	Introduction

Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. The federal government pays a share of each state's Medicaid costs; states must contribute the remaining portion in order to qualify for federal funds. This report describes the federal medical assistance percentage (FMAP) calculation used to reimburse states for most Medicaid expenditures, and it lists the statutory exceptions to the regular FMAP rate. In addition, this report discusses other FMAP-related issues, including FMAP changes in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended), federal deficit reduction proposals that would amend the FMAP rate, and the disaster-recovery FMAP adjustment. The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The formula provides higher reimbursement to states with lower incomes (with a statutory maximum of 83%) and lower reimbursement to states with higher incomes (with a statutory minimum of 50%). Recent Issues

Some recent issues related to the FMAP rate include FMAP changes in the ACA, federal deficit reduction proposals impacting the FMAP rate, and the disaster-related FMAP adjustment. Additional FMAP Increase for Certain "Expansion States." Regular FMAP rates for FY2014 range from 50% (15 states) to 73% (Mississippi). Disaster-Recovery Adjusted FMAP Rate

The ACA added a disaster-recovery FMAP adjustment for states that have experienced a major, statewide disaster. This adjustment was available to states beginning the fourth quarter of FY2011. For the second and subsequent years a state qualifies for the adjustment, the FMAP rate shall be equal to the state's regular FMAP rate for that year plus 25% of the difference between the current year's regular FMAP rate and the preceding year's disaster-recovery adjusted FMAP rate. As a result, Section 3204 of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. The effective date was later amended by Section 100123 of the Moving Ahead for Progress in the 21 st Century Act (MAP-21, P.L. The ACA added a number of exceptions to the FMAP for "newly eligible" individuals, "expansion states," disaster-affected states, primary care payment rate increases, specified preventive services and immunizations, smoking cessation services for pregnant women, specified home and community-based services, health home services for certain people with chronic conditions, home and community-based attendant services and supports, and state balancing incentive payments. Since federal Medicaid expenditures are a large and growing portion of the federal budget, controlling federal Medicaid spending has been a focus of federal deficit reduction proposals. Amending the FMAP structure has been identified as a way to reduce federal Medicaid spending by reducing the statutory FMAP floor.
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. The federal government's share of a state's expenditures is called the federal medical assistance percentage (FMAP) rate. The remainder is referred to as the nonfederal share, or state share.
Generally determined annually, the FMAP formula is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. For FY2014, regular FMAP rates range from 50.00% to 73.05%. The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services.
Some recent issues related to FMAP include FMAP changes in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended), federal deficit reduction proposals that would amend the FMAP rate, and the disaster-related FMAP adjustment.
The ACA contains a number of provisions affecting FMAP rates. Most notably, the ACA provides initial FMAP rates of up to 100% for certain "newly eligible" individuals. Also, under the ACA, "expansion states" receive an enhanced FMAP rate for certain individuals. In addition, ACA provides increased FMAP rates for certain disaster-affected states, primary care payment rate increases, specified preventive services and immunizations, smoking cessation services for pregnant women, specified home and community-based services, health home services for certain people with chronic conditions, home and community-based attendant services and supports, and state balancing incentive payments.
Since federal Medicaid expenditures are a large and growing portion of the federal budget, controlling federal Medicaid spending has been included in some federal deficit reduction proposals. Some of the federal deficit reduction proposals include provisions that would amend the current FMAP structure through either a blended FMAP or a reduction to the statutory FMAP floor.
The ACA included a provision providing a disaster-recovery FMAP adjustment for states that have experienced a major, statewide disaster. Louisiana is the only state that has been eligible for the disaster-recovery adjusted FMAP since the fourth quarter of FY2011 (when the adjustment was first available). Both the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) and the Moving Ahead for Progress in the 21st Century Act (MAP-21, P.L. 112-141) amended the formula for the disaster-recovery adjusted FMAP.
This report describes the FMAP calculation used to reimburse states for most Medicaid expenditures, and it lists the statutory exceptions to the regular FMAP rate. In addition, this report discusses other FMAP-related issues, including FMAP changes in ACA, federal deficit reduction proposals affecting the FMAP rate, and the disaster-recovery FMAP adjustment.