Medicaid Financing for the Territories

Medicaid Financing for the Territories

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Updated June 22, 2023
Medicaid Financing for the Territories
Medicaid is a joint federal-state program that finances the
are disregarded. For American Samoa, CNMI, Guam, and
delivery of medical services for low-income individuals.
USVI, the Medicaid data systems improvement
The territories (i.e., American Samoa, the Commonwealth
expenditures are disregarded.
of the Northern Mariana Islands [CNMI], Guam, Puerto
Rico, and the U.S. Virgin Islands [USVI]) operate Medicaid
The annual federal capped funding for the territories was
programs under rules that differ from those applicable to
supplemented by various sources of federal funding from
the 50 states and the District of Columbia (DC).
July 1, 2011, through December 31, 2019. Then, as shown
in Table 1, the FY2020 and FY2021 annual federal capped
American Samoa and CNMI operate their Medicaid
funding for the territories was significantly increased to be
programs under the Social Security Act (SSA) Section
comparable to what the territories had received in recent
1902(j) waiver authority. Under these waivers, the only
years through the combination of the annual federal capped
Medicaid requirements that may not be waived are (1) the
funding and the supplemental Medicaid funding.
federal medical assistance percentage (FMAP) rate (i.e.,
federal matching rate); (2) the annual federal capped
For FY2022, the Centers for Medicare & Medicaid Services
funding; and (3) the requirement that Medicaid payments
(CMS) construed the effect of the amendments that
are for services otherwise coverable.
provided federal Medicaid funding to the territories in
FY2020 and FY2021 as providing federal Medicaid
For Guam, Puerto Rico, and USVI, most of the eligibility
funding to the territories comparable to the annual federal
and benefit requirements for the states apply. However, the
capped funding provided in either FY2020 (for Puerto
Government Accountability Office (GAO) has documented
Rico) or FY2021 (for the other territories).
that these three territories had not met these requirements.
Table 1. Annual Federal Capped Funding,
Medicaid financing for the territories is different from the
FY2019-FY2023
financing for the states and DC. Federal Medicaid funding
($ in mil ions)
to the states and DC is open-ended, but Medicaid programs
in the territories are subject to annual federal capped

FY19 FY20
FY21
FY22
FY23
funding. The FMAP rate for the territories is not determined
American
using the FMAP formula used for the states and DC.
$12
$86
$86
$88
$90
Samoa
Federal Medicaid Funding
CNMI
7
63
62
64
66
Federal Medicaid funding for the territories comes from
Guam
18
131
130
133
137
different sources: annual federal capped funding and SSA
Section 1935(e) funding. In addition, Puerto Rico may
Puerto
receive additional federal Medicaid funding (1) if Puerto
367
2,716
2,809
2,943
3,275
Rico
Rico establishes a floor for Medicaid physician payment
rates and (2) if certain program integrity conditions are met.
USVI
18
129
128
131
135
American Samoa, CNMI, Guam, and the USVI are eligible
Total
$422 $3,125 $3,215 $3,360 $3,704
for additional federal Medicaid funding for improving,
updating, or enhancing a Medicaid data system.
Source: Communication from Centers for Medicare & Medicaid
Services (CMS) June 2019 for FY2019; Social Security Act §1108(g)
Annual Federal Capped Funding
for FY2020 and FY2021; CMS letters to territories September 2021
The main source of federal Medicaid funding for the
for FY2022; and communication from CMS April 2023 for FY2023.
territories is the annual federal capped funding. For all the
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
territories, once the cap is reached, the territories assume
USVI = U.S. Virgin Islands. May not sum to totals due to rounding.
the full cost of Medicaid services or, in some instances,
FY2019 funding was supplemented by other funding sources.
may suspend services or cease payments to providers until
the next fiscal year.
Currently, the annual federal capped Medicaid funding is
determined differently for American Samoa, CNMI, Guam,
Certain Medicaid expenditures are disregarded for purposes
and USVI than for Puerto Rico.
of the annual federal capped funding, such as (1) Medicaid
Electronic Health Record Incentive Program payments, (2)
The annual federal capped funding for Medicaid for
design and operation of the claims and eligibility systems,
American Samoa, CNMI, Guam, and USVI varies by
and (3) services for citizens of Freely Associated States (the
territory and increases annually according to the change in
Marshall Islands, Micronesia, and Palau). Also, for Puerto
the medical component of the Consumer Price Index for All
Rico and USVI, Medicaid Fraud Control Unit expenditures
Urban Consumers (CPI-U). The FY2023 annual federal
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capped funding for these territories was based on each of
states and DC are determined annually and vary by state
these territories’ FY2022 funding. (See Table 1.)
according to each state’s per capita income. The rates can
range from 50% to 83%. By contrast, the FMAP rates for
The amount of Puerto Rico’s annual federal capped funding
the territories are set at a fixed rate in statute.
for Medicaid for FY2023 through FY2027 is specified in
statute, and as shown in Table 1, the amount of funding is
The FMAP rate for American Samoa, CNMI, Guam, and
comparable to what Puerto Rico has received in recent
USVI was recently set at 83% permanently. This means
years (i.e., FY2020 through FY2022). Under current law,
these four territories get 83 cents back from the federal
the annual federal capped Medicaid funding for Puerto Rico
government for most dollars these territories spend on its
is to be significantly reduced in FY2028 and subsequent
Medicaid program up to the federal funding limits.
years.
Currently, the FMAP rate for Puerto Rico is temporarily
Section 1935(e) Funding
increased from 55% to 76%. This temporary increase to
The territories also receive SSA Section 1935(e) funding in
Puerto Rico’s FMAP rates is set to end September 30, 2027.
addition to the annual federal capped funding. Section
1935(e) funding is sometimes referred to as the Enhanced
Table 2. FMAP Rates for the Territories
Allotment Program (or EAP), and territories receive these
funds in lieu of their residents being eligible for low-
American Samoa,

income subsidies under Medicare Part D. The territories can
CNMI, Guam, and
Puerto Rico
only use this funding to provide prescription drug coverage
USVI
under Medicaid for low-income Medicare beneficiaries.
FY2023
83%
76%
Additional Funding for Puerto Rico
FY2024
83%
76%
Puerto Rico received an additional $200 million in federal
FY2025
83%
76%
Medicaid funding for each of FY2020 though FY2022 for
establishing a floor for Medicaid physician payment rates
FY2026
83%
76%
that was 70% of the Medicare Part B rate in Puerto Rico for
those services. For each fiscal year from FY2023 through
FY2027
83%
76%
FY2027, Puerto Rico can receive an additional $300
FY2028
83%
55%
million in federal Medicaid funding if Puerto Rico
Source: SSA §1905(b) and (ff).
establishes a floor for Medicaid physician payment rates
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
implemented through a directed payment arrangement that
USVI = U.S. Virgin Islands.
is 75% of the Medicare Part B rate in Puerto Rico for those
services.
Potential FMAP Reduction for Puerto Rico
Puerto Rico is required to implement an asset verification
For FY2023 through FY2027, Puerto Rico can receive an
program by January 1, 2026. If Puerto Rico does not have
additional increase in federal Medicaid funding of $75
an asset verification program, starting January 1, 2026, the
million in each fiscal year if certain program integrity
regular FMAP rate for Puerto Rico would be reduced by the
conditions are met. For FY2023 through FY2025, Puerto
following percentage points in each calendar quarters of the
Rico is eligible for the additional $75 million if the
specified fiscal year: 0.12 percentage points for FY2026;
Secretary of Health and Human Services (HHS) determines
0.25 percentage points for FY2027; 0.35 percentage points
that Puerto Rico has designated an officer to serve as the
for FY2028; and 0.50 percentage points for FY2029 and
Medicaid program integrity lead. For FY2026 and FY2027,
each year thereafter. These FMAP reductions are similar to
Puerto Rico is eligible for the additional $75 million if the
the asset verification requirement and potential FMAP
HHS Secretary determines that Puerto Rico meets the same
reductions that have been in place for the 50 states and DC
requirement for a Medicaid program integrity lead and a
since January 1, 2021.
new requirement for a contracting and procurement
oversight lead.
Reporting Requirement
Medicaid Data Systems Improvement Payments
For FY2020 and FY2021, the territories were required to
submit annual reports to Congress no later than 30 days
American Samoa, CNMI, Guam, and the USVI are eligible
after the end of the fiscal year to describe how the
for additional federal Medicaid funding for improving,
territories have increased access to health care under
updating, or enhancing a Medicaid data system beginning
Medicaid using the additional Medicaid funding and the
October 1, 2023. The federal government is to pay 100% of
increased FMAP rates. This requirement was recently
these expenditures. The total amount of payments for the
extended for FY2023 through FY2027 for Puerto Rico, and
data system improvements for all four territories is not to
FY2023 and subsequent years for American Samoa, CNMI,
exceed $20 million. The HHS Secretary is to specify an
Guam, and USVI.
allotment for each territory so that each eligible territory
receives an equitable allotment.
For additional information about Medicaid financing for the
FMAP Rates
territories, see CRS Report R47601, Legislative History of
Medicaid Financing for the Territories.
The federal share of most Medicaid expenditures is
determined by the FMAP rate. The FMAP rates for the 50
Alison Mitchell, Specialist in Health Care Financing
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Medicaid Financing for the Territories

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