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Tuesday, July 12, 2011

Another Threat to Medicaid….the Blended FMAP

Dee Mahan

Just when you think that all the possible variations of Medicaid cuts have been laid out—straight cuts, spending caps, converting Medicaid to a block grant—something new pops up. This time it’s an idea from the Administration, and it isn’t a good one: It’s what is known as a “blended FMAP.” Yet another acronym in a sea of them, this one is very important to Medicaid—FMAP stands for the Federal Medical Assistance Percentage, the share of Medicaid costs paid by the federal government.

As a primer, you should know that Medicaid is state and federally funded. The federal government matches each state’s Medicaid costs at a certain percent using a formula based on a state’s per capita income in relation to the U.S. average. So the federal percent, or FMAP, varies by state. It also varies by program or populations within Medicaid.

For example, for the regular Medicaid program, the federal government pays between 50 and 75 percent of a state’s costs. For the Children’s Health Insurance Program (CHIP) and some other services and programs, the FMAP is higher.

In 2014, the Affordable Care Act will expand Medicaid. For the first three years, the FMAP for people newly covered under the Affordable Care Act will be 100 percent. This means that the federal government will pay all Medicaid costs for this population in every single state. Over the next four years, the percent will gradually fall to 90 percent, where it will remain.

That’s how FMAP is currently set to work. But the Administration is proposing "blending" the FMAP so that instead of a state having different rates for different services and populations, there would be only one rate within every state (although that overall rate would still be state-specific.) Let’s take a look at Louisiana to see how this works:

  • Louisiana’s FMAP for current Medicaid population is 63.61 percent.
  • Louisiana’s Enhanced FMAP for CHIP population is 74.53 percent.
  • In 2014, Louisiana’s FMAP for its newly covered Medicaid recipients will be 100 percent.

A “blended FMAP” would combine these three percentages and Louisiana would get a single rate for all Medicaid and CHIP recipients.

It seems like a single rate would be a little less bureaucratic. But in reality the state would not save that much in administrative costs from having a single rate. We don’t know the details, but since this is designed to save the federal government a significant sum, presumably states would get less federal Medicaid support than they do now. With less money, there will be no winners—every state loses.

This is a bad idea that passes costs on to states, making it more likely that they will cut Medicaid. It also makes expanding Medicaid in 2014 harder. If the FMAP for people that are newly eligible under the Affordable Care Act is lower, the costs to states will be higher. As a result, states will be less likely to work hard to make sure that all these people enroll in Medicaid.

It’s also an approach that places Medicaid in a position of ongoing risk because it’s all too easy to manipulate. If budget negotiators find that they have come up short, it will be all too tempting to look to Medicaid and consider just lowering the blended rate a bit, thereby passing more costs on to states and low-income individuals and families.

Creating a blended FMAP doesn’t deal with underlying health care costs—it is another way to cut federal funding that puts states and vulnerable citizens on the line.