Extension of Enhanced Medicaid Benefits to States (FMAP)

As legislatures and governors finalized state budgets earlier this year, 24 states made the bet that Congress would extend enhanced Medicaid match rates from ARRA and included that assumption in their budgets. In August 2010, Congress passed legislation including additional Medicaid assistance through enhanced FMAP rates through the end of FY 2011 - or June 2011 - but provided less aid to states than many had anticipated.

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Congress extended enhanced Medicaid matching rates in August.

  • The Federal Medical Assistance Percentages (FMAP) are used to determine the federal matching fund rate, or the federal government’s contribution to certain state assistance programs, including Medicaid. For example, if the FMAP rate for Illinois is 50 percent, the federal government will match the state’s expenditures on eligible programs dollar for dollar.
  • The original 2009 federal stimulus package provided $87 billion for states’ Medicaid programs, in part through an enhanced FMAP rate. The states used that money to avoid cuts in their state health programs as their revenues shrank and unemployment swelled Medicaid rolls.
  • The increased matching rate was originally due to expire at the end of 2010, but in August 2010, Congress passed legislation including additional Medicaid assistance through enhanced FMAP rates through the end of the 2011 fiscal year, or June 2011.
  • The assistance is estimated at $14.15 billion by the Federal Funds Information for the States1 and ranges at the lower end from $22 million in North Dakota and $23 million in Wyoming and South Dakota to the higher end of $851 million in Texas, $1.41 billion in New York and $1.88 billion in California.

The stakes surrounding the funding extension were high.

  • The Center on Budget and Policy Priorities released a report in June estimating that 900,000 public and private sector jobs would be lost without the extension.
  • As legislatures and governors finalized state budgets earlier this year, 24 states made the bet that Congress would extend the enhanced Medicaid match rates and included that assumption in their budgets. If Congress had not approved the additional funding, however, those states would have faced a nearly $9 billion shortfall.

However, the six-month enhanced rate is at a lesser rate than most states assumed.

  • The additional aid to states is an estimated $1.74 billion short of the amount 24 states included in their official 2011 fiscal year budgets.
  • States that counted on more federal funds than they received will be forced to either reduce overall spending for their Medicaid programs or find additional state matching funds.
  • Pennsylvania received an estimated 22 to 30 percent less than anticipated. Last week, the commonwealth’s Office of Administration announced it would begin furloughing 50 employees to make up some of the gap, while Gov. Ed Rendell—among other moves—cut $50 million in education spending and enforced a 1.9 percent funding cut for all executive branch agencies.2
  • The real winners are the states that did not count on the additional funds in their 2011 fiscal year budgets. Because those states now have an additional estimated $7.3 billion3 in federal funds, they can either move state general funds they had allocated for Medicaid to other spending areas, or use these state funds to pull down even more federal Medicaid.
  • While the additional federal funding will certainly help cash-strapped states in the short term, current enrollment trends and increasing health care costs mean Medicaid spending will continue to be a strain on budgets. Nearly all states are finding that enrollment is growing faster than expected due to the slow economic recovery, so it is likely many states will face deficits in their Medicaid budgets by the end of the 2011 fiscal year.

Notes:

1. Calculations include 24 states that passed budgets assuming the FMAP extension, excluding California. California also includes the extension in their proposed budget, but the state’s FY 2011 budget has not yet passed.

2. Pennsylvania Office of Administration. "Office of Administration Announces Reductions in State Workforce Due to Budget Cuts."  September 20, 2010. 

3. Including California

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