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). FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. For FY2014, regular FMAP rates range from 50.00% to 73.05%. 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 FMAP changes in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended), federal deficit reduction proposals that would amend the FMAP rate, and the disaster-related FMAP adjustment.
The ACA contains a number of provisions affecting FMAP rates. Most notably, the ACA provides initial FMAP rates of up to 100% for certain “newly eligible” individuals. Also, under the ACA, “expansion states” receive an enhanced FMAP rate for certain individuals. In addition, ACA provides increased FMAP rates for certain disaster-affected states, primary care payment rate increases, specified preventive services and immunizations, smoking cessation services for pregnant women, specified home and community-based services, health home services for certain people with chronic conditions, home and community-based attendant services and supports, and state balancing incentive payments.
Since federal Medicaid expenditures are a large and growing portion of the federal budget, controlling federal Medicaid spending has been included in some federal deficit reduction proposals. Some of the federal deficit reduction proposals include provisions that would amend the current FMAP structure through either a blended FMAP or a reduction to the statutory FMAP floor.
The ACA included a provision providing a disaster-recovery FMAP adjustment for states that have experienced a major, statewide disaster. Louisiana is the only state that has been eligible for the disaster-recovery adjusted FMAP since the fourth quarter of FY2011 (when the adjustment was first available). Both the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) and the Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) amended the formula for the disaster-recovery adjusted FMAP.
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 FMAP changes in ACA, federal deficit reduction proposals affecting the FMAP rate, and the disaster-recovery FMAP adjustment.
Date of Report: January 30, 2013
Number of Pages: 25
Order Number: R42941
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