Medicaid: The Federal Medical Assistance Percentage (FMAP)

Medicaid is a health insurance program jointly funded by the federal government and the states. Historically, eligibility for Medicaid was generally limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities; however, recent changes will soon require coverage for childless adults as well. The federal government’s share of a state’s expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The remainder is referred to as the nonfederal share, or state share.

Generally determined annually, the FMAP is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). For FY2011, regular FMAPs—that is, excluding the impact of a temporary increase—range from 50.00% to 74.73%.

States are currently receiving a temporary FMAP increase that was included in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) and later extended by H.R. 1586 (which was signed into law as P.L. 111-226). It runs for 11 quarters, from the first quarter of FY2009 through the third quarter of FY2011 (i.e., October 2008 through June 2011), subject to certain requirements. The Administration estimates that the original ARRA provision will increase federal Medicaid payments to states by about $91 billion, and the Congressional Budget Office estimates that the six-month extension in P.L. 111-226 will provide an additional $16 billion. Although ARRA FMAPs were originally set to end December 31, 2010, about 30 states assumed that a six-month extension would be provided when they planned their SFY2011 budgets (most of which began on July 1).

The recently enacted Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended by P.L. 111-152) also contains a number of provisions that affect FMAPs. Most notably, it provides FMAPs of up to 100% for certain newly eligible individuals. It also provides—subject to various requirements—increased FMAPs for certain disaster-affected states, primary care payment rate increases, specified preventive services and immunizations, smoking cessation services for pregnant women, specified home and community-based services, and health home services for certain people with chronic conditions.