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 http://wikileaks.org/wiki/CRS-RS22333 ! 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 http://wikileaks.org/wiki/CRS-RS22333 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. http://wikileaks.org/wiki/CRS-RS22333 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 http://wikileaks.org/wiki/CRS-RS22333 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 http://wikileaks.org/wiki/CRS-RS22333 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%.