Implementation of Section 5001 of the American Recovery and Reinvestment Act of 2009 (ARRA) for Adjustments to the Third Quarter of Fiscal Year 2009 Federal Medical Assistance Percentage (FMAP) Rates for Federal Matching Shares for Medicaid and Foster Care and Adoption Assistance

Summary:

This notice with comment period describes the methodology for calculating the higher federal matching funding that is made available under Section 5001 of the American Recovery and Reinvestment Act of 2009 (ARRA). Section 5001 of the ARRA provides for temporary increases in the Federal Medical Assistance Percentage (FMAP) rates to provide fiscal relief to States and to protect and maintain State Medicaid programs in a period of economic downturn. The increased FMAP rates apply during a recession adjustment period that is defined as the period beginning on October 1, 2008 and ending on December 31, 2010.

Table of Contents

Table of Figures

Effective date:

The percentages listed are for the third quarter of Fiscal Year 2009 beginning April 1, 2009 and ending June 30, 2009.

Comment Date: To be assured consideration, comments must be received at the address provided below, no later than 5 p.m. on August 19, 2009.

Addresses:

Because of staff and resource limitations, we can only accept comments by regular mail. You may mail written comments (one original and one copy) to the following address only: Department of Health and Human Services, Room 447D, Attention: FMAP Notice—ARRA, 200 Independence Ave., SW., Washington, DC 20201.

Submitting Comments: We welcome comments from the public on the calculation methodology set forth in this notice with comment period to assist us in fully considering issues and developing policies. Please provide a reference to the section on which you choose to comment.

A. Background

The Federal Medical Assistance Percentage (FMAP) is used to determine the amount of Federal matching for specified State expenditures for assistance payments under programs under the Social Security Act. Sections 1905(b) and 1101(a)(8)(B) of the Social Security Act (“the Act”) require the Secretary of Health and Human Services to publish the FMAP rates each year. The Secretary calculates the percentages, using formulas set forth in sections 1905(b) and 1101(a)(8)(B), from the Department of Commerce's statistics of average income per person in each State and for the Nation as a whole. The percentages must be within the upper and lower limits given in section 1905(b) of the Act. The percentages to be applied to the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands are specified in statute, and thus are not based on the statutory formula that determines the percentages for the 50 States.

Section 1905(b) of the Social Security Act specifies the formula for calculating FMAP as follows:

The FMAP for any State shall be 100 per centum less the State percentage; and the State percentage shall be that percentage which bears the same ratio to 45 per centum as the square of the per capita income of such State bears to the square of the per capita income of the continental United States (including Alaska) and Hawaii; except that (1) the FMAP shall in no case be less than 50 per centum or more than 83 per centum, and (2) the FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa shall be 50 per centum. Section 4725 of the Balanced Budget Act of 1997 amended section 1905(b) to provide that the FMAP for the District of Columbia for purposes of titles XIX (Medicaid) and XXI (CHIP) shall be 70 percent.

Section 5001 of Division B of the American Recovery and Reinvestment Act of 2009 (ARRA) provides for a temporary increase in FMAP rates for Medicaid, Foster Care and Adoption Assistance programs. The purposes of the increases to the FMAP rates are to provide fiscal relief to States and to protect and maintain State Medicaid programs in a period of economic downturn, referred to as the “recession adjustment period.” The recession adjustment period is defined as the period beginning on October 1, 2008 and ending on December 31, 2010.

B. Calculation of the Increased FMAP Rates Under ARRA

Section 5001 of the ARRA specifies that the FMAP rates shall be temporarily increased for the following: (1) Maintenance of FMAP rates for fiscal year 2009, fiscal year 2010, and first quarter of fiscal year 2011, so that the FMAP rate will not decrease from the prior year, determined by using as the FMAP rate for the current year the greater of any prior fiscal year FMAP rates between 2008-2010 or the rate calculated for the current fiscal year; (2) in addition to any maintenance increase, the application of an increase in each State's FMAP of 6.2 percentage points; and (3) an additional percentage point increase based on the State's increase in unemployment during the recession adjustment period. The resulting increased FMAP cannot exceed 100 percent. Each State's FMAP will be recalculated each fiscal quarter beginning October 2008. Availability of certain components of the increased FMAP is conditioned on States meeting statutory programmatic requirements, such as maintenance of effort requirements, which are not part of the calculation process.

Expenditures for which the increased FMAP is not available under title XIX include expenditures for disproportionate share hospital payments, certain eligibility expansions, services received through an IHS or tribal facility (which are already paid at a rate of 100 percent which is not subject to increase), and expenditures that are paid at an enhanced FMAP rate. The increased FMAP is also not available for payments under title XXI. The increased FMAP is available for expenditures under part E of title IV (Foster Care Maintenance payments) only to the extent of maintenance increase, if any, and the 6.2 percentage point increase.

For each qualifying State with an unemployment rate that has increased at a rate above a statutory threshold percentage, ARRA provides additional relief above the general 6.2 percentage point increase in FMAP through application of a different increase calculation. For those States, the FMAP for each qualifying State is increased by the number of percentage points equal to the product of the State matching percentage (as calculated under section 1905(b) and adjusted if necessary for the maintenance of FMAP without reduction from the prior year, and after applying half of the 6.2 percentage point general increase in the federal percentage) and the applicable percent determined from the State unemployment increase percentage for the quarter, in addition to the 6.2 percentage point increase.

The unemployment increase percentage for a calendar quarter is equal to the number of percentage points (if any) by which the average monthly unemployment rate for the State in the most recent previous 3-consecutive-month period for which data are available exceeds the lowest average monthly unemployment rate for the State for any 3-consecutive-month period beginning on or after January 1, 2006 and preceding the most recent previous 3-consecutive-month period. A State qualifies for additional relief based on an increase in unemployment if that State's unemployment increase percentage is at least 1.5 percentage points.

The applicable percent is: (1) 5.5 percent if the State unemployment increase percentage is at least 1.5 percentage points but less than 2.5 percentage points; (2) 8.5 percent if the State unemployment increase percentage is at least 2.5 percentage points but less than 3.5 percentage points; and (3) 11.5 percent if the State unemployment increase percentage is at least 3.5 percentage points.

If the State's applicable percent is less than the applicable percent for the preceding quarter, then the higher applicable percent shall continue in effect for any calendar quarter beginning on January 1, 2009 and ending before July 1, 2010.

Puerto Rico, the Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and America Samoa can make a one-time election between (1) A 30 percent increase in their cap on Medicaid payments (as determined under subsections (f) and (g) of section 1108 of the Social Security Act), or (2)applying the increase of 6.2 percentage points in the FMAP plus a 15 percent increase in the cap on Medicaid payments. There is no quarterly unemployment adjustment for Territories. As a result, we are not addressing the Territories or Commonwealth in this document, and will instead work with them separately and individually.

C. Methodology Utilized in the Calculation of Increased FMAP Rates for the Third Quarter of Fiscal Year 2009 and Subsequent Quarters During the Recession Adjustment Period

This notice sets forth increased FMAP rates for the third quarter of Fiscal Year 2009 that have been calculated pursuant to the ARRA and are set forth in the table at the end of the notice. The rates set forth in this notice are effective from April 1, 2009 through June 30, 2009. The table gives figures for each of the 50 States and the District of Columbia. Adjusted figures are not shown for Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. Under ARRA, the application of an increased FMAP calculation for the Territories and Commonwealth depends upon a one-time election of a higher FMAP and 15 percent increase in their cap on federal Medicaid payments, or a 30 percent increase in their cap. Moreover, there is no quarterly unemployment adjustment for the Territories or Commonwealth. As a result, we will instead work with the Territories and Commonwealth separately and individually.

The maintenance of FMAP calculation and the general 6.2 percentage point increase are non-discretionary calculations, and were included in a prior notice issued April 21, 2009, at 74 FR 18235. This notice specifically adjusts FMAP rates for States qualifying for additional increase based on currently available information on unemployment rates in the States as obtained from the Department of Labor's Bureau of Labor Statistics, and describes the methodology we intend to use throughout the recession adjustment period.

The methodology that we have used to calculate the unemployment adjustment is to utilize the final unemployment rate for the most recent previous 3-month period for which data are available prior to each quarter to calculate that quarter's FMAP. The unemployment rate for the most recent previous 3-month period includes final unemployment rates for all three months.

The timing of the availability of final State unemployment data for the month just prior to the start of the fiscal quarter prevents the publication of the FMAP rates until after the fiscal quarter has begun. For example, State unemployment data for the month of March, the month just prior to the start of the fiscal quarter beginning April 1, becomes available during the month of April on a preliminary basis. State unemployment data for March does not become final until May with the release of preliminary April state unemployment data and so forth for subsequent months and quarters.

Because States rely on timely publication of the percentages for their use in budget planning activities, HHS will calculate preliminary quarterly FMAP rates at the time preliminary monthly data for the month prior to the start of the quarter is available. HHS will provide these rates to the Centers for Medicare and Medicaid Services (CMS) for the purpose of calculating preliminary quarterly adjustments, as specified by ARRA, for States' federal matching amounts. HHS will calculate final quarterly FMAP rates at the time final monthly data for the month prior to the start of the fiscal quarter is available. HHS will provide these rates to CMS for the purpose of calculating the final quarterly adjustments, as specified by ARRA, for States' final quarterly federal matching amounts and publish these final quarterly rates in a Federal Register notice.

As an example of the methodology, HHS will calculate preliminary FMAP rates for the fiscal quarter beginning April 1, using State unemployment data from final January, final February, and preliminary March unemployment rates, in April when preliminary March data become available, and supply these to CMS. HHS will calculate final FMAP rates for the fiscal quarter beginning April 1, using State unemployment data from final January, final February, and final March unemployment rates, in May when final March data become available and supply these to CMS and publish these final quarterly rates in a Federal Register notice. The methodology and timing for the calculations and their release will proceed similarly for subsequent quarters during the recession adjustment period.

We intend to utilize annual updates to the historical BLS data to make changes in the States' lowest unemployment rate. Revised historical unemployment rates are part of the currently available data used at the time of calculating third quarter FMAP rates each year. These revisions to the historical data will remain current until the following third quarter FMAP rate is calculated, when new historical data becomes available.

Using data for the final State unemployment rates for the 3-consecutive-month period prior to the start of the fiscal quarter beginning April 1, 2009 and historical periods of each 3-consecutive-months beginning on or after January 1, 2006, differences in States' unemployment rates were calculated to determine if a State qualifies for an adjustment in its FMAP due to changes in its unemployment rate. For the third quarter of fiscal year 2009, we compared each State's final unemployment rate for the 3-month period ending in March 2009 to the lowest average unemployment rate for the State for any 3-consecutive-month period from January 1, 2006 through February 2009. A State received an additional FMAP increase if the State's unemployment increase percentage was at least 1.5 percentage points.

ARRA adjustments to FMAP are shown by State in the accompanying table. The hold harmless FY09 FMAP is the higher of the original FY08 or FY09 FMAP. The 6.2 percentage point increase is added to the hold harmless FY09 FMAP. The unemployment tier is determined from the comparison of the 3-month average unemployment rate ending March 2009 and the lowest 3-month unemployment rate during January 2006 to February 2009. The unemployment adjustment is calculated according to the unemployment tier and added to the hold harmless FY09 FMAP with the 6.2 percentage point increase.

We are requesting public comment on the calculation methodology described above, which we have used in developing the third quarter increased FMAP rates. We will address any public comments in the next quarterly notice of increased FMAP rates.

For further information contact:

Thomas Musco or Rose Chu, Office of Health Policy, Office of the Assistant Secretary for Planning and Evaluation, Room 447D—Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, (202) 690-6870.

(Catalog of Federal Domestic Assistance Program Nos. 93.558: TANF Contingency Funds; 93.563: Child Support Enforcement; 93.596: Child Care Mandatory and Matching Funds of the Child Care and Development Fund; 93.658: 93.659: Adoption Assistance; 93.769: Ticket-to-Work and Work Incentives Improvement Act (TWWIIA) Demonstrations to Maintain Independence and Employment)

Dated: July 27, 2009. Kathleen Sebelius,

Secretary.

ARRA Adjustments to FMAP Q3 FY09
StateFY08 original FMAPFY09 original FMAPHold harmless FY 09Hold harmless FY09 FMAP with 6.2%pt increase1st and 2nd quarter FY09 FMAP Adjust (incl HH-6.2-unemploy-ment)3-Month average unemploy-ment ending Mar 2009Minimum unemploy-mentUnemploy-ment differenceUnemploy-ment tierUnemploy-ment adjustmentQ3 FY09 3nd quarter FY09 FMAP adjust (incl HH-6.2-unemploy-ment)
Alabama 67.62 67.98 67.98 74.18 76.64 8.4 3.3 5.1 11.5 3.33 77.51
Alaska 52.48 50.53 52.48 58.68 58.68 8.0 6.0 2.0 5.5 2.44 61.12
Arizona 66.20 65.77 66.20 72.40 75.01 7.4 3.6 3.8 11.5 3.53 75.93
Arkansas 72.94 72.81 72.94 79.14 79.14 6.4 4.8 1.6 5.5 1.32 80.46
California 50.00 50.00 50.00 56.20 61.59 10.6 4.8 5.8 11.5 5.39 61.59
Colorado 50.00 50.00 50.00 56.20 58.78 7.1 3.6 3.5 11.5 5.39 61.59
Connecticut 50.00 50.00 50.00 56.20 60.19 7.4 4.3 3.1 8.5 3.99 60.19
Delaware 50.00 50.00 50.00 56.20 60.19 7.2 3.3 3.9 11.5 5.39 61.59
District of Columbia 70.00 70.00 70.00 76.20 77.68 9.6 5.4 4.2 11.5 3.09 79.29
Florida 56.83 55.40 56.83 63.03 67.64 9.4 3.3 6.1 11.5 4.61 67.64
Georgia 63.10 64.49 64.49 70.69 73.44 8.9 4.3 4.6 11.5 3.73 74.42
Hawaii 56.50 55.11 56.50 62.70 66.13 6.6 2.2 4.4 11.5 4.65 67.35
Idaho 69.87 69.77 69.87 76.07 78.37 6.8 2.8 4.0 11.5 3.11 79.18
Illinois 50.00 50.32 50.32 56.52 60.48 8.5 4.4 4.1 11.5 5.36 61.88
Indiana 62.69 64.26 64.26 70.46 73.23 9.6 4.4 5.2 11.5 3.75 74.21
Iowa 61.73 62.62 62.62 68.82 68.82 5.0 3.7 1.3 0.0 0.00 68.82
Kansas 59.43 60.08 60.08 66.28 66.28 5.9 4.0 1.9 5.5 2.03 68.31
Kentucky 69.78 70.13 70.13 76.33 77.80 9.3 5.4 3.9 11.5 3.08 79.41
Louisiana 72.47 71.31 72.47 78.67 80.01 5.6 3.5 2.1 5.5 1.34 80.01
Maine 63.31 64.41 64.41 70.61 72.40 7.9 4.4 3.5 11.5 3.74 74.35
Maryland 50.00 50.00 50.00 56.20 58.78 6.6 3.4 3.2 8.5 3.99 60.19
Massachusetts 50.00 50.00 50.00 56.20 58.78 7.6 4.4 3.2 8.5 3.99 60.19
Michigan 58.10 60.27 60.27 66.47 69.58 12.1 6.7 5.4 11.5 4.21 70.68
Minnesota 50.00 50.00 50.00 56.20 60.19 7.9 3.9 4.0 11.5 5.39 61.59
Mississippi 76.29 75.84 76.29 82.49 83.62 9.1 6.0 3.1 8.5 1.75 84.24
Missouri 62.42 63.19 63.19 69.39 71.24 8.4 4.7 3.7 11.5 3.88 73.27
Montana 68.53 68.04 68.53 74.73 76.29 5.9 3.2 2.7 8.5 2.41 77.14
Nebraska 58.02 59.54 59.54 65.74 65.74 4.5 2.8 1.7 5.5 2.05 67.79
Nevada 52.64 50.00 52.64 58.84 63.93 10.0 4.2 5.8 11.5 5.09 63.93
New Hampshire 50.00 50.00 50.00 56.20 56.20 5.7 3.4 2.3 5.5 2.58 58.78
New Jersey 50.00 50.00 50.00 56.20 58.78 7.9 4.2 3.7 11.5 5.39 61.59
New Mexico 71.04 70.88 71.04 77.24 77.24 5.5 3.5 2.0 5.5 1.42 78.66
New York 50.00 50.00 50.00 56.20 58.78 7.5 4.3 3.2 8.5 3.99 60.19
North Carolina 64.05 64.60 64.60 70.80 73.55 10.4 4.5 5.9 11.5 3.71 74.51
North Dakota 63.75 63.15 63.75 69.95 69.95 4.2 3.0 1.2 0.0 0.00 69.95
Ohio 60.79 62.14 62.14 68.34 70.25 9.3 5.3 4.0 11.5 4.00 72.34
Oklahoma 67.10 65.90 67.10 73.30 74.94 5.5 3.3 2.2 5.5 1.64 74.94
Oregon 60.86 62.45 62.45 68.65 71.58 10.8 5.0 5.8 11.5 3.96 72.61
Pennsylvania 54.08 54.52 54.52 60.72 63.05 7.5 4.3 3.2 8.5 3.60 64.32
Rhode Island 52.51 52.59 52.59 58.79 63.89 10.4 4.8 5.6 11.5 5.10 63.89
South Carolina 69.79 70.07 70.07 76.27 78.55 10.9 5.5 5.4 11.5 3.09 79.36
South Dakota 60.03 62.55 62.55 68.75 68.75 4.6 2.7 1.9 5.5 1.89 70.64
Tennessee 63.71 64.28 64.28 70.48 73.25 9.1 4.5 4.6 11.5 3.75 74.23
Texas 60.56 59.44 60.56 66.76 68.76 6.5 4.4 2.1 5.5 2.00 68.76
Utah 71.63 70.71 71.63 77.83 77.83 5.0 2.5 2.5 8.5 2.15 79.98
Vermont 59.03 59.45 59.45 65.65 67.71 7.0 3.5 3.5 11.5 4.31 69.96
Virginia 50.00 50.00 50.00 56.20 58.78 6.4 2.8 3.6 11.5 5.39 61.59
Washington 51.52 50.94 51.52 57.72 60.22 8.4 4.4 4.0 11.5 5.22 62.94
West Virginia 74.25 73.73 74.25 80.45 80.45 6.0 4.2 1.8 5.5 1.25 81.70
Wisconsin 57.62 59.38 59.38 65.58 65.58 7.8 4.4 3.4 8.5 3.19 68.77
Wyoming 50.00 50.00 50.00 56.20 56.20 4.0 2.8 1.2 0.0 0.00 56.20

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