Nature and Source of Payments to States

4002 - Nature and Source of Payments to States (Rev. 1, 05-21-04) 4002A - Trust Funds for Title XVIII-Related Activities (Rev. 1, 05-21-04) Execution of an agreement with a SA under §1864 of the Act involves the assumption by CMS of the obligation to meet the necessary and reasonable expenses of performing services provided for in the agreement. Payments to States under §1864 of the Act are made from the Federal Hospital and Supplementary Medical Insurance Trust Funds to cover the costs of services performed under the agreement are authorized by §1864 of the Act. The costs of health insurance benefits and the administrative costs of the program are charged to the Trust Funds. Administrative expenses (including advances or payment to States under §1864 of the Act) are authorized for expenditure from the Trust Funds only through the regular appropriation process of Congress. 4002B - Grant Funds for Title XIX-Related Activities (Rev. 1, 05-21-04) Sections 1903(a)(4) and (a)(7) provide that to the extent the SA is performing certification activities pursuant to an approved State plan, the Federal financial grant mechanisms are used to pay the State for a percentage of the cost of those activities during each quarter of the year. The matching grants come from appropriated general revenues of the United States. The Secretary is authorized to pay a percentage against these costs for the proper and efficient administration of the State plan. Whereas the title XVIII trust funds are controlled under terms of the State agreement, the grant funds are controlled by the established rules of Federal grant laws and regulations.