LegiStorm

Summary:

Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs by making payments to service providers (e.g., for doctor visits) and performing administrative activities (e.g., making eligibility determinations), and the federal government reimburses states for a share of these costs. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The FMAP varies by state and is inversely related to each state's per capita income. For FY2020, FMAP rates range from 50% (13 states) to 77% (Mississippi). Medicaid is a countercyclical program, which means that the rate of growth for Medicaid enrollment tends to accelerate when the economy weakens and tends to slow when the economy gains strength. During recessions, growth in the unemployment rate results in an increase in the rate of growth for Medicaid enrollment, which increases the rate of growth for Medicaid expenditures at the same time that state revenues decline. Reduced state revenues can make it difficult for states to continue financing their Medicaid program, especially with the recession-related growth in Medicaid enrollment. Federal fiscal relief to states is provided during recessions through adjustments to the FMAP rate because this process for getting federal Medicaid funding to states is already in place. Many states have indicated that past FMAP increases allowed the states to prevent further reductions to their Medicaid programs and other portions of their state budgets. The federal government provided states with temporary FMAP rate increases to provide states with fiscal relief on two past occasions: in response to the 2001 recession through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27) and in response to the Great Recession through the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5, as amended by P.L. 111-226). The JGTRRA FMAP increase provided a 2.95 percentage point increase to FMAP rates for the last two quarters of FY2003 and the first three quarters of FY2004. The ARRA FMAP increase provided an across-the-board increase, along with an unemployment-related increase for eligible states. The ARRA across-the-board increase was a 6.2 percentage point FMAP increase, starting in the first quarter of FY2009 and lasting through the first quarter of FY2011; the increase phased down to 3.2 and 1.2 percentage points for the second and third quarters of FY2011, respectively. Most recently, the Families First Coronavirus Response Act (FFCRA; P.L. 116-127) added a temporary Medicaid FMAP increase of 6.2 percentage points beginning January 1, 2020, and continuing through the Coronavirus Disease 2019 (COVID-19) public health emergency period. Although the country had not officially entered into a recession at the time FFCRA was enacted, a recession with significant increases in the unemployment rate was expected in the near term. The recession-related FMAP increases have similar components, but there are differences. Similarities of all three of these recession-related FMAP increases include across-the-board FMAP increases; requirements to maintain Medicaid eligibility standards that are no more restrictive than they were prior to the FMAP increases; and requirements to ensure that states do not increase the percentage that local governments contribute to Medicaid expenditures. However, there are differences in how the recession-related FMAP increases were determined. For instance, the JGTRRA and ARRA FMAP increases included hold-harmless provisions that kept the states' regular FMAP rates from declining, and these increases excluded certain Medicaid expenditures from the FMAP increases. The ARRA FMAP increase had an unemployment-related increase that the JGTRRA and FFCRA increases did not have. Also, the JGTRRA FMAP increase did not have additional requirements for states, but ARRA and FFCRA have differing sets of additional requirements for states to adhere to in order to qualify for the FMAP increases.