It is important to understand the various Medicaid terms that are being used and how they may impact state Medicaid implementation. The guide below defines commonly used terms and phrases and how changes could affect children and youth with special care needs in the long term.
Per Capita Cap: Currently the federal government pays a fixed percentage of a state’s Medicaid costs, whatever the costs are. A per capita cap would change that, so states receive a fixed amount per beneficiary, regardless of actual costs. Per capita caps may affect states’ ability to keep pace with the growing costs of health care, including unexpected costs from a public health emergency or a new, costly drug therapy. For example, coverage for a one-time, two-million-dollar spinal muscular atrophy gene therapy drug, which can completely change the course of a child’s life, would be inaccessible for families who need it.
Enhanced Matching Rate & FMAP: The federal government currently covers 90 percent of the cost of Medicaid expansion. Without the Enhanced Matching Rate, states would receive the regular matching rate, or FMAP, which is about 57 percent, which could impact the number of states that offer Medicaid expansion.
The FMAP is calculated based on the state’s per capita income relative to the rest of the nation. Under current law, no state’s FMAP may be below 50 percent. The proposed change does not detail a new minimum. However, ten states with the minimum 50 percent matching rate would be heavily impacted – California, Colorado, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Washington and Wyoming.
In the District of Columbia, the current FMAP is 70 percent. However, the current proposal would lower the FMAP to 50 percent or lower. The shift in costs would likely lead to cuts to the Medicaid program including cutting eligibility, benefits, and provider payment rates.
The Medicaid expansion covered an additional 20.9 million parents, which led to more children enrolled in health coverage. Medicaid coverage improves infant health, education and health outcomes, and financial security. It has also been shown to decrease school absenteeism and lower rates of youth robbery and assault charges.
Trigger Laws: Trigger laws are activated when certain conditions are met. Nine states have trigger laws that automatically drop the Medicaid expansion if the expansion FMAP is lowered – Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah and Virginia. Three other states have trigger laws authorizing the state Medicaid agency to drop the expansion or require state legislative reconsideration if the FMAP is lowered – Idaho, Iowa, and New Mexico.
Provider Taxes: States have flexibility in how to pay for their share of Medicaid costs. States can use taxes and assessments on hospitals, nursing homes, and other health care providers, as well as on Medicaid managed care plans. All states, except Alaska, use these taxes to pay for their Medicaid programs.
Provider taxes and assessments must be uniform, broad-based, and cannot hold taxpayers harmless, which means the tax cannot be more than six percent of patient revenue. The proposal would lower that rate to 3 percent by 2028. This would impact 48 states, including the District of Columbia, disqualifying at least one tax from safe harbor. Reduced funding would result in states cutting Medicaid programs.
Enhanced Matching Rate for Medicaid Administrative Costs: The matching rate for states’ Medicaid administrative costs is generally 50 percent. However, certain administrative functions qualify for a higher FMAP.
- 100 percent
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- Implementation and operation of an immigration status verification system
- 90 percent
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- Replacement or upgrade of state Medicaid claims or eligibility systems
- 75 percent
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- Operating state Medicaid claims or eligibility systems
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- Operation of a Medicaid Fraud Control Unit (MFCU)
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- Survey and certification of nursing homes
Eliminating these enhanced matching rates would heavily shift costs to states, making it difficult to sustain administrative functions, let alone improve Medicaid administration.
State Incentive for Medicaid Expansion: The 2021 American Rescue Plan provides remaining non-expansion states a five-percentage point increase to their FMAP for two years if they adopt Medicaid expansion, regardless of when they expand. Removal of the expansion incentive could deter the remaining non-expansion states. This would prevent nearly 2.9 million low-income adults, including 1.5 million people in the coverage gap, from gaining eligibility.
Medicaid Work Reporting Requirements: This proposal would require all people seeking Medicaid coverage to work, including those with disabilities and receiving SSI benefits. Research has shown that 91 percent of Medicaid beneficiaries who are able to work already do. Exempt groups in the proposal include pregnant women, primary caregivers of dependents, individuals with disabilities or health-related barriers to employment, and full-time students. However, there is no requirement that states automatically exclude these groups or have systems in place for automatic exemptions. Anyone who does not meet the work reporting requirement would be barred from federal Medicaid funding. The result of the requirement would be heavy cuts to Medicaid funding and threatened health coverage, as well as additional bureaucratic hurdles and red tape.
Additional Information on Changes to Medicaid from Georgetown CCF: House Budget Committee Circulates New Detailed List of Budget Reconciliation Options Including Draconian Medicaid Cuts Within House Republican Caucus – Center For Children and Families
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