WikiLeaks Document Release
               http://wikileaks.org/wiki/CRS-RS22333
                                            February 2, 2009



                       Congressional Research Service
                                     Report RS22333
   Budget Reconciliation FY2006: Provisions Affecting the
   Medicaid Federal Medical Assistance Percentage (FMAP)
                              April Grady, Domestic Social Policy Division

                                             March 28, 2006

Abstract. The federal medical assistance percentage (FMAP) is the rate at which states are reimbursed
for most Medicaid service expenditures. Provisions that (1) exclude certain Hurricane Katrina evacuees and
their incomes from FMAP calculations and (2) prevent Alaska's FY2006 and FY2007 FMAPs from falling
below the state's FY2005 level were included in the Deficit Reduction Act (DRA) of 2005 (S. 1932, enacted as
P.L. 109-171). This report provides information on these enacted DRA provisions and on Senate-passed and
House-passed FMAP provisions that were not included in the final bill.
                                                                                                                         Order Code RS22333
                                                                                                                       Updated March 28, 2006



                                            CRS Report for Congress
                                                            Received through the CRS Web


                                              Budget Reconciliation FY2006: Provisions
                                               Affecting the Medicaid Federal Medical
                                                   Assistance Percentage (FMAP)
                                                                              April Grady
                                                                     Analyst in Social Legislation
                                                                    Domestic Social Policy Division
http://wikileaks.org/wiki/CRS-RS22333




                                        Summary

                                                 The federal medical assistance percentage (FMAP) is the rate at which states are
                                            reimbursed for most Medicaid service expenditures. Provisions that (1) exclude certain
                                            Hurricane Katrina evacuees and their incomes from FMAP calculations and (2) prevent
                                            Alaska's FY2006 and FY2007 FMAPs from falling below the state's FY2005 level were
                                            included in the Deficit Reduction Act (DRA) of 2005 (S. 1932, enacted as P.L. 109-
                                            171). This report provides information on these enacted DRA provisions and on Senate-
                                            passed and House-passed FMAP provisions that were not included in the final bill. It
                                            will not be updated.


                                        Background
                                              The federal medical assistance percentage (FMAP) is the rate at which states are
                                        reimbursed for most Medicaid service expenditures. It is based on a formula that provides
                                        higher reimbursement to states with lower per capita incomes relative to the national
                                        average (and vice versa); it has a statutory minimum of 50% and maximum of 83%.1 An
                                        enhanced FMAP is available for both services and administration under the State
                                        Children's Health Insurance Program (SCHIP), subject to the availability of funds from
                                        a state's SCHIP allotment.2




                                        1
                                         For more detailed information, see CRS Report RL32950, Medicaid: The Federal Medical
                                        Assistance Percentage (FMAP), by Christine Scott.
                                        2
                                          Impacts on SCHIP are not addressed in this report. Although the FMAP is also used in
                                        determining federal share of certain child support enforcement collections, Temporary Assistance
                                        for Needy Families (TANF) contingency funds, a portion of the Child Care and Development
                                        Fund (CCDF), and foster care and adoption assistance under Title IV-E of the Social Security
                                        Act, budget reconciliation provisions did not affect FMAPs for these programs.

                                                   Congressional Research Service ~ The Library of Congress
                                                                                 CRS-2

                                             When FMAPs are calculated by the Department of Health and Human Services
                                        (HHS) for an upcoming fiscal year (usually in the preceding November), the state and
                                        U.S. per capita personal income amounts used in the formula are equal to the average of
                                        the three most recent calendar years of data available from the Department of
                                        Commerce's Bureau of Economic Analysis (BEA). For example, to calculate FMAPs for
                                        FY2007, HHS used per capita personal income data for 2002, 2003, and 2004 that became
                                        available from BEA in October 2005.

                                             BEA revises its most recent estimates of state per capita personal income on an
                                        annual basis to incorporate revised and newly available source data on population and
                                        income. It also undertakes a comprehensive data revision -- reflecting methodological
                                        and other changes -- every few years that may result in upward and downward revisions
                                        to each of the component parts of personal income (as defined in BEA's national income
                                        and product accounts, or NIPA). These components include

                                             !   earnings (wages and salaries, employer contributions for employee
                                                 pension and insurance funds, and proprietors' income);
                                             !   dividends, interest, and rent; and
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                                             !   personal current transfer receipts (e.g., government social benefits such
                                                 as Social Security, Medicare, Medicaid, unemployment insurance, etc.).

                                             As a result of these annual and comprehensive revisions, it is often the case that the
                                        value of a state's per capita personal income for a given year will change over time. For
                                        example, the 2002 per capita personal income data published by BEA in October 2004
                                        (used in the calculation of FY2006 FMAPs) differed from the 2002 per capita personal
                                        income published in October 2005 (used in the calculation of FY2007 FMAPs).

                                        FY2006 Budget Reconciliation
                                            The Senate initially approved a FY2006 budget reconciliation bill on November 3,
                                        2005 (S. 1932) with FMAP provisions that would have

                                             !   temporarily increased FMAPs for states affected by Hurricane Katrina;
                                             !   prevented FY2006 and FY2007 FMAPs for Alaska from falling below
                                                 the state's FY2005 level; and
                                             !   limited FY2006 FMAP reductions for all states.

                                              The House budget reconciliation bill, passed on November 18, 2005 (H.R. 4241),
                                        also included FMAP provisions that would have

                                             !   temporarily increased FMAPs for states affected by Hurricane Katrina;
                                             !   excluded certain Hurricane Katrina evacuees and their incomes for
                                                 purposes of calculating FMAPs; and
                                             !   disregarded employer contributions toward pensions in the calculation of
                                                 FMAPs if they exceeded a certain threshold.

                                             A conference report on S. 1932 (H.Rept. 109-362) containing some FMAP
                                        provisions was filed on December 19, 2005. The House agreed to the report that day, but
                                        the Senate passed an amended version and returned it to the House for another vote.
                                                                                           CRS-3

                                        Ultimately, the House passed the amended bill, which was enacted as P.L. 109-171 -- the
                                        Deficit Reduction Act (DRA) of 2005 -- on February 8, 2006.3

                                           Table 1 provides more information on the Senate-passed, House-passed, and enacted
                                        DRA provisions. Table 2 shows the estimated impact of selected provisions on FY2006
                                        FMAPs.

                                                       Table 1. FY2006 Budget Reconciliation Provisions
                                                                   Affecting Medicaid FMAPs
                                                                                                                                    P.L. 109-171,
                                               FMAP          S. 1932, as initially passed         H.R. 4241, as passed by          enacted on Feb.
                                              provision      by Senate on Nov. 3, 2005             House on Nov. 18, 2005              8, 2006
                                            Increase for   Section 6032. For items and         Section 3021. For items and         No provision.c
                                            Katrina        services furnished during the       services furnished during the
                                            relief         period of August 28, 2005           period of August 28, 2005
                                                           through May 15, 2006, states        through May 15, 2006, states
                                                           would receive 100% FMAP             would receive 100% FMAP
                                                           reimbursement for Medicaid          reimbursement for Medicaid
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                                                           and SCHIP assistance provided       and SCHIP assistance provided
                                                           to individuals who resided          to (1) any individual residing in
                                                           during the week preceding           a parish of Louisiana, a county
                                                           Hurricane Katrina in one of the     of Mississippi, or a major
                                                           parishes of Louisiana or            disaster county of Alabama and
                                                           counties of Mississippi and         (2) individuals who resided
                                                           Alabama specified in the bill.      during the week preceding
                                                           Costs directly attributable to      Hurricane Katrina in a parish or
                                                           related administrative activities   county for which a major
                                                           would also be reimbursed at         disaster has been declared as a
                                                           100%.a                              result of the hurricane and for
                                                                                               which the President has
                                                                                               determined, as of September
                                                                                               14, 2005, that individual
                                                                                               assistance under the Stafford
                                                                                               Act is warranted.          Costs
                                                                                               directly attributable to related
                                                                                               administrative activities would
                                                                                               also be reimbursed at 100%.b
                                            Adjustment     No provision.                       Section 3205. In computing          Section 6053.
                                            related to                                         Medicaid and SCHIP FMAPs            Follows the
                                            Hurricane                                          for any year after 2006 for a       House bill.
                                            Katrina                                            state that the Secretary of HHS
                                            evacuees                                           determines has a significant
                                                                                               number of individuals who
                                                                                               were evacuated to and live in
                                                                                               the state as a result of
                                                                                               Hurricane Katrina as of
                                                                                               October 1, 2005, the Secretary
                                                                                               would disregard such evacuees
                                                                                               and their incomes.d
                                            Alaska         Section 6032. If Alaska's           No provision.                       Section 6053.
                                                           FY2006 or FY2007 FMAP for                                               Fo llo ws the
                                                           Medicaid or SCHIP is less than                                          Senate bill.


                                        3
                                         See CRS Report RL33251, Side-by-Side Comparison of Medicare, Medicaid, and SCHIP
                                        Provisions in the Deficit Reduction Act of 2005, by Karen Tritz, et al.
                                                                                          CRS-4

                                                                                                                                   P.L. 109-171,
                                            FMAP            S. 1932, as initially passed         H.R. 4241, as passed by          enacted on Feb.
                                           provision        by Senate on Nov. 3, 2005            House on Nov. 18, 2005               8, 2006
                                                          its FY2005 FMAP, the FY2005
                                                          FMAP would apply.
                                         Limitation       Section 6037. FY2006 FMAPs          No provision.                       No provision.
                                         on FY2006        for Medicaid and SCHIP would
                                         reduction        be re-computed so that no
                                                          FY2006 FMAP would be less
                                                          than the greater of (1) a state's
                                                          FY2005 FMAP minus 0.5
                                                          percentage points (0.1 in the
                                                          case of Delaware and
                                                          Michigan, 0.3 in the case of
                                                          Kentucky), or (2) the FY2006
                                                          FMAP that would have been
                                                          determined for a state if per
                                                          capita incomes for 2001 and
                                                          2002 that were used to
                                                          calculate the state's FY2005
                                                          FMAP were used.
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                                         Employer         No provision.                       Section 3148. For purposes of       No provision.
                                         pension                                              computing Medicaid FMAPs
                                         contributions                                        beginning with FY2006,
                                                                                              employer contributions toward
                                                                                              pensions would be disregarded
                                                                                              in computing a state's per
                                                                                              capita income (but not U.S. per
                                                                                              capita income) if they exceed
                                                                                              50% of the state's total increase
                                                                                              in personal income for a period.

                                        Source: Congressional Research Service.

                                        a. The parishes (31 in Louisiana) and counties (47 in Mississippi, 11 in Alabama) specified in the bill
                                              appear to be those that had been designated for individual assistance following Hurricane Katrina as
                                              of the date the Senate Finance Committee approved its reconciliation proposal (October 25, 2005).
                                              On October 27, two additional counties in Mississippi were designated for individual assistance.
                                              These counties are not listed in the bill.
                                        b. According to Federal Register notices from the Federal Emergency Management Agency (FEMA), 31
                                              parishes in Louisiana, 47 counties in Mississippi, and 10 counties in Alabama had been designated
                                              for individual assistance following Hurricane Katrina as of September 14, 2005.
                                        c. Section 6201 of the law appropriates $2 billion for use by the Secretary of HHS to pay eligible states for,
                                              among other things, the non-federal (i.e., state) share of expenditures for Medicaid and SCHIP
                                              assistance provided to certain individuals affected by Hurricane Katrina. While FMAPs are not
                                              directly affected, the provision allows for an increase in the federal share of a state's Medicaid and
                                              SCHIP expenditures.
                                        d. It is unclear whether the intent of this provision (described in the bill as "hold harmless for Katrina
                                              impact") is to prevent both increases and decreases in FMAPs that may result from the presence of
                                              evacuees. States with lower per capita incomes relative to the national average receive higher FMAPs
                                              (and vice versa). In theory, if Hurricane Katrina evacuees have low incomes, they could have a
                                              dampening effect on a state's per capita income, which could serve to increase the state's FMAP. As
                                              written, the provision would require evacuees to be disregarded even if their inclusion would increase
                                              a state's FMAP. It appears as though the first FMAP year for which the provision could apply is
                                              FY2008, when 2005 per capita personal income data (the first year for which evacuees and their
                                              incomes could be disregarded) would first be used by HHS (see text for a discussion of FMAP
                                              timing).
                                                                                          CRS-5

                                                    Table 2. Medicaid FMAPs Under Current Law
                                                and Under Selected Provisions of S. 1932 and H.R. 4241
                                                                                                                                    FMAP under
                                                                                                           FMAP under           Section 3148 of H.R.
                                                                                                        Section 6037 of S.       4241 as passed by
                                                                                                         1932 as initially      House (disregard of
                                                                                                        passed by Senate            extraordinary
                                                                                                           (limitation on         employer pension
                                                          Medicaid FMAP under current law              FY2006 reduction)a           contribution)b
                                                                                                                  Estimated                Estimated
                                                                                                                    change                  change
                                                                                    FY05- FY06-                      from                    from
                                                                                    FY06     FY07       FY06        current      FY06       current
                                              State      FY05     FY06     FY07     change change      estimate       law       estimate      law
                                        Alabama           70.83    69.51    68.85      -1.32   -0.66       70.33         0.82       69.51        0.00
                                        Alaskac           57.58    57.58    57.58       0.00    0.00       57.08         6.92       50.16        0.00
                                        Arizona           67.45    66.98    66.47      -0.47   -0.51       67.35         0.37       66.98        0.00
                                        Arkansas          74.75    73.77    73.37      -0.98   -0.40       74.25         0.48       73.77        0.00
                                        California        50.00    50.00    50.00       0.00    0.00       50.00         0.00       50.00        0.00
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                                        Colorado          50.00    50.00    50.00       0.00    0.00       50.00         0.00       50.00        0.00
                                        Connecticut       50.00    50.00    50.00       0.00    0.00       50.00         0.00       50.00        0.00
                                        Delaware          50.38    50.09    50.00      -0.29   -0.09       50.28         0.19       50.11        0.02
                                        District of
                                                         70.00 70.00 70.00             0.00     0.00      70.00         0.00       70.00        0.00
                                        Columbia
                                        Florida          58.90    58.89    58.76      -0.01    -0.13      58.92         0.03       58.89        0.00
                                        Georgia          60.44    60.60    61.97       0.16     1.37      60.84         0.24       60.60        0.00
                                        Hawaii           58.47    58.81    57.55       0.34    -1.26      58.81         0.00       58.81        0.00
                                        Idaho            70.62    69.91    70.36      -0.71     0.45      70.44         0.53       69.91        0.00
                                        Illinois         50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        Indiana          62.78    62.98    62.61       0.20    -0.37      62.98         0.00       63.04        0.06
                                        Iowa             63.55    63.61    61.98       0.06    -1.63      63.61         0.00       63.61        0.00
                                        Kansas           61.01    60.41    60.25      -0.60    -0.16      60.54         0.13       60.56        0.15
                                        Kentucky         69.60    69.26    69.58      -0.34     0.32      69.30         0.04       69.26        0.00
                                        Louisiana        71.04    69.79    69.69      -1.25    -0.10      70.54         0.75       69.79        0.00
                                        Maine            64.89    62.90    63.27      -1.99     0.37      64.39         1.49       62.90        0.00
                                        Maryland         50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        Massachusetts    50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        Michigan         56.71    56.59    56.38      -0.12    -0.21      56.61         0.02       56.88        0.29
                                        Minnesota        50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        Mississippi      77.08    76.00    75.89      -1.08    -0.11      76.58         0.58       76.00        0.00
                                        Missouri         61.15    61.93    61.60       0.78    -0.33      61.93         0.00       61.93        0.00
                                        Montana          71.90    70.54    69.11      -1.36    -1.43      71.40         0.86       70.60        0.06
                                        Nebraska         59.64    59.68    57.93       0.04    -1.75      59.68         0.00       59.82        0.14
                                        Nevada           55.90    54.76    53.93      -1.14    -0.83      55.89         1.13       54.76        0.00
                                        New
                                                         50.00 50.00 50.00             0.00     0.00      50.00         0.00       50.00        0.00
                                        Hampshire
                                        New Jersey       50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        New Mexico       74.30    71.15    71.93      -3.15     0.78      73.80         2.65       71.15        0.00
                                        New York         50.00    50.00    50.00       0.00     0.00      50.00         0.00       50.00        0.00
                                        North Carolina   63.63    63.49    64.52      -0.14     1.03      63.77         0.28       63.50        0.01
                                        North Dakota     67.49    65.85    64.72      -1.64    -1.13      66.99         1.14       65.87        0.02
                                        Ohio             59.68    59.88    59.66       0.20    -0.22      59.88         0.00       59.92        0.04
                                                                                          CRS-6

                                                                                                                                    FMAP under
                                                                                                           FMAP under           Section 3148 of H.R.
                                                                                                        Section 6037 of S.       4241 as passed by
                                                                                                         1932 as initially      House (disregard of
                                                                                                        passed by Senate            extraordinary
                                                                                                           (limitation on         employer pension
                                                          Medicaid FMAP under current law              FY2006 reduction)a           contribution)b
                                                                                                                  Estimated                Estimated
                                                                                                                    change                  change
                                                                                    FY05- FY06-                      from                    from
                                                                                    FY06     FY07       FY06        current      FY06       current
                                            State        FY05     FY06     FY07     change change      estimate       law       estimate      law
                                        Oklahoma          70.18    67.91    68.14      -2.27    0.23       69.68         1.77       67.91        0.00
                                        Oregon            61.12    61.57    61.07       0.45   -0.50       61.67         0.10       61.57        0.00
                                        Pennsylvania      53.84    55.05    54.39       1.21   -0.66       55.05         0.00       55.05        0.00
                                        Rhode Island      55.38    54.45    52.35      -0.93   -2.10       54.88         0.43       54.45        0.00
                                        South Carolina    69.89    69.32    69.54      -0.57    0.22       69.46         0.14       69.32        0.00
                                        South Dakota      66.03    65.07    62.92      -0.96   -2.15       65.53         0.46       65.07        0.00
                                        Tennessee         64.81    63.99    63.65      -0.82   -0.34       64.31         0.32       63.99        0.00
                                        Texas             60.87    60.66    60.78      -0.21    0.12       61.32         0.66       60.83        0.17
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                                        Utah              72.14    70.76    70.14      -1.38   -0.62       71.77         1.01       70.76        0.00
                                        Vermont           60.11    58.49    58.93      -1.62    0.44       59.61         1.12       58.49        0.00
                                        Virginia          50.00    50.00    50.00       0.00    0.00       50.00         0.00       50.00        0.00
                                        Washington        50.00    50.00    50.12       0.00    0.12       50.00         0.00       50.00        0.00
                                        West Virginia     74.65    72.99    72.82      -1.66   -0.17       74.15         1.16       72.99        0.00
                                        Wisconsin         58.32    57.65    57.47      -0.67   -0.18       57.82         0.17       57.65        0.00
                                        Wyoming           57.90    54.23    52.91      -3.67   -1.32       57.40         3.17       54.23        0.00

                                        Source: FY2005-FY2007 current law FMAPs were obtained from Department of Health and Human
                                        Services (HHS) notices published in the Federal Register. Other figures are Congressional Research
                                        Service estimates based on analysis of data from Department of Commerce, Bureau of Economic Analysis
                                        (BEA), State and Regional Tables (Oct. 2003) and State Personal Income (Oct. 2004), and personal
                                        communication with BEA.

                                        Note: Neither of the provisions shown here were included in the final budget reconciliation bill (DRA,
                                        enacted as P.L. 109-171). See Table 1 for more information.

                                        a. Among the 31 states that would have an FY2006 FMAP increase under this provision, 11 (AZ, GA, HI,
                                             ID, KS, NV, NC, OR, SC, TX, and UT) benefit most from the use of 2001 and 2002 per capita
                                             incomes used to calculate the state's FY2005 FMAP (i.e., 2001 and 2002 amounts that were available
                                             prior to BEA's most recent data revisions). The remaining 20 states would have a higher FY2006
                                             FMAP under the provision language that limits FY2006 FMAP reductions to 0.5 percentage points
                                             (0.1 in the case of DE and MI, 0.3 in the case of KY).
                                        b. As the bill language reads, aggregate employer contributions toward pensions would be disregarded if
                                             they exceed 50% of a state's total increase in personal income. However, the table figures assume
                                             that the intent of the provision is to disregard increases in such contributions. The figures also
                                             provide an overestimate of the provision's impact on FMAPs because they include employer
                                             contributions for both pension and insurance (health, life, etc.) funds, which cannot be identified
                                             separately from each other in state-level BEA data. Calculations are based on changes in employer
                                             contributions and total personal income for 2001-2002 and 2002-2003 (i.e., the three years of data
                                             used by HHS to calculate FY2006 FMAPs). Due to BEA revisions, comparable 2000 data required
                                             to calculate 2000-2001 changes are not available. As a result, the calculations disregard
                                             "extraordinary" employer contributions in 2002 and 2003, but not in 2001.
                                        c. Alaska's Medicaid FMAP used an alternative formula for FY2001-FY2005 and will not fall below its
                                             FY2005 level for FY2006-FY2007 as a result of DRA. Prior to DRA, Alaska had reverted to using
                                             the same FMAP calculation as other states, providing an FY2006 FMAP of 50.16% and FY2007
                                             FMAP of 51.07%.