Medicaid Financing for the Territories

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Updated May 27, 2020
Medicaid Financing for the Territories
Medicaid is a joint federal-state program that finances the
drug coverage under Medicaid for low-income Medicare
delivery of medical services for low-income individuals.
The territories (i.e., American Samoa, Commonwealth of
the Northern Mariana Islands [CNMI], Guam, Puerto Rico,
Figure 1. Proportion of Federal Medicaid Funding
and the U.S. Virgin Islands) operate Medicaid programs
from Annual Capped Funding and Additional Funding
under rules that differ from those applicable to the 50 states
and the District of Columbia (DC).
American Samoa and CNMI operate their Medicaid
programs under the Section 1902(j) waiver authority. Under
these waivers, the only Medicaid requirements that may not
be waived are (1) the federal medical assistance percentage
(FMAP) rate (i.e., federal matching rate); (2) the annual
federal capped funding; and (3) the requirement that
Medicaid payments are for services otherwise coverable.
For Guam, Puerto Rico, and the U.S. Virgin Islands, most
of the eligibility and benefit requirements for the states

apply. However, the Government Accountability Office has
Source: SSA §1108(g)(2) and (6); Medicaid and CHIP Payment and
documented that these three territories do not cover all of
Access Commission, Medicaid and CHIP in the Territories, April 2020.
the federally mandated coverage groups or benefits.
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
USVI = U.S. Virgin Islands.
Medicaid financing for the territories is different from the
financing for the states. Federal Medicaid funding to the
Annual Federal Capped Funding
states and DC is open-ended, but the Medicaid programs in
The Medicaid programs in the territories are subject to
the territories are subject to annual federal capped funding.
annual federal capped funding. These Medicaid cap
The FMAP rate for the territories is not determined using
amounts vary by territory and increase annually according
the FMAP formula used for the states and DC.
to the change in the medical component of the Consumer
Price Index for All Urban Consumers. Once the cap is
Federal Medicaid Funding
reached, absent additional federal funding, the territories
The federal Medicaid funding for the territories comes from
assume the full cost of Medicaid services or, in some
a few different sources. The permanent source of federal
instances, may suspend services or cease payments to
Medicaid funding for the territories is the annual federal
providers until the next fiscal year.
capped funding, which has been supplemented by various
funding sources since July 1, 2011.
Certain Medicaid expenditures are disregarded for purposes
of the annual federal capped funding, such as (1) Medicaid
Figure 1 shows the proportion of each territory’s federal
Electronic Health Record Incentive Program payments and
Medicaid funding from annual federal capped funding and
(2) design and operation of the claims and eligibility
additional Medicaid funding in FY2020. The aggregate
systems. Also, for Puerto Rico and the U.S. Virgin Islands,
total of the annual federal capped funding for the territories
Medicaid Fraud Control Unit expenditures are disregarded.
is $431.5 million, and the aggregate additional federal
Medicaid funding for all the territories is $3.1 billion. After
Additional Medicaid Funding
each territory spends through its capped funding, it has
Prior to the Patient Protection and Affordable Care Act
access to additional federal Medicaid funding.
(ACA; P.L. 111-148, as amended), all five territories
typically exhausted their federal Medicaid annual federal
Usually, the territories also receive Section 1935(e) of the
capped funding before the end of the fiscal year. For this
Social Security Act (SSA) funding in addition to the annual
reason, the ACA included additional Medicaid federal
federal capped funding, but for FY2020 and FY2021, the
funding for all of the territories. Certain territories received
1935(e) funding comes out of the additional Medicaid
additional federal funding through the Consolidated
funding. Section 1935(e) funding is sometimes referred to
Appropriations Act, 2017 (P.L. 115-31); the Bipartisan
as the enhanced allotment program (or EAP), and
Budget Act of 2018 (P.L. 115-123); and the Additional
territories receive these funds in lieu of their residents being
Supplemental Appropriations for Disaster Relief Act, 2019
eligible for low-income subsidies under Medicare Part D.
(P.L. 116-20). All of these funds expired on either
The territories can use this funding to provide prescription
September 30, 2019, or December 31, 2019.

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On December 20, 2019, the Further Consolidated
For the remainder of FY2020 (i.e., December 21, 2019,
Appropriations Act, 2020 (P.L. 116-94), was enacted; this
through September 30, 2020) and FY2021, P.L. 116-69
law includes additional federal Medicaid funding for all of
increases the FMAP rate for the territories from 55% to
the territories for FY2020 and FY2021 that was later
83% for American Samoa, CNMI, Guam, and the U.S.
increased through the Family First Coronavirus Response
Virgin Islands and from 55% to 76% for Puerto Rico.
Act (FFCRA; P.L. 116-127). Table 1 shows the additional
funding amounts for FY2020 and FY2021.
These matching rates for the remainder of FY2020 and
FY2021 could be reduced if the territories do not comply
Table 1. Additional Federal Medicaid Funding for
with certain program integrity requirements. All the
FY2020 and FY2021
territories are required to designate a program integrity
($ in millions)
lead. Puerto Rico is also required to publish (1) a plan to
develop measures to satisfy the payment error rate

measurement requirements; (2) a contracting reform plan
to combat fraudulent, wasteful, or abusive Medicaid
American Samoa
contracts; and (3) a plan to comply with the Medicaid
eligibility quality control requirements.
FFCRA increases the FMAP rate for all states, DC, and
the territories by 6.2 percentage points beginning January
Puerto Rico
1, 2020, and ending on the last day of the calendar
quarter in which the last day of the Coronavirus Disease
2019 (COVID-19) pandemic public health emergency
period. As a result, in FY2020 and FY2021, during this
Source: SSA §1108(g)(2) and (6).
period, the FMAP rate for American Samoa, CNMI, Guam,
Notes: CNMI = Commonwealth of the Northern Mariana Islands;
and the U.S. Virgin Islands is 89.2% and the FMAP rate for
USVI = U.S. Virgin Islands.
Puerto Rico is 82.2%.
Through a provision in P.L. 116-94, Puerto Rico could
receive an additional $200 million in each of FY2020 and
The territories are increasingly relying on the additional
FY2021 if Puerto Rico establishes a floor for Medicaid
Medicaid funding for their Medicaid programs. In every
physician payment rates that is 70% of the Medicare
year since FY2012, a majority of the federal Medicaid
payment rate in Puerto Rico for those services.
funding has come from the additional Medicaid funding.
The additional Medicaid federal funding and the increased
The territories are to submit annual reports to Congress no
FMAP rates expire after September 30, 2021. Each territory
later than 30 days after the end of FY2020 and FY2021 to
will need to make decisions about how to deal with its loss
describe how the territories increase access to health care
of this federal funding. The territories could (1) make
under Medicaid using the additional Medicaid funding and
programmatic changes (e.g., restrict eligibility or cut
the increased FMAP rates provided in P.L. 116-94.
benefits), (2) suspend Medicaid programs when the annual
spending cap is exhausted, or (3) increase territory funding
FMAP Rates
of Medicaid (if possible).
The federal share of most Medicaid expenditures is
determined by the FMAP rate. The FMAP rates for the 50
Table 2. FMAP Rates for the Territories
states and DC are determined annually and vary by state
according to each state’s per capita income. The rates can
Samoa, CNMI,
range from 50% to 83%. By contrast, the FMAP rates for
Guam, and
the territories have been set at 55% since July 1, 2011; this
Puerto Rico
means each territory gets 55 cents back from the federal

government for almost every dollar the territory spends on
its Medicaid program up to the federal funding limits (i.e.,

annual capped funding and additional Medicaid funding).
Through 12/20/19
For FY2020 and FY2021, FMAP rates for the territories
have been temporarily increased through a few laws. Table
After 12/20/19
2 shows FMAP rates for FY2019 through FY2022.
For the beginning of FY2020 (i.e., October 1, 2019, through
December 20, 2019), the FMAP rate for the territories was
Source: SSA §1905(b) and (ff).
increased to 100% (i.e., fully federally funded) for all
Notes: The FMAP rates do not include the FFCRA FMAP increase of
territories through the Continuing Appropriations Act,
6.2 percentage points during the COVID-19 pandemic public health
2020; the Health Extenders Act of 2019 (P.L. 116-59); the
emergency period. CNMI = Commonwealth of the Northern Mariana
Further Continuing Appropriations Act, 2020; and the
Islands; USVI = U.S. Virgin Islands.
Further Health Extenders Act of 2019 (P.L. 116-69).

Medicaid Financing for the Territories

Alison Mitchell, Specialist in Health Care Financing

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