Examining Medicaid and CHIP’s Federal Medical Assistance Percentage

Examining Medicaid and CHIP’s Federal Medical Assistance Percentage

Statement of
Alison Mitchell
Analyst in Health Care Financing
Before
Committee on Energy and Commerce
Subcommittee on Health
U.S. House of Representatives
Hearing on
“Examining Medicaid and CHIP’s Federal
Medical Assistance Percentage”
February 10, 2016
Congressional Research Service
https://crsreports.congress.gov
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Chairman Pitts, Ranking Member Green, and Members of the Subcommittee, my name is Alison
Mitchell. I am an Analyst in Health Care Financing with the Congressional Research Service. Thank you
for the opportunity to appear before you today to provide an overview of the federal medical assistance
percentage (FMAP) and some exceptions to the FMAP.
Federal Medical Assistance Percentage
Medicaid is jointly financed by the federal government and the states. The federal government’s share of
most Medicaid expenditures is determined by the FMAP.
FMAP rates vary by state and have a statutory minimum of 50% and a statutory maximum of 83%. For a
state with an FMAP of 60%, the state gets 60 cents back from the federal government for every dollar the
state spends on its Medicaid program.
The FMAP is also used to determine the federal share of other programs, such as Temporary Assistance
for Needy Families contingency funds and Foster Care Title IV-E Maintenance payments. The FMAP is
used to calculate the enhanced FMAP (E-FMAP), which determines the federal share of the State
Children’s Health Insurance Program (CHIP).
How FMAP Rates Are Calculated
The FMAP rates are calculated annually by the Department of Health and Human Services and vary
according to each state’s per capita income. The FMAP formula compares each state’s per capita income
with the average per capita income across all states. The formula provides higher rates to states with
lower incomes and lower rates to states with higher incomes. For FY2016, regular FMAP rates range
from 50% in 13 states to 74% in Mississippi.
The E-FMAP used for CHIP is higher than the FMAP, and it is calculated by reducing the state share
under the regular FMAP by 30%. For FY2016 through FY2019, the E-FMAP for most CHIP expenditures
is increased by 23 percentage points (not to exceed 100%). With this provision, the statutory range for the
E-FMAP is 88% to 100%. In FY2016, 12 states have an E-FMAP of 100%.
Data Used to Calculate State FMAP Rates
The per capita income amounts used in the FMAP formula are equal to the average of the three most
recent calendar years of data available from the Department of Commerce. The use of the three-year
average helps to moderate fluctuations in states’ FMAP rate over time. The per capita income amounts
used to calculate FMAP rates for a given fiscal year are several years old by the time the FMAP rates take
effect. For example, the FY2016 FMAP calculations are based on state per capita income data for 2011,
2012, and 2013.
Factors that Affect FMAP Rates
The FMAP is impacted by each state’s income and population relative to the national average. The impact
of a national economic downturn or upturn on a particular state will be related to the structure of the state
economy and its business sectors.
The FMAP changes from year to year for most states. Usually, this change is less than one percentage
point. However, even these small changes to the FMAP can have major budgetary implications.
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FMAP Exceptions
Exceptions to the regular FMAP rate have been made under Medicaid for certain states, situations,
populations, providers, and services. There are currently more than 20 exceptions to the regular FMAP.
Some of these exceptions have been around for a while, and some are newer.
Since the beginning of the Medicaid program, most administrative expenditures have been reimbursed at
50% for all states. Beginning in the 1970s, services provided to Medicaid enrollees at Indian Health
Service facilities have been reimbursed at 100%.
The District of Columbia’s FMAP rate has not been calculated according to the regular FMAP formula
since 1998. Instead, the FMAP rate for the District of Columbia has been set in statute at 70% since that
time for the purposes of Title XIX and XXI of the Social Security Act. However, for other purposes, the
percentage for the District of Columbia is 50%, unless otherwise specified by law.
The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) added a couple of new
FMAP exceptions, including enhanced matching rates for states that have implemented the ACA
Medicaid expansion. For individuals newly eligible for Medicaid due to the expansion, states receive
100% federal match for 2014 through 2016. This matching rate phases down to 90% for 2020 and
subsequent years.
The federal share of Medicaid expenditures used to be about 57% on average in a typical year. However,
with the exceptions to the FMAP added by the ACA, the federal share of Medicaid expenditures has
increased. In FY2014, the federal share of Medicaid expenditures was 60% on average. It is expected to
remain around 60% through at least FY2023.

This concludes my statement. I would be happy to answer any questions you may have at the appropriate
time.

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Disclaimer
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