Sneak Preview: GAO Promotes Prototype Medicaid FMAP Formula

December 22, 2011 | By Jerry Ashworth | Post a Comment

(The following excerpt is from an article in the January Federal Grants Management Handbook.) The Government Accountability Office has sent Congress a proposed prototype formula that would adjust the federal share of Medicaid funding to offer states more assistance during periods of national economic downturn.

Under the standard formula for determining the federal share of Medicaid funding, which is known as the Federal Medicaid Assistance Percentage (FMAP), the federal government pays a larger portion of Medicaid expenditures to states with lower per capita incomes relative to the national average and a smaller portion to states with higher per capital incomes.

To provide states with fiscal relief and help maintain state Medicaid programs during the recession from 2007 to 2009, Congress provided $89 billion in American Recovery and Reinvestment Act funds to states, temporarily increasing the federal share of Medicaid funding between October 2008 and December 2010.

However, in March 2011, GAO found that many states’ ability to fund Medicaid had been hampered by increased Medicaid enrollment and the declining state revenues that are typical of a national downturn. In response, and under a congressional mandate, GAO developed a prototype formula whereby FMAPs would be triggered automatically when at least 26 states have sustained decreases in employment-to-population (EPOP) ratios. The EPOP ratio compares the number of employed persons in a state to the work-age population aged 16 and older. The assistance would end when fewer than 26 states have declining EPOP ratios.

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