased 
FMAP rate: The last two quarters of FY 2003 and the first three 
quarters of FY 2004. In implementing the Qualifying State provisions of 
Pub. L. 108-74, and in determining the additional amount that would be 
paid to States under section 2105(g)(1)(B)(i) of the Act, we will use 
the actual increased FMAP that is being used each quarter in a State 
for matching a State's Medicaid expenditures.
    Example. The Qualifying State's enhanced FMAP is 65 percent, and 
its ``increased FMAP'' under TRRA is 52.95 percent. If the State has a 
$10,000 allowable expenditure, the total Federal share it could claim 
would be $6,500 (65 percent of $10,000). However, only $1,205, 
representing 12.05 percent (65 percent (the enhanced FMAP rate) minus 
52.95 percent (the regular FMAP rate)) of the $10,000 expenditure, 
would be applied against the Qualifying State's available 20 percent 
allowance(s) under title XXI. $5,295 of the total $6,500 Federal share 
(52.95 percent of $10,000) would be charged against the title XIX 
appropriation.
    Subject to the Availability of the FY 20 Percent Allowance. Section 
2105(g)(1)(A) of the Act provides for States to elect to use up to 20 
percent of the available allotments for FYs 1998 through 2001. The 
discussion above describes the determination of the amounts of the 20 
percent allowances for each fiscal year. The calculated 20 percent 
allowances serve as an overall limit, against which the 20 percent 
allowance expenditures would be applied, and claims in excess of those 
amounts would not be payable. However, operationally, a Qualifying 
State's actual claims for expenditures (including both the 20 percent 
allowance expenditures and all the other SCHIP expenditures that a 
State may claim) will be applied against all the various allotments 
that would be available to the Qualifying State during the quarter for 
which the State is making the claim (including both the allotments upon 
which the 20 percent allowances are based and all the other SCHIP 
allotments). In the application of the State's various expenditures 
against all the available allotments, it is possible that any or all of 
the allotments upon which the 20 percent allowance is based may be 
reduced below the determined 20 percent allowance, for any or all of 
the 20 percent allotment(s). In that case, the payments to the States 
for the 20 percent allowance expenditures may be additionally limited.
    Example. The Qualifying State's original FY 1998, 1999, 2000, and 
2001 allotments were $10 million, $10 million, $12 million, and $12 
million, respectively. At the beginning of FY 2003, the Qualifying 
State has the following unexpended allotments carried over from FY 
2002: $0 in FY 1998 retained allotments; $2 million in FY 1999 retained 
allotments; $12 million in FY 2001 allotments; and finally, in FY 2003 
the State retains $6 million of its unexpended FY 2000 allotments that 
remained at the end of FY 2002.
    In FY 2003 the State's total 20 percent allowances are:
     FY 1998: $2 million (20 percent of the $10 million 
original allotment)
     FY 1999: $2 million (20 percent of the $10 million 
original allotment)
     FY 2001: $2.4 million (20 percent of the $12 million 
original allotment)
     FY 2000: $2.4 million (20 percent of the $12 million 
original allotment)
    In this example, the four calculated 20 percent allowances total to 
$8.8 million ($2 million + $2 million + $2.4 million + $2.4 million). 
Therefore, the Qualifying State could potentially use up to $8.8 
million from the four related fiscal year allotment amounts for 
matching the eligible 20 percent allowance expenditures, if those funds 
were available. As indicated, at the beginning of FY 2003 the State had 
$20 million ($0 + $2 million + $6 million + $12 million) in FY 1998 
through 2001 allotment funds. However, with the submission of $6 
million in other expenditures through the end of the third quarter of 
FY 2003 (June 30, 2003), there would be the following remaining 
allotment funds available at the beginning of the fourth quarter FY 
2003: $0 in FY 1998 retained allotment; $0 in FY 1999 retained 
allotment; $2 million in FY 2000 retained allotments, and $12 million 
in FY 2001 allotments. Therefore, in the fourth quarter FY 2003 the 
States could potentially claim up to the following amounts as 20 
percent allowance expenditures:
     FY 1998: $0. Although the FY 1998 20 percent allowance is 
$2 million, in the fourth quarter of FY 2003 there is $0 in FY 1998 
retained allotment remaining.
     FY 1999: $0. Although the FY 1999 20 percent allowance is 
$2 million, in the fourth quarter of FY 2003 there is $0 in FY 1999 
retained allotment remaining.
     FY 2000: $2 million. Although the FY 2000 20 percent 
allowance is $2.4 million, in the fourth quarter of FY 2003 there is 
only $2 million in FY 2000 retained allotment remaining.
     FY 2001: $2.4 million. The FY 2001 20 percent allowance is 
$2.4 million, and there is $12 million in FY 2001 allotment remaining.
    In this example, through the end of the third quarter FY 2003, $6 
million in SCHIP matching funds related to other expenditures were 
applied against the available four 20 percent allotment funds before 
any 20 percent allowance expenditures were submitted. Therefore, at the 
beginning of the fourth quarter FY 2003 only $4.4 million related to 
the available allotments and 20 percent allowances for FY 2000 and FY 
2001 could potentially be claimed as 20 percent allowance expenditures.
3. Ordering of Allotments and Expenditures
    In the SCHIP, the application of payments for a State's 
expenditures against the State's available SCHIP allotments follows an 
order specified by statute and regulation. In general, payments for 
expenditures are applied against a State's available allotments in the 
following priority order prescribed in section 2105(a) of the Act:
     Medicaid SCHIP expansion expenditures paid at the enhanced 
FMAP rate;
     Medicaid presumptive eligibility expenditures under 
section 1920A of the Act;
     SCHIP program expenditures; and
     SCHIP ``10 percent fiscal year limit'' expenditures 
(representing four categories of expenditures that are subject to the 
State's annual fiscal year 10 percent limit on those expenditures).
    Furthermore, as specified by regulation, States' fiscal year 
allotments are also ordered in a certain priority. Typically, payments 
for expenditures are first applied against the oldest fiscal year 
allotment and the most recent fiscal year allotment is ordered last. A

[[Page 44026]]

retained allotment for a fiscal year is ordered in the same priority as 
the original allotment for that fiscal year. However, redistributed 
allotments for a fiscal year are ordered in the priority chosen by the 
redistribution States.
    ORDERING OF ALLOTMENTS--Reopening of States' Elections for Ordering 
FY 1998 and FY 1999 Redistributed Allotments Ordering Elections. Before 
the passage of Pub. L. 108-74, the FY 1998 and FY 1999 reallotment 
amounts (referring to both redistributed and retained allotments) 
expired at the end of FY 2002. However, with the enactment of Pub. L. 
108-74, the availability of these allotments was extended to the end of 
FY 2004. As indicated in the discussion above on the extension of the 
FYs 1998 through 2000 allotments, States with redistributed allotments 
have the option to reopen their ordering elections for FY 1998 and FY 
1999 redistribution funds during FY 2003 (the first fiscal year in 
which these funds are restored).
    ORDERING OF EXPENDITURES--Ordering of 20 Percent Allowance 
Expenditures. Section 2105(g)(1)(B)(ii) of the Act establishes a new 
expenditure under the Medicaid program for which certain amounts of 
payments would be applied against a State's available SCHIP allotments. 
However, Pub. L. 108-74 did not amend section 2105(a) of the Act to add 
these new 20 percent allowance expenditures to the list of recognized 
expenditures that are applied against the title XXI SCHIP allotments. 
The 20 percent allowance expenditures can only be applied against the 
allotment funds on which the 20 percent allowance amounts are based 
(that is, the available FY 1998, 1999, 2000, and 2001 allotment funds); 
they cannot be applied against any other available fiscal year 
allotment funds. Since the 20 percent allowance expenditures can only 
be applied against the FY 1998 through 2001 allotment funds, if a 
Qualifying State submits 20 percent allowance expenditures in a 
particular quarter, those expenditures must skip over other available 
fiscal year allotments in the otherwise required fiscal year allotment 
priority order.
    If a Qualified State submits both 20 percent allowance expenditures 
and other ``regular'' SCHIP expenditures at the same time in a quarter 
(based on the allotment priority order, they both must apply against an 
available fiscal year allotment), the 20 percent allowance expenditures 
will be applied first.
    This ordering of expenditures provides states with flexibility and 
administrative ease. Although the priority order of funding allows 
states to claim the 20 percent allowance expenditures first, this order 
does not negatively affect health coverage for children, which is the 
first priority in SCHIP, and was a primary consideration in determining 
the ordering of expenditures. CMS' analysis indicated that health 
coverage for children would not be affected by this ordering of 
expenditures. CMS would have revisited the priority order if the 
analysis had been different.
    10 Percent Limit Calculation--Under the SCHIP program, Federal 
matching funds for certain expenditures (including but not limited to 
administrative expenditures), listed in section 2105(a)(1)(D) of the 
Act, is only available up to the ``10 percent limit'' referenced in 
section 2105(b)(2) of the Act. Under section 2105(b)(2) of the Act (and 
related regulations), the amount of the 10 percent limit, a dollar 
amount, is calculated based only on the following expenditures listed 
in section 2105(a)(1)(A) through (a)(1)(C) of the Act: Medicaid SCHIP 
expansion group expenditures, Medicaid section 1920A presumptive 
eligibility expenditures, and SCHIP title XXI program expenditures. 
Since the dollar amount of the 10 percent limit is calculated by taking 
a percentage of the total of these expenditures, the greater the amount 
of these expenditures, the higher a State's calculated 10 percent limit 
dollar amount would be.
    Though Pub. L. 108-74 recognizes a new Medicaid 20 percent 
allowance expenditure, for which Qualifying States' specified SCHIP 
fiscal year allotment funds could be used, this legislation did not 
amend title XXI with respect to the calculation of the 10 percent 
limit. The new 20 percent allowance expenditures under title XIX were 
not added to the list of expenditures in section 2105(a)(1) of the Act 
upon which the 10 percent limit calculation is based. Therefore, the 20 
percent allowance expenditures will not be used in calculating the 10 
percent limit.
4. 20 Percent Allowance Expenditures Described
    Section 2105(g)(1)(B)(ii) of the Act indicates that the 20 percent 
allowance ``Expenditures Described'' are those that are made after the 
date of enactment of Pub. L. 108-74 for ``medical assistance under 
title XIX to individuals who have not attained age 19 and whose family 
income exceeds 150 percent of the poverty line.'' The date of enactment 
for Pub. L. 108-74 was August 15, 2003. Federal regulations at 45 CFR 
part 95 contain the rules on the timing of expenditures.
    Generally, a Qualifying State can choose any eligible Medicaid 
program expenditures or subset of those expenditures. For example, the 
State can submit expenditures by category of medical assistance (for 
example, by physician services, hospital services, public agency 
services). Similarly, as long as the age and income criteria are met, 
the Qualifying State could submit expenditures by eligibility category 
(for example, medically needy children, disabled children).
    In general, a Qualifying State may claim any category of Medicaid 
expenditures against their 20 percent allowance. However, the following 
expenditures are precluded from being applied against the 20 percent 
allowance expenditures:
     Medicaid Expansion Population Expenditures. The 20 percent 
allowance expenditures do not include medical assistance expenditures 
for individuals covered in a State's Medicaid program as the SCHIP 
Medicaid expansion population. Under the Medicaid statute, expenditures 
for the Medicaid expansion population are already claimed at the 
enhanced FMAP. Further, the full Federal share amount for those 
expenditures must be applied against the SCHIP allotments (not just the 
additional amount above the regular FMAP rate). Therefore, expenditures 
for the Medicaid expansion population would not be claimable under the 
20 percent allowance provision.

III. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980 Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more annually). We have determined 
that this rule is not a major rule for the reasons discussed below.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and

[[Page 44027]]

government agencies. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $6 to $29 million or less annually. For purposes of the 
RFA, all hospices are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. This 
notice is the result of a statutory formula that does not involve any 
agency discretion or policy. Therefore, we do not believe further 
regulatory analysis is necessary because there are no regulatory 
options to be considered.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. Because participation in the SCHIP 
program on the part of States is voluntary, any payments and 
expenditures States make or incur on behalf of the program that are not 
reimbursed by the Federal Government are made voluntarily. This notice 
will not create an unfunded mandate on States, tribal, or local 
governments. Therefore, we are not required to perform an assessment of 
the costs and benefits of these regulations.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this notice and have determined that it 
does not significantly affect States' rights, roles, and 
responsibilities.
    Low-income children will benefit from payments under this program 
through increased opportunities for health insurance coverage. We 
believe this notice will have an overall positive impact by informing 
States, the District of Columbia, and Commonwealths and Territories of 
the extent to which they are permitted to expend funds under their 
child health plans using the FY 2000 and FY 2001 allotment's 
redistribution and retained amounts.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

(Section 1102 of the Social Security Act (42 U.S.C. 1302))

(Catalog of Federal Domestic Assistance Program No. 93.767, State 
Children's Health Insurance Program)

    Dated: March 5, 2004.
Dennis G. Smith,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: March 25, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-14580 Filed 7-22-04; 8:45 am]
BILLING CODE 4120-01-P