Alison Mitchell
Analyst in Health Care Financing
Evelyne P. Baumrucker
Analyst in Health Care Financing
Medicaidis a means-tested entitlement program that finances the delivery of primary andacute medical services as well as long-term care. Medicaid is jointlyfunded by the federal government and the states. The federal government’sshare of a state’s expenditures is called the federal medical assistancepercentage (FMAP) rate. The remainder is referred to as the nonfederal share, orstate share.
Generally determined annually, the FMAP formula is designed so that the federalgovernment pays a larger portion of Medicaid costs in states with lowerper capita incomes relative to the national average (and vice versa forstates with higher per capita incomes). FMAP rates have a statutoryminimum of 50% and a statutory maximum of 83%. For FY2014, regular FMAP rates rangefrom 50.00% to 73.05%. The FMAP rate is used to reimburse states for thefederal share of most Medicaid expenditures, but exceptions to the regularFMAP rate have been made for certain states, situations, populations,providers, and services.
Some recent issues related to FMAP include FMAP changes in the PatientProtection and Affordable Care Act (ACA, P.L. 111-148 as amended), federaldeficit reduction proposals that would amend the FMAP rate, and thedisaster-related FMAP adjustment.
The ACA contains a number of provisions affecting FMAP rates. Most notably, theACA provides initial FMAP rates of up to 100% for certain “newly eligible”individuals. Also, under the ACA, “expansion states” receive an enhancedFMAP rate for certain individuals. In addition, ACA provides increasedFMAP rates for certain disaster-affected states, primary care payment rate increases,specified preventive services and immunizations, smoking cessation services for pregnantwomen, specified home and community-based services, health home services forcertain people with chronic conditions, home and community-based attendantservices and supports, and state balancing incentive payments.
Since federal Medicaid expenditures are a large and growing portion of thefederal budget, controlling federal Medicaid spending has been included insome federal deficit reduction proposals. Some of the federal deficitreduction proposals include provisions that would amend the current FMAPstructure through either a blended FMAP or a reduction to the statutory FMAP floor.
The ACA included a provision providing a disaster-recovery FMAP adjustment forstates that have experienced a major, statewide disaster. Louisiana is theonly state that has been eligible for the disaster-recovery adjusted FMAPsince the fourth quarter of FY2011 (when the adjustment was firstavailable). 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 forthe disaster-recovery adjusted FMAP.
This report describes the FMAP calculation used to reimburse states for mostMedicaid expenditures, and it lists the statutory exceptions to theregular FMAP rate. In addition, this report discusses other FMAP-relatedissues, including FMAP changes in ACA, federal deficit reduction proposalsaffecting 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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