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FMAP-Quest – Navigating Medicaid Funding Just Got More Difficult

The Federal Medical Assistance Percentages (FMAPs) are used in determining the amount of Federal matching funds for State expenditures for assistance payments for certain social services, and State medical and medical insurance expenditures. With a budget for Medicaid in excess of $45 billion all funds, you can imagine the impact a small percentage change can have on the State budget. The “Federal Medical Assistance Percentages” for Medicaid are found in Section 1905(b) of the Social Security Act which specifies the formula for calculating Federal Medical Assistance Percentages. The Social Security Act requires the Secretary of Health and Human Services to calculate and publish the FMAPs each year and here in lies the rub. The FMAP impacts all Health and Human Services Departments: Family and Protective Services, Aging and Disability Services, Assistive and Rehabilitative Services, State Health Services and of course the Health and Human Services Commission.

When The Health and Human Services Commission, and sister Departments, developed their Legislative Appropriations Request (LAR) they assumed an FMAP that was a little higher (more favorable) than it is actually going to be. After the HHSC submitted its LAR, CMS announced the FMAP rates for 2014 Federal Fiscal Year. The rates as they appeared in the Consolidated Budget are presented below.

LAR Estimated and Revised Federal Matching Rates (FMAP)
State Fiscal Years 2013-2015

State Fiscal Year Original Estimated FMAP Revised FMAP
2013 59.21 59.21
2014 59.76 58.74
2015 59.80 58.69 (projected)

HHSC reports that, “The result of this change in FMAP is the need for additional general revenue for HHS agencies estimated to be more than $587 million for base funding and another $41.4 million for exceptional items needed to maintain service levels. Federal funds will decrease by the same amounts.”  The FMAP for fiscal year 2015 is not yet available and will not be available until the fall of 2013.

This creates a couple of problems for appropriators. The first involves the manner in which HHSC was instructed to prepare their LAR. The instructions required development of items in a manner that could not account for the anticipated case load growth. Because of this the request for HHSC is $1.2 billion short of addressing the total anticipated case load growth. This additional amount is requested as an exceptional item and not included in the base request. FMAP must then be calculated for the base request and then the projected actual caseload HHSC anticipates it will experience. The Legislature will make decisions on how much of that caseload growth they agree will occur. The revised FMAP estimate will increase the budget request for the base level by $587 million and the exceptional items by $41.4 million for a total unanticipated increase of $628.4 million.

The second area of concern involves the FMAP projection for 2015. Since this will not be available until after the Legislature concludes its work, the actual FMAP received for 2015, if it is revised downward again, will create another unfunded hole in the Health and Human Services Budget. However, if the FMAP is adjusted to a level that is higher than anticipated, then the state will experience additional federal funds and the ability to reduce the amount of state funds needed to fund the various programs.

Previous articles from Texas Insight have indicated the shifting sands that have come to be the norm in the world of Medicaid (under state and federal reform). Additional skill and patience will be needed to navigate this changing environment.

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