CSG study details Medicaid funding cliff ahead for Midwstern states

A new CSG report takes a look at what states will face after enhanced federal Medicaid funds run out in mid-2011.

Stateline Midwest: Vol. 20, No. 4: April 2011


As enhanced federal matching rates for the Medicaid program expire later this year, there will be major changes in the federal funding that states receive for the health program.

Trends in Medicaid matching funds are detailed in a report released in March by The Council of State Governments.

Since it was created in the 1960s, Medicaid has been financed jointly by the states and the federal government. States receive federal matching funds for each state dollar spent on the program, which currently provides health care to 49 million low-income adults and children.

The federal government’s share of the costs is called the federal medical assistance percentage, or FMAP. The percentage is calculated using a formula that compares the state’s per-capita income to that of the United States as a whole. The minimum matching rate is 50 percent, with poorer states receiving up to 83 percent federal assistance.

When the American Recovery and Reinvestment Act was passed, it provided “enhanced” matching rates in order to help states handle an anticipated influx of enrollees during the economic downturn. The original bill provided enhanced funding through the end of 2010. A second bill passed late last year extended enhanced federal matching funds through June of this year, although at a lower level than the Recovery Act.

Under the enhanced rates, the average federal match on a state dollar rose $1.07 — from $1.61 in 2008 to $2.68 in late 2010. The additional match for states ranged from $0.56 in Alaska to $2.39 in Mississippi.

On June 30, states will lose any additional federal stimulus match and revert to the pre-recession method of calculating Medicaid matching rates. The FMAPs set for fiscal year 2012 used income data from 2007, 2008 and 2009.

Because their average income improved when compared with the national average in those years, 20 states will have a Medicaid matching rate in FY 2012 that is lower than the pre-recession rate. States that will receive a lower FMAP include Iowa, Kansas, Nebraska, North Dakota, and South Dakota.

Seventeen states, however, will have higher Medicaid matching rates in FY 2012 than before the recession. Michigan, Indiana, Ohio and Wisconsin will all have higher FMAP rates in FY 2012 than in 2008.

In the 13 remaining states (including Illinois and Minnesota), matching rates will revert to 2008 levels.