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Monday, May 16, 2011

Medicaid: The Federal Medical Assistance Percentage (FMAP)

Evelyne P. Baumrucker
Analyst in Health Care Financing

Alison Mitchell
Analyst in Health Care Financing

Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. Historically, eligibility for Medicaid was generally limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities; however, recent changes will soon require coverage for certain other low-income individuals, such as childless adults. The federal government’s share of a state’s expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The remainder is referred to as the nonfederal share, or state share.

Generally determined annually, the FMAP is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). For FY2011, regular FMAPs—that is, excluding the impact of a temporary increase—range from 50.00% to 74.73%.

States are currently receiving a temporary FMAP increase that was included in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) and later extended by P.L. 111-226. It runs for 11 quarters, from the first quarter of FY2009 through the third quarter of FY2011 (i.e., October 2008 through June 2011), subject to certain requirements. The Administration estimates that the original ARRA provision will increase federal Medicaid payments to states by about $91 billion, and the Congressional Budget Office estimates that the six-month extension in P.L. 111- 226 will provide an additional $16 billion. Although ARRA FMAPs were originally set to end December 31, 2010, about 30 states assumed that a six-month extension would be provided when they planned their SFY2011 budgets (most of which began on July 1).

The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended by P.L. 111- 152) also contains a number of provisions that affect FMAPs. Most notably, it provides FMAPs of up to 100% for certain newly eligible individuals. It also provides—subject to various requirements—increased FMAPs for certain disaster-affected states and other changes to the Medicaid program.

Date of Report: May 4, 2011
Number of Pages: 34
Order Number: RL32950
Price: $29.95

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