In Washington, DC, we love our acronyms and an important one for Medicaid policy is the Federal Medical Assistance Percentage or FMAP. This is the percentage that the federal government matches state expenditures for Medicaid. This is a very important percentage for state Medicaid programs because it determines the federal investment in Medicaid. It is also important for those who are enrolled in the Medicaid program and those doctors and hospitals that provide care in the program.
Medicaid is a very important program for children, providing coverage to 1 in 4 children. It is also critical for children’s hospitals because, on average, more than half of their patients rely on Medicaid for health insurance coverage. Therefore, changes to the program and its funding can have a significant impact on many children and the providers who care for them.
The FMAP is even more important today because of the severe economic downturn in the states which has resulted in decreasing revenues and unprecedented budget shortfalls. States often turn to Medicaid cuts to fill budget gaps because Medicaid is such a large part of many state budgets.
Congress is considering the “The American Jobs, Closing Tax Loopholes and Preventing Outsourcing Act” (H.R. 4213) that includes an extension of a 6.2 percentage point increase in states’ FMAP enacted as part of the stimulus bill last year. The bill under consideration this week would extend the bump in FMAP for states through June 30, 2011. Without this extension, many states would have to go back to the drawing board to fill budget holes, which would in many cases result in additional payment cuts to Medicaid providers.
Take Children’s National Medical Center in Washington, DC as an example. As a regional hospital, Children’s National must work closely with its three surrounding jurisdictions—the District of Columbia, Maryland and Virginia—because that is where the bulk of their patients come from. If Congress does not extend the FMAP increase, each of these three jurisdictions would need to pursue further budget cuts, and a likely target is Medicaid payments to hospitals and physicians. During the 2010 session, the Virginia General Assembly essentially enacted two biennial budgets: one that takes into account an FMAP bump, and one that does not. If the FMAP funding is not extended, hospitals such as Children’s National face cuts in inpatient and outpatient reimbursement rates, and physicians will face significant reimbursement cuts as well. If the FMAP extension is approved, the cuts will not take effect. Maryland built the FMAP extension into its budget assuming it would happen. If it does not, the state will look to make additional cuts—again, Medicaid providers will be a top target. The District of Columbia City Council is considering an assessment of $1,500 per licensed hospital bed to help fill its Medicaid budget gap.
All these cuts add up to additional financial pressures on critical providers of care for children. The extension of the enhanced FMAP is a “must do” for Congress to best support state Medicaid programs during this difficult economic time.