(a) Subject to the conditions in paragraph (b) of this section, the enhanced FMAP determined in accordance with § 457.622 of this chapter will be used to determine the Federal share of State expenditures, except any expenditures pursuant to section 1923 of the Act for payments to disproportionate share hospitals for—
(1) Services provided to optional targeted low-income children described in § 435.4 or § 436.3 of this chapter; and
(2) Services provided to children born before October 1, 1983, with or without group health coverage or other health insurance coverage, who would be described in section 1902(l)(1)(D) of the Act (poverty-level-related children's groups) if—
(i) They had been born on or after that date; and
(ii) They would not qualify for medical assistance under the State plan in effect on March 31, 1997.
(b) Enhanced FMAP is not available if—
(1) A State adopts income and resource standards and methodologies for purposes of determining a child's eligibility under the Medicaid State plan that are more restrictive than those applied under policies of the State plan (as described in the definition of optional targeted low-income children at § 435.4 of this chapter) in effect on June 1, 1997; or
(2) No funds are available in the State's title XXI allotment, as determined under part 457, subpart F of this chapter for the quarter enhanced FMAP is claimed; or
(3) The State fails to maintain a valid method of identifying services provided on behalf of children listed in paragraph (a) of this section.