Order Code RS21262
Updated February 17, 2004
CRS Report for Congress
Received through the CRS Web
Federal Medical Assistance Percentage
(FMAP) for Medicaid
Christine Scott
Specialist in Tax Economics
Domestic Social Policy Division
Summary
Medicaid is a health insurance program jointly funded by the federal government
and the states. Generally, eligibility for Medicaid is limited to low-income children,
pregnant women, parents of dependent children, the elderly, and people with disabilities.
The federal government’s share of a state’s expenditures for Medicaid is called the
federal medical assistance percentage (FMAP). Determined annually, the FMAP is
designed so that the federal government pays a larger portion of Medicaid costs in states
with lower per capita income relative to the national average (and vice versa for states
with higher per capita incomes). For FY2004, state FMAPs range from 50% to 77%;
that is, the federal government’s share of Medicaid costs for FY2004 ranges from 50%
to 77% depending on the state.
The current fiscal situation of the states has focused attention on Medicaid costs.
In the 107th Congress legislation to increase the FMAP passed the Senate. Legislation
was introduced in the House but did not pass. In the 108th Congress legislation has been
introduced to increase the FMAP for FY2003 and FY2004 (H.R. 816, H.R. 1593, H.R.
2000, S. 10, S. 106, S. 138, S. 414, S. 565, and S. 1012), or alter specific state FMAPs
(H.R. 675, H.R. 2716, and S. 294). The budget reconciliation bill, H.R. 2 (P.L. 108-27)
contained a provision for temporary fiscal relief to states that includes increased
payments under Medicaid. H.R. 2854 (P.L. 108-74) clarified the reinstatement
requirements for states related to the higher FMAP payments under P.L. 108-27. This
report will be updated as legislative activities warrant.
Introduction
Medicaid is a health insurance program jointly funded by the federal government and
the states. While states have considerable flexibility to design and administer their
Medicaid programs, certain groups of individuals must be covered for certain categories
of services. Generally, eligibility is limited to low-income children, pregnant women,
parents of dependent children, the elderly, and people with disabilities. The federal
Congressional Research Service ˜ The Library of Congress

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government’s share of Medicaid costs is determined by a formula included in statute;
states must contribute the remaining portion of costs in order to qualify for federal funds.
Federal Medical Assistance Percentage (FMAP)
The federal government’s share of a state’s expenditures for Medicaid is called the
federal medical assistance percentage (FMAP). The FMAP for each of the 50 states and
the District of Columbia is determined annually based on a statutory formula that uses the
average per capita income of each state and the United States for the three most recent
calendar years for which data are available from the Department of Commerce. This
formula is designed to pay a higher FMAP to states with lower per capita income relative
to the national average (and vice versa for states with higher per capita incomes). The
Secretary of Health and Human Services (HHS) must promulgate the FMAP between
October 1 and November 1 of each year. This FMAP is in effect for the 1-year period
beginning the following October. Thus, the FMAP for FY2003, the year beginning
October 2002, was promulgated in 2001. FMAPs must not fall below 50% or exceed
83%.1 Overall, the federal government finances about 57% of all Medicaid costs
annually.
In the 50 states and the District of Columbia, Medicaid is an individual entitlement.
There are no limits on the federal payments for Medicaid as long as the state is able to
contribute its share of the matching funds. In contrast, Medicaid programs in the
territories are subject to spending caps. The spending caps for FY2003 are $201.4 million
for Puerto Rico, $6.14 million for Guam, $6.35 million for the Virgin Islands, $3.62
million for American Samoa, and $2.19 million for the Northern Mariana Islands. For
subsequent fiscal years, these caps are increased by the percentage change in the medical
care component of the Consumer Price Index for All Urban Consumers (as published by
the Bureau of Labor Statistics). The FMAP is statutorily set at 50% for the territories.
Therefore, the federal government pays 50% of the cost of Medicaid items and services
in the territories up to the spending caps. In addition, for disproportionate share to
hospital (DSH) adjustments, the federal government matches state payments using the
FMAP, but the total DSH adjustment payments in a state are subject to an annual limit
at the state and facility level.
Legislative Developments
The recent fiscal crisis for states has focused attention on the impact of Medicaid
spending on state budgets.2
During the 107th Congress, the Senate passed legislation (S. 812) which would have
provided fiscal relief to the states through a temporary increase in the federal
government’s share of Medicaid program costs by increasing each state’s FMAP. The
Senate-passed bill would have maintained a state’s FY2002 FMAP for FY2003 if the
1 For the District of Columbia, the FMAP is permanently set to 70.00% starting in FY1998. For
Alaska, the state percentage is calculated using the 3-year average per capita income for the state
divided by 1.05, for FY2001 through FY2005 only.
2 For more information on the role of Medicaid in state budgets see CRS Report RL31773,
Medicaid and the Current State Fiscal Crisis, by Christine Scott.

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FY2003 FMAP was lower (“hold-harmless”). In addition, each state would have received
an increase in their FMAP of 1.35 percentage points for FY2003. Although bills were
introduced in the House to also provide a temporary increase in the FMAP, no further
action occurred. Other proposals were considered that would have provided grants to
states for general fiscal relief but did not specify that funds would be for Medicaid
purposes.
In the 108th Congress, a number of bills have been introduced and referred to
committee, which would change the FMAPs. H.R. 1593, S. 138 and S. 565 would
increase the FMAP for each state in the last two quarters of FY2003 and for all of
FY2004 by 2.45 percentage points respectively. The bills also provide a hold-harmless
provision for these 2 years to prevent declines in the FMAP (from the prior year) before
the 2.45 percentage point increase. S. 138 provides an additional $10 billion for the
Social Services Block Grant. H.R. 1593 and S. 565 provides $30 billion in grants to
states and local governments for budget crisis relief and $10 billion in homeland security
grants. The spending caps for the territories would be increased by 4.9% for the last 2
quarters of FY2003 and all of FY2004. The bills do not alter the DSH allotments (limits)
for the states.
S. 10 would increase the FMAP for each state in the last 2 quarters of FY2003 and
for all of FY2004 by 2.38 percentage points. The bill provides a hold-harmless provision
for both years to prevent declines in the FMAP (from the prior year) before the 2.38
percentage point increase. The spending caps for the territories would be increased by
4.76% for the last 2 quarters of FY2003 and all of FY2004. Other provisions in S. 10
include: providing an FMAP of 90% for costs associated with language services for
individuals with limited English proficiency; expanding the authority for states to use
certain funds (State Children’s Health Insurance Program) for Medicaid expenditures and
receive the enhanced FMAP (the FMAP for SCHIP expenditures is referred to as an
“enhanced FMAP”); and providing states with the option of allowing families of disabled
children to purchase Medicaid coverage.
S. 106 would increase the FMAP for each state in the last two quarters of FY2003
and for all of FY2004 by 1.35 percentage points respectively. The bill also provides a
hold-harmless provision for these 2 years to prevent declines in the FMAP (from the prior
year) before the 1.35 percentage point increase, and an additional $3 billion in temporary
grants to states. The spending caps for the territories would be increased by 2.7% for the
last 2 quarters of FY2003 and all of FY2004. The bill does not alter the DSH allotments
(limits) for the states. The bill also provides tax cuts and $5 billion for Workforce
Investment Act activities in FY2003.
HR. 816 would increase the FMAP for each state in the last two quarters of FY2003
and for all of FY2004 by 2.0 percentage points respectively. There is also an additional
2.5 percentage point increase for high unemployment states. The bill also provides a
hold-harmless provision for these 2 years to prevent declines in the FMAP (from the 2002
level) before the percentage point increases. The spending caps for the territories would
be increased by 9.0% for the last 2 quarters of FY2003 and all of FY2004. The bill does
not alter the DSH allotments (limits) for the states.
S. 414 would increase the FMAP for each state in the last two quarters of FY2003
and the first quarter of FY2004 by 3.76 percentage points respectively. The bill also

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provides a hold-harmless provision for these 2 years to prevent declines in the FMAP
(from the prior year) before the 3.76 percentage point increase. The spending caps for the
territories would be increased by 7.52% for the last 2 quarters of FY2003 and the first
quarter of FY2004. The bill does not alter the DSH allotments (limits) for the states. The
bill also provides tax cuts and additional funding to states for homeland security and
education.
S. 1012 and H.R. 2000 would increase the FMAP for each state in the last two
quarters of FY2003 and for all of FY2004 by 3.73 percentage points respectively. The
bill also provides a hold-harmless provision for these 2 years to prevent declines in the
FMAP (from the prior year) before the 3.73 percentage point increase, and an additional
$15 billion in temporary grants to states. The spending caps for the territories would be
increased by 7.46% for the last 2 quarters of FY2003 and all of FY2004. The bill also
alter the DSH allotments (limits) for the states.
Other legislation introduced in the 108th Congress would change specific FMAPs
rather than all FMAPs. The FMAP for Alaska for 2001 through 2005 is done using a 3-
year per capita average income. S. 294 would make this formula permanent. H.R. 675
would increase the FMAP for the territories from 50% to 77%, and remove the spending
caps. H.R. 2716 would increase the FMAP to 100% for services provided to individuals
permitted to enter the United States under the Compact of Free Association, and remove
payment for these services from the annual cap on payments to the territories.
The budget reconciliation bill, H.R. 2 (P.L. 108-27), contained a provision providing
temporary fiscal relief for states and local governments. The bill provided $10 billion to
the states through changes in Medicaid financing. The FMAPs for the last 2 quarters of
FY2003 and the first 3 quarters of FY2004 are held harmless for declines from the prior
year, and 2.95 percentage points are added to the FMAPs. In addition, the spending caps
for the territories are raised by 5.9% for the last 2 quarters of FY2003 and first 3 quarters
of FY2004. The bill also provided $5 billion in grants to the states (including the District
of Columbia, Puerto Rico, and the territories)in both FY2003 and FY2004 based on
population. The grant funds must be used for improving education or job training, health
care services, transportation or other infrastructure, law enforcement or public safety, and
maintaining essential government services.
P.L. 108-27 provided that to qualify for the increased FMAP payments, a state
cannot have a Medicaid plan with more restrictive eligibility rules than the plan in effect
on September 2, 2003. If a state restores the program eligibility to the levels in effect on
September 2, 2003, then the state would qualify for increased matching payments for the
entire quarter in which eligibility was reinstated. H.R. 2854 provides that if state reduces
eligibility after September 2, 2003, and later restores eligibility to the September 2, 2003
levels, the state would qualify for the higher payments from the date of the eligibility
restoration rather than for the entire calendar quarter.
If a state expands eligibility rules after the beginning of the higher payments (April
1, 2003) and before September 2, 2003, under P.L. 108-27 the state would not be eligible
for the higher payments for the period beginning on April 1, 2003 to the date that
eligibility was expanded. H.R. 2854 (P.L. 108-74) provides that under these
circumstances, the state would be eligible for the higher payments.

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Table 1 provides the FMAP for each state, the District of Columbia, and the
territories for FY2002-FY2005, including the rates under H.R. 2 for FY2003 and FY2004.

Table 1. Federal Medical Assistance Percentage (FMAP)
for FY2002-FY2005, by State
FY2003
FY2004
Last 2
First 3
FY2004
First 2
Quarters Quarters
Last
State
FY2002 Quarters (H.R. 2)
(H.R. 2) Quarter FY2005
Alabama
70.45
70.60
73.55
73.70
70.75
70.83
Alaska
57.38
58.27
61.22
61.34
58.39
57.58
Arizona
64.98
67.25
70.20
70.21
67.26
67.45
Arkansas
72.64
74.28
77.23
77.62
74.67
74.75
California
51.40
50.00
54.35
52.95
50.00
50.00
Colorado
50.00
50.00
52.95
52.95
50.00
50.00
Connecticut
50.00
50.00
52.95
52.95
50.00
50.00
Delaware
50.00
50.00
52.95
52.95
50.00
50.38
District of Columbia
70.00
70.00
72.95
72.95
70.00
70.00
Florida
56.43
58.83
61.78
61.88
58.93
58.90
Georgia
59.00
59.60
62.55
62.55
59.58
60.44
Hawaii
56.34
58.77
61.72
61.85
58.90
58.47
Idaho
71.02
70.96
73.97
73.91
70.46
70.62
Illinois
50.00
50.00
52.95
52.95
50.00
50.00
Indiana
62.04
61.97
64.99
65.27
62.32
62.78
Iowa
62.86
63.50
66.45
66.88
63.93
63.55
Kansas
60.20
60.15
63.15
63.77
60.82
61.01
Kentucky
69.94
69.89
72.89
73.04
70.09
69.60
Louisiana
70.30
71.28
74.23
74.58
71.63
71.04
Maine
66.58
66.22
69.53
69.17
66.01
64.89
Maryland
50.00
50.00
52.95
52.95
50.00
50.00
Massachusetts
50.00
50.00
52.95
52.95
50.00
50.00
Michigan
56.36
55.42
59.31
58.84
55.89
56.71
Minnesota
50.00
50.00
52.95
52.95
50.00
50.00
Mississippi
76.09
76.62
79.57
80.03
77.08
77.08
Missouri
61.06
61.23
64.18
64.42
61.47
61.15
Montana
72.83
72.96
75.91
75.91
72.85
71.90
Nebraska
59.55
59.52
62.50
62.84
59.89
59.64
Nevada
50.00
52.39
55.34
57.88
54.93
55.90
New Hampshire
50.00
50.00
52.95
52.95
50.00
50.00
New Jersey
50.00
50.00
52.95
52.95
50.00
50.00
New Mexico
73.04
74.56
77.51
77.80
74.85
74.30
New York
50.00
50.00
52.95
52.95
50.00
50.00
North Carolina
61.46
62.56
65.51
65.80
62.85
63.63
North Dakota
69.87
68.36
72.82
71.31
68.31
67.49
Ohio
58.78
58.83
61.78
62.18
59.23
59.68
Oklahoma
70.43
70.56
73.51
73.51
70.24
70.18

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FY2003
FY2004
Last 2
First 3
FY2004
First 2
Quarters Quarters
Last
State
FY2002 Quarters (H.R. 2)
(H.R. 2) Quarter FY2005
Oregon
59.20
60.16
63.11
63.76
60.81
61.12
Pennsylvania
54.65
54.69
57.64
57.71
54.76
53.84
Rhode Island
52.45
55.40
58.35
58.98
56.03
55.38
South Carolina
69.34
69.81
72.76
72.81
69.86
69.89
South Dakota
65.93
65.29
68.88
68.62
65.67
66.03
Tennessee
63.64
64.59
67.54
67.54
64.40
64.81
Texas
60.17
59.99
63.12
63.17
60.22
60.87
Utah
70.00
71.24
74.19
74.67
71.72
72.14
Vermont
63.06
62.41
66.01
65.36
61.34
60.44
Virginia
51.45
50.53
54.40
53.48
50.00
50.00
Washington
50.37
50.00
53.32
52.95
50.00
50.00
West Virginia
75.27
75.04
78.22
78.14
75.19
74.65
Wisconsin
58.57
58.43
61.52
61.38
58.41
58.32
Wyoming
61.97
61.32
64.92
64.27
59.77
57.90
America Samoa
50.00
50.00
52.95
52.95
50.00
50.00
Guam
50.00
50.00
52.95
52.95
50.00
50.00
N. Marina Islands
50.00
50.00
52.95
52.95
50.00
50.00
Puerto Rico
50.00
50.00
52.95
52.95
50.00
50.00
Virgin Islands
50.00
50.00
52.95
52.95
50.00
50.00
Source: Table prepared by the Congressional Research Service (CRS).

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