Federal medical assistance percentage
Federal Medicaid spending is determined by the amount that states spend. The federal share for most health care services is determined by the Federal Medical Assistance Percentage (FMAP). The FMAP is based on a formula that provides higher reimbursement to states with lower per capita incomes relative to the national average. The formula is intended to reflect states’ differing abilities to fund Medicaid from their own revenues. Although alternative measures have been suggested, the use of per capita income reflects the information available at the time the funding formula was designed (GAO 2003).
There is a statutory minimum of 50 percent and a maximum of 83 percent. For example, in fiscal year (FY) 2016 the federal contribution ranges from just over 74.1 percent in Mississippi to 50 percent in New York and 12 other states. There are statutorily set FMAPs for the District of Columbia and the territories. Current FMAPs are here.
There are several exceptions for certain populations, providers, and services. For example, the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) requires the federal government to pay 100 percent of state Medicaid costs for certain newly eligible individuals until 2016; at that point the rate begins phasing down to 90 percent in 2020 and thereafter. The newly eligible include those who would not have been eligible for Medicaid in the state as of December 1, 2009, or who were eligible under a waiver but not enrolled because of limits or caps on waiver enrollment. States that expanded eligibility to low-income parents and adults without children prior to the ACA receive the same enhanced FMAP for these groups. In addition, some Medicaid-related activities, such as the Money Follows the Person rebalancing demonstration and the Vaccines for Children program, use FMAP or a related formula for determining the federal contribution.
An enhanced FMAP (E-FMAP) is provided for both services and administration under the State Children’s Health Insurance Program (CHIP), subject to the availability of funds from a state’s federal allotment for CHIP. When a state expands its Medicaid program using CHIP funds (rather than Medicaid funds), the enhanced FMAP applies and is paid out of the state’s federal allotment. The E-FMAP is calculated by reducing the state share under the regular FMAP by 30 percent. In fiscal years 2016 through 2019, the CHIP matching rate is increased by 23 percentage points, ranging from 88 percent to 100 percent. Click here to find state-specific matching rates.
Federal financial participation for Medicaid administrative activities
The federal financial participation or federal match for Medicaid administrative activities does not vary by state and is generally 50 percent, although certain administrative functions have a higher federal match. These exceptions include activities that require medically trained personnel, the operation of information systems for eligibility and claims processing, fraud control activities, and administration of services that themselves have higher medical assistance match rates.
In many cases, higher administrative match rates are provided only for expenditures that meet certain conditions; for example, external quality review activities conducted by an organization that meets specific requirements can be matched at 75 percent, while the same activities conducted by other types of organizations can only be matched at 50 percent. Learn more about administrative matching rates.
If a state contracts with managed care plans under a risk contract, amounts paid to the managed care plan to cover administrative functions are matched as a medical assistance cost at the applicable FMAP, not as an administrative cost (42 CFR 438.812). Administrative costs related to CHIP receive federal match at the state’s E-FMAP rate for health care services, and therefore varies by state. However, administrative costs for CHIP are limited to 10 percent of the state’s annual federal CHIP spending.