What is the Federal Medical Assistance Percentage (FMAP)?
The Federal Medical Assistance Percentage is the federal government’s share of the expenditures for medical services and administrative costs for a state Medicaid program and is often called the “federal match.”
Why does it matter to Oklahoma’s healthcare providers?
FMAP matters because each state’s Medicaid program is funded jointly by state and federal dollars. Generally, states receiving a higher FMAP for medical services need fewer state dollars. But a state must have state dollars to leverage federal matching dollars. On a quarterly basis, a state submits to the federal government its Medicaid expenditures paid by state dollars seeking to “draw down” the federal matching dollars.
How often does the FMAP change?
The FMAP for medical services for all states is calculated annually by U.S. Department of Health and Human Services (HHS), based on a formula in the Social Security Act, and is effective from Oct. 1 through Sept. 30 of each year. The FMAP varies from state to state; it can be no lower than 50% and no higher than 83%. So, for every $1 states spend on Medicaid, states can “draw down” at least $1 from the federal government. However, the FMAP for a state’s Medicaid administrative costs is fixed, generally at 50% FMAP. States do receive enhanced FMAP for certain populations, services and a variety of administrative functions.
How does the FMAP specifically impact physicians, hospitals and other healthcare providers?
Fluctuations in the FMAP for medical services can have significant impact on all healthcare providers. Significant increases often allow a state to restore, increase or add benefits compensable under the Medicaid program, as well as adjust upward the rates paid to providers. Conversely, depending on a state’s ability to offset the loss of federal funds, a decrease in the FMAP can trigger the elimination or reduction in certain benefits provided to Medicaid enrollees, as well as a decrease in provider rates.
How is the FMAP for medical services calculated?
The FMAP is based on a rolling three-year average of the per capita income of each state as compared to the national average per capita income. However, there is a lag in the data used. For instance, for FY 2019 (effective Oct 1, 2018-Sept. 30, 2019) the FMAP calculation for states was based on state per capita personal income data for 2014, 2015 and 2016. Generally, what this means is that for states with lower per capita incomes relative to the national average, the federal government contributes more to the Medicaid program. Conversely, the federal government contributes less to the Medicaid program in those states with higher per capita incomes. However, the formula is not responsive quickly when a state experiences an economic downturn.
How does the FMAP work in Oklahoma?
With the exception of the FY 2014 FMAP of 64.02%, Oklahoma’s FMAP declined overall from 64.00% in FY 2013 to 58.57% in FY 2018. Oklahoma experienced the largest cumulative FMAP decrease in the nation over this period. This significant loss of federal dollars prompted the Oklahoma Health Care Authority (OHCA) to implement administrative and operational strategies to continue to operate the Medicaid program, resulting in physician and other provider rate reductions of 7.75% in July 2015 and 3% in January 2016. From FY 2018 to FY 2019, Oklahoma had the greatest FMAP increase of any state of 3.81%, from 58.57% ($1.43 in federal dollars for every state dollar spent in medical services) to 62.38% ($1.66 in federal dollars for every state dollar spent in medical services). This influx of federal matching dollars and OHCA’s management of its administrative and program budgets allowed OHCA to restore the last provider rate reduction of 3%. From FY 2019 to FY 2020, Oklahoma experienced another significant FMAP increase of 3.64% from 62.38% ($1.66 in federal dollars for every state dollar spent in medical services) to 66.02% ($1.94 in federal dollars for every state dollar spent in medical services). Once again, provider rates were increased. The good news is that, due to Oklahoma’s experience with shifting FMAPs, a Rate Preservation Fund of $29.4 million was created this year, to help offset future FMAP decreases and mitigate potential provider rate reductions.
Rebecca Pasternik-Ikard is an attorney at Phillips Murrah.