Order Code RS22333
Updated March 28, 2006
CRS Report for Congress
Received through the CRS Web
Budget Reconciliation FY2006: Provisions
Affecting the Medicaid Federal Medical
Assistance Percentage (FMAP)
April Grady
Analyst in Social Legislation
Domestic Social Policy Division
Summary
The federal medical assistance percentage (FMAP) is the rate at which states are
reimbursed for most Medicaid service expenditures. Provisions that (1) exclude certain
Hurricane Katrina evacuees and their incomes from FMAP calculations and (2) prevent
Alaska’s FY2006 and FY2007 FMAPs from falling below the state’s FY2005 level were
included in the Deficit Reduction Act (DRA) of 2005 (S. 1932, enacted as P.L. 109-
171). This report provides information on these enacted DRA provisions and on Senate-
passed and House-passed FMAP provisions that were not included in the final bill. It
will not be updated.
Background
The federal medical assistance percentage (FMAP) is the rate at which states are
reimbursed for most Medicaid service expenditures. It is based on a formula that provides
higher reimbursement to states with lower per capita incomes relative to the national
average (and vice versa); it has a statutory minimum of 50% and maximum of 83%.1 An
enhanced FMAP is available for both services and administration under the State
Children’s Health Insurance Program (SCHIP), subject to the availability of funds from
a state’s SCHIP allotment.2
1 For more detailed information, see CRS Report RL32950,
Medicaid: The Federal Medical
Assistance Percentage (FMAP), by Christine Scott.
2 Impacts on SCHIP are not addressed in this report. Although the FMAP is also used in
determining federal share of certain child support enforcement collections, Temporary Assistance
for Needy Families (TANF) contingency funds, a portion of the Child Care and Development
Fund (CCDF), and foster care and adoption assistance under Title IV-E of the Social Security
Act, budget reconciliation provisions did not affect FMAPs for these programs.
Congressional Research Service ˜
The Library of Congress
CRS-2
When FMAPs are calculated by the Department of Health and Human Services
(HHS) for an upcoming fiscal year (usually in the preceding November), the state and
U.S. per capita personal income amounts used in the formula are equal to the average of
the three most recent calendar years of data available from the Department of
Commerce’s Bureau of Economic Analysis (BEA). For example, to calculate FMAPs for
FY2007, HHS used per capita personal income data for 2002, 2003, and 2004 that became
available from BEA in October 2005.
BEA revises its most recent estimates of state per capita personal income on an
annual basis to incorporate revised and newly available source data on population and
income. It also undertakes a comprehensive data revision — reflecting methodological
and other changes — every few years that may result in upward and downward revisions
to each of the component parts of personal income (as defined in BEA’s national income
and product accounts, or NIPA). These components include
! earnings (wages and salaries, employer contributions for employee
pension and insurance funds, and proprietors’ income);
! dividends, interest, and rent; and
! personal current transfer receipts (e.g., government social benefits such
as Social Security, Medicare, Medicaid, unemployment insurance, etc.).
As a result of these annual and comprehensive revisions, it is often the case that the
value of a state’s per capita personal income for a given year will change over time. For
example, the 2002 per capita personal income data published by BEA in October 2004
(used in the calculation of FY2006 FMAPs) differed from the 2002 per capita personal
income published in October 2005 (used in the calculation of FY2007 FMAPs).
FY2006 Budget Reconciliation
The Senate initially approved a FY2006 budget reconciliation bill on November 3,
2005 (S. 1932) with FMAP provisions that would have
! temporarily increased FMAPs for states affected by Hurricane Katrina;
! prevented FY2006 and FY2007 FMAPs for Alaska from falling below
the state’s FY2005 level; and
! limited FY2006 FMAP reductions for all states.
The House budget reconciliation bill, passed on November 18, 2005 (H.R. 4241),
also included FMAP provisions that would have
! temporarily increased FMAPs for states affected by Hurricane Katrina;
! excluded certain Hurricane Katrina evacuees and their incomes for
purposes of calculating FMAPs; and
! disregarded employer contributions toward pensions in the calculation of
FMAPs if they exceeded a certain threshold.
A conference report on S. 1932 (H.Rept. 109-362) containing some FMAP
provisions was filed on December 19, 2005. The House agreed to the report that day, but
the Senate passed an amended version and returned it to the House for another vote.
CRS-3
Ultimately, the House passed the amended bill, which was enacted as P.L. 109-171 — the
Deficit Reduction Act (DRA) of 2005 — on February 8, 2006.3
Table 1 provides more information on the Senate-passed, House-passed, and enacted
DRA provisions.
Table 2 shows the estimated impact of selected provisions on FY2006
FMAPs.
Table 1. FY2006 Budget Reconciliation Provisions
Affecting Medicaid FMAPs
P.L. 109-171,
FMAP
S. 1932, as initially passed
H.R. 4241, as passed by
enacted on Feb.
provision
by Senate on Nov. 3, 2005
House on Nov. 18, 2005
8, 2006
Increase for
Section 6032. For items and
Section 3021. For items and
No provision.c
Katrina
services furnished during the
services furnished during the
relief
period of August 28, 2005
period of August 28, 2005
through May 15, 2006, states
through May 15, 2006, states
would receive 100% FMAP
would receive 100% FMAP
reimbursement for Medicaid
reimbursement for Medicaid
and SCHIP assistance provided
and SCHIP assistance provided
to individuals who resided
to (1) any individual residing in
during the week preceding
a parish of Louisiana, a county
Hurricane Katrina in one of the
of Mississippi, or a major
parishes of Louisiana or
disaster county of Alabama and
counties of Mississippi and
(2) individuals who resided
Alabama specified in the bill.
during the week preceding
Costs directly attributable to
Hurricane Katrina in a parish or
related administrative activities
county for which a major
would also be reimbursed at
disaster has been declared as a
100%.a
result of the hurricane and for
which the President has
determined, as of September
14, 2005, that individual
assistance under the Stafford
Act is warranted. Costs
directly attributable to related
administrative activities would
also be reimbursed at 100%.b
Adjustment
No provision.
Section 3205. In computing
Section 6053.
related to
Medicaid and SCHIP FMAPs
F o l l o w s t h e
Hurricane
for any year after 2006 for a
House bill.
Katrina
state that the Secretary of HHS
evacuees
determines has a significant
number of individuals who
were evacuated to and live in
the state as a result of
Hurricane Katrina as of
October 1, 2005, the Secretary
would disregard such evacuees
and their incomes.d
Alaska
Section 6032. If Alaska’s
No provision.
Section 6053.
FY2006 or FY2007 FMAP for
F o l l o w s t h e
Medicaid or SCHIP is less than
Senate bill.
3 See CRS Report RL33251,
Side-by-Side Comparison of Medicare, Medicaid, and SCHIP
Provisions in the Deficit Reduction Act of 2005, by Karen Tritz, et al.
CRS-4
P.L. 109-171,
FMAP
S. 1932, as initially passed
H.R. 4241, as passed by
enacted on Feb.
provision
by Senate on Nov. 3, 2005
House on Nov. 18, 2005
8, 2006
its FY2005 FMAP, the FY2005
FMAP would apply.
Limitation
Section 6037. FY2006 FMAPs
No provision.
No provision.
on FY2006
for Medicaid and SCHIP would
reduction
be re-computed so that no
FY2006 FMAP would be less
than the greater of (1) a state’s
FY2005 FMAP minus 0.5
percentage points (0.1 in the
case of Delaware and
Michigan, 0.3 in the case of
Kentucky), or (2) the FY2006
FMAP that would have been
determined for a state if per
capita incomes for 2001 and
2002 that were used to
calculate the state’s FY2005
FMAP were used.
Employer
No provision.
Section 3148. For purposes of
No provision.
pension
computing Medicaid FMAPs
contributions
beginning with FY2006,
employer contributions toward
pensions would be disregarded
in computing a state’s per
capita income (but not U.S. per
capita income) if they exceed
50% of the state’s total increase
in personal income for a period.
Source: Congressional Research Service.
a. The parishes (31 in Louisiana) and counties (47 in Mississippi, 11 in Alabama) specified in the bill
appear to be those that had been designated for individual assistance following Hurricane Katrina as
of the date the Senate Finance Committee approved its reconciliation proposal (October 25, 2005).
On October 27, two additional counties in Mississippi were designated for individual assistance.
These counties are not listed in the bill.
b. According to
Federal Register notices from the Federal Emergency Management Agency (FEMA), 31
parishes in Louisiana, 47 counties in Mississippi, and 10 counties in Alabama had been designated
for individual assistance following Hurricane Katrina as of September 14, 2005.
c. Section 6201 of the law appropriates $2 billion for use by the Secretary of HHS to pay eligible states for,
among other things, the non-federal (i.e., state) share of expenditures for Medicaid and SCHIP
assistance provided to certain individuals affected by Hurricane Katrina. While FMAPs are not
directly affected, the provision allows for an increase in the federal share of a state’s Medicaid and
SCHIP expenditures.
d. It is unclear whether the intent of this provision (described in the bill as “hold harmless for Katrina
impact”) is to prevent both increases
and decreases in FMAPs that may result from the presence of
evacuees. States with lower per capita incomes relative to the national average receive higher FMAPs
(and vice versa). In theory, if Hurricane Katrina evacuees have low incomes, they could have a
dampening effect on a state’s per capita income, which could serve to increase the state’s FMAP. As
written, the provision would require evacuees to be disregarded even if their inclusion would
increase
a state’s FMAP. It appears as though the first FMAP year for which the provision could apply is
FY2008, when 2005 per capita personal income data (the first year for which evacuees and their
incomes could be disregarded) would first be used by HHS (see text for a discussion of FMAP
timing).
CRS-5
Table 2. Medicaid FMAPs Under Current Law
and Under Selected Provisions of S. 1932 and H.R. 4241
FMAP under
FMAP under
Section 3148 of H.R.
Section 6037 of S.
4241 as passed by
1932 as initially
House (disregard of
passed by Senate
extraordinary
(limitation on
employer pension
Medicaid FMAP under current law
FY2006 reduction)a
contribution)b
Estimated
Estimated
change
change
FY05-
FY06-
from
from
FY06
FY07
FY06
current
FY06
current
State
FY05 FY06 FY07
change
change estimate
law
estimate
law
Alabama
70.83 69.51 68.85
-1.32
-0.66
70.33
0.82
69.51
0.00
Alaskac
57.58 57.58 57.58
0.00
0.00
57.08
6.92
50.16
0.00
Arizona
67.45 66.98 66.47
-0.47
-0.51
67.35
0.37
66.98
0.00
Arkansas
74.75 73.77 73.37
-0.98
-0.40
74.25
0.48
73.77
0.00
California
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Colorado
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Connecticut
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Delaware
50.38 50.09 50.00
-0.29
-0.09
50.28
0.19
50.11
0.02
District of
70.00 70.00 70.00
0.00
0.00
70.00
0.00
70.00
0.00
Columbia
Florida
58.90 58.89 58.76
-0.01
-0.13
58.92
0.03
58.89
0.00
Georgia
60.44 60.60 61.97
0.16
1.37
60.84
0.24
60.60
0.00
Hawaii
58.47 58.81 57.55
0.34
-1.26
58.81
0.00
58.81
0.00
Idaho
70.62 69.91 70.36
-0.71
0.45
70.44
0.53
69.91
0.00
Illinois
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Indiana
62.78 62.98 62.61
0.20
-0.37
62.98
0.00
63.04
0.06
Iowa
63.55 63.61 61.98
0.06
-1.63
63.61
0.00
63.61
0.00
Kansas
61.01 60.41 60.25
-0.60
-0.16
60.54
0.13
60.56
0.15
Kentucky
69.60 69.26 69.58
-0.34
0.32
69.30
0.04
69.26
0.00
Louisiana
71.04 69.79 69.69
-1.25
-0.10
70.54
0.75
69.79
0.00
Maine
64.89 62.90 63.27
-1.99
0.37
64.39
1.49
62.90
0.00
Maryland
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Massachusetts
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Michigan
56.71 56.59 56.38
-0.12
-0.21
56.61
0.02
56.88
0.29
Minnesota
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Mississippi
77.08 76.00 75.89
-1.08
-0.11
76.58
0.58
76.00
0.00
Missouri
61.15 61.93 61.60
0.78
-0.33
61.93
0.00
61.93
0.00
Montana
71.90 70.54 69.11
-1.36
-1.43
71.40
0.86
70.60
0.06
Nebraska
59.64 59.68 57.93
0.04
-1.75
59.68
0.00
59.82
0.14
Nevada
55.90 54.76 53.93
-1.14
-0.83
55.89
1.13
54.76
0.00
New
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Hampshire
New Jersey
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
New Mexico
74.30 71.15 71.93
-3.15
0.78
73.80
2.65
71.15
0.00
New York
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
North Carolina 63.63 63.49 64.52
-0.14
1.03
63.77
0.28
63.50
0.01
North Dakota
67.49 65.85 64.72
-1.64
-1.13
66.99
1.14
65.87
0.02
Ohio
59.68 59.88 59.66
0.20
-0.22
59.88
0.00
59.92
0.04
CRS-6
FMAP under
FMAP under
Section 3148 of H.R.
Section 6037 of S.
4241 as passed by
1932 as initially
House (disregard of
passed by Senate
extraordinary
(limitation on
employer pension
Medicaid FMAP under current law
FY2006 reduction)a
contribution)b
Estimated
Estimated
change
change
FY05-
FY06-
from
from
FY06
FY07
FY06
current
FY06
current
State
FY05 FY06 FY07
change
change estimate
law
estimate
law
Oklahoma
70.18 67.91 68.14
-2.27
0.23
69.68
1.77
67.91
0.00
Oregon
61.12 61.57 61.07
0.45
-0.50
61.67
0.10
61.57
0.00
Pennsylvania
53.84 55.05 54.39
1.21
-0.66
55.05
0.00
55.05
0.00
Rhode Island
55.38 54.45 52.35
-0.93
-2.10
54.88
0.43
54.45
0.00
South Carolina
69.89 69.32 69.54
-0.57
0.22
69.46
0.14
69.32
0.00
South Dakota
66.03 65.07 62.92
-0.96
-2.15
65.53
0.46
65.07
0.00
Tennessee
64.81 63.99 63.65
-0.82
-0.34
64.31
0.32
63.99
0.00
Texas
60.87 60.66 60.78
-0.21
0.12
61.32
0.66
60.83
0.17
Utah
72.14 70.76 70.14
-1.38
-0.62
71.77
1.01
70.76
0.00
Vermont
60.11 58.49 58.93
-1.62
0.44
59.61
1.12
58.49
0.00
Virginia
50.00 50.00 50.00
0.00
0.00
50.00
0.00
50.00
0.00
Washington
50.00 50.00 50.12
0.00
0.12
50.00
0.00
50.00
0.00
West Virginia
74.65 72.99 72.82
-1.66
-0.17
74.15
1.16
72.99
0.00
Wisconsin
58.32 57.65 57.47
-0.67
-0.18
57.82
0.17
57.65
0.00
Wyoming
57.90 54.23 52.91
-3.67
-1.32
57.40
3.17
54.23
0.00
Source: FY2005-FY2007 current law FMAPs were obtained from Department of Health and Human
Services (HHS) notices published in the
Federal Register. Other figures are Congressional Research
Service estimates based on analysis of data from Department of Commerce, Bureau of Economic Analysis
(BEA),
State and Regional Tables (Oct. 2003) and
State Personal Income (Oct. 2004), and personal
communication with BEA.
Note: Neither of the provisions shown here were included in the final budget reconciliation bill (DRA,
enacted as P.L. 109-171). See
Table 1 for more information.
a. Among the 31 states that would have an FY2006 FMAP increase under this provision, 11 (AZ, GA, HI,
ID, KS, NV, NC, OR, SC, TX, and UT) benefit most from the use of 2001 and 2002 per capita
incomes used to calculate the state’s FY2005 FMAP (i.e., 2001 and 2002 amounts that were available
prior to BEA’s most recent data revisions). The remaining 20 states would have a higher FY2006
FMAP under the provision language that limits FY2006 FMAP reductions to 0.5 percentage points
(0.1 in the case of DE and MI, 0.3 in the case of KY).
b. As the bill language reads,
aggregate employer contributions toward pensions would be disregarded if
they exceed 50% of a state’s total increase in personal income. However, the table figures assume
that the intent of the provision is to disregard
increases in such contributions. The figures also
provide an overestimate of the provision’s impact on FMAPs because they include employer
contributions for both pension and insurance (health, life, etc.) funds, which cannot be identified
separately from each other in state-level BEA data. Calculations are based on changes in employer
contributions and total personal income for 2001-2002 and 2002-2003 (i.e., the three years of data
used by HHS to calculate FY2006 FMAPs). Due to BEA revisions, comparable 2000 data required
to calculate 2000-2001 changes are not available. As a result, the calculations disregard
“extraordinary” employer contributions in 2002 and 2003, but not in 2001.
c. Alaska’s Medicaid FMAP used an alternative formula for FY2001-FY2005 and will not fall below its
FY2005 level for FY2006-FY2007 as a result of DRA. Prior to DRA, Alaska had reverted to using
the same FMAP calculation as other states, providing an FY2006 FMAP of 50.16% and FY2007
FMAP of 51.07%.