Order Code RS21071
Updated June 7, 2004
CRS Report for Congress
Received through the CRS Web
Medicaid Expenditures, FY2001 and FY2002
Karen L. Tritz
Analyst in Social Legislation
Domestic Social Policy Division
Summary
Medicaid is a health insurance program jointly funded by the states and the federal
government. Generally, eligibility is limited to low-income children, pregnant women,
parents of dependent children, people with disabilities, and the elderly. Each state
designs and administers its own program within broad federal guidelines.
The federal government shares in a state’s Medicaid costs by means of a statutory
formula based on a state’s per capita income, adjusted annually. The federal medical
assistance percentage (FMAP) is the percentage of Medicaid benefit costs paid for by
the federal government. FMAPs must not fall below 50% and may not exceed 83%.
Overall, during FY2001 and FY2002, the federal government financed about 57% of all
Medicaid costs.
Federal payments for health care services and administration of the Medicaid
program totaled $130 billion in FY2001, 11.1% higher than in FY2000. Combined state
and federal spending for Medicaid totaled $228 billion in FY2001, a 10.7% increase
over FY2000.
Federal payments for health care services and administration of the Medicaid
program totaled $146 billion in FY2002, 12.9% higher than in FY2001. Combined state
and federal spending for Medicaid totaled $258 billion in FY2002, a 13.2% increase
over FY2001. This report will be updated when new data are available.
Medicaid is a health insurance program jointly funded by the states and the federal
government. Eligibility requirements are set by the states within federal guidelines
including age, income, resources, family structure, and disability. Generally, eligibility
is limited to certain categories or groups of individuals; namely, low-income children,
pregnant women, parents of dependent children, people with disabilities, and the elderly.
Within federal guidelines, each state also designs and administers its own program.
The federal government shares in a state’s Medicaid service costs through a variable
matching formula. After a state pays for a Medicaid-covered service, it makes a claim for
the federal share of the payment and is reimbursed at the federal matching rate for that
state. The federal matching rate for the cost of services provided to Medicaid
beneficiaries, known as the federal medical assistance percentage (FMAP), is inversely
Congressional Research Service ˜ The Library of Congress

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related to a state’s per capita income and may range from 50% to 83%. For the territories
and the District of Columbia, however, the FMAP is statutorily set at 50% and 70%
respectively. In FY2001 federal matching rates for states ranged from 50% to 77%. In
FY2002, FMAP rates ranged from 50% to 76%. In FY2002, 11 states received the
minimum of 50% federal matching on Medicaid payments, and Mississippi had the
highest FMAP at 76.09%. The federal share of most state expenditures to administer the
program is 50% in all states; higher matching is allowed for certain administrative
activities, however.
The 108th Congress enacted legislation which provided temporary fiscal relief for
state and local governments including $10 billion to states through changes in Medicaid
financing. Specifically, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L.
108-27) held states harmless for any declines in the FMAP percentage for the prior year
for the last two quarters of FY2003 and the first three quarters of FY2004 and added 2.95
percentage points each states FMAP rate. In addition, the spending caps for the territories
(as discussed later) are raised by 5.9% for the last two quarters of FY2003 and first three
quarters of FY2004.
Medicaid Expenditures
Federal and state expenditures for Medicaid benefits and program administration
totaled $228 billion in FY2001, a 10.7% increase from the $206 billion spent the year
before. Federal and state expenditures for Medicaid benefits and program administration
totaled $258 billion in FY2002, a 13.2% increase from the $228 billion spent the previous
year (Table 1). Federal spending accounted for approximately 57% of all Medicaid
expenditures during FY2001 and FY2002, with the other 43% paid by state and local
governments. Payments for services accounted for 88% of total Medicaid expenditures
in FY2001 and 89% in FY2002. Disproportionate share hospital (DSH) payments1
accounted for 7% of expenditures in FY2001 and 6% in FY2002, and program
administration accounted for about 5% of total spending in both years (Tables 3 and 4).
Table 1. Medicaid Spending, FY2000, FY2001, and FY2002
(in millions of dollars)
FY2000
FY2001
FY2002
State
$88,991
$97,994
$111,255
Federal $116,696
$129,634
$146,308
Totala
$205,687
$227,628
$257,563
Source: Table prepared by Congressional Research Service (CRS) based on analysis from Centers for
Medicare and Medicaid Services (CMS), Form 64.
a. Medicaid expenditures for the territories are not included.
1 Under Medicaid, states must make disproportionate share (DSH) adjustments to the payment
rates of certain hospitals treating large numbers of low income and Medicaid patients — on the
assumption that hospitals incur higher costs for such persons.

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Just over half of all FY2001 and FY2002 federal Medicaid spending occurred in nine
states.2 Medicaid expenditures vary a great deal across states, as shown in Tables 3 and
4, for reasons that include differences in eligible populations in the state, provider
reimbursement rates, the range of optional services covered, the number of beneficiaries
who are elderly or who have a disability, the breadth of private health insurance coverage
in the state, and the state’s federal medical assistance percentage (FMAP). There is no
limit on the amount of federal funds a state may receive provided that the state incurs the
Medicaid expenses.
In contrast, the amount of federal expenditures in the five territories is subject to
spending caps. The five territories include American Samoa, Commonwealth of the
Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands. In FY2001,
the federal cap on Medicaid spending for the territories was $203 million, a 5% increase
from FY2000. In FY2002 this amount increased 3% to $210 million.
Medicaid Spending by Category
Though total Medicaid spending had annual increases of 10.7% and 13.2% for
FY2001 and FY2002 over the previous year, the annual growth in Medicaid expenditures
varied widely by category of expenditures and by year (Figure 1). For example, DSH
payments grew only by a couple of percentage points each year,3 and expenditures for
Medicaid prescription drugs increased by 19% in both FY2001 and FY2002 over the
previous year. Other categories of spending had significant differences in the annual
growth rates between the two years of analysis. For example, Medicaid managed care
payments grew by 9% in FY2001 over the previous year and 24% in FY2002 over
FY2001.
The broad categories shown in Figure 1 and Table 2 combine several specific types
of Medicaid services. For example, acute care includes services such as hospitals,
physicians, lab and X-ray, and nurse practitioner. Managed care includes payments to
Medicaid managed care organizations and individuals who are paid a fee to manage the
care of Medicaid beneficiaries referred to as “primary care case managers.” The data does
not permit disaggregating managed care payments into specific types of services (e.g.,
hospital, prescription drug). Long-term care includes services such as nursing facilities,
home and community-based waivers, and mental health facilities. Third party payments
include payment of Medicare premiums, and co-payments and payments of private
insurance premiums on behalf of Medicaid beneficiaries.
2 The nine states in order of spending for FY2001 are: NY, CA, TX, PA, OH, FL, MI, IL, and
NC. The nine states, in order of spending for FY2002 are: NY, CA, TX, PA, FL, OH, IL, NC and
MA.
3 Congress has restricted the growth in DSH payments by setting limits on the amounts available
to each state and setting national limits.

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Figure 1. Annual Percentage Increase in Medicaid Expenditures by Category,
FY2001 and FY2002
Note: These percentages were calculated using unrounded expenditures and may differ slightly from
calculations done using the rounded numbers in Table 2 below.
Source: CRS based on analysis from Centers for Medicare and Medicaid Services (CMS), Form 64.
Medicaid expenditures for the territories are not included.
Table 2. Total Medicaid Expenditures by Category,
FY2000, FY2001 and FY2002
(in billions)
Category of Spendinga
FY2000
FY2001
FY2002
All Medicaid servicesb
$179.6
$200.0
$229.7
— Acute care
$52.4
$57.8
$66.9
— Prescription drugs
$16.6
$19.7
$23.4
— Long-term care
$79.7
$88.2
$98.0
— Third party payments
$9.0
$10.5
$10.9
— Managed care payments
$25.4
$27.7
$34.4
DSH
$15.6
$15.8
$15.9
Administration
$10.5
$11.8
$11.9
Total Expenditures
$205.7
$227.6
$257.6
Source: Table prepared by Congressional Research Service (CRS) based on analysis from Centers for
Medicare and Medicaid Services (CMS), Form 64.
a. Medicaid expenditures for the territories are not included.
b. The sum of the specific categories of services is greater than “All Medicaid Services” because offsetting
collections to Medicaid (e.g., estate recovery, overpayments identified through fraud and abuse) are
not attributable to a specific category of service and are not subtracted from the reported amounts.
Collections ranged from $3.5 to $3.9 between FY2000 and FY2002.

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Table 3. Medicaid Expenditures by State, FY2001
(in millions of dollars)
Total Expenditures
Federal Expenditures
Medical
DSH
Admin.
Total
Medical
DSH
Admin.
Total
State
assistance payments
assistance payments
Alabama
$2,509
$367
$112
$2,988
$1,759
$257
$65
$2,081
Alaska
$563
$14
$47
$624
$376
$8
$28
$413
Arizona
$2,562
$103
$159
$2,824
$1,737
$68
$81
$1,886
Arkansas
$1,829
$23
$95
$1,947
$1,338
$17
$57
$1,411
California
$21,944
$1,926
$1,913
$25,783
$11,372
$987
$1,058
$13,417
Colorado
$1,956
$186
$105
$2,247
$980
$93
$59
$1,132
Connecticut
$2,923
$291
$166
$3,379
$1,462
$145
$90
$1,697
DC
$898
$82
$39
$1,019
$629
$52
$21
$702
Delaware
$588
$4
$43
$635
$295
$2
$27
$324
Florida
$8,219
$339
$488
$9,046
$4,663
$192
$266
$5,121
Georgia
$4,612
$425
$277
$5,315
$2,758
$254
$156
$3,168
Hawaii
$635
$0
$41
$675
$342
$0
$25
$367
Idaho
$683
$10
$53
$746
$484
$7
$31
$523
Illinois
$7,386
$379
$657
$8,421
$3,705
$190
$354
$4,248
Indiana
$3,353
$656
$191
$4,200
$2,083
$407
$104
$2,594
Iowa
$1,653
$14
$84
$1,751
$1,037
$9
$49
$1,095
Kansas
$1,639
$47
$88
$1,775
$982
$28
$51
$1,061
Kentucky
$3,113
$191
$94
$3,398
$2,193
$135
$56
$2,384
Louisiana
$3,330
$872
$108
$4,310
$2,349
$615
$59
$3,023
Maine
$1,266
$49
$72
$1,387
$838
$33
$39
$909
Maryland
$3,194
$63
$238
$3,494
$1,596
$31
$131
$1,758
Massachusetts
$6,134
$485
$316
$6,935
$3,088
$243
$175
$3,505
Michigan
$6,787
$432
$673
$7,891
$3,818
$242
$369
$4,429
Minnesota
$3,772
$64
$241
$4,077
$1,940
$33
$129
$2,101
Mississippi
$2,260
$179
$78
$2,517
$1,738
$137
$46
$1,922
Missouri
$4,290
$455
$218
$4,963
$2,636
$278
$125
$3,038
Montana
$482
$0
$40
$522
$357
$0
$24
$380
Nebraska
$1,187
$0
$65
$1,252
$719
$0
$39
$758
Nevada
$598
$76
$41
$716
$304
$38
$23
$365
New Hampshire
$715
$158
$49
$922
$358
$79
$29
$466
New Jersey
$6,006
$1,117
$238
$7,361
$3,015
$559
$134
$3,708
New Mexico
$1,452
$15
$77
$1,545
$1,085
$11
$46
$1,142
New York
$28,912
$2,456
$1,100
$32,468
$14,497
$1,228
$595
$16,321
North Carolina
$5,735
$415
$279
$6,429
$3,591
$259
$152
$4,003
North Dakota
$405
$1
$23
$430
$286
$1
$13
$300
Ohio
$7,796
$637
$424
$8,857
$4,608
$376
$228
$5,212
Oklahoma
$1,998
$23
$150
$2,171
$1,450
$16
$84
$1,550
Oregon
$2,628
$30
$219
$2,878
$1,586
$18
$125
$1,730
Pennsylvania
$10,147
$761
$478
$11,386
$5,483
$408
$261
$6,153
Rhode Island
$1,107
$81
$67
$1,255
$596
$44
$38
$678
South Carolina
$2,647
$372
$101
$3,120
$1,872
$262
$60
$2,194
South Dakota
$463
$1
$13
$477
$326
$1
$8
$335
Tennessee
$5,501
$0
$165
$5,666
$3,515
$0
$89
$3,604
Texas
$10,238
$1,346
$657
$12,240
$6,219
$816
$357
$7,392
Utah
$833
$1
$71
$905
$596
$1
$43
$639
Vermont
$575
$27
$46
$648
$360
$17
$28
$404
Virginia
$2,800
$236
$165
$3,202
$1,487
$123
$92
$1,702
Washington
$3,978
$328
$464
$4,770
$2,026
$166
$244
$2,436
West Virginia
$1,446
$102
$69
$1,618
$1,090
$77
$39
$1,206
Wisconsin
$3,964
$12
$203
$4,179
$2,356
$7
$111
$2,475
Wyoming
$243
$0
$21
$264
$159
$0
$14
$172
United Statesa
$199,956
$15,854
$11,818 $227,628
$114,140
$8,970
$6,524
$129,634
Source: Table prepared by Congressional Research Service (CRS) based on analysis from Centers for
Medicare and Medicaid Services (CMS), Form 64.
a. This does not include expenditures for the five U.S. territories.

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Table 4. Medicaid Expenditures by State, FY2002
(in millions of dollars)
Total Expenditures
Federal Expenditures
Medical
DSH
Medical
DSH
State
Assistance Payments Admin
Total
Assistance Payments Admin
Total
Alaska
$667
$18
$54
$739
$431
$10
$31
$472
Alabama
$2,719
$374
$101
3,195
$1,921
$263
$58
2,243
Arkansas
$2,223
$15
$103
$2,341
$1,620
$11
$64
$1,694
Arizona
$3,454
$88
$214
$3,756
$2,320
$57
$114
$2,490
California
$25,541
$1,350
$2,165
$29,056
$13,246
$694
$1,184
$15,124
Colorado
$2,161
$162
$90
$2,413
$1,086
$81
$51
$1,218
Connecticut
$3,215
$242
$145
$3,601
$1,621
$121
$79
$1,821
Dist. Of Col.
$981
$40
$60
$1,082
$688
$28
$35
$751
Delaware
$631
$3
$54
$688
$317
$2
$36
$354
Florida
$9,480
$392
$528
$10,400
$5,365
$221
$288
$5,874
Georgia
$5,808
$433
$303
$6,544
$3,429
$256
$180
$3,865
Hawaii
$740
$0
$64
$804
$417
$0
$38
$456
Iowa
$2,548
$28
$80
$2,655
$1,603
$17
$46
$1,667
Idaho
$763
$10
$63
$836
$543
$7
$39
$589
Illinois
$8,432
$377
$701
$9,510
$4,236
$188
$376
$4,801
Indiana
$4,049
$399
$181
$4,630
$2,518
$247
$104
$2,869
Kansas
$1,796
$41
$120
$1,956
$1,082
$25
$69
$1,176
Kentucky
$3,566
$197
$100
$3,864
$2,497
$138
$60
$2,695
Louisiana
$4,025
$861
$136
$5,022
$2,836
$605
$88
$3,529
Massachusetts
$7,440
$623
$317
$8,380
$3,734
$312
$176
$4,221
Maryland
$3,477
$137
$274
$3,888
$1,751
$68
$145
$1,965
Maine
$1,379
$51
$60
$1,490
$920
$34
$37
$991
Michigana
$7,157
$405
($164)
$7,398
$4,040
$228
($123)
$4,145
Minnesota
$4,355
$59
$248
$4,662
$2,188
$30
$133
$2,351
Missouri
$4,824
$537
$216
$5,576
$2,953
$328
$116
$3,396
Mississippi
$2,688
$189
$88
$2,965
$2,047
$144
$52
$2,244
Montana
$571
$0
$27
$598
$422
$0
$16
$438
North Carolina
$6,264
$460
$302
$7,026
$3,879
$283
$167
$4,329
North Dakota
$459
$2
$23
$484
$323
$2
$13
$338
Nebraska
$1,328
$11
$82
$1,421
$794
$7
$47
$847
New Hampshire
$835
$181
$59
$1,075
$418
$91
$35
$544
New Jersey
$6,530
$1,216
$241
$7,987
$3,273
$608
$134
$4,015
New Mexico
$1,765
$12
$64
$1,840
$1,304
$9
$37
$1,350
Nevada
$732
$76
$56
$864
$369
$38
$33
$440
New York
$33,434
$2,861
$1,182
$37,477
$16,750
$1,431
$646
$18,827
Ohio
$9,004
$654
$320
$9,978
$5,302
$385
$176
$5,863
Oklahoma
$2,236
$24
$167
$2,428
$1,593
$17
$97
$1,707
Oregon
$2,549
$23
$226
$2,798
$1,522
$14
$129
$1,665
Pennsylvania
$11,352
$779
$557
$12,688
$6,216
$425
$305
$6,947
Rhode Island
$1,270
$88
$63
$1,421
$667
$46
$37
$750
South Carolina
$2,902
$391
$133
$3,426
$2,020
$271
$76
$2,368
South Dakota
$549
$1
$16
$566
$373
$1
$9
$383
Tennessee
$5,787
$0
$245
$6,032
$3,689
$0
$130
$3,819
Texas
$12,100
$1,423
$707
$14,230
$7,302
$857
$386
$8,544
Utah
$972
$12
$78
$1,062
$683
$9
$48
$739
Virginia
$3,630
$182
$187
$4,000
$1,877
$94
$108
$2,078
Vermont
$632
$29
$55
$716
$400
$18
$34
$451
Washington
$4,811
$358
$491
$5,659
$2,440
$180
$260
$2,880
Wisconsin
$4,144
$49
$186
$4,380
$2,433
$29
$104
$2,566
West Virginia
$1,501
$83
$73
$1,657
$1,130
$62
$41
$1,233
Wyoming
$274
$0
$24
$298
$170
$0
$16
$186
United Statesb
$229,748
$15,949
$11,866
$257,563 $130,756
$8,991
$6,560
$146,308
Source: Table prepared by Congressional Research Service (CRS) based on analysis from Centers for
Medicare and Medicaid Services (CMS), Form 64.
a. Form-64 is also used to report adjustments from a prior period resulting in a negative value.
b. This does not include expenditures for the five U.S. territories.

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