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Friday, February 17, 2012

Medicaid: The Federal Medical Assistance Percentage (FMAP)

Alison Mitchell
Analyst in Health Care Financing

Evelyne P. Baumrucker
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. The federal government’s share of a state’s expenditures is called the federal medical assistance percentage (FMAP) rate. The remainder is referred to as the nonfederal share, or state share.

Generally determined annually, the FMAP formula 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 FY2013, regular FMAP rates range from 50.00% to 74.43%. The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services.

Some recent issues related to FMAP include state fiscal conditions, the disaster-related FMAP adjustment, and the exclusion of certain employer contributions from the FMAP calculation. While the fiscal environment for states is improving, states continue to face fiscal challenges, which makes it difficult for states to finance the state share of Medicaid expenditures. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) included a provision providing a disaster-recovery FMAP adjustment for states that have experienced a major, statewide disaster. The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, P.L. 111-3) included a provision allowing a state’s FMAP rate to be adjusted if the state had significantly disproportionate employer pension and insurance fund contributions in any calendar year since 2003.

Legislation was enacted during the 111th Congress that impacts the FMAP rate. First, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) provided assistance to states through a temporary FMAP rate increase that was later extended by P.L. 111-226. Also, ACA contains a number of provisions affecting FMAP rates. Most notably, ACA provides initial FMAP rates of up to 100% for certain “newly eligible” individuals.

During the 112th Congress, there has been a focus on reducing the federal deficit; controlling federal Medicaid spending is often discussed as a means to reduce federal expenditures. For this reason, the FY2012 House budget resolution proposed restructuring Medicaid from an entitlement program to a block grant, and most federal deficit reduction proposals include Medicaid provisions.

This report describes the FMAP calculation used to reimburse states for most Medicaid expenditures, and it lists the statutory exceptions to the regular FMAP rate. In addition, this report discusses other FMAP-related issues, including state fiscal conditions, the temporary FMAP rate increase, the exclusion of certain employer contributions, FMAP changes in ACA, the Medicaid proposal included in the House budget resolution, and other federal deficit reduction proposals.

Date of Report: January 27, 2012
Number of Pages: 40
Order Number: RL32950
Price: $29.95

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