how much freedom does a state have in its SCHIP program, I was posed this question?

The State of has recently announced that it would like to expand coverage under its State Children’s Health Insurance Program (SCHIP) to cover children living in families with income up to 250% of the federal poverty level.  To achieve budgetary savings in order to make the proposal budget neutral, the State has also proposed to operate a fully-separate SCHIP program and not to operate the program as part of its Medicaid program.  With regard to this proposal, it is most likely to conclude that:

(A)CMS will approve it, assuming that if VA has suficiant allotments

(B)    CMS will disapprove it, because SCHIP funds can only be used on to cover a “targeted low-income child,” and the definition of “targeted low-income child” in title XXI is children who live in families with income beneath 200% of the federal poverty level.

(C)    CMS will approve it, because States have complete flexibility to develop an SCHIP program design.

(D)    CMS will disapprove it, because Medicaid is an entitlement and a State cannot limit Medicaid benefits.